Managing Services Week 3 PDF

Managing Services EL Week - 03 PT N Prof. Jayanta Chatterjee Department of Industrial and Managemen...

Managing Services EL Week - 03 PT N Prof. Jayanta Chatterjee Department of Industrial and Management Engineering Indian Institute of Technology Kanpur Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur  DEFINING PRODUCTIVE CAPACITY?  Productive capacity can take several forms in services  Time EL  People  Space PT  Success in capacity-constrained business = N use of productive capacity as efficiently and optimally as possible. Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (01) (1)1  ADDRESSING PROBLEM OF FLUCTUATING DEMAND Two basic approaches of which most firms use a mix of: EL  Adjust level of capacity to meet demand  Need to understand productive capacity and how it varies on an incremental basis  Manage level of demand PT N  Use marketing strategies to smooth out peaks, fill in valleys  Inventorying demand until capacity becomes available Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (02) (1)1  FLEXIBLE CAPACITY EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (03) (1)1  MANAGING CAPACITY  Enables more people to be served at same level of capacity  Stretch and shrink:  Offer inferior extra capacity at peaks (e.g., bus/train standees) EL  Use facilities for longer/shorter periods  Reduce amount of time spent in process by minimizing slack time PT  Adjusting capacity to match demand N  Rest during low demand  Ask customers to share  Cross-train employees  Create flexible capacity  Use part-time employees  Rent/share facilities and equipment  Customers perform self- service Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (04) (1)1  MANAGING DEMAND  Take no action  Let demand find its own levels EL  Interventionist approach  Reduce demand in peak periods  Increase demand when there is excess capacity PT  Inventorying demand until capacity becomes N available  Formal wait and queuing system  Reservation system Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (05) (1)1  MARKETING MIX ELEMENTS TO SHAPE DEMAND PATTERNS  Use price and other nonmonetary costs to manage demand EL  Change product elements PT  Modify place and time of delivery  No change N  Vary times when service is available  Offer service to customers at a new location  Promotion and Education Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (06) (1)1  TRANSFORMATION EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (07) (1)1  HOTEL ROOM DEMAND CURVES BY SEGMENT AND SEASON Price per room night Bl Bh Th Bh = business travelers in high season EL Bl = business travelers in low season Tl Th = tourist in high season Tl = tourist in low season PT N Th Bh Bl Tl Quantity of rooms demanded at each price by travelers in each segment in each season Note: hypothetical example Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (08) (1)1 RESERVATIONS STRATEGIES SHOULD FOCUS ON YIELD  Yield analysis helps managers recognize opportunity cost of allocating capacity to one customer/segment when another segment might yield a higher rate later EL  Decisions need to be based on good information    PT Detailed records of past usage Current market intelligence and good marketing sense Realistic estimate of the chances of obtaining higher rated business N  When firms overbook to increase yield,  Victims of overbooking should be compensated to preserve the relationship Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (09) (1)1  SETTING HOTEL ROOM SALES TARGETS BY SEGMENT AND TIME PERIOD Capacity (% rooms) Week 7 Week 36 (Low Season) (High Season) 100% Out of commission for renovation Loyalty Program Members EL Loyalty Program Members Transient guests Weekend 50% PT Groups and conventions package Transient guests W/E package N Groups (no conventions) Airline contracts Airline contracts Time Nights: M Tu W Th F S Su M Tu W Th F S Su Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (10) (1)1  EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (11) (1)1  MANAGING WAITING LINES  Rethink design of queuing system  Install a reservations system EL  Tailoring the queuing system to different market segments  Manage customer behavior and perceptions of wait PT N  Redesign processes to shorten transaction time Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (12) (1)1  WHY DO WAITING LINES OCCUR?  Because number of arrivals at a facility exceeds capacity of system to process them at a specific point in the process EL  Queues are basically a symptom of unresolved capacity management problems PT N  Not all queues take form of a physical waiting line in a single location  Queues may be physical but geographically dispersed ( Beeper)  Some are virtual (TTD wristband) Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (13) (1)1  TEN PROPOSITIONS ON PSYCHOLOGY OF WAITING LINES Feels longer than Unoccupied time Occupied time ( TV at boarding gate ) Solo waits Group waits ( Mirror ) EL Physically uncomfortable waits Comfortable waits Pre- and post-process waits In-process waits ( Holding Rooms at TTD ) Unexplained waits PT Explained waits ( Pilot’s announcement ) N Anxious waits Calm waits ( Alternate Flights ) Monotonous waits Valued waits ( Spa at Airport ) Sources: Maister; Davis & Heineke; Jones & Peppiatt Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (14) (1)1  BENEFITS OF RESERVATIONS  Saves customers from having to wait in line  Helps to control and manage the demand (e.g., leave EL time for emergency jobs) PT  Pre-sells the service and can be used to prepare and educate the customer for the service encounter N  Data captured helps organizations to understand their demand patterns and to plan their operations and staffing levels Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (15) (1)1  