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Understanding Service Operations Management

The ultimate aim of service operations management is to provide all the resources
needed by customer support and service teams. The service operations managers seek
to improve the capabilities of those professionals involved in improving customer
experience. They also help these teams to scale up their operations. The main
responsibility of the management team is to set up and maintain the infrastructure used
by the support and service teams in the company. This includes providing and
upgrading the tools that help the teams create a positive customer experience, monitor
their feedback and take customer engagement forward.

The service operations management team is also responsible for monitoring the teams
that provide customer support. They must develop the metrics necessary for evaluating
the performance of such teams. There must be accurate information about the quality of
service the firm provides to its customers. The service operations team will also track
the time taken to resolve issues, and the number of tickets closed in a specific period.
They also collect data about the usage of company services by the customers and the
ROI of such services.

Service operations are not a very old concept. Those aspiring to become operations
managers can learn more about this from the Advanced Certificate Course in
Operations, Supply Chain And Project Management. You can visit our website to learn
more about this course and how it helps you become an efficient leader in this
department.

Key Principles Of Service Operations Management

Service operations managers must keep in mind certain key principles that help them
ensure better customer experience and comfortable working conditions for those tasked
with keeping customers happy.

Know The Challenges

Service operations management is a multifaceted job that requires managers to use not
just tools but also their problem-solving skills. This job needs the leaders to have a
holistic overview of the company’s needs regarding customer support and service. They
must understand the real challenges that prevent bringing meaningful changes to the
system. Training, product design, process design and service operations strategy are
important principles that service operations managers must keep in mind. They must
solve issues in the service processes that affect the organization at large.
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Organization

One of the problems that most companies offering field service face is the difficulty in
coordination between different departments. Technicians and service managers should
share data to improve customer service delivery. But in many firms, the data lies in
various sources that force the officials to jump from one source to another to access
data. This is where the organization of information is necessary. The service operations
management must include tools that help to centralize data and make it easily
accessible to everyone involved in the job.

Seek Help

Improving customer satisfaction through excellent service delivery is a continuous

process that will need inputs from various sources. It cannot be done by the service
operations management team alone. This is where the managers must know where and
when to seek help. Having a positive attitude and trying new things is good in many
jobs. But there is no scope for trial and error in customer service improvement. The
leader must seek help from other departments or recruits who may have better
knowledge about the latest technology that helps quickly improve customer experience.

Be Customer-Centric

Success is often measured in terms of sales volumes and market share. But for a
service organization, customer experience should be the benchmark. The focus of
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205 OSCM: Service Operations Management – I

service operations management must always be on improving customer experience and

gaining loyalty. They must look at how happy the customers are and whether they will
recommend the company to their friends. This is what drives the company forward and
makes the team a successful one.

Accountability

Accountability is an important quality to develop in the service team that provides

customer support. It is another crucial task that comes under service operations
management. The leader must create a set of rules and directions for the service team
and ensure that these are followed strictly. It is also necessary to formulate a set of
metrics that will help measure their performance. This will not only keep them
accountable for the job but also motivate them to improve. The aim is to create a
roadmap with checkpoints that the service personnel must hit to ensure the
achievement of overall business goals.

Address The Cause

One of the most important principles that service operations management should work
under is to address the cause. There is no use providing symptomatic relief to problems
as they will recur, causing great damage to the image of the organization. A recurring
problem will lead to poor customer experience that results in their moving to other
brands. The team leader must motivate the members to go deep into the problem and
find out what caused it in the first place. This will remove the problem permanently from
the system.

Maintain Basics But Introduce Changes

The rule of 80/20 applies to service operations management too. Eighty percent of
success comes from maintaining what is already there and ensuring it is followed
correctly. But the remaining twenty per cent can be achieved only by introducing new
techniques. The old systems don’t need to be scrapped to bring in new techniques. A
little tweaking of the old processes can help to improve performance to a great extent.
Using new technology can help monitor the service team on a real-time basis. It will also
help to make employees more productive and deliver higher-quality service.

