Assuit University. Faculty of Computers and Information. Academic Year 2015 / Elective Course Year 4. Service Management

Transcription

1 Assuit University Faculty of Computers and Information Academic Year 2015 / 2016 Elective Course Year 4 Service Management

2 Understanding Services The Role of Services in an Economy The Nature of Services Services Strategy

3 Service s cornerstone Service Management; Is all about the efficient, effective and economical use of its 4Ps People Products Processes Partners People Processes Products Partners

4 Service-Product Bundle Distinguish between PRODUCT and SERVICE is difficult, because Purchase a Product is accompanied by some facilitating service, and vice versa Purchase a Service often includes facilitating goods. Example; Product installation Food at restaurant Element Business Core Goods Core Service Example Example Custom clothier Business hotel Core Business suits Room for the night Peripheral Goods Peripheral Service Garment bag Deferred payment plans Bath robe In house restaurant Variant Coffee lounge Airport shuttle

5 Distinctive مميزه Characteristics of Services Distinction التمييز between Services Inputs and Services Resources; Services Inputs are the customers themselves Services Resources are the Facilitating Goods, Labor, and Service s Capital Customers are major part of the service system, and they participate in the services process. (customers arrive at their own unique demands on the service system) Matching services capacity with demand is a challenge

6 Distinctive Characteristics of Services Banking Service (example) The Focus is on processing data & information, not people Electronic funds transfer, can be substituted for physically depositing a payroll check. Thus, customer presence at bank is unnecessary

7 Distinctive Characteristics of Services Customer Participation in the Service Process: requires attention to facility design, opportunities for co-production, concern for customer and employee behavior -promote confidence- (e.g. Front- Office & Back-Office) Fast food restaurants; customer is a significant component of the service process (place the order & expected to clear the table) Simultaneity :التزامن Service cannot be stored, it is created and consumed simultaneity. Customer waiting (Queuing) is an issue in service management, thus selecting service capacity, facility utilization, and use of idle time all are balanced against customer waiting time Opportunities for personal selling, interaction creates customer perceptions of quality (product can be inspected before delivery, but service rely on other measures)

8 Distinctive Characteristics of Services Perishability للفساد / الصالحيه) :(قابل Service is a perishable commodity cannot be stored, it is lost forever if not used (e.g. empty airline seat, unoccupied hotel,..). Full utilization of service is management challenge. Opportunity loss of idle capacity, need to match supply with demand To face the variable demand and Time-Perishable capacity there are three options; 1. Smooth Demand (reservation, appointment, and/or price incentives) 2. Adjust Service Capacity (part-timers in peak Hrs, work shifts according to demand, and/or increasing the customer self-service) 3. Allow customer to wait - last option Intangibility: Service is an idea and concept, but product is thing. Thus, services innovations are not patentable. Service provider use Franchise concept to sell its idea and establish a brand name, however, customer rely on reputation and certification granted from government)

9 Distinctive Characteristics of Services :عدم التجانس Heterogeneity The Combination of the intangible nature of services and the customer as participant in the service delivery system results in variation of service from customer to customer. The interaction between customer and employee in services, creates satisfying human work experience. In service, work activity generally is oriented toward people rather than things, however, there are exceptions e.g. process information (communications), or customers property (brokerage services) In service, employee is the firm s sole contact with customers, therefore employees attitudes & performance are important for the success of the service provider firm. In service business you cannot make happy customer (guests) with unhappy employees.., J. Willard Marriott

10 Non-ownership Classification of Services In service business, firms share their resources among customer by allocating the use of the service. Customers use the firm s asset for a specific time (temporary ownership) Sharing resources among customers presents management challenges; Returning goods to acceptable condition (renting) Keeping the resource skill (consultation) Avoid idle periods when hours are not billable (pricing policy)

11 Non-ownership Classification of Services Type of Service Customer value Examples Management Challenge Goods rental Obtain temporary right to exclusive use Vehicles, tools, furniture, equipment Site selection and maintenance Place and space rental Obtain exclusive use of defined portion of a larger space Hotel room, seat on airplane, storage unit Housekeeping and achieving economies of scale Labor and expertise Hire other people to do a job Car repair, surgery, management consulting Expertise is a renewable resource, but time is perishable Physical facility usage Gain admission to a facility for a period of time Theme park, camp ground, physical fitness gym Queuing and crowd control Network usage Gain access to participate Electric utility, cell phone, internet Availability and pricing decisions

12 The Service Package Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane. Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history. Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi.

13 The Service Package Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, ontime departure. Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot.

