Service Strategy
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Service Strategy Service Strategy Service Strategy Service Strategy
Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning ObjectivesFormulate a strategic service vision.Describe how a service has addressed each
element in the strategic service concept.Discuss the competitive environment of
services.Describe how a service competes using the
three generic service strategies.Discuss the service purchase decision.Discuss the competitive role of informationExplain the role of the virtual value chain in
service innovation.Discuss the limits in the use of information
Strategic Service VisionStrategic Service VisionTarget Market SegmentsTarget Market SegmentsWhat 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?
Strategic Service VisionStrategic Service VisionService ConceptsService ConceptsWhat 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?
Strategic Service VisionStrategic Service VisionOperating StrategyOperating StrategyWhat 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?
Strategic Service VisionStrategic Service VisionService Delivery SystemService Delivery SystemWhat 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?
Service Design ElementsService Design ElementsService Design ElementsService Design ElementsStructural:
Delivery system (front & back office)Facility design (aesthetics, layout)Location (competition, site characteristics)Capacity planning (number of servers)
Managerial:Service encounter (culture, empowerment)Quality (measurement, guarantee)Managing capacity and demand (queues)Information (data collection, resource)
Staying FocusedStaying FocusedCrotts, Dickson and Ford, “Aligning Organizational
Processes with Mission: The case of service Excellence, Academy of Management Executive, 2005 19:3.
Communications:◦ Top Management Walks the Service Mission Talk◦ Departmental and Unit Goals are Aligned with
Service Mission◦ Performance Standards are Aligned with Service
Mission◦ Environmental Setting and Physical Design
Communicate Service Mission◦ Service Excellence Stories are Told and Successes
Celebrated
Staying Focused (cont.)Staying Focused (cont.)HR:
◦Job Descriptions Include Service Mission
◦Job Ads Include Service Mission◦Interviews Include Questions about
Service Mission◦Orientation Programs Stress Mission◦Performance Appraisals Include and
Reward Service Mission◦Annual Training in Service Mission
Staying Focused (cont.)Staying Focused (cont.)Processes and Measurement:
◦Service Quality Systematically Measured
◦Feedback on Service Quality Systematically Provided to All
◦Service Delivery System Design Reflects Service Mission
Competitive Environment of Competitive Environment of ServicesServicesCompetitive Environment of Competitive Environment of ServicesServicesRelatively Low Overall Entry BarriersEconomies of Scale LimitedHigh Transportation CostsErratic Sales FluctuationsNo Power Dealing with Buyers or
SuppliersProduct Substitutions for ServiceHigh Customer LoyaltyExit Barriers
Competitive Service Competitive Service Strategies Strategies Overall Cost Overall Cost LeadershipLeadership
Competitive Service Competitive Service Strategies Strategies Overall Cost Overall Cost LeadershipLeadershipSeeking Out Low-cost CustomersStandardizing a Custom Service Reducing the Personal Element in
Service Delivery (promote self-service)
Reducing Network Costs (hub and spoke)
Taking Service Operations Off-line
Competitive Service Competitive Service Strategies Strategies DifferentiationDifferentiationCompetitive Service Competitive Service Strategies Strategies DifferentiationDifferentiationMaking the Intangible Tangible
(memorable)Customizing the Standard ProductReducing Perceived RiskGiving Attention to Personnel TrainingControlling Quality
Note: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service.
Competitive Service Competitive Service Strategies Strategies FocusFocusCompetitive Service Competitive Service Strategies Strategies FocusFocusBuyer Group: (e.g. USAA
insurance and military officers)
Service Offered: (e.g. Shouldice Hospital and hernia patients)
Geographic Region: (e.g. Austin Cable Vision and TV watchers)
Customer Criteria for Customer Criteria for SelectingSelecting a Service Provider a Service Provider
Customer Criteria for Customer Criteria for SelectingSelecting a Service Provider a Service ProviderAvailability (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 Purchase DecisionService Purchase DecisionService Purchase DecisionService Purchase DecisionService 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 Purchase Decision Service Purchase Decision (cont.)(cont.)Service Purchase Decision Service Purchase Decision (cont.)(cont.)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).
Competitive Role of Information Competitive Role of Information in Servicesin Services
Competitive use of InformationCompetitive use of Information
Online (Real time)Online (Real time) Offline (Analysis)Offline (Analysis)
External External (Customer)(Customer)
Creation of barriers to Creation of barriers to entry:entry:
Reservation systemReservation system
Frequent user clubFrequent user club
Switching costsSwitching costs
Database asset:Database asset:
Selling informationSelling information
Development of servicesDevelopment of services
MicromarketingMicromarketing
Internal Internal (Operations)(Operations)
Revenue generation:Revenue generation:
Yield managementYield management
Point of salesPoint of sales
Expert systemsExpert systems
Productivity enhancement:Productivity enhancement:
Inventory StatusInventory Status
Data envelopment analysis Data envelopment analysis (DEA)(DEA)
The Virtual Value ChainThe Virtual Value ChainMarketplace vs MarketspaceCreating New Markets Using Information
(Gather, Organize, Select, Synthesize, and Distribute)
Three Stage Evolution• 1st Stage (Visibility): See physical operations more effectively with information – Ex. USAA “paperless operation” • 2nd Stage (Mirroring Capability): Substitute virtual activities for physical – Ex. USAA “automate underwriting” • 3rd Stage (New Customer Relationships): Draw on information to deliver value to customer in new ways – Ex. USAA “event oriented service”
Limits in the Use of Limits in the Use of InformationInformationAnti-competitive (Barrier to entry)
Fairness (Yield management)
Invasion of Privacy (Micro-marketing)
Data Security (Medical records)
Reliability (Credit report)
Target Strategic Advantage
Low cost Uniqueness
Entire Market
Overall cost leadership
Differentiation
Market Segment
Focus
America America WestWest Airlines Strategy Airlines StrategyAmerica America WestWest Airlines Strategy Airlines Strategy
Service Qualifiers
Service Winners
Service Losers
America America WestWest Winning Winning CustomersCustomers
America America WestWest Winning Winning CustomersCustomers
Target market segments
Service concept
Operating strategy
Service delivery system
America West Strategic Service America West Strategic Service VisionVision
America West Strategic Service America West Strategic Service VisionVision
CABIN SERVICECABIN SERVICE
Full ServiceFull Service
PREFLIGHT SERVICEPREFLIGHT SERVICE
InconvenienInconvenientt
ConvenientConvenient
No AmenitiesNo Amenities
America America WestWest Airlines Airlines PositioningPositioning
America America WestWest Airlines Airlines PositioningPositioning
Alamo Drafthouse Alamo Drafthouse PositioningPositioning
MOVIEMOVIE SELECTION SELECTION
FOOD QUALITYFOOD QUALITY
ManyManyFewFew
PoorPoor
GoodGood
Alamo Drafthouse Alamo Drafthouse Strategic Service VisionStrategic Service VisionTarget market segments
Service concept
Operating strategy
Service delivery system
Alamo Drafthouse Alamo Drafthouse Winning CustomersWinning CustomersQualifiers
Service winners
Service losers
Alamo Drafthouse Alamo Drafthouse Profitability Profitability RecommendationsRecommendations
Discussion TopicsDiscussion TopicsGive examples of service firms that use both
the strategy of focus and differentiation and the strategy of focus and overall cost leadership.
Use the service design elements for a service of your choice to illustrate how all eight elements support the service strategy.
What ethical issues are associated with micro-marketing?
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?
Interactive Class ExerciseInteractive Class ExerciseDivide into two groups and
debate the following proposition:
Frequent flyer award programs are or are not anticompetitive