demand and capacity

7/28/2019 Demand and Capacity

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DELIVERING AND

PERFORMINGSERVICE


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CUSTOMER

COMPANYService Delivery

ServicePerformance

Gap

Customer-DrivenService Designs and

Standards

Provider Gap 3

Part 5 Opener


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Employees Roles in Service

Delivery

Demonstrate the importance of creating a

service culture in which providing excellent

service to both internal and external customers

is a way of life.

Illustrate the critical importance of service

employees in creating customer satisfaction

and service quality.

Identify the challenges inherent in boundary-

spanning roles.


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Overview

Provide examples of strategies for

creating customer-oriented service

delivery through hiring the right people,

developing employees to deliver service

quality, providing needed support

systems, and retaining the best service

employees.


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Service Culture

A culture where an appreciation for good

service exists, and where giving good

service to internal as well as ultimate,

external customers, is considered a naturalway of life and one of the most important

norms by everyone in the organization.

- Christian Gronroos(1990)


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The Critical Importance of Service

Employees

They are the service.

They are the organization in thecustomers eyes.

They are the brand.

They are marketers.

Their importance is evident in:

the services marketing mix (people)

the service-profit chain

the services triangle


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The Services Marketing

Triangle

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

Enabling the promise

Delivering the promise

Making the promise

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler


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Ways to Use the

Services Marketing Triangle

Overall Strategic

Assessment

How is the service

organization doing on allthree sides of the

triangle?

Where are the

weaknesses?What are the strengths?

Specific Service

Implementation

What is being promoted

and by whom?How will it be delivered

and by whom?

Are the supporting

systems in place todeliver the promised

service?


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The Service Profit Chain

Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, Putting the Service-Profit Chain to Work,

Harvard Business Review, March-April 1994, p. 166.


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Service Employees

Who are they?

boundary spanners

What are these jobs like?

emotional labor

many sources of potential conflict

person/role

organization/client

interclient

quality/productivity tradeoffs


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Boundary Spanners Interact with

Both Internal and External

Constituents

Internal Environment

External Environment


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Boundary-Spanning Workers Juggle

Many Issues

Person versus role

Organization versus client

Client versus client


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Human Resource Strategies for

Delivering Service Quality through

People

Provide

needed support

systems

Hire the

right people

Retain the

best

people

Develop

people to

deliver

service

quality

Hire for service

competencies and

service

inclinationCompete for

the best

people

Measure and

reward strong

serviceperformers

Treat

employees

as

customers

Include

employees in

the

companys

vision

Develop

service-oriented

internal

processes

Provide

supportive

technology

andequipment

Measure

internal service

quality

Promote

teamwork

Empower

employees

Train for

technical and

interactiveskills

Be the

preferred

employer

Customer-

Oriented

Service

Delivery


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Empowerment

Benefits:

quicker responses to

customer needs during

service delivery

quicker responses todissatisfied customers during

service recovery

employees feel better about

their jobs and themselves

employees tend to interactwith warmth/enthusiasm

empowered employees are a

great source of ideas

great word-of-mouth

advertising from customers

Drawbacks:

potentially greater dollar

investment in selection and

training

higher labor costs potentially slower or

inconsistent service delivery

may violate customers

perceptions of fair play

employees may give awaythe store or make bad

decisions


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Traditional Organizational Chart

Manager

Supervisor

Front-lineEmployee

Customers

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Supervisor

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee


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Customer-Focused Organizational

Chart

Manager

Supervisor

Front-lineEmployee

Customers

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Supervisor

Front-line

Employee

Front-line

Employee

Front-line

Employee

Front-line

Employee


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Customers Roles in Service

Delivery Illustrate the importance of customers in

successful service delivery and cocreation of

service experiences.

Discuss the variety of roles that servicecustomers play: productive resources for the

organization; contributors to quality and

satisfaction; competitors.

Explain strategies for involving service customers

effectively to increase both quality and

productivity.


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Table 13.1

Levels of Customer Participation

across Different Services

Source: Adapted from A. R. Hubbert, Customer Co-Creation of Service Outcomes: Effects of Locus of Causality Attributions,doctoral dissertation, Arizona State University, Tempe, Arizona, 1995.


