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Operations process for service vs product businesses

By Samantha Garner | May 5, 2012

Last week we talked about an operations process – namely, what it was. As you may have guessed, the operations process of product and service businesses differ in a few important ways.

Operations process for service vs product businesses

In last week’s post, we looked at the operations process for a flower shop. The owner Lauren’s main “output” is flowers, a product. But what if your business is, for example, a consulting business – a service?

Inconsistency of output

The first major difference is that services have the possibility of inconsistency of output with a service. We’ve all had a bad haircut – perhaps the stylist didn’t have much experience, knowledge or skill, was just having a bad day, or truly wasn’t cut out (sorry) for this line of work. The result? A hood, scarf, paper bag until your hair grows back – a bad customer experience. It’s very challenging in a service business to make sure that each and every customer experience is the same. All the more reason to carefully and thoroughly train your staff and hold them accountable for producing the standard of excellence in service delivery that you’ve set for your business.

Service intangibility

Another difference between product and service operation processes is that customers can’t see, touch, feel, evaluate, or experience the service prior to it being produced. This is known as service intangibility. With a product, you can pick it up, roll it around, evaluate it, decide if you like it before you buy it. You can’t check out that new ‘do, however, until it’s too late. Thanks to website technology, new hairstyle websites allow you to upload a photo of yourself and drag and drop different hairstyles onto your head in the photograph – a “try before you buy” approach. This reduces the intangibility of services, and helps service businesses achieve the right customer experience.

The problem of inventory

Unlike product companies, service businesses don’t carry inventory. You can’t put a haircut on a shelf and hope it will finally sell tomorrow. Service businesses must learn to level out demand during off-peak hours to maximize the efficiency of their operations. For example, if a hair salon noticed that very few customers came in for a haircut between 9:00am and 11:00am, the shop could offer “early bird” discounts or senior’s discounts to encourage those who might be more available to travel to the salon at that time of day.

Inseparability of services

In a product business, the manufacture of the product was likely performed somewhere else, by someone else. With a service business, the service provider is the business. The hairstylist who performs haircuts really is the business. It won’t matter much to you, walking out with a paper bag over your head after a bad haircut, that the receptionist was friendly, that the coffee was good, or that there was lots of parking. The impact of incompetent or rude service providers is felt directly by the customer. You may not get a second chance with customer experience.

If you’re planning to run a service business, you’ll need to bear these differences in mind. As you review your customer experience and operations process models, think about how will you handle intangibility, inconsistency, lack of inventory, and inseparability of services. Think about how you will handle these differences, while ensuring that your customer experience is the best it can be.

Our word of advice – always put yourself in your customer’s shoes. Will it make sense to the customer? What would the customer think? WWTCT?


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Topics: GoForth Institute Small Business Training, Small Business Tips and Advice | 8 Comments »

8 Responses to “Operations process for service vs product businesses”

  1. Jessica Miller Says:
    May 17th, 2012 at 7:52 am

    Both product and service business have standards to maintain to have their customers return to them. They are related with each other.They could work together to give customers what is due to them.

    Jessica Miller

  2. Tiisetso Motloung Says:
    September 14th, 2016 at 6:22 am

    To me all these processes relate to the quality of the material procured, how to identify the target market in terms of services, the approach and the environment where these services are done.

  3. Varsha Harpal Says:
    October 14th, 2016 at 6:03 am

    quality can be defined as customer satisfaction in the service industry and in production its evident in the end product.

  4. Tiisetso Motloung Says:
    December 14th, 2016 at 1:30 am

    As they always say “a customer is a queen” listen to what your customers say and scan the environment in order to be relevent to their needs and demands.
    the service one provides will always linger in the customers mind whether bad or good; therefore it is imperative that you leave a positive experiance that will also add into your marketing strategy.

  5. Grace Makumbi Says:
    January 11th, 2017 at 8:37 am

    Whether its tangible or intangible the end result must benefit the customer. The customer remains in the judging seat.
    What differentiates these two is that in service orientated industry customer satisfaction is also married to customer experience of the service rendered.

  6. Deon Bothma Says:
    February 8th, 2017 at 8:45 am

    It is a vital part of the process to give the customer what they want, but what is more important is that the raw materials must be of the highest standard, otherwise the end product will not perform, it is also of the utmost importance to have an open door policy with the customer to come and do an own audit.

  7. Quinton Bennett Says:
    March 15th, 2017 at 1:16 pm

    Its quite simple , “serve the customer the way you would want to be served” The product
    will thereafter speak for itself.

  8. Aune Ndjendja Says:
    April 14th, 2017 at 5:08 pm

    If you do what you love, your customers will love what you do regardless of tangible products or intangible services.