SERVICE MARKETING (Lovelock)

Understanding services

• Service vs Goods
• 8 integrated Service Management (4Ps + 4Ps)
• Service As A Process
• Factors which increase service demand (Transformation of service management)

Managing service encounter (direct encounter of customer and employee)

• Type of service encounter
• Service as A System
• Management service encounter for satisfactory outcome

Target customer  + Customer relationship + Loyalty

• Segmentation 
• Target customer
• Valued relationship
• Four type of service marketing
• Loyalty 

Complaint Handling + Service Recovery + Service Guarantee

• Complaint
• Entry points of complaint
• Factor influencing customer complaint
• Principle of effective problem resolution
• Service guarantee
• Designing guarantee

Positioning a service

• Focus strategy
• Importance vs Determinants
• Identify / Select target segment
• Positioning
• Develop a positioning map 

Creating Service Product &  Adding Value

• Understanding service offering
• Blueprinting
• Identify / Classifying SUPPLEMENTARY service (8 clusters)
• Product Line / Brands
• Hierarchy of New Service Categories

Creating Delivery System - Place, Time, Cyberspace

• Service Delivery Concept
  • nature of contact customer-provider
  • where
  • when
  • atmosphere, experience (service scape)
  • extent of delegation
  • served in type of package
  • serving protocol

Enhancing Value - Improving Quality & Production

• Productivity & Quality
• SERVQUAL (Service Quality)
• GAP in service industry

Building A Service Quality Information System

• Service Measurement
• Improves Service Production
• Customer-Driven To Increase Productivity
• Sensitivity to Customer Reluctant to Change

Balancing Demand & Capacity

• Ups / Down of Demand
• Measure & Manage Capacity
• Create flexible capacity
• Managing Unsold Service Capacity
• Demand (What determines demand)
• Strategy in managing demand
• Info needs to make good demand management

Managing Customers Waiting Lines & Reservations

• Queuing System
• Matching Queuing System To Market Segment
• Psychology of Waiting Lines
• Reservation

Understanding services

Service vs Goods (top)

• ° ownership
• intangible
• greater decision control of customer in production process
  • eg ATM machine (how much to withdraw?), hair saloon (what hair style?), hospital (treatment choice), college (course preference) 
• variability in operational input / output - under real time condition
  • eg : well-trained waiter, pleasant employee
• difficult for customer evaluation
  • no search property - eg colour, feel, hardness
  • no experience property - eg taste of food
  • credence property - cannot evaluate even after consumption eg surgery, accountancy
  • thus, must develop trust with customer and educate them
• absence of inventories after production - intangible, no storage
• time factor important
  • service must be delivered quickly - quick + quality service eg haircut, dental procedure, cinema ticketing
  • elapsed time - after ordering eg food- how long will be served
  • customer hate to waste time in 'service' delivery
• different distribution channel    
  • electronic channel - electronic fund transfer (EFT)
• other people (employee or other customer) may form part of the service - eg their dressing, behaviour of other noisy customer

8 integrated Service Management (4Ps + 4Ps)(top)

• product (service) - core/benefit
• place - distribution channel
  • electronically eg credit card
  • retail outlets
  • cyber space
• promotion / education -
  • create service awareness to customer
  • mass media - TV
  • 3 roles
    • provide info/advice - thus create service awareness
    • influence target customer about service benefit
    • encourage customer take action at specific time eg reduce travel tickets during holidays
• price
  • establish / set appropriate price
  • make convenience to pay 
  • reduce mental/physical effort to pay eg credit card
• process
  • create and deliver service to customer - procedure eg hair saloon
    • Step 1 (step in), Step 2 (wait, sit) Step 3 (shampoo, cut ) Step 4 (payment)
  • problem - bureaucratic, slow delivery
• production, quality
  • production æ 1/quality
  • productivity = input -» output
  • quality - customer satisfaction - build customer loyalty
• people (include employee and other customer as well)
  • many services æ personal interaction with customers
  • influence customer perception / quality
  • other noisy customer can be a nuisance to other customer !!! BEWARE
  • include motivating personnel, trained / skilled workers / service providers
  • eg massager, hair stylist, lecturer
• physical evidence
  • appearance of building, landscaping, decoration, surrounding, environment
  • eg : movie cinema - dark surrounding + good sound system + carpet floor to absorb sound

