HMD 120 ASU Implications of Intangibility Discussion

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Description

You are in charge of making accommodation arrangements for a 75-person family reunion trip in Sardinia.  Based on excellent third party online reviews, you decided to book at ForteVillage Resort.  However, as you complete the reservation, you begin to have anxiety due to Implications of Intangibility discussed in the chapter. 
Assignment Instructions
Access the Forte Village Website at www.fortevillageresort.comLinks to an external site. and discuss how the website does or does not reduce the anxiety that you have based on the three primary Implications of Intangibility.
Your assignment will list each of the three primary implications of Intangibility and your response to them.The Nature of Service
Chapter 2
Outline
• Differences between products and service
• Intangibility
• Heterogeneity
• Inseparability
• Perishability
• Management implications for ‘IHIP’
• Managing service supply and demand
Differences Between
Products and Service
• Service ‘products’ differ from physical products in their
composition, production process, delivery and consumption
• The management and marketing of a service therefore
requires different approaches from those traditionally used for
manufactured goods
• Four distinctive characteristics of service:
• Intangibility
• Heterogeneity (variability)
• Inseparability (of production and consumption)
• Perishability
IHIP
Intangibility
What is ‘intangibility’?
Service is a performance, as opposed to an object – it cannot be
seen, felt, tasted or touched as goods can be. Although the effects
of service might be felt for some time, the service itself essentially
goes out of existence at the very moment that it is rendered.
• Intangibility has been called the critical difference between
service and physical goods
• It is the factor from which the other differences between goods
and service emerge
• Unlike manufactured goods, service cannot be physically
examined (‘search’ qualities), checked (‘experience’ qualities) or
tested (‘credence’ qualities’)
The Special Importance of Intangibility
• Tangibility exists along a continuum
and all products exhibit some
tangible and intangible qualities,
but the service remains the primary
product offering
• Rather than striving to ‘tangibilize’
their offerings, service managers
should be selling the intangible
benefits
Heterogeneity
What is ‘heterogeneity’?
The word heterogeneity or variability implies many different parts and
many or different people. Ultimately, numerous employees over a
series of encounters are in contact with any one individual customer.
• Service industries differ in the extent to which they are
‘people-based’ or ‘technology-based’
• The outcomes of people-based service operations tend to
be more heterogeneous than the outcomes of technologybased operations
• Heterogeneity poses both challenges and opportunities
because there is potential for significant variability in the
performance of service, which can be positive or negative
depending on the circumstance
Heterogeneity at Various Levels
• This variability of service performance occurs at three
levels. The quality of service performance varies:
• from one service organization to another;
• from one service performer to another; and
• for the same performer on different occasions.
Heterogeneity at Various Levels
• Therefore, what the firm has promised to deliver might be
quite different from what is actually received by the
customer
• Similarly, even the same service delivered at the same time to a
group of customers can be perceived very differently
between members of the group
Heterogeneity is Inevitable
• Although heterogeneity is essentially a ‘people problem,’
technology does not necessarily improve matters
• e.g. “I don’t like talking to a machine! I want to talk to a
real person!”
• Implications for customers’ perceptions of the firm’s quality
and image
Heterogeneity is Inevitable
• Heterogeneity is not always a negative
• Variation can be beneficial in the case of specially
customized service
• ‘Customerization’ takes advantage of the heterogenous
nature of service and allows it to turn into a personalized
and unique experience for the customer
Inseparability
What is ‘inseparability’?
The inseparability of production and consumption refers to the fact
that most service provision is characterized by simultaneous
production and consumption. Typically goods are first produced,
then sold, and then consumed. In contrast, a typical service is first
sold, and the produced and consumed simultaneously.
