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Management 3121 - Lecture notes 1-5

John Marsh
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Baruch College CUNY

Honors – Service Operations Management (MGT 3121H)

Management 3121
Chapter 1:
Utility- the measure of the customer’s preference of a product or service.
 Composed of three components:
1. Consumption
2. Price
3. Inconvenience
Consumption utility- is a measurement of how much you like a service, ignoring the effects of
price and its inconvenience.
 Comes from various attributes such as, performance and fit
Performance- is a subcomponent capturing how much a customer desires a product or service.
Fit- is a subcomponent that captures how well the product or service matches with the
uniqueness of given consumable.
Price- the total cost of owning a product or receiving the service; Includes expenses such as
shipping and financing etc.
Inconvenience- is the reduction in utility that results from the effort of obtaining the product or
Consumption utility is divided into:
1. Performance
2. Fit
Inconvenience is divided into:
1. Location
2. Timing
Capabilities- the dimension of the customers utility function a firm is able to satisfy.
 Allow a company to do well on some but not all components for customer utility
Tradeoffs- the need to sacrifice one capability in order to increase another one
Strategic tradeoff- when selecting inputs and resources, the firm must choose between a set that
excels in one direction of customer utility or another, but no single set of inputs and resources
can excel in all dimensions


Management 3121 - Lecture notes 1-5

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