In Part 1 we covered intangibility and inseparability and the reason to highlight the service industry
To recap, there are three reasons. Firstly the service industry is the strongest growth and more people are employed in services than in all other sectors put together. The second reason is the specialised nature of the market. Services have five important features that effect how they are managed and marketed.
The services provided are of a specialised nature, these arise from the * intangibility of the offering, * inseparability of production and consumption, * heterogeneity - the difficulty of achieving standardization * perishable -nature of the service * ownership - the lack of full use only have the service for a limited time
The third reason is some of today's service companies have developed new models of successful management practice.
Heterogeneity Heterogeneity is the potential for high levels of variability in the quality and consistency of a service. Its difficult to achieve a consistent level of service. For example, two visits to a restaurant may not be identical in performance. The difference will depend on the staff in charge. Unlike machines, people are not normally predictable and consistent in their attitudes and behavior. This makes it difficult for service organisations to develop a consistent brand image. There are three ways of reducing the effects of heterogeneity;
* Invest in personal selection, motivation and training * Standardise the service such as McDonalds * Customise the service to suit the target such as an exclusive hotel
Perishability Services cannot not be saved. Hotel rooms not occupied, airline tickets not purchased and telephone line capacity not used are some examples. Demand fluctuates for most services, creating a major peak-load problem. During peak hours, Johannesburg's highways are choked with traffic, but quite during off-peak times.
Managers should achieve a better match to reconcile demand with supply. One can do this by; * Differential pricing - peak users pay more for than off-peak, thus reducing demand * Making waiting times more acceptable - comfortable seats and a complimentary drink can be offered * Increase off-peak demand - open facilities for the users such as business hotels for tourists * Use of reservation systems - control the peaks and make it more attractive to use a service during off-peak times
As well as dampening peak demand, peak supply can be increased in the following ways; * Use part-time employees * Reschedule work by performing non-essential tasks outside peak hours * Increase consumers participation by encouraging customers to clear their tables in a restaurant. McDonalds is a good example of this practice.
Ownership Lack of ownership is a major difference between a service and a good. Owners have full use of a product while a customer only has personal access to a service for a limited time. Payment is for the use of it or access to hire of items. To overcome this problem one can use the following approaches * Stress the advantages of non-ownership such as easier payment terms and less risk of capital loss * Create membership associations to provide the appearance of ownership such as timeshare * Provide incentives for frequent use such as Voyager miles