1

Customer Analysis - III

Alaska Airlines

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

2

$6.00

$5.00

$4.00

$3.00

$2.00

$1.00

Commodity Good Service Experience

Price of Coffee Offerings (Pine & Gilmore, 1999)

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

3

Retail Banking: Transaction Costs

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

4

Co-production

• Customer as co-producer (hence stakeholder)

– pre-purchase

– production and consumption

– post-purchase

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

5

Go back to Flowcharting

• Where can we create value?

Existing Actions

NewActions

Existing Actors

NewActors

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

6

Co-Production: An Illustration

advanced

development

customer

interface

supplier

Traditional Approach

advanced

development

Customers-as-Innovators-Approach

supplier

interface

test (feedback)

Build (prototypes)

test (feedback)

Build (prototypes)

design

customer

design

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

7

A Closer Look at the Impact of Co-production

•The Fundamental Issue in Alaska Airline–Use of Technology to alter Consumer Interactions with the Firm

•A Benchmarking Comparison–The Diffusion of Online Banking

•What are the consequences?–Service Consumption Activities–Segmentation–Customer Revenue–Firm’s Costs–Overall Profitability

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

8

Estimated Transaction Cost by Channel

Channel Estimated Cost Per Transaction

Branch* 1

Call Center (Live Agent) 0.94

ATM 0.31

Voice Response Unit (VRU) 0.18

Online 0.09

*Cost of branch transaction normalized to 1

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

9

Distribution of Transactions by Channel May 2001

Branch % Txn's Cumulative %Deposit 59.4% 59.4%

Cash Check 27.2% 86.6%Withdrawal 8.3% 94.9%Purchase 3.2% 98.1%

Verify Funds 1.7% 99.8%Miscellaneous 0.2% 100.0%

ATMWithdrawal 56.4% 56.4%

Deposit 18.5% 75.0%Balance Inquiry 14.6% 89.6%

Incompleted Transaction 4.2% 93.8%Miscellaneous 4.1% 97.9%

Transfer 2.1% 100.0%

P4 Sept/Oct -2003 Services Marketing – Professor V. Padmanabhan

10

Performance Measures by Online Status

Mean Median Std. Dev. 10% 90% Min. Max Cost

Offline 7.2 5.7 4.96 3.3 12.8 0 218.7 Online 10.0 8.6 6.02 4.5 17.2 0 492.9

Revenue Offline 34.3 14.1 392.7 0.39 78.5 -1,603 395,556 Online 43.3 23.8 140.4 3.4 95.7 -2,643 59,336

Profit Offline 26.9 6.9 392.5 -3.7 114.3 -1,645 395,543 Online 33.5 14 139.8 -4.8 83.2 -2,652 59,334