Service Management PDF

SERVICE MANAGEMENT ENT 51115 PRELIMS PERIOD - PROF. NANCY BARTOLOME - L1-3 (ex. The presence of the taxi driver is...

SERVICE MANAGEMENT ENT 51115 PRELIMS PERIOD - PROF. NANCY BARTOLOME - L1-3 (ex. The presence of the taxi driver is essential to provide service) L1: Introduction to Services VARIABILITY: The quality of services can vary significantly depending on who TOPIC OVERVIEW provides them, when, and where. A. Introduction to services PERISHABILITY: Services cannot be a. What is a service? stored for later use; they are b. Categories of Services time-sensitive and must be consumed as c. The Scale of Market they are produced. Entities/The Molecular Model d. Factors Stimulating the B CATEGORIES OF SERVICES Transformation of the Service Economy B1 SERVICES CATEGORIZED WITHIN NON-OWNERSHIP FRAMEWORK A SERVICE 💡 “Something that can be bought or sold but RENTED GOODS SERVICES: This includes services that offer access to which cannot be dropped on your foot.” physical goods without transferring ownership, such as car rentals or equipment leasing. SERVICES DEFINED A service is defined as an act or performance DEFINED PLACE AND SERVICE offered by one party to another. While it may be RENTALS: Services that provide physical tied to a physical product, the performance is spaces for use, like hotel typically transitory and intangible, meaning it accommodations or office rentals. does not result in ownership of any physical goods. Services create value and provide LABOR AND EXPERTISE RENTALS: This benefits for customers at specific times and category encompasses services that places, often bringing about a desired change on provide specialized skills or labor, such behalf of the service recipient. as consulting or maintenance services. A2 CHARACTERISTICS OF SERVICES ACCESS TO SHARED PHYSICAL ENVIRONMENTS: Services that allow customers to share access to facilities, Services possess several distinctive such as co-working spaces or community characteristics that differentiate them from centers. physical goods: SYSTEMS AND NETWORKS ACCESS INTANGIBILITY: Services cannot be AND USAGE: This includes services that touched or owned; they are experienced. provide access to digital platforms or networks, such as internet service INSEPARABILITY: Services are typically providers or software as a service (SaaS) produced and consumed simultaneously, offerings. meaning the provider and consumer must interact during the service delivery. NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 1  💡 Services offer benefits without ownership. 💡 8Ps of Marketing Product, price, place, promotion, people, process, physical evidence, productivity & B2 SERVICES CATEGORIZED BASED ON quality. NATURE AND RECIPIENT OF SERVICE BROAD Who or What is the Direct NATURE OF SERVICE CATEGORIES Recipient of the Service? Can either be classified as tangible or intangible. OF SERVICES RECIPIENT OF SERVICE Nature of the People Possessions Can either be classified as people or objects. Service Act PEOPLE PROCESSING Tangible People- Possession- ○ Customers must (1) physically Actions processing processing enter the service factory and (2) (services (services actively cooperate with the directed at directed at service operation. people’s physical ○ Managers should think about bodies) possessions) process and output from customer’s perspective to E.g., Barbers & E.g. Refueling identify benefits created and Health care & Disposal/ non-financial costs: time, Recycling mental, and physical effort. Intangible Mental Information POSSESSION PROCESSING Actions stimulus processing ○ Customers are less physically processing (services involved compared to people (services directed at processing services. directed at intangible ○ Involvement is limited people’s mind) assets) ○ Production and consumption are separable E.g., Educ & E.g., Advertising/PR Accounting & MENTAL STIMULUS PROCESSING Banking ○ Ethical standards required when customers who depend on such services can potentially be manipulated by suppliers ○ Physical presence of recipients not required ○ Core content of services is information-based (Can be “inventoried”) INFORMATION PROCESSING ○ Information is the most intangible form of service output ○ But maybe transformed into enduring forms of service output ○ The line between information processing and mental stimulus processing may be blurred. NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 2 C SCALE OF MARKET ENTITIES/ MOLECULAR MODEL, ETC. D FACTORS STIMULATING THE TRANSFORMATION OF THE SERVICE ECONOMY The global economy is increasingly driven by services, with many countries reporting a significant portion of their GDP generated by the service sector. This shift is driven by five major forces that are transforming the service economy: GOVERNMENT POLICIES: ○ Changes in regulations ○ Privatization ○ New