SERVICE

STRATEGY AND
DEMAND
MANAGEMENT
By, Komal Suryavanshi
TOPICS TO BE COVERED
• Process in strategic planning and process
• A market oriented service strategy
• Strategic management trap
• Service oriented approach
• Service oriented organization structure
• Service Triangle and Marketing Mix
• Strategy implementation
• Corporate strategy and Social control
• Strategy Evaluation and control
• Demand situations, patterns and variations
• Demand capacity, waiting line management
• Demand forecasting methods
WHILE FORMULATING STRATEGIES
TAKE CARE OF FOLLOWING-
 What should be our business?
 What is our business?
 How should the business be developed?
 How should consumers be satisfied?
 How should competition be dealt with?
 What should be the response to the ever-changing market
condition?
 How should strategic and financial results be achieved?
STRATEGIC PLANNING
PROCESS
Defining the mission
Carrying out a SWOT Analysis
Formulating a strategy
Implementing the strategy
Evaluating and controlling the strategy
DEFINING THE MISSION
 Mission Statement defines the scope and identifies the priorities,
distinctive competencies, and future orientation of the company in a
simple and understandable way to all the stakeholders of the company

 Mission statement should inspire and motivate all those connected with
the company
 CARRYING OUT SWOT
ANALYSIS(1/2)
 S and W are internal to the organisation
 O and T are external to organisation
 Review of strength helps identify core competencies and define them from a proper perspective
 Strengths may encompass company image, brand image and financial, personnel, marketing,
production and R&D resources
 Strength of organisation are often measured against those of its competitors
 Weakness are competencies that the organisation lacks
 Weakness includes- deficiencies in important skills vis-à-vis competitor and technology, poorly
organised functional areas and manpower, poor financial position and weak management
 CARRYING OUT SWOT
ANALYSIS(2/2)
 Opportunities depend on the dynamic nature of the business environment
 Identifying the opportunities and exploiting it to companies benfit shapes the future of the
company
 Dynamic business environment may pose threat to the business
 Emergence of cheaper or better technologies, new entrants, better products, new government
policy initiatives and changes may spell doom to the existing business

 SWOT analysis is a widely accepted approach to analyse and understand the internal
environment vis-avis the external environment of the organisation. The analysis helps align
the strength and weakness of the company with the opportunities and/or threats emerging or
existing in the external environment
FORMULATING A STRATEGY (1/3)
 Strategy formulation is a science as well as an art.
 It is necessary to analyze the environment scientifically and develop the strategy creatively by
exploring artistic skills to find a distinctive and unique way of addressing the needs and wants of
consumers.
 Competitiveness is the desired focus in strategy formulation.
 SWOT analysis provides the necessary strategic inputs for effective strategy formulation and
implementation.
 Before formulating the strategy the organization should scrutinize and analyze the strategies of its
competitors
 M.E. Porter suggested that a competitive strategy is about being different. Porter suggested five
distinct competitive strategies which benefit which benefit service organizations- Low-cost-provider
strategy, Differentiation strategy, best-cost-provider strategy, focused strategy (market niche) based on
lower cost, and focused strategy (market niche) base on differentiation
FORMULATING A STRATEGY
(2/3)
 Low-cost-provider strategy- • The Best-Cost Provider Strategy-
 Providing service at a low cost as compared to the • Providing more value for the money paid by the
competitors to appeal to a spectrum of price- customers for the service
sensitive customers • Consumers generally prefer quality services at a
relatively low cost. Effective cost-management
practices, thus, are important for service
 Differentiation Strategy- companies to follow in order to minimize costs.
 Service characteristic- variability- provides for the It is necessary to classify costs into good costs
companies to pursue a differentiation strategy for and evil costs. Good costs improve buyer-seller
each customer, thereby providing enhanced value interactions; hence, they need to be promoted.
perceptions
Evil costs, on the other hand, burden-some to
 Innovation is key to the success of a service business.
customers, need to be eliminated.
Service companies should focus on and invest in
research and development to find distinctive ways of
serving consumers and providing higher value.
Through innovation, service firms can achieve a
differentiation advantage over the competition
FORMULATING A STRATEGY
(3/3)
 The Focused (Market Niche) Strategy Based on Low Cost-
 Identify sub-groups within a broad market segment that has a distinctive
set of traits and might seek a special combination of benefits
 Niches are smaller and generally attract very few competitors

