To develop an understanding of service productivity, we need to have a clear understanding of the following services production concepts:
1. Efficiency: Rate at which inputs are converted into outputs, e.g., calls per sales representative; customers served per catering assistant.
The emphasis is often on quantitative measurement, and the objective is one of securing the maximum output from the minimum input.
2. Effectiveness: Extent to which purposes/goals are achieved, e.g., the number of productive and profitable calls per sales representative and the nature of customer relationships established and fostered; the number of satisfied customers served per catering assistant.
The emphasis is on qualitative measurement and the objective one of meeting customer needs and delivering service quality.
3. Economy: The cost of selecting and hiring people, materials, and equipment and conversion through training and installation into resource inputs capable of providing service.
It is not a measure of performance but can have an impact on the level of performance.
4. Production Function: All the resources (staff, buildings, equipment, and consumables) are combined to produce Intermediate outputs, i.e., the capacity to produce the relevant service (hospital beds, train seats, restaurant seats).
5. Capacity Utilisation: The ratio of intermediate output to final output, i.e., how good is management at converting the intermediate output to final output into customer take-up.
For example, what percentage of seats will be taken up by customers in a restaurant. For services in general and in particular, where advance preparation is involved (meals in a restaurant), accurate demand forecasting will become part of effective marketing management.