• Inseparable during consumption
• The service provider is often physically present when
consumption occurs (e.g. a flight attendant is present when
serving an in-flight meal)
• Inseparable during production
• The customer is often physically present during the
production of a service (e.g. a diner is present during
restaurant service)
Inseparability
• Inseparability and marketing
• The service provider is often ‘selling’ the service
(convincing the customer of its value) at the same time as
it’s being produced and consumed
• In the case of service, the emphasis shifts from ensuring
the right place and the right time to ensuring that
service is produced and delivered in the right way
• Inseparability and quality
• Quality is determined by service delivery, therefore service
providers are simultaneously involved in production,
marketing and quality control
• The input from the customer is often crucial to the quality
of the service
Inseparability
• Inseparability and ‘multiple consumption’
• Many services are consumed by more than one person
simultaneously
• The presence of others influences the perception of the
quality of the service
• Inseparability and value ‘co-creation’
• Co-creation implies that value is created at the same time
as production and consumption
• It is a process whereby the organization, employee and
customer are ‘co-responsible’ for value creation
• Customers are thus ‘co-developers’ of experiences and
are a new source of competence for an organization, and
such competence can be a source of competitive
advantage, leading to ‘reciprocal value’ creation
Perishability
What is ‘perishability’?
Perishability, closely related to intangibility, means that a service
cannot be stored, and therefore it is produced only when needed by
the customer. Service production is thus dictated by demand
at any given time.
• Reliability and timing are important in service – supply and
demand thus play a significant role
• Supply refers to the total amount of a specific good or
service that is available to customers (e.g. the number of
rooms in a hotel)
• Demand refers to the quantity of a product or service which
would be bought at a given price and at a given time
Perishability, Ownership & Control
• Service cannot be ‘possessed’ (i.e. it cannot be stored, taken
away or used at a later time) and it essentially disappears’ as
quickly as it is delivered
• The perishability and intangibility of service renders
‘ownership’ impossible – buyers of a service are buying only
the right to a service, and then only at a designated time
• Implications for both suppliers and customers
• Thus, service managers must reappraise:
• the management of supply and demand; and
• the management of patents, rights and risks.
• Note: It is important not to confuse perishability with lost value!
Value is co-produced with the customer and created at the
point of consumption
List examples of production, marketing
and quality control
Management Implications for ‘IHIP’
Along with understanding the characteristics of service (IHIP),
it is critical for service managers to understand the
implications for these challenges in
managing their service firms.
Group work
Think about implications for IHIP
You and your team members will become marketing managers,
create four power point slides with group members.
When you are done, one team member can upload the slide on
webcampus.
Implications with Intangibility
• From the customer’s perspective, intangibility is a challenge because:
• customers have difficulty in discriminating between one service
offering and another;
• customers perceive the service purchase as involving high levels
of risk; and
• customers seek personal information regarding the reliability of
service.
• Management strategies:
• offer ‘clues’ with which customers are able to associate the
additional benefits;
• offer explicit service guarantees to reduce the perceived risk; and
• design systems and approaches to enhance word-of-mouth
advertising opportunities by customers who have already used
the service.
Implications with Intangibility
• From the manager’s perspective, intangibility of service means that:
• customers take an active role in the production process and,
essentially, co-produce the service;
• other customers co-consume the service and affect the perceived
outcome; and
• the service is often provided only at specified locations.
• Management strategies:
• encourage opportunities for service personnel to develop
personal relationships with their customers, thereby enhancing
the perceived quality of service;
• carefully plan both the production process and the ‘multiple
consumption’ stage to influence customer perceptions and
ensure the enjoyment of the customer; and
• offer selective components of the service away from the main
location (e.g. overcoming capacity limits at a restaurant by
offering take-away food).
Implications with Heterogeneity
• Two management challenges particularly associated with
heterogeneity are:
• customers experience the same service differently, according to
the time, day and service producer; and
• variability can post problems in maintaining brand standards at
different service locations.
• Management strategies:
• streamline service procedures and systems to reduce variability
in task performance, or, in some situations, take advantage of the
opportunity that variability presents for personalised service; and
• create a company-wide culture to maintain standards by carefully
constructing a company policy that staff members are aware of
and also trained and empowered to implement.
Implications with Inseparability
• Inseparability of consumption and production creates significant
challenges for service managers, such as:
• quality control is embedded in service delivery with an important
role played by the customer;
• services are delivered in a setting of ‘multiple consumption’; and
• employees and customers are ‘co-responsible’ for creating
value.
• Management strategies:
• training and empowering employees in case of customer
dissatisfaction, which calls for a service recovery;
• designing the ‘servicescape’ with tangible clues to help
customers navigate the service process; and
• viewing customers as a new source of competence for the
organization and finding ways to make customers their partners
by actively engaging them throughout the service process.