rules to protect customers, employees, and the environment ○ New agreement on trade in services SOCIAL CHANGES: ○ Rising consumer expectations ○ More affluence ○ Personal Outsourcing ○ Increased desire for buying experiences vs things ○ Rising consumer ownership of high-tech equipment ○ Easier access to more information ○ Immigration ○ Growing but aging population BUSINESS TRENDS: ○ Push to increase shareholder value ○ Emphasis on productivity and cost savings ○ Manufacturers add value through service and sell services ○ More strategic alliances ○ Focus on quality and customer satisfaction NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 3  ○ Growth of franchising Marketing emphasis by A UNDERSTANDING CUSTOMER ○ non-profits BEHAVIOR LIES AT THE HEART OF MARKETING ADVANCES IN I.T. ○ Growth of Internet To create successful marketing strategies, ○ Greater bandwidth service providers must have insights into: ○ Compact mobile equipment ○ Wireless networking 1. How customers make decisions about ○ Faster, more powerful software buying and using a service ○ Digitization of text, graphics, 2. What factors determine their audio, and video satisfaction after service consumption GLOBALIZATION Without this understanding, no organization can ○ More companies operating on hope to create and deliver services that will transnational basis result in satisfied customers. ○ Increased international travel ○ International mergers and alliances B PRE-PURCHASE STAGE ○ “Off-shoring” of customer service ○ Foreign competitors invade B1 NEED AWARENESS domestic markets Customers seek solutions to aroused needs L2: 3-Staged Model of Service triggered by internal or external factors, Consumption including: UNCONSCIOUS MIND: (personal identity and aspirations) having prior TOPIC OVERVIEW knowledge about it A. Understanding customer behavior PHYSICAL CONDITIONS: Hunger and lies at the heart of marketing uncomfortability B. Pre-purchase Stage a. Need awareness EXTERNAL SOURCES: Marketing and b. Information search advertisements c. Evaluation of alternatives d. How product attributes affect ease of evaluation B2 INFORMATION SEARCH e. Categories of perceived risks f. How might consumers handle Customers gather information from personal, perceived risk? public, and market-dominated sources to create g. Strategic responses to an evoked set of solution options to consider managing customer after recognizing a need. perceptions of risk h. Understanding customer INTERNAL SEARCH: (Unconscious mind) expectations Based on what you already know. C. Service Encounter Stage a. Models and frameworks EXTERNAL SEARCH: Based on the D. Post-encounter Stage unique personal qualities that a person a. Evaluation of service brings to the leadership situation. performance b. Future intentions ○ PERSONAL SOURCES: Family or friends NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 4  ○ PUBLIC SOURCES: Consumer review (Google, Social media posts, etc.) ○ MARKET-DOMINATED: Advertisements and Mall displays EVOKE SET or CONSIDERATION SET: ○ Derived from options that customers remember from past experiences and exposure, new options that are highlighted by external sources. ○ The set of products or brands a customer may consider in the decision-making process 💡 PERCEIVED RISK Uncertainty about the outcomes or high difficulty in evaluating the service increase B3 EVALUATION OF ALTERNATIVES perceived risk. Evaluating a service may be difficult, unlike B5 CATEGORIES OF PERCEIVED RISK goods. SEARCH SERVICE ATTRIBUTES: Those FUNCTIONAL RISK: Also known as with tangible characteristics that performance risk, is the unsatisfactory customers can readily evaluate before performance outcomes. Related to the they purchase. (Hotel room service, idea that it will not perform the task for airline schedule, and entertainment which it was purchased. system quality) SOCIAL RISK: How others may think EXPERIENCE SERVICE PRODUCTS: and react. There are laws of personal Those that cannot be evaluated before status associated with the product. buying because there are features that can only be evaluated after purchase. PHYSICAL RISK: Risk of personal injury (Concert, restaurant, and salon services) or damage to possessions. CREDENCE SERVICE PRODUCTS: Those PSYCHOLOGICAL RISK: Fears and still difficult even after the service is negative emotions. (e.g., not consistent completed because of the attributes with the brand image; doctors) buyers cannot confidently evaluate, even after several purchases. Thus, buyers FINANCIAL RISK: Unexpected extra tend to rely on the reputation of the costs or monetary loss. (e.g, repair brand name, testimonials from someone services might cost more than the they know or respect, service quality, estimated price) and place. (Surgery, computer repair, and legal services) TEMPORAL RISK: Wasting of time or consequences of delay. B4 HOW