Service As A Process(top)

• INPUT (people / object)  --------(process)--»»  OUTPUT
• 4 groups (operational perspective)
  • people processing
    • service directed at people body
    • customer need to present physically throughout service delivery
    • eg haircut, dental work, surgery, hotel, education
  • possession processing
    • service directed at physical possession
    • object required processing must present
    • customer might not present
    • eg car wash, car repair, plumbing service
  • mental stimulus processing
    • directed at mind
    • customer present mentally but can be or not at the place service created
    • eg cinema (movie), radio (customer not in radio station), on-line education (student not inside class), music performance (live telecast)
  • information processing
    • directed at intangible assets eg idea, opinion, money credit
    • little direct customer involvement
    • service can be undertaken by mail, phone, internet
    • eg insurance, banking, consulting

Factors which increase service demand (Transformation of service management) (top)

• Government policy 
  • ¯ govern. regulation leads to ­competition
  • encourage privatization
  • loosen trading restriction via WTO
  • increased service demand
  • eg MAS vs Air Asia
• Social changes
  • lifestyle changes
    • more busy
    • leads to ­ house service eg child care,plumbing, house cleaning
  • income changes
    • getting richer, affluent
    • trend form buying physical product to buying experiences / services eg credit card service
  • immigration to ­ US / UK
    • new service created
    • eg language English centre , Feng Shui service - to cater for Chinese & Indians immigrants
• Business trends
  • manufacturer add value to sell services
    • eg buy car, free 3 uears repair
  • relaxation of ban of promotion towards professional service
    • eg lawyer, architect, doctor
  • franchising growth
    • expansion / demand increased
    • eg Maria Bodyline France
  • innovative hiring practice
    • seek better friendly employee
    • service had direct contact with customer
    • eg trained Indonesian maid for household
• Advance in IT
  • improved service created eg
    • better bandwith, faster transmission
    • online payment - credit card
• Globalization / Internationalization
  • increased competition in open market
  • encourage technology transfer in service industry
  • cheap labour service eg construction

   

Managing service encounter (direct encounter of customer and employee)

Type of service encounter(top)

Service as A System(top)

• defined as level of contact a service business intends to have with its encounter
• comprised of 3 types
  • service operation
  • service delivery
  • service marketing

Management service encounter for satisfactory outcome (top)

• satisfaction æ 
  • service provider - skill , knowledge , technology, equipment
  • customer - expectation
• manage people in service encounter
  • high contact employee - 2 roles
    • deliver jobs
    • selling / promoting new services
  • brief employee the objective of market place
• involve customer as co-producer
  • make them involved actively in the production process
  • eg health care, education, personal fitness, weight loss
  • once involved, will not blame entirely service provider if satisfaction not obtained
• Critical incidence - specific encounter between customer and service provider that are satisfying / dissatisfying for 1/both parties
  • Bad critical incidence from
    • customer perspective
      • core service failure
      • unfair price
      • inconvenience time, location, delays
      • poor response to service failure
    • employee perspective
      • problematic customers (jay customers - 6 types)
        •  thief
          • º intension paying
          • eg : bypass electric meter, free bus ride
          • solution : - find how they cheat
        • rule breaker
          • rules can imposed by (eg air travel - to facilitate smooth operation)
            • government - no weapon carried
            • firm - luggage size limited
        • belligerent
          • customer behave, resent, anger
          • solution :-employee trained to calm, explain things carefully, solve anger
        • family feuder
          • customer argue with other customer eg smoking people in non-smoke zone
          • solution:-get another customer together with you to solve it 
        • vandal
          • customer abuse physical facilities eg phone
          • solution : - 
        • dead beat
          • 'failed' to pay
          • solution : - insist on pre-payment                       

Target customer  + Customer relationship + Loyalty

Segmentation  (top)

• mass customization - segmentation can be based on
  • demographic
  • geographic
  • psychographic
  • behavioral variables
  • technographic
• technographic segmentation
  • willingness to use latest technology
  • based on interaction between 3 variables
    • attitude towards technology - optimistic vs pessimistic
    • financial situation - affluent vs poor
    • technology application - career, family, entertainment