14 Service Package Supporting Facility Explicit Services Service Experience Implicit Services The Service Package is defined as a bundle of goods and services with information that is provided in some environment

15 Grouping Services by Delivery Process Concept of service management should be applicable to all service organizations (e.g. hospital administrators could learn from restaurant and hotel business) In Service Process Matrix, services are classified across two dimensions that significantly affect the character of the service delivery process. Vertical dimension measures degree of labor intensity cost) (the ratio of labor cost to capital كثافه Horizontal dimension measures degree of customer interaction and customization (ability of customer to affect personally the nature of service being delivered)

16 Degree of labor intensity The Service Process Matrix Degree of interaction and customization Low High Low Service Factory Low labor / low interaction and customization Airlines Hotels Resorts & recreation Service Shop Low labor / high interaction and customization Hospitals Auto repair Low High Mass Service High labor / low interaction and customization Retailing Schools Wholesaling Professional service High labor / high interaction and customization Physicians Lawyers Accountants High Low High

17 Challenges for Service Managers Low interaction / Low customization Marketing Making service warm Attention to physical surroundings Low labor intensity; Capital decisions Technological advances Managing demand to avoid peaks and to promote off-peaks Scheduling service delivery Service Factory Mass Service Service Shop Professional service High labor intensity; Hiring Training Methods development and control Employees welfare Start-up of new units Managing growth High interaction / High customization Maintaining quality Managing advancement of people delivering service Gaining employee loyalty Managing flat organization Fighting cost increases

18 Classifying Services for Strategic Insights Strategic insights that يتجاوزtranscend industry boundaries are needed; e.g. Competitive strategies used by Banking could find an application in laundry services, both deal with a customer s property. (drop-off & pick-up Vs. ATM ) The following classification schemes provide an appreciation of possible strategic dimensions that transcend service industry boundaries Nature of the Service Act ; 1. Relationship with Customers 2. Customization and Judgment 3. Nature of Demand and Capacity 4. Method of service Delivery

19 Classifying Services for Strategic Insights Nature of the Service Act; Consider across 2 dimensions; who or what is the direct recipient of the service Vs. the tangible nature of the service. This creates 4 possible classifications Classifications raises questions about the way of service delivery, the availability of customer during delivery of the service and at which stage; To initiate the service To terminate the service transaction Not at all Or, throughout the service The service facility as part of the delivery process; Dose customer come to the service or service travel to customer (e.g. Ambulance) Facility design & employee interaction (customer s impression)

20 Nature of the service Act Classifying Services for Strategic Insights Nature of the Service Act Direct recipient of the service People Property Tangible People s bodies Health care Passenger transportation Beauty salons Restaurants Physical possessions Freight transportation Repair & maintenance Laundry & dry cleaning Veterinary care Intangible People s minds Education Broadcasting Information services Theaters Museums Intangible assets Banking Legal services Accounting Securities insurance

21 Nature of service delivery Classifying Services for Strategic Insights 1. Relationship with Customers Build long-term relation with customer in person, which is not the case in manufacture (through distribution channel) Knowing your customer is a significant competitive advantage for a service provider Type of relation between service firm and its customer Continuous delivery Discrete transactions Membership Insurance Telephone subscription Banking Retailing Schools Wholesaling No formal relation Radio / TV Police protection Public highway Toll highway Pay phone Restaurant Public transportation

22 Extent to which customer contact employees exercise judgment in meeting customer needs Classifying Services for Strategic Insights 2. Customization and Judgment Because service is created as it is consumed, and customer is often a participant in the process, thus to tailor the service to customer need is an exist opportunity. Degree of customization Low High Low Surgery Taxi service Gourmet restaurant Telephone service Hotel service Retail banking cafeteria High Education (large classes) Preventive health programs Family restaurant Public transportation Movie theater Spectator sports Institutional food service

23 Extent to which demand exceeds capacity Classifying Services for Strategic Insights 3. Nature of Demand and Capacity Inventory is not an option, thus the extent of demand and supply imbalances varies across service industries. Extent of demand fluctuations over time Wide Narrow Peak demand met without major delay Peak demand regularly exceeds capacity Electricity Telephone Police emergencies Maternity unit - Hospital Tax preparation Hotels Passenger transportation Insurance Legal services Banking Laundry & dry cleaning Fast-Food restaurant Movie theater Gas station

