Service Strategy NKFUST Nature of Service Competitive Environment - - PDF document

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Shin‐Ming Guo

NKFUST

 Nature of Service  Competitive Environment  Competitive Strategies  Role of Information

Service Strategy

The Alamo Drafthouse

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Case Questions

 Define the service concept.  Identify the target market.  What is the service winner?  Describe the service package.  What are the weakness and threats?

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• I. Nature of Service

 Customer Participation: attention to facility design,

• pportunities for co‐production, concern for customer

and employee behavior

 Simultaneity: opportunities for personal selling,

interaction creates customer perceptions of quality

 Perishability: cannot inventory, opportunity loss of idle

capacity, need to match supply with demand

 Intangibility: creative advertising, no patent protection,

importance of reputation

 Heterogeneity: customer involvement in delivery

process results in variability

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Services: Nontransferrable Ownership

Type of Service Customer value Examples Goods rental Obtain temporary right to exclusive use Vehicles, tools, furniture, equipment Place and space rental Obtain exclusive use of defined portion of a larger space Hotel room, seat on airplane, storage unit Labor and expertise Hire other people to do a job Car repair, surgery, management consulting Physical facility usage Gain admission to a facility for a period of time Theme park, camp ground, physical fitness gym Network usage Gain access to participate Electric utility, cell phone, internet

Competitive Environment of Services

6  Relatively Low Overall Entry Barriers  Economies of Scale Limited  Erratic Sales Fluctuations  No Power Dealing with Buyers or Suppliers  Product Substitutions for Service  High Customer Loyalty  Hobby or job satisfaction  High Exit Barriers

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• II. Service Strategy: Cost Leadership

There is usually a segment of the market that buys solely on the basis of low price.

 Standardizing a Custom Service (fast haircut)  Reducing the Personal Element in Service

Delivery (promote self‐service)

 Reducing Network Costs (hub and spoke)  Taking Service Operations Off‐line (drop‐off/pick‐up) 7

Service Strategy: Differentiation

Differentiation in service means being unique in brand image, technology use, features, or reputation.

 Making the Intangible Tangible (complimentary towels)  Customizing the Standard Product (Burger King)  Reducing Perceived Risk (service guarantee)  Giving Attention to Personnel Training (Southwest)  Controlling Quality 8

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Service Strategy: Focus

Cost and differentiation for a particular target market, not the entire market.

 Buyer Group: (USAA insurance and military officers)  Service Offered: (Shouldice Hospital and hernia patients)  Geographic Region: (neighborhood restaurant)

Target market could be too small.

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How Customers Select a Service Provider

10  Price

(Quality surrogate)

 Availability

(24 hour ATM)

 Speed

(Avoid excessive waiting)

 Convenience

(Site location)

 Dependability

(On‐time performance)

 Personalization

(Know customer’s name)

 Quality

(Perceptions important)

 Reputation

(Word‐of‐mouth)

 Safety

(Air travel)

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Winning Customers in the Marketplace

 Service 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

• r safe aircraft for an airline.

 Service Winner: The competitive dimension used to

make the final choice among competitors. – Examples are price or reputation.

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Strategy: Sushi bar vs. Sushi train

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Southwest Airlines

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Limited Service Frequent, reliable departures

Consistent Quality, Low Cost

Productive ground crews High aircraft utilization Selected routes between midsize cities Lean and effective flight crews Standardized 737 aircraft

Strategic Service Vision

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Service Delivery System Operating Strategy Service Concept Target Market Segment

• Fun cabin

atmosphere to differentiate service

• Use only Boeing

737 aircraft to control maintenance &

• perating costs
• Hire cabin crew

based on attitude

• Quick turnaround

at gate results in high utilization of aircraft

• No assigned

seating rewards punctuality and promotes on‐time performance

• Short flights with

frequent departures

• Serve peanuts &

soft drinks only

• Use of inner‐city
• r low traffic

airports avoids congestion

• Carry‐on luggage
• State of Texas

residents

• Business

traveler who drives because

• f inadequate

service

• Inexpensive

family travel on weekends

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• III. The Service Package

 Supporting Facility: The physical resources that must be in

place before a service can be sold.

 Facilitating Goods: The material consumed by the buyer or

items provided by the consumer.

 Information: Operations data or information that is provided

to enable efficient and customized service.

 Explicit Services: Benefits readily observable by the senses.

The essential or intrinsic features.

 Implicit Services: Psychological benefits or extrinsic features

which the consumer may sense only vaguely.

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Designing a Service Package

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Criteria for Evaluating the Service Package

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Low High Service Factory Service Shop * Airlines * Hospitals Low * Trucking * Auto repair * Hotels * Other repair services * Resorts & recreation Mass Service Professional Service * Retailing * Doctors High * Wholesaling * Lawyers * Schools * Accountants * Retail banking * Architects Degree of labor Intensity Degree of Interaction and Customization

The Service Process Matrix

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• IV. Competitive Role of Information

Online (Real time) Offline (Analysis) External (Customer) Creation of barriers to entry: Reservation system Frequent user club Switching costs Database asset: Selling information Development of services Micromarketing Internal (Operations) Revenue generation: Yield management Point of sales (POS) Expert systems Productivity enhancement: Inventory Status Data envelopment analysis (DEA)

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Using Information to Categorize Customers

21  Coding grades customers on how profitable their

business is.

 Routing is used by call centers to place customers

in different queues based on customer code.

 Targeting allows choice customers to have fees

waived and get other hidden discounts.

 Sharing data about your transaction history with

• ther firms is a source of revenue.

Limits in the Use of Information

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Anti‐competitive (membership, frequent flyers)

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Fairness (yield management)



Invasion of Privacy (selling database)

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Data reliability (credit report)