• segmentation reason - for effective capacity utilization
• strategy 
  • time strategy
    • eg : Cineplex charged RM9 during weekends and Wednesday RM5
  • place separation
    • eg seating airlines has different charge - 1st class vs economy class
• CAUTION - must not to jeopardize image eg 5-star hotel charged cheap prices for luxury rooms

Target customer (top)

• targeting - serve the right customer
• search for value not just number - value means heavy user of service
• restrict service to target customer by:
  • insists on dress code - eg wear proper dress to high class gambling casino 
  • impose rules / regulations - eg no smoking allowed in restaurant
  • members only -eg entrance into a club require ID card
  • security guard / bowers - to reduce nuisance, drunk, fighting customers in night club
• retain customer more worthy than recruit new customers to reduce cost of education + promotion
• however, sometimes need to terminate unprofitable customer eg club member who vandalize facilities

Valued relationship (top)

• definition 
  • benefits received by customers which eXceed the associated costs of obtaining them
    • confidence benefit - 
      • trust
      • correct performance
      •  know what to expect
      •  less risk of something getting wrong
    • social benefit
      • being known by name - eg Jimmy Choo designed the late Princess Diana shoe
      • mutual recognition - eg ever living in Hilton is a luxurous lifestyle
    • special Tx benefit
      • better price with discount
      • faster service
  • benefits received by firm / sellers / service providers that is financially profitable over times such as knowledge / pleasure working with customers 

Four type of service marketing (top)

• transactional
  • 1) transactional
    • exchange of value of 2 parties
    • seller dunno buyer, buyer dunno seller
    • eg cinema
• relational
  • 2) database
    • value excahnge + information exchange
    • used of technology
      • build database
      • delivered customised message
      • track customer / buying trend
      • eg : online subscription, eBay, Amazon.book
  • 3) interaction
    • face to face ( ear to ear) 
    • eg phone banking, loan application
  • 4) networking
    • develop network with customers, distributors
    • customer encouraged to be referral
    • eg sales representatives Glaxo, insurance, multilevel marketing

Loyalty (top)

• membership relationship
  • formalized relationship - eg: signed  an application form to be a member
  • between firm and customers that offer benefit to BOTH parties
  • result in customer loyalty
  • eg : subscription service TV cable, Golf Club, Amway, multilevel marketing
• loyalty benefits to firm
  • ­ purchases - eg credit card, Bonus Link card
  • ¯ operating costs - eg more experienced with the service, customer make fewer demand, thus less promotion in educating them and recruit new customers
  • referral to others customers - positive words of mouth comments
  • price premium - pay REGULAR price willingly  compared to new customers
• reinforce loyalty by rewards
  • potential of a loyalty program depends on
    • deal loyalty
      • eg Bonus Link - Shell, Parkson. The more regular,popular shops associated with Bonus Link, the more people would join Bonus Link program
    • buyer perception on rewards value
      • cash value of redemption reward eg voucher, free cash
      • range of choice rewards - more choice better
      • aspirational value of rewards - exotic, appealing eg free travel to Hawaii
      • amount of usage / expenses required to redeem reward eg:  Bonus-Link points 10,000 points just to get a small cup free
      • ease of using the program / working claims eg: just present yr Bonus-Link card
      • psychological benefits of belonging to the program eg multilevel marketing AMWAY
    • how soon customer obtain the benefit

Complaint Handling and Service Recovery

Complaint (top)

• serve as
  • market research data
  • early warning indicator
  • monitor production, quality
• Compliant handling is a profit centre  not cost centre
• Customer confidence destroyed if
  • failure service outrages ( blatant dishonesty of price)
  • problems fit a pattern of failure rather than an isolated incident
  • recovery efforts are weak

Entry points of complaint (top)

• front-line employee
• intermediatries
• manager
• complaints cards / feedback
• 3rd party
  • legislative authority eg City Council
  • consumer advocate group eg FOMCA

Factor influencing customer complaint (top)

• Reason to complaint
  • recover economic loss- seek refund
  • rebuild self esteem - complaint of impolite service
• Cost of complain
  • monetary eg: postage stamp of feedback delivery to head office
  • time wasted to complaint
  • psychological cost - unpleasant confrontation with service personnel
• 'low' power customer will not complaint eg doctor, lawyer

