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Tips of Studying. Know the key terms and definitions at the end of each chapter. Pay attention to examples, figures and tables. Study the three team assignments and presentations. Go over the mid-term. Practice using a calculator for control chart formulas. Study with others. Chapter 1.

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Tips of studying l.jpg
Tips of Studying

  • Know the key terms and definitions at the end of each chapter.

  • Pay attention to examples, figures and tables.

  • Study the three team assignments and presentations.

  • Go over the mid-term.

  • Practice using a calculator for control chart formulas.

  • Study with others.


Chapter 1 l.jpg
Chapter 1

What is the role of services in an economy?


Service definition l.jpg
Service Definition

A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.




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Stages of Economic Development

Pre- Use of Standard

dominant human Unit of of living

Society Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional tools

power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical

nature

Post- Among Services Artistic Community Quality of Inter- Information

industrial Persons Creative life in terms dependent

Intellectual of health, Global

education,

recreation


The new experience economy l.jpg

Economy

Agrarian

Industrial

Service

Experience

Function

Extract

Make

Deliver

Stage

Nature

Fungible

Tangible

Intangible

Memorable

Attribute

Natural

Standardized

Customized

Personal

Method of

Stored in

Inventoried

Delivered

Revealed

supply

bulk

on demand

over time

Seller

Trader

Manufacturer

Provider

Stager

Buyer

Market

User

Client

Guest

The New Experience Economy



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Experience Design Principles

  • Theme the Experience Forum shops

  • Harmonize Impressions with Positive CuesO’Hare airport parking garage

  • Eliminate Negative Cuescinemark talking trash containers

  • Mix in Memorabilia Hard Rock T-shirts

  • Engage all Five Senses Mist in Rainforest


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Source of Service Sector Growth

  • InnovationPush theory New discovery, Post-itPull theory changing demographic, interest ratesServices derived from products Video RentalInformation driven services statement of transaction for tax prep

    Difficulty of testing service prototypes focus group

  • Social TrendsAging of the populationTwo-income familiesGrowth in number of single peopleHome as sanctuary


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Chapter 2

How do you categorize a service?



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The Service Package

1. Supporting Facility

Examples are golf course, ski lift, hospital, airplane.

2. Facilitating Goods

Examples are food items, legal documents, golf clubs, medical history.

3. Information

Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi.

4. Explicit Services

Examples are quality of meal, attitude of the waiter, on-time departure.

5. Implicit Services

Examples are privacy of loan office, security of a well lighted parking lot.


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Distinctive Characteristics of Services

  • Customer Participation

  • Simultaneity

  • Perishability

  • Intangibility

  • Heterogeneity


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The Service Process Matrix

Degree of Interaction and Customization

Low High

Service factory: Service shop:

* Airlines * Hospitals

Low * Trucking * Auto repair

* Hotels * Other repair services

* Resorts/ recreation

Degree

of labor IntensityMass service: Professional service:

* Retailing * Doctors

High * Wholesaling * Lawyers

* Schools * Accountants

* Retail aspects of * Architects

commercial banking


Strategic service classification nature of the service act l.jpg
Strategic Service Classification (Nature of the Service Act)

Direct Recipient of the Service

Nature of

the Service ActPeople Things

People’s bodies: Physical possessions:

Health care Freight transportation

Passenger transportation Repair and maintenance

Tangible actions Beauty salons Veterinary care

Exercise clinics Janitorial services

Restaurants Laundry and dry cleaning

People’s minds: Intangible assets:

Education Banking

Intangible actions Broadcasting Legal services

Information services Accounting

Theaters Securities

Museums Insurance


Strategic service classification relationship with customers l.jpg
Strategic Service Classification (Relationship with Customers)

Type of Relationship between Service Organization and Its Customers

Nature of

Service Delivery“Membership” relationship No formal relationship

Insurance Radio station

Telephone subscription Police protection

Continuous delivery Electric Utility Lighthouse

of service Banking Public Highway

Long-distance phone calls Restaurant

Theater series tickets Pay phone

Discrete transactions Transit pass Toll highway

Sam’s Wholesale Club Movie theater

Airline frequent flyer Public transportation


Strategic service classification nature of demand and supply l.jpg
Strategic Service Classification (Nature of Demand and Supply)

