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Service Strategy


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Service Strategy

Service Strategy

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  • 1. Service Strategy
  • 2. Learning Objectives
    • Formulate a strategic service vision.
    • Discuss the competitive environment of services.
    • Describe how a service competes using the three generic service strategies.
    • Discuss the service purchase decision.
    • Discuss the competitive role of information in services.
    • Explain the role of the virtual value chain in service innovation.
    • Discuss the limits in the use of information.
    • Categorize a service firm according to its stage of competitiveness.
    • Conduct a data envelopment analysis (DEA).
  • 3. Strategic Service Vision 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?
  • 4. Strategic Service Vision 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 do customers perceive the service concept?
    • What efforts does this suggest in terms of the manner in which the service is designed, delivered, marketed?
  • 5. Strategic Service Vision Operating Strategy
    • What are important elements of the strategy: operations, financing, marketing, organization, human resources, 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 versus competition in terms of, quality of service, cost profile, productivity, morale/loyalty of servers?
  • 6. Strategic Service Vision Service Delivery System
    • What are important features of the service delivery system including: role of people, technology, equipment, layout, procedures?
    • What capacity does it provide, normally, at peak levels?
    • To what extent does it, help insure quality standards, differentiate the service from competition, provide barriers to entry by competitors?
  • 7. Competitive Environment of Services
    • Relatively Low Overall Entry Barriers
    • Economies of Scale Limited
    • High Transportation Costs
    • Erratic Sales Fluctuations
    • No Power Dealing with Buyers or Suppliers
    • Product Substitutions for Service
    • High Customer Loyalty
    • Exit Barriers
  • 8. Competitive Service Strategies (Overall Cost Leadership)
    • Seeking Out Low-cost Customers
    • Standardizing a Custom Service
    • Reducing the Personal Element in Service Delivery (promote self-service)
    • Reducing Network Costs (hub and spoke)
    • Taking Service Operations Off-line
  • 9. Competitive Service Strategies (Differentiation)
    • Making the Intangible Tangible (memorable)
    • Customizing the Standard Product
    • Reducing Perceived Risk
    • Giving Attention to Personnel Training
    • Controlling Quality Note : Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service.
  • 10. Competitive Service Strategies (Focus)
    • Buyer Group: (e.g. USAA insurance and military officers)
    • Service Offered: (e.g. Shouldice Hospital and hernia patients)
    • Geographic Region: (e.g. Austin Cable Vision and TV watchers)
  • 11. Customer Criteria for Selecting a Service Provider
    • Availability (24 hour ATM)
    • Convenience (Site location)
    • Dependability (On-time performance)
    • Personalization (Know customer’s name)
    • Price (Quality surrogate)
    • Quality (Perceptions important)
    • Reputation (Word-of-mouth)
    • Safety (Customer well-being)
    • Speed (Avoid excessive waiting)
  • 12. Service Purchase Decision
    • Service Qualifier : To be taken seriously a certain level must be attained on the competitive dimension, as defined by other market players. Examples are cleanliness for a fast food restaurant or safe aircraft for an airline.
    • Service Winner : The competitive dimension used to make the final choice among competitors. Example is price.
  • 13. Service Purchase Decision (cont.)
    • Service Loser : Failure to deliver at or above the expected level for a competitive dimension. Examples are failure to repair auto (dependability), rude treatment (personalization) or late delivery of package (speed).
  • 14. Competitive Role of Information in Services
    • Strategic Focus Competitive Use of Information
    • On-line Off-line
    • (Real time) (Analysis)
    • Creation of barriers to entry: Data base asset:
    • External Reservation system Selling information
    • (Customer) Frequent user club Development of services
    • Switching costs Micro-marketing
    • Revenue generation: Productivity enhancement:
    • Internal Yield management Inventory status
    • (Operations) Point of sale Data envelopment
    • Expert systems analysis (DEA)
  • 15. The Virtual Value Chain
    • Market place vs Market space
    • Creating New Markets Using Information (Gather, Organize, Select, Synthesize, and Distribute)
    • Three Stage Evolution • 1st Stage (Visibility): See physical operations more effectively with information – Ex. USAA “paperless operation” • 2 nd Stage (Mirroring Capability): Substitute virtual activities for physical – Ex. USAA “automate underwriting” • 3 rd Stage (New Customer Relationships): Draw on information to deliver value to customer in new ways – Ex. USAA “event oriented service”
  • 16. Limits in the Use of Information
    • Anti-competitive (Barrier to entry)
    • Fairness (Yield management)
    • Invasion of Privacy (Micro-marketing)
