Final - Service Ops

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level capacity

Capacity stays constant through fluctuations in demand • Marketing strategies are used to try and smooth demand to match

Architectural Innovation

Change in the way an existing design is used for an existing market (Memory Foam) *new market with exsisting tech

assurance

Convey trust and confidence • Ex: being polite and showing respect

what makes service difficult?

Customer perception matters most • Customer's are all unique • What pleases one customer may not please the next • Tough to develop cost effective and efficient procedures • Customer Satisfaction does not equal Customer Retention

characteristics of service ops

* Produces the services of an organization and provides them directly to its customers • Difficult and complex to manage • Service level and cost must be properly balanced

elements of the competitive environment of services

*low entry barriers, minimial economies of scale, erractic sales, substitution, customer loyalty, exit barriers

mcdonalds - using data analytics in action

- cameras see what traffic comes in and predicts what that car will order - there is a 100% chance 1/5 car will order a big mac

how can we improve retention in firms?

- make sure people are the right fit for the right job -assign mentors --recognize good behavior --ensure a good work life balance -give training and continued education

How to achieve a cost leader strategy?

- seek out low-cost customers *costco - standardize a customer service * deliver routine prof services at a low cost - urgent care -reducing the personal element * convenience for less employee interaction - ATM's

How do we help limit the perishability of services?

- smooth demand - (price incentives, happy hours, use reservations) - adjust service capacity - seasonal workers, increase self-service automation if possible - set and meet customer expectations - let them know of wait times!

pros of self-service

-eliminates labor costs, able to handle unlimited demand at any time, tech enables customers to customize needs

How to achieve differentiation

-make the intangible tangible *make mementos from the service - HOTEL's give us soap with their name -customize a standard product *Burger King, address guests by name, Sports Clips -reduce perceived risk - give customers peace of mind --- a mechanic who shows customer exactly what needs to be done -controlling quality - consistent level of service quality

2 competitive strategies of services

1 - cost leader - low cost w/ innovative tech 2 - differentiation - unique experience to foster customer loyalty, higher price bc customer is willing to pay more for difference

6 traits of service operations

1 - customer participation 2 - simultaneity 3 - perishability 4 - intangibility 5- heterogeneity 6 - nontransferable

6 behaviorally based principles for service encounter design and management

1 - end matters so much more than the beginning 2 - segment the pleasure, combine the pain *break pleasent experiences into multiple stages, pay upfront- cruise 3 -let customer control the process 4-pay attention to norms 5-people are easier to blame than the systems - putting problems on real people 6-let punishment fit the crime *a personal mistake should have an apology

4 stage approach to service recovery

1 - identify service failures *can be difficult to identify (only 5-10% of dissatisfied customers choose to complain), set measurable performance standards (delivery in 30 mins of less) 2 - resolving customer problems *customers expect justice regarding their complaint *assess it by using outcome, procedural, interactional fairness 3-communicating & classifying service failures - firms should track,measure, and follow up but this rarely happens since there are inefficient systems and little interest in hearing what they did wrong 4- integrating data and improving overall science *direct investments towards improving service quality & retention (zero customer defections)

transformation steps

1 - rethink customer segmentation 2 -restructure the sales organization 3-drive the right sales behavior

1 & 2 laws of service

1 - satisfaction = perception - expectation - Restaurant that says the wait is 20 mins but they get you in 10 2-hard to play catch up

how to deal with customers who take advantage of you?

1 - set appropriate boundaries early on in the customer relationship 2- exceeding expectations will require you to continue that level of all the time

recommendations of clinic

1 - trade off between utilization, capacity and variability ***surgeon is over-utilized, but one resident is following him around (resident could shadow and handle simple cases) ***scheduling follow-ups visits - categorize them from simple to hard and by expected about of time *** we don't want to schedule long, hard ones all in a row - mix up the difficulty do upper body seperate from all lower body purchase another x-ray machine - would reduce arrival variabity since they wouldn't have to use an external x-ray service manage customer expectations - be transparent with wait times, find ways to occupy their time while waiting

How do we foster revenue generation?