Bring Fresh Ideas

Customer needs and expectations have changed a great deal over the past years. As
companies vie with each other to provide better service, this trend is likely to continue.
This means that the service operations management team cannot sit back even if they
have achieved a level of success. The manager must remain updated with the latest
trends and techniques used in service operations. Fresh ideas and new models must be
introduced to ensure that the company stays ahead of the competition. Service
improvement needs constant trials of new methods.

Motivate Employees
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205 OSCM: Service Operations Management – I

Numerous tools can help you perform service operations management successfully.
However, without motivated employees to do the job, success will always be out of
reach. It is necessary to develop a team of passionate employees who are highly
motivated to perform their tasks in the best manner. The service operations manager
must find ways to keep the service team motivated and always ready to go the extra
mile to keep customers happy. Regular team meetings, one-on-one interactions, talking
about things other than work and showing genuine interest in their development can
help create a team passionate about their work.

Embrace Change

Like in all aspects of business, service management is also changing. The service
operations management leaders and team members must accept the changes and gear
up to live with them. They must bring changes in the way they manage the service team
to make sure that the company is on the way to achieving its goals. Accepting change
will help the leaders to adjust quickly to it and ensure that the service team performs
efficiently.

Learning and adopting the above principles can help operations managers achieve
better success. The Advanced Certificate Course In Operations, Supply Chain and
Project Management can teach you more about these principles and how to become a
successful service operations manager. You may visit our website to learn more about
the program.

Challenges In Managing Service Operations

1. Information Silos

Any customer service employee needs access to a variety of information. If the person
is a field service official, then this becomes even more difficult. In many companies,
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205 OSCM: Service Operations Management – I

such data is spread across several applications and tools. A person on the field trying to
service customers and keep them happy will find it frustrating if they have to search
numerous tools for their information. This is an important obstacle in service operations
management. Such scattered information leads to waste of time, inefficiency, employee
dissatisfaction and poor customer experience.

2. Poor Scheduling

Scheduling is a very important task for field service operations. The company must
dispatch workers who have different skill sets, certifications, roles and responsibilities to
the right spot on time. It is not easy when using traditional methods of scheduling.
Matching the right worker to the right task is a cumbersome job. Any delay in allocating
work to the service personnel can delay service to the customer. A modern tool with the
latest features will help service operations management to speed up service and earn
customer loyalty. Such applications also enable real-time tracking of field service
professionals.

3. Communication

Communication is crucial in all business tasks. This is especially so when your service
personnel are spread across various locations. They must be able to access information
quickly, failing which, they will be wasting precious time that can be used to service a
customer. Information regarding changes in scheduling or customer details must quickly
reach the people on the field. If there is no real-time communication facility, it is not
possible to reach someone in the field to pass on important information. The service
operations management team must implement a centralized communication system to
improve efficiency.

4. Cross-Team Collaboration

This is another big obstacle that service professionals face. Those working in the field
servicing customers and taking care of their requirements must perform well because
they are the face of the organization. Customers judge the organization by looking at
how the service personnel do their work. But it is not possible for these people on the
field to do their jobs well unless they get proper support from the back office. Traditional
tools don’t facilitate such engagement between two teams. The aim of service
operations management must be to connect these two teams.

5. Using Data Beneficially

Information is everything in this modern age of technology. If the company is not able to
collect, store and analyze data, then it cannot find insights that help make better
decisions. It is essential to collect approvals, surveys and customer feedback and use it
for analyzing if the company wants to improve its decision-making capabilities. But
using such data beneficially is not an easy task using traditional tools. This is one of the
setbacks that many service operations management teams face. The company must
adopt modern methods of data collection, storage and analysis.
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6. Predictive Maintenance

The number of devices and gadgets in each household is increasing every day. This
provides a great opportunity for companies dedicated to providing service for such
devices. But with rising numbers of such firms, there is competition in who does the best
service. Reacting to a complaint and solving it is no more enough. Companies must be
able to predict when maintenance will be required by a particular customer. Service
operations management teams must overcome this challenge by adopting modern
technologies like AI and machine learning that help predict service needs in advance.

Conclusion

There is a huge opportunity for companies that offer service to customers. But
competition is heavy, and this poses a challenge for organizations to earn the loyalty of
customers. By managing the service operations well, these establishments can greatly
improve their profits and keep customers happy. It will also help the service personnel
work more efficiently and with much less stress. Happy employees will work better, and
that, in turn, will bring more customers and loyalty.

