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- Creating delivery systems in place, Cyberspace

and time, Enhancing Value by Improving Quality

and Productivity, Balancing Demand & Capacity

CHAPTER 4- Planning & Managing

Service Delivery

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The Type Of Contact: Options For

Service Delivery

There are 3 types of interactions between

customers and service firms

y Customer goes to the service provider (or intermediary)

y Service provider goes to the customer

y Interaction at arms length (via the Internet, telephone, fax,

mail, etc.)

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Method of Service Delivery

Availability of Service Outlets

Nature of Interactionbetween Customerand Service

Organization

Single Site Multiple Sites

Customer goes to serviceorganization

Theater

Barbershop

Bus service

Fast-food chain

Service organization goesto customer

House painting

Mobile car was

h

Mail delivery

Customer and serviceorganization transact atarms length

Credit card company Broadcast network

Telephone company

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Decisions About Place and Timey WHERE should service be delivered?

i) Locational Constraints- a) Due to operational requirements

b) Geographic factors

c) Need for economies of scale

ii) Ministores - Service factories created on a very small scale inorder to maximize coverage within a geographic area.eg ATMs,Taco Bells K-Minus Strategy, Take Away Outlets.

iii) Locating in Multipurpose Facilities-Modern buildings areoften designed to be multipurpose, featuring not only office or

production space but also such services as a bank, ATM, arestaurant, a salon, health club, several stores.

Onsite child day care facility.

Chains of retail stores to complement fuel pumps eg In & Out

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Decisions About Place and Time

Contd

y WHEN should service be delivered?

i) In the past most retail and professional services in

industrialized countries followed a traditional and rather

restricted schedule that limited service availability to about40-50 hrs a week.

ii) This routine reflected social norms and even legal

requirements or union agreements .

iii) Today, the situation is different- for some highly responsiveservice operations that standard has become 24/7.

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24/7 - Factors Encouraging

Extended Operating Hours

Economic pressure from

consumers

Changes in legislation

Economic incentives to

improve asset utilization

Availability of employees to

work nights, weekends

Automated self-service

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Place vs. Cyberspace

Place - customers and suppliers

meet in a physical environment

Cyberspace - customers and

suppliers do business

electronically in virtual

environment created by

phone/internet linkages

Required for people processing services

Offers live experiences, social

interaction, e.g., food services

More emphasis on eye-catching

servicescape, entertainment

Ideal for info-based services

Saves time

Facilitates information gathering

May use express logistics service to

deliver physical core products

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Technology Revolutionizes Service

Delivery: Some Examples

y Smart mobile telephones-PDAs to link users to Internet

y Voice recognition software- Allows customers to give information and

request service simply by speaking into a phone or microphone.

y Automated kiosks for self-service (e.g. bank ATMs)

y Web sites

y provide information

y

take orders and accept paymenty deliver information-based services

y Smart cards that can act as electronic wallets- Smart cards contain a

microchip that can store detailed information about the customer and act

as an electronic purse containing digital money.

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E-Commerce:

Factors that Attract Customers to

Virtual Stores

y Convenience (24-hour availability, save time, effort)

y

Ease of obtaining information on-line and searching for desireditems

y Broad selection

y User friendly websites

y Some even provide the opportunity for live email dialogue withhelpful customer service personnel.

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Service Delivery Through

Intermediaries

y Travel Agents

y Distributors or retailers of physical products also take on

responsibility for supplementary services as information,

advice, order taking, delivery, installation, billing andpayment.

y Franchising

y Agents, brokers

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Enhancing value by IMProvingquality & Productivity

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Importance of Productivity and Quality

for Service Marketers

Productivity

y Helps to keep costs down

y lower prices to develop market, compete better

y increase margins to permit larger marketing budgets

y raise profits to invest in service innovation

y May impact service experience (must avoid negatives)

y May require customer involvement, cooperation

Qualityy Gain competitive advantage, maintain loyalty

y Increase value (may permit higher margins)

y Improve profits

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What is Service Quality-

FivePerspectives

Transcendental: Quality = excellence. Recognized only throughexperience

Quality is precise and measurable

Quality lies in the eyes of the beholder

Quality is conformance to t

he firms developedspecifications

Quality is a trade-off between price and value

Product-Based:

