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Lecturer: John MurtaghHETAC notesTRANSCRIPT
Service Management Review
The Role of Services in the Economy
Service Definitions
Services are deeds, processes, and performances.
Valarie Zeithaml & Mary Jo Bitner
A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.
James Fitzsimmons
Definition of Service Firms
Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives.
James Fitzsimmons
Economic Evolution
Clark-Fisher Hypotheses: “As productivity increases in one sector
the labour force moves into another” This leads to a classification of
economies by noting the activity of the majority of the workforce, this classification is divided across 5 stages of economic activities.
Economic Evolution
1.Primary (Extractive) Agriculture, mining, fishing and forestry
2. Secondary (Goods – Producing) Manufacturing / Processing
3. Tertiary (Domestic service) Hotels, restaurants, maintenance and
repair etc
Economic Evolution
4. Quaternary (Trade & Commerce Services) Retail, Transportation,
Communications, Finance & Insurance, Government, Real Estate
5 Quinary (Refining and Extending Human Capacities) Health, Education, Research,
Recreation, Arts
Economic Evolution
The majority of countries are still in the Primary stage of development. These economies are based on extracting natural resources from the land Their productivity is low, and incomes are
subject to fluctuations based on the prices of the commodities such as copper and sugar etc.
In much of Africa and parts of Asia , more than 70% of the labour force is engaged in extractive activities.
Stages of Economic Development
Daniel Bell, The Coming of Post-Industrial Society (1973) argues that to place the concept of post-industrial society in perspective, we must compare its features with those of pre-industrial and industrial societies
Stages of Economic Development
Pre-industrial Society: This is the condition of majority of the worlds
population today Life is characterised as a game against nature Working with muscle power and tradition, the
labour force is engaged in agriculture, mining and fishing.
Stages of Economic Development
Life is conditioned by the elements: Weather Soil condition Availability of water
Productivity is low and bears little evidence of the use of technology
Social life revolves around the extended household
Stages of Economic Development
This combination of low productivity and large population results in high rates of unemployment
Many seek jobs in the service sector, but of personal or household variety (servants)
Pre-industrial societies are agrarian (farming) and structured around tradition, routine and authority
Stages of Economic Development
Industrial Society: The main activity is the production of goods The focus is on making more for less cost Energy and machines multiply the output per
labour hour and structure the nature of work Work is accomplished in the artificial
environment of the factory, and the workers tend the machines.
Stages of Economic Development
Society is a world of schedules and an awareness of the value of time
Standard of living is measured by the quantity of goods owned
Characterised by large bureaucratic and hierarchic organisations
Members have specific roles, and their operation tends to be impersonal, with people treated as units of production
Stages of Economic Development
The individual worker is the unit of social life in a society that is considered to be the total sum of all the individual decisions being made in he market place
Trade Unions
Stages of Economic Development
Post-industrial Society: Is concerned with the quality of life, as
measured by services such as health, education, and recreation
The central figure is the professional person, because instead of physical strength, information is the key resource
Life is now a game played among persons
Stages of Economic Development
Social life becomes more difficult because political claims and social rights multiply
Society becomes aware that independent action of individuals can create havoc for everyone (traffic congestion / air pollution)
The community rather than the individual becomes the social unit
The Nature of Services
The Service Package
The service package is defined as a bundle of goods and services with information that is provided in some environment. This bundle consists of the following five features:
1. Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane.
2. Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history.
The Service Package
3. Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are
patient medical records seats available on a flight customer preference location of customer to dispatch a
taxi.
The Service Package (cont.)
4. Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure.
5 Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot.
The Service Package (cont.)
Criteria for Evaluating the Service package:
1.Supporting Facility Location Interior decorating Supporting equipment Architectural appropriateness Facility layout
The Service Package (cont.)
2. Facilitating Goods Consistency of product Quantity – small, large or medium drink Selection – number of menu items, rental skies
available etc
3. Information Accuracy Timely Useful
The Service Package (cont.)
4. Explicit Service Training of service personnel Comprehensiveness, how does the
service compare it an alternative e.g. discount broker versus full service
Consistency Availability e.g. 24 hour ATM service
The Service Package (cont.)
5. Implicit Service Attitude of service providers Atmosphere - decor Waiting – being placed on hold Status – college degree Sense of well-being – well lighted car park Privacy and security – advising clients in a
private office Convenience – use of appointments / free
parking
Process Improvement
Quality and Productivity Improvement ProcessQuality and Productivity Improvement Process
Foundations of Continuous Improvement - Customer Satisfaction- Management by Facts- Respect for People
Quality and Productivity Improvement Process
Plan-Do-Check-Act (PDCA) Cycle Planning begins with the selection of
the problem The problem is documented using perhaps
a flow chart Ideas to solve the problem are generated
– brain storming etc. Workable solutions and measures of
success are agreed Implement targets agreed
Quality and Productivity Improvement Process
DO Implement the solution or process
change perhaps on a trial basis Monitor the implementation plan Note progress against milestones
Quality and Productivity Improvement Process
Check Revue and evaluate the results of the
change. Check that the solution is having
intended effect and note any unforeseen consequences
Quality and Productivity Improvement Process
Act Reflect and act on learning from the
experience. If successful, the process changes are
standardised and communicated to all involved workers with training in the new methods as needed.
In some cases this will include Customers and suppliers
Quality Improvement Programmes
G.M.Hostage believes that the success of Marriott Corporation results in part from personal programmes that stress training, standards of performance, career development and rewards.
He argues that service quality is enhances by the attitude of the company towards its employees.
