Chapter 4- Sm1`

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    - Creating delivery systems in place, Cyberspace

    and time, Enhancing Value by Improving Quality

    and Productivity, Balancing Demand & Capacity

    CHAPTER 4- Planning & Managing

    Service Delivery

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    The Type Of Contact: Options For

    Service Delivery

    There are 3 types of interactions between

    customers and service firms

    y Customer goes to the service provider (or intermediary)

    y Service provider goes to the customer

    y Interaction at arms length (via the Internet, telephone, fax,

    mail, etc.)

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    Method of Service Delivery

    Availability of Service Outlets

    Nature of Interactionbetween Customerand Service

    Organization

    Single Site Multiple Sites

    Customer goes to serviceorganization

    Theater

    Barbershop

    Bus service

    Fast-food chain

    Service organization goesto customer

    House painting

    Mobile car was

    h

    Mail delivery

    Customer and serviceorganization transact atarms length

    Credit card company Broadcast network

    Telephone company

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    Decisions About Place and Timey WHERE should service be delivered?

    i) Locational Constraints- a) Due to operational requirements

    b) Geographic factors

    c) Need for economies of scale

    ii) Ministores - Service factories created on a very small scale inorder to maximize coverage within a geographic area.eg ATMs,Taco Bells K-Minus Strategy, Take Away Outlets.

    iii) Locating in Multipurpose Facilities-Modern buildings areoften designed to be multipurpose, featuring not only office or

    production space but also such services as a bank, ATM, arestaurant, a salon, health club, several stores.

    Onsite child day care facility.

    Chains of retail stores to complement fuel pumps eg In & Out

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    Decisions About Place and Time

    Contd

    y WHEN should service be delivered?

    i) In the past most retail and professional services in

    industrialized countries followed a traditional and rather

    restricted schedule that limited service availability to about40-50 hrs a week.

    ii) This routine reflected social norms and even legal

    requirements or union agreements .

    iii) Today, the situation is different- for some highly responsiveservice operations that standard has become 24/7.

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    24/7 - Factors Encouraging

    Extended Operating Hours

    Economic pressure from

    consumers

    Changes in legislation

    Economic incentives to

    improve asset utilization

    Availability of employees to

    work nights, weekends

    Automated self-service

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    Place vs. Cyberspace

    Place - customers and suppliers

    meet in a physical environment

    Cyberspace - customers and

    suppliers do business

    electronically in virtual

    environment created by

    phone/internet linkages

    Required for people processing services

    Offers live experiences, social

    interaction, e.g., food services

    More emphasis on eye-catching

    servicescape, entertainment

    Ideal for info-based services

    Saves time

    Facilitates information gathering

    May use express logistics service to

    deliver physical core products

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    Technology Revolutionizes Service

    Delivery: Some Examples

    y Smart mobile telephones-PDAs to link users to Internet

    y Voice recognition software- Allows customers to give information and

    request service simply by speaking into a phone or microphone.

    y Automated kiosks for self-service (e.g. bank ATMs)

    y Web sites

    y provide information

    y

    take orders and accept paymenty deliver information-based services

    y Smart cards that can act as electronic wallets- Smart cards contain a

    microchip that can store detailed information about the customer and act

    as an electronic purse containing digital money.

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    E-Commerce:

    Factors that Attract Customers to

    Virtual Stores

    y Convenience (24-hour availability, save time, effort)

    y

    Ease of obtaining information on-line and searching for desireditems

    y Broad selection

    y User friendly websites

    y Some even provide the opportunity for live email dialogue withhelpful customer service personnel.

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    Service Delivery Through

    Intermediaries

    y Travel Agents

    y Distributors or retailers of physical products also take on

    responsibility for supplementary services as information,

    advice, order taking, delivery, installation, billing andpayment.

    y Franchising

    y Agents, brokers

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    Enhancing value by IMProvingquality & Productivity

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    Importance of Productivity and Quality

    for Service Marketers

    Productivity

    y Helps to keep costs down

    y lower prices to develop market, compete better

    y increase margins to permit larger marketing budgets

    y raise profits to invest in service innovation

    y May impact service experience (must avoid negatives)

    y May require customer involvement, cooperation

    Qualityy Gain competitive advantage, maintain loyalty

    y Increase value (may permit higher margins)

    y Improve profits

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    What is Service Quality-

    FivePerspectives

    Transcendental: Quality = excellence. Recognized only throughexperience

    Quality is precise and measurable

    Quality lies in the eyes of the beholder

    Quality is conformance to t

    he firms developedspecifications

    Quality is a trade-off between price and value

    Product-Based:

