Introduction

Lecture 3. Service Environment

1
3.1
• Service Environment
1.Nature and importance of services
2.Designing service organization
3.Service blue printing
4.Service guarantees

2
3.2
 Difference between manufacture and service

Manufacturing Organization Service Organization

Physical, durable product Intangible, perishable

Output can be product
inventoried Output that cannot be
Low customer contact inventoried
Long response time Short response time
Regional, national or Local markets
international markets Small facilities
large facilities Labor intensive
Quality not easily
Capital Intensive
measured
Quality easily Measured

3.3
 Nature and Importance of Service

• Service creation process

• Idiosyncratic: What works well in providing one kind
of service may prove disastrous in another
• Quality of work is not quality of service
• Service package Consist of a mix of tangible and
intangible attributes
• High contact
• Effective management of services requires an
understanding of marketing and personnel
• Face to face, telephone and other interactions

3.4
 Service Strategy

• Treatment of the customers by selecting the

operating focus, friendliness and helpfulness
• Speed and convenience of service delivery
• Price of the service
• Variety of services
• Quality of the tangible goods that are central to
or accompany the service.
• Unique skills that constitute the service offerings

3.5
 Designing Service Organizations

• Designing a service organization involves four major

elements
1. Identification of target market (Who is our customer?)
2. Service concept: How do we differentiate our service
in the market?
3. Service strategy: What is our service package and the
operating focus of our service?
4. Service delivery system: What are the actual
processes, staff and facilities by which the service is
created?

3.6
Service Process Design

3.7
 Service Blueprinting

• Service blueprint is a flowchart for service

process design
• Service Blueprint is a process analysis
technique that focuses on the customer and
the provider’s interaction with the customer.
• Service blueprint distinguish between high
customer contact aspects of the service and
those activities that the customer does not
see.
This distinction is term as “ line of visibility”

3.8
 Poka-Yokes

• (Roughly translated from the Japanese as

“Avoid Mistakes”
• Service blueprinting describe features of
the service design but doesn’t provide any
direct guidelines for how to make the
process confirm to that design.
• Poka-Yokes blocks inevitable mistakes
from becoming service defects

3.9
Service Blueprint for Service at Ten Minute Lube, Inc.

3.10
 Customer Interaction and Process Strategy
Low High
Mass Service Professional Service

Commercial Personal banking

Banking

High
General purpose law firms
Full-service
stockbroker
Degree of Labor Intensity

Retailing Boutiques

Service Factory Service Shop

Law clinics

Low
Limited service stockbroker For-profit
hospitals

Warehouse and catalog Fast food Fine dining

restaurants restaurants Hospitals
stores

Airlines
No frills airlines

Degree of Interaction and Customization

3.11
 Service Process Technology

Depending on the nature and types of service to be rendered to the

customer, the process technology is divided to two major types
a.Customer contact
b.Labor versus capital intensive

Customer Contact
The main feature of service is that customer’s contact is essential in two
ways
a.Designing service or creating service or customizing service
e.g. while designing new house, customer interact closely with architect
a.During creating and consuming the service
e.g Hair styling

The high contact process technology is more flexible to accommodate the

diverse need of customer and more customization. But the conversion
process is difficult to standardized.
If the degree of contact is low, the process technology can be
standardized to some extent with higher efficiency.
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3.12
 Service Process Technology
Labor versus Capital Intensive
Some service organizations are labor intensive and some are
capital intensive.
The service industry is classified into labor intensive organization
and capital intensive organization.
In labor intensive organization, training and development of labor
plays a vital role for rendering service to customer whereas
technology and capital investment plays a dominant role in capital
intensive organization.

On the basis of the customer’s contact and labor intensiveness, service

process technology can be classified into four distinct categories as
follow;
a.Quasi-Manufacturing process technology
b. Mass-service process technology
C, Custom shop service process technology
d. Professional service process technology
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3.13
 The Service Process Matrix

Low Degree of Interaction and Customization High

Quasi Manufacturing Custom-shop Services/
low customer contact, low labor Service Shop
intensity, rigid standardized high customer contact, capable to
Capital process, concerned with provide customized services with
Intensive developing reliable delivery professional staff in relatively
schedules e.g. airlines, federal capital intensive conversion
express technology e.g. hospital

Mass Service Professional Service

Labor intensive conversion
Labour
process, offers a standardized
Intensive product, training & development
and scheduling if human
resources is critical for successful
service delivery e.g. live
entertainment, cafeterias
3.14
Customized service delivered
through intensive interaction
between customer and
professional, professional skills
relating to customer is essential
e.g. medical diagnosis
 Service-System Design Matrix
Degree of customer/server contact
Buffered Permeable Reactive
High core (none) system (some) system (much) Low

Face-to-face
total
customization
Face-to-face
Sales loose specs Production
Opportunity Face-to-face Efficiency
tight specs
Phone
Internet & Contact
on-site
technology
Mail contact

Low High

3.15
 Components of Service-system design matrix

Degree of customer/server contact

It describe the contact of the customer with the service design and
delivery. It is of three types
a. Buffered core: Very less contact with customer, or physically
separated from the customer
b. Permeable system: It is penetrable to customer’s requirements
c. The reactive system: It is both penetrable and reactive to the
customer’s requirements.