Implications with Perishability
• The problem with perishability is essentially the inability to store
services and offer them when needed by the customer
• Because a service cannot be stored, the focus must be on
managing demand – as opposed to managing supply
• The successful management of demand must be the guiding
principle in the design of any service system or process
Managing Supply and Demand
• The crucial issue is the degree to which available capacity is
effectively utilized
• When demand is low, productive capacity is wasted
• When demand is high, potential business is lost due to the
inability to supply the services
• Aspects of demand:
• variations in demand
• effect of demand on quality
• waiting and the psychology of waiting
• strategies for managing demand
Aspects of Demand
• Variations in demand
• Effect of demand on quality
• Managers need to understand why
• To gain customer confidence, maintain image, engender
customers seek to use the service
customer loyalty and enhance employee morale,
when they do
managers must design strategies to manage demand
and quality simultaneously
• Regular fluctuations in demand (e.g.
seasonal cycles) can be influenced • ‘The Psychology of Waiting’:
by creative marketing
• Unoccupied time feels longer than occupied time
• Waiting
• Anxious, sad and angry waits feel longer than relaxed
• Saving a customer’s time is one of
ones
the quickest ways to increase the
• Waits of a uncertain length feel longer than certain ones
value of the service experience!
• Unexplained waits feel longer than explained ones
• Successful service firms now take
• Uncomfortable waits feel longer than comfortable ones
advantage of technology to reduce
• Unfair waits feel longer than fair ones
the wait or wait perception
Strategies for Managing Demand
Aspects of Supply (Capacity)
• Capacity and quality
• Maximum capacity represents the upper limit that
the organization can possibly achieve
• Optimum capacity is the desirable level achievable
• A service organization is generally faced with one of
four conditions:
• Demand exceeds max. capacity (business is lost)
• Demand exceeds opt. capacity (perceived service
quality deteriorates)
• Demand and supply are balanced as opt. capacity
is achieved
• Demand below opt. capacity (resources
underutilized)
Strategies for Managing Supply
Summary
• The main objective of service management is to provide guests with a
superior experience – it is thus imperative that managers understand
the nature of their service offerings
• The distinctive characteristics of service (IHIP) present significant
challenges for both customers and service managers
• Service firms that can meet these challenges will significantly improve
customer satisfaction, maintain the firm’s competitive advantage, and
lift its overall profit performance
To do list
• Discussion (reply 2 posts)
• Assignment
• Quiz
• All due by 2/18 (11:59pm)

Purchase answer to see full
attachment

Description You are in charge of making accommodation arrangements for a 75-person family reunion trip in Sardinia.  Based on excellent third party online reviews, you decided to book at ForteVillage Resort.  However, as you complete the reservation, you begin to have anxiety due to Implications of Intangibility discussed in the chapter.  Assignment Instructions Access the Forte Village Website at www.fortevillageresort.comLinks to an external site. and discuss how the website does or does not reduce the anxiety that you have based on the three primary Implications of Intangibility. Your assignment will list each of the three primary implications of Intangibility and your response to them.The Nature of Service Chapter 2 Outline • Differences between products and service • Intangibility • Heterogeneity • Inseparability • Perishability • Management implications for ‘IHIP’ • Managing service supply and demand Differences Between Products and Service • Service ‘products’ differ from physical products in their composition, production process, delivery and consumption • The management and marketing of a service therefore requires different approaches from those traditionally used for manufactured goods • Four distinctive characteristics of service: • Intangibility • Heterogeneity (variability) • Inseparability (of production and consumption) • Perishability IHIP Intangibility What is ‘intangibility’? Service is a performance, as opposed to an object – it cannot be seen, felt, tasted or touched as goods can be. Although the effects of service might be felt for some time, the service itself essentially goes out of existence at the very moment that it is rendered. • Intangibility has been called the critical difference between service and physical goods • It is the factor from which the other differences between goods and service emerge • Unlike manufactured goods, service cannot be physically examined (‘search’ qualities), checked (‘experience’ qualities) or tested (‘credence’ qualities’) The Special Importance of Intangibility • Tangibility exists along a continuum and all products exhibit some tangible and intangible qualities, but the service remains the primary product offering • Rather than striving to ‘tangibilize’ their offerings, service managers should be selling the intangible benefits Heterogeneity What is ‘heterogeneity’? The word heterogeneity or variability implies many different parts and many or different people. Ultimately, numerous employees over a series of encounters are in contact with any one individual customer. • Service industries differ in the extent to which they are ‘people-based’ or ‘technology-based’ • The