The following eight programmes have been the most effective
Quality Improvement Programmes1. Individual Development: Using programme
instruction manuals, new management trainees acquire the skills and techno ledge that are needed for the entry-level position of assistant manager. For geographically dispersed organisations, these manuals ensure that job skills are taught in a consistent manner.
2. Management Training: Management personnel through the middle levels should attend at least management one development session each year.
3. Human Resource Planning: The kinds of people who will be needed to fill key company positions over the coming rime period are identified, and a list of people with good prospects is created for future posts that may become vacant or available.
Quality Improvement Programmes
4. Standards and Performance: A set of booklets was developed to instruct employees in how to conduct themselves when dealing with guests and, in some cases, even how to speak with a guests and handle a variety of situations. The Housekeeper tells exactly how a room is to be made up, right down to the detail of placing the wrapped soap baron the proper corner of he washbasin with the label upright. In many cases a DVD accompanies the book to demonstrate proper procedure. Adherence to these standards is checked by random visits from a group of inspectors
5. Career Progression: A job-advancement programme with a ladder of positions of increasing skills and responsibility gives each employee the opportunity to grow with the company
6. Opinion Surveys: A rank-and-file survey is conducted each year by trained personnel at each unit. The results are discussed at meetings. The survey has acted as a early warning system to head off any build up of unfavourable attitudes with staff.
Quality Improvement Programmes
7. Fair Treatment: Employees are issued with a handbook of company expectations and obligations to its employees. The formal grievance procedure includes access to an ombudsperson to help resolve difficulties.
8. Profit Sharing: A profit-sharing plan recognises that employees are responsible for much of the company's success and that they deserve more than just a pay check for their efforts.
Six Sigma DMAIC Process Steps
Step Definition
Define Define project objectives, internal and external customers
Measure Measure current level of performance
Analyze Determine causes of current problems
Improve Identify how the process can be improved to eliminate the problems
Control Develop mechanisms for controlling the improved process
Service Strategy
Competitive Service Strategies (Overall Cost Leadership)
A overall cost leadership strategy requires: Efficient-scale facilities Tight costs Overhead control Innovative technology
Having a low cost position provides a defence against competition
A low cost strategy usually requires: a high capital investment in state of the art
equipment Aggressive pricing
Competitive Service Strategies (Overall Cost Leadership)Competitive Service Strategies (Overall Cost Leadership)
Seeking Out Low-cost Customers Some customers cost less to service than others
Standardizing a Custom Service
Reducing the Personal Element in Service Delivery (promote self-service) ATMs
Reducing Network Costs (hub and spoke) Federal Express US network from Memphis. DHL European network from Amsterdam
Taking Service Operations Off-line Collections points where customers leave in goods for
repair and are forwarded to repair centre
Competitive Service Strategies (Differentiation)
The essence of differentiation lies in creating a service that is perceived as unique. Brown Thomas, Grafton St. McDonalds golden arches
Service Quality
Moments of Truth
Each customer contact is called a moment of truth.
You have the ability to either satisfy or dissatisfy them when you contact them.
A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.
Five Dimensions of Service Quality
Reliability: Perform promised service dependably and accurately. Example: receive mail at same time each day.
Responsiveness: Willingness to help customers promptly. Example: avoid keeping customers waiting for no apparent reason.
5 Dimensions of Service Quality
Assurance: Ability to convey trust and confidence. Example: being polite and showing respect for customer.
Empathy: Ability to be approachable. Example: being a good listener.
Tangibles: Physical facilities and facilitating goods. Example: cleanliness.
Approaches to Service Recovery
Case-by-case addresses each customer’s complaint individually but could lead to perception of unfairness.
Systematic response uses a protocol to handle complaints but needs prior identification of critical failure points and continuous updating.
Early intervention attempts to fix problem before the customer is affected.
Substitute service allows rival firm to provide service but could lead to loss of customer.
Managing Capacity and Demand
Managing Capacity and Demand
Service capacity is a perishable commodity
Unlike products that are stored , a service is intangible personal experience that cannot be transferred from one person to another
A service is produced and consumed simultaneously
Strategies for Matching Capacity and Demand for Services
Customer induced variability The variability in customer arrival rates
is a well known challenge for customer service managers attempting to match demand with capacity.
Frances Frei describes 5 sources of customer induced variability in service operations:
Customer-induced Variability
Arrival: customer arrivals are independent decisions not evenly spaced.
Capability: level of knowledge and skills vary resulting in some hand-holding.
Request: uneven service times result from unique demands.
Effort: level of commitment to coproduction or self-service varies.
Subjective Preference: personal preferences introduce unpredictability.
Strategies for Managing Capacity
Defining Service Capacity: Service capacity is defined in terms of an
achievable level of output per unit time (e.g. transactions per day for a busy bank cashier) For service providers the measure must be based on a bust employee and not on observed total output that must always be less than capacity.
Many services , demand cannot be smoothed very effectively see the example for a call centre on the following slide
Strategies for Managing Capacity
Daily Work shift Scheduling – by scheduling work shifts carefully during the day, the profile of service capacity can be made to approximate demand
Forecast demand Increase Customer Participation
Yield management
Yield management is a comprehensive system that incorporates many of the strategies discussed earlier (e.g. reservation systems etc)
It maximises revenue through price discrimination and capacity allocation in real time
Ideal Characteristics for Yield Management
Relatively Fixed Capacity Once all hotel rooms or airline seats are sold you can take
no extra business – you can however divert to another location or flight
Ability to Segment Markets Different customer classes – must stay 2 nights to qualify
for weekend rate Perishable Inventory Product Sold in Advance
Sell capacity in advance at a discount price or wait until later and possible sale at full price
Fluctuating Demand Using demand forecasting allows managers to increase
utilasation during slow demand and to increase revenue during peak demand