User-Based:

Manufacturing-

Based:

Value-Based:

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Generic Dimensions Customers Use to

Evaluate Service Quality

y Credibility

y Security

y Access

y

Communicationy Understanding the customer

y Tangibles

y Reliability

y

Responsivenessy Competence

y Courtesy

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SERVQUAL SCALE

y Research instrument developed by Zeithaml to measure

customer satisfaction with different aspects of service quality.

y In its basic form, the scale contains 21 perception items and a

series of expectation items reflecting the 5 dimensions ofservice quality ( Tangibles, Reliability, Responsiveness,

Assurance, Empathy)

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Providing service as promised

Dependability in handling customersservice problems

Performing services right the first time

Providing services at the promised time

Maintaining error-free records

Keeping customers informed as towhen services will be performed

Prompt service to customers

Willingness to help customers

Readiness to respond to customers

requests

RELIABILITY

RESPONSIVENESS

Employees who instill confidence incustomers

Making customers feel safe in theirtransactions

Employees who are consistently courteous

Employees who have the knowledge to

answer customer questions

ASSURANCE

Giving customers individual attention

Employees who deal with customers in acaring fashion with best interest at heart.

Employees who understand the needs oftheir customers

Convenient business operating hours

EMPATHY

Modern equipment

Visually appealing facilities

Employees who have a neat,professional appearance

Visually appealing materialsassociated with the service

TANGIBLES

SERVQUAL Attributes

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The GAP Model: A conceptual tool to identify

and correct service quality problems

Customer experiencerelative to expectations

Advertising andsales promises

Customer interpretationof communications

1. Knowledge Gap

2. Standards Gap

3. Delivery Gap

5. Perceptions Gap

7. Service Gap

Customer needsand expectations

Management definitionof these needs

Translation intodesign/delivery specs

Execution ofdesign/delivery specs

Customer perceptionsof product execution

6. Interpretation Gap

4. I.C.Gap

MANAGEMENT

CUSTOMER

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Prescriptions for Closing Service

Quality Gaps

y Knowledge: Learn what customers expect--conduct research,

dialogue, feedback

y Standards: Specify SQ standards that reflect expectations

yDelivery: Ensure service performance matches specs--consider rolesof employees, equipment, customers

y Internal communications: Ensure performance levels match

marketing promises

y Perceptions: Educate customers to see reality of service deliveryy Interpretation: Pretest communications to make sure message is

clear and unambiguous.

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Hard and Soft Measures of Service

Quality

y Hard measures refer to standards and measures that can be counted,

timed or measured through audits

y typically operational processes or outcomes

y e.g. how many trains arrived late?

y Soft measures refer to standards and measures that cannot easily be

observed and must be collected by talking to customers, employees

or others

y e.g. SERVQUAL, surveys, and customer advisory panels.

y Control charts are useful for displaying performance over time

against specific quality standards.

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Tools to Address Service Quality

Problems

y Fishbone diagrams: A cause-and-effect diagram to identify

potential causes of problems.

yPareto charts: Separating the trivial from the important. Often, amajority of problems is caused by a minority of causes i.e. the

80/20 rule.

y

Blueprinting: A visualization of service delivery. It allows one toidentify fail points in both the front stage and backstage.

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Cause and Effect Chart for

Airline Departure Delays

Aircraft late to

gate

Late food

service

Late fuel

Late cabin

cleanersPoor announcement of

departures

Weight and balance

sheet late

Delayed

Departures

Delayed check-in

procedure

Acceptance of latepassengers

Facilities,

EquipmentFront-StagePersonnel

Procedures

Materials,Supplies

Customers

Gate agents

cannot process fast

enough

Late/unavailable

airline crew

Arrive late

Oversized bags

Weather

Air traffic

Frontstage

Personnel

Procedure

Materials,

Supplies

Backstage

Personnel

Information

Customers

Other Causes

Mechanical

Failures

Late pushback

Late baggage

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Analysis of Causes of

Flight Departure Delays Pareto

Charts

Late passengers

Waiting for pushback

Waiting for fueling

Late weight and balance sheet

Late cabin cleaning / supplies

Other

Newark

All stations, excluding

Chicago-Midway Hub

Washington Natl.