 The Focused (Market Niche) Strategy Based on Differentiation-

 The aim of this strategy is to do a better job of serving buyers in the target
market niche
 When a company identifies a substantial group with well-defined desires,
requiring special service attributes and quality levels, this strategy is capable of
earning rich dividends.
SELECTING RIGHT STRATEGY IS THE SUCCESS
KEY
 Strategy Choice depends on the type of service  Providing complete, end-to-end service in one stop is the
business and the kind of customers to be served. key strategic direction for these firms.
 Variables influencing the choice are- service process  Complex process and customized service-
(whether simple or complex) and service type  Companies with complex processes requiring
(whether standardized or customized service) customization like personal financial planning, expert
medical diagnosis, relationship marketing, engineering
and design and so on may look at developing in-
sourcing, on-shoring, de-integration, decoupling,
 Four possible ways to combine above two aspects-
selective automation, selective outsourcing and so on.
 Simple process and customized service-
 Complex process and standardized service-
 Example- Retail Sales, Web design, Travel and tourism
 Companies using complex processes to deliver
and technical support should consider strategies such as
standardized services like credit analysis, technical
automation, self-service, end-to-end service, captive off-
research, content mgmt, software development and so on
shoring and selective out-sourcing. It is important to this
may consider strategies like captive off-shoring, in-house
set of companies to keep close tabs on the customer.
automation, selective outsourcing, globalisation and so
 Simple process and standardised service- on
 Companies with simple service process deliver
standardized service such as retail banking, data
management, tele-marketing and billing want to look at
off-shoring, outsourcing, globalisation, on-stop shop,
end-to-end service
A MARKET-ORIENTED
SERVICE STRATEGY
Strategic service management (SSM) is a business strategy that aims to optimize the post-sales
service that a company provides, by synchronizing service parts and resources forecasting, service
partners, workforce technicians, and service pricing.

 The Strategic Management Trap-

 The do-it-all strategy: failing to make choices, and making everything a priority. Strategy is choice.

 The Don Quixote strategy: attacking competitive “walled cities” or taking on the strongest
competitor first, head-to-head.

 The Waterloo strategy: starting wars on multiple fronts with multiple competitors at the same
time. No company can do everything well. If you try to do so, you will do everything weakly.
 The Strategic Management Trap (continue)-

 The something-for-everyone strategy: attempting to capture all consumer or

channel or geographic or category segments at once. Remember, to create real
value, you have to choose to serve some constituents really well and not worry about
the others.

 The dreams-that-never-come-true strategy: developing high-level aspirations and

mission statements that never get translated into concrete where-to-play and how-to-
win choices, core capabilities, and management systems. Remember that aspirations
are not strategy. Strategy is the answer to all five questions in the choice cascade.

 The program-of-the-month strategy: settling for generic industry strategies, in

which all competitors are chasing the same customers, geographies, and segments in
the same way. The choice cascade and activity system that supports these choices
should be distinctive. The more your choices look like those of your competitors, the
less likely you will ever win.
THE SERVICE-ORIENTED APPROACH
 A service-oriented strategy focuses on the improvement of buyer-seller interactions, when there is a marketing problem.