PRODUCT ATTRIBUTES AFFECT SENSORY RISK: Unwanted effects on EASE OF EVALUATION any of the five senses. B6 HOW MIGHT CONSUMERS HANDLE PERCEIVED RISK? NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 5  Seek information promises, word of mouth, and past Search for reviews & ratings experience. (e.g., going to the same bank Rely on a firm with good reputation each time) Look for warranty or guarantees Visit service facilities ZONE OF TOLERANCE: Range within Ask knowledge employees which customers are willing to accept variations in service delivery can be larger or smaller for individual B7 STRATEGIC RESPONSES TO customers, depending on factors such as MANAGING CUSTOMER competition, price, or importance of PERCEPTIONS OF RISK specific service attributes. Offer free trial FACTORS INFLUENCING CUSTOMER Use of evidence management EXPECTATIONS OF SERVICE Display credentials Offer guarantee or money back Encourage visitations to facilities Advertising B8 UNDERSTANDING CUSTOMER EXPECTATIONS 💡 EXPLICIT VS IMPLICIT SERVICE PROMISES >Explicit promises comprise of advertisements, personal selling, and other forms of communication. (Stated and mentioned) >Implicit promises comprise of tangible surroundings, atmosphere, price of service and the service itself. (Implied) We, as customers, evaluate service quality by comparing what we expect and what we perceive. Expectations can vary as well as PURCHASE DECISION change over time. When possible alternatives have been compared and evaluated, the best COMPONENTS OF CUSTOMER EXPECTATIONS: option is selected. Can be quite simple if perceived risks are DESIRED SERVICE LEVEL: Wished-for low and alternatives are clear level of service quality that customer Very often, trade-offs are involved. The believe can and should be delivered in more complex the decision, the more the context of their personal needs. trade-offs need to be made. Price is often a key factor in the purchase ADEQUATE SERVICE LEVEL: Minimum decision. acceptable level of service. PREDICTED SERVICE LEVEL: Service C SERVICE ENCOUNTER STAGE level that customer believes firm will actually deliver. Predicted service can A period of time during which a customer also be affected by service provider interacts directly with the service provider. NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 6 Contact may take the form of exchanges or impersonal interactions such as online Coined by two French researchers, Eiglier and purchasing. There are high and low contact Langeard, which is a combination of the words services. service and conduction. It is used to describe the physical environment that is visible to the customers and is experience by customers. It C1 MOMENT OF TRUTH shows all the interactions that make up the customer experience in high-contact services. “We could say that the perceived quality is realized at the moment of truth when the FRONT STAGE/DELIVERY SYSTEM service provider and the service customer MINDSET: Create good service confront one another in the arena. At that experiences (e.g., enjoyable, unique, moment, they are very much on their own… It is responsive to their needs) the skill, the motivation, and the tools employed Service process takes place by the firm’s representative and the expectations Occurs at service encounter and behavior of the client which together will High-contact service between customer create the service delivery process.” & service provider (customer highly involve) — RICHARD NORMANN Customer also interact with environment, physical facilities & other customers. Moment of truth takes place. C2 HIGH/LOW CONTACT MODEL EXAMPLE: The waiter serves the food to the customer according to what he/she ordered. BACKSTAGE/TECHNICAL SYSTEM MINDSET: Follow different goals and techniques, strive for efficiency and standardization, and treat people as abstract actors Input are processed & element of service product is created Invisible to the eye of the customers What goes in the backstage is not in the interest of the customer unless it affects the quality of front-stage activities. Represents the three levels of interaction with the physical service elements or encounters with EXAMPLE: Chefs service personnel. C3 SERVUCTION MODEL NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 7  Satisfaction judgements are based on this C4 THEATER METAPHOR comparison: “All the world’s a stage and all the men and POSITIVE DISCONFIRMATION: (+) women merely players. They have their exits and Better than expectations their entrances and each man in his time plays CONFIRMATION: (+/-) Same with many parts.” expectations NEGATIVE DISCONFIRMATION: (-) — WILLIAM SHAKESPEARE: As You Like It Lesser than expectations THEATRICAL METAPHOR: AN INTEGRATIVE CUSTOMER DELIGHT: GOING BEYOND PERSPECTIVE SATISFACTION Goes beyond satisfaction when service SERVICE FACILITIES: Stage on which