    • Data Security (Medical records)
    • Reliability (Credit report)
  • 17. Using Information to Categorize Customers
    • Coding grades customers on how profitable their business is.
    • Routing is used by call centers to place customers in different queues based on customer code.
    • Targeting allows choice customers to have fees waived and get other hidden discounts.
    • Sharing data about your transaction history with other firms is a source of revenue.
  • 18. Stages in Service Firm Competitiveness
    • 1. Available for service 2. Journeyman 3. Distinctive competence 4. World-class service delivery
    • Customers patronize service Customers neither seek Customers seek out the firm The company’s name is synonymous
    • firm for reasons other than out nor avoid the firm. on the basis of its sustained with service excellence. Its service
    • performance. reputation for meeting doesn’t just satisfy customers; it
    • customer expectations delights them and thereby expands
    • customer expectations to levels its
    • competitors are unable to fulfill.
    • Operations is reactive, Operations functions in a Operations continually excels, Operations is a quick learner and fast
    • at best. mediocre, uninspired reinforced by personnel innovator; it masters every step of the
    • fashion. management and systems service delivery process and provides
    • that support an intense capabilities that are superior to
    • customer focus. competitors.
    • Is subsidiary to cost, Meets some customer Exceeds customer Raises customer expectations and
    • highly variable. expectations; consistent expectations; consistent seeks challenge; improves
    • on one or two key on multiple dimensions. continuously.
    • dimensions.
  • 19. Stages in Service Firm Competitiveness
    • 1. Available for service 2. Journeyman 3. Distinctive competence 4. World-class service delivery
    • Counting room. Contributes to service, plays Is equally valued with front Is proactive, develops its own
    • an important role in the total office; plays integral role. capabilities, and generates
    • service, is given attention, opportunities.
    • but is still a separate role.
    • Unspecified, to be A market segment whose A collection of individuals A source of stimulation, ideas,
    • satisfied at minimum cost. basic needs are understood. whose variation in needs is and opportunity.
    • understood.
    • When necessary for When justified by cost When promises to enhance Source of first-mover advantages,
    • survival, under duress. savings. service. creating ability to do things your
    • competitors can’t do.
    • Negative constraint. Efficient resource; disciplined; Permitted to select among Innovative; creates procedures.
    • follows procedures. alternative procedures.
    • Controls workers. Controls the process. Listens to customers; coaches Is listened to by top management
    • and facilitates workers. as a source of new ideas. Mentors works to enhance their career.
  • 20. America West Airlines Strategy
    • Target Strategic Advantage
    • Low cost Uniqueness
    • Entire Overall cost Differentiation
    • Market leadership
    • Market Focus
    • Segment
  • 21. America West Winning Customers
    • Service Qualifiers:
    • Service Winners:
    • Service Losers:
  • 22. America West Strategic Service Vision
    • Target market segments
    • Service concept
    • Operating strategy
    • Service delivery system
  • 23. America West Airlines Positioning
    • Full Service
    • Inconvenient Convenient
    • No Amenities
  • 24. Mrs. Fields Strategic Use of Information
    • Strategic Focus Competitive Use of Information
    • On-line Off-line
    • (Real time) (Analysis)
    • Creation of barriers to entry: Data base asset:
    • External
    • (Customer)
    • Revenue generation: Productivity enhancement:
    • Internal
    • (Operations)
  • 25. Mrs. Fields Management Information System
    • How might the management information system contribute to a reported 100% turnover of store managers?
    • Will the management information system support or inhibit the expansion of Mrs. Field’s outlets? Why?
  • 26. Alamo Drafthouse Positioning MOVIE SELECTION FOOD QUALITY Many Few Poor Good
  • 27. Alamo Drafthouse Strategic Service Vision
    • Target market segments
    • Service concept
    • Operating strategy
    • Service delivery system
  • 28. Alamo Drafthouse Winning Customers
    • Qualifiers
    • Service winners
    • Service losers
  • 29. Alamo Drafthouse Profitability Recommendations
  • 30. Discussion Topics
    • Give examples of service firms that use both the strategy of focus and differentiation and the strategy of focus and overall cost leadership.
    • What ethical issues are associated with micro-marketing?
    • For each of the three generic strategies (i.e., cost leadership, differentiation, and focus) which of the four competitive uses of information is most powerful?
    • Give an example of a firm that begin as world-class and has remained in that category.
    • Could firms in the “world-class service delivery” stage of competitiveness be descried as “learning organizations”?
  • 31. Interactive Class Exercise
    • The class divides and debates the proposition “Frequent flyer award programs are or are not anticompetitive.”