1 © The McGraw-Hill Companies, Inc., 2004 Chapter 6 Product Design and Process Selection – Services

2 © The McGraw-Hill Companies, Inc., 2004 Service Generalizations Service Strategy: Focus & Advantage Service-System Design Matrix Service Blueprinting Service Fail-safing Characteristics of a Well-Designed Service Delivery System OBJECTIVES

3 © The McGraw-Hill Companies, Inc., 2004 Service Generalizations 1. Everyone is an expert on services 2. Services are idiosyncratic 3. Quality of work is not quality of service 4. Most services contain a mix of tangible and intangible attributes

4 © The McGraw-Hill Companies, Inc., 2004 Service Generalizations (Continued) 5. High-contact services are experienced, whereas goods are consumed 6. Effective management of services requires an understanding of marketing and personnel, as well as operations 7. Services often take the form of cycles of encounters involving face-to-face, phone, Internet, electromechanical, and/or mail interactions

5 © The McGraw-Hill Companies, Inc., 2004 Service Businesses Defined Facilities-based services: Where the customer must go to the service facility (Banks, Hospitals) Field-based services: Where the production and consumption of the service takes place in the customer’s environment (Repairperson) A service business is the management of organizations whose primary business requires interaction with the customer to produce the service

6 © The McGraw-Hill Companies, Inc., 2004 Internal Services Defined Internal Supplier Internal Customer External Customer Internal services is the management of services required to support the activities of the larger organization. Services include data processing, accounting, engineering, maintenance, etc.

7 © The McGraw-Hill Companies, Inc., 2004 The Service Triangle Exhibit 6.1 The Customer The Service Strategy The People The Systems A philosophical view that suggests the organization exists to serve the customer, and the systems and the employees exist to facilitate the process of service.

8 © The McGraw-Hill Companies, Inc., 2004 Classification of Service: Level of Contact High Degree of customer Contact —Customer is involved in the process —Usually more difficult to control —More difficult to rationalize —Customer affects time of demand, nature of service Low Degree of customer Contact —Customer has less involvement in the process

9 © The McGraw-Hill Companies, Inc., 2004 Designing Service Organizations Services cannot be inventoried —Demand must be met as it arises Capacity is dominant issue —It too much, excess costs (discount fares, specials) —If not enough, lost sales (specials, rain checks) How do you know how much to provide for? —Some form of analysis—forecasts

10 © The McGraw-Hill Companies, Inc., 2004 Elements of Service Organization Design Identification of target market —Who is your customer? Service concept —How do you differentiate your service in the market? Service strategy —What is your service package and operating focus? Service delivery system —What are the actual processes, staff, and facilities by which the services are created?

11 © The McGraw-Hill Companies, Inc., 2004 Applying Behavioral Science to Service Encounters 1.The front-end and back-end of the encounter are not created equal 2.Segment the pleasure, combine the pain 3.Let the customer control the process 4.Pay attention to norms and rituals 5.People are easier to blame than systems 6.Let the punishment fit the crime in service recovery

12 © The McGraw-Hill Companies, Inc., 2004 Service Strategy: Focus and Advantage Performance Priorities Treatment of the customer (warrantees) Speed and convenience of service delivery Price Variety (one stop shopping) Quality of the tangible goods Unique skills that constitute the service offering

13 © The McGraw-Hill Companies, Inc., 2004 Service-System Design Matrix Exhibit 6.7 Mail contact Face-to-face loose specs Face-to-face tight specs Phone Contact Face-to-face total customization Buffered core (none) Permeable system (some) Reactive system (much) High Low High Low Degree of customer/server contact Internet & on-site technology Sales Opportunity Production Efficiency

14 © The McGraw-Hill Companies, Inc., 2004 Service Blueprinting: Steps 1.Identify the processes 2.Isolate fail points 3.Establish a time frame 4.Analyze profitability

15 © The McGraw-Hill Companies, Inc., 2004 Example of Service Blueprinting

16 © The McGraw-Hill Companies, Inc., 2004 Service Recovery (Just in case) A real-time response to a service failure Blueprinting can guide recovery planning (fail points) Recovery planning involves training front-line workers to respond to such situations as overbooking, lost luggage, or a bad meal

17 © The McGraw-Hill Companies, Inc., 2004 Service Fail-safing Poka-Yokes (A Proactive Approach) Keeping a mistake from becoming a service defect How can we fail- safe the three Ts? Task TangiblesTreatment Performance Of Customer The Environment

18 © The McGraw-Hill Companies, Inc., 2004 Have we compromised one of the 3 Ts? 1.Task 2.Treatment 3.Tangible 1.Task 2.Treatment 3.Tangible

19 © The McGraw-Hill Companies, Inc., 2004 Three Contrasting Service Designs The production line approach —Treat service delivery as a manufacturing process —Example: McDonald’s Restaurants The self-service approach —Involve the customer in production of the service —Examples: ATM and self-service gas stations The personal attention approach —Anything to satisfy the customer

20 © The McGraw-Hill Companies, Inc., 2004 What is a Good Service Guarantee? Unconditional (No hidden clauses) Meaningful to the customer —The payoff fully covers customer dissatisfaction Easy to understand and communicate —For customers and —For employees Painless to invoke —Given proactively

21 © The McGraw-Hill Companies, Inc., 2004 Characteristics of a Well-Designed Service System 1. Each element of the service system is consistent with the operating focus of the firm 2. It is user-friendly —The customer can interact with it easily 3. It is robust —Cope with variations in demand and resources 4. It is structured so that consistent performance by its people and systems is easily maintained

22 © The McGraw-Hill Companies, Inc., 2004 Characteristics of a Well-Designed Service System (Continued) 5. It provides effective links between the back office and the front office so that nothing falls between the cracks 6. It manages the evidence of service quality in such a way that customers see the value of the service provided 7. It is cost-effective —There is minimum waste of time and resources in delivering the service