23.1%23.1%

23.1%15.3%

15.4%

53.3%

15%

11.3%

8.7%11.7%

33.3%

33.3%19%

9.5%

4.9

%

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Developing a Blueprint Some Basic

Advice

y Identify key activities in creating and delivering the

service

y Distinguish between front stage (what customers

experience) and back stagey Chart activities in sequence

y Show how interactions between customers and

employees are supported by backstage activities and

systems

y Establish service standards for each step

y Identify potential fail points

y Focus initially on big picture (later, can drill down for

more detail in specific areas)

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Service Blueprinting: Key Components

1. Define standards for front stage activities

2. Specify physical evidence

3. Identify principal customer actions

4. ------------line of interaction (customers and front stage personnel)--------

5. Front stage actions by customer-contact personnel

6. ------------line of visibility (between front stage and backstage)--------------

7. Backstage actions by customer contact personnel

8. Support processes involving other service personnel

9. Support processes involving ITWhere appropriate, show fail points and risk of excessive waits

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PRODUCTIVITY

y Productivity: financial valuation of outputs to inputs

y Effectiveness:degree to which firm is meeting its goals.

yEfficiency: comparison to a standard--usually time-based (e.g.,how long employee takes to perform specific task)

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Measuring Service Productivity

y Traditional measures of service output tend to ignore variations in

quality or value of service

y That is, they focus on outputs rather than outcomes, and stress efficiency

but not effectiveness.

y Firms that are more effective in consistently delivering outcomes

desired by customers can command higher prices. Furthermore,

loyal customers are more profitable.

y Measures with customers as denominator include:

y profitability by customer

y capital employed per customer

y shareholder equity per customer

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Questions to AskWhen Developing

Strategies to Improve Service

Productivity

y How to transform inputs into outputs efficiently?

y Will improving productivity hurt quality?

y Will improving quality hurt productivity?

y Are employees or technology the key to productivity?

y Can customers contribute to higher productivity?

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How Productivity Improvements

Impacts Quality & Value

y Backstage improvements can ripple to the front stage and

affect customers

y e.g., new printing peripherals may affect appearance of bank

statements.

y Front-stage productivity enhancements are especially visible

in high contact services.

y Some may just require passive acceptance by customers

y Others require customers to change their scripts and behavior.

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Balancing demand and capacity

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Relating Demand to Capacity:

Four Key Concepts

y Excess demand: too much demand relative to capacity at a

given time

y Excess capacity: too much capacity relative to demand at a

given timey Maximum capacity: upper limit to a firms ability to meet

demand at a given time

y Optimum capacity: point beyond which service quality declines

as more customers are serviced

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Variations in Demand Relative to Capacity

VOLUME DEMANDED

TIME CYCLE 1 TIME CYCLE 2

Maximum AvailableCapacity

Optimum Capacity(Demand and Supply

Well Balanced

Low Utilization(May Send Bad Signals)

Demand exceeds capacity(business is lost)

Demand exceedsoptimum capacity(quality declines)

Excess capacity(wasted resources)

CAPACITY UTILIZED

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Defining Productive Capacity

in Services

y Physical facilities to contain customers

y Physical facilities to store or process goods

y Physical equipment to process people, possessions, or information

y Labor used for physical or mental work

y Public/private infrastructuree.g., highways, airports, electricity

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Strategies for Shifting Demand

to Match Capacity

y Use signage to communicate busydays and times.

y Offer incentives to customers forusage during non-peak times.

y Take care of loyal or regularcustomers first.

y Advertise peak usage times andbenefits of non-peak use.

y Charge full price for the service--nodiscounts.

Use sales and advertising toincrease business from current

market 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

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Strategies for Flexing Capacity

to Match Demand

y Stretch time, labor, facilities and equipment.

y Cross-train employees.

y Hire part-time employees.y Request overtime work from employees.

y Rent or share facilities.

y Rent or share equipment.

y Subcontract or outsource activities.

y Outsource.

Perform maintenance,

renovations. Schedule vacations.

Schedule employee training.

Lay off employees.

Demand Too High Demand Too LowFlex Capacity

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Thank You