Extent of Demand Fluctuation over Time

Extent to which Supply

Is ConstrainedWide Narrow

Electricity Insurance

Peak demand can Telephone Legal services

usually be met Police emergency Banking

without a major delay Hospital maternity unit Laundry and dry cleaning

Tax preparation Fast food restaurant

Peak demand regularly Passenger transportation Movie theater

exceeds capacity Hotels and motels Gas station


Strategic service classification method of service delivery l.jpg
Strategic Service Classification (Method of Service Delivery)

Availability of Service Outlets

Nature of Interaction

between Customer and

Service OrganizationSingle site Multiple site

Customer travels to Theater Bus service

service organization Barbershop Fast-food chain

Service provider Taxi Mail delivery

travels to customer Pest control service AAA emergency repairs

Transaction is at Credit card company Broadcast network

arm’s length Local TV station Telephone company


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Open Systems View of Services Delivery)

Service Process Consumer Evaluation

Consumer arrivals Consumer participant departures Criteria

(input) Consumer-Provider ( output) Measurement

interface

Control Monitor

Customer demandService Operations ManagerService personnel

Production function:

Perceived needs Alter Monitor and control process Schedule Empowerment

Location demand Marketing function: supply Training

Interact with consumers Attitudes

Control demand

Modify as necessary

Define standard

Service package

Supporting facility

Communicate Facilitating goods Basis of

by advertising Explicit services selection

Implicit services


Chapter 3 l.jpg
Chapter 3 Delivery)

What is a service strategy?


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Strategic Service Vision Elements Delivery)

  • Target Market SegmentWhat are common characteristics of important market segments?

  • Service ConceptHow do customers perceive the service concept?

  • Operating StrategyWhat are important elements of the strategy: operations, financing, marketing, organization, human resources, control?

  • Service Delivery SystemWhat are important features of the service delivery system including: role of people, technology, equipment, layout, procedures?


Competitive environment of services l.jpg
Competitive Environment of Services Delivery)

  • Relatively Low Overall Entry Barriers

  • Economies of Scale Limited

  • High Transportation Costs

  • Erratic Sales Fluctuations

  • No Power Dealing with Buyers or Suppliers

  • Product Substitutions for Service

  • High Customer Loyalty

  • Exit Barriers


Competitive service strategies l.jpg
Competitive Service Strategies Delivery)

  • Overall Cost Leadership

  • Differentiation

  • Focus


Overall cost leadership l.jpg
Overall Cost Leadership Delivery)

  • Seeking Out Low-cost Customers

  • Standardizing a Custom Service

  • Reducing the Personal Element in Service Delivery (promote self-service)

  • Reducing Network Costs (hub and spoke)

  • Taking Service Operations Off-line


Differentiation l.jpg
Differentiation Delivery)

  • Making the Intangible Tangible (memorable)

  • Customizing the Standard Product

  • Reducing Perceived Risk

  • Giving Attention to Personnel Training

  • Controlling QualityNote: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service.


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Focus Delivery)

  • Buyer Group: (e.g. USAA insurance and military officers)

  • Service Offered: (e.g. Shouldice Hospital and hernia patients)

  • Geographic Region: (e.g. Austin Cable Vision and TV watchers)


Customer criteria for selecting a service provider l.jpg

Availability Delivery)

Convenience

Dependability

Personalization

Price

Quality

Reputation

Safety

Speed

Customer Criteria for Selecting a Service Provider


Service purchase decision l.jpg
Service Purchase Decision Delivery)

  • Service Qualifier:Just to be considered.

  • Service Winner: Used to make the final choice.

  • Service Loser:Failure to deliver.


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Competitive Role of Information in Services Delivery)

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

(Operations) Point of sale Data envelopment

Expert systems analysis (DEA)


The virtual value chain l.jpg
The Virtual Value Chain Delivery)

Marketplace

vs.

Marketspace


Limits in the use of information l.jpg
Limits in the Use of Information Delivery)

  • Anti-competitive (Barrier to entry)

  • Fairness (Yield management)

  • Invasion of Privacy (Micro-marketing)

  • Data Security (Medical records)

  • Reliability (Credit report)


Using information to categorize customers l.jpg
Using Information to Categorize Customers Delivery)

  • Coding (how to handle)

  • Routing (call centers)

  • Targeting (hidden discounts)

  • Sharing (source of revenue)


Chapter 4 l.jpg
Chapter 4 Delivery)

How do you develop a new service?