NATURE OF THE SERVICE SECTOR

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Nature of Services

The definition of service is “any intangible product, which is essentially a transaction and
is transferred from the buyer to the seller in exchange for some consideration (or no
consideration). Let us take a look at some of the characteristics of a service.

● Intangibility: A service is not a physical product that you can touch or see. A
service can be experienced by the buyer or the receiver. Also, you can not
judge the quality of the service before consumption.
● Inconsistency: There can be no perfect standardization of services. Even if
the service provider remains the same, the quality of the service may differ
from time to time.
● Inseparability: One unique characteristic of services is that the service and
the service provider cannot be separated. Unlike with goods/products the
manufacturing and the consumption of services cannot be separated by
storage.
● Storage: The production and consumption of services are not inseparable
because storage of services is not possible. Being an intangible transaction
there can never be an inventory of services.

Types of Services

Let us take a look at the kinds of services that we come across in the economy. There
are basically three types of classification of services.

Browse more Topics under Business Services

● Banking and E-Banking
● Insurance
● Life Insurance, Fire Insurance and Marine Insurance
● Communication Services, Transportation and Warehousing

1] Business Services
The first type of service is business services. The most basic definition would be
services that support the daily functioning and activity of any business but are not a
commodity. Take for example IT services. In this day and age, every business will
require technological setup. The people who provide IT support to a business are
providing a service in exchange for consideration.

There are other similar services that any business enterprise may require for the
smooth functioning and management of its activities. Some such services are Banking,
warehousing, insurance, communication, transport etc.
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205 OSCM: Service Operations Management – I

2] Personal Services
Personal services are commercial activities that are provided to individuals according to
their individualistic needs. The service here is extremely personalized to the customer.
So there can be no uniformity in the services. The service provider will alter his service
according to the personal needs of each customer.

Some examples of personal services are catering, hotel and accommodation, medicine,
any kind of artistic endeavor (like painting, sculpting etc). As you will notice all these
services fulfill personal needs of the customers.

3] Social Services
And when talking about types of services, we come to social services. These are
essential public services. They are provided by the government or other such non-profit
organizations. These services aim to achieve social equality in the society by providing
the backward sections with the help they need. The service is not provided for a profit
motive but as a social cause. Social services include services in the sector of education,
sanitation, medical facilities, housing etc.

What Is an Open System?

An open system is a system that regularly exchanges feedback with its external
environment. Open systems are systems, of course, so inputs, processes,
outputs, goals, assessment and evaluation, and learning are all important.
Aspects that are critically important to open systems include the boundaries,
external environment and equifinality.

Healthy open systems continuously exchange feedback with their environments,

analyze that feedback, adjust internal systems as needed to achieve the
system’s goals, and then transmit necessary information back out to the
environment.

Boundaries
All systems have boundaries, although the boundaries can be difficult to identify
because systems can be very dynamic. Open systems have porous boundaries
through which useful feedback can readily be exchanged and understood.

Closed systems, unlike open systems, have hard boundaries through which
little information is exchanged. Organizations that have closed boundaries
often are unhealthy. Examples include bureaucracies, monopolies and
stagnating systems.
External Environment
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The external environment includes a wide variety of needs and influences

that can affect the organization, but which the organization cannot directly
control. Influences can be political, economic, ecological, societal and
technological in nature.

A highly effective organization is regularly exchanging feedback with its external

environment – it is an open system. Healthy organizations regularly try to
understand their environments through use of environmental scanning, market
research and evaluations. These organizations often try to influence their external
environment, as well, for example, through use of public relations, advertising and
promotions, lobbying and advocacy, and educating industry and local leaders.

Outcomes (Results Among Customers)

Outcomes are critically important to the success of an organization. Outcomes
are in regard to the changes, or benefits, that customers accomplish as a result
of using a particular product or service. Outcomes are usually specified in
terms of changed:

● Knowledge (usually short-term outcomes).

