what is productivity? - werner kunz€¦ · slide © 2007 by christopher lovelock and jochen wirtz...

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Kunz - Services Marketing 12

What is productivity?

!  Efforts you put into work and the final result

!  Efficiency

! How many service you produce in a certain amount of time

!  Productivity vs. Service Quality

!  Productivity is cost related

! Quality is perceived


Integrating Service Quality and Productivity Strategies

"  Quality and productivity are twin paths to creating value for both customers and companies

"  Quality focuses on the benefits created for customers; productivity addresses financial costs incurred by firm

"  Importance of productivity:

!  Keeps costs down to improve profits and/or reduce prices

!  Enables firms to spend more on improving customer service and supplementary services

!  Secures firm’s future

! May impact service experience


What can you do to increase productivity in your business?

Discuss with your neighbor (don’t have to be your group member)

!  Train your employee better

!  Partnering with companies (Gas-station, …)

!  Specialized jobs for just serving in a bar

!  Partnering with a parking lot to keep the tables full


Improving Service Productivity: (1) Operations-driven Strategies

"  Control costs, reduce waste

"  Set productive capacity to match average demand

"  Automate labor tasks

"  Upgrade equipment and systems

"  Train employees

"  Broadening array of tasks that a service worker can perform

"  Leverage less-skilled employees through expert systems

"  Service process redesign


Improving Service Productivity: (2) Customer-driven Strategies

"  Change timing of customer demand !  By shifting demand away from peaks, managers can make better

use of firm’s productive assets and provide better service

"  Involve customers more in production ! Get customers to self-serve

!  Encourage customers to obtain information and buy from firm’s corporate websites

"  Ask customers to use third parties ! Delegate delivery of supplementary service elements to

intermediary organizations


Generic Productivity Improvement Strategies

"  Typical strategies to improve service productivity:

! Careful control of costs at every step in process !  Efforts to reduce wasteful use of materials or labor !  Replacing workers by automated machines !  Installing expert systems that allow paraprofessionals to take on

work previously performed by professionals who earn higher salaries

"  Although improving productivity can be approached incrementally, major gains often require redesigning entire processes

? ? ?


Long Waiting Times May Indicate Need for Service Process Redesign (Fig 14.8)


Questions When Developing Strategies to Improve Service Productivity

"  How to transform inputs into outputs efficiently? "  Will improving quality hurt productivity? "  Will improving productivity hurt quality? "  Are employees or technology the key to productivity? "  Can customers contribute to higher productivity?


Tools to Analyze and Address Service Quality & Profitability Problems

"  Pareto Chart !  Separating the trivial from the important. Often, a majority of

problems is caused by a minority of causes (i.e. the 80/20 rule)

"  Fishbone diagram

! Cause-and-effect diagram to identify potential causes of problems

"  Blueprinting !  Visualization of service delivery, identifying points where failures

are most likely to occur


When Does Improving Service Reliability Become Uneconomical? (Fig 14.7)

Satisfy Target Customers through Service Recovery

Optimal Point of Reliability: Cost of Failure = Service

Recovery

Satisfy Target Customers through Service Delivery as

Planned

100%

Serv

ice

Rel

iabi

lity

Investment Small Cost,

Large Improvement Large Cost,

Small Improvement

A B C D

Assumption: Customers are equally (or even more) satisfied with the service recovery provided than with a service that is delivered as planned.


Cause-and-Effect Chart for Flight Departure Delays (Fig 14.5)

Aircraft late to gate

Late food service

Late fuel

Late cabin cleaners

Poor announcement of departures

Weight and balance sheet late

Delayed Departures

Delayed check-in procedure

Acceptance of late passengers

Facilities, Equipment Front-Stage

Personnel Procedures

Materials, Supplies

Customers

Gate agents cannot process

fast enough

Late/unavailable airline crew

Arrive late Oversized bags

Weather Air traffic

Frontstage Personnel

Procedures

Materials, Supplies

Backstage Personnel

Information

Customers

Other Causes

Mechanical Failures Late pushback

Late baggage


Cause-and-Effect Chart for Flight Departure Delays (Fig 14.5)

Aircraft late to gate

Late food service

Late fuel

Late cabin cleaners

Poor announcement of departures

Weight and balance sheet late

Delayed Departures

Delayed check-in procedure

Acceptance of late passengers

Facilities, Equipment Front-Stage

Personnel Procedures

Materials, Supplies

Customers

Gate agents cannot process

fast enough

Late/unavailable airline crew

Arrive late Oversized bags

Weather Air traffic

Frontstage Personnel

Procedures

Materials, Supplies

Backstage Personnel

Information

Customers

Other Causes

Mechanical Failures Late pushback

Late baggage


When Does Improving Service Reliability Become Uneconomical? (Fig 14.7)

Satisfy Target Customers through Service Recovery

Optimal Point of Reliability: Cost of Failure = Service

Recovery

Satisfy Target Customers through Service Delivery as

Planned

100% Se

rvic

e R

elia

bilit

y

Investment Small Cost,

Large Improvement Large Cost,

Small Improvement

A B C D

Assumption: Customers are equally (or even more) satisfied with the service recovery provided than with a service that is delivered as planned.


