Introduction
Lecture 3. Service Environment
1
3.1
• Service Environment
1. Nature and importance of services
2. Designing service organization
3. Service blue printing
4. Service guarantees
2
3.2
Difference between manufacture and service
Manufacturing Organization
Service Organization
Physical, durable product
Output can be inventoried
Low customer contact
Long response time
Regional, national or
international markets
large facilities
Capital Intensive
Quality easily Measured
3.3
Intangible, perishable
product
Output that cannot be
inventoried
Short response time
Local markets
Small facilities
Labor intensive
Quality not easily
measured
Nature and Importance of Service
• Service creation process
• Idiosyncratic: What works well in providing one
kind of service may prove disastrous in another
• Quality of work is not quality of service
• Service package Consist of a mix of tangible and
intangible attributes
• High contact
• Effective management of services requires an
understanding of marketing and personnel
• Face to face, telephone and other interactions
3.4
Service Strategy
• Treatment of the customers by selecting the
operating focus, friendliness and helpfulness
• Speed and convenience of service delivery
• Price of the service
• Variety of services
• Quality of the tangible goods that are central
to or accompany the service.
• Unique skills that constitute the service
offerings
3.5
Designing Service Organizations
• Designing a service organization involves four
major elements
1. Identification of target market (Who is our
customer?)
2. Service concept: How do we differentiate our
service in the market?
3. Service strategy: What is our service package
and the operating focus of our service?
4. Service delivery system: What are the actual
processes, staff and facilities by which the
service is created?
3.6
Service Process Design
3.7
Service Blueprinting
• Service blueprint is a flowchart for service
process design
• Service Blueprint is a process analysis
technique that focuses on the customer and
the provider’s interaction with the customer.
• Service blueprint distinguish between high
customer contact aspects of the service and
those activities that the customer does not
see.
This distinction is term as “ line of visibility”
3.8
Poka-Yokes
• (Roughly translated from the Japanese as
“Avoid Mistakes”
• Service blueprinting describe features of
the service design but doesn’t provide any
direct guidelines for how to make the
process confirm to that design.
• Poka-Yokes blocks inevitable mistakes
from becoming service defects
3.9
Service Blueprint for Service at Ten Minute Lube, Inc.
3.10
Customer Interaction and Process Strategy
Low
High
Mass Service
Professional Service
Personal banking
Commercial
Banking
Full-service
stockbroker
Boutiques
Retailing
Service Factory
Service Shop
Law clinics
Limited service
stockbroker
For-profit
hospitals
Fast food
restaurants
Warehouse and catalog
stores
Airlines
No frills airlines
Degree of Interaction and Customization
3.11
Fine dining
restaurants
Low
Degree of Labor Intensity
High
General purpose law
firms
Hospitals
Service Process Technology
Depending on the nature and types of service to be rendered to the
customer, the process technology is divided to two major types
a. Customer contact
b. Labor versus capital intensive
Customer Contact
The main feature of service is that customer’s contact is essential in two
ways
a. Designing service or creating service or customizing service
e.g. while designing new house, customer interact closely with architect
a. During creating and consuming the service
e.g Hair styling
The high contact process technology is more flexible to accommodate the
diverse need of customer and more customization. But the conversion
process is difficult to standardized.
If the degree of contact is low, the process technology can be standardized
to some extent with higher efficiency.
12
3.12
Service Process Technology
Labor versus Capital Intensive
Some service organizations are labor intensive and some are
capital intensive.
The service industry is classified into labor intensive organization
and capital intensive organization.
In labor intensive organization, training and development of labor
plays a vital role for rendering service to customer whereas
technology and capital investment plays a dominant role in capital
intensive organization.
On the basis of the customer’s contact and labor intensiveness, service
process technology can be classified into four distinct categories as
follow;
a. Quasi-Manufacturing process technology
b. Mass-service process technology
C, Custom shop service process technology
d. Professional service process technology
13
3.13
The Service Process Matrix
Low Degree of Interaction and Customization
High
Quasi Manufacturing
Custom-shop Services/
low customer contact, low labor Service Shop
Capital
Intensive
Labour
Intensive
intensity, rigid standardized
process, concerned with
developing reliable delivery
schedules e.g. airlines, federal
express
high customer contact, capable to
provide customized services with
professional staff in relatively
capital intensive conversion
technology e.g. hospital
Mass Service
Professional Service
Labor intensive conversion
process, offers a standardized
product, training & development
and scheduling if human
resources is critical for successful
service delivery e.g. live
entertainment, cafeterias
Customized service delivered
through intensive interaction
between customer and
professional, professional skills
relating to customer is essential
e.g. medical diagnosis
3.14
Service-System Design Matrix
Degree of customer/server contact
Buffered
High
core (none)
Permeable
system (some)
Reactive
system (much)
Low
Face-to-face
total
customization
Face-to-face
loose specs
Sales
Opportunity
Face-to-face
tight specs
Internet &
on-site
technology
Production
Efficiency
Phone
Contact
Mail contact
Low
High
3.15
Components of Service-system design matrix
Degree of customer/server contact
It describe the contact of the customer with the service design and
delivery. It is of three types
a. Buffered core: Very less contact with customer, or physically
separated from the customer
b. Permeable system: It is penetrable to customer’s requirements
c. The reactive system: It is both penetrable and reactive to the
customer’s requirements.
Logical marketing proposition
The greater the amount of contact with customer, the greater the
sales opportunity.