24 Nature of service delivery Classifying Services for Strategic Insights 4. Method of service Delivery Has both a geographic component and a level-of-customerinteraction component. Services with multiple sites have significant management implications for ensuring Quality & Consistency Using Internet-USP allows customer to do some Banking transaction from home or to track their packages, thus decrease amount of physical interaction with human service provider. A availability of service outlets Customer travels to service Service firm delivers Transaction at arm s length Theater Barbershop Taxi Single site Credit card company Multiple site Bus service Fast-food chain Mail delivery Telephone company

25 Open-System View of Services In an Open-System environment with customer as a participant, the role of Service Operation Manager includes the functions of both Production and Marketing, which is not the case in traditional manufacturing as both functions are separated. For services, the process is the product Customer impressions is based on the total service experience not just on the explicit service performed. Employee attitudes, facility design, (service quality) In open-system customer participate actively in the process, which can increase productivity and create a competitive edge. (providing a salad bar at restaurant)

26 Open-System View of Services Consumer arrivals Input Service Process Consumer participant Consumer provider interface Consumer departures output Evaluation Criteria Measurement Control Monitor Consumer Demand Perceived needs Location Alter demand Service Operations Manager Production function Monitor & control process Marketing function Interact with consumers Control demand Schedule supply Service Personnel Empowerment Training Attitudes Modify as necessary Communicate by advertising Define standard Service Package Supporting facility Facilitating goods Information Explicit services Implicit services Basis of selection

27 The Nature of Services Explain what is meant by a service-product bundle. Identity and critique the five distinctive characteristics of a service operation and explain the implications for managers. Explain how services can be described as customers renting resources. Describe a service using the five dimensions of the service package. Use the service process matrix to classify a service. Explain how a strategic classification of services can be helpful to managers. Explain the role of a service manager from an opensystems view of service.

28 Back Office The Nature of Services Key Terms & Definitions Explicit services Facilitating goods Front Office Implicit services Service Package Service process matrix Supporting facility Time-perishable capacity

29 Understanding Services The Role of Services in an Economy The Nature of Services Services Strategy

30 3. Service Strategy Strategic service vision Competitive environment of services. How a service competes using the three generic service strategies. What is meant by qualifiers, service winners, and service losers. The competitive role of information in services. The concept of the virtual value chain and its role in service innovation. Identify potential limits in the use of information as a competitive strategy. Categorize a service firm according to its stage of competitiveness.

31 Service life cycle Portfolio Mgmt. Financial Mgmt. Demand Mgmt. Service Catalogue Service Level Mgmt. Capacity Mgmt. Availability Mgmt. Continuity Mgmt. Information Security Supplier Mgmt. S & T Mgmt. Change Mgmt. SACM Mgmt. Release & Deploy Validation Evaluation Knowledge Mgmt. Event Mgmt. Incident Mgmt. Fulfillment Mgmt. Problem Mgmt. Access Mgmt. Service Strategy (Product Mgmt.) Service Design (Planning) Service Transition (Implementation) Service Operation (Delivery Mgmt.) Service Lifecycle Continual Service Improvement (Quality & Optimization)

32 The Strategic Service Vision Service begins with; Idea & Need In formulating a strategic service vision, a number of questions should be categorized and asked; Questions about Service Delivery System Questions about Operating Strategy Questions about Service Concept Questions about Target Market Segment How are the effectiveness of these categories will support each others and as an one Strategic Service Vision

33 Dose the service delivery system support the operating strategy? To what extent is the value of results and process quality for customer leveraged over cost to the service provider? How well is the service concept positioned in relation to customers needs and competitors offering? The Strategic Service Vision Service Delivery System Operating Strategy Service Concept Target Market Segment What are important features of the service delivery system including: role of people, technology, equipment, layout, procedures? What capacity does it provide, normally, at peak levels? To what extent does it, help insure quality standards, differentiate the service from competition, provide barriers to entry by competitors? What are important elements of the strategy: operations, financing, marketing, organization, human resources, control? On which will the most effort be concentrated? Where will investments be made? How will quality and cost be controlled: measures, incentives, rewards? What results will be expected versus competition in terms of, quality of service, cost profile, productivity, morale/loyalty of servers? What are important elements of the service to be provided, stated in terms of results produced for customers? How are these elements supposed to be perceived by the target market segment, by the market in general, by employees, by others? How do customers perceive the service concept? What efforts does this suggest in terms of the manner in which the service is designed, delivered, marketed? What are common characteristics of important market segments? What dimensions can be used to segment the market, demographic, psychographic? How important are various segments? What needs does each have? How well are these needs being served, in what manner, by whom?

