1. OPSM 405 Service Management
Koç University
OPSM 405 Service Management
Class 4:
Strategic Service Vision
Zeynep Aksin

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

3. 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

4. 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.

5. 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

6. 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?

7. 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?

8. 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?

9. 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?

10. 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?

11. 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?

12. 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?

13. 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

14. 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!