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How Customers Widen the

Service Performance Gap

Lack of understanding of their roles

Not being willing or able to perform their

roles

No rewards for good performance

Interfering with other customers

Incompatible market segments

I t f Oth (F ll )


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Importance of Other (Fellow)

Customers

in Service Delivery Other customers can detract fromsatisfaction:

disruptive behaviors

overly demanding behaviors

excessive crowding

incompatible needs

Other customers can enhance satisfaction:

mere presence

socialization/friendships

roles: assistants, teachers, supporters, mentors


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Customer Roles in Service

Delivery

Productive Resources

Contributors to

Service Quality and

Satisfaction

Competitors


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Services Production Continuum

1 2 3 4 5 6

Gas Station Illustration

1. Customer pumps gas and pays at the pump with automation

2. Customer pumps gas and goes inside to pay attendant

3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation

5. Attendant pumps gas and customer goes inside to pay attendant

6. Attendant pumps gas and attendant takes payment at the pump

Customer Production Joint Production Firm Production


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Customers as Productive

Resources customers can be thought of as partial

employees

contributing effort, time, or other resources to

the production process

customer inputs can affect organizations

productivity

key issue:

should customers roles be expanded?

reduced?


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Customers as Contributors to

Service Quality and Satisfaction

Customers can contribute to:

their own satisfaction with the service

by performing their role effectively

by working with the service provider

the quality of the service they receive

by asking questions

by taking responsibility for their own satisfaction

by complaining when there is a service failure


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Customers as Competitors

customers may compete with the serviceprovider

internal exchange vs. external exchange

internal/external decision often based on: expertise capacity

resources capacity

time capacity

economic rewards psychic rewards

trust

control


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Strategies for Enhancing Customer

Participation


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Strategies for Enhancing

Customer Participation

Define customers jobs

helping oneself

helping others

promoting the company

Recruit, educate, and reward customers

recruit the right customers

educate and train customers to perform effectively

reward customers for their contributions

avoid negative outcomes of inappropriate customer

participation

Manage the customer mix

Characteristics of Service that


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Characteristics of Service that

Increase the Importance of

Compatible Segments

Source: Adapted from C. I. Martin and C. A. Pranter, Compatibility Management: Customer-to-Customer Relationships in Service Environments,

Journal of Services Marketing,3, no. 3 (Summer 1989), pp. 515.


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Delivering Service Through

Intermediaries

Identify the primary channels through which

services are delivered to end customers.

Provide examples of each of the key serviceintermediaries.

View delivery of service from two

perspectivesthe service provider and theservice deliverer.

Discuss the benefits and challenges of each

method of service deliver .


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Service Provider Participants

service principal (originator)

creates the service concept

(like a manufacturer)

service deliverer (intermediary)

entity that interacts with the customer in the

execution of the service(like a distributor/wholesaler)


31/49

Services Intermediaries

Franchiseesservice outlets licensed by a principal to deliver a

unique service concept it has created e.g., Jiffy Lube, Blockbuster, McDonalds

Agents and Brokers representatives who distribute and sell the services of

one or more service suppliers

e.g., travel agents, independent insurance agents

Electronic Channelsall forms of service provision through electronic means

e.g., ATMs, university video courses, TaxCut software


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Benefits and Challenges for

Franchisers of Service

Benefits:

Leveraged business

format for greater

expansion and revenues

Consistency in outlets

Knowledge of local

markets

Shared financial riskand more working

capital

Challenges:

Difficulty in maintaining

and motivating

franchisees

Highly publicized

disputes and conflict

Inconsistent quality

Control of customerrelationship by

intermediary


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Benefits and Challenges for

Franchisees of Service

Benefits:

An established business

format

National or regional

brand marketing

Minimized risk of starting

a business

Challenges:

Encroachment

Disappointing profits

and revenuesLack of perceived

control over operations

High fees

Benefits and Challenges in


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Benefits and Challenges in

Distributing Services through Agents

and Brokers Benefits:Reduced selling and

distribution costs

Intermediaryspossession of special

skills and knowledge

Wide representation

Knowledge of localmarkets

Customer choice

Challenges:

Loss of control over

pricing

Representation ofmultiple service

principals


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Benefits and Challenges in Electronic

