Managing Customer Managing Customer SatisfactionSatisfaction

Week 1Week 1IntroductionIntroduction

IntroductionIntroduction►Service operations management is Service operations management is

concerned with delivering service to the concerned with delivering service to the customers or users of the service. It customers or users of the service. It involves:involves: Understanding customer needsUnderstanding customer needs Managing the service delivery processManaging the service delivery process Ensure meeting objectivesEnsure meeting objectives Continual improvementContinual improvement

Service Operations Service Operations ManagementManagement

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

ServiceService►From the customers’ perspective, service is From the customers’ perspective, service is

the combination of the customers’ the combination of the customers’ experience and their perception of the experience and their perception of the outcome of the service.outcome of the service.

►The customers’ inputs to the service The customers’ inputs to the service experience:experience: TimeTime EffortEffort Financial costs Financial costs

Your service experienceYour service experience► Describe a successful service situation. Describe a successful service situation.

What was the situation?What was the situation? What was your expected result?What was your expected result? What was the actual result?What was the actual result? Why was the outcome successful?Why was the outcome successful? Would you do business with this organization again?Would you do business with this organization again?

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

Service outcomesService outcomesService outcome describes the result for the Service outcome describes the result for the

customer of service delivery, both customer of service delivery, both tangible and intangible.tangible and intangible.

►ValueValue►EmotionsEmotions► JudgmentJudgment► Intentions Intentions

Service outcomesService outcomes►Value: the customer’s assessment of the Value: the customer’s assessment of the

benefits weighed against all the costs benefits weighed against all the costs involvedinvolved

►Emotions: strong mental feelings (affect), like Emotions: strong mental feelings (affect), like pleasurepleasure

► Judgments: opinions that form as a result of Judgments: opinions that form as a result of the experiencethe experience

► Judgments result in intentions, such as the Judgments result in intentions, such as the intention to remain a customer or notintention to remain a customer or not

CMMAQ/PB

A definition of customer A definition of customer serviceservice

Customer service is a task, other than Customer service is a task, other than proactive selling, that involves interactions proactive selling, that involves interactions with customers in person, by with customers in person, by telecommunications or by mail. It is telecommunications or by mail. It is designed, performed, and communicated designed, performed, and communicated with two goals in mind: operational with two goals in mind: operational efficiency and customer satisfactionefficiency and customer satisfactionLovelock(1998)Lovelock(1998)

Service Economy SectorsService Economy Sectors►Business-to-business (B2B)Business-to-business (B2B)►Business-to-customer (B2C)Business-to-customer (B2C)► Internal servicesInternal services►Public servicesPublic services►Not-for-profit servicesNot-for-profit services

Service process design factors Service process design factors ► Key factors in designing a service processKey factors in designing a service process

Number of transactionsNumber of transactions Variety of tasks Variety of tasks

► Commodity—low process/high volumeCommodity—low process/high volume Processes clearly defined, little customizationProcesses clearly defined, little customization McDonald’sMcDonald’s

► Capability—processes have less definitionCapability—processes have less definition Each task may be different from its predecessor and Each task may be different from its predecessor and

may be customizedmay be customized A software consultantA software consultant

Service process design factorsService process design factors►Simplicity—low variety/low volumeSimplicity—low variety/low volume

Simple operationsSimple operations A software consultantA software consultant

►Complexity—high variety/high volumeComplexity—high variety/high volume Emphasis is on flexibilityEmphasis is on flexibility IBM IBM

►Designing the right process is the service Designing the right process is the service operations manager’s challengeoperations manager’s challenge

►For each of the following organizations, For each of the following organizations, BMWBMW,, McDonald’sMcDonald’s,, Dell Dell,, Project Hope Project Hope, identify:, identify: Service economy sector (B2B, B2C, internal, Service economy sector (B2B, B2C, internal,

public, not-for-profit)public, not-for-profit) Service process design factors (volume/variety of Service process design factors (volume/variety of

transactions)transactions)►Commodity (low process variety/high volume)Commodity (low process variety/high volume)►Capability (tasks may be different from its Capability (tasks may be different from its

predecessors)predecessors)►Simple (low variety/low volume)Simple (low variety/low volume)►Complex (high variety/high volume)Complex (high variety/high volume)