CHARACTERISTICS OF WELL-DESIGNED RESERVATIONS SYSTEM  Fast and user-friendly for customers and staff  Responsive to customer queries and needs EL  Offers options for self service (e.g., through an online reservations system) PT  Accommodates preferences (e.g., room with a view) N  Deflects demand from unavailable first choices to alternative times and locations Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (16) (1)1  CREATING ALTERNATIVE USE FOR OTHERWISE WASTED CAPACITY  Use capacity for service differentiation  Reward your best customers and build loyalty EL PT  Customer and channel development N  Reward employees  Barter free capacity Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (1)1 (17)  EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (18) (1)1  PRE-PURCHASE STAGE - OVERVIEW Pre-purchase Stage Customers seek solutions to aroused needs Evaluating a service may be EL difficult Uncertainty about outcomes Increases perceived risk What risk reduction strategies Service Encounter Stage PT can service suppliers develop? Understanding customers’ service expectations N Components of customer expectations Post-encounter Stage Making a service purchase decision Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (19) (1)1  NEED AROUSAL  Decision to buy or use a service is triggered by need arousal EL  Triggers of need:  Unconscious minds (e.g., personal identity and aspirations) PT  Physical conditions (e.g., hunger )  External sources (e.g., a service firm’s marketing activities) N  Consumers are then motivated to find a solution for their need Courtesy of Masterfile Corporation Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (20) (1)1  INFORMATION SEARCH  Need arousal leads to attempts to find a solution  Evoked set – a set of products and brands that a EL consumer considers during the decision-making process – that is derived from past experiences or external sources PT N  Alternatives then need to be evaluated before a final decision is made Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (21) (1)1  EVALUATING ALTERNATIVES – SERVICE ATTRIBUTES  Search attributes help customers evaluate a product before purchase  E.g., type of food, location, type of restaurant and price EL  Experience attributes cannot be evaluated before purchase PT  The consumer will not know how much s/he will enjoy the food, the service, and the atmosphere until the actual experience N  Credence attributes are those that customers find impossible to evaluate confidently even after purchase and consumption  E.g., hygiene conditions of the kitchen and the healthiness of the cooking ingredients Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (22) (1)1  HOW MIGHT CONSUMERS HANDLE PERCEIVED RISK?  Seek information from respected personal sources  Compare service offerings and search for independent EL reviews and ratings via the Internet  Relying on a firm with good reputation PT  Looking for guarantees and warranties N  Visiting service facilities or going for trials before purchase and examining tangible cues or other physical evidence  Asking knowledgeable employees about competing services Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (23) (1)1  STRATEGIC RESPONSES TO MANAGING CUSTOMER PERCEPTIONS OF RISK Free trial (for services with high Advertise (helps to Display credentials experience visualize) attributes) EL Use evidence management (e.g., Encourage visit to Offer guarantees furnishing, equipment etc.) PT service facilities N Give customers online access about order status Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (24) (1)1  UNDERSTANDING CUSTOMERS’ SERVICE EXPECTATIONS  Customers evaluate service quality by comparing what they expect against what they perceive EL  Situational and personal factors also considered PT  Expectations of good service vary from one business to another, and differently positioned service providers in N same industry  Expectations change over time Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (1)1 (25)  PURCHASE DECISION  Purchase Decision: Possible alternatives are compared and evaluated, whereby the best option is selected EL  Simple if perceived risks are low and alternatives are clear PT  Complex when trade-offs increase  Trade-offs are often involved N  After making a decision, the consumer moves into the service encounter stage Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (26) (1)1  SERVICE ENCOUNTER STAGE - OVERVIEW Pre-purchase Stage  Service encounters range from high- to low-contact  Understanding the servuction EL system Service Encounter  Theater as a metaphor for Stage PT service delivery: An integrative perspective  Service facilities N Post-encounter  Personnel Stage  Role and script theories Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (27) (1)1  SERVICE ENCOUNTER STAGE  Service encounter – a period of time during which a customer interacts directly with the service provider EL  Might be brief or extend over a period of time (e.g., a phone call or visit to the hospital)  Models and frameworks: PT N a) “Moments of Truth” – importance of managing touchpoints b) High/low contact model – extent and nature of contact points c) Servuction model – variations of interactions d) Theater metaphor – “staging” service performances Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (28) (1)1  POST-PURCHASE STAGE - OVERVIEW Pre-purchase Stage EL  Evaluation of service performance Service Encounter Stage PT  Future intentions N Post-encounter Stage Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (29) (1)1  LEVELS OF CUSTOMER PARTICIPATION High – Customer works actively with provider to co-produce the service EL Service cannot be created without customer’s active participation Customer can jeopardize quality of service