Principle of effective problem resolution (top)

• act fast
• admit mistake but don't be defensive
• show understand problem from customer perspective
• xx argue with customer
• acknoledge customer feeling of doubt eg say ' I understand how you felt'
• give customer benefit of doubt
  • depends if how much $$$ is involved
    • if $$ high - need investigation
    • if $$ low - not worth trouble over small matter
• clarify steps needed to solve problems
• keep customers informed of progress
• consider compensation
  • monetary
  • offer of free equivalent service
• persevere to regain customer goodwill (trust)

Service guarantee (top)

• promotional tools used by company to gain 
  • promote service
  • give satisfaction
• how providing service guarantee will benefits service providers
  • force firm to focus on what customer wants
  • set clear standard (benchmark) - because need to pay financial costs due to quality failures
  • require development of system for generating meaningful customer feedback
  • force firm to understand service failure / encourage them to overcome potential failures
  • build marketing muscle - reducing risk of purchase decision and building long-term loyalty

Designing guarantee (top)

• what guest want in a guarantee? eg a total replacement
• easy to reclaimed or invoked - not much word jargon or procedure in claiming the guarantee
• cost-effective - cost vs brand loyalty eg: cannot change into a new Mercedes if only tyre punctured
• implementation ease
• front-line fully empowered to provide guarantee eg no hassle over a untasty cup of coffee but give free one immediately

Positioning a service

Focus strategy (top)

• Focus strategy depends on
  • service breadth
  • numbers of market served

    Many	Focus strategy
    Number of markets served	Service focused eg bank, food industry	Unfocused (everything, everywhere) public hospital
    	Fully focused (service / market focus ) niche	Market focused saloon- wide service but only to women
    Few / Narrow	Breadth of service		Wide

Importance vs Determinants (top)

• importance - the needs from the service
• determinants - factor which influence / determine buyer choice between competing alternatives
  • eg haircut
    • importance - to look nice, civlized, smart
    • determinants 
      • comfotability during service ( air con)
      • offer different type of hairstyle
      • extra service - free massage
  • eg college (education)
    • importance - to get a degree for better job prospect
    • determinants
      • cost
      • distance from home
      • quality lecturers

Identify / Select target segment (top)

• market segment - group of buyers share similar needs, purchasing behaviour, characteristics
• using research to identify market segment
  • purpose of using service
    • eg choose restaurant for lunch
      • cheap place with going with friends
      • formal expensive place with prospective client
  • who is decision maker
    • eg health care setting
      • patient consider cost
      • doctor - refer to specialist in serious cases
  • timing of use
    • day, week, season, holiday
  • whether if service use alone / by group - holiday package. tour
  • composition / demographic of the group - rich, poor, old, young

Positioning (top)

• establish distinctive place in the market
• 4 principles
  • establish in the minds
  • single, clear message
  • set company apart from competitors
  • cannot be all thing, must focus it efforts
• steps in positioning

Develop positioning map (perceptual map) (top)

• way of representing consumer perception of alternative service graphically

• based on 2 attributes or more through research

• BEWARE of halo effects - respondents fake answer in questionnaire

• eg hotel industry - based on customer perception on cost and service quality

Creating Service Product &  Adding Value

Understanding service offering (top)

• molecular model

  • identify tangible / intangible dominant

  • eg : 

    Transport	-------	Service frequency
    	------	Vehicle
    	------	In-flight service	-----	Toilet in flight
    			-----	Food and drink

• service components

  • core products eg: accommodation

  • core delivery process eg : customer contact, reservation, equipments (beds , air-con)

  • supplementary service - augment core product, add value eg room service, porter, door boy, taxi service, sport facilities in hotel 

Blueprinting (top)

• flow chart (refer to text)

• reason for usage

  • distinguish between customer experiences, frontstage and backstage

  • clarify intersection between customers and employees

  • identify potential fail points / critical points

    • eg : waiting time process, taking order process

  • suggest product (service) improvement opportunities

  • repositiong service to appeal more customers

• components ( eg in a restaurant)

Identify / Classifying SUPPLEMENTARY service (8 clusters) (top)