Service operations managersService operations managers► Service operations managers’ roleService operations managers’ role

Responsible for a large part of an organization’s assetsResponsible for a large part of an organization’s assets Delivering service to customersDelivering service to customers Significant impact on the organization’s successSignificant impact on the organization’s success

► Measuring service operations managers’ successMeasuring service operations managers’ success Providing Providing customer valuecustomer value Delivering Delivering brand valuebrand value Making financial contributions to the organizationMaking financial contributions to the organization Delivering an organizational contributionDelivering an organizational contribution

Customer valueCustomer value►Value is the customer's assessment of the Value is the customer's assessment of the

benefits of the service weighed against all benefits of the service weighed against all the costs involved. the costs involved.

►The definition of value varies from customer The definition of value varies from customer to customer and from service to serviceto customer and from service to service Getting more for the moneyGetting more for the money Pay more to get better servicePay more to get better service Pay a lot more for high statusPay a lot more for high status

Brand valueBrand value► A brand is essentially a marketer’s promise to A brand is essentially a marketer’s promise to

deliver a specific set of features, benefits, and deliver a specific set of features, benefits, and services consistently to the buyers. services consistently to the buyers. Philip Kotler, Philip Kotler, Marketing ManagementMarketing Management, 11, 11thth ed. (Upper Saddle River, NJ: Prentice-Hall, ed. (Upper Saddle River, NJ: Prentice-Hall, 2003), pg.420.2003), pg.420.

► ‘‘brand promise’ 4 levels of brand promise:brand promise’ 4 levels of brand promise: Rational—desired customer expectations (experience Rational—desired customer expectations (experience

& outcome)& outcome) Emotional—psychological benefitsEmotional—psychological benefits Political—ethical & environmental issuesPolitical—ethical & environmental issues Spiritual—related to people’s ‘higher order’ needs Spiritual—related to people’s ‘higher order’ needs

Judging success summary Judging success summary ► Technical tasks: Technical tasks:

Managing an organization’s assetsManaging an organization’s assets Delivering service to customersDelivering service to customers Impact on the success of the organizationImpact on the success of the organization

► Providing customer valueProviding customer value► Delivering brand valuesDelivering brand values► Making a financial contribution to the organizationMaking a financial contribution to the organization► Help organization achieve its Help organization achieve its

goals/objectives/missiongoals/objectives/mission

Managing Customer Managing Customer SatisfactionSatisfaction

Week 1Week 1The Service ConceptThe Service Concept

What are we buying?What are we buying?1.1. Magical experienceMagical experience2.2. The ultimate driving The ultimate driving

machinemachine3.3. An educational An educational

experienceexperience4.4. Peace of mindPeace of mind5.5. Great evening outGreat evening out6.6. Just do itJust do it7.7. We build excitementWe build excitement

a.a. RestaurantRestaurantb.b. Harvard UniversityHarvard Universityc.c. Health insuranceHealth insuranced.d. BMWBMWe.e. Pontiac (a GM auto)Pontiac (a GM auto)f.f. Athletic wearAthletic wearg.g. Disneyland Disneyland

Customers buy conceptsCustomers buy concepts► IKEA (pg. 38)IKEA (pg. 38)►People aren’t just buying a tangible product People aren’t just buying a tangible product

or a serviceor a service►People are also buying something intangiblePeople are also buying something intangible

—a concept (an idea formed by mentally —a concept (an idea formed by mentally combining a set of characteristics)combining a set of characteristics)

►Concepts help organizations differentiate Concepts help organizations differentiate themselves from one another. How does themselves from one another. How does IKEA differentiate itself from its competition?IKEA differentiate itself from its competition?

