1. Managing Customer Satisfaction Week 1 Introduction

2. Introduction ► Service operations management is concerned with delivering service to the customers or users of the service. It involves:  Understanding customer needs  Managing the service delivery process  Ensure meeting objectives  Continual improvement

3. Service Operations Management ► Service operations management is the term used to cover activities, decisions & responsibilities of operations managers in service organizations.

4. Service ► From the customers’ perspective, service is the combination of the customers’ experience and their perception of the outcome of the service. ► The customers’ inputs to the service experience:  Time  Effort  Financial costs

5. Your service experience ► Describe a successful service situation.  What was the situation?  What was your expected result?  What was the actual result?  Why was the outcome successful?  Would you do business with this organization again? ► Describe an unsuccessful service situation.  What was the situation?  What was your expected result?  What was the actual result?  Why was the outcome unsuccessful?  Would you do business with this organization again?

6. Service outcomes Service outcome describes the result for the customer of service delivery, both tangible and intangible. ► Value ► Emotions ► Judgment ► Intentions

7. Service outcomes ► Value: the customer’s assessment of the benefits weighed against all the costs involved ► Emotions: strong mental feelings (affect), like pleasure ► Judgments: opinions that form as a result of the experience ► Judgments result in intentions, such as the intention to remain a customer or not

8. CMMAQ/PB A definition of customer service  Customer service is a task, other than proactive selling, that involves interactions with customers in person, by telecommunications or by mail. It is designed, performed, and communicated with two goals in mind: operational efficiency and customer satisfaction Lovelock(1998)

9. Service Economy Sectors ► Business-to-business (B2B) ► Business-to-customer (B2C) ► Internal services ► Public services ► Not-for-profit services

10. Service process design factors ► Key factors in designing a service process  Number of transactions  Variety of tasks ► Commodity—low process/high volume  Processes clearly defined, little customization  McDonald’s ► Capability—processes have less definition  Each task may be different from its predecessor and may be customized  A software consultant

11. Service process design factors ► Simplicity—low variety/low volume  Simple operations  A software consultant ► Complexity—high variety/high volume  Emphasis is on flexibility  IBM ► Designing the right process is the service operations manager’s challenge

12. ► For each of the following organizations, BMW, McDonald’s, Dell, Project Hope, identify:  Service economy sector (B2B, B2C, internal, public, not-for-profit)  Service process design factors (volume/variety of transactions) ► Commodity (low process variety/high volume) ► Capability (tasks may be different from its predecessors) ► Simple (low variety/low volume) ► Complex (high variety/high volume)

13. Service operations managers ► Service operations managers’ role  Responsible for a large part of an organization’s assets  Delivering service to customers  Significant impact on the organization’s success ► Measuring service operations managers’ success  Providing customer value  Delivering brand value  Making financial contributions to the organization  Delivering an organizational contribution

14. Customer value ► Value is the customer's assessment of the benefits of the service weighed against all the costs involved. ► The definition of value varies from customer to customer and from service to service  Getting more for the money  Pay more to get better service  Pay a lot more for high status

15. Brand value ► A brand is essentially a marketer’s promise to deliver a specific set of features, benefits, and services consistently to the buyers. Philip Kotler, Marketing Management, 11 th ed. (Upper Saddle River, NJ: Prentice-Hall, 2003), pg.420. ► ‘brand promise’ 4 levels of brand promise:  Rational—desired customer expectations (experience & outcome)  Emotional—psychological benefits  Political—ethical & environmental issues  Spiritual—related to people’s ‘higher order’ needs

16. Judging success summary ► Technical tasks:  Managing an organization’s assets  Delivering service to customers  Impact on the success of the organization ► Providing customer value ► Delivering brand values ► Making a financial contribution to the organization ► Help organization achieve its goals/objectives/mission

17. Managing Customer Satisfaction Week 1 The Service Concept

18. What are we buying? 1. Magical experience 2. The ultimate driving machine 3. An educational experience 4. Peace of mind 5. Great evening out 6. Just do it 7. We build excitement a. Restaurant b. Harvard University c. Health insurance d. BMW e. Pontiac (a GM auto) f. Athletic wear g. Disneyland

19. Customers buy concepts ► IKEA (pg. 38) ► People aren’t just buying a tangible product or a service ► People are also buying something intangible—a concept (an idea formed by mentally combining a set of characteristics) ► Concepts help organizations differentiate themselves from one another. How does IKEA differentiate itself from its competition?

20. Defining the service concept ► A shared understanding of the service including: ► The organizing idea—essence of the service ► The service experience ► The service outcome ► The service operation—the way the service will be delivered ► The value of the service—the benefit weighed against the cost of the service

21. Service value ► Costs—the combination of price + inconvenience of making the purchase ► Value—consumers assessment of benefits weighed against costs ► The task of operations is to  Maximize benefits to the customer  Minimize costs to the customer  Minimize cost to the organization

22. The marketing concept ► An attempt to reconcile the perceived view of the service concept by both organization and the customer ► The marketing concept—customer needs must be understood then satisfied ► “The marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets.” Philip Kotler, Marketing Management, 11 th ed. (Upper Saddle River, NJ: Prentice-Hall, 2003), pg. 19.

23. Organizational Alignment

24. Organizational alignment ► You are a customer service representative for L. L. Bean. A customer comes to you with a backpack they say was bought at your store 5 years ago. The customer wants you to replace the bag. ► You don’t recognize the backpack. You think it may not have been sold by L. L. Bean. ► The backpack has been abused. It is in terrible condition. ► What should you do?

25. Organizational alignment ► Organizations must make their marketing message clear to both customers and employees ► The service concept links together different organizational functions (accounting, sales, HR, etc.) ► Objective: internal and external alignment “service in the mind”

26. Focus & the service concept ► Focused service operations: providing a targeted customer segment with a narrow range of services  Visa & MasterCard (delivering)  McDonald’s (fixed menu) ► Organization benefits: simplified operations, ease of training, lower costs, dedicated operation & facilities ► Customer benefits: ease of use, low price, customers can select a service according to their needs

27. Focus & the service concept ► Unfocused service operations: deliver a wide range of services to a narrow market segment or wide market  American Express (narrow market - international/business traveler)  Supermarkets (wide market) ► Service concepts based on focus:  Service focus  Market focus  Service & market focus  Unfocused

28. Four service concepts Service focused Unfocused everything for everyone Service & market focused Market focused Many Few Narrow Number of markets served Range of services Wide

29. Four service concepts Service focused Starbuck’s Unfocused everything for everyone Local gov’t Service & market focused Lexus Market focused American Express Many Few Narrow Number of markets served Range of services Wide