Four main service elements

The Offering

The Funding Mechanism

Employee Management System

Customer Management System

The Four Things a Service Business Must Get Right

The service must meet the needs and desires of an attractive group of customers in terms of customer experience and service features.E.g. Convenience and friendly service vs. price.E.g. Banks extended hours.Identify customer operating segments in terms of attribute preference . E.g. Walmarts customers preference for low price and wide selection over ambience and customer service. Managers must choose areas to excel.

The Offering

The Funding Mechanism: Service comes at a cost(1) Charge the customers in a palatable way: rarely a la carte.Imagine if Starbuck charged its customers per hour for the uses of its lounge area? What if Commerce Bank charged customers explicitly for having longer operating hours? Avoid charging your customers explicitly for added serviceFind creative ways to fund the added service

(2) Create a win-win between operation savings and value-added servicesProgressive Casualty Insurance:Sends van out to accident Lowers fraud risk and increases serviceHow to find win-win solutions?Look at largest costsAttempt to remove time

The Funding Mechanism: Continued(3) Spend now to save laterOffer free customer support - feedback leads to a better productAutomation Investment in technology

(4) Have the customers do the workSelf service: Turn labor into an activity for customersE.g., Airlines self check in. Improve customer experience ( access to useful tools such as seat maps) and lowers costs

Recruiting and Selection ProcessCommerce Bank: Hire for attitude and train for service.Combination of attitude and aptitude expensive Place preference.Training (see above)Job DesignMake sure that employee is not set up for failure but allows an average employee to thrive.Should have fault tolerance built in, i,e., able to compensate for lack of either aptitude or attitude Performance ManagementConsistent with goals of organization and achievable by employees

Employee Management System

Customer Management SystemEmployees arent the only people affecting the cost and quality of service.The customers themselves can be involved in operational processes, and their input influences their experiences (and often other customers too).E.g., a customer who is slow at a fast food counter makes the service less fast for everyone behind him.Customer involvement in operations alters the traditional role of business in value creationProduct based business buys materials and adds value to them and deliver to customers who pay to receive itIn a service business, employees and customers are both part of the value-creation process.

Customer Management SystemBenefits of Service Organizations:A main benefit is that customer labor can be far less expensive than employee laborIt can also lead to better service experiences Example:When students participate more in a classroom environment, they learn more.Challenges:Designing a system that explicitly manages these challenges of customer involvement is essential to service success

Customer Management SystemChallenges 1. The issue of customer selectionService designs may call for customers to perform important tasks, but for the most part customers have no interview, no background check, and no personalityprofile. 2. Customers are not as easy to train as employeesThere are usually many times more customers than employeesCreating effective training for a large, dispersed, unpaid, and irrelevantly skilled workforce is difficult

Customer Management SystemChallenges (continued)3. Customers have a great deal of discretion in their operational activities, usually far more than employeesExample: Zipcar, the car sharing serviceTo keep costs low, its service model depends on customers to clean, refuel, and return cars in time for the next userMotivating employees to perform these tasks would be routineMotivating customers requires a complex mix of rewards and penalties

Customer Management SystemWays to meet the challenges:1)Simplify the systemExample: self-service airlines check-in, supermarket check-outsAn airline employee performs many keystrokeswhen checking-in a customerThe check-in role was greatly simplified when it was transferred to the customer2) Provide limited training 3)Provide additional on site assistance

Customer Management SystemKey Questions to address when managing customers in your operationsWhich customers are you focusing on?Which behaviors do you want?Which techniques will most effectively influence behavior?Techniques used to modify customer behavior can be divided into two basic categories1. Instrumental: the carrot and sticks we commonly see played out as discounts and late fees2. Normative: the use of shame, blame, and pride to motivate us to return shopping carts and pick up the trash, even when no one is looking