SERVICE STRATEGY

PREPARED BY

•EKREM TAÇYILDIZ

•BURCU ERDEM

•KEREM ÖZGER

AFTER COMPLETING THIS CHAPTER,WE WILL BE ABLE TO :

1.Formulate a strategic service vision.

2.Critically discuss the competitive environment of services.

3.Describe ,with examples,how a service competes using the

generic service strategies of overall cost leadership

,differentation,and focus.

4.Discuss the service purchase decision in the context of

qualifiers , service winners,and service losers.

5.Discuss the competitive role of information in services.

6.Explain the concept of the virtual value chain and its role in

service innovation.

7.Discuss the limits in the use of information.

8.Categorize a service firm according to its stage of

competitiveness.

9.Conduct a data envelopment analysis.

THE STRATEGIC SERVICE VISION

Service strategy must begin with vision of the place

and purpose of enterprise. A vision is formulated by

this four question.

Target market

Service concept

Operating strategy

Delivery system

SERVICE DELIVERY SYSTEM;

What are important features of the service

delivery system including.

The role of people?

Technology?

Equıpment?

Layout?

Procedures?

OPERATING STRATEGY;

What are important elements of the strategy?

Operations?

Financing?

Marketing?

Organization?

Human resources?

Control?

SERVICE CONCEPTS;

What are important elements of this 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

TARGET MARKETS SEGMENT

What are common characteristics of important market

segments?

What dimensions can be used to segment the market?

Demographic?

Psychographics?

UNDERSTANDING THE COMPETITIVE ENVIRONMENT

OF SERVICES.

In general,service firms compete in a diffucult economic

enviroment,and there are many reason for this diffuculty.

Relatively low overall entry barriers: service innovations are not

patentable thus innovations can easily be coppied by competitors.

Minimal opportunities for economies of scale: The necessity of

physical travel limits the market area and result in small-scale outlets.

Erratic sales fluctuations: service demand varies as a function of the

time of day and the day of the week.

No advantage of size in dealing with buyers or suppliers: the

small size of many service firms palace them at a disadvantage

in bargaining with powerful buyers or suppliers.

Product substitutions: product innovations can be substitute

for services.

Customer loyallty: 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 oparate

despite low even noneexistent, profits.

COMPETITIVE SERVICE STRATEGIES

There are three generic competitive strategies;

Overall cost leadership

Differentiation

Focus

OVERALL COST LEADERSHIP;

Having a low-cost position provide a defense against

competition

Because efficient competitors will suffer first from

competitive pressures.

Seeking out low-cost customers:some customers cost

less to serve than others, and they can betargetted by

the service provider.

Standardizing a custom service: the key word here is

routine.(ne kadar standartlaştırırsan o kadar ucuzlar)

Overall cost leadership;

• Reducing the personal element in service delivery: thepotentially high-rsik strategy of reducing the personal element in service delivery can be accepted by customers if increasedconvenience results.

• Reducing network costs: Unusal start-up costs areencountered by service firms that require a network to knittogether providers and customers.

• Taking service operations offline: for services in which thecustomer need not to be present, the service transaction can be “decoupled” with some content performed “offline”. Performing services offline represent significant cost saving.

DIFFERENTIATION;

The essence of the differentiation stratgey lies in creating a

service that is perceived as being unique.

Making the intangible tangible

Customizing the standart product

Reducing perceived risk

Giving attention to personnel training

Controlling quality

FOCUS

The focus strategy is built around idea of servicing a

particular target market very vell by addressing

customers’ specific needs.

As a result the firm achives competitive advantage

in its market segment by meeting specific customers

needs and/or by lower costs through specialization.

WINNING CUSTOMERS IN THE MARKETPLACE

Depending on the competition and personal needs,

costumers select a service provider using creteria

listed here.

Availability: how accesible is the service?

Convienience: isn’t service closee to customer.

Dependability: how reliable is the service.

Personalization: are you treated as an individual?

Winning customers in the

marketplace

• Price : is it enough cheap?

• Quality: can you satisfy your customers’ prior

expectations.

• Reputation : how are you known in market?

• Safety : is your service safe enough?

• Speed: how long must ı wait for services?

QUALIFIERS

Criteria used by a customer a subset of service

firms meetin minumum performance requirements.