Distribution of Services

Benefits:

Consistent delivery for

standardized services

Low costCustomer convenience

Wide distribution

Customer choice and

ability to customizeQuick customer

feedback

Challenges:

Price competition

Inability to customize

with highly standardizedservices

Lack of consistency due

to customer involvement

Changes in consumerbehavior

Security concerns

Competition from

widening geographies


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Common Issues

Involving Intermediaries

conflict over objectives and performance

difficulty controlling quality and consistencyacross outlets

tension between empowerment and control

channel ambiguity


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Strategies for Effective ServiceDelivery Through Intermediaries

Control Strategies:

Measurement

Review

Partnering

Strategies:Alignment of goals

Consultation and

cooperation

Empowerment

Strategies:

Help the intermediary

develop customer-oriented service

processes

Provide needed support

systems

Develop intermediaries

to deliver service quality

Change to a cooperative

management structure


38/49

Managing Demand and Capacity

Explain the underlying issue for capacity-constrained services: lack of inventorycapability.

Present the implications of time, labor,equipment, and facilities constraints combinedwith variations in demand patterns.

Lay out strategies for matching supply anddemand through (a) shifting demand to matchcapacity or (b) adjusting capacity to meetdemand.


39/49

Overview

Demonstrate the benefits and risks ofyield management strategies in forging abalance among capacity utilization,

pricing, market segmentation, andfinancial return.

Provide strategies for managing waiting

lines for times when capacity anddemand cannot be aligned.


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Variations in Demand Relative to

Capacity

Source: C. Lovelock, Getting the Most Out of Your Productive Capacity, in Product Plus (Boston: McGraw Hill, 1994), chap. 16, p. 241.

Understanding Capacity


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Understanding CapacityConstraints

and Demand Patterns

Time, labor,

equipment, andfacilities

Optimal versus

maximum use of

capacity

Charting demand

patterns Predictable cycles

Random demand

fluctuations Demand patterns by

market segment

Capacity Constraints Demand Patterns


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Demand versus Supply

Source: C. H. Lovelock, Classifying Services to Gain Strategic Marketing Insights, Journal of Marketing47, (Summer 1983): 17.


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Constraints on Capacity

Nature of the Constraint Type of ServiceTime Legal

ConsultingAccountingMedical

Labor Law firmAccounting firmConsulting firmHealth clinic

Equipment Delivery servicesTelecommunicationNetwork servicesUtilitiesHealth club

Facilities HotelsRestaurantsHospitalsAirlinesSchoolsTheatersChurches


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Strategies for Shifting Demand to

Match Capacity

Use signage to

communicate busydays and times.

Offer incentives tocustomers for usageduring nonpeak times.

Take care of loyal orregular customersfirst.

Advertise peak usagetimes and benefits ofnonpeak use.

Use sales and advertising to

increase business from currentmarket 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

S f C


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Strategies for Adjusting Capacity to

Match Demand

Stretch time, labor, facilitiesand equipment.

Cross-train employees.

Hire part-time employees.

Request overtime work fromemployees.

Rent or share facilities. Rent or share equipment.

Subcontract or outsourceactivities.

Perform maintenance,

renovations.

Schedule vacations. Schedule employee training.

Lay off employees.

Demand Too High Demand Too LowAdjust Capacity

Ch ll d Ri k i U i


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Challenges and Risks in Using

Yield Management

Loss of competitive focus

Customer alienation

Employee morale problems

Incompatible incentive and reward systems

Lack of employee training

Inappropriate organization of the yieldmana ement function


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Waiting Line Strategies

Employ operational logicmodify operations

adjust queuing system

Establish a reservation process

Differentiate waiting customers importance of the customer

urgency of the job

duration of the service transaction

payment of a premium price

Make waiting fun, or at least tolerable

I t C id i M ki


48/49

Issues to Consider in Making

Waiting More Tolerable

unoccupied time feels longer than occupied time

preprocess waits feel longer than in-process waits

anxiety makes waits seem longer

uncertain waits seem longer than known, finite waits

unexplained waits seem longer than explained waits

unfair waits feel longer than equitable waits

the more valuable the service, the longer the customerwill wait

solo waits feel longer than group waits


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Waiting Line Configurations

demand and capacity

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