1 - yield management *Revenue maximizing strategy to make full use of service capacity • Ex: Airlines change price levels in real-time based on # of unsold seats 2 - PoS - save necessary steps to allow employees to improve service *tablet to order food faster rather than wait on a server to come to a table physically 3-expert systems Collection of vital information made easily available • Ex: WebMD

3 step framework for preventing customer failure:

1) collect diagnostic date on customer failure points *accounting company - picking clients that are willing to provide the statements needed for accountant to do the work in the first place 2) identify root causes of customer failure - • Most often there is a big difference between what actual cause and the perceived cause of failure • Customers blame the company. Company will state customers did not understand directions, didn't provide enough effort, or wasn't prepared. USE FISHBONE. 3) Establish preventative solutions *must be mistake proof...

service quality gaps

1- market research Gap 2-design Gap 3-Conformance Gap 4- communication Gap 5- customer satisfaction Gap * we want to minimize gaps 1 to 4 to meet customer satisfaction

dissatisfied employees are ___ times more likely to leave a company than satisfied companies

3X

a ___% increase in customer loyalty can boost profits ___-___%

5, 25-85

service face many innovation challenges

Ability to protect intellectual and property technologies - Patents are difficult to obtain, Transparency makes imitation simple • Incremental nature of innovation - Tend to be a modification of an existing service • Ability to prototype - Cannot be tested realistically in a lab environment • Readiness to Embrace - People resist change and unfamiliarity

empowerment

Allowing employees to evaluate choices and competently execute creative decisions • Unleashes within each person the opportunity to make a difference • Layers of supervision are drastically reduced because contact personnel are trained, motivated and supplied with information that enables them to manage the service encounter at the point of delivery

tangibles

Appearance of facilities, personnel, etc. • Ex: cleanliness, professional dress

substitution

Automation/Technology can make a service obsolete

explicit services

Benefits that are readily observable by the senses and that consist of the essential features of the service (feeling after a massage, response time of the fire department)

cons of self-service

Customers must be capable and provide effort • Low-wage, unskilled service jobs may disappear • Need for technical support of self-service technology rises • Opportunity for building relationships is lost • Opportunity for immediate feedback and resolution is lost

zero defections culture

Defection rate must be measured and used in performance management • Put a dollar figure on a loyal customer to make the impact hit home with employees • Eliminating the source of customer complaints not only creates a more loyal customer base, but a happier customer base. Which in turn treats the employees better, creating a more positive work experience resulting in loyal employees

culture

Defined as a pattern of beliefs shared by an organization • Reputation of a firm is important to attract business and employees

service profit chain

Defines a relationship that links profitability, customer loyalty and service value to employee satisfaction, capability and productivity

price incentives

Demand for a service generally follows a time or seasonal pattern

what can we do to help the perishability aspect service?

Determine proper level of reduction/accommodation • Improve forecasting accuracy • Influence demand to meet our desired capacity level • Use data analytics to determine optimal capacity • Ensure customer expectations are inline with service offering • Use technology (self-service)

outsourcing

Develop relationships with other firms who have expertise that can help you satisfy your customers • Benefits • Allows you to concentrate on your core competence • Cost savings by not having full time employees • Leverages suppliers economies of scale • Risks •Loss of direct control of quality • Jeopardizes employee loyalty • Customers could go direct with supplier

service design and standards gap

Difference between company understanding of customer expectations and the development of customer-driven service design and standards

the listening gap

Difference between the customer expectations of service and company understanding of those expectations

market research gap

Discrepancy between customer expectations and management perceptions of these expectations • Strategies for closing this gap include: • Improving market research • Better communication between management and customer-facing employees

service performance

Discrepancy between the development of customer-driven service standards and actual service performance by company employees

disruptive innovation

Displaces established market-leading firms with a new design (3D Printing, iphone) *new tech in existing market

Radical Innovation

Establishes a new market, with new designs (Airplane) *new market, new tech

service losers

Failure to deliver the expected level of a criteria can result in a customer being lost forever • Dependability, Personalization, Speed are particularly vulnerable

Microsoft's SaaS model

Firms no longer pay based on # of licenses, but based on consumption (how much they use the software) • The more an employee uses the software, the more they are charged

