Microsoft PowerPoint C unit 3 2020 Compatibility Mode Unit 3 Service Strategy Nguyen Manh Tuan Learning Objectives Formulate a strategic service vision Competitive environment of services Generic Service Strategies
Unit Service Strategy Nguyen Manh Tuan Learning Objectives Formulate a strategic service vision Discuss the competitive environment of services Describe how a service competes using the generic service strategies Discuss the service purchase decision Discuss the competitive role of information in services Explain the role of the virtual value chain in service innovation Discuss the limits in the use of information Categorize a service firm according to its stage of competitiveness 5/18/2020 nguyen manh tuan – internal use Strategic Service Vision A Target Market Segments What are common characteristics of important market segments? What dimensions can be used to segment the market, demographic, psychographic? How important are various segments? What needs does each have? How well are these needs being served, in what manner, by whom? 5/18/2020 nguyen manh tuan – internal use Strategic Service Vision B Service Concept What are important elements of the 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? How customers perceive the service concept? What efforts does this suggest in terms of the manner in which the service is designed, delivered, marketed? 5/18/2020 nguyen manh tuan – internal use Strategic Service Vision C Operating Strategy What are important elements of the strategy: operations, financing, marketing, organization, human resources, control? On which will the most effort be concentrated? Where will investments be made? How will quality and cost be controlled: measures, incentives, rewards? What results will be expected versus competition in terms of, quality of service, cost profile, productivity, morale/loyalty of servers? 5/18/2020 nguyen manh tuan – internal use Strategic Service Vision D Service Delivery System What are important features of the service delivery system including: role of people, technology, equipment, layout, procedures? What capacity does it provide, normally, at peak levels? To what extent does it, help insure quality standards, differentiate the service from competition, provide barriers to entry by competitors? 5/18/2020 nguyen manh tuan – internal use Ex: Southwest Airlines Target market segment Interstate business travelers with carry-on luggage who are currently driving Short flights Service Concept On time performance Frequent departures Operating Strategy Fast airport turnaround to allow productive use of aircraft and provide frequent departures Service delivery system Cabin crew with good interpersonal skills to create ‘fun’ atmosphere No assigned seating to provide fast gate turnaround Short distance haul – mostly carry-on luggage – less ground crew 5/18/2020 nguyen manh tuan – internal use Competitive Environment of Services Reasons for the difficulty of economic environment Relatively Low Overall Entry Barriers Economies of Scale Limited Erratic Sales Fluctuations No Advantage of Size in Dealing with Buyers or Suppliers Product Substitutions for Service High Customer Loyalty Exit Barriers 5/18/2020 nguyen manh tuan – internal use Competitive Environment of Services Relatively Low Overall Entry Barriers Not patentable Typically not capital intensive Exception – when you are first in a small market, or prized location advantage Economies of Scale Limited limited opportunities for economies of scale because of simultaneous production and consumption Erratic Sales Fluctuations demand varies by time of day and day of the week with random arrivals 5/18/2020 nguyen manh tuan – internal use Competitive Environment of Services No Power Dealing with Buyers or Suppliers Typically service firms are small, so they have less power Exception are McDonald’s buying beef Product Substitutions for Service For example blood pressure or diabetes checking can be done at home due to innovations So service firms need to watch for competition from other service firms and product innovations High Customer Loyalty This can act as a barrier to entry Exit Barriers Typically high 5/18/2020 nguyen manh tuan – internal use 10 B D’Aveni’(1997) 7S 5/18/2020 nguyen manh tuan – internal use 17 Customer Criteria for Selecting a Service Provider Availability (24 hour ATM) Convenience (Site location) Dependability (On-time performance) Personalization (Know customer’s name) Price (Quality surrogate because of intangibility) Quality (Both outcome & process) Reputation (Word-of-mouth) Safety (Customer well-being) Speed (Avoid excessive waiting) 5/18/2020 nguyen manh tuan – internal use 18 Service Purchase Decision Service Qualifier To be taken seriously a certain level must be attained by the service provider on the competitive dimension, as defined by other market players Ex: cleanliness for a fast food restaurant or safe aircraft for an airline Service Winner The competitive dimension used to make the final choice among competitors Ex: price, convenience, reputation Service Loser Failure to deliver at or above the expected level for a competitive dimension Ex: failure to repair auto (dependability), rude treatment (personalization) or late delivery of package (speed) 5/18/2020 nguyen manh tuan – internal use 19 Competitive Role of Information in Services Strategic Focus Competitive Use of Information On-line (Real time) Creation of barriers to External entry: (Customer) Reservation system Frequent flyer user club Switching costs Revenue generation: Yield management Internal (Operations) Point of sale Expert systems 5/18/2020 Off-line (Analysis) Data base asset: Selling information Development of services Micro-marketing Productivity enhancement: Inventory status Data envelopment analysis (DEA) nguyen manh tuan – internal use 20 5.1 Creation of Barriers to Entry Reservation system American Airline’s Sabre System Frequent User club American airlines used its reservation system to also create frequent flyer club to reward people to accumulate credit Switching cost Data transfer New