• facilitating supplementary service (smoothen delivery process) - POBI

  • information

    • eg : service hours, notification of change, prices, warning

    • timely , accurate

    • through

      • materials - brochures, pamphlets, books

      • human - frontline employees

      • websites

  • order taking

    • polite, fast, ° unnecessary mental / physical effort

    • eg : application membership, booking, reservation room, ticketless system

  • billing

    • complete, accurate, itemized

    • ca be in the form of 

      • verbal statement (food stall)

      • machine display (receipt)

      • periodic statement (phone bill)

  • payment

    • self service - insert token in gaming, casino industry

    • direct to payee - credit card, electronic fund transfer (EFT), pay electric bill via Internet

• enhancing supplementary service (add value) - CESH

  • consultation

    • involve a dialog to probe customer requirement

    • advice, experience

    • eg health treatment, diet center, loan application, tutoring, managerial service

  • hospitability

    • reflect pleasure at meeting customers

    • courtesy, polite

    • eg greeting, toilet, washroom, security, waiting facilities (lounge in airport, magazine, newspaper provided in waiting rooms)

  • safekeeping

    • assistance with their personal possession

    • eg : pet care, coatroom, baggage handling, parking space, chiild care, car wash

  • exception

    • fall outside normal routine service delivery

    • type

      • special request - children needs, medical disability, religious observance ( halal food)

      • problem solving - warranty, guarantee, teach people use product

      • handling complaint / compliment

      • restitution - compensation - refund, free repair, legal settlements

Product Line / Brands (top)

• difference brands by one company - distinct mix of benefit, targeted customers

• eg :Marriott Hotels

  • hotels - big, full service hotel

  • resorts - recreational, sporting facilities

  • courtyards - comfortable, business travelers

  • inn - affordable, inexpensive

Hierarchy of New Service Categories (top)

• major service innovation

  • new CORE service that was not previously defined

  • eg : eBay online auction, FedEx expres package delivery 1971, CNN global news service

• major process innovation

  • using NEW process to deliver core service

  • eg : core service - education, new service - by ON-LINE, MAIL 

• product line extension

  • addition to current product line

  • eg : Banking - not only to keep money, now offered

    • loans

    • investment

    • mutual funds

    • consultation

    • on-line bill payment eg Maybank

• process line extension

  • less innovative than process innovation

  • eg : self-service click to order something from bookshop instead buying directly

• supplementary service innovation

  • adding new facilitating / enhancing service element

  • eg :

    • credit card payment

    • theme restaurant eg Rainforest Cafe - combine experience + environment enhancer such as aquarium, waterfall, fiberglass monkey, parrot

• service improvement

  • common type of innovation

  • eg recruit more employee during peak hour

• style change

  • simplest innovation type

  • eg : repainting  retail branches, change logo, change uniform colour

Creating Delivery System - Place, Time, Cyberspace

Service Delivery Concept (top)

• nature of contact customer-provider

  • customer go to provider - cinema, barner, bus service

  • provider go to customer - convenience to customer, housekeeping, plumbering

  • arm length transaction (electronic) - credit card, online shopping

• where

  • location constraints - eg airport inconvenience near housing estate

  • ministores - ATM located at supermarket - convenience

  • multipurpose facilities - KLCC has ATM, bank, health club

  • E-commerce - selling via Internet, E-bay

• when

  • office hours time - bank

  • 24 hours - 7 eleven, mechanic repairs shop, public service (ambulance, police)

  • support service - hotline toll free

• atmosphere, experience (service scape)

  • physical evidence eg:

    • airline company - employee uniform, air con, airport, service logo, ticket design

    • hotels - marble lobby floor, glass door, lift, carpet, interior decor

    • cinema - big screen, dark surrounding, sound system, comfortable seat

  • role of physical evidence

    • attention creating medium

      • distinguish from other competitors

      • Air Asia - small, cheap plane & computer for online ticketing

      • Maybank - online payment for water, electric bill

    • message creating medium

      • use of symbolic cue to promote / communicate with audience

      • Air Asia - cheaper fare

      • Maybank - 'Tiger' head - aggressiveness

    • effect creating medium

      • employ colour, sounds to heighten an appetite for goods / service

      • Air Asia - red uniform, plane

      • Maybank - yellow - Royalty colour

• extent of delegation - bundled / unbundled

  • role of intermediaries

    • cost effective - travel agents help customer book air ticket, hotel reservation