Criteria used by a

customers tomake the

final purchase decision

among competitors that

have been previously

qualified.

Price

Convenience

Reputation

e.g ATM use by banks

Criteria representingfailure to deliver a service at or above theexpected level, resultingin adissatisfied customerwho is lost forever.

Dependabilty

Personalization

Speed

e.g delivering package on time.

Service Winner Service Losers

COMPETITIVE ROLE OF INFORMATION IN

SERVICES

For service management, information technology

is helping to define the competetive strategy of

succesful firms

CREATION OF BARRIERS TO ENTRY

Many services exist in market that have low entry

barriers. There are three examples.

Reservation system (birer cümle)

Frequent user club

Switching costs.

REVENUE GENERATION

Real time information technologies with a focus

on internal operation can play a competitive role in

increasing revenue opporunities.

Yield management

Point of sale

Expert system

Yield management : An information system that

attempts to maximize revenue for service with

time-perishable capasity(e.g airline, hotels)

Point of sale : It is a system that helps to

facilitate sales.

Expert system: a computer program that can

make inferences using a knowledge base and

decision rules.

DATABASE ASSET

Database aservice firm posseses can be a hidden

asset of strategic importance. The expense of

assembling and maintaining a large database is

itself a barrier to entry by competitors.

Selling informations

Devoloping services

Micromarketing

PRODUCTIVITY ENHANCEMENT

New developments in the collection and analysis of

information have increased our ability to manage

multisite service operations.

Inventory status;

Knowledge about the

ınventory helps us to

control productivity and

provide to profitable

Data envelopment

analysis;

A linear programing

technique that measure

the performance of

service units to

determine an efficiency

frontier for internal

benchmarking.

THE VIRTUAL VALUE CHAIN

Stage in the customer relationship where

information is gathered, organized, selected

synthesized, and disturbuted to create innovative

service products to meet customer needs.

First stage(visibility)

Second stage(mirroring capability)

Third stage ( new customer relationship)

LIMITS IN THE USE OF INFORMATION

Anticompetitive

Fairness

İnvasion of privacy

Data security

Reliability

Anticompetitive: to create entry barriers, the use of

reservation system and frequent user programs has

been ıdentified as potentially anticpmatitive.

Fairness : Do firms behave equal to each

customers?

İnvasion of privacy: Do firms follow their customers’

behaving and their purchase.

Data security: Do firms use or sell their customers

datas without consent of the customer?

Reliability: Are the data accurate?

USING INFORMATION TO CATEGORIZE

CUSTOMERS.

Firms want to catogorize in terms of customer

profitability. There are popular 4 techniques that

given here.

Coding grade: customers based on how profitable

their business is.

Routing: firms distributed different queues

customers based on their code.

Targetting; they interest customers' based on the

value of their business

Sharring;corporate data about your transaction

history with other firms is a source of revenue.

STAGES IN SERVICE FIRM

COMPETITIVENESS

If a service firm is to remain competetive,

continuous improvment in productivity and quality

must be part of its strategy and corporate culture.

Available for service

Journeyman

Distinctive competence achieved

World-class service delivery

AVAIABLE FOR SERVICE

Some services firms and often, government services

in particular , fall into this category because they view

operations as a necessery evil to be performed at

minimum cost. This firms are noncompetitive, and they

only exist in this stage until they are challenged by

competition.

JOURNEYMAN

After maintaining a sheltered existence in stage

1, a service firm may face competition and, thus

may be forced to reevaluate its delivery

system.Operations managers then must adopt

industry practices to maintain parity with new

competitors and avoid a significant loss of market

share.

DISTINCTIVE COMPETENCE ACHIVED

Firms in stage 3 are fotunate to have senior

managers with a vision of what createsvalue for the

customer and who understand the role that

operations managers must play in delivering the

service.

WORLD-CLASS SERVICE DELIVERY

Not satisfied with just meeting customer expectations,

world-class firms expand on these expectations to

levels that competitors find difficult to meet.

Management is pro active in performing higher

standarts of performance and identifying new business

opportunities by listening to customers.world- class

service firm such as disney,marriot and american

airlines define the quality standarts by whic others are

judged.

THANK YOU FOR YOUR

ATTENTION