    User-Based:

    Manufacturing-

    Based:

    Value-Based:

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    Generic Dimensions Customers Use to

    Evaluate Service Quality

    y Credibility

    y Security

    y Access

    y

    Communicationy Understanding the customer

    y Tangibles

    y Reliability

    y

    Responsivenessy Competence

    y Courtesy

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    SERVQUAL SCALE

    y Research instrument developed by Zeithaml to measure

    customer satisfaction with different aspects of service quality.

    y In its basic form, the scale contains 21 perception items and a

    series of expectation items reflecting the 5 dimensions ofservice quality ( Tangibles, Reliability, Responsiveness,

    Assurance, Empathy)

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    Providing service as promised

    Dependability in handling customersservice problems

    Performing services right the first time

    Providing services at the promised time

    Maintaining error-free records

    Keeping customers informed as towhen services will be performed

    Prompt service to customers

    Willingness to help customers

    Readiness to respond to customers

    requests

    RELIABILITY

    RESPONSIVENESS

    Employees who instill confidence incustomers

    Making customers feel safe in theirtransactions

    Employees who are consistently courteous

    Employees who have the knowledge to

    answer customer questions

    ASSURANCE

    Giving customers individual attention

    Employees who deal with customers in acaring fashion with best interest at heart.

    Employees who understand the needs oftheir customers

    Convenient business operating hours

    EMPATHY

    Modern equipment

    Visually appealing facilities

    Employees who have a neat,professional appearance

    Visually appealing materialsassociated with the service

    TANGIBLES

    SERVQUAL Attributes

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    The GAP Model: A conceptual tool to identify

    and correct service quality problems

    Customer experiencerelative to expectations

    Advertising andsales promises

    Customer interpretationof communications

    1. Knowledge Gap

    2. Standards Gap

    3. Delivery Gap

    5. Perceptions Gap

    7. Service Gap

    Customer needsand expectations

    Management definitionof these needs

    Translation intodesign/delivery specs

    Execution ofdesign/delivery specs

    Customer perceptionsof product execution

    6. Interpretation Gap

    4. I.C.Gap

    MANAGEMENT

    CUSTOMER

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    Prescriptions for Closing Service

    Quality Gaps

    y Knowledge: Learn what customers expect--conduct research,

    dialogue, feedback

    y Standards: Specify SQ standards that reflect expectations

    yDelivery: Ensure service performance matches specs--consider rolesof employees, equipment, customers

    y Internal communications: Ensure performance levels match

    marketing promises

    y Perceptions: Educate customers to see reality of service deliveryy Interpretation: Pretest communications to make sure message is

    clear and unambiguous.

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    Hard and Soft Measures of Service

    Quality

    y Hard measures refer to standards and measures that can be counted,

    timed or measured through audits

    y typically operational processes or outcomes

    y e.g. how many trains arrived late?

    y Soft measures refer to standards and measures that cannot easily be

    observed and must be collected by talking to customers, employees

    or others

    y e.g. SERVQUAL, surveys, and customer advisory panels.

    y Control charts are useful for displaying performance over time

    against specific quality standards.

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    Tools to Address Service Quality

    Problems

    y Fishbone diagrams: A cause-and-effect diagram to identify

    potential causes of problems.

    yPareto charts: Separating the trivial from the important. Often, amajority of problems is caused by a minority of causes i.e. the

    80/20 rule.

    y

    Blueprinting: A visualization of service delivery. It allows one toidentify fail points in both the front stage and backstage.

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    Cause and Effect Chart for

    Airline Departure Delays

    Aircraft late to

    gate

    Late food

    service

    Late fuel

    Late cabin

    cleanersPoor announcement of

    departures

    Weight and balance

    sheet late

    Delayed

    Departures

    Delayed check-in

    procedure

    Acceptance of latepassengers

    Facilities,

    EquipmentFront-StagePersonnel

    Procedures

    Materials,Supplies

    Customers

    Gate agents

    cannot process fast

    enough

    Late/unavailable

    airline crew

    Arrive late

    Oversized bags

    Weather

    Air traffic

    Frontstage

    Personnel

    Procedure

    Materials,

    Supplies

    Backstage

    Personnel

    Information

    Customers

    Other Causes

    Mechanical

    Failures

    Late pushback

    Late baggage

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    Analysis of Causes of

    Flight Departure Delays Pareto

    Charts

    Late passengers

    Waiting for pushback

    Waiting for fueling

    Late weight and balance sheet

    Late cabin cleaning / supplies

    Other

    Newark

    All stations, excluding

    Chicago-Midway Hub

    Washington Natl.