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Levels of Service Innovation Delivery)

I. Radical Innovations

  • Major Innovation internet banking

  • Start-up Business new service in existing service

  • New Services for the Market Presently Served kiosks in supermarkets

    II. Incremental Innovations

  • Service Line Extensions new menu items

  • Service Improvements self airline check-in

  • Style Changes funeral homes celebrate life


Technology driven service innovation l.jpg
Technology Driven Service Innovation Delivery)

  • Power/energy

  • Physical design

  • Materials

  • Methods

  • Information


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Service Design Elements Delivery)

  • Structural- Delivery system- Facility design- Location- Capacity planning

  • Managerial- Service encounter- Quality- Managing capacity and demand- Information


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New Service Development Cycle Delivery)

  • Full-scale launch

  • Post-launch review

Full Launch

Development

Enablers

  • Formulation

  • of new services

  • objective / strategy

  • Idea generation

  • and screening

  • Concept

  • development and

  • testing

People

Organizational

Context

Teams

  • Service design

  • and testing

  • Process and system

  • design and testing

  • Marketing program

  • design and testing

  • Personnel training

  • Service testing and

  • pilot run

  • Test marketing

Product

Technology

Systems

Tools

Analysis

Design

  • Business analysis

  • Project authorization



Strategic positioning through process structure l.jpg
Strategic Positioning Delivery) Through Process Structure

  • Degree of Complexity

    Measured by the number of steps in the service blueprint. (clinic vs. hospital)

  • Degree of Divergence

    Amount of discretion permitted the server to customize the service. (attorney vs. paralegal)


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Generic Approaches to Service Design Delivery)

1. Production-line McDonald’s

• Limit Discretion of Personnel mufflers

• Division of Labor MRI tech

• Substitute Technology for People greeting card reorder

• Standardize the Service franchising - Starbucks

2. Customer as Coproducer Pizza Hut buffet• Self Service automatic check-in at airlines • Smoothing Service Demand midweek ski lift discount

3. Customer Contact front office/back office • Degree of Customer Contact laundry at a hospital • Separation of High and Low Contact Operations

Airline reservationists/baggage handler

4. Information Empowerment IT – it’s not just for nerds anymore • Employee cancelled airline flight

• Customer package tracking



Chapter 5 l.jpg
Chapter 5 Delivery)

What is the role of technology in services?


Role of technology l.jpg

Technology Delivery)

Technology

Technology

Customer

Server

Customer

Server

Customer

Server

A. Technology-Free

Service Encounter

B. Technology-Assisted

Service Encounter

C. Technology-Facilitated

Service Encounter

Technology

Technology

Customer

Server

Customer

Server

D. Technology-Mediated

Service Encounter

E. Technology-Generated

Service Encounter

Role of Technology

MRI, Optometrist, Airlines

Personal Care, Professional services

Financial planner

Tech call center, House arrest monitoring

ATM, Web based info, checkout scanning, airport kiosks


Classification of service automation l.jpg
Classification of Service Automation Delivery)

  • Fixed-sequence (F) automatic tollbooth, newspaper dispenser

  • Variable-sequence (V) ATM, car wash, collating copy machine

  • Playback (P) directory assistance, answering machine, spell check

  • Numerical controlled (N) IRS Forms, animation

  • Intelligent (I) autopilot, computer games, Doppler radar

  • Expert system (E) car diagnostics, medical diagnosis, stock trading

  • Totally automated system (T) telemarketing, eft, space shuttle


Purpose of web site l.jpg
Purpose of Web-site Delivery)

  • A retail channel Amazon.com

  • Supplemental channel Barnes & Nobel

  • Technical support Dell Computer

  • Embellish existing service HBR, News websites

  • Order processing Airlines, Expedia.com

  • Convey information Kelly Blue Book, Dr. Koop

  • Organization membership asq.org

  • Games treeloot.com


Chapter 6 l.jpg
Chapter 6 Delivery)

What are the dimensions of service quality?


Moments of truth l.jpg
Moments of Truth Delivery)

  • Each customer contact is called a moment of truth.

  • You have the ability to either satisfy or dissatisfy them when you contact them.

  • A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.


