Faculty of Computers and Information...• Perishability (هيحلاصلا / داسفلل لباق):...
Transcript of Faculty of Computers and Information...• Perishability (هيحلاصلا / داسفلل لباق):...
Assuit University
Faculty of Computers and Information
Academic Year 2015 / 2016
Elective Course – Year 4
Service Management
Understanding Services
The Role of Services in an Economy
The Nature of Services
Services Strategy
Service’s cornerstone
People
Products Processes
Partners
Service Management; Is all about the efficient, effective and
economical use of its 4Ps
People
Products
Processes
Partners
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 Core Goods
Example
Core Service
Example
Business Custom clothier Business hotel
Core Business suits Room for the night
Peripheral
Goods
Garment bag Bath robe
Peripheral
Service
Deferred payment plans
In house restaurant
Variant Coffee lounge Airport shuttle
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
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
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)
Distinctive Characteristics of Services
• Perishability (قابل للفساد / الصالحيه): 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)
Distinctive Characteristics of Services
• Heterogeneity عدم التجانس: – 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”
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)
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
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.
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, on-time 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.
Service Package
Service Experience
Explicit Services
Implicit Services
Supporting Facility
The Service Package is defined as a bundle of goods and
services with information that is provided in some environment
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 (the ratio of labor cost to capital cost) كثافه
– Horizontal dimension measures degree of customer interaction and customization (ability of customer to
affect personally the nature of service being delivered)
The Service Process Matrix
Service Shop Low labor / high interaction and customization
• Hospitals • Auto repair
Service Factory Low labor / low interaction and customization
• Airlines • Hotels • Resorts & recreation
Professional service High labor / high interaction and customization
• Physicians • Lawyers • Accountants
Mass Service High labor / low interaction and customization
• Retailing • Schools • Wholesaling
Degree of interaction and customization
Low High
Low
High
De
gre
e o
f la
bo
r in
ten
sity
Low High
Low
High
Challenges for Service Managers
Service Shop Service Factory
Professional service Mass Service
Low labor intensity; • Capital decisions • Technological advances • Managing demand to avoid peaks and
to promote off-peaks • Scheduling service delivery
High labor intensity; • Hiring • Training • Methods development and control • Employees’ welfare • Start-up of new units • Managing growth
Low interaction / Low customization • Marketing • Making service
“warm” • Attention to
physical surroundings
High interaction / High customization • Maintaining quality • Managing
advancement of people delivering service
• Gaining employee loyalty
• Managing flat organization
• Fighting cost increases
Classifying Services for Strategic Insights
Strategic insights that transcendيتجاوز 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
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)
Classifying Services for Strategic Insights Nature of the Service Act
Physical possessions • Freight transportation • Repair & maintenance • Laundry & dry cleaning • Veterinary care
People’s bodies • Health care • Passenger
transportation • Beauty salons • Restaurants
Intangible assets • Banking • Legal services • Accounting • Securities • insurance
People’s minds • Education • Broadcasting • Information services • Theaters • Museums
Direct recipient of the service
People Property
Tangible
Intangible
Nat
ure
of
the
se
rvic
e A
ct
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
• Radio / TV • Police protection • Public highway
• Insurance • Telephone subscription • Banking
• Toll highway • Pay phone • Restaurant • Public transportation
• Retailing • Schools • Wholesaling
Type of relation between service firm and its customer
Membership No formal relation
Continuous
delivery
Discrete
transactions
Nat
ure
of
serv
ice
de
live
ry
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.
• Education (large classes) • Preventive health
programs • Family restaurant
• Surgery • Taxi service • Gourmet restaurant
• Public transportation • Movie theater • Spectator sports • Institutional food service
• Telephone service • Hotel service • Retail banking • cafeteria
Degree of customization
Low High
Low
High
Exte
nt
to w
hic
h c
ust
om
er
con
tact
e
mp
loye
es
exe
rcis
e ju
dgm
en
t in
m
eet
ing
cust
om
er
ne
ed
s
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.
• Insurance • Legal services • Banking • Laundry & dry cleaning
• Electricity • Telephone • Police emergencies • Maternity unit - Hospital
• Fast-Food restaurant • Movie theater • Gas station
• Tax preparation • Hotels • Passenger transportation
Extent of demand fluctuations over time
Wide Narrow
Peak demand
met without
major delay
Peak demand
regularly exceeds
capacity
Exte
nt
to w
hic
h d
em
and
ex
cee
ds
cap
acit
y
Classifying Services for Strategic Insights
4. Method of service Delivery • Has both a geographic component and a level-of-customer-
interaction 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.
Bus service Fast-food chain
Theater Barbershop
Mail delivery
Taxi
Telephone company Credit card company
Single site Multiple site
Customer travels to service
Service firm delivers
Transaction at arm’s length
A availability of service outlets
Nat
ure
of
serv
ice
de
live
ry
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)
Open-System View of Services
Service Process
Service Operations Manager
Service Package
Consumer Demand Service Personnel
Evaluation
Input
Alter
demand
output
Schedule
supply
Control Monitor
Modify as necessary
Define standard
Basis of
selection Communicate
by advertising
Consumer arrivals Consumer
departures
• Production function Monitor & control process
• Marketing function Interact with consumers
Control demand
Perceived needs
Location
Empowerment
Training
Attitudes
Criteria
Measurement
Consumer participant
Consumer – provider
interface
Supporting facility
Facilitating goods
Information
Explicit services
Implicit 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 open-
systems view of service.
The Nature of Services
The Nature of Services Key Terms & Definitions
– Back Office
– Explicit services
– Facilitating goods
– Front Office
– Implicit services
– Service Package
– Service process matrix
– Supporting facility
– Time-perishable capacity
Understanding Services
The Role of Services in an Economy
The Nature of Services
Services Strategy
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.
Service life cycle
Service Strategy
(Product Mgmt.)
Service Design (Planning)
Service Transition
(Implementation)
Service Operation
(Delivery Mgmt.)
Continual Service Improvement (Quality & Optimization)
• 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 Lifecycle
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
The Strategic Service Vision Service Delivery System
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?
Operating Strategy
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?
Target Market Segment
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?
Service Concept
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? D
ose the s
erv
ice d
eliv
ery
sys
tem
support
the o
pera
ting s
trate
gy?
To w
hat
exte
nt
is the v
alu
e o
f re
sults a
nd p
rocess q
ualit
y fo
r
custo
mer
levera
ged o
ver
cost
to the s
erv
ice p
rovid
er?
How
well
is t
he s
erv
ice c
oncept
positio
ned in r
ela
tion
to c
usto
mers
’ needs a
nd c
om
petito
rs’ offering?
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
• 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)
The Service Competitive Environment
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”
Winning Customers in the Marketplace Customer Criteria for Selecting a Service Provider
• Availability (24 hour ATM)
• Convenience (Site location)
• Dependability (On-time performance)
• Personalization (Know customer’s name)
• Price (Quality surrogate)
• Quality (Perceptions important)
• Reputation (Word-of-mouth)
• Safety (Customer well-being)
• Speed (Avoid excessive waiting)
• 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).
Winning Customers in the Marketplace
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
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.)
Strategic Role of Information in Services
Database Asset • Selling Information • Developing Services • Micromarketing
Creation of barriers to entry • Reservation Systems • Frequent User Club • Switching costs
Productivity Enhancement • Inventory Status • Data Envelopment Analysis
Revenue Generation • Yield management • Point-of-sale • Expert systems
Competitive use of information
Online
(Real time)
Offline
(Analysis)
External
(Customer)
Internal
(operations)
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)
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.
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 micro-marketing?
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”?