Impact of production efficiency
The right hand side shows the impact on production efficiency as
the customer exerts more influence on the operation.
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3.16
Use of Service-system design matrix
a. Operational Uses
Service-system matrix helps to visualize the understanding of service
Process.
• It helps to visualize the service process.
• Helps to understand the components of service delivery as human factor
and technical components
• Helps to make focus on operation and its improvements
b. Strategic Use
•Enables systematic integration of operations and marketing strategy
•Provides clear picture of what combination of service delivery the firm is
providing
•Comparison with the other firms delivery on specific services
•Indicates evolutionary or life cycle changes that might be in order as the firm
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grows
3.17
Use of Service- System Design Matrix
A.
Operational Use
Degree of Customer/ Server Contact
Low
High
Worker
Requirements
Clerical
Skills
Helping
Skills
Verbal
Skills
Procedural Trade Skills
Skills
Diagnostic
Skills
Focus of
Operations
Paper
Handling
Demand
Management
Scripting
Calls
Flow
Control
Capacity
Management
Client Mix
Routing
Methods
Computer
Databases
Electronic
Aids
Self Service
Client/
Worker
teams
Technological Office
Innovations
Automation
B. Strategic Use
• Enables systematic integration of operations and marketing strategy
•Provides clear picture of what combination of service delivery the firm is providing
•Comparison with the other firms delivery on specific services
•Indicates evolutionary or life cycle changes that might be in order as the firm grows
3.18
Techniques for Improving Service Productivity
Strategy
• Separation
• Self-service
Technique
• Structure service so
customers must go where
service is offered
• Self-service so customers
examine, compare and
evaluate at their own pace
• Postponement
• Customizing at delivery
• Focus
• Restricting the offerings
3.19
Techniques for Improving Service Productivity
Strategy
Technique
• Modules
• Modular selection of service.
Modular production
• Automation
• Separating services that lend
themselves to automation
• Precise personnel scheduling
• Clarifying the service options
• Explaining problems
• Improving employee flexibility
• Scheduling
• Training
3.20
Processes at Service Organizations
High
Project process
• Real estate process for
For constructing facilities
for insurance company
• Student’s project work
Job process
• Customer service process
at financial services firm
• General medical practice
Customization
Batch process
• Order fulfillment process for
distributor
• Placing purchase order at
Public relations agency
Line process
• Cafeteria line
• Teller line at bank
Continuous process
• Power generation plant
• Providing telephone line access
Low
Low
Volume
3.21
High
Processes Reengineering
The fundamental rethinking and radical redesign of process to
improve performance dramatically – far more radical than
regular process improvement.
Elements of Process Reengineering
Critical processes in
core business
Cross-functional
team
Strong leadership
Information
technology
Clean-slate customer
focused philosophy
3.22
Thorough
process analysis
Service Business and Internal services
• Service Business
(Business require interaction with the
customers to produce service. E.g banks,
airlines, hospitals etc
Facilities based services
Customer must go to service facility
Field based services
Production and consumption of service
takes place in customer premise (e.g
home repair)
3.23
Service Business and Internal services
• Internal service
Services required to support the activities of
the larger organization
• E.g. data processing, accounting,
engineering etc
3.24
New Service development process
Full
Launch
Design
Development
Analysis
3.25
New Service development process
Development
Formulation of new services objective/strategy
Idea Generation and screening
Concept development
Analysis
Business analysis
Project authorization
3.26
New Service development process
Design
Service design and testing
Process and system design and testing
Marketing program design and testing
Personnel training
Service testing and pilot run
Test marketing
3.27
Characteristics of a Well-Designed Service System
1. Each element of the service system is consistent with the operating
focus of the firm
2. It is user-friendly
3. It is robust
4. It is structured so that consistent performance by its people and
systems is easily maintained
5. It provides effective links between the back office and the front office
so that nothing falls between the cracks
6. It manages the evidence of service quality in such a way that
customers see the value of the service provided
7. It is cost-effective
3.28
Service Guarantees
• Service guarantee can be a marketing tool designed
to provide a peace of mind for customers unsure about
trying their services
A service guarantee offer has to be:
• Unconditional
•Meaningful to the customer
•Easy to understand and communicate
•Painless to exercise
3.29
Service Guarantees
A service guarantee can be used not only as an improvement
tool but also at the design stage to focus the firm’s delivery
system squarely on the things it must do well to satisfy the
customer.
Issues in Service Guarantees
1. Any guarantee is better than no guarantee. The most
effective guarantees are big deals. They put the company
at risk in the eyes of customer.
2. Involve the customer as well as employees in the design
3. Avoid complexity or legalistic language.
4. Do not quibble when a customer invokes the guarantee
5. Make it clear that you are happy for customers to invoke
the guarantee
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3.30
End of Lecture
31
3.31
Important Question
1. How do you design service? Discuss the steps of service
designing process.
2. Describe the service design and service process technology.
3. Explain the techniques for improving service productivity.
4. Explain Service Blue Printing (5) PU 2009 BBA
5. Explain Service Guarantee (5) PU 2008
6. “A house of quality integrates customer’s voice into the product
development process.” Explain. (7) PU BBA 2004
7. Differentiate between job shop, batch assembly and continuous
process. (8) PU 2004
8. Discuss about different types of process strategy. (7) PU 2008
9. What are the types of processes? How do they differ ? Give
example of each. (7) PU 2008
10.How do you define services? Write down its characteristics. (7)
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3.32