Dimensions of service quality l.jpg
Dimensions of Service Quality Delivery)

  • Reliabilitydependable over time

  • Responsivenesskeeping customers waiting

  • Assurance reputation, credentials, confidence, track record

  • Empathybeing a good listener, putting yourself in their place

  • Tangiblescleanliness, physical appearance


Perceived service quality l.jpg
Perceived Service Quality Delivery)

Word of

mouth

Personal

needs

Past

experience

Service Quality

Dimensions

Reliability

Responsiveness

Assurance

Empathy

Tangibles

Service Quality Assessment

1. Expectations exceeded

ES<PS (Quality surprise)

2. Expectations met

ES~PS (Satisfactory quality)

3. Expectations not met

ES>PS (Unacceptable quality)

Expected

service

Perceived

service



Taguchi s robust design l.jpg

Most “Robust” Setting Delivery)

Taguchi’s Robust Design


Taguchi loss function l.jpg

L (x) = k (x-T) Delivery)2

Traditional loss function

Taguchi Loss Function

Loss ($)

.480

.500

.520

.Lower

limit

Target

.Upper

Limit


Classification of service failures with poka yoke opportunities l.jpg

Server Errors: Delivery)

Task checklist

Treatment listening check

Tangible clean uniform

Customer Errors:

Preparation survey

Encounter size limitation

Resolution computer beep

Classification of Service Failureswith Poka-Yoke Opportunities


Benchmarking l.jpg
Benchmarking Delivery)

Benchmarking is the systematic process of evaluating the work processes of organizations that are recognized as representing best

practices for the purpose of improving performance.

World-Class Best

Functional

Industry

Competition

Internal

(12.1)


Walk through audit l.jpg
Walk-Through-Audit Delivery)

  • Service delivery system should conform to customer expectations.

  • Customer impression of service influenced by use of all senses.

  • Service managers lose sensitivity due to familiarity.

  • Need detailed service audit from a customer’s perspective.


Quality costs l.jpg
Quality Costs Delivery)


Costs of service quality bank example l.jpg
Costs of Service Quality Delivery)(Bank Example)

Failure costs Detection costs Prevention costs

External failure: Process control Quality planning

Loss of future business Peer review Training program

Negative word-of-mouth Supervision Quality audits

Liability insurance Customer comment card Data acquisition and analysis

Legal judgments Inspection Recruitment and selection

Interest penalties Supplier evaluation

Internal failure:

Scrapped forms

Rework

Recovery:

Expedite disruption

Labor and materials


Descriptive statistics l.jpg
Descriptive Statistics Delivery)

1.Measures of Central Tendencies (Location)

  • Mean

  • Median = The middle value

  • Mode - The most frequent number

    2. Measures of Dispersion (Spread)

  • Range R=Maximum-Minimum

  • Standard Deviation

  • Variance


The normal gaussian curve l.jpg

68.26% Delivery)

99.73%

The Normal (Gaussian) Curve

-3-2-1+1+2+3

95.46%



Control charts l.jpg
Control Charts Delivery)

Special Cause

(Assignable)

+3σ

Average

-3σ

Common Cause

(Chance or Random)

Special Cause

(Assignable)


Unconditional service guarantee customer view l.jpg
Unconditional Service Guarantee: Customer View Delivery)

  • Unconditional L.L. Bean, Target

  • Easy to understand and communicate 15 minutes or free

  • Meaningful $3 rebate vs free pizza

  • Easy to invoke toll-free call

  • Easy to collect on the spot, Ritz-Carlton, restaurant manager


Unconditional service guarantee management view l.jpg
Unconditional Service Guarantee: Management View Delivery)

  • Focuses on customers British Airways

  • Sets clear standards FedEx

  • Guarantees feedback Manpower

  • Promotes an understanding of the service delivery system Bug Killer

  • Builds customer loyalty by making expectations explicit reduce customer risk, expectations explicit, retains dissatisfied customers


Customer feedback and word of mouth l.jpg
Customer Feedback and Delivery)Word-of-Mouth

  • The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems.

  • The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers.

  • About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly.

  • A dissatisfied customer will tell between 10 and 20 other people about their problem.

  • A customer who has had a problem resolved by a company will tell about 5 people about their situation.


