Service Economy

Learning Objectives Identify traits that all services have in common. Discuss the central role of services in an economy. Identify and differentiate the five stages of economic activity. Describe the features of preindustrial, industrial, and postindustrial societies. Describe the features of the new service economy. Contrast the push vs. pull theories of innovation. Identify the sources of service sector growth. 1-2 Service Definitions Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.

James Fitzsimmons 1-3 Definition of Service Firms Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives. James Fitzsimmons 1-4 Role of Services in an Economy FINANCIAL SERVICES · Financing · Leasing · Insurance INFRASTRUCTURE SERVICE · Communications · Transportation · Utilities · Banking MANUFACTURING Services inside company: · Finance · Accounting · Legal · R&D and design DISTRIBUTION SERVICES · Wholesaling · Retailing · Repairing.

PERSONAL SERVICES · Healthcare · Restaurants · Hotels CONSUMER (Self-service) BUSINESS SERVICES · Consulting · Auditing · Advertising · Waste disposal GOVERNMENT SERVICES · Military · Education · Judicial · Police and fire protection 1-5 Percent Employment in Services Top Ten Postindustrial Nations Country United States United Kingdom The Netherlands Sweden Canada Australia France Japan Germany Italy 1965 59. 5 51. 3 52. 5 46. 5 57. 8 54. 6 43. 9 44. 8 41. 8 36. 5 1975 66. 4 58. 3 60. 9 57. 7 65. 8 61. 5 51. 9 52. 0 n/a 44. 0 1985 70. 0 64. 1 68. 3 66. 1 70.

6 68. 4 61. 4 57. 0 51. 6 55. 3 1995 74. 1 71. 4 73. 4 71. 5 74. 8 73. 1 70. 0 61. 4 60. 8 62. 2 2005 78. 6 77. 0 76. 5 76. 3 76. 0 75. 8 74. 8 68. 6 68. 5 65. 5 1-6 Proportation of total employement 60 70 80 90 10 20 30 40 50 0 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Service Agriculture Manufacturing Year 1-7 Trends in U. S. Employment by Sector Distribution of GDP in the US Economy (GDP:Gross Domestic Product) Product A Physical 6% 31% Services B 37% Information 10% 53% 63% C 16% 84% D 1-8 Stages of Economic Development.

Society PreIndustrial Game Against Nature Predominant Activity Agriculture Mining Use of Human Labor Raw muscle power Standard Unit of of Living Social Life Measure Structure Extended household Subsistence Technology Routine Simple hand Traditional tools Authoritative Bureaucratic Machines Hierarchical Industrial Against Goods Machine Individual fabricated production tending nature Among Services Persons Quantity of goods Postindustrial Artistic Community Quality of Interlife in terms dependent Creative Intellectual health, education, recreation.

Information 1-9 Economic Evolution Economy Economic Offering Function Nature Attribute Method of Supply Seller Buyer Expectation Agrarian Food Industrial Packaged goods Make Tangible Standardized Inventoried Producer Customer Features Service Commodity service Deliver Intangible Customized Delivered on demand Provider Client Benefits Experience Consumer services Stage Memorable Personal Revealed over time Stager Guest Sensations Business services Co-create Effectual Growth Sustained over time Collaborator Collaborator Capability 1-10.

Extract Fungible Natural Stored in bulk Trader Market Quantity The Four Realms of an Experience Customer Participation Passive Active Absorption Entertainment Education (Movie) (Language) Environmental Relationship Immersion Esthetic (Tourist) Escapist (ScubaDiving) 1-11 Experience Design Principles Theme the Experience (Forum shops) Harmonize Impressions with Positive Cues (O’Hare airport parking garage) Eliminate Negative Cues (Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest) 1-12.

Source of Service Sector Growth Information Technology (e. g. Internet) Innovation Push theory (e. g. Post-it) Pull theory (e. g. Cash Management) Services derived from products (e. g. Netflix) Exploiting information (e. g. Auto part sales) Difficulty of testing service prototypes Changing Demographics Aging of the population Two-income families Growth in number of single people Home as sanctuary 1-13 Typology of Services in the 21st Century Core Experience Creative Enabling Experiential Extending Entrusted Information Innovation Problem solving Quality of life Regulation.

Essential Feature Present ideas Act as intermediary Presence of customer Extend and maintain Contractual agreement Access to information Facilitate new concepts Access to specialists Improve well-being Establish rules and regulations Examples Advertising, theater Transportation, communications Massage, theme park Warranty, health check Service/repair, portfolio mgt. Internet search engine R&D services, product testing Consultants, counseling Healthcare, recreation, tourism Environment, legal, patents 1-14.