_____ and _____ help the competitive strategies of service firms.

IT, Data

professional service

Individual attention by highly trained specialists * high, high - physicians, lawyers, accountants, architects

service profit chain

Link between profitability, customer loyalty, and employee satisfaction

loss aversion

Losses are twice as powerful as gains • Principal behind free trials: Giving an item back is felt as a loss

facilitating goods

Material purchased or consumed by the customer (golf clubs, food, auto parts)

yield management

Maximize revenue and utilize capacity; airlines change ticket prices all the time - every 5 mins

economizing

Maximize value for his time, effort and money spent

Capacity utilisation

Measure of actual output relative to the capacity when fully busy

service quality gaps

Measuring the gap between expected service and perceived service is a feedback process practiced by leading companies

service qualifiers

Minimum level of service to be considered • Ex: Airline safety, Restaurant cleanliness

does less accomdation equal less customer satisifaction?

NO - its all about setting and meeting customer expectations.

heterogeneity

Nature of services results in variation of service from customer to customer • Creates the possibility of a more satisfying human work experience

conformance gap

Occurs because actual delivery of the service does not meet service standards set by management • Strategies for closing this gap include: • Improve teamwork • Improve employee selection and training • Employee performance management

chase demand

Operations-oriented strategies such as workshift scheduling to vary capacity to match changing levels of customer demand

pareto chart

Order problems by relative frequency

capacity

Output per unit time when fully busy

ethical

Patronizes socially responsible firms

Reliability

Perform promised service dependably and accurately ex - mail at the same time every delivery day

service shops

Permit more customization, but in a high-capital environment * low labor, high customization hospitals & auto repair

customer loyalty

Personalized service can create customer loyalty, which becomes a barrier to entry by new services

supporting facility

Physical resources that must be in place before a service can be offered (golf course, hospital, airplane, restaurant)

decoy effect

Preferences for either option A or B changes in favor of option B when option C is presented, which is similar to option B but in no way better.

Histogram

Presents data over time in bar-chart form

service factories

Provide a standardized service with high capital investment * low, low - airlines, trucking, hotel industry

empathy

Provision of caring, individualized attention • Ex: making the customer's problem your own

implicit services

Psychological benefits that the customer may sense only vaguely (status of a degree from GT, worry-free mechanic)

customer-led vs. market-oriented

Pursue customer satisfaction, but set limits on being led by customers • Market-oriented firms commit to understand current customers desires plus competitors' capabilities plus future possibilities

incremental innovation

Refines and extends and established design; new flavors of coke

reservations

Reservations are a way of "guaranteeing" the service capacity and demand will match; overbooking not used as much since we pay in advance.

service process matrix

Services are classified across two dimensions that affect the character of the service delivery process: degree of interaction & customization & degree of labor intensity

Simultaneity

Services are created and used at the same time. Services cannot be stored. - queuing, there is no buffer or inventory that can be stored. -no quality-control in the moment

Scatter Plot Graph

Shows the relationship between two variable

cause-and-effort diagram

Structured approach to identify, in detail, all possible causes related to a problem to identify root cause

follow-the-sun working

System of moving working to different offices around the globe as the day progresses, ending work in each location as the end of the day approaches, and moving it to a new office elsewhere where the day is just beginning.

4 things a service business must get right

The Offering, The Funding Mechanism, Employee Management, Customer Management

bottleneck

The operation that limits production (slowest operation) • Determines the output of the entire system

mass service

Undifferentiated service in a labor-intensive environment *high labor, low interaction & customization - retail, school, wholesale

control chart

Used to monitor if a process is within acceptable boundaries

Influencing customer behavior

Want to promote behavior that serves the company's interests and discourage customer behaviors that unintentionally increase the cost or decrease the quality of a service

personalizing

Wants gratification from recognition and conversation

convience

Willing to pay extra for hassle-free service

Responsiveness

Willingness to help and provide prompt service ex - server keeping drinks filled

expectations of service quality are based on:

Word of mouth • Personal needs • Past experience • Price

six sigma

a rigorous statistical analysis process that reduces defects in manufacturing and service-related processes -REDUCE PROCESS VARIATION

service encounter triad

a triangle depicting the balance of goals among the service organization, the contact personnel, and the customer

what do service employees value the most?

ability and empowerment to achieve results for customers pay is only short term motivation

great service recovery creates

apostles

service

are activities offered by one party to another.

