Reading: Lesson 3 - Service Businesses

10.3.A - Service Businesses

1. THE NATURE OF SERVICES

1. Service businesses are the fastest-growing segment of our society. Close to 80 percent of the U.S. labor force is now employed in service-producing businesses or service jobs. Over 80 percent of economic activity in the United States is service related. Therefore, the United States is changing from the world’s leading manufacturing economy into the leading service economy. Many service businesses are quite small and employ only a few people, and others have total sales of millions of dollars each year and employ thousands of people. Figure below shows how pure services are different from tangible products. Services are activities of value that do not result in the ownership of anything tangible. Traditional service businesses include theaters, travel agencies, hair salons, barbershops, lawn care businesses, and insurance agencies. New types of services are emerging as well, such as online music and video download services, comprehensive financial services, information management, and human resources management. 
   

   
   

2. Services have important characteristics that make them different from other products. These differences in form, availability, quality, and timing require unique operating procedures for service businesses. 
   
3. Services are intangible, meaning they do not have a physical product, they cannot be seen or examined before purchase, and they do not exist after the consumer uses them. When you go to a theater to see a play, you rely on a review in the newspaper or what you have heard from others to decide if it is something you want to attend. If a company hires a carpet-cleaning business for its offices, it will need to bring them back when the carpets must be cleaned again.
   
4. A service cannot be separated from the person or business supplying it. Dental care requires a dentist, a concert requires an orchestra, and tax preparation requires an accountant. People who purchase services are also purchasing the availability and the skill of the person performing the service. If a business or individual is unable to deliver a service, customers must go without. Trading in the stock market using the Internet has become popular as investors bypass traditional stockbrokers. However, in several instances, a business offering Internet stock trading has had serious hardware or software problems that prevented customers from accessing accounts to buy and sell stocks.
   
5. The quality of the service depends on who provides it as well as where and when that service is provided. Removing ten inches of snow from a parking lot may be more effective with a tractor and a dump truck than with a small snow blower. A hairstylist who has not completed training recently may not be able to offer the latest hair designs. A service provider who is tired, untrained, or unconcerned about the customer may not provide the same quality of service each time. Understanding these factors makes it easier for a business to control the quality of services and ensure that customers get the same quality time after time.
   
6. The quality of the service depends on who provides it as well as where and when that service is provided. Removing ten inches of snow from a parking lot may be more effective with a tractor and a dump truck than with a small snow blower. A hairstylist who has not completed training recently may not be able to offer the latest hair designs. A service provider who is tired, untrained, or unconcerned about the customer may not provide the same quality of service each time. Understanding these factors makes it easier for a business to control the quality of services and ensure that customers get the same quality time after time.
   
7. By understanding the unique characteristics of services, managers in charge of planning services can do a better job of meeting customer needs. Consider the planning that must be done by the managers of Millennium, the new store described at the beginning of the chapter. They must make sure the business offers the best level of customer service possible to the thousands of people who shop there. Because a service is intangible, service providers must find ways to describe their service to prospective customers. They may have to demonstrate how they will provide the service and the benefits the customers will receive. To help overcome this problem, service businesses sometimes provide a product to customers as part of the service. Insurance companies provide policy documents and leather cases to hold the documents, tour services provide travel bags, and hotels provide small gifts in their rooms to remind their guests of the service and the service provider. The service must be provided in an acceptable way to the customer. A client visiting a barbershop may want the services of a specific barber. A person completing a bank transaction may want to talk with a teller rather than use an ATM. Airline travelers may prefer not to stand in long lines to check their luggage and get a boarding pass for their flight.

1. Just as manufacturers are constantly improving their products and processes to better satisfy customers, service businesses also look for better ways to provide services. Some of those ways include hiring and training employees more carefully, thoroughly planning how to maintain service quality standards, and using technology to improve the availability and delivery of services. The Internet is providing both opportunities and challenges for service businesses. For example, landscaping services can advertise and demonstrate services online. At the same time, individuals who may have at one time hired a landscaping business to provide landscaping advice can now look online for designs and plans. 
2. Franchises for service businesses are becoming quite common. Franchising allows a service to be provided in a variety of locations while maintaining a consistent image and level of quality. Examples of franchised service businesses include car repair, restaurants, tax preparation and legal services, and house-cleaning businesses. Service businesses are responding to the specific needs of customers. Extended hours, more service locations, a greater variety of services, and follow-up activities with customers to ensure satisfaction are all ways that businesses are attempting to meet customer needs. Managers of service businesses are learning that they must plan their service processes as carefully as manufacturers plan their production processes. In both cases, customers expect a quality product or service delivered in a timely fashion at a fair price.
3. Many industries are shifting the performance of services once provided by an employee to the customers themselves. Self-service reduces costs to a business and, in many cases, increases customer satisfaction. For example, if passengers book a flight online, print out boarding passes, and pay for luggage online, they can speed up the check-in process because they may not have to wait in line. Some restaurants are using technology that allows customers to place their order using tablets at their table, thus shortening their wait time. Although self-service has its benefits, it can also be a source of frustration for customers. Customers may become weary of logging in to different websites or wading through numerous web pages to place an order, check the order status, or get access to other types of information. Also, as more businesses move customers to self-service, they often reduce the number of employees offering the service, which can be another source of frustration for customers. Service managers need to ensure that self-service systems are reliable and responsive to customer’s needs.