Defining the service conceptDefining the service concept►A shared understanding of the service A shared understanding of the service

including:including:►The organizing idea—essence of the serviceThe organizing idea—essence of the service►The service experienceThe service experience►The service outcomeThe service outcome►The service operation—the way the service will The service operation—the way the service will

be deliveredbe delivered►The value of the service—the benefit weighed The value of the service—the benefit weighed

against the cost of the serviceagainst the cost of the service

Service valueService value►Costs—the combination of price + Costs—the combination of price +

inconvenience of making the purchaseinconvenience of making the purchase►Value—consumers assessment of benefits Value—consumers assessment of benefits

weighed against costs weighed against costs ►The task of operations is toThe task of operations is to

Maximize benefits to the customerMaximize benefits to the customer Minimize costs to the customer Minimize costs to the customer Minimize cost to the organization Minimize cost to the organization

The marketing conceptThe marketing concept► An attempt to reconcile the perceived view of the An attempt to reconcile the perceived view of the

service concept by both organization and the service concept by both organization and the customercustomer

► The marketing concept—customer needs must be The marketing concept—customer needs must be understood then satisfiedunderstood then satisfied

► ““The marketing concept holds that the key to achieving its The marketing concept holds that the key to achieving its organizational goals consists of the company being more organizational goals consists of the company being more effective than competitors in creating, delivering, and effective than competitors in creating, delivering, and communicating superior customer value to its chosen target communicating superior customer value to its chosen target markets.”markets.”

Philip Kotler, Philip Kotler, Marketing ManagementMarketing Management, 11, 11thth ed. (Upper Saddle River, NJ: Prentice-Hall, 2003), pg. 19. ed. (Upper Saddle River, NJ: Prentice-Hall, 2003), pg. 19.

Organizational AlignmentOrganizational Alignment

Organizational alignmentOrganizational alignment► You are a customer service representative for You are a customer service representative for

L. L. Bean. A customer comes to you with a L. L. Bean. A customer comes to you with a backpack they say was bought at your store 5 backpack they say was bought at your store 5 years ago. The customer wants you to replace the years ago. The customer wants you to replace the bag.bag.

► You don’t recognize the backpack. You think it You don’t recognize the backpack. You think it may not have been sold by L. L. Bean.may not have been sold by L. L. Bean.

► The backpack has been abused. It is in terrible The backpack has been abused. It is in terrible condition.condition.

► What should you do?What should you do?

Organizational alignmentOrganizational alignment►Organizations must make their marketing Organizations must make their marketing

message clear to both customers and message clear to both customers and employeesemployees

►The service concept links together The service concept links together different organizational functions different organizational functions (accounting, sales, HR, etc.)(accounting, sales, HR, etc.)

►Objective: internal and external alignment Objective: internal and external alignment “service in the mind”“service in the mind”

Focus & the service conceptFocus & the service concept► Focused service operations: providing a targeted Focused service operations: providing a targeted

customer segment with a narrow range of servicescustomer segment with a narrow range of services Visa & MasterCard (delivering)Visa & MasterCard (delivering) McDonald’s (fixed menu)McDonald’s (fixed menu)

► Organization benefits: simplified operations, ease Organization benefits: simplified operations, ease of training, lower costs, dedicated operation & of training, lower costs, dedicated operation & facilitiesfacilities

► Customer benefits: ease of use, low price, Customer benefits: ease of use, low price, customers can select a service according to their customers can select a service according to their needsneeds

Focus & the service conceptFocus & the service concept► Unfocused service operations: deliver a wide range of Unfocused service operations: deliver a wide range of

services to a narrow market segment or wide marketservices to a narrow market segment or wide market American Express (narrow market - international/business American Express (narrow market - international/business

traveler)traveler) Supermarkets (wide market)Supermarkets (wide market)

► Service concepts based on focus:Service concepts based on focus: Service focusService focus Market focusMarket focus Service & market focusService & market focus Unfocused Unfocused

Four service conceptsFour service concepts

Service focused

Unfocused everything for everyone

Service & market focused

Market focused

Many

Few

Narrow

Number of markets served

Range of services

Wide

Four service conceptsFour 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