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Service Strategy
3-2
Strategic Service Vision
Target Market Segments
What are common characteristics of important
market segments?
What dimensions can be used to segment the
market, demographic, psychographic?
How important are various segments?
What needs does each have?
How well are these needs being served, in
what manner, by whom?
3-3
Strategic Service Vision
Service Concept
What are important elements of the service to be
provided, stated in terms of results produced for
customers?
How are these elements supposed to be
perceived by the target market segment, by the
market in general, by employees, by others?
How do customers perceive the service concept?
What efforts does this suggest in terms of the
manner in which the service is designed,
delivered, marketed?
3-4
Strategic Service Vision
Operating Strategy
What are important elements of the strategy:
operations, financing, marketing, organization,
human resources, control?
On which will the most effort be concentrated?
Where will investments be made?
How will quality and cost be controlled:
measures, incentives, rewards?
What results will be expected versus
competition in terms of, quality of service, cost
profile, productivity, morale/loyalty of servers?
3-5
Strategic Service Vision
Service Delivery System
What are important features of the service
delivery system including: role of people,
technology, equipment, layout, procedures?
What capacity does it provide, normally, at
peak levels?
To what extent does it, help insure quality
standards, differentiate the service from
competition, provide barriers to entry by
competitors?
3-6
Southwest Airlines Strategic
Service Vision
Service Delivery System Operating Strategy Service Concept Target Market Segment
Fun cabin atmosphere to Quick turnaround at gate Short flights with State of Texas residents
differentiate service results in high frequent departures
utilization of aircraft Serve peanuts and Business traveler who
Use only Boeing 737 soft drinks only drives because of
aircraft to control No assigned seating inadequate service
maintenance and rewards punctuality Use of inner-city or low
operating costs and promotes on-time traffic airports avoids Inexpensive family travel
performance congestion on weekends
Hire cabin crew based on
attitude Carry-on luggage
3-7
Competitive Environment of
Services
3-8
Competitive Service Strategies
(Overall Cost Leadership)
3-10
Competitive Service Strategies
(Focus)
3-12
Winning Customers in the
Marketplace
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 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).
3-13
Competitive Role of Information
in Services
3-14
The Virtual Value Chain
Marketplace vs Marketspace
Creating New Markets Using Information (Gather,
Organize, Select, Synthesize, and Distribute)
Three Stage Evolution
1st Stage (Visibility): See physical operations more
effectively with information Ex. USAA paperless
operation
2nd Stage (Mirroring Capability): Substitute virtual
activities for physical Ex. USAA automate underwriting
3rd Stage (New Customer Relationships): Draw on
information to deliver value to customer in new ways
Ex. USAA event oriented service
3-15
Limits in the Use of Information
3-16
Using Information to Categorize
Customers
3-17
Stages in Service Firm
Competitiveness
Customers patronize service Customers neither seek Customers seek out the firm The companys name is synonymous
firm for reasons other than out nor avoid the firm. on the basis of its sustained with service excellence. Its service
performance. reputation for meeting doesnt just satisfy customers; it
customer expectations delights them and thereby expands
customer expectations to levels its
competitors are unable to fulfill.
Operations is reactive, Operations functions in a Operations continually excels, Operations is a quick learner and fast
at best. mediocre, uninspired reinforced by personnel innovator; it masters every step of the
fashion. management and systems service delivery process and provides
that support an intense capabilities that are superior to
customer focus. competitors.
SERVICE QUALITY
Is subsidiary to cost, Meets some customer Exceeds customer Raises customer expectations and
highly variable. expectations; consistent expectations; consistent seeks challenge; improves
on one or two key on multiple dimensions. continuously.
dimensions.
3-18
Stages in Service Firm
Competitiveness
BACK OFFICE
Counting room. Contributes to service, plays Is equally valued with front Is proactive, develops its own
an important role in the total office; plays integral role. capabilities, and generates
service, is given attention, opportunities.
but is still a separate role.
CUSTOMER
Unspecified, to be A market segment whose A collection of individuals A source of stimulation, ideas,
satisfied at minimum cost. basic needs are understood. whose variation in needs is and opportunity.
understood.
INTRODUCTION OF NEW TECHNOLOGY
When necessary for When justified by cost When promises to enhance Source of first-mover advantages,
survival, under duress. savings. service. creating ability to do things your
competitors cant do.
WORKFORCE
Negative constraint. Efficient resource; disciplined; Permitted to select among Innovative; creates procedures.
follows procedures. alternative procedures.
FRONT-LINE MANAGEMENT
Controls workers. Controls the process. Listens to customers; coaches Is listened to by top management
and facilitates workers. as a source of new ideas. Mentors
works to enhance
their career.
3-19
Alamo Drafthouse Positioning
FOOD QUALITY
Good
MOVIE SELECTION
Few Many
Poor
3-20
Alamo Drafthouse Strategic Service
Vision
Service concept
Operating strategy
3-21
Alamo Drafthouse Winning
Customers
Qualifiers
Service winners
Service losers
Make recommendations for Tim and Carrie that would increase profit
3-22
Discussion Topics
1. Give examples of service firms that use both the
strategy of focus and differentiation and the
strategy of focus and overall cost leadership.
2. What ethical issues are associated with micro-
marketing?
3. For each of the three generic strategies (i.e., cost
leadership, differentiation, and focus) which of the
four competitive uses of information is most
powerful?
4. Give an example of a firm that begin as world-class
and has remained in that category.
5. Could firms in the world-class service delivery
stage of competitiveness be described as learning
organizations?
3-23
Interactive Class Exercise
The class divides and debates the
proposition Frequent flyer award
programs are or are not
anticompetitive.
3-24