Final - Service Ops
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
