SESSION – 6 & 7

Competitive Environment of Services

SESSION – 6 & 7

Competitive Environment of Services

By

Dr. Nripendra Singh

Jaypee Business School, Noida

By

Dr. Nripendra Singh

Jaypee Business School, Noida

Agenda

• Strategic Service Vision

• Competitive Service Strategies

• Winning Customers

• Role of Information in Services

• Case Study: America West Airlines & Alamo Drafthouse

Agenda

• Strategic Service Vision

• Competitive Service Strategies

• Winning Customers

• Role of Information in Services

• Case Study: America West Airlines & Alamo Drafthouse

STRATEGIC SERVICE VISIONExamples: Kmart – first retail giant to use private satellite network (VSAT)

Southwest Airlines – Southwest Airlines began as a small intrastate Texas airline, operating commuter length routes between Dallas (Love Field), Houston, and San Antonio. In June 1971, having overcome legal hurdles raised by entrenched Braniff and Texas International, Southwest inaugurates service with a massive promotional campaign and many innovations designed to attract passengers. On February 1, 1973, Southwest must decide how to respond to Braniff's "Half Price Sale.“

United Services Automobile Association (USAA) – USAA is well known for its pioneering spirit in providing insurance products and financial services to its members. That same spirit and innovative attitude is evident in the use of information technology (IT) to reduce operating costs, accommodate growth, and improve services. USAA has been the pacesetter for insurance industry automation.

STRATEGIC SERVICE VISIONExamples:

British Airways: Using Information Systems to Better Serve the Customer

British Airways develops an information system, Customer Analysis and Retention System (CARESS) to ensure rapid response to customer complaints. The case explores how this system is able to melt the complaint iceberg in order to resolve customer complaints quickly and improve retention as well as provide data for root-cause-analysis of problems.

Ritz Carlton: Using Information Systems to Better Serve the Customer

Ritz-Carlton, a Malcolm Baldrige National Quality Award winner, relies on two information systems to promote customer loyalty: COVIA to handle centralized reservations and Encore, a local system that keeps track of guest preferences.

ELEMENTS OF STRATEGIC SERVICE VISION

Service strategy must begin with a vision of place and purpose of the enterprise.

Elements of the Strategic Service Vision:

- Target Market Segment

- Service Concept

- Operating Strategy

- Delivery System

STANDARD CHARTERED BANK (when started its operations in India) Vs SBI

  Service Delivery System

Operating Strategy

Service Concept

Target Market

SegmentsStan Chart

English Speaking

International Branches

Fee based services

Elite & Business Class

ATMs and Credit Cards

High Cost Formal settingLocated in CBD

Facilities for Corporates

Corporate Clients

SBI Hindi Speaking

Location not important

Extremely Low fees

All types

Traditional Branches in Urban & Rural

Low interest rates

 

  Service Delivery System

Operating Strategy

Service Concept

Target Market

Segments

Southwest Airlines

Cabin Crew with interpersonal skills

Airport turnaround time very less

on-time performance

Interstate business traveller

No assigned seating

frquent departure frequent departure

customer who travel on auto and train

On-time performance

Type of aircrafts used short-flights

Lost luggagelow-cost producer

only carry-on luggage

employee satisfaction

Southwest Airlines

Competitive Service StrategiesM. Porter has argued that 3 generic competitive strategies exist:

• Overall cost leadership• Differentiation• Focus

Southwest Airlines employ the strategies of focus and overall cost leadership. Southwest concentrates on serving a select geographic region at low cost. It achieves low cost by providing “no-frills” service, and it maximizes utilization of its assets by maintaining a quick turnaround practice at airports.

The United Services Automobile Association (USAA) has a well-

defined focus, primarily that of providing insurance and financial services for American military officers and their families. It is able to provide the lowest possible rates in the industry to its customers, in part, by doing business over the phone instead of using field agents.

