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Service Operations Management. Module Objectives. Understand the importance of and need for a service focus within the value-driven operations management system Develop and implement service delivery system designs that maximize customers’ perceptions of service value

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Service Operations


Module objectives
Module Objectives

  • Understand the importance of and need for a service focus within the value-driven operations management system

  • Develop and implement service delivery system designs that maximize customers’ perceptions of service value

  • Assess customers’ perceptions of service quality and develop action plans for closing gaps in service design and delivery

  • Develop plans for preventing poor service and for recovering from failed service encounters

  • Describe some impact of the Internet and telecommunications on e-service delivery and service globalization

Service value
Service Value

Service value can be defined as a function of customers’ perceptions of what they receive in a service encounter relative to what they give or lose in the encounter.

Value equation
Value Equation


Value = Total Cost

Total cost
Total Cost

Total cost includes the price that is paid for the service, in addition to, other customer acquisition costs (monetary and nonmonetary).

Nonmonetary acquisition costs

Non-Monetary Service Acquisition Cost



Preparing for the service by such actions as seeking referrals, researching competitors, and arriving early.

Relationship Building

Building a relationship with the service provider through such actions as smiling, offering words of kindness, getting to know providers, "trying to build loyalty", and asking for servers by name.

Information Exchange

Providing and seeking information to clarify service expectations and seek status.


Providing negative performance feedback and involving oneself in problem diagnosis and resolution.

Nonmonetary Acquisition Costs

Service design
Service Design

Service design ranges from the creation of new service business to the addition, adaptation, or modification of new service elements within an existing business.

Service value proposition
Service Value Proposition

A service value proposition is a succinct statement of the service provided and its expected value to customers.

Value proposition example
Value Proposition - Example

Deferred payments--let you borrow aggressively while matching costs to revenues

Aligned with the manufacturer--finance your network with the company who best understands your business-Cisco Systems-and tailors its financing products to conform to the unique service provider business model

Full financial product suite--Cisco is investing in your success as a business, and forging a long term relationship with you as both a technology and financial partner, with other financing programs you can use later as your business grows

One-stop shopping--with one place to go for best-of-class technology solutions and financing, it's easier and faster to get your network built and business started

Service package
Service Package

  • Explicit services

  • Implicit services

  • Facilitating goods

  • Supporting facility

  • Human resources

Types of services
Types of Services

  • Coproduction approach

  • Production-line approach

  • Customized-care approach

  • Front office and back office

Production line approach



Limited Discretionary Action of Personnel

Levitt’s prototypic service example, McDonald’s, is able to promise customers a consistent service package by automating most parts of the production process and clearly defining employees’ tasks.

Division of Labor.

Cooks, take-out-window cashiers, and front-line cashiers focus on specialized tasks.

Substitution of Technology for People

Lights and buzzers pace hamburger production just as the moving assembly line sets the pace of mass production of automobiles.

Service Standardization

Many travelers frequent McDonald's because they know exactly what to expect.

Production-Line Approach

Service recovery
Service Recovery

  • Incorporate recovery into hiring, training, and empowerment

  • Establish recovery guidelines and standards

  • Provide systems that promote easy access and effective responses

  • Maintain customer and product databases

Identifying and closing the gaps
Identifying and Closing the Gaps

Gap 1: Failure to understand what our customers expect

Gap 2: Inability to translate expectations into service design specifications

Gap 3: Inability to deliver the service per the design specifications

Gap 4: Communicated expectations that do not match service delivery capabilities

Gap 5: Dissatisfaction due to unmet expectations

Importance performance matrix
Importance-Performance Matrix





Importance (Expectation)