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The Important Role Services Play in an Economy

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Service Management: An Integrated Approach to Supply Chain Management and Operations is intended to help managers of service organizations develop strategies and practices to raise customer satisfaction with services to the same levels attained by manufacturers. This chapter begins by defining services and exploring the role of services in our society.
This chapter is from the book

1.1. Introduction

There has been a surge of interest in all aspects of service management in recent times. Many books, articles, and research papers on services and service management have appeared in popular and academic business literature starting in the 1980s and continue to be published today. The impetus for this phenomenon can be traced back to two major developments in recent history. First, the quality movement that started in the 1980s had brought most consumers, news media, and academicians to the realization that the overall quality of services in the United States was not ideal, acceptable, or competitive in the international markets. Second, the fact that services no longer formed the least important (tertiary) sector of the economy became obvious. Contrary to the once widely held view among economists, services in the second half of the twentieth century had increasingly played a significant role in the economic life in the United States and in all industrialized countries.

Growing attention paid to service quality and customer satisfaction had stirred managers of many service organizations into action. Even the executives and managers of one service conglomerate almost everyone loved to criticize, the federal government, were not immune to the mounting pressure. A lot has been done to improve quality and customer satisfaction in most service industries during the 1980s and in the twenty-first century. As a result, there have been marked improvements in the quality of many services. Nevertheless, mediocre service quality is still a fact of life in the United States and around the world. Exhibit 1-1 confirms this fact.

Exhibit 1-1. American Customer Satisfaction Index (ACSI)

Baseline

1994

1995

2000

2005

2010

2012

Manufacturing

Durable goods

79.2

79.8

79.4

78.9

81.3

83.0

Nondurable goods

81.6

81.2

80.8

81.8

81.3

81.9

Services

Accommodation & food services

73.2

71.6

71.2

74.2

77.3

79.4

Transportation

70.3

71.1

70.0

72.4

73.3

73.6

Information

78.5

78.3

69.4

65.8

72.8

71.9

Finance and insurance

78.5

74.1

74.4

73.9

76.1

75.4

E-Commerce

NA

NA

75.2

79.6

79.3

80.1

E-Business

NA

NA

63.0

75.9

73.5

74.2

Energy,utilities

75.0

74.0

75.0

73.1

74.1

76.7

Retail trade

75.7

74.6

72.9

72.4

75.0

76.1

Health care & social assistance

74.0

74.0

69.0

70.8

77.0

78.5

Public administration/government

64.3

61.9

67.0

67.1

66.9

67.0

NA: Not Available

2011 survey

Source: Adapted from American Customer Satisfaction Index 1994–2012 (http://www.theacsi.org/acsi-results/acsi-results)

Exhibit 1-1 presents a summary of American Customer Satisfaction Index (ACSI) numbers for select years between 1994 and 2012. The ACSI is designed to measure the quality of goods and services as evaluated by customers. The index is based on surveys of the customers of more than 200 organizations in more than 40 industries in seven major consumption areas.1 It measures satisfaction by asking consumers to compare their expectations of a good or service with their actual experience with it. It is clear from the data that overall customer satisfaction with goods and services has fluctuated over the years but has not changed much. Referring to Exhibit 1-1 it can be seen that customer satisfaction with accommodation and food services, transportation, e-Commerce, and e-Business have increased over the years while satisfaction with other services had ups-and-downs. Actually, Information, Finance and Insurance, and Utilities declined from their baseline levels. Over the years, satisfaction with government services has been consistently the lowest of all services.

Perhaps the most important revelation of the ACSI data is that no service in the recent past has had a customer satisfaction index equal to those for goods. It is not certain if an index of 100 percent satisfaction will ever be achieved, or if that is even possible, in any industry. However, it is clear that both private and public service organizations have a long way to go, and managers of these organizations face a tremendous challenge. Will they rise to the challenge and raise customer satisfaction with services to the same levels attained by manufacturers, or possibly surpass them? We certainly hope so! This book is written with the hope that it can help managers of service organizations develop strategies and practices to do so. Chapter 1 begins by defining services and exploring the role of services in our society.

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