outcomes of people-based service operations tend to be more heterogeneous than the outcomes of technologybased operations • Heterogeneity poses both challenges and opportunities because there is potential for significant variability in the performance of service, which can be positive or negative depending on the circumstance Heterogeneity at Various Levels • This variability of service performance occurs at three levels. The quality of service performance varies: • from one service organization to another; • from one service performer to another; and • for the same performer on different occasions. Heterogeneity at Various Levels • Therefore, what the firm has promised to deliver might be quite different from what is actually received by the customer • Similarly, even the same service delivered at the same time to a group of customers can be perceived very differently between members of the group Heterogeneity is Inevitable • Although heterogeneity is essentially a ‘people problem,’ technology does not necessarily improve matters • e.g. “I don’t like talking to a machine! I want to talk to a real person!” • Implications for customers’ perceptions of the firm’s quality and image Heterogeneity is Inevitable • Heterogeneity is not always a negative • Variation can be beneficial in the case of specially customized service • ‘Customerization’ takes advantage of the heterogenous nature of service and allows it to turn into a personalized and unique experience for the customer Inseparability What is ‘inseparability’? The inseparability of production and consumption refers to the fact that most service provision is characterized by simultaneous production and consumption. Typically goods are first produced, then sold, and then consumed. In contrast, a typical service is first sold, and the produced and consumed simultaneously. • Inseparable during consumption • The service provider is often physically present when consumption occurs (e.g. a flight attendant is present when serving an in-flight meal) • Inseparable during production • The customer is often physically present during the production of a service (e.g. a diner is present during restaurant service) Inseparability • Inseparability and marketing • The service provider is often ‘selling’ the service (convincing the customer of its value) at the same time as it’s being produced and consumed • In the case of service, the emphasis shifts from ensuring the right place and the right time to ensuring that service is produced and delivered in the right way • Inseparability and quality • Quality is determined by service delivery, therefore service providers are simultaneously involved in production, marketing and quality control • The input from the customer is often crucial to the quality of the service Inseparability • Inseparability and ‘multiple consumption’ • Many services are consumed by more than one person simultaneously • The presence of others influences the perception of the quality of the service • Inseparability and value ‘co-creation’ • Co-creation implies that value is created at the same time as production and consumption • It is a process whereby the organization, employee and customer are ‘co-responsible’ for value creation • Customers are thus ‘co-developers’ of experiences and are a new source of competence for an organization, and such competence can be a source of competitive advantage, leading to ‘reciprocal value’ creation Perishability What is ‘perishability’? Perishability, closely related to intangibility, means that a service cannot be stored, and therefore it is produced only when needed by the customer. Service production is thus dictated by demand at any given time. • Reliability and timing are important in service – supply and demand thus play a significant role • Supply refers to the total amount of a specific good or service that is available to customers (e.g. the number of rooms in a hotel) • Demand refers to the quantity of a product or service which would be bought at a given price and at a given time Perishability, Ownership & Control • Service cannot be ‘possessed’ (i.e. it cannot be stored, taken away or used at a later time) and it essentially disappears’ as quickly as it is delivered • The perishability and intangibility of service renders ‘ownership’ impossible – buyers of a service are buying only the right to a service, and then only at a designated time • Implications for both suppliers and customers • Thus, service managers must reappraise: • the management of supply and demand; and • the management of patents, rights and risks. • Note: It is important not to confuse perishability with lost value! Value is co-produced with the customer and created at the point of consumption List examples of production, marketing and quality control Management Implications for ‘IHIP’ Along with understanding the characteristics of service (IHIP), it is critical for service managers to understand the implications for these challenges in managing their service firms. Group work Think about implications for IHIP You and your team members will become marketing managers, create four power point slides with group members. When you are done, one team member can upload the slide on webcampus. Implications with Intangibility • From the customer’s perspective, intangibility is a challenge because: • customers have difficulty in discriminating between one service offering and another; • customers perceive the service purchase as involving high levels of risk; and • customers seek personal information regarding the reliability of service. • Management strategies: • offer ‘clues’ with which customers are able to associate the additional benefits; • offer explicit service guarantees to reduce the perceived risk; and • design systems and approaches to enhance word-of-mouth advertising opportunities by customers who have already used the service. Implications with Intangibility • From the manager’s perspective, intangibility of service means that: • customers take an active role in the production process and, essentially, co-produce the service; • other customers co-consume the service and affect the perceived outcome; and • the service is often provided only at specified locations. • Management strategies: • encourage opportunities for service personnel to develop personal relationships with their customers, thereby enhancing the perceived quality of service; • carefully plan both the production process and the ‘multiple consumption’ stage to influence customer perceptions and ensure the enjoyment of the customer; and • offer selective components of the service away from the main location (e.g. overcoming capacity limits at a restaurant by offering take-away food). Implications with Heterogeneity • Two management challenges particularly associated with heterogeneity are: • customers experience the same service differently, according to the time, day and service producer; and • variability can post problems in maintaining brand standards at different service locations. • Management strategies: • streamline service procedures and systems to reduce variability in task performance, or, in some situations, take advantage of the opportunity that variability presents for personalised service; and • create a company-wide culture to maintain standards by carefully constructing a company policy that staff members are aware of and also trained and empowered to implement. Implications with Inseparability • Inseparability of consumption and production creates significant challenges for service managers, such as: • quality control is embedded in service delivery with an important role played by the customer; • services are delivered in a setting of ‘multiple consumption’; and • employees and customers are ‘co-responsible’ for creating value. • Management strategies: • training and empowering employees in case of customer dissatisfaction, which calls for a service recovery; • designing the ‘servicescape’ with tangible clues to help customers navigate the service process; and • viewing customers as a new source of competence for the organization and finding ways to make customers their partners by actively engaging them throughout the service process. Implications with Perishability • The problem with perishability is essentially the inability to store services and offer them when needed by the customer • Because a service cannot be stored, the focus must be on managing demand – as opposed to managing supply • The successful management of demand must be the guiding principle in the design of any service system or process Managing Supply and Demand • The crucial issue is the degree to which available capacity is effectively utilized • When demand is low, productive capacity is wasted • When demand is high, potential business is lost due to the inability to supply the services • Aspects of demand: • variations in demand • effect of demand on quality • waiting and the psychology of waiting • strategies for managing demand Aspects of Demand • Variations in demand • Effect of demand on quality • Managers need to understand why • To gain customer confidence, maintain image, engender customers seek to use the service customer loyalty and enhance employee morale, when they do managers must design strategies to manage demand and quality simultaneously • Regular fluctuations in demand (e.g. seasonal cycles) can be influenced • ‘The Psychology of Waiting’: by creative marketing • Unoccupied time feels longer than occupied time • Waiting • Anxious, sad and angry waits feel longer than relaxed • Saving a customer’s time is one of ones the quickest ways to increase the • Waits of a uncertain length feel longer than certain ones value of the service experience! • Unexplained waits feel longer than explained ones • Successful service firms now take • Uncomfortable waits feel longer than comfortable ones advantage of technology to reduce • Unfair waits feel longer than fair ones the wait or wait perception Strategies for Managing Demand Aspects of Supply (Capacity) • Capacity and quality • Maximum capacity represents the upper limit that the organization can possibly achieve • Optimum capacity is the desirable level achievable • A service organization is generally faced with one of four conditions: • Demand exceeds max. capacity (business is lost) • Demand exceeds opt. capacity (perceived service quality deteriorates) • Demand and supply are balanced as opt. capacity is achieved • Demand below opt. capacity (resources underutilized) Strategies for Managing Supply Summary • The main objective of service management is to provide guests with a superior experience – it is thus imperative that managers understand the nature of their service offerings • The distinctive characteristics of service (IHIP) present significant challenges for both customers and service managers • Service firms that can meet these challenges will significantly improve customer satisfaction, maintain the firm’s competitive advantage, and lift its overall profit performance To do list • Discussion (reply 2 posts) • Assignment • Quiz • All due by 2/18 (11:59pm) Purchase answer to see full attachment

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