Competitive Service Strategies

Overall cost leadership - Seeking Out Low-cost Customers (Big Bazzar, Sam’s Club) - Standardizing a Custom Service (TALLY) - Reducing the Personal Element in Service Delivery (ATMs, Digital Kiosks, Vending Machines) - Reducing Network Costs (FedEx - Hub & Spoke n/w) - Taking Service Operations Offline (Shoe repair, Laundry, Bill collection – Drop Box)

Differentiation (brand, technology, features, service, n/w) - Making the Intangible Tangible (complimentary items like calendar, diaries, toiletries with co. names on it) - Customizing the Standard Product (Calling by Name, Barber – personal style) - Reducing Perceived Risk (Auto repair-SOP) - Giving Attention to Personnel Training (NIIT, Hamburger Univ) - Controlling Quality (Tunde Ke Kabab – Recipe)

Competitive Service Strategies

Focus

- By Buyer Group (Citi Bank, Palace on wheels, Haldiram)

- By Service (Dr. Batra’s Clinic, Choki Dhani, Essel World)

- By Geographical Region (City Montesori School)

Winning Customers

Depending on the competition and personal needs, customers select a service provider using different criteria.These criterias like safety, speed, personalization, quality, reputation etc. are used for differentiating themselves.

They may be clubbed under three heads: - Service winners (eg. price, convenience, reputation that sell products). But situation dependent, choosing restaurant for which occasion dinner or anniversary. - Qualifiers (criteria whose presence is necessary for the product to enter the market place) - Service Losers (eg. dependability, personalization, speed whose absence will dissatisfy the customer)

Productivity enhancement is the most powerful use of information for achieving cost leadership, because it allows firms to reduce inventory, reduce waste, and eliminate paperwork, all of which save money. Eg. retail shelf space.

Creating barriers to entry is the most powerful use of information for protecting a differentiation strategy. When customer loyalty is high, cost cutting by competitors is less effective. Switching costs can also create barriers to entry. Eg. Use of computer network by courier cos.

Database assets are the most powerful use of information for building a focus strategy. These assets allow a company to develop profiles of their customers and their buying habits. This information allows the firm to develop new services and to be seen as responsive to its customers' needs. Eg. Advertising and distribution.

Role of Information in Services

Role of Information in Services

Competitive Use of InformationOnline (Real time) Offline (Analysis)

Strategic

Focus

External (Customer)

Creation of Barriers to entry:

Reservation SystemFrequent User ClubSwitching Costs

Database Asset:

Selling InformationDevelopment of ServicesMicromarketing

Internal (Operations)

Revenue Generation:

Yield ManagementPoint of SalesExpert Systems

Productivity Enhancement:

Inventory StatusData Envelopment Analysis (DEA)

Case Study: Alamo Drafthouse

1. Marketing analysts use market position maps to display visually the customers' perceptions of a firm in relation to its competitors regarding two attributes. Prepare a market position map for Alamo Drafthouse using "foodquality" and "movie selection as axes".2. Use the "Strategic Service Vision" framework to describe Alamo Drafthouse in terms of target market segments, service concept, operating strategy, and service delivery system.3. Identify the service qualifiers, winners, and service losers for Alamo Drafthouse. Are the Alamo purchase decision criteria appropriate for the multiplex movie theater market? What do you conclude?

1. Marketing analysts use market position maps to display visually the customers' perceptions of a firm in relation to its competitors regarding two attributes. Prepare a market position map for Alamo Drafthouse using "foodquality" and "movie selection as axes".2. Use the "Strategic Service Vision" framework to describe Alamo Drafthouse in terms of target market segments, service concept, operating strategy, and service delivery system.3. Identify the service qualifiers, winners, and service losers for Alamo Drafthouse. Are the Alamo purchase decision criteria appropriate for the multiplex movie theater market? What do you conclude?

Target Market

Service Concept

Operating Strategy

Service Delivery

· 18-30 year old, male, alcohol consumers, cult film appeal

· 25-40 year olds with sophisticated taste in films

· Meal and 2nd run or cult film

· Single screen theater with ever other row replaced with narrow table

· Low cost old theater

· Inexpensive 2nd run movies

· Food made to order with less waste

· Unobtrusive wait people

· Acceptable sound and projection equipment

· Excess capacity mid-day

Case Study: Alamo Drafthouse

THANKS