Slide67 l.jpg

Service Recovery Framework Delivery)

-

-

Provider

Service

Aware of

Failure

Failure

Occurs

Severity

Perceived

Psychological

Tangible

Psychological

Of

Service

empathy

apology

-

fair fix

Failure

Quality

apology

-

value add

show interest

Follow

-

up

Service

Loyalty

Service

Service

Recovery

Satisfaction

Patronage

Recovery

Recovery

Expectations

Retention

Customer

Service

Speed of

Frontline

Tangible

Loyalty

Guarantee

Recovery

Discretion

-

small token

Pre

-

recovery Phase

Immediate Recovery Phase

Follow

-

up Phase

-

-

Fair

Restitution


Approaches to service recovery l.jpg
Approaches to Service Recovery Delivery)

  • Case-by-case individual, but fair

  • Systematic response protocol to handle complaints

  • Early intervention notify the customer immediately

  • Substitute service capitalizing on rival failure


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Quality Principles of Delivery)Continuous Improvement

  • Customer satisfaction

  • Management by facts

  • Respect for people


Plan do check act pdca cycle l.jpg
Plan-Do-Check-Act (PDCA) Cycle Delivery)

Plan

Act

Do

Check


Flow charting l.jpg
Flow Charting Delivery)

(AV.3)


Cause and effect diagram a k a ishikawa diagram fishbone diagram l.jpg
Cause Delivery) and Effect Diagrama.k.a. Ishikawa Diagram, Fishbone Diagram

Person

Procedures

Process

Material

Equipment


Pareto chart a k a 80 20 rule l.jpg
Pareto Chart Delivery)a.k.a. 80/20 Rule

Vital Few

Trivial (Useful) Many


Deming s 14 points l.jpg
Deming’s 14-Points Delivery)

  • Fulfill the long-term needs.

  • Chronic mistakes are unacceptable.

  • Cease dependence on mass inspection.

  • End the practice of awarding business on price tag alone.

  • Improve constantly and forever the system of production and service.

  • Institute training.

  • Institute leadership.


Deming s 14 points75 l.jpg
Deming’s 14-Points Delivery)

  • Drive out fear.

  • Break down barriers between staff areas.

  • Eliminate slogans, exhortations, and targets for the workforce.

  • Examine the impact of work standards.

  • Remove barriers to pride of workmanship.

  • Institute a vigorous program of education and retraining.

  • Take action to accomplish the transformation.



Chapter 7 l.jpg
Chapter 7 Program

How does the service encounter describe a service firm’s delivery process?


The service encounter triad l.jpg

Service Program

Organization

Efficiency

versus

autonomy

Efficiency

versus

satisfaction

Contact

Personnel

Customer

Perceived

control

The Service Encounter Triad


The service organization l.jpg
The Service Organization Program

  • Culture Values ServiceMaster (Service to the Master) Behaviors Disney (Choice of language)

  • Empowerment Invest in people like investing in equipment Use IT to enable personnel customer history Recruitment and training match to firm’s CSF Anchor performance recognition and reward


Culture l.jpg
Culture Program

The shared beliefs and values of an organization that guide employee decision-making and behavior in the firm.


Empowerment l.jpg
Empowerment Program

Providing contact personnel with the training and information to make decisions for the firm without close supervision.


Organizational control for employee empowerment l.jpg
Organizational Control Programfor Employee Empowerment


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Contact Personnel Attributes Program

  • Flexibility

  • Tolerance for Ambiguity

  • Ability to Monitor and Change Behavior on the Basis of Situation Cues

  • Empathy for Customers


Contact personnel l.jpg
Contact Personnel Program

Selection1. Abstract Questioning “From your past experience, …”2. Situational Vignette ability to “think on their feet” in substance and delivery3. Role Playing requires careful scripting and customer actor rehearsal

Training

1. Technical Skills

2. Unrealistic customer expectations

3. Unexpected service failure


Unrealistic customer expectations l.jpg
Unrealistic customer expectations Program

1. Unreasonable demands I want to take all my luggage on board

2. Demands against policies I have to smoke

3. Unacceptable treatment of

employees You’re an idiot

4. Drunkenness Hey, where’s my drink?

5. Breaking of societal norms I like to sunbath nude

6. Special-needs customers Why don’t you understand English?


Unexpected service failure l.jpg
Unexpected Service Failure Program

1. Unavailable service Why isn’t the ATM working?

2. Slow performance Why hasn’t our plane arrived?

3. Unacceptable service There’s a fly in my soup.


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Training on Unrealistic Customer Expectations and Unexpected Service Failure

  • A prescribed response to a any given situation

    “I am very sorry, but federal safety regulations permit a passenger only two carry-on pieces small enough to be stored under the seat or overhead. May I check your larger pieces all the way to your final destination?”