performance exceeds expectations significantly, drama unfolds. This may change from creating a positive emotional response. one act to another. Unexpectedly high levels of performance PERSONNEL: Front stage personnel are Arousal like members of a cast. Backstage Positive affect personnel are support production team. D2 FUTURE INTENTIONS ROLES: Like actors, employees have roles to play and behave in a specific way. A set of behavior patterns learned Based on their evaluation, consumers form through experience and communication intentions regarding future purchases or to be performed by an individual in a recommendations. (e.g. Repurchasing and certain social interaction in order to word-of-mouth) attain maximum effectiveness in goal accomplishment. L3: Positioning Services in SCRIPTS: Specifies the sequences of Competitive Markets behavior for customers and employees. 💡 Good metaphor as service delivery is a TOPIC OVERVIEW series of events that customers experience as A. Focused Strategies for Services 💡 a performance. Role and Script theory complement each a. Fully Focused other. b. Market Focused c. Service Focused d. Unfocused D POST ENCOUNTER STAGE B. Market Segmentation a. Service attributes and levels C. Positioning of Services SATISFACTION a. Four principles of positioning Attitude-like judgement following a service strategy purchase or series of service interactions whereby customers have expectations prior to consumption, observe service performance, A FOCUSED STRATEGIES FOR compare it to expectations. SERVICES D1 EVALUATION OF SERVICE STANDING APART FROM THE COMPETITION PERFORMANCE “A business must set itself apart from its competition. To be successful it must identify and NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 8 promote itself as the best provider of attributes understand customer purchasing that are important to target customers.” practices and preferences. — GEORGE S. DAY EXAMPLE/S: (1) Asian Center for Insulin Resistance specializes on patients with metabolic disorders along with other services such as consultations, programs, etc. (2) Medical City Heart Hospital have advanced diagnostic services, specialized treatments, rehabilitation programs, and preventive care. (3) NutriAsia have personalized nutrition plans, nutritional counseling, weight management programs, wellness workshops. (4) Aboitiz Equity Ventures targets industrial and commercial companies that require electrical solutions while serving power A1 FULLY FOCUSED generation, power distribution, energy solutions, and infrastructure development. LIMITED SERVICE RANGE TO A SPECIFIC MARKET SEGMENT: A3 SERVICE FOCUSED Opportunities include developing recognized expertise in a well-defined NARROW RANGE OF SERVICES TO niche may provide protection against FAIRLY BROAD MARKET: As new would-be competitors. Allows firms to segments are added, firm needs to charge premium prices. develop knowledge and skills in serving each segment RISKS: Market is too small to generate needed volume. Demand may be EXAMPLE/S: displaced by generic competition from (1) SM Supermall service focus (shopping & mall alternative products. Purchasers in management), broad market (wide demo across chosen segment may be susceptible to various income levels & locations), and narrow economic downturn. range of services (core service—management and operation of shopping malls). EXAMPLE/S: (2) LALAMOVE service focus (on-demand (1) Romulo Mabanta Buenaventura Sayoc & De delivery), broad market (diverse range of Los Angeles (Law office specializing in customers), and narrow range of services intellectual property), (concentrate on specific aspect of logistics). (2) Happylicious and Lydia’s Lechon (Specializing in Lechon), (3) Marriott (Premium executive lounge), A4 UNFOCUSED (4) Krispy Kreme (specializes in donuts and coffee), (5) Studio Vino (specializes in wine) BROAD MARKETS WITH WIDE RANGE OF SERVICES: Many service providers fall into this category A2 MARKET FOCUSED DANGER: becoming a “jack of all trades and master of none.” NARROW MARKET SEGMENT WITH WIDE RANGE OF SERVICES: Need to EXAMPLE/S: make sure firms have operational (1) PLDT service focused telecommunication and capability to do & deliver each of the internet services, broad market (residential different services selected. Need to users, businesses and government agencies), NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 9 wide range of services (landline, mobile telecom, broadband internet, data services) DETERMINANT ATTRIBUTES: the (2) GMA service focused media and attributes that consumers use to broadcasting, broad market (caters to a wide differentiate and choose between audience), wide range of services (TV, competing brands after considering the broadcasting, radio, digital content, online important attributes. platforms, news, entertainment, educational ○ Service