Service Strategy

Strategic Service Concept STRUCTURAL Delivery System: front-back-office, automation, customer participation Location:, demographics, competition, site characteristics Facility Design: size, aesthetics, layout Capacity Planning: queues, number of servers, average/peak demand

Strategic Service Concept (cont.) MANAGERIAL Service Encounter: service culture, employee selection, training, motivation Quality: service guarantee, methods... Managing Capacity and Demand: strategies Information: data collection

Competitive Environment of Services Relatively Low Overall Entry Barriers (no patent) Economies of Scale Limited High Transportation Costs Erratic Sales Fluctuations (demand) No Power Dealing with Buyers or Suppliers (small size) Product Substitutions for Service (Language CD) High Customer Loyalty (lock-in customers) Exit Barriers (difficulty to drive-out marginals)

Competitive Service Strategies (Overall Cost Leadership) Seeking Out Low-cost Customers (Metro market, BİM) Standardizing a Custom Service (Medical Check-up) Reducing the Personal Element in Service Delivery (ATM/teller, call centre) Reducing Network Costs hub-and-spoke (UPS, Airlines) Taking Service Operations Off-line (kiosks for pick-up and delivery, 800 calls, help desks in low-cost locations)

Competitive Service Strategies (Differentiation) Differentiation in service: being unique in brand image, technology use( Internet banking), features (array of services), reputation for customer service, or dealer network (Remax real estate)

Competitive Service Strategies (Differentiation) Making the Intangible Tangible: free diagnosis, free facilitating goods Customizing the Standard Product: Burger King make-to order Reducing Perceived Risk: Village Volvo Giving Attention to Personnel Training: Hamburger University Controlling Quality Gaps

Competitive Service Strategies (Focus) Buyer Group: (e.g. USAA insurance and military officers, only students, Turkcell) Service Offered: (e.g. Shouldice Hospital and hernia patients; Dünya Göz Hastanesi) Geographic Region: (e.g. Regional TV/Radio; Radyo ODTÜ)

Customer Criteria for Selecting a Service Provider Availability (24 hour) Convenience (Site location) Dependability (On-time performance) Personalization (Know customer’s name) Price (Quality surrogate) Quality (Perceptions important) Reputation (Word-of-mouth) Safety Speed (Avoid excessive waiting)

Service Purchase Decision Service Qualifier: To be taken seriously a certain level must be attained on the competitive dimension, as defined by other market players. Examples are cleanliness for a fast food restaurant or safe aircraft for an airline. Service Winner: The competitive dimension used by customers to make the final choice among competitors. Examples are price, convenience, reputation. A service winner may become a qualifier (ATM)

Service Purchase Decision (cont.) Service Loser: Failure to deliver at or above the expected level for a competitive dimension. Examples are failure to repair auto (dependability), rude treatment (personalization) or late delivery of package (speed).

Competitive Role of Information in Services Strategic Focus Competitive Use of Information On-line Off-line (Real time) (Analysis) Creation of barriers to entry: Data base asset: External Reservation system Selling information (Customer) Frequent user club Development of services Switching costs Micro-marketing Revenue generation: Productivity enhancement: Internal Yield management Inventory status (Frito-Lay) (Operations) Point of sale(shopping cart, hand-held comp) Data envelopment Artificial Intelligence analysis (DEA)

The Virtual Value Chain Stages in Physical Value Chain (Inbound logistics, Production process, Outbound logistics, Marketing/Sales) Marketplace vs Marketspace Creating New Markets Using Information Exploiting the Virtual Value Chain

Limits in the Use of Information Anti-competitive (Barrier to entry) Fairness (Yield management) Invasion of Privacy (Micro-marketing) Data Security (Medical records) Reliability (Inaccurate data)

America West Airlines Competitive Features Service Qualifiers: Service Winners: Service Losers:

America West Airlines Strategic Service Concept Delivery System: Location: Facility Design: Capacity Planning

America West Airlines Strategic Service Concept (cont.) Service Encounter: Quality: Managing Capacity and Demand: Information: