Service Process Design

Chapter 5

McGraw-Hill/Irwin

The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

5-1

Chapter 5: Outline
Defining Service Service Guarantees/service recovery The Service-Product Bundle Cycle of Service Customer Contact Service Matrix Service/Profit Chain
5-2

The Shift to Services

5-3

Services in Europe
The Service Sector accounts for about 70 percent of the European economy.
Source: Wall Street Journal, 4 March 2005, p. A13

5-4

Definition of Service
Key Concepts

No finished goods inventory Intangibility of the product Simultaneous production and consumption Difficulty in defining and measuring quality and productivity Other Differences between Manufacturing and Service (See Table 5.1)
5-5

Production of Services vs. Goods

Typical Differences

Services are process focused.

Customers served as first come, first served.

Labor is scheduled, not the customer.

Location often near customers.

Result: service production tends to be less

efficient than production of goods.
5-6

Related Concepts
Service guarantee
Analogous to a guarantee for a product Requires specific criteria and responses

Service Recovery
What you do to compensate the customer for bad service.

5-7

The Service/Product Continuum

Pure Service
No product with intrinsic value involved. e.g. lawyer

Service/Product bundle
Combination of product with service (most common)

Pure Product
Very rare. Yard sale. Blacksmith.

5-8

Service-Product Bundles
The Service-Product Bundles has three parts: physical goods (facilitating goods)what you can carry away tangible service (explicit service)what the seller does for you. psychological service (implicit service) how you feel about it.
5-9

Comparison of Goods and Services (Figure 5.1)

Goods
100% 75% 50% 25% 0%

Services
25% 50% 75% 100%

Self-service groceries

Automobile
Installed carpeting Fast-food restaurant Gourmet restaurant Auto maintenance

Haircut
Consulting services

5-10

Moments of Truth
Moment of Truth = customer contact with a service system. Service is defined as the cumulative effect of all the moments of truth. One failed moment of truth can cause failure of the entire service.

Therefore, service systems must be designed as a whole, not in parts.

5-11

Moments of Truth
Examples from book: SAS airlines has 50,000 moments of truth per day. Marriott hotels has 6,000,000 moments of truth per day.

5-12

Cycle of Service for an Airline (Figure 5.2)

Leaves Airport
Receive Baggage Customer requests schedule information Makes reservation Arrives at airport Checks baggage and checks in for flight Proceeds to gate and security check Receives boarding pass
5-13

Departs Plane
Receives in-flight service Boards aircraft

Customer Contact (1)

Definition of contactinteraction between service provider and the customer. Each moment of truth is a contact.

5-14

Customer Contact (2)

Potential inefficiency in services is a function of the amount of customer contact Why?
Customer determines the time Customer determines the order of service Customer influences what happens during the service

5-15

Customer Contact (3)

High contact (front room) services
Direct customer contact Customer has control of process

Low-contact (back room) services

Out of sight of customer Provider has control of process

Goal: move as much activity as possible to the back roomwhy?

5-16

Service Matrix (Figure 5.3)

Degree of Interaction and Customization

Low
Degree of Labor intensity
Service factory

High
Service shop
Hospitals Auto repair Repair services

Low

Airlines Trucking Hotels Resort and recreation

Mass services

High

Retailing Wholesaling Schools Retail aspects of commercial banking

Professional Services
Lawyers Doctors Accountants Architects

5-17

Links in the service-profit chain

(See Figure 5.4)

Internal service quality, leads to Employee satisfaction, leads to Employee retention & productivity, lead to External service value, leads to Customer satisfaction, leads to Customer loyalty, leads to Revenue growth & profitability (the goal)
5-18

Summary
Defining Service Service Guarantees/service recovery The Service-Product Bundle Cycle of Service Customer Contact Service Matrix Service/Profit Chain
5-19

End of Chapter Five

5-20