  • Anticipate the types of exchange they might encounter through role playing


The customer l.jpg
The Customer Service Failure

Shopping attitudes1. Economizing customer compares value with competition2. Ethical customer moral obligation (Ronald McDonald House)3. Personalizing customer know your name4. Convenience customer pay extra for hassle free service

Customer as Co-Producer

1. What is their role?

2. How to train?

3. When to retrain?



The customer90 l.jpg
The Customer Service Failure

Shopping attitudes1. Economizing customer compares value with competition2. Ethical customer moral obligation (Ronald McDonald House)3. Personalizing customer know your name4. Convenience customer pay extra for hassle free service

Customer as Co-Producer

1. What is their role?

2. How to train?

3. When to retrain?



Slide92 l.jpg

Satisfaction Mirror Service Failure

More

Repeat

Purchases

More Familiarity with Customer Needs andWays of Meeting Them

Stronger Tendency to Complain about Service Errors

Greater Opportunity for Recovery

from Errors

Higher Customer Satisfaction

Higher Employee

Satisfaction

Higher Productivity

Lower Costs

Better Results

Improved Quality

of Service


Slide93 l.jpg

Internal Service Failure

External

Service concept

Operating strategy and

service delivery system

Target market

Loyalty

Revenue

growth

Customers

Satisfaction

Productivity

&

Output

quality

Service

value

Employees

Satisfaction

Loyalty

Capability

Profitability

Service

quality

Customer orientation/quality emphasis

Allow decision-making latitude

Selection and development

Rewards and recognition

Information and communication

Provide support systems

Foster teamwork

Quality & productivity improvements yield higher service quality and lower cost

Attractive Value

Service designed

& delivered to

meet targeted

customers’ needs

Solicit customer

feedback

Lifetime value

Retention

Repeat Business

Referrals

Service Profit Chain


Slide94 l.jpg

Is attitude emphasized? Service Failure

Are job previews utilized?

Are customers screened?

Careful Employee

and Customer Selection

(and Self-selection))

Are employees encouraged to

refer friends?

Are referrals from

the “best” employees given priority?

Is training for job and life?

Is it an important element of quality of work life?

Employee

Referrals of

Potential Job

Candidates

High-Quality Training

Is satisfaction

measured periodically?

Are measurements linked to other functions on

the cycle?

Do they reflect

needs of the

service encounter?

Are they designed to foster relationships?

Cycle

of Capability

  • Well-Designed

  • Support Systems

  • Information

  • Facilities

Satisfied

Employees

Appropriate

Rewards

and Frequent

Recognition

Greater Latitude to Meet

Customer’s Needs

Does it reflect top management “talk”?

Is it enough to allow delivery of results to customers?

Are they linked to

service objectives?

Are they balanced

between monetary

and non-monetary?

Clear Limits on, and Expectations of, Employees

Do they limit the “right” risks?

Are they logical to employees?


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Chapter 11 Service Failure

How do you forecast the demand for services?


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Delphi Method Service Failure Nuclear Power Industry Example


Chapter 12 l.jpg
Chapter 12 Service Failure

Describe strategies for managing capacity and demand.


Strategies for matching supply and demand for services l.jpg

SUPPLY Service Failure

STRATEGIES

DEMAND

STRATEGIES

Partitioning

demand

Increasing

customer

participation

Developing

complementary

services

Sharing

capacity

Establishing

price

incentives

Scheduling

work shifts

Cross-

training

employees

Developing

reservation

systems

Creating

adjustable

capacity

Promoting

off-peak

demand

Using

part-time

employees

Yield

management

Strategies for Matching Supply and Demand for Services


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Daily Scheduling of Service Failure Telephone Operator Workshifts

Scheduler program assigns tours so that the number of operators present each half hour adds up to the number required

Topline profile

2500

2000

1500

Calls

1000

500

Tour

0

12 2 4 6 8 10 12 2 4 6 8 10 12

12 2 4 6 8 10 12 2 4 6 8 10 12

Time


Integer linear programming ilp model for weekly nurse staffing requirements l.jpg

Objective function Service Failure

:

+ x

+ x

+ x

+ x

+ x

+ x

Minimize x

1

2

3

4

5

6

7

Constraints

:

³

+ x

+ x

+ x

+ x

3

Sunday x

2

3

4

6

5

³

Monday

x

+ x

+ x

+ x

+ x

6

3

4

5

6

7

³

+ x

+ x

+ x

+ x

5

Tuesday x

1

4

5

6

7

³

+ x

+ x

+ x

6

+ x

Wednesday x

1

2

5

6

7

+ x

+ x

³

+ x

+ x

5

Thursday x

1

2

3

6

7

³

+ x

+ x

+ x

5

Friday x

+ x

7

1

2

3

4

³

+ x

+ x

+ x

+ x

Saturday x

5

1

2

3

4

5

Integer Linear Programming (ILP) Modelfor Weekly Nurse Staffing Requirements

Tour Requirement: 5 days on and 2 consecutive days off


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Weekly Nurse Staffing Schedule Service Failure

Schedule matrix, x = day off

Nurse Su M Tu W Th F Sa

1 x x … … … … ... 2 … x x … … … …

3 … ... x x … … …

4 … ... x x … … …

5 … … … … x x …

6 … … … … x x …

7 … … … … x x …

8 x … … … … … x

Total 6 6 5 6 5 5 7

Required 3 6 5 6 5 5 5

Excess 3 0 0 0 0 0 2


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Tellers required Service Failure

5

4

4

Tellers required

3

3

0 1 2 3 4 5

2

2

1

Two Full-time Tellers

1

1

5

2

Fri. Mon. Wed. Thurs Tues.

Mon. Tues. Wed. Thurs. Fri.

Scheduling Part-time Bank Tellers

Decreasing part-time teller demand histogram

0 1 2 3 4 5 6 7

DAILY PART-TIME WORK SCHEDULE, X=workday

Teller Mon. Tues. Wed. Thurs. Fri.

1 x …. x …. x

2 x …. …. x x

3,4 x …. …. …. x

5 …. …. x …. x


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Yield Management Service Failure

Most appropriate for services with the following characteristics:

  • Fixed Capacity hotels, airlines

  • Ability to Segment Markets Saturday-night stay, Seasonal resort example

  • Perishable Inventory standby passengers

  • Product Sold in Advance Demand control for a hotel example

  • Fluctuating Demand Increase utilization (slow demand) Increase revenue (high demand)

  • Low Marginal Sales Cost and High Capacity Change Cost selling airline snack vs. cost on bigger aircraft


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Chapter 15 Service Failure

What are the challenges of managing the service supply relationships?


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Deming’s 14-Points Service Failure

Point 4

End the practice of awarding business on price tag alone.


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Customer-Supplier Duality in Service Supply Relationships (Hubs)

Supplier

Service

Provider

Service

Design

Customer

Material transfer

Information transfer



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Sources of Value in Service Supply Relationships (Hubs)

  • Managing Productive Capacity1. Transfer make knowledge available web based FAQ 2. Replacement substitute technology for server digital blood pressure device3. Embellishment enable self-service by teaching change surgical dressing

  • Management of Perishability

    1.Time allotment based on “best use”real-time schedules

    2. Idle time for trainingcomputer-based (mobile data terminals)


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Outsourcing Services (Hubs)Benefits

Allows the firm to focus on its core competence

Service is cheaper to outsource than perform in-house

Provides access to latest technology

Leverage benefits of supplier economy of scale


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Outsourcing Services (Hubs)Risks

Loss of direct control of quality

Jeopardizes employee loyalty

Exposure to data security and customer privacy

Dependence on one supplier compromises future negotiation leverage

Additional coordination expense and delays

Atrophy of in-house capability to perform service


Taxonomy for outsourcing business services l.jpg

Importance of Service (Hubs)

Low

High

Facility Support:

Equipment Support:

Property

-

Laundry

-

Repairs

-

Janitorial

-

Maintenance

Focus

-

Waste disposal

-

Product testing

Employee Support:

Employee

of

Development:

People

-

Food service

-

Plant security

-

Training

-

Temp

orary personnel

-

Education

-

Medical care

Service

Facilitator:

Professional:

-

Bookkeeping

-

Advertising

Process

-

Travel booking

-

Public relations

-

Packaged software

-

Lega

l

Taxonomy for Outsourcing Business Services


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