MBA 570 Summer 2011. Understanding the managerial implications of the distinctive characteristics...
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Transcript of MBA 570 Summer 2011. Understanding the managerial implications of the distinctive characteristics...
Service OperationsThe Nature of Services
MBA 570Summer 2011
Unique Characteristics of Services
Intangibility: creative advertising, no patient protection, importance of reputation
Perishability: cannot inventory, opportunity loss of idle capacity, need to match supply with demand
Heterogeneity: customer participation in delivery process results in variability
Simultaneity: opportunities for personal selling, interaction creates customer perceptions of quality
Site Location: dictated by your customers Customer Participation in the Service Process: attention
to facility design but opportunities for co-production Difficulty in measuring quality of output:
Interactive Model of an Economy
Businessservices
Publicadministration
Infrastructureservices
Tradeservices
Extractivesector
Manufacturingsector
Customer
Social/personalservices
1850 1880 1910 1935 1960 1975 1995 20070
10
20
30
40
50
60
70
80
90
Farming
Services
Industry
Global Employment, % Share
1980 1989 1998 20070
10
20
30
40
50
60
70
80Canada
US
Australia
Belgium
Israel
France
Finland
Italy
Japan
UK
Percent Employment in ServiceJobs, by Nation, 1983-2007
Growth In Employment
1980-2007
0
20
40
60
80
100
120 Legal
Business
Health
Recreat.
Hotels
Education
Retail
Financial
Wholesal
Transport
Global Private Sector Services, 1980-2007, %
1970 1996 20070
10
20
30
40
50
60
70
80
U. S.
Canada
Italy
U. K.
Japan
W. Ger.
Services as % of GDP
Why Services Are Important
Increased Competition Manufacturing Support Makes Economic Sense
“When the quality and price of competingproducts are similar or nearly identical,service activities can ‘differentiate’undifferentiated products in the mind ofthe customer”
Glaskowsky et al.
Relative Importance of Service Activities
Relative Importance of Marketing Variables
ProductPriceServiceSales EffortTOTAL
All
Indust
ries
All M
an
ufa
ctu
rin
g
Chem
icals
&Pla
stic
s M
fg.
Food M
fg.
36232318100
38242018100
38261818100
36271522100
Ele
ctro
nic
s M
fg.
Paper
Mfg
.
All
Oth
er
Manufa
cturi
ng
48142216100
29262421100
38252215100
All M
erc
han
dis
ing
Consu
mer
Goods
Merc
handis
ing
Indust
rial G
oods
Merc
handis
ing
30222721100
31232323100
28173916100
National Council of Physical Distribution Management
Parallel Product/Service Design
ProductConcept
Product Design
ProductDelivery
ServiceConcept
ServiceDesign
ServiceDelivery
SuppliersTier 2
SuppliersTier 1
Manufacturing
Inbound Logistics
Operations
Outbound Logistics
CUS
T
O
M
E
R
S
DistributorsRetailers
The Supply Chain
Information
Manufacturing
ServiceIntermediary
CommercialServices User(Self-Service)
Consumer(Self-Service)
R & D
ProductDesign
Distribution
ServicesWholesalin
gRetailingRepairing
Service IndustriesCommunications, Transportation,
Utilities, Health Care, Banking, etc.
Private Business ServicesSupporting Manufacturing,
Accounting, Legal, Consulting, Software, Maintenance
Government Support ServicesWaste Disposal Services, Road Maintenance,
Education, Health Support, Standards,Police and Fire Protection, etc.
Services Inside the
Company--Design, Legal,
AccountingAdvertising,
etc.
The Service Revolution
“There are no such things as serviceindustries. There are only industries whose service components are greater or less then those of other industries. Everybody is in service”
Theodore Levitt
Service and Profitability
Reduced operating expenses Competitive differentiation Increased quality Increased efficiency Increased responsiveness Increased market Share Increased customer loyalty
Contributors to Market Share
MarketShare
Time
Market ShareDue to
Product Features
Market ShareDue to
Captive Markets
Market ShareDue to
Service Activities
Proportion of Goods and Services in Purchase Bundle
Goods Services
100% 75 50 25 0 25 50 75 100% Self-service gasoline……………. Personal computer…………… Office copier…………………. Fast-food restaurant………… Gourmet restaurant………… Auto repair…………………… Airline flight……………………. Haircut………………………….
The Service Process Matrix Degree Degree of Interaction and
Customization of labor Intensity Low High
Service factory: Service shop: * Airlines * Hospitals Low * Trucking * Auto repair * Hotels * Other repair services * Resorts and recreation Mass service: Professional service: * Retailing * Doctors High * Wholesaling * Lawyers * Schools * Accountants * Retail aspects of * Architects commercial banking
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 purchased or consumed by the buyer or items provided by the consumer. Examples are food items, auto parts, legal documents, golf clubs.
The Service Package (cont.) 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.
The Servuction Service Model
Customer A
CustomerB
Bundle of ServiceBenefits Received
By Customer A
InanimateEnvironment
ContactPersonnelor Service Provider
VisibleInvisible
InvisibleOrganizationAnd System
Moments of Truth Each customer contact is called a moment
of truth.
You have the ability to either satisfy or dissatisfy them when you contact them.
A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.
Cycle of Service
Begin Service Encounter
End Service Encounter
= MOT
Service Process Orientation
Customer as Coproducer Front and Back Office Perspectives Service Profit Chain Focus on Internal and
External Customers Quality (perceptions vs expectations) Focus on Both Efficiency and
Effectiveness Use IT as Productivity Enabler for Both
Internal and External Customers
Customer Contact View of Services Degree of Customer Contact Influences
Potential Efficiency of Service
Separate High- and Low-Contact Operations
Consider Sales Opportunity and Production Efficiency Tradeoff
Servicescapes
Designing Physical Surroundings to Affect Employee and Customer Behavior
Ambient Conditions: background characteristics such as noise level, music, lighting, temperature, and scent.
Spatial Layout and Functionality: reception area, circulation paths of employees and customers, and focal points.
Signs, Symbols, and Artifacts: selection, orientation, location, and size of objects.
Service Profit Chain
• Internal quality drives employee satisfaction• Employee satisfaction drives retention and
productivity• Employee retention and productivity drives
service value.• Service value drives customer satisfaction.• Customer satisfaction drives customer loyalty.• Customer loyalty drives profitability and
growth.
InternalServiceQuality
EmployeeSatisfaction
EmployeeRetention
Employee Productivity
ExternalServiceValue
Customer Satisfaction
CustomerLoyalty
RevenueGrowth
Profitability• workplace design• job design• employee selection and development• employee rewards and recognition• tools for serving customers
•Service concept:results for customers
•service designed and delivered to meet targeted customers' needs
•retention•repeat business•referral
Operating Strategy andService Delivery System
The Links in the Service-Profit Chain
The Cycle of Capability
Careful employee and customer selection High-quality training Well-designed support systems Greater latitude to meet customer’s needs Clear limits on expectations of employees Appropriate rewards and recognition Satisfied employees Employee referrals of job candidates