1.3 Focus on Service Industries
1.3.1 Trends and explanations about service industry
Service industries have grown massively during the last decades. Currently service represents around 70% of Gross Domestic Product (GDP) of the main industrialised countries. It represents 72.5% of the United States'GDP (the total GDP is $11 trillions) , 72.9% of the French one and 73.3% of the Japan's GDP . Most of the American, French and Japanese companies provide more than they produce.The employment of the service industry has followed the same trends. In the beginning of the century, 30% of the United State workforce was employed by the service industry. It has increased till 74% of the workforce in 1974 and represents almost 80% today. The portion of the total workforce employed by the service industry represents 70% in Japan , 71,5 % in France and 76.7% In the US
Some of the reasons described by A. Wölfl to explain this growth is the demand in service are considered to be income-elastic. This means that a raise in incomes would lead to more than proportionate increases in the demand for services. Wölfl emphasises the idea that countries with a high GDP per capita such as Luxembourg, Norway or the USA have a significant proportion of their work force is involved in service. In comparison, countries such as Greece, Portugal and Korea have a low per capita GDP and as a matter of fact a low part of service employment and service in the whole GDP of their economy. Others reasons are demographic evolution and the increasing role of service as intermediate production. Indeed, demographic changes have favoured the growth of the service sector. Time pressure is one of the main reasons for this evolution consumers now demand more personal services such as restaurants, housekeeping, laundry, beauty, and so on. Due to personal service, consumers have more free time for entertainment, travel and recreation. And finally, with the baby boom, the number of aging people is strongly increasing and the demands for health care as well.
The range of service has risen a lot and the competition has amplified. The service industry is become a challenging sector, the main actors had to gain in competitiveness. They had to compete on several areas such as price, customer service, differentiation, image and customer retention.
1.3.2 Definition of services and main dynamic service industries
According to the Cambridge dictionary, service industries provide "a service for people but does not result in the production of goods" . However, this dictionary does not include any accurate definition of service itself. They propose a definition of the verb to serve that is "the act of dealing with a customer in a shop, restaurant or hotel by taking their order, showing or selling them goods". Berry has a more general approach; he describes service as "deeds, effort or performance" . A last definition is given by Prentice-Hall "Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything." .
To deepen the definition of the service industry, it is useful to list the different business area it includes. The following inventory has been based on research by Hoffman and Bateson :
Type of service Description Business services, health services and professional services Fastest growing category in terms of sales, account for 2/3 of service firms. It includes Business services (Advertising, Building Maintenance) and Health services such as doctors, hospitals The management-consulting firms It is an $18 billion industry . Their first client is typically their former employer. Hospitality services The World's largest industry, it employs 6 millions workers in the U.S. and generates 300 billions in revenues . Lodging industry It is ranked as first, second, or third largest industry in 47 states. It belongs to the travel and tourism industry. That comprises cater, entertainment needs as well as lodging needs . Meeting and convention planning It consists in booking rooms, arranging for meals, and ensuring travel arrangements Food service One out of every three meals is eaten outside the home. Operations provide nearly half of all meals eaten in the U.S . E-service An electronic service available via the Net that completes tasks, solves problems, or conducts transactions. E-services can be used by people, business and other e-services and can be accessed via wide range of information appliances. Supplemental services Many such as: Information (schedules, operating instructions, warnings, prices), consultation and Advice, order-taking and Fulfilment, hospitality (treating customers as guests), safekeeping (personal possessions, parking, packaging, delivery), exceptions (special requests, problem solving, handling of complaints), billing (clear and timely bills) and payment (ease and convenience) Figure 1-3: The business areas of the service industry
So as to improve the understanding of the service industry and its stakes, it is useful to focus on the differences there are between goods and services
1.3.3 Service VS Goods
Service industry is very widespread and differs from the good industry. Though it is important to make a difference between services and goods, they don't have the same characteristics. Schwartz supported that the differentiation between services and goods was a major concern, and the absence of distinction, contributes to the lack of quality for both.Many authors have studied this difference, among others, Stamatis identified four main distinguishing characteristics: "tangible, storable, transportable and immediate consumption" . However, let's focus on a distinction often used. It has been described among others by Zeithmal& Bitner and Hoffman & Bateson. According to these authors, the main characteristics are intangibility, inseparability, heterogeneity and perishability . The focus on these 4 characteristics is adapted form the research of these 4 authors. The first characteristic is the intangibility.
1.3.3.1 Intangibility
The intangibility is a distinction on characteristics that makes services unable to be touched or sensed in the same manner as physical goods. Services result in the performance of a human. When a customer buys a DVD player, he can touch it, feel it and bring it back home. With a service such as a plane ticket, there is a more subjective evaluation; the customer will just remember the experience of the service. To face this difficulty, M. Martin advised to communicate a lot lower the lack of information.1.3.3.2 Inseparability
For every service, there is an interconnection between the service provider, the customer and the other customers. They are all involved in the production process and their shared experience will depend on this interaction. Services are first sold and then produced due to this inseparability. They are consumed simultaneously they are produced. The consumer is part of the process. Hoffman & Bateson consider 3 types of participation, physically present (doctor, movie), present for start and stop (auto repair, dry cleaning) or mentally present (University). That means the services factories must be built considering the clients presence on the site. And the way the employees will act producing the service will influence the whole customer experience. That's why the employee's management influences meaningfully the customer satisfaction. This criteria of intangibility is tightly linked to design that will be focused in the part 2.3.2.3.1.3.3.3 Heterogeneity
Service is a 0-stock industry; every service is produced in front of the client or with him. It means that control is hard to achieve. Once the service has started, it cannot be stopped or re-initialised. In comparison with goods, it is possible to have flows on it and to remake it. With a service, there are no flows allowed or the service will be badly perceived by clients. The authors focus on the difference that might occur within the same company in several subsidiaries or even in the same subsidiaries but at different time in the day, due to the turn over of employees. The heterogeneity emphasises the role of employees regarding the customer's perception. If just one doesn't serve the customer correctly, the customer may be lost. That's why the engagement of each employee is primordial.1.3.3.4 Perishability
The last characteristic is perishability, it means services cannot be saved and the unused capacity cannot be inventoried. It depends on supply and demand. The best scenario is when service demand fits with the supply demand. Nevertheless, other situation might happen: if demand is bigger than supply, clients will have to wait and to get the line to have the service, it will result in unhappiness.
These four types of difference highlight the particular management company must implement to satisfy the customer throughout their employees. It is important to assess the expectation of the customers to understand better the stakes.