● Behaviors, notably those that comprise useful skills (often intermediate
outcomes).
● Attitudes, values and conditions, such as increased security, stability or pride
(usually long- term outcomes).

Some examples of outcomes from a product or service are when customers learn
to read from attending a training, achieve a healthier body by using a health club’s
facilities or have a cleaner house from using the company’s vacuum cleaner
product. Notice the difference between outcomes (measures of changes in
customers) and outputs (measure of activities in an organization).

Equifinality (More Than One Way to Accomplish the Same Result)

Equifinality means that the same or similar results can be achieved by using a
variety of different processes. For example, management can achieve the same
results by using different inputs or by using different processes with the same
inputs. Equifinality suggests that there is no one right way to accomplish
important results in an organization.

In contrast, closed systems have one right way to do things. For example, in
heavily bureaucratic organizations, a person must finish the necessary
procedures regardless of how useful an intended result will be for the organization
– the focus is on doing things right, rather than doing the right things.
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205 OSCM: Service Operations Management – I

The concept of equifinality explains why there is no one right way to lead or
manage organizations. It explains why there is no one right way to guide
organizational change. You should keep this in mind when adopting various
solutions-based best practices, diagnostic models and assessment tools.
Overview of the Open System of an Organization
The graphic on the following page depicts the overall open system of an
organization. In the following depiction, remember that the general flow of
activities in the system is in a large loop or cycle. Each phase exchanges
feedback (for evaluation and learning) with other phases and, as a result, some
phases are changed and/or repeated in the overall cycle. Remember that the
following graphic is a model of the workings of a system. Do not confuse the
graphic to be the actual system of an organization.
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205 OSCM: Service Operations Management – I

UNIT II - Designing the Service Enterprise

New Service Development

One of the serious challenges service firms face in recent times is new service process
development. According to PhilipKotler, every company must develop new products.
New product development shapes the future of the company. The development of new
services can lead to better understanding of the market's particular requirements,
making it easier to spot further opportunities. Customers want new products and
competitors do their best to surpass the company. The increased level of competition,
the rapid pace of change in technology and innovation, growing consumer awareness
and heightened consumer expectation, established, beyond doubt, the need for
introducing new services faster than the competitors in the market. The faster offer
provides greater mileage for firms to face competition and win consumers.

A constructive organization mechanism is necessary to facilitate new service

development in service companies on a continuous basis. Research studies suggest
that are designed and introduced by following a structured planning framework have
greater likelihood of success than those that are not developed in a structured
framework. The technical infrastructure for the development and production, that is to
say, the hardware, software and delivery system of one new product, can provide a
platform for new services. It is important to develop human resource infrastructure for
various stages of a new service development process to improve design, production
and marketing operations and also to face challenges of new service development in
the future.

What is a New Service Product?

A service can be termed as a new service when it is innovative, created and offered by
the company to the world for the first time. Some new services are adaptive
replacements. They are the improved versions of the existing service product either in
technology, style, status or performance. (K. Rama MohanaRao)

Categories of new service

There are many different ways for service provider to innovate which are explained
as follow:-

i) Style: It represents the simplest type of innovation, involving no changes in either

processes or performance. However they often are highly visible, create excitement,
and may serve to motivate employees (Christopher Lovelock). For example, changing
the color scheme of a restaurant, revising the logo for an organization, redesigning a
website, or painting aircraft a different color. (Valarie A. Zeithaml)
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ii) Service improvements: It is the most common type of innovation. It involves modest
changes in the performance of current products, including improvements to either the
core product or to existing supplementary services.

iii) Supplementary service innovations: It takes the form of adding new facilitating or
enhancing service elements to an existing core service or of significantly improving an
existing supplementary service. Multiple improvements may have the effect of creating
what customers perceive as an entirely new experience, even though it is built around
the same core. For example, cafes are designed to keep customers entertained with
aquariums, waterfalls, monkeys and complete with lightning. (Christopher Lovelock).

iv) Service-line extension: It represents augmentations of the existing service line,

such as a restaurant adding a new menu item, airline offering new routes, a law firm
offering additional legal services and a university adding new courses or
degrees.(Valarie A. Zeithaml)

v) Major process innovations: It consists of using new processes to deliver existing

core products in new ways with additional benefits.

