integrated service strategy-12

8/12/2019 Integrated Service Strategy-12

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Integrated Service Strategy

Chapter 9


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Learning Objectives

In this chapter we will Explain four major growth strategies for service

businesses using the Ansoff Grid

Explore quality strategies of service companies Discuss customer satisfaction measures and their usein improving service performance.

Elaborate on strategies for market leaders,challengers, followers and niche markets

Look at the issue of service performance metrics Explore the role of innovation in the growth of

service businesses.


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Growth strategies for servicebusinesses

The classic framework developed byAnsoff holds good for growth in all industries,including services. The Ansoff grid definesfour basic ways to achieve growth.


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The Ansoff Grid

1.Same service/ Same

market (Penetration)

3.New Service/ Same

market (New serviceDevelopment)

2.New market/sameservice

(new marketDevelopment

New Service/newMarket

(Diversification)

Product

M

arket

New

New

Current

Current


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Penetration

Example:

HDFC bank trying to increase the amount

of usage of their bank by existing loancustomers.

LIC trying to market another insurancepolicy to an existing customer.


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Market Development

Example:

HDFC Bank trying to expand into rural

areas, after successfully tapping the urbanmarkets.

Infosys trying to market their softwareskills in Japan, after tapping the US andEuropean customers.


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Product Development

Example:

Debit cards of UTI Bank in which your

account gets debited instantly, as anoption to customers who do not like creditcards.

Tata AIGs health insurance products whichcaters to major illness with a lot offlexibility and easy claims procedure.


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Diversification

Example:

An Airline launching a hotel

A media company launching a real estatebrokerage service.


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New Companies Launching a CompletelyNew Business for the First Time

A set of entrepreneurs find a way toinnovate a totally new business, which

becomes a pioneering effort to definethe business concept itself.

Examples -

Sabeer Bhatia launching HotmailAmazon.com launching e-tailing

A Domestic Help providing company


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Outsourcing

Many currently outsourced services were performedwithin the company itself.

For example,maintenance,catering,accounting,HR andbill processing.

Each of these is now a new service business,sometimes attracting former employees of thecompanies who became entrepreneurs and providedthese outsourced services.


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Quality Strategies for ServicePlayers

Quality control can be achievedthrough some or all of the following:

1. Good hiring and training procedures2. Service blueprints (plans/designs)

3. Monitoring customer satisfaction regularly

4. Using employee suggestions.


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Customer Satisfaction Measures

Internal measures of efficiency andoperational effectiveness usually present onlyone side (the providers) of the story.

What really matters is the effect of theservice providers efforts have on thecustomer.

Therefore, customer satisfaction must bemeasured.


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Measuring Customer Satisfaction

1. The Perception-Expectation score, as per theParasuraman, Zeithaml and Berry model ofservice quality is one way to measureservice satisfaction.

2. J.D. Power and Associates, uses its ownscale to measure satisfaction on specific

attributes and features of the automobilepurchase and maintenance experience.


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Measuring Service Quality

In general, there are 2 or 3

approaches that could be used tomeasure the service quality in anyservice industry.

The most common approach isthrough the use of SCALES.


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Scales

The most common approach isto use a 5 point, or 7 point scale of

customer satisfaction, with1 Very Dissatisfied

7 Very Satisfied response,

with other responses falling in between.


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Scales Contd..

The same 5 point or 7 point scale as shownabove can be modified and used with thefollowing wording, to include comparison

against expectations- Much better than expected

Somewhat better than expected

Exactly as expected Somewhat worse than expected

Much worse than expected


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Scales Contd..

Comparison with other competitors isalso possible, by including other

providers in general, or a specificcompetitor by name in the question.

An example is provided in the nextslide.


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Competitor Comparison usingScales

For instance, in the statement, one could ask

Please rate the service in comparisonwith other service providers you haverecently used, and then asking for a ratingon a suitably worded 5 point scale such as

Much better than other providers

Somewhat better than other providers

Same as other providers

Somewhat worse than other providers

Much worse than other providers


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Scales contd..

Apart from satisfaction, you can alsoask other questions like

intention to re-use the service providerreasons why if there is an indication of

possible defection

ranking of service features provided,importance ranking of the features

benefits to gauge their priorities etc.


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The Service Profit Chain

Given by Heskett, Jones, Loveman,Sasser and Schlesinger

Directly links employee satisfaction andcustomer satisfaction to profitability.


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Service Profit Chain contd..

The major propositions of the service-profit chain are the following-

1. Customer loyalty drives profitability andgrowth.

2. Customer satisfaction drives customer loyalty

3. Value drives customer satisfaction

4. Employee productivity drives value

5. Employee Loyalty drives productivity

6. Employee satisfaction drives loyalty

7. Internal Quality drives employee satisfaction


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Service Profit Chain

In summary,the major issues related to profitability-

the satisfaction of customers and employees,are explored under one umbrella.


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Strategies for Market Leaders

Their first priority is to maintain theirleadership position in terms of market shareand sales.

If there are aggressive challengers, keepingup growth rates, aggressively promoting yourservices, or investing in technology areoptions.

The leader usually also is a price leader, abarometer for deciding on prices which otherplayers tend to follow.


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Strategies for Challengers

Challengers are usually the number two orthree players in a given industry.

Strategies for this group of players in any

industry include direct and indirect ways totopple the leader and become a leaderthemselves.

One common way is to attempt to take awaythe leaders customers through offers ofbetter price, service, or some other benefits.

Another way is by employing new technology.


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Strategies for Followers

Followers in an industry are smaller players. They may be number 5-10 in market share . For companies which are followers, it may be

a good idea to simply defend their existingsegments, and try to consolidate withoutattracting too much attention.

Usually, these companies do not have the

wherewithal in terms of the resourcesneeded, to challenge the leader in theindustry


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Strategies for Niche Markets

A niche marketer follows a strategy of finding a well-defined niche in terms of geography or product-market and remaining in it.

At one level, this is the equivalent of a focus strategyadvocated by Porter, and in a broad sense, it alsoimplies a focus on areas of core competence.

For example, if a company is good at massdistributed, high volume, low margin services, it

probably has a core competence in that type ofservices, and may not do well in other types.

Eg: RelQ in IT verification and validation


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Service Performance Metrics

Measurements in a service organizationneed to be multidimensional. Thesemeasurements can be of three types-

1. Effectiveness Metrics

(Number of error-free orders or bills processed)

2. Capability Metrics

(mean ratings of attributes of services like serversknowledge about service features, etc.)

3. Efficiency Metrics

(average utilization of manpower)


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Innovation the Last Frontier

Innovators worldwideWal-Mart, the biggest branded

retailer,McDonalds, the legendaryrestaurant,

Disney, the theme park operator,Federal Express, the overnightcourier service


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Innovation

Indian service innovators includeApollo hospitals, Food World, NIIT,

IMS and TIME coaching centres, SOTC travel and tours, Oberoi and Taj hotels, ICICI Bank, the original housing finance company HDFC,

media brands Malayala Manorama and Times of India, Zee TV, soap opera producer Balaji Telefilms, news channel Aaj Tak,Air Sahara and Jet Airways, and a host of education brands like Chaitanya


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Scalability

An important issue along with innovation, if you wantto grow into a world class brand, is that you need toreplicate your success and scale up the service

delivery to a much larger audience. The slow growth of some world class service brandsin India suggests that they have faced someroadblocks here.

These could be infrastructural or procedural in

nature. But they have to overcome if high growth is an

objective.

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