What Happens, When, in What Sequence? Time Dimension in Augmented Product (Fig 3.3)

Before Visit

Reservation

internet

Parking Get car

Check in

Porter

Use room

Meal Pay TV

Room service

Internet Check out

Time Frame of An Overnight Hotel Stay (Real-time service use)

USE GUESTROOM OVERNIGHT

Internet


Blueprinting the Restaurant Experience: A Three Act Performance

"  Act 1: Prologue and Introductory Scenes

"  Act 2: Delivery of Core Product

!  Cocktails, seating, order food and wine, wine service !  Potential fail points: Menu information complete? Menu intelligible?

Everything on the menu actually available?

!  Mistakes in transmitting information a common cause of quality failure—e.g. bad handwriting; poor verbal communication

!  Customers may not only evaluate quality of food and drink, but how promptly it is served, serving staff attitudes, or style of service

"  Act 3: The Drama Concludes

!  Remaining actions should move quickly and smoothly, with no surprises at the end

!  Customer expectations: Accurate, intelligible and prompt bill, payment handled politely, guest are thanked for their patronage


Developing a Blueprint

Define �big picture� before �drilling down� to obtain a higher level of detail

"  Identify key activities in creating and delivering service

"  Which persons are involved?

"  Distinguish between �front stage� and �backstage�

"  Clarify interactions between customers and staff, and support by backstage activities and systems (key elements of the script).

"  Identify potential fail points; take preventive measures; prepare contingency

"  Develop standards for execution of each activity— times for task completion, maximum wait times, and scripts to guide interactions between employees and customers


Key Components of a Service Blueprint

1.  Identify principal customer actions 2.  Front-stage actions by customer-contact personnel 3. Identify & define scripts (detailed)

4. Define standards for front-stage activities 5. Specify physical evidence 6. Line of interaction (customers and front-stage personnel) 7. Line of visibility (between front stage and backstage) 8.  Backstage actions by customer contact personnel 9. Support processes involving other service personnel 10. Support processes involving IT

-  Identify fail points and risks of excessive waits -  Set service standards and do failure-proofing (detailed) -  Points to improve profitability (e.g. SST)


Exercise

"  Develop a detailed blueprint for your service company

Including customer actions, Front-stage actions, scripts (detailed), standards, physical evidence, Line of interaction, Line of visibility, Backstage actions, Support processes involving other service personnel, Support processes involving IT, Fail Points, Waiting time

"  E-mail me till Monday your blueprint (e.g. ppt, photo, scan)


Developing a Blueprint

Define �big picture� before �drilling down� to obtain a higher level of detail

"  Identify key activities in creating and delivering service

"  Which persons are involved?

"  Distinguish between �front stage� and �backstage�

"  Clarify interactions between customers and staff, and support by backstage activities and systems (key elements of the script).

"  Identify potential fail points; take preventive measures; prepare contingency

"  Develop standards for execution of each activity— times for task completion, maximum wait times, and scripts to guide interactions between employees and customers


Benefits of Blue Printing

"  Provides a platform for innovation.

"  Recognizes roles and interdependencies among functions, people, and organizations.

"  Transfers and stores service knowledge.

"  Designs moments of truth from the customer�s point of view.

"  Suggests critical points for measurement and feedback in the service process

"  Clarifies competitive positioning

"  Provides understanding of the ideal customer experience.


