mgmt 471 chp 1

Characteristics of ServiceAgenda

goods

Physical items that include raw materials, parts, subassemblies, and final products.

• Automobile

• Computer

• Oven

• Shampoo

services

 Activities that provide some combination of time, location, form or psychological value.

• Air travel

• Education

• Haircut

• Legal counsel

US manufacturing vs. service employment

The service sector now accounts for more than 70% of jobs in the United States

Decrease in Manufacturing Employment: Technological Advancements

• Automation and robotics reduce need for manual labor.

• Digitalization drives growth in tech-based services.

• Enhanced manufacturing efficiency with fewer workers

Decrease in Manufacturing Employment: Globalization

• Offshoring and outsourcing to lower-cost regions.

• Efficient global supply chains reduce domestic manufacturing needs

Increase in Service Employment: Consumer Behavior:

• Preference for experiences over material goods fuels service industry growth.

• Rising standards of living drive demand for leisure and personal services.

• Increased consumer spending on services over goods.

Characteristics of Service: Intangibility

Services cannot be seen, tasted, felt, heard, or smelled before they are purchased.

• The customer cannot evaluate it.

• This causes increase in the uncertainty level.

• It is difficult to promote their value: Challenging to get customers to notice and desire a product when it cannot be seen or touched.

Characteristics of Service: Inseparability

Services are produced and consumed at the same time (Production & Consumption).

• Services cannot be separated from their providers. Customers and employees coproduce the service.

• The service employee is a part of the service and so is the customer and they both influence the service that is being offered.

• Customers and service providers are dependent on one another for the success of service provided

• (Other) Customers are part of the product.

• Customers influence each other’s experiences.

Characteristics of Service: Variability

The quality depends on who provides them and when and where they are provided. “human element”

• No two service experiences are exactly alike.

• Service quality depends on uncontrollable factors.

• Actual service often not what was planned.

• There are also many uncontrollable factors: weather, natural disasters, (other) customers, events, etc.

Characteristics of Service: Perishability

Services can’t be saved, stored, returned, or resold.

• The service value exists only at certain point and then disappears and the unused service cannot be stored.

• When the demand is steady, service perishability is not a problem but the service sector faces a huge problem when the demand fluctuates.

• 200 hotel rooms / 198 sold vs. 200 iPhone / 198 sold