    • rely on distributors / retailers to sell service - marketing agents in direct marketing selling insurance

    • delegate specific service elements - Proton car service ( manufacturer supply product (car) but servicing by local delegated / appointed car service)

  • mode of partnership

    • franchising

      • franchisor recruit entrepreneur (franchisee) to invest OWN time and money to manage previously developed service concept eg : McDonald, KFC, Shell

      • franchisor give

        • training

        • sell necessary supply eg oil in Shell

        • provide promotion support eg advertisement

      • disadvantage

        • franchisor control delivery system

        • not tuned to local market

    • licensing

      • supplier act on original supplier behalf to deliver core product

      • eg: 

        • university offer license to college to deliver course designed by the former

        • bank sell insurance underwritten by an insurance company

• served in type of package

  • individual - haircut

  • batches - package travelling

  • self service - token in gaming industry

• serving protocol

  • reservation 1st come 1st served service

  • club members priority

  • VIP first

Enhancing Value - Improving Quality & Production

Productivity & Quality (top)

• productivity  

  • associated with low cost

  • best price to customer - dominate larger market

  • productivity growth should focus on customer as denominator

    • profitability by customer

    • capital employed per customer

    • shareholder equity employed per customer

  • worthless to increase numbers of customers / day if the process delivery perceived as inferior eg 

    • big class - tutor

    • 'rushing' customer in haircut service by getting more faster cut

• quality

  • competitive advantage

  • value to customer

  • satisfaction

  • defined by

    • transcendent view

      • innate excellence

      • viewpoint applied to visual art

      • know quality just by 'seeing' it

      • eg Dunhill cigar advertisement - Excellence, Quality, Dunhill

    • product-based approach

      • measurable variable

      • physical attributes - durability performance

    • user based definition

      • 'eye of the beholder'

      • some like it, some not

      • based on experience

    • manufacturing based

      • operation driven

      • internally developed specification - performance, feature, reliability, durability

    • value based

      • value vs price

      • trade off between performance, price, quality

• efficiency - comparison to a standard, usually time based

• effectiveness - degree a company achieve its goal

SERVQUAL (Service Quality) (top)

• Reliability

  • ability to perform the promised service accurately - eg error free records

• Assurance

  • credibility, security, courtesy

  • behave confidently

  • knowledgeable to answer customer queries

• Tangible

  • appearance of physical elements

  • eg: internal decor, functioning ATM machine, clean toilet

• Empathy

  • easy access, good communication, customer understanding

  • eg give personal attention, convenient operating hours 

• Responsive

  • promptness, helpfulness, urgentness

  • not busy, prompt, eagerness to help

• disadvantage
  • cannot measure service high in credency eg : complex legal case, medical Tx
  • provider service STYLE may not be liked eg colour of the shop although has excellence service
  • peer view also influence outcome of service quality measurement

GAP in service industry (top)

• Caused by
  • not knowing customer expectation
  • specifying service quality that do not match  customer expectation
  • failing to ensure service performance match specification
  • not living up to the levels of service performance that are promised by marketing communication

• Knowledge gap 

  • service provider vs customer expectation

• Standard gap 

  • mgt vs quality standard establish for service delivery

  • eg: gas filter is mandatory installed in bus service but company A failed to do so

• Delivery gap 

  • delivery standard (standard set by own management) vs provider performance

  • eg : private college ensure lecturer perform well up to its standard

• Internal communication gap 

  • mgt vs marketers

• Perception gap 

  • what customer perceived vs what is delivered 

  • customer do not understand what service had done for them

    • thus, briefing, advice eg medical surgery

• Interpretation gap

  • what customer interpret vs marketer promised 

  • thus , need to do pretesting of advertisement

  • eg : education counselor twisted the fact that its degree is recognized by government

• Service gap

  • whay is delivered vs customer expectation

Building A Service Quality Information System

Service Measurement (top)

• soft

  • cannot be observed

  • collected by talking to customer , employee

  • eg SERVQUAL - measure satisfaction

• hard (see text)