 The strategy helps enhance customers’ quality perceptions and satisfaction levels to bring the business of the company back on track and make it profitable.
THE SERVICE-ORIENTED ORGANISATION STRUCTURE
 Service Organisations should not have a large number of hierarchical levels or be
unnecessarily bureaucratic.
 Market orientation requires a thorough understanding of customers and the authority to the
frontline employees to take decision to serve them
ARTICLE FOR REFERENCE
THE SERVICE TRIANGLE
 A service triangle is one of the strategic marketing models for service companies. The model suggests that
service companies should professionally manage internal marketing (between the company management and
the employees), external marketing (between the company management and the customers) and interactive
marketing (between the employees and the customers).

 The services marketing triangle was created to handle the complexity that service marketers face when
dealing with intangible products. The service marketing triangle highlights three key players, these are;
• Company: The management of a company, including full-time marketers and sales personnel. This is
enabled through continuous development and internal marketing with their employees.
• Employees: This includes anyone that is working within close contact of the consumer. They play an integral
role within the interactive marketing of service marketing.
• Customers: Anyone that purchases the service of a company. They are also heavily exposed to the external
marketing of a firm.
For marketing to be successful, a marketer should ensure that there is positive interaction between these three
players. Furthermore, for this success to be accomplished, three types of marketing must be conducted. These
are- external marketing, internal marketing, interactive marketing
• External Marketing — Making Promises: Involves communication by a company towards their consumer. This form of
communication allows the company to offer their services, and set the expectation of service quality that the client can expect.
In service marketing this pays particular attention to physical evidence, such as the appearance of the place of business or
appearance of staff.
• Interactive Marketing — Keeping Promises: Interactive marketing is revolved around the communication that occurs between
the client and the service delivery personnel. This is one of the most important parts of successfully utilising the services
marketing triangle, as it is the only time that the client will have face-to-face experience with the company, via the providers.
• Internal Marketing — Enabling Promises: A more modern addition to the services marketing triangle, internal marketing
centres on training employees to the highest standards so they can deliver exceptional service. Without internal marketing, there
is a high chance that the client will receive sub-standard service.
For the service marketing triangle to be implemented successfully, all departments of a company must work together to deliver
the highest quality of service that is possible. All members of an organisation must be conscious of their role in delivering service
quality, and understand what their marketing function is.
SERVICE MARKETING MIX
 Service marketing mix is a combination of the different elements of services marketing that companies use to
communicate their organizational and brand message to customers.
 Mix consists of the seven P’s i.e. Product, Pricing, Place, Promotion, People, Process and Physical Evidence.
 Service marketing mix, also known as the extended marketing mix, treats the service that the business offers
just as it would treat a product. While the first four P’s are involved in product marketing too, the remaining
three P’s focus mainly on service delivery and enhancing customer satisfaction.
DEMAND SITUATIONS
 Demand Situations for service companies are different in different market segments at different times.’
 Possible demand situations are –Negative Demand, No Demand, Latent Demand and Seasonal Demand

 Negative Demand-
 No Demand

 Latent Demand
 Seasonal Demand
Demand patterns

 Demand to the level of optimum capacity

 Demand exceeds optimum capacity: An

over crowded bus
 Excess Demand: some persons are left
behind at the bus station because the bus is
full
DEMAND VARIATIONS
 Service demand variation refers to the changes in the demand for a service over time. It is an important
factor to consider when designing and delivering services.

Professor Frances Frei's 5 types of service demand variation are:

• Arrival variability: when/ whether calls come in. If no calls are coming in at a point in time, the call
agent can’t handle one!
• Request variability: what the customer is asking for. This could be simple or complex to properly handle
• Capability variability: how much the customer understands. Are they knowledgeable about their need or
do they need a great deal explaining?
• Effort variability: how much help the customer wants. Are they happy to do things for themselves, or do
they want the call agent to do it all for them?
• Subjective preference variability: different customers have different opinions on things e.g. are they
happy just to accept the price or are they price sensitive and want the call agent to break it down into all
its parts and explain the rationale for each?
Service demand variation is affected by factors such as the geographic distribution of residences,
employment, and other urban land uses
CAPACITY MANAGEMENT
WAITING LINE MANAGEMENT
DEMAND FORECASTING METHODS