characteristics that are programming) important to purchasers ○ Customers see significant differences between competing B MARKET SEGMENTATION alternatives on these attributes ○ Example: amenities in an airline MARKET SEGMENT A market segment is composed of a group of ESTABLISHING SERVICE LEVELS buyers sharing common characteristics, needs, purchasing behavior, and consumption patterns. Make decisions on service levels—level of performance firm plans to offer on each Target segments should be selected with attribute. reference to the following: ○ Easily quantified attributes are Firm’s ability to match or exceed easier to understand (e.g., competing offerings directed at the vehicle speed, physical same segment dimensions) Not just profit oriental ○ Qualitative attributes subject to individual interpretation (e.g., physical comfort, noise levels) B1 SERVICE ATTRIBUTES AND LEVELS Customers can often be segmented DEVELOPING RIGHT SERVICE CONCEPT FOR according to willingness to trade-off A SPECIFIC SEGMENT price versus service level. Use research to identify and prioritize which ○ Price-insensitive customers attributes of a given service are important to willing to pay relatively high specific market segments. Individuals may set prices for high levels of service different priorities according to the following: ○ Price-sensitive customers look for inexpensive service with Purpose of using the service relatively low performance. Who makes the decision Timing of use C POSITIONING OF SERVICES Whether service is used alone or with a group Composition of that group. MARKET POSITIONING Market positioning is a strategic exercise we use 💡 Consumers usually choose between to establish the image of a brand or product in a consumer's mind. Positioning distinguishes a alternative service offerings based on brand from its competitors. This is achieved 💡 perceived differences between them. Attributes that distinguish competing through the consideration of the following: services from one another are not necessarily product, needs, competition, planning, habitude, the most important one. and timing. IMPORTANT ATTRIBUTES: the features C1 FOUR PRINCIPLES OF POSITIONING or benefits a product must possess for STRATEGY consumers to consider it a suitable choice. ○ Example: Safety is standard for Must establish position for firm or all airlines product in minds of customers NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 10  Position should be distinctive, providing INTERNAL CORPORATE ANALYSIS one simple, consistent message ○ Identify the organization’s Position must set firm/product apart resources, limitations, goals, and from competitors values A company cannot be all things to all ○ Select a limited number of people—must focus its efforts target segments to serve 💡 Avoid the trap of investing too heavily in COMPETITOR ANALYSIS ○ Understand competitors’ points of differences that are easily copied! strengths and weaknesses ○ Anticipate responses to SERVICE MANAGERS' QUESTIONS IN potential positioning strategies MAKING EFFECTIVE STRATEGIES (differentiation) What does our firm stand for in the USING POSITIONING MAPS TO PLOT minds of current and potential COMPETITIVE STRATEGY customers? What customers do we serve now, and Great tool to visualize competitive which ones would we like to target? positioning and map developments over What is the value proposition for our time current service products and market Perceptual mapping—a useful way to segments? represent consumer perceptions of How does each of our service products differ from competitors’? alternative products graphically How well do target customers perceive Maps have two attributes, but 3D models our service products as meeting their can be used to portray positions based needs? on three attributes simultaneously. What changes must we make to Information about a product can be strengthen our competitive position? obtained from market data, derived from ratings by representative DEVELOPING AN EFFECTIVE POSITIONING STRATEGY consumers, or both. Positioning links market analysis and competitive POSITIONING PERCEPTION MAP analysis to internal corporate analysis A tool to understand how consumers perceive a company or brand in relation to its competitors. It's used to identify opportunities and threats and develop strategies for improving brand positioning. INTERPRETING A POSITIONING PERCEPTION MAP Keep in mind the following: Context in which the data was gathered MARKET ANALYSIS: (e.g., historical relevance) ○ Focus on the overall level and Consider the target audience (e.g., trend of demand and difference between demographics) geographic locations of demand ○ Look into the size and potential ** END ** of different market segments ○ Understand customer needs and preferences and how they perceive the competition NEYOMI ELYZZSE - 3TE1 - PROVERBS 16:9 PAGE 11