  • activities that can be 

    • counted

    • timed

    • audited

  • eg : no. of phone calls, no. of time to complete a task

  • Control chart

    • display performance vs time

    • trend

    • erratic, stabile, upgoing

    • measure ONE single variable only - easy to operate

  • Service Quality Index

    • measure multiple variable

    • weighted factor for important variable

    • Federal Express	Weigh	No. of incident	Daily Fail Points
      Late delivery	2	3	6
      Lost packaged	20	4	80
      Miss pick-up	10	2
      Package broken	15	4
      		Total fail points

  • Root Cause Analysis

    • Fishbone Chart

      • by Japanese

      • cause-effect analysis

      • categorized into

        • equipment

        • people

        • procedure

        • information

        • others

    • Pareto Analyis

      • 80/20

      • 80% service failure accounted by 20% causable variable

      • one problem lead to another

Improves Service Production (top)

• careful of cost control

• effort to minimize wasteful labor

• matching productivity = demand, to avoid underutilized resources of workers and equipments

• provide employee with database - enable them to work faster

• teach employee work productively (efficiently)

• installing expert system - allow PARA-professional to take on task previously handled by more professional experienced employee

Customer-Driven To Increase Productivity (top)

• change timing of customer demand

  • eg : post-office urge post early Christmas card - save time and resources

• involve customer in production

  • use technology eg: ATM

  • dierect dialing - reduce operators cost

  • place order through e-mail service

• ask customer use 3rd party

  • specialist intermediaries might enjoy economies of scale

  • eg : travel agencies

Sensitivity to Customer Reluctant to Change (top)

• steps to avoid insensitivity

  • develop customer trust

    • customer willingness to accept change closely related to degree of goodwill toward company

  • understand customer habit / expectation

    • change might disrupt routine

    • eg self service in ordering water might not popular

  • pre-test new procedures, equipments

    • determine custome response

    • field testing

    • complex, ambigious operation deter customer to change

  • publicize the benefits

    • time saving, extended service hours = benefit

    • tell everyone, market its benefit of service change

  • teach customer use innovation / promotional trial

    • service personnel provide simple training to customer eg use of ATM

    • promotional incentive may serve to stimulate initial trial

  • monitor performance and continue seek improvement

    • ongoing process

    • see how customer / performance progress

    • monitor if change has positive / negative response

Balancing Demand & Capacity

Ups / Down of Demand (top)

Measure & Manage Capacity (top)

• productive capacity
  • resources / assets that a firm employ to provide services
  • 5 forms (service industry)
    • physical facilities designed to contain customers
      • inpeople-proces industry
      • eg: medical clinics, hotel, bus, swimming pool
    • physical facilities to store / processed goods
      • parking lots -cars
      • shelves in the supermarket
      • freight containers
    • physical equipments to process people , info
      • ATM
      • toll gates payment
      • security detector
    • labor - employee, personnel
    • infrastructure 
      • ascess to deliver quality service
      • eg: phone line, electric power
• measuring capacity
  • no. hours work
  • no. of workers
  • area / space
• change capacity
  • stretch
    • use facilities for longer period eg 24 hours ATM , toll free
    • extended working hours
    • restaurant add extra table / chair to accommodate demand
  • shrink
    • used when demand is low to minimize operation cost
• chase demand - tailoring capacity to match with demand
  • schedule downtime during period of low demand - employee take holiday during that period so that in peak demand, all will not take holiday again
  • part time employee - during 'peak' demand eg: hire more postman during festive season (too many cards)
  • rent / share extra facilities - rent more space to accommodate demand eg: area expansion in cineplex
  • cross-train employee - can be shifted to certain production line which is busy / slow eg: cashier do stock checking in slow periods / stocker become cashier during peak periods

Create flexible capacity (top)

• eg in eco-tourism
  • spring / summer - provided tour to jungle-trekking
  • winter / snow - cross country skiing
• eg in hotel with rooms with connecting doors
  • two rooms locked - can sell 2 bedrooms / units
  • doors un locked - one bedroom converted to sitting room , offering a suite
• eg in tuition
  • school days - tuition class
  • holidays - revising past year exam / intensive tuition
• eg in cinema
  • weekends - higher price
  • mid- weekdays (Wed) - lower price

Managing Unsold Service Capacity (top)