    23.1%23.1%

    23.1%15.3%

    15.4%

    53.3%

    15%

    11.3%

    8.7%11.7%

    33.3%

    33.3%19%

    9.5%

    4.9

    %

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    Developing a Blueprint Some Basic

    Advice

    y Identify key activities in creating and delivering the

    service

    y Distinguish between front stage (what customers

    experience) and back stagey Chart activities in sequence

    y Show how interactions between customers and

    employees are supported by backstage activities and

    systems

    y Establish service standards for each step

    y Identify potential fail points

    y Focus initially on big picture (later, can drill down for

    more detail in specific areas)

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    Service Blueprinting: Key Components

    1. Define standards for front stage activities

    2. Specify physical evidence

    3. Identify principal customer actions

    4. ------------line of interaction (customers and front stage personnel)--------

    5. Front stage actions by customer-contact personnel

    6. ------------line of visibility (between front stage and backstage)--------------

    7. Backstage actions by customer contact personnel

    8. Support processes involving other service personnel

    9. Support processes involving ITWhere appropriate, show fail points and risk of excessive waits

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    PRODUCTIVITY

    y Productivity: financial valuation of outputs to inputs

    y Effectiveness:degree to which firm is meeting its goals.

    yEfficiency: comparison to a standard--usually time-based (e.g.,how long employee takes to perform specific task)

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    Measuring Service Productivity

    y Traditional measures of service output tend to ignore variations in

    quality or value of service

    y That is, they focus on outputs rather than outcomes, and stress efficiency

    but not effectiveness.

    y Firms that are more effective in consistently delivering outcomes

    desired by customers can command higher prices. Furthermore,

    loyal customers are more profitable.

    y Measures with customers as denominator include:

    y profitability by customer

    y capital employed per customer

    y shareholder equity per customer

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    Questions to AskWhen Developing

    Strategies to Improve Service

    Productivity

    y How to transform inputs into outputs efficiently?

    y Will improving productivity hurt quality?

    y Will improving quality hurt productivity?

    y Are employees or technology the key to productivity?

    y Can customers contribute to higher productivity?

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    How Productivity Improvements

    Impacts Quality & Value

    y Backstage improvements can ripple to the front stage and

    affect customers

    y e.g., new printing peripherals may affect appearance of bank

    statements.

    y Front-stage productivity enhancements are especially visible

    in high contact services.

    y Some may just require passive acceptance by customers

    y Others require customers to change their scripts and behavior.

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    Balancing demand and capacity

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    Relating Demand to Capacity:

    Four Key Concepts

    y Excess demand: too much demand relative to capacity at a

    given time

    y Excess capacity: too much capacity relative to demand at a

    given timey Maximum capacity: upper limit to a firms ability to meet

    demand at a given time

    y Optimum capacity: point beyond which service quality declines

    as more customers are serviced

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    Variations in Demand Relative to Capacity

    VOLUME DEMANDED

    TIME CYCLE 1 TIME CYCLE 2

    Maximum AvailableCapacity

    Optimum Capacity(Demand and Supply

    Well Balanced

    Low Utilization(May Send Bad Signals)

    Demand exceeds capacity(business is lost)

    Demand exceedsoptimum capacity(quality declines)

    Excess capacity(wasted resources)

    CAPACITY UTILIZED

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    Defining Productive Capacity

    in Services

    y Physical facilities to contain customers

    y Physical facilities to store or process goods

    y Physical equipment to process people, possessions, or information

    y Labor used for physical or mental work

    y Public/private infrastructuree.g., highways, airports, electricity

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    Strategies for Shifting Demand

    to Match Capacity

    y Use signage to communicate busydays and times.

    y Offer incentives to customers forusage during non-peak times.

    y Take care of loyal or regularcustomers first.

    y Advertise peak usage times andbenefits of non-peak use.

    y Charge full price for the service--nodiscounts.

    Use sales and advertising toincrease business from current

    market segments.

    Modify the service offering to

    appeal to new market segments.

    Offer discounts or price

    reductions.

    Modify hours of operation.

    Bring the service to the customer.

    Demand Too High Demand Too LowShift Demand

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    Strategies for Flexing Capacity

    to Match Demand

    y Stretch time, labor, facilities and equipment.

    y Cross-train employees.

    y Hire part-time employees.y Request overtime work from employees.

    y Rent or share facilities.

    y Rent or share equipment.

    y Subcontract or outsource activities.

    y Outsource.

    Perform maintenance,

    renovations. Schedule vacations.

    Schedule employee training.

    Lay off employees.

    Demand Too High Demand Too LowFlex Capacity

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    Thank You