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Lecture 2

HTM 3120 Lecture Notes - Lecture 2: The Experience Economy, Industrial Society, Intangibility


Department
Hospitality and Tourism Management
Course Code
HTM 3120
Professor
Mark Homles
Lecture
2

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Service Operations Analysis
HTM*3120
Week 1 part 2
Weekly Topics
Review Key Concepts from Previous Class
Characteristics of Service
Service Strategies
The Role of IT in Service
Key Concepts from Previous Class
Evolution of Social and Economic
Development
Pre-industrial society
Industrial society; specializing in
certain tasks
Post-industrial society; looking for
service
Experience economy; service to be
staged
Experience Design Principles
Theme the Experience
Harmonize Impressions with Positive
Cues; what’s positive about buying
the product
Eliminate Negative Cues; reasons not
to use service
Mix in Memorabilia; free marketing
Engage all Five Senses
The Nature of Services
How are Services different from Manufactured Goods?
Services are intangible and cannot be patented, protected or owned
Services cannot be stored and thus are perishable
Services are heterogeneous in nature and differ from one customer and service provider
to another
The customer participates in the service process; makes each service unique
Services are delivered and consumed at the same time
Distinctive Service Characteristics (Challenges of Managing Services) *Key terms
Intangibility: creative advertising, no patent protection, importance of reputation
Perishability: cannot store inventory, opportunity loss of idle capacity, need to match
supply with demand
Heterogeneity: customer participation in delivery process results in variability
Simultaneity: opportunities for personal selling, interaction creates customer
perceptions of quality
Customer participation in the service process: attention to facility design and
opportunities for co-production
The Service Process Matrix Robert Schmenner, 1986

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Degree of Interaction and Customization
Low
High
Degree
of Labour
Intensity
(vs.
Capital
Intensity)
Service Factory
Airlines
Trucking
Hotels
Automated Car Wash
Service Shop
Hospitals ?
Auto repair
Mass Service
Retail
Wholesale
School
Eye test
Professional Service
Doctors
Lawyers
Accountants
Architect
Challenges for Managing Low Interaction / Low Customisation should be standardized
Marketing
Attention to physical surroundings
Standard operating procedure
Rigid Hierarchy
Challenges for Managing High Interaction / High Customisation changing for each customer
Fighting cost increases
Maintaining quality
Managing a flat hierarchy with loose subordinate / supervisor relationships; do things
without having to ask each time
Gaining employee loyalty
Managing customer intervention in the process
Challenges for Managing Low & High Labour Intensity
Low: turnover, lack of consistency between employees
Capital planning and expenditure, technology, managing demand peaks and valleys,
scheduling service delivery
High: hiring, training, employee welfare, employee welfare and scheduling, managing
growth, multiple-site development, methods of development and control
Service Package
- Supporting facility: the physical resources that must be in place
- Facilitating goods: the material purchased or consumed by the buyer or items
provided by the consumer; ex. food items
- Information: operations data or information that is provided by the customer to
enable efficient and customized service; ex. patient medical records, seats
available on a flight

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- Explicit services: benefits readily observable by the senses, essential for intrinsic
features
- Implicit services: psychological benefits or extrinsic features which the consumer
may sense only vaguely; ex. loan office
Nature of the Service Act Christopher Lovelock, 1983
Direct Recipient of the Service
People
Things
Nature
of the
Service
Act
Tangible
Bodies
Health Care
Passenger transport
Restaurants
Fitness Centres
Goods / Possessions
Freight transportation
Equipment repair
Housekeeping
Laundry / dry cleaning
Veterinary care
Intangible
Minds
Education
Broadcasting
Theatre, Museums
Information services
Intangible Assets
Banking / Securities
Legal Services
Accounting
Insurance
Relationship with Customers Christopher Lovelock, 1983
Type of Relationship between
Service Organization and Its Customers
Membership
No formal relationship
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