1

OPSM 405 Service Management

Class 4:

Strategic Service Vision

Koç University

Zeynep Aksinzaksin@ku.edu.tr

2

Recall: The service value chain

internalquality

employeesatisfaction

employeeloyalty employee

productivity

Value

customersatisfaction

customerloyalty

$ $ $ Euro$ $ $ YTL

3

The Value Profit Chain - Schlesinger

Determinants of employee and customer loyalty– cycle of failure - low wages, little training, =>

limited customer loyalty, high turnover– cycle of capability - share of profits, greater

control, => highly productive employees, satisfied customers

4

The Service Profit Chain - Heskett

Strategic Service Vision– markets targeted on “psychographic” (how

people think and act) as well as demographic factors.

– Service concepts, products, and entire businesses defined in terms of the results produced for customers.

5

Heskett - continued

Strategic Service Vision - continued– Operating strategies comprising organization

controls, operating policies, and process that “leverage” value to customers over cost.

– Service delivery systems comprising bricks and mortar, information systems and equipment that complement associated operating strategies

6

Heskett - continued

Questions –Strategic Service Vision– Does the service delivery system support the

operating strategy?– To what extent is the value of results and

process quality for customers leveraged over cost to the service provider?

– How well is the service concept positioned in relation to customers’ needs and competitors’ offerings?

7

Strategic service vision: the external view

Target Market Segments what are the market segments?

Positioning how do customers view the service?

Service Concept what is the service bundle?

Value/Cost Leveraging perceived value-cost?

Operating Strategy investment / purchasing decisions?

Strategy/System Integration is everything consistent?

Service Delivery System what are resource needs?

8

Strategic service vision: the internal view

Target Employee Groups who are my employees?

Positioning how do employees fit?

Service Concept what are employee beliefs?

Value/Cost Leveraging perceived value-cost?

Operating Strategy is human contact essential?

Strategy/System Integration is everything consistent?

Service Delivery System what are resource needs?

9

Target market segments

What are common characteristics of important market segments?

What dimensions can be used to segment the market?– Demographic?– Psychographic?

How important are various segments? What needs does each have? How well are these needs being served? In what manner? By whom?

10

Service Concept

What are important elements of the service to be provided, stated in terms of results produced for customers?

How are these elements supposed to be perceived by the target market segment? By the market in general? By employees? By others?

How is the service concept perceived? What efforts does this suggest in terms of the

manner in which the service is designed? Delivered? Marketed?

11

Operating Strategy

What are important elements of the strategy? Operations? Financing? Marketing? Organization? Human resource? Control?

On which will the most effort be concentrated? Where will investments be made? How will quality and cost be controlled?

Measures? Incentives? Rewards? What results will be expected vs. competition in

terms of: quality of service? cost profile? Productivity? Morale/loyalty of servers?

12

Service Delivery System

What are important features of the service delivery system including: the role of people? Technology? Equipment? Facilities? Layout? Procedures?

What capacity does it provide? Normally? At peak times?

To what extent does it: help ensure quality standards? Differentiate the service from competition? Provide barriers to entry by competitors?

13

The service profit chain

Source: Adapted and reprinted by permission of Harvard Business Review. An exhibit from “Putting the Service Profit Chain to Work,” by James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr., and Leonard A. Schlesinger, March-April 1994, p. 166

Satisfaction

Loyalty

Productivity and Output

Quality

Service Quality

Capability

Employees

Operating strategy and service delivery system

Target marketService concept

Internal External

Service value Satisfaction Loyalty

Customers Revenue growth

Profitability

• Workplace design• Job design/decision-making latitude• Selection and development• Rewards and recognition• Information and communication• Adequate “tools” to serve customers

• Quality and productivity improvements yield higher service quality and lower cost

• Attractive value

• Service designed and delivered to meet targeted customers’ needs

• Lifetime value• Retention• Repeat

business • Referral

14

Implementation challenges

define your service bundle: details matter! get the right resources to achieve the bundle: match

employees and technology to vision integrate your resources continuous improvement of bundle and resources use technology when necessary

Remember to keep both an external and internal vision!