5 types of variability

arrival, effort, request, capability, subjective perference

van halen and preventing service failure

asked for a bowl of mnm's without brown ones to ensure that stage managers read the contract for the venue

cycle time

avg time needed to complete a process

Challenges for firms when customers failure

awkward to hold customer's accountable for the fault - not holding customers resposible for their failures removes any incentive for them to improve their performance • It actually reinforces the behavior

_______ decisions are fixed and permanent

capital; companies like Airbnb & uber have avoided this however

promoting off-peak demand

cheaper in the non-summer times

example of face to face tight specs

chickfila - fast food in general

4 types of accommodation

classic accommodation, low-cost accommodation, classic reduction, uncompromised reduction

Products are becoming ___ faster

commoditized; firms are using value-added services - GeekSquad, Prime to gain leverage

we are in the age of the ______

convenience ex- Carvana

the organization exists to serve the ______

customer and employees

employee satisfaction =

customer satisfaction

customer participation

customers assist in delivering the service * college degree * discount stores - Goodwill Customers expect something in return for their participation - low prices, faster service.

nontransferrable

customers do not own a service. You gain access or rental of something - airline seat, a hotel room. They gain experiences and memories.

employees are just as important as ____

customers; how can we help our employees achieve excellence.

_____ are actively involved in the delivery of services.

customers; they impact the quality of their own experiences, but also other customers and employees.

poor service recovery creates

defectors

segmenting demand

demand for a service usually doesn't come from one place * airlines have different types of travelers *doctors have walk-ins and appointments

Disney wrap-up

differentiator, provide EXPERIENCES AND MEMORIES, 330m people live 3 hours outside Shanghai *consider customs - shanghai is not a multiday experience, needed to imbed traditonal culture over that off disney customs **vacation flexibility is low, car ownership is less and more difficult to travel, ticket prices are high despite low incomes, higher training bc most are unfamiliar with theme parks -- if not turnover, way more adults going than children recommendations - smooth demand for low-peak times, soft opening, and provide guides to teach people how to use a theme park

service fees are used to ______

discourage behavior ***discouraged bc a competitor come along and not charge it - Netflix to Blockbuster, and customers get upset

Zone of defection

dissatisfied

4 types of customers

economizing, ethical, personalizing, connivence

normative control

emotional side of the brain; MORE POWERFUL • Invokes peer pressure and other social influences to shape behavior • Less expensive than instrumental controls and usually more effective *social approval and disapproval, community-focused, pride or beloging, fears of shame or rejection, less expensive

service-system matrix

evaluate trade-offs

services are based in

experience-based relationships - Disney

instrumental (rational)

financial decisions *rewards or discounts, more expensive, and individual-focused

what is the first step in analyzing a process?

flow chart

How do we foster loyalty?

frequent user club - Kroger Plus switching costs - a fine, charge, and inconvenience for customer to go somewhere else *usually a bank

flow diagram

good for analyzing process statistics

Swim lane flowcharts are most appropriate when

good for cross functional processes

loyalist/apostle

high customer loyalty & high customer satifaction

hostage

high customer loyalty & low customer satifaction

customer type matrix

hostage, loyalist/apostle, defector/terrorist, mercenary

defections management

if particular types of customers don't stay loyal, companies should not invest in attracting them *identify those who stay loyal

how does the service profit chain work?

increase employee satisfaction ---> increased employee loyalty ---> increased employee productivity ---> better service ---> increased customer satisfaction and loyalty

process of the service profit chain

internal service quality --> employee satifaction --> employee loyalty -> employee producitivity ---> external service value ---> customer satisfaction --> customer loyalty --> growth and profitabilty

how do we handle manufacturing environment variability vs service environments?

inventory vs sevices cannot be inventored

factors that drive profitability

investment in people, tech that support frontline workers, good recruitment & training, and compensation linked to performance

Measuring Service Quality

is a challenge bc it contains many psychological features * we can use customer satisfaction surverys and walk-through audits

Servicescape

is based on the idea that the physical environment influences the behavior and perception of the service for both the customers and employees • Ex: Apple Store Facility - reflects value of organization -- going to a gucci vs American eagle at outlet mall

cost of wait times

is calculated by how many customer's defect

Direct Labor

labor directly involved in performing work

Paediatric Orthopaedic Clinic overview

long wait times in x-ray clinic --arrival, request, and capability have biggest impact --surgeon is over 100% capacity; radiology has the longest wait time (35 mins) and cap of 84%

classi reduction in lotus

low cost -- minimum service, require serverations, get ride off unpopular services, self-service

mercenary

low customer loyalty & high customer satifaction

Defector/Terrorist

low customer loyalty & low customer satifaction

What is an additional challenge service companies face over product focused companies?

