1 The Service Package and Service Delivery System Service Content Service Levels

2 Goods-Services Spectrum GoodsRetailingProcessingCookingServing

3 Service Content Premanufacturing and Prepacking of services Cost reduction Cost reduction Centralised control Centralised control Increasing the Service Content Competitive pressure, personalizing products Competitive pressure, personalizing products Consumerization of production Transfer part of the service production to the customer Transfer part of the service production to the customer

4 Impact of Service Content Staffing Marketing, advertising TrainingInventory Process design and control Investment Understand position on spectrum and plan direction of movement

5 Service Levels Key concern, elusive concept (athmosphere, convenience, status, consistency in addition to service) Expected service levels are met by delivering the components that the customer percieves as important Percieved service level combined with price=percieved value Service Level is a measure of the implicit and explicit benefits provided

6 Setting Service Levels Adequate service level? Level of performance that will satisfy customer expectations Level of performance that will satisfy customer expectations Challenge: understand ‘satisfaction’ and translate it to ‘discernable’ service levels Challenge: understand ‘satisfaction’ and translate it to ‘discernable’ service levels Areas that require service level decisions: staffing, customer throughput, quality of facilitating good, length of queue

7 Setting Service Levels (cont) Initial service level must be set carefully: dangerous to change later Match management and consumer perception of service level Undertand consumer expectations through feedback from customer Undertand consumer expectations through feedback from customer Shape consumer expectations through advertising Shape consumer expectations through advertising

8 Service Levels-Consumer Model Substantive service vs desired (peripheral) attributes (hotel, restaurant, Village Volvo) Understand consumer judgement May show conflict when translated into desired attributes May show conflict when translated into desired attributes Broad menu – too much choice Exclusive small hotel – location, reservation uncertainty

9 Consumer model Consumer needs Substantive need ControlTrustConvenienceSelf-fulfillmentStatus Desired attributes Substantive service SecurityConsistencyAttitudeCompletenessConditionAvailabilityTiming translated to Mixture of attributes creates the service level

10 Consumer model (cont.) Security: safety (lighted parking lot) Consistency: standardisation, reliability (meat in restaurant) Attitude: service worker, printed instructions, signs Completeness: array of services (agent just ticket/transportation/lodging) Availability: access time, location, opening hours, frequency of schedule Timing: service time (quick vs right psychological moment)

11 Models of consumer judgement One overpowering attribute Single attribute with threshold minimum of other attributes Weighted average of attributes

12 Service level – Price combination Rational consumer: D (at a given price P1 maximise service level-D more attractive than A) Consumer chooses desired service level: D (for service level SL minimise price-D better than F or E) Service firm: F A to B nominal expense to firm Successful firm B to E at nominal expense Unacceptable to customer unprofitable

13 Service Level Challenge Difficult to measure and communicate service levels Initial service level must be set with care (no turning back) Service level must be designed into the service delivery system Cannot be introduced later with inspection or QC (Simultaneity) Hotel complaint: light bulbs, towels. More inspection? Encouraging workers? Set routine for making up a room; same sequence in all rooms. minimises effort for worker, ensures standards

14 Human input in service levels Labor intensive (difficult to control service level) substitute technology for people substitute technology for people Missing elements Human presence (warmth) Human presence (warmth) Human assurance (security, trust) Human assurance (security, trust) Human response (infinite variations, tailored to need) Human response (infinite variations, tailored to need) Human dexterity Human dexterity Human reasoning Human reasoning Important to identify functional tasks that are provided by humans as the starting point for controlling and measuring service levels

15 Servive level focus Services FewMany Markets Few Many Start in Cell 1 Move to Cell 2: Charter airline expands to businessmen. Can the same service delivery system control service levels for both markets? Move to Cell 3: airline also offering accomodation, car rental (successful?) Can the same service delivery system control service levels for different types of services? Move to Cell 4: dangerous. UNFOCUSING (being all things to all people)

16 Integrating the service package,service delivery system and service levels Service Package Supporting facility Facilitating good Explicit services Implicit services Service Delivery System Quality of facilitating good Athmosphere & image of firm Attitude of employees Service Levels defined in terms of performance levels of Goods Facilities Personnel DICTATES AND IS DEFINED BY IS DEFINED BY MANAGEMENT TO CREATE OPERATES TO CREATE Consumer perceived service levels COMMUNICATED BY ADVERTISINGPURCHASES