Logical marketing proposition

The greater the amount of contact with customer, the greater the
sales opportunity.
Impact of production efficiency
The right hand side shows the impact on production efficiency as
the customer exerts more influence on the operation.
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3.16
 Use of Service-system design matrix

a. Operational Uses

Service-system matrix helps to visualize the understanding of service

Process.
• It helps to visualize the service process.
• Helps to understand the components of service delivery as human factor
and technical components
• Helps to make focus on operation and its improvements

b. Strategic Use
• Enables systematic integration of operations and marketing strategy
• Provides clear picture of what combination of service delivery the firm is
providing
• Comparison with the other firms delivery on specific services
• Indicates evolutionary or life cycle changes that might be in order as the
17
firm grows 3.17
 Use of Service- System Design Matrix
A. Operational Use

Degree of Customer/ Server Contact

Low High
Worker Clerical Helping Verbal Procedural Trade Skills Diagnostic
Requirements Skills Skills Skills Skills Skills

Focus of Paper Demand Scripting Flow Capacity Client Mix

Operations Handling Manage- Calls Control Management
ment
Technological Office Routing Computer Electronic Self Service Client/
Innovations Automation Methods Databases Aids Worker
teams
B. Strategic Use

• Enables systematic integration of operations and marketing strategy

•Provides clear picture of what combination of service delivery the firm is providing
•Comparison with the other firms delivery on specific services
•Indicates evolutionary or life cycle changes that might be in order as the firm grows

3.18
 Techniques for Improving Service Productivity

Strategy Technique
• Separation • Structure service so
customers must go where
service is offered
• Self-service • Self-service so customers
examine, compare and
evaluate at their own pace
• Postponement • Customizing at delivery
• Focus • Restricting the offerings

3.19
 Techniques for Improving Service Productivity

Strategy Technique
• Modules • Modular selection of service.
Modular production
• Automation • Separating services that lend
themselves to automation
• Precise personnel scheduling
• Scheduling • Clarifying the service options
• Training • Explaining problems
• Improving employee flexibility
3.20
 Processes at Service Organizations
High Project process
• Real estate process for
For constructing facilities
for insurance company
• Student’s project work

Job process
• Customer service process
at financial services firm
• General medical practice
Batch process
Customization

• Order fulfillment process for

distributor
• Placing purchase order at
Public relations agency
Line process
• Cafeteria line
• Teller line at bank

Continuous process
• Power generation plant
• Providing telephone line access
Low
Low Volume High
3.21
 Processes Reengineering

The fundamental rethinking and radical redesign of process to

improve performance dramatically – far more radical than
regular process improvement.
Elements of Process Reengineering

core business team

focused philosophy
Information Thorough
technology

3.22
 Service Business and Internal services

• Service Business
(Business require interaction with the customers
to produce service. E.g banks, airlines,
hospitals etc
Facilities based services
Customer must go to service facility
Field based services
Production and consumption of service takes
place in customer premise (e.g home repair)

3.23
 Service Business and Internal services

• Internal service
Services required to support the activities of
the larger organization
• E.g. data processing, accounting,
engineering etc

3.24
New Service development process

3.25
 New Service development process

Development
Formulation of new services objective/strategy
Idea Generation and screening
Concept development

Analysis
Business analysis
Project authorization

3.26
 New Service development process

Design
Service design and testing
Process and system design and testing
Marketing program design and testing
Personnel training
Service testing and pilot run
Test marketing

3.27
Characteristics of a Well-Designed Service System

1. Each element of the service system is consistent with the operating

focus of the firm

2. It is user-friendly

3. It is robust

4. It is structured so that consistent performance by its people and

systems is easily maintained

5. It provides effective links between the back office and the front office
so that nothing falls between the cracks

6. It manages the evidence of service quality in such a way that

customers see the value of the service provided

7. It is cost-effective

3.28
 Service Guarantees
• Service guarantee can be a marketing tool designed
to provide a peace of mind for customers unsure about
trying their services
A service guarantee offer has to be:
• Unconditional
•Meaningful to the customer
•Easy to understand and communicate
•Painless to exercise

3.29
 Service Guarantees

A service guarantee can be used not only as an improvement

tool but also at the design stage to focus the firm’s delivery
system squarely on the things it must do well to satisfy the
customer.

Issues in Service Guarantees

1.Any guarantee is better than no guarantee. The most
effective guarantees are big deals. They put the company at
risk in the eyes of customer.
2.Involve the customer as well as employees in the design
3.Avoid complexity or legalistic language.
4.Do not quibble when a customer invokes the guarantee
5.Make it clear that you are happy for customers to invoke the
guarantee 30
3.30
End of Lecture

31
3.31
 Important Question

1. How do you design service? Discuss the steps of service

designing process.
2. Describe the service design and service process technology.
3. Explain the techniques for improving service productivity.
4. Explain Service Blue Printing (5) PU 2009 BBA
5. Explain Service Guarantee (5) PU 2008
6. “A house of quality integrates customer’s voice into the product
development process.” Explain. (7) PU BBA 2004
7. Differentiate between job shop, batch assembly and continuous
process. (8) PU 2004
8. Discuss about different types of process strategy. (7) PU 2008
9. What are the types of processes? How do they differ ? Give
example of each. (7) PU 2008
10.How do you define services? Write down its characteristics. (7)
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3.32