operations in service industry 3

Dr. Swatantra Kumar, SSVGI, Bareilly

Operations in Service Industry

ByDr. Swatantra Kumar


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 consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history.

Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi.


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 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 banking * Architects


Strategic Service Classification (Relationship with Customers)Strategic Service Classification (Relationship with Customers)


Strategic Service Classification (Customization and Judgment)Strategic Service Classification (Customization and Judgment)


Strategic Service Classification (Nature of Demand and Capacity)

Strategic Service Classification (Nature of Demand and Capacity)


Open Systems View of Services


Topics for Discussion

What are the characteristics of services that will be most appropriate for Internet delivery?

When does collecting information through service membership become an invasion of privacy?

What are some management problems associated with allowing service employees to exercise judgement in meeting customer needs?

Illustrate the “distinctive characteristics of service operations” for a service with which you are familiar.

What factors are important for a manager to consider when attempting to enhance a service firm’s image?


Classification of services

On the basis of end user On the basis of degree of tangibility Degree of customer contact Degree of expertise Profit orientation


On the basis of end user

Business services Consumer services Govt.


On the basis of degree of tangibility

Purely intangible Services with tangible inputs Products with service inputs


On the basis of degree of customer contact

Low customer contact High Customer contact


On the basis of degree of expertise required

High Moderate Low


On the basis of profit orientation

For profit Not for profit


Similarities and differences between goods and services

Goods are tangible whereas services are intangible

Customers participate in many service processes, activities and transactions

The demand for services is more difficult to predict than the demand for goods

Services can not be stored as physical inventory

Service management skills are paramount to a successful service encounter


Contd..

Service facilities typically need to be in close proximity to the customer

Patents do not protect services


Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets


Goods versus Services


Unique characteristic of services

“you’ll never have product or price advantage again. They can be easily duplicated, but a strong customer service culture can’t be copied” – Jerry Fritz, Director of Management InstituteUniversity of Wisconsin, Madison, WI


Unique characteristics of services

Intangibility Perishability Heterogeneity/ non-standardization/

variability inseparability


Implications of intangibility

No possibility of the customer to see, touch or feel the service proposition before or during its purchase.

No impulse purchase Very difficult to evaluate or measure

quality in service The customer cannot stake any

claim of ownership or possession of the service proposition: he can only experience the offer


Implications of Intangibility

Services cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult


Implications of perishability

Simultaneous production and consumption

They can’t be stored and reproduced Example: Business school

enrolments; cinema show; rail/air travel reservation, they all expire with time

Time is irrecoverable and so as service


Implications of Perishability

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold


Implications of Variability/ heterobenity

Inconsistent quality and delivery (due to human element)


Implications of Heterogeneity

Service delivery and customer satisfaction depend on employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted


Implications of inseperability

We can’t have any new Gazals from Legendary Jagjit Singh (of course the old ones are preserved and can be reproduced)

People is service (both provider and recipient are important)

For heart surgery you need the doctor and the patient.


Implications of Simultaneous Production and Consumption

Customers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Mass production is difficult


How to address the unique characteristics of the service industry


Intangibility

These are the ways in which intangibility can be overcome

Visualization Association Physical Representation Documentation Facts and figures


Dealing with intangibility

Beautiful looking internet sites Beautiful building and landscapes at

institutions Well dressed staff at Hotels/hospitals Big offices of real estate brokers


Perishability

Over marketing Managing Demand ( demand states) Managing Supply (goods, systems

and processes, people)


Dealing with perishability

Differential pricing at Cinema theaters

Peak & off peak offers at Holiday resorts

Happy hours at restaurant


variability

Training of internal customers Recruitment and selection of internal

customers Training of external customers automation


Dealing with variability

Automation (ATMs for banking services)

Training is critical (as most service businesses are people intensive)


Inseperability

Training of internal customers Video conferencing Robotics


Service marketing & operations interaction

All business organizations are functionally integrated.

Hence functions overlap and interact Service operations and service

marketing are intensely affected by each other as the production and consumption of services is simultaneous


Traditional Marketing MixAll elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: Product Price Place Promotion


Expanded Mix for Services --The 7 Ps

Product Price Place Promotion People

All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

Physical Evidence The environment in which the service is delivered and where

the firm and customer interact, and any tangible components that facilitate performance or communication of the service.

Process The actual procedures, mechanisms, and flow of activities by

which the service is delivered—the service delivery and operating systems.


Expanded Marketing Mix for Services


Employees’ Roles in Service Delivery Service Culture The Critical Importance of Service Employees

Boundary-Spanning Roles Strategies for Delivering Service Quality Through People

Customer-Oriented Service Delivery


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 natural way of life and one of the most important norms by everyone in the organization.”

- Christian Gronroos (1990)


The Critical Importance of Service Employees

They are the service.

They are the organization in the customer’s 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


The Services Marketing Triangle

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

“Enabling the promise”

“Delivering the promise”

“Making the promise”


Service Employees

Who are they? “boundary spanners”

What are these jobs like? emotional labor many sources of potential conflict

▪ person/role▪ organization/client

quality/productivity tradeoffs


Boundary Spanners Interact with Both Internal and External Constituents

Internal Environment

External Environment


Boundary-Spanning Workers Juggle Many Issues

Person versus role

Organization versus client

Client versus client


Human Resource Strategies for Delivering Service Quality through People

Provideneeded supportsystems

Hire theright

people

Retain thebest

people

Developpeople to

deliverservicequality

Hire for servicecompetencies

andservice

inclinationCompete

forthe bestpeople

Measure and

reward strongservice

performers

Treatemployees

ascustomers

Includeemployees

inthe

company’svision Develop

service-orientedinternal

processes

Providesupportivetechnology

andequipment

Measureinternal service

quality

Promoteteamwork

Empower employees

Train fortechnical and

interactiveskills

Be the preferredemployer

Customer-

OrientedServiceDelivery

Elements of Physical Evidence

Servicescape Other tangibles Facility exterior Exterior design Signage Parking Landscape Surrounding environment

Facility interior Interior design Equipment Signage Layout Air quality/temperature

Business cards Stationery Billing statements Reports Employee dress Uniforms Brochures Web pages Virtual servicescape


Customer Benefit package Is a clearly defined set of tangible (goods

content) and intangible (Service-content) features that the customer recognizes, pays for, uses, or experiences

CBP consists of a primary good or services coupled with peripheral goods and/or services, and sometimes a variant

A primary good or service is the core offering that attracts customers and responds to their primary wants and needs.


CBP…

Peripheral goods or services are those that are not essential to the primary good or service, but enhance it.

A variant is a CBP attribute that departs from the standard CBP and is normally location or firm specific.


Example

Primary Good Vehicle

Free wash

Anytime

Free Coffee & tea

Purchasing and leasing

Replacement parts

High speed

internet

Kids play area

VariantPeripheral goods

Peripheral services


Excercise

Think of a service May be an existing or new idea Draft a plan for service creation and

delivery. Create primary good/service, peripheral goods/services and variant.


Thanks