management of customers

a major challenge for managers is

matching service capacity with customer demand on a daily basis in a dynamic environment

low-cost accomdation in lotus

medium cost, involves self-service, put paperwork online

if we accommodate a lot of customer variability?

more cost, more complexity

what do lotus do to solve their problem?

moved paperwork online, opening automated basic teller functions, empowered staff to make decision - got ride of levels, introduced service charges if they used in-person service - reduced opp to make a relationship

zone of indifference

neither

The front end and back end of service are _____ _____

not equal, the end matters so much more

1/3

of all service problems are caused by the customer

perishability

once the time has been spent, the service is gone - a dentist who sits idle bc they have no patients cannot get his service time back. due to customer demand that varies - arrival & request variability

minimal economies of scale benefits

people and training intensive rather than machines

all features of a service are experienced on the basis of a person's __________

perception

what would you propose to improve the situation and why in lotus?

pooled-resources pros - low wait times, evenly distrubuted server utilization, cross-train employees, flexibile, potential reduction of servers cons - lower service quality (bc not specialized), require higher salary, training costs

_____ is key to managing customer failure.

prevention

seperated-resources

pros - specialization, lower salary cons - high wait times, uneven utilization, fixed employee schedule - can't cover for people who are out

how do customer's rate quality?

quality of design, quality of conformance, fitness for use, and value-based

experiences create

relationships which foster loyalty

5 dimensions customers use to judge service quality

reliability, responsiveness, assurance, empathy, tangible

what can companies do to prevent shakedowns?

resolve the issue immediately, with a fair outcome and attitude -develop and push concrete service standards

Service ops

responsible for producing the services of an organization and providing them directly to its customers.

complimentary services

restuarant in a bar, movie theaters with video games

what are the tools for influencing human behavior?

rewards & punishments

Zone of affection

satisfied

low cost accommodation

self-service

as more firms implement _____, customer failures will become more critical.

self-service tech

How do we use database assets to attract customers to services?

selling information - mining customer data to see buying habits developing services - capturing customer data early on focus new devlopments *club med - all inclusive resort micromarketing - target adveristing to the right person at the right time

as business charge for memorable experiences we are shifting from a _____ economy to a ______ economy.

service, experience

________ are central to the economic activity in any society.

services

Intangibilty

services are ideas and concepts. NOT PATENTABLE. -- services rely on reputation - i.e. lawyers, chickfilas drive-thru

low entry barrier of services

services are not patentable - can be easily copied

3 elements of managing service

servicescapes, process analysis, employee capacity & demand

what is the KEY to service operations?

setting and meeting customer expectations

what are the trends in US employment?

shifting to services (since 1900's) over manufacturing & agriculture

What queue are good for Lotus?

single line multiple server - tellers can handle all desk and know the info *also called pool-resources

how does self-service impact customer behavior?

social interaction does influence our behavior, people order less healthy more complicated things on apps *its the fear of embarrssment of asking, social pressure to eat heathly Tech doesn't judge you.

technology has changed the way service is provided

stage 1 -broadcasters - ABC stage 2 - content owners with multiple stations - COMCAST step 3 - consumers in control - NETFLIX

uncompromised reduction in lotus

target customers who fit your operation experiences

customer variability is the major problem with services

that require direct customer contacts

achieving service quality

the penalty for poor quality is greater than the benefit good quality

classic accomodation

think ritz-carlton, we will accommodate everything but you need to be willing pay

cost of a customer defection

to calculate the cost of customer defections, you must calculate the lifetime value of a loyal customer

yield management

to maximize revenue

run chart

tool for tracking results over a period of time

how can wang balance the efficiency and effectiveness service ops management and overcome long wait times?

