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Variations in Customer Contact - The Service Process Matrix
The classification schemes so far discussed are 'one-dimensional' and do not adequately reflect the great diversity of service operations. In particular, the significant issue of customer involvement in the process is not explained. Of the many attempts to capture this aspect of service operations, perhaps the most useful is the 'two-dimensional' service-process matrix devised by Schmenner (1986), shown in the figure below. The matrix has two axes: 'degree of labour intensity' and 'degree of interaction and customisation'.
If elasticity is -2, price is $10, and marginal cost is $8, should you raise or lower price?
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