vi) Major service innovations: These are new core products for markets that have not
been previously defined (Christopher Lovelock). For example, retailers adding a coffee
bar or children’s play area, and airlines offering phone and internet services during
flights.

vii) Start up businesses: This consists of new services for a market already served by
existing products that meet the same generic needs. For example, on line banking for
financial transactions.(Valarie A. Zeithaml)

Service development is different:

The new service development faces following unique service disconnects:-

1) Services are intangible experiences– Services are more experiential in nature rather
than product. As a result is experiential, new service development needs a different
approach or at least modified approach.
2) Individualized experience- Services mean doing something for someone and not
mass producing a product for ‘everyone’.
3) Strategic benefits- People normally think services to be the enhancement to the
perceived 'real' product or offering.
4) Simultaneous product and delivery- Service developers must design and plan for all
people and interactions. The service experience is built at each step in the service
delivery chain which includes customer to frontline employees’ exchanges, customer to
back line employees responses and customer to customer interactions.
5) Services are perishable- Services cannot be returned or resold.
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Reasons for New Service Development

For service firms to survive in the competitive environment, continued innovations and
new service development are considered necessary. The reasons for introducing new
offerings are:-

Ø Build recognition as an innovator in the market

Ø Provide a new service offering to develop a market
Ø Proactive territorial expansion through new or modified offerings at the existing

service place
Ø Defensive actions to challenge competitors
Ø Initiate the success of another organization
Ø Take advantage of the technological breakthrough
Ø To reposition i.e. fit consumer requirements more accurately

The development of new service offerings is stimulated by both proactive and reactive
strategies, although much of the growth in the marketplace relates to imitation and
repositioning of the service offerings. Those organizations which do have proactive
strategies tend to have real commitment and resource base to plan a succession of new
service offerings (M.K. Rampal).

Sources of New Service Ideas

New service ideas are available from internal as well as external sources which are
explained in the following table:-

External Sources

Trade customers, Intermediaries, Consumer

Customers feedback, Complaints and Suggestions.
Competitors Imitation, Improvements/Enhancements,
Specialist Consultants, Market research agencies
Others Suppliers, Joint ventures

Internal Sources

Research Development Ongoing Research, Basic Research

Engineering, Manufacturing,Purchasing Development and Operations
Marketing Market research,Sales Market studies, Analysis of previous
personal, Customer service research, Product testing
Management Ideas of senior management
Others Employee suggestions, Brainstorming
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New Service Development Stages

Services leading marketers have cited commonly acknowledged eight stage process of
new service development which is explained as follows:-

1. Idea Generation: The main point of idea generation is to find, in a structured,

goal oriented manner, new ways to service the customer in a meaningful way. An
innovative organization conducts a formal search of the market for new service ideas.
The ideas may come from management, employees, unsatisfied needs of customers,
competitors, government regulations. For example, globalization brought many service
industries through franchising, joint-ventures etc. (M.K. Rampal). In themselves, ideas
are neither good nor bad; it is their application and execution that make them so. The
frontline people, in direct contact with customers and involved in service production, are
critical factor to development of new ideas. In order to motivate Employees, companies
should reward new service ideas. While collecting ideas, the concerned manager
should have an open mind and not be evaluative at this point. They should look for
maximum number of ideas from various sources; pooling of ideas should be the only
objective. Service attribute analysis is one technique that helps the service organization
to improve the existing process. Under this approach, each of the attributes-facilitating
service attributes and supporting service attributes- is scrutinized for any possible
improvements. The pool of new ideas thus generated needs to be evaluated using
specific criteria through the process known as screening. (K. Rama MohanaRao)

2. Screening: Many of the ideas might look interesting but they must be screened
against service objectives, service policy and organization’s resources. Only a small
percentage of idea will survive an initial screening exercise to assess whether they are
sufficiently commercial to progress. The type of questions asked at this stage relates
potential markets, how the idea fits into existing service offerings and likely level of
resources to develop the idea. (M.K. Rampal) The objective of screening new ideas is to
allocate new resources between the various projects. In the screening process, two
types of errors are likely to occur: go errors and drop errors. Go errors occur when bad
idea is forwarded for further processing. This error result in monetary and opportunity
costs to the organization as all the efforts to process and implement this idea yields no
result. Drop errors occur when good idea is dropped due to an improper evaluation
criterion and mechanism, causing the company to loose it forever. The ideas shortlisted
through screening need to be conceptualized. Ideas are general and vague in nature,
whereas concepts are specific and concrete.

