OPSM 405 Service Management Koç University OPSM 405 Service Management Class 4: Strategic Service Vision Zeynep Aksin zaksin@ku.edu.tr

Recall: The service value chain internal quality customer loyalty $ $ $ Euro $ $ $ YTL customer satisfaction employee satisfaction employee loyalty Value employee productivity

The Value Profit Chain - Schlesinger Determinants of employee and customer loyalty cycle of failure - low wages, little training, => limited customer loyalty, high turnover cycle of capability - share of profits, greater control, => highly productive employees, satisfied customers

The Service Profit Chain - Heskett Strategic Service Vision markets targeted on “psychographic” (how people think and act) as well as demographic factors. Service concepts, products, and entire businesses defined in terms of the results produced for customers.

Strategic Service Vision - continued Heskett - continued Strategic Service Vision - continued Operating strategies comprising organization controls, operating policies, and process that “leverage” value to customers over cost. Service delivery systems comprising bricks and mortar, information systems and equipment that complement associated operating strategies

Questions –Strategic Service Vision Heskett - continued Questions –Strategic Service Vision Does the service delivery system support the operating strategy? To what extent is the value of results and process quality for customers leveraged over cost to the service provider? How well is the service concept positioned in relation to customers’ needs and competitors’ offerings?

Strategic service vision: the external view Target Market Segments what are the market segments? Positioning how do customers view the service? Service Concept what is the service bundle? Value/Cost Leveraging perceived value-cost? Operating Strategy investment / purchasing decisions? Strategy/System Integration is everything consistent? Service Delivery System what are resource needs?

Strategic service vision: the internal view Target Employee Groups who are my employees? Positioning how do employees fit? Service Concept what are employee beliefs? Value/Cost Leveraging perceived value-cost? Operating Strategy is human contact essential? Strategy/System Integration is everything consistent? Service Delivery System what are resource needs?

Target market segments What are common characteristics of important market segments? What dimensions can be used to segment the market? Demographic? Psychographic? How important are various segments? What needs does each have? How well are these needs being served? In what manner? By whom?

Service Concept What are important elements of the service to be provided, stated in terms of results produced for customers? How are these elements supposed to be perceived by the target market segment? By the market in general? By employees? By others? How is the service concept perceived? What efforts does this suggest in terms of the manner in which the service is designed? Delivered? Marketed?

Operating Strategy What are important elements of the strategy? Operations? Financing? Marketing? Organization? Human resource? Control? On which will the most effort be concentrated? Where will investments be made? How will quality and cost be controlled? Measures? Incentives? Rewards? What results will be expected vs. competition in terms of: quality of service? cost profile? Productivity? Morale/loyalty of servers?

Service Delivery System What are important features of the service delivery system including: the role of people? Technology? Equipment? Facilities? Layout? Procedures? What capacity does it provide? Normally? At peak times? To what extent does it: help ensure quality standards? Differentiate the service from competition? Provide barriers to entry by competitors?

The service profit chain Internal External Operating strategy and service delivery system Service concept Target market Satisfaction Loyalty Productivity and Output Quality Service Quality Capability Employees Revenue growth Customers Service value Satisfaction Loyalty Profitability Workplace design Job design/decision-making latitude Selection and development Rewards and recognition Information and communication Adequate “tools” to serve customers Quality and productivity improvements yield higher service quality and lower cost Attractive value Service designed and delivered to meet targeted customers’ needs Lifetime value Retention Repeat business Referral Source: Adapted and reprinted by permission of Harvard Business Review. An exhibit from “Putting the Service Profit Chain to Work,” by James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr., and Leonard A. Schlesinger, March-April 1994, p. 166

Implementation challenges define your service bundle: details matter! get the right resources to achieve the bundle: match employees and technology to vision integrate your resources continuous improvement of bundle and resources use technology when necessary Remember to keep both an external and internal vision!