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7/28/2019 Demand and Capacity
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DELIVERING AND
PERFORMINGSERVICE
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CUSTOMER
COMPANYService Delivery
ServicePerformance
Gap
Customer-DrivenService Designs and
Standards
Provider Gap 3
Part 5 Opener
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Employees Roles in Service
Delivery
Demonstrate the importance of creating a
service culture in which providing excellent
service to both internal and external customers
is a way of life.
Illustrate the critical importance of service
employees in creating customer satisfaction
and service quality.
Identify the challenges inherent in boundary-
spanning roles.
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Overview
Provide examples of strategies for
creating customer-oriented service
delivery through hiring the right people,
developing employees to deliver service
quality, providing needed support
systems, and retaining the best service
employees.
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Service Culture
A culture where an appreciation for good
service exists, and where giving good
service to internal as well as ultimate,
external customers, is considered a naturalway of life and one of the most important
norms by everyone in the organization.
- Christian Gronroos(1990)
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The Critical Importance of Service
Employees
They are the service.
They are the organization in thecustomers eyes.
They are the brand.
They are marketers.
Their importance is evident in:
the services marketing mix (people)
the service-profit chain
the services triangle
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The Services Marketing
Triangle
Internal Marketing
Interactive Marketing
External Marketing
Company(Management)
CustomersEmployees
Enabling the promise
Delivering the promise
Making the promise
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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Ways to Use the
Services Marketing Triangle
Overall Strategic
Assessment
How is the service
organization doing on allthree sides of the
triangle?
Where are the
weaknesses?What are the strengths?
Specific Service
Implementation
What is being promoted
and by whom?How will it be delivered
and by whom?
Are the supporting
systems in place todeliver the promised
service?
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The Service Profit Chain
Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, Putting the Service-Profit Chain to Work,
Harvard Business Review, March-April 1994, p. 166.
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Service Employees
Who are they?
boundary spanners
What are these jobs like?
emotional labor
many sources of potential conflict
person/role
organization/client
interclient
quality/productivity tradeoffs
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Boundary Spanners Interact with
Both Internal and External
Constituents
Internal Environment
External Environment
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Boundary-Spanning Workers Juggle
Many Issues
Person versus role
Organization versus client
Client versus client
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Human Resource Strategies for
Delivering Service Quality through
People
Provide
needed support
systems
Hire the
right people
Retain the
best
people
Develop
people to
deliver
service
quality
Hire for service
competencies and
service
inclinationCompete for
the best
people
Measure and
reward strong
serviceperformers
Treat
employees
as
customers
Include
employees in
the
companys
vision
Develop
service-oriented
internal
processes
Provide
supportive
technology
andequipment
Measure
internal service
quality
Promote
teamwork
Empower
employees
Train for
technical and
interactiveskills
Be the
preferred
employer
Customer-
Oriented
Service
Delivery
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Empowerment
Benefits:
quicker responses to
customer needs during
service delivery
quicker responses todissatisfied customers during
service recovery
employees feel better about
their jobs and themselves
employees tend to interactwith warmth/enthusiasm
empowered employees are a
great source of ideas
great word-of-mouth
advertising from customers
Drawbacks:
potentially greater dollar
investment in selection and
training
higher labor costs potentially slower or
inconsistent service delivery
may violate customers
perceptions of fair play
employees may give awaythe store or make bad
decisions
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Traditional Organizational Chart
Manager
Supervisor
Front-lineEmployee
Customers
Front-lineEmployee
Front-lineEmployee
Front-lineEmployee
Supervisor
Front-lineEmployee
Front-lineEmployee
Front-lineEmployee
Front-lineEmployee
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Customer-Focused Organizational
Chart
Manager
Supervisor
Front-lineEmployee
Customers
Front-lineEmployee
Front-lineEmployee
Front-lineEmployee
Supervisor
Front-line
Employee
Front-line
Employee
Front-line
Employee
Front-line
Employee
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Customers Roles in Service
Delivery Illustrate the importance of customers in
successful service delivery and cocreation of
service experiences.
Discuss the variety of roles that servicecustomers play: productive resources for the
organization; contributors to quality and
satisfaction; competitors.
Explain strategies for involving service customers
effectively to increase both quality and
productivity.
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Table 13.1
Levels of Customer Participation
across Different Services
Source: Adapted from A. R. Hubbert, Customer Co-Creation of Service Outcomes: Effects of Locus of Causality Attributions,doctoral dissertation, Arizona State University, Tempe, Arizona, 1995.