3. Concept Development and Testing: Concept Development means the translation

of an idea into description form in accurate terms. Concept Development is especially
difficult for service firm because of the specific characteristics of service. A clearly
defined service concept includes the elements of basic service package, customer
employee interaction and the service design document. A popularly used technique for
development of service concept is ‘service blueprinting’. It provides a clear picture of
service process to different people involved in service production and consumption. The
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service concept developed is tested by presenting the concept to target consumers and
seeking feedback. Besides customers, the concept has to be tested with employees of
the organization so as to assess their understanding, ability, and willingness in
performing the service. The results of concept testing help the management find out the
need- gap level, purchase intention level, the broad and strong consumer appeals, the
shortcomings in the concept, the preferential order of various processes and so on. It
provides an opportunity to develop a service package that matches closely with target
consumer expectations. After successful testing of the concept, a preliminary marketing
strategy has to be developed. The service plan should clearly identify the target
consumer, the market size and the competitors. The plan should outline the positioning,
pricing and distribution strategies. The strategic plan should also set targets for long
term sales, the expected market share and profit- both long and short term. (K. Rama
MohanaRao)

4. Business Analysis: The ideas which appear attractive to the market are then
subject to more detailed analysis. This allows the company to assess the market size,
potential sales, and revenue against development and launch costs. The use of
sensitivity costing will be applied at this stage, where a series of adjustments are made
to factors such as price, packaging and customer take- up, and revenue implications
evaluated. On this basis minimum and maximum revenue potential will be projected.
(M.K. Rampal) Market competitiveness and the ability of the company to respond to
variations in the demand for new service are also analyzed. Business analysis helps
managers to rank the screen ideas. (K.RamaMohanaRao)

5. Service Development: During this stage, the organization determines whether it is

possible to provide the service at cost and quantity that will make the service price
attractive to the customer. The elements of the service that will be particularly important
to the consumers must be identified at this stage and clearly highlighted during service
design. This is also the stage at which promotion, distribution and pricing strategies are
developed. The development stage involves production of prototype or sample of new
offering. For example, in banking sector, the development phase of new savings product
would require the modification of savings computer system by programming staff, the
design of forms and documents to be used in setting up the accounts, branch staff to
follow in completing the forms and processing them. (M.K. Rampal) This step is an
action- oriented one, involving expenditure. It is a clear shift from deskwork to the
execution of the concept. The success of the step represents the efficiency of the
management in transforming a theoretical design into practical reality.

6. Test Marketing: Now the services are ready for sale. To know how the service
offer could really provide satisfactory experiences, it is necessary to test it among
different groups of customers. Based on early responses, appropriate changes can be
made to make the offer more qualitative. Service firm generally invite employees’
families and select the customer to know their responses. (K.RamaMohanaRao) Usually
the organization tries out the new offering in the market. If the offering is tested in more
than one geographic market, the different promotional approaches in each market are
used to test their relative impact. The test marketing is time consuming and expensive.
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As there is danger of quick imitation by the competitors the test marketing period should
be kept minimum. (M.K. Rampal)

7. Commercialization: The new service developed is now offered for the sale. At this
stage the service firms have to incur huge costs, particularly in external marketing. The
major task is to create awareness in the market and persuade the target market to use
the service. Consumer education, guidance and training, if necessary, are to be
organized to make the consumer participate well in the service process and also to
make them perceive the quality of service. At this stage, the following four decisions are
of utmost importance:

i) When should the service be offered?

ii) Where should the services be offered?

iii) To whom should the services be offered?

iv) How should the services be offered? (K. Rama MohanaRao)

Introducing a new service offering requires heavy involvement by marketing

department. Employee incentives and customer premium must be planned and offered
for making the service offering launch a success.