outcome PT Medium – Customer inputs required to assist provider Provide needed information and instructions Make some personal effort; share physical possessions N Low – Employees and systems do all the work Involves standardized work Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (30) (1)1  SST EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (31) (1)1  CUSTOMERS AS PARTIAL EMPLOYEES  Customers can influence productivity and quality of service processes and outputs EL  Customers not only bring expectations and needs but also need to have relevant service production competencies PT N  For the relationship to last, both parties need to cooperate with each other Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (32) (1)1  SELF-SERVICE TECHNOLOGIES (SSTS)  SSTs are the ultimate form of customer involvement where customers undertake specific activities using facilities or systems provided by service supplier EL  Customer’s time and effort replace those of employees PT  Information-based services lend selves particularly well to SSTs N  Used in both supplementary services and delivery of core product Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (33) (1)1  PUTTING SSTS TO TEST BY ASKING A FEW SIMPLE QUESTIONS  Does the SST work reliably?  Firms must ensure that SSTs are dependable and user- friendly EL  Is the SST better than interpersonal alternatives? PT  Customers will stick to conventional methods if SST doesn’t create benefits for them N  If it fails, what systems are in place to recover?  Always provide systems, structures, and technologies that will enable prompt service recovery when things fail Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (34) (1)1 THE TRADITIONAL VIEW OF VALUE CREATION EL PT N (from Prahalad, C.K. & Ramaswamy, V. (2004a).) Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (35) (1)1  THE BASIC TRANSFORMATION IN VALUE CREATION EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (36) (1)1 CO-CREATION IS IMPORTANT BECAUSE IT IS:  All about relationships: we stress the importance of focusing on the quality of the interactions between people rather than on technologies per se EL  A learning process: we need to intertwine knowledge and processes in an overall co-creation PT framework, rather than just enabling co-creativity, if we want to achieve wider organizational impact. N  From ‘Co-creation: New pathways to value, An overview’, by Nick Coates, Research Director, Promise, 2009. Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (37) (1)1  MOVING CUSTOMERS... From To  Passive buyers  Active agents EL  Listening  Dialogue  Consumers as buyers PT  Consumers as partners  Understanding N  Researching need.  experiences  Reliance on experts.  Consumer knowledge Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (38) (1)1  DART Dialogue encourages not just knowledge sharing, but shared understanding between companies and customers. It also give individuals more EL opportunity to interject their views of outcomes of value into the value creation process. PT Access to knowledge, tools and expertise helps N individuals construct their own experience outcomes. Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (39) (1)1  DART  Risk Management assumes that if consumers become co-creators of value with companies, they will demand more information about potential risks EL of goods and services, but they may also have to bear more responsibility for dealing with those risks. PT  Transparency of information in interaction N processes is necessary for individuals to participate effectively in co-creation, and engender trust between institutions and individuals. Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (40) (1)1  CO-CREATION EXAMPLES  Ice-cream and Yogurt flavors  T-Shirts  Toys and Decoration EL  Crystal Jewelry  Sports Shoes  Detergents PT N  YouTube, Wikipedia, Linux , Facebook Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (1)1 (41)  CO-CREATION CROWDSOURCING EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (42) (1)1  MAP MULTIPLE BRAINSTORMING EL PT N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (43) (1)1  EL 3 mins INR 3 3 mins INR 2 each 1 mins INR 0.5 each PT 10 mins INR 15 N Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (44) (1)1  RESEARCH CONTEXT AND OBJECTIVES Critical role in development Physical growth & economic Amount of waste sustainabilit Better generation planning of y governed systematic municipalities EL development Environmental URBANIZATION deterioration Policy driven villages are practices As a Wicked , pollution industries moving away building to move away from cities Problem smart cities Design Thinking for from cities Urbanization PT Human health hazards & challenges Lack of greenery Psychological integrated and lack unhappiness & e cient of Lack of E ective horizonta transportation governance fresh l surfaces food supply syste Infrastructure m N oriented practices future ur Create green buildings Gardening and farming Human centric appoach Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (45) (1)1  CURRENT STATUS Bulk Tax Economic Waste Revenue Lack of fresh growth Generation vegetables, fruits & owers Major share in GDP Hazardous Vision pollution Crucial role in Psychological Lack of development unhappiness Greener Future urban y Agriculture, Urbanization scenario of India EL Villages are moving away As a stakehoder Diffusion & Prototype Adoption PT Adopter User Co-creater Students,house Design development: Through Social Media -holds,gardeners idea sourcing, protocepting, Co-creation Co-tester N Evaluation Testing Feedbacks: from students, professors, staff, online feedback IIT Kanpur as a Living Laboratory Prof. Jayanta Chatterjee : Dept. Industrial and Management Engineering : IIT Kanpur (46) (1)1