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How Customers Widen the
Service Performance Gap
Lack of understanding of their roles
Not being willing or able to perform their
roles
No rewards for good performance
Interfering with other customers
Incompatible market segments
I t f Oth (F ll )
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Importance of Other (Fellow)
Customers
in Service Delivery Other customers can detract fromsatisfaction:
disruptive behaviors
overly demanding behaviors
excessive crowding
incompatible needs
Other customers can enhance satisfaction:
mere presence
socialization/friendships
roles: assistants, teachers, supporters, mentors
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Customer Roles in Service
Delivery
Productive Resources
Contributors to
Service Quality and
Satisfaction
Competitors
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Services Production Continuum
1 2 3 4 5 6
Gas Station Illustration
1. Customer pumps gas and pays at the pump with automation
2. Customer pumps gas and goes inside to pay attendant
3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation
5. Attendant pumps gas and customer goes inside to pay attendant
6. Attendant pumps gas and attendant takes payment at the pump
Customer Production Joint Production Firm Production
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Customers as Productive
Resources customers can be thought of as partial
employees
contributing effort, time, or other resources to
the production process
customer inputs can affect organizations
productivity
key issue:
should customers roles be expanded?
reduced?
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Customers as Contributors to
Service Quality and Satisfaction
Customers can contribute to:
their own satisfaction with the service
by performing their role effectively
by working with the service provider
the quality of the service they receive
by asking questions
by taking responsibility for their own satisfaction
by complaining when there is a service failure
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Customers as Competitors
customers may compete with the serviceprovider
internal exchange vs. external exchange
internal/external decision often based on: expertise capacity
resources capacity
time capacity
economic rewards psychic rewards
trust
control
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Strategies for Enhancing Customer
Participation
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Strategies for Enhancing
Customer Participation
Define customers jobs
helping oneself
helping others
promoting the company
Recruit, educate, and reward customers
recruit the right customers
educate and train customers to perform effectively
reward customers for their contributions
avoid negative outcomes of inappropriate customer
participation
Manage the customer mix
Characteristics of Service that
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Characteristics of Service that
Increase the Importance of
Compatible Segments
Source: Adapted from C. I. Martin and C. A. Pranter, Compatibility Management: Customer-to-Customer Relationships in Service Environments,
Journal of Services Marketing,3, no. 3 (Summer 1989), pp. 515.
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Delivering Service Through
Intermediaries
Identify the primary channels through which
services are delivered to end customers.
Provide examples of each of the key serviceintermediaries.
View delivery of service from two
perspectivesthe service provider and theservice deliverer.
Discuss the benefits and challenges of each
method of service deliver .
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Service Provider Participants
service principal (originator)
creates the service concept
(like a manufacturer)
service deliverer (intermediary)
entity that interacts with the customer in the
execution of the service(like a distributor/wholesaler)
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Services Intermediaries
Franchiseesservice outlets licensed by a principal to deliver a
unique service concept it has created e.g., Jiffy Lube, Blockbuster, McDonalds
Agents and Brokers representatives who distribute and sell the services of
one or more service suppliers
e.g., travel agents, independent insurance agents
Electronic Channelsall forms of service provision through electronic means
e.g., ATMs, university video courses, TaxCut software
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Benefits and Challenges for
Franchisers of Service
Benefits:
Leveraged business
format for greater
expansion and revenues
Consistency in outlets
Knowledge of local
markets
Shared financial riskand more working
capital
Challenges:
Difficulty in maintaining
and motivating
franchisees
Highly publicized
disputes and conflict
Inconsistent quality
Control of customerrelationship by
intermediary
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Benefits and Challenges for
Franchisees of Service
Benefits:
An established business
format
National or regional
brand marketing
Minimized risk of starting
a business
Challenges:
Encroachment
Disappointing profits
and revenuesLack of perceived
control over operations
High fees
Benefits and Challenges in
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Benefits and Challenges in
Distributing Services through Agents
and Brokers Benefits:Reduced selling and
distribution costs
Intermediaryspossession of special
skills and knowledge
Wide representation
Knowledge of localmarkets
Customer choice
Challenges:
Loss of control over
pricing
Representation ofmultiple service
principals
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Benefits and Challenges in Electronic
Distribution of Services
Benefits:
Consistent delivery for
standardized services
Low costCustomer convenience
Wide distribution
Customer choice and
ability to customizeQuick customer
feedback
Challenges:
Price competition
Inability to customize
with highly standardizedservices
Lack of consistency due
to customer involvement
Changes in consumerbehavior
Security concerns
Competition from
widening geographies
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Common Issues
Involving Intermediaries
conflict over objectives and performance
difficulty controlling quality and consistencyacross outlets
tension between empowerment and control
channel ambiguity
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Strategies for Effective ServiceDelivery Through Intermediaries
Control Strategies:
Measurement
Review
Partnering
Strategies:Alignment of goals
Consultation and
cooperation
Empowerment
Strategies:
Help the intermediary
develop customer-oriented service
processes
Provide needed support
systems
Develop intermediaries
to deliver service quality
Change to a cooperative
management structure
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Managing Demand and Capacity
Explain the underlying issue for capacity-constrained services: lack of inventorycapability.