understand the goal - better operational efficiency at a high cost, identify main problem decision trade-offs - more automated methods for transactions at the cost of low customer contact classic accomdation- we need to increase authority of personal (remove level a,b,c) so that they dont have to ask manager

waiting times

unoccupied time feels longer than occupied time *add distractions in waiting lines - Disney has game, resturants have menus pre-process wait feels longer than in-process wait ---- handing out menus shows the process has started anxiety makes waits seem longer - "The other line always moves faster" just since we are in the other one. uncertain waits are longer than known wait times unexplained wait times are longer than known ones - we known driving in the snow will have more traffic than sunny days unfair waits are longer than equitable waits - we hate that someone has cheated the patient customers the more valuable the service, the longer I will wait solo wait is longer than a group

classic reduction

we are going to reduce the amount of options available - you can order whats on the menu but nothing off of it

uncompromised reduction

we are going to reduce the number of options available without you knowing - number of degree programs offered at Tech

eastern lotus case

what is customer-introduced variability? 5 types - arrival - for a bank, additional customers are harder to handle in a small space request - sometimes long, sometmes short and only so many can be self-service capability- has a large impact on efficiency that a firm can service, an incapable customer increase waittimes, simplify paperwork effort - subjective preference - perception of waitimes, price

when would mistake proofing not work?

when the failure is from a lack of motivation or effort. ex - Jenny Craig - failure in the program was fixed by adding 1-1 coaching and education support and fool-proofed meals that were pre-packaged

To influence capacity:

workshift scheduling, increasing customer participation - atm, cross-train employees - aldi, part-time employees during peak seasons - Christmas at Macy's

What are methods of influencing customers?

• Brand • Product Placement (in a high traffic area, or tucked away in a bottom corner, Google search optimization) • Packaging (frames expectations and can stand out) • Reputation • Price • Promotion • Product

Offshoring

• Can save labor costs by sending back-office operations to low cost countries • Quality issues may occur, Training can be difficult

service winners

• Criteria that is most important to a customers at the time of purchase • May vary at different times and vary by customer • Ex: Sometimes convenience/speed is most important factor for picking restaurant. Another time it may be quality/reputation

information

• Data that is available from the customer or provider to enable efficient and customized service (electronic patient records, airline seat map, menu)

customer gap

• Defined as the difference between the customer's expected service and perceptions of received service

service package

• Defined as the package of goods and services provided in the same environment 5 elements - supporting facility, facilitating goods, information ---> explicit & implicit services ---> service experience

communication gap

• Difference between service delivery and the service provider's external communications

how is service quality determined?

• Each customer contact is an opportunity to satisfy or dissatisfy the customer • Customer satisfaction can be defined by comparing perceptions of the service received with expectations of the service desired

the funding mechanism

• Excellence comes at a cost and the cost must be covered • Products always have their cost covered before consumption through their purchase • Services can be used but not paid for • Flat monthly fees may be charged whether or not the service use is high or low • Advice and knowledge may be shared as part of the service package, with no product being purchased

managers must understand the economics of defections

• Improvement in Service Quality is an Investment, not a Cost! • Creating a loyal customer creates an enormous return on investment • Prioritize initiatives in Service Quality, versus Cost Reduction

the offering

• Must effectively meet the needs and desires of a group of customers you want to attract *example - Wal-Mart • Ambience and store help are least valued by customers. • Low price and wide selection are most valued • Trade off is clearly seen in its store operations

where do problems in a process come from?

• Poor handoff between departments • Poor communication between departments • Conflicting priorities between departments

design gap

• Results from management's inability to formulate a service design that meets customer expectations and translates these into workable service standards • Strategies for closing this gap include: • Setting goals • Standardizing service delivery tasks

communication gap

• Results when customer perceptions are at odds with the intended service delivery • Strategies for closing this gap include: • Take action on the evidence • Management involvement

exit barriers

• Switching costs make it difficult to transfer a service from one provider to another

What makes loyal customers more profitable?

• Tend to spend more as relationship grows *Cost less to serve • Recommend new customers to firm • Relationship & Trust lead to willingness to pay full price vs shopping for discounts

erratic sales fluctuations

• Varies as a function of time of day, day of the week, month of the year, with random intervals

characteristics of social media

• Wide reach • Easy access • Ease of use • Instantaneous • No accountability *good for customer service, and target marketing

service recovery paradox

• You can create a more loyal customer after a failure, than if the service was satisfactory to begin with


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