software and hardware requirements 5/18/2020 nguyen manh tuan – internal use 21 5.2 Revenue Generation Yield management Real time pricing by monitoring demand and supply Point of sale Information can travel to suppliers for real time inventory management Server can transmit order information directly to the kitchen and to the cashier at the same time Expert system Past data can be fed to create expert systems – which maintenance people can recall to trouble shoot problems 5/18/2020 nguyen manh tuan – internal use 22 5.3 Database Asset Selling information Developing services Data mining to find new trends for new services or improving existing services Micromarketing To target your advertisements 5/18/2020 nguyen manh tuan – internal use 23 5.4 Productivity Enhancement Inventory status Real time inventory management and tie up with suppliers Better movement of inventory through multiple sites 5/18/2020 nguyen manh tuan – internal use 24 Using Information to Categorize Customers Coding grade customers on how profitable their business is Routing 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 other firms is a source of revenue 5/18/2020 nguyen manh tuan – internal use 25 The Virtual Value Chain Marketplace vs Marketspace Physical versus virtual Creating New Marketspace Using Information: steps Gather Organize Select Synthesize Distribute 5/18/2020 nguyen manh tuan – internal use 26 Example: USAA United Service Automobile Association (USAA): provides financial services to military personnel and their families and becomes a world class competitor by exploiting the virtual value chain Three Stage Evolution 1st Stage (Visibility): See physical operations more effectively with information – Ex USAA “paperless operation 2nd Stage (Mirroring Capability): Substitute virtual activities for physical – Ex USAA “automate underwriting” 3rd Stage (New Customer Relationships): Draw on information to deliver value to customer in new ways – Ex USAA “event oriented service” 5/18/2020 nguyen manh tuan – internal use 27 Limitations in the Use of Information Anti-competitive (Barrier to entry) How to account the expense on frequent flyer service? Fairness (Yield management) How to justify different price paid for same service by customers? Invasion of Privacy (Micromarketing) Data Security (Medical records) How to protect sensitive information about people? Reliability (Credit report) How to challenge erroneous information? 5/18/2020 nguyen manh tuan – internal use 28 Stages in Service Firm Competitiveness Available for service Journeyman Distinctive competence World-class service delivery Customers patronize service firm for reasons other than performance Customers neither seek out nor avoid the firm Customers seek out the firm on the basis of its sustained reputation for meeting customer expectations The company’s name is synonymous with service excellence Its service doesn’t just satisfy customers; it delights them and thereby expands customer expectations to levels its competitors are unable to fulfill Operations is reactive, at best Operations functions in a mediocre, uninspired fashion Operations continually excels, reinforced by personnel management and systems that support an intense customer focus Operations is a quick learner and fast innovator; it masters every step of the service delivery process and provides capabilities that are superior to competitors Meets some customer expectations; consistent on one or two key dimensions Exceeds customer expectations; consistent on multiple dimensions Raises customer expectations and seeks challenge; improves continuously SERVICE QUALITY Is subsidiary to cost, highly variable 5/18/2020 nguyen manh tuan – internal use 29 Stages in Service Firm Competitiveness Available for service Journeyman Distinctive competence World-class service delivery Contributes to service, plays an important role in the total service, is given attention, but is still a separate role Is equally valued with front office; plays integral role Is proactive, develops its own capabilities, and generates opportunities A market segment whose basic needs are understood A collection of individuals whose variation in needs is understood A source of stimulation, ideas, and opportunity When justified by cost savings When promises to enhance service Source of first-mover advantages, creating ability to things your competitors can’t Efficient resource; disciplined; follows procedures Permitted to select among alternative procedures Innovative; creates procedures Listens to customers; coaches and facilitates workers Works to enhance their career Is listened to by top management as a source of new ideas Mentors BACK OFFICE Counting room CUSTOMER Unspecified, to be satisfied at minimum cost INTRODUCTION OF NEW TECHNOLOGY When necessary for survival, under duress WORKFORCE Negative constraint FRONT-LINE MANAGEMENT Controls workers Controls the process 5/18/2020 nguyen manh tuan – internal use 30 Home Assignment Give examples of service firms that use both the strategy of focus and differentiation and the strategy of focus and overall cost leadership For each of the three generic strategies (i.e., cost leadership, differentiation, and focus) which of the four competitive uses of information is most powerful? Give an example of a firm that begin as world-class and has remained in that category Could firms in the “world-class service delivery” stage of competitiveness be descried as “learning organizations”? 5/18/2020 nguyen manh tuan – internal use 31 ... Formulate a strategic service vision Discuss the competitive environment of services Describe how a service competes using the generic service strategies Discuss the service purchase decision... others Standardizing a Custom Service Reducing the Personal Element in Service Delivery (promote self -service) Reducing Network Costs (hub and spoke) Taking Service Operations Off-line when... manh tuan – internal use 22 5 .3 Database Asset Selling information Developing services Data mining to find new trends for new services or improving existing services Micromarketing To