Present the implications of time, labor,equipment, and facilities constraints combinedwith variations in demand patterns.
Lay out strategies for matching supply anddemand through (a) shifting demand to matchcapacity or (b) adjusting capacity to meetdemand.
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Overview
Demonstrate the benefits and risks ofyield management strategies in forging abalance among capacity utilization,
pricing, market segmentation, andfinancial return.
Provide strategies for managing waiting
lines for times when capacity anddemand cannot be aligned.
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Variations in Demand Relative to
Capacity
Source: C. Lovelock, Getting the Most Out of Your Productive Capacity, in Product Plus (Boston: McGraw Hill, 1994), chap. 16, p. 241.
Understanding Capacity
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Understanding CapacityConstraints
and Demand Patterns
Time, labor,
equipment, andfacilities
Optimal versus
maximum use of
capacity
Charting demand
patterns Predictable cycles
Random demand
fluctuations Demand patterns by
market segment
Capacity Constraints Demand Patterns
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Demand versus Supply
Source: C. H. Lovelock, Classifying Services to Gain Strategic Marketing Insights, Journal of Marketing47, (Summer 1983): 17.
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Constraints on Capacity
Nature of the Constraint Type of ServiceTime Legal
ConsultingAccountingMedical
Labor Law firmAccounting firmConsulting firmHealth clinic
Equipment Delivery servicesTelecommunicationNetwork servicesUtilitiesHealth club
Facilities HotelsRestaurantsHospitalsAirlinesSchoolsTheatersChurches
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Strategies for Shifting Demand to
Match Capacity
Use signage to
communicate busydays and times.
Offer incentives tocustomers for usageduring nonpeak times.
Take care of loyal orregular customersfirst.
Advertise peak usagetimes and benefits ofnonpeak use.
Use sales and advertising to
increase business from currentmarket segments.
Modify the service offering to
appeal to new market
segments.
Offer discounts or price
reductions.
Modify hours of operation.
Bring the service to the
customer.
Demand Too High Demand Too LowShift Demand
S f C
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Strategies for Adjusting Capacity to
Match Demand
Stretch time, labor, facilitiesand equipment.
Cross-train employees.
Hire part-time employees.
Request overtime work fromemployees.
Rent or share facilities. Rent or share equipment.
Subcontract or outsourceactivities.
Perform maintenance,
renovations.
Schedule vacations. Schedule employee training.
Lay off employees.
Demand Too High Demand Too LowAdjust Capacity
Ch ll d Ri k i U i
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Challenges and Risks in Using
Yield Management
Loss of competitive focus
Customer alienation
Employee morale problems
Incompatible incentive and reward systems
Lack of employee training
Inappropriate organization of the yieldmana ement function
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Waiting Line Strategies
Employ operational logicmodify operations
adjust queuing system
Establish a reservation process
Differentiate waiting customers importance of the customer
urgency of the job
duration of the service transaction
payment of a premium price
Make waiting fun, or at least tolerable
I t C id i M ki
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Issues to Consider in Making
Waiting More Tolerable
unoccupied time feels longer than occupied time
preprocess waits feel longer than in-process waits
anxiety makes waits seem longer
uncertain waits seem longer than known, finite waits
unexplained waits seem longer than explained waits
unfair waits feel longer than equitable waits
the more valuable the service, the longer the customerwill wait
solo waits feel longer than group waits
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Waiting Line Configurations