Identify strategic opportunities available in the design of the service concept.
Understand the competitive environment of services.
Explore the dimensions of service competition.
Identify methods of winning customers in the marketplace
Discuss the limits in the use of information
Discuss the competitive role of information in services.
The Strategic Service Concept
Structural: Delivery system (front & back office) Facility design (aesthetics, layout) Location (competition, site characteristics) Capacity planning (number of servers )
Managerial Service encounter (culture, empowerment) Quality (measurement, guarantee) Managing capacity and demand (queues) Information (data collection, resource)
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
Competitive Service Strategies (Overall Cost Leadership)
Seeking Out Low-cost Customers
Standardizing a Custom Service
Reducing the Personal Element in Service Delivery
Reducing Network Costs
Taking Service Operations Off-line
Competitive Service Strategies (Differentiation)
Making the Intangible Tangible
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.
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)
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)
Safety (Doing things to people)
Speed (Avoid excessive waiting)
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.
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).
Competitive Role of Information in Services
Strategic Focus Competitive Use of Information
(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)
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)
What are the characteristics of service that will be affected by the emerging electronic and communications technology?
When does information collected through service membership become an invasion of privacy?
Discuss the concept of service ‘winners’ and service ‘losers’ for a service you are familiar with.
What are the implications of the growing use of personal computers for the customization of services and elimination of human interactions?
America West Airlines Generic Competitive Strategy
Target Strategic Advantage
Low cost Uniqueness
Entire Overall cost Differentiation
America West Airlines Competitive Features
America West Airlines Strategic Service Concept
America West Airlines Strategic Service Concept (cont.)