• pledging
  • strategy to reward intermediaries
  • eg: tour guide get free accommodation in hotel if can bring a group to stay
• bartering
  • exchanged with supplier / other provider
  • eg: airline seat with hotel rooms, cinema ticket with food coupon

Demand (What determines demand) (top)

• do demand follow a predictable cycle
  • day (varies by hour) - after office hour
  • week (varies by days) - weekdays vs weekends
  • month (varies by week ) -
  • year (varies by months) -season autumn, winter
• determine the underlying cause of these cycle
  • employment timetable
  • wages / salaries pay date
  • school holidays
  • seasonal climate change
• demand is random
  • natural disaster -earthquake causing demand increase in medical service
  • health alert - eg: heart attack cannot be pinpointed the time
• can demand be disaggregated / separated by market segment
  • rich vs poor
  • rural vs urban

Strategy in managing demand (top)

• disaggregate demand by market segment -
  •  understanding of each segment - rich vs poor, young vs old
• price 
  • increased price reducing demand, vice versa
• change product element 
  •  mountain resort
    • winter - skiing
    • autumn - hiking, jungle trekking
• modify time / place of delivery
  • mobile car wash
• promotion / education
  • communication important
• strong demand through queue / reservation
  • used when capacity is limited

Info needs to make good demand management (top)

• historical data
• segment by segment data
• forecast data
• identify determinants
• customer opinion towards queuing system

Managing Customers Waiting Lines & Reservations

Queuing System (top)

• waiting lines - queue occurs when number of arrival (demand) > capacity (supplier) to serve them
• elements of queuing system
  • customer population
    • from which demands for service originate
    • must be identified
    • eg : hospital-customer population is injured patient -speed of service is important
  • arrival process
    • rate customer arrive over time
      • random - eg individuals enter a store
      • predicted - eg students enter cafeteria after class ends
  • balking
    • decision by arriving customer not to join the queue
    • manager can disguise queue line by having them wind around corner ('snake' configuration - look shorter line
  • queues configuration (see text)
    • single line, single server , single stage
      • eg theme park
    • single line, single server, sequential stage
      • eg airport check in. Luggage - body scan - ticket pass
    • parallel line to multiple server
      • eg fast food McD, Sugarbun
    • designated lines to designated server
      • eg immigration department handling license, passport at different cunter
    • single line to multiple server (snake)
      • eg bank
    • 'take a number'
  • reneging
    • decision by customer already in queue, yet to be served to leave the queue
  • customer selection policies
    • queue discipline
    • formal ad hoc discipline
    • eg: VIP first, member priority, emergency patient
  • the service process
    • physical design of service delivery system
    • issue to be considered
      • how customer served - by batch, individual
      • served by who - machine (ATM), personnel
      • delivery speed - quick (slow)
      • place - customer go to service site or vice versa
      • quality of waiting line - air con, waiting room

Matching Queuing System To Market Segment (top)

• usually 1st come 1st serve basis
• priority is set for different segment
  • job urgency
    • hospital emergency unit, a triage nurse to filter cases according to severity 
  • duration of service transaction
    • bank, supermarket create an express lane for shorter, uncomplicated transaction
  • payment of premium price
    • airline - priority booking for 1st class seat
  • importance of customer
    • membership of club being served 1st

Psychology of Waiting Lines (top)

• unoccupied time feel longer than occupied time
  • provide magazine, TV at waiting room to 'kill' time
• pre / post process wait feel longer than in-process wait
  • eg: difference between buy ticket into theme park and buy ticket for roller coaster in the theme park
  • eg: asking customer what to eat during queuing in fast -food restaurant
• anxiety make wait longer
• uncertain wait longer than finite wait
• unexplained wait longer - eg unexplained elevator stopped
• unfair wait longer
• more valuable service, the longer people will wait
• solo wait longer
• physical uncomfortable wait longer - standing wait longer than sitting wait
• unfamiliar wait longer

Reservation (top)

• go beyond simple placing of an order because supposed to guarantee service available at specified time agreed by customers
• how to reserve
  • require deposit
  • cancelled non-paid booking after certain time
  • provide compensation to victims of overbooking
• design the system
  • user friendly
  • provide info on the service rserved
• focus on YIELD
  • average revenue per unit of capacity
  • is it worth the wait to reserve 'demand' for future increase value?