34 The Service Competitive Environment Relatively Low Overall Entry Barriers Service innovations are not patentable and not capital-intensive, thus it easily can be copied. Economies of Scale Limited Due to nature of service (simultaneous / consumption) customer travel to service or service travel to customer. The necessity of travel limits the market area (franchise or using internet e.g Amazon.com) Erratic Sales Fluctuations Service demand varies as a function of the day time and the week day (seasonally) No advantage in Dealing with Buyers or Suppliers The small size of many service firms places them at a disadvantage in bargaining with buyer or suppliers

35 The Service Competitive Environment Product Substitutions for Service Product innovations can be substitution for services (e.g. home diabetes test). Thus, service firms most not only watch competitors but also anticipate potential product innovations that might make their service obsolete. Customer Loyalty Established firms using personalized service create a loyal customer base, which becomes a barrier to entry by new services. Exit Barriers Marginal service firms may continue to operate despite low or even nonexistent profits. E.g. firms may have employment of family members rather than maximizing profit. Other firms have a hobby or romantic appeal that provides their owners with enough job satisfaction to offset low financial compensation. (difficult on Profit-motivated firms)

36 Competitive Service Strategies Overall Cost Leadership Seeking out Low-Cost Customers Standardizing a custom Service Reducing the personal Element in Service Delivery Reducing Network Costs Taking Service Operations offline Differentiation (Being unique) Making the Intangible Tangible (memorable) Customizing the Standard product Reducing Perceived Risk Giving Attention to Personnel Training Controlling Quality Focus the idea is servicing a particular target market very well by addressing customers specific needs

37 Winning Customers in the Marketplace Customer Criteria for Selecting a Service Provider Availability Convenience Dependability Personalization Price Quality Reputation Safety Speed (24 hour ATM) (Site location) (On-time performance) (Know customer s name) (Quality surrogate) (Perceptions important) (Word-of-mouth) (Customer well-being) (Avoid excessive waiting)

38 Winning Customers in the Marketplace Service Qualifier: To be taken seriously a certain level must be attained on the competitive dimension, as defined by other market players. Examples are cleanliness for a fast food restaurant or safe aircraft for an airline. Service Winner: The competitive dimension used to make the final choice among competitors. Example is price. Service Loser: Failure to deliver at or above the expected level for a competitive dimension. Examples are failure to repair auto (dependability), rude treatment (personalization) or late delivery of package (speed).

39 Competitive Role of Information in Services Creation of barriers to entry Barriers to entry can be created by using economies of scale, building market share, create switching costs, investing in communications network, and using database and information technologies to strategic advantage. Three uses of information for creating barriers to entry; Reservation Systems Frequent User Club Switching costs Revenue Generation Real-time IT with focus on internal operations can play a competitive role in increasing revenue opportunities. Yield management Point-of-sale Expert systems

40 Competitive Role of Information in Services Database Asset The DB a service firm possesses can be hidden asset of strategic importance. The expense of assembling and maintaining a large DB is itself a barrier to entry by competitors. Selling Information Developing Services Micromarketing Productivity Enhancement New developments in the collection and analysis of information have increased the ability to manage multisite service operations. Inventory Status (e.g. hand-held) Data Envelopment Analysis (linear programming technique to evaluate nonprofit and public sector org.)

41 Strategic Role of Information in Services Competitive use of information External (Customer) Internal (operations) Online (Real time) Creation of barriers to entry Reservation Systems Frequent User Club Switching costs Revenue Generation Yield management Point-of-sale Expert systems Offline (Analysis) Database Asset Selling Information Developing Services Micromarketing Productivity Enhancement Inventory Status Data Envelopment Analysis

42 Limits in the use of information Anti-competitive (e.g. Barrier to entry) Fairness (e.g. Yield management) Invasion of Privacy (e.g. Micro-marketing) Data Security (e.g. Medical records) Reliability (e.g. Credit report)

43 Using Information to Categorize Customers Coding is grades customers on how profitable their business. Routing is used by call centers to place customers in different queues based on customer code. Targeting allows choice customers to have fees waived and get other hidden discounts. Sharing data about your transaction history with other firms is a source of revenue.

44 Service Strategy Discussion Topics 1. Give examples of service firms that use both the strategy of focus and differentiation and the strategy of focus and overall cost leadership. 2. What ethical issues are associated with micromarketing? 3. For each of the three generic strategies (i.e., cost leadership, differentiation, and focus) which of the four competitive uses of information is most powerful? 4. Give an example of a firm that begin as world-class and has remained in that category. 5. Could firms in the world-class service delivery stage of competitiveness be described as learning organizations?

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