Where are

Failure points, Standards, Physical evidence


Different Services – Different Flow Charts (Blueprints)

Park Car

Check In

Spend Night in Room Breakfa

st

Check Out

Breakfast

Prepared

Maid Makes

up Room

People Processing – Stay at Motel Possession Processing – Repair a DVD Player

Travel to

Store

Technician Examines

Player, Diagnoses Problem

Leave Store

Return, Pick up Player and Pay

Technician Repairs Player

(Later) Play DVDs at Home

Mental Stimulus Processing – Weather Forecast

Turn on TV, Select Channel

View Presentation of Weather Forecast

TV Weatherperso

n Prepares Local Forecast

Confirm Plans for Picnic

Meteorologists Input Data to Models and Creates Forecast

from Output

Collect

Weather

Data

Information Processing – Health Insurance

Learn about

Options

Select Plan, Complete

Forms Pay

Customer Information Entered in Database

Printed Policy

Documents Arrive

Insurance Coverage

Begins

University and Insurance Company Agree on Terms of

Coverage


Setting Service Standards

"  Service providers should design standards for each step sufficiently high to satisfy and even delight customers !  Standards may include time parameters, script for a technically correct

performance, and prescriptions for appropriate style and demeanor

!  Must be expressed in ways that permit objective measurement

"  First impression is important as it affects customer’s evaluations of quality during later stages of service delivery !  Research by Marriott Hotels indicates that four of five top factors

contributing to customer loyalty come into play during the first 10 minutes of service delivery

"  Customer perceptions of service experiences tend to be cumulative

"  For low-contact service, a single failure committed front stage is relatively more serious than in high-contact service

!  Viewed more seriously because there are fewer subsequent opportunities to create a favorable impression


Improving Reliability of Processes by Failure Proofing

"  Analysis of reasons for failure often reveals opportunities for failure proofing to reduce/eliminate future risk of errors

"  Need fail-safe methods for both employees and customers "  Errors include:

!  Treatment errors—human failures during contact with customer ―  e.g., lack of courteous or professional behavior, failure to acknowledge, listen

to, or react appropriately to the customer

!  Tangible errors—failures in physical elements of service ―  e.g., noise pollution, improper standards for cleaning of facilities and uniforms,

equipment breakdown

"  Goal of fail-safe procedures is to prevent errors such as: !  Performing tasks incorrectly, in the wrong order, too slowly !  Doing work that wasn’t requested in the first place

"  See Service Perspectives 8.1 – Poka Yokes


Where might be possibility

to redesign this process?


Redesigning Service Processes


Why Redesign?

"  Not profitable anymore "  Rising Quality issues (e.g. waiting time) "  Revitalizes process that has become outdated "  Changes in external environment make existing practices obsolete

and require redesign of underlying processes !  Creation of brand-new processes to stay relevant

"  Rusting occurs internally !  Natural deterioration of internal processes; creeping bureaucracy; evolution of

spurious, unofficial standards -  Extensive information exchange

-  Data redundancy

-  High ratio of checking or control activities to value-adding

activities, increased exception processing

-  Customer complaints about inconvenient and unnecessary procedures


Process Redesign: Approaches and Potential Benefits

"  Eliminating non-value-adding steps

"  Delivering direct service

"  Bundling services

"  Redesigning physical aspects of service processes

"  Shifting to more customer participation


Process Redesign: Approaches and Potential Benefits (1) (Table 8.1)

"  Eliminating non-value-adding steps

!  Streamline front-end and back-end processes of services with goal of focusing on benefit-producing part of service encounter

!  Eliminate non-value-adding steps !  Improve efficiency !  More customized service !  Differentiate company

"  Delivering direct service

!  Bring service to customers instead of bringing customers to provider !  Improve convenience for customers !  Productivity can be improved if companies can eliminate expensive retail locations !  Increase customer base



"  Shifting to self-service

!  Increase in productivity and service quality !  Lower costs and perhaps prices !  Enhance technology reputation !  Greater convenience

"  Bundling services

!  Involves grouping multiple services into one offer, focusing on a well-defined customer group

!  Often has a better fit to the needs of target segment !  Increase productivity !  Add value for customers through lower transaction costs !  Customize service !  Increase per capita service use



"  Redesigning physical aspects of service processes

!  Focus on tangible elements of service process; include changes to facilities and equipment to improve service experience

!  Increase convenience !  Enhance the satisfaction and productivity of front-line staff !  Cultivate interest in customers !  Differentiate company


Levels of Customer Participation

"  Customer Participation

!  Actions and resources supplied by customers during service production

and/or delivery

!  Includes mental, physical, and even emotional inputs

"  Three Levels

!  Low—Employees and systems do all the work -  Often involves standardized service

!  Medium—Customer inputs required to assist provider -  Provide needed information and instructions -  Make some personal effort; share physical possessions

!  High—Customer works actively with provider to co-produce the service -  Service cannot be created without customer’s active participation -  Customer can jeopardize quality of service outcome (e.g., weight loss, marriage

counseling)