8. Evaluation: This is the final stage in developing a new service offering and involves
the use of primary and secondary research to monitor the progress of new service
offering in relation to organization’s goals. No service development plan is complete if it
fails to induce a system for monitoring the results of the plan. Effective monitoring
enables the service provider to take remedial action where needed, as well as acquire
additional knowledge for successful management of service life cycle.

It will be observed that first two stages are closely related to overall new service
strategy. This strategy enables generation of new idea and basis for their evaluation.
Whereas next three stages deal with ideas and as such are the least expensive. Many
new service offerings fail because the idea or timing is wrong. These three stages are
helpful in identification of such situation. The subsequent stages are costly because
they require more rupees and more human resources to implement them. Some
companies adopt short- cuts and they usually skip- test marketing. With the avoidance
of this stage companies lack consumer reactions to propose service offering. The
service development process is not as advanced as the products because of historical
reason. The service by virtue of having a shorter life cycle compared to products needs
a dynamic and flexible approach to suit the distinctive circumstances. (M.K. Rampal)

Achieving Success in New Service Development

Researchers that in developing new services, the core [product is of only secondary
importance. The quality of the total service offerings and the market support that goes
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with are vital. Underlying success in these areas, they emphasize, is market knowledge.
Without an understanding of market place, knowledge about customers, and knowledge
about competitors, it is very unlikely that a new product will be a success. Service firms
are not immune to the high failure rates plaguing new manufactured products. The
reasons for failure ranged widely, including failure to meet demonstrate a consumer
need in ability to cover costs from revenue and poor execution. A research was
conducted and researchers found that the three factors contributed most to success
were, in order of importance:

1. Market Synergy: The New product fit well with the existing image of the firm,
provided a superior advantage to competing products in terms of meeting customers’
known needs, and received strong support during and after the launch from the firm and
its branches; further, the firm had a good understanding of its customers’ purchase
decision behavior.

2. Organizational Factors: There was strong interfunctional cooperation and

coordination; development personnel were fully aware of why they were involved and of
the importance of the new products to the company.
3. Market Research Factors: Detailed and scientifically designed market research
studies were conducted early in the development process with the clear idea of the type
of information to be obtained; a good definition of the service concept was developed
before field surveys were undertaken. (Christopher Lovelock)

The fact that the services are intangible and heterogeneous, it becomes imperative for a
new service development system to have four basic attributes which are given below:
i. The service design should be objective and not subjective.
ii. Service Design should be precise and not vague.
iii. Service Design should be fact- driven and not opinion- driven
iv. The steps in service design should be methodological and not philosophical.

A service product comprises all the elements of the service performance that create
value for the customer, and it consists of a core product bundled with a variety of
supplementary service elements and their delivery process. Designing a service product
is a complex task that requires an understanding of how the core and supplementary
services should be combined, sequenced, delivered, and branded to create a value
proposition that meets the need of the target market segments. For service firms to
survive in the competitive environment, continued innovations and new service
development are considered necessary. A service can be termed as a new service
when it is innovative, created and offered by the company to the world for the first time.
There are many different ways for service providers to innovate. New service ideas are
available from internal as well as external sources. The development of new service
offerings is stimulated by both proactive and reactive strategies, although much of the
growth in the marketplace relates to imitation and repositioning of the service offerings.
Services leading marketers have cited a commonly acknowledged eight stage process
of new service development. It is observed that the first two stages are closely related to
the overall new service strategy. This strategy enables generation of new ideas and
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basis for their evaluation. Whereas the next three stages deal with ideas and as such
are the least expensive. Many new service offerings fail because the idea or timing is
wrong. These three stages are helpful in identifying such situations. The subsequent
stages are costly because they require more rupees and more human resources to
implement them. Some companies adopt short- cuts and they usually skip- test
marketing. The service development process is not as advanced as the products
because of historical reasons. The service by virtue of having a shorter life cycle
compared to products needs a dynamic and flexible approach to suit the distinctive
circumstances. In developing new services, the core product is of only secondary
importance. The quality of the total service offerings and the market support that goes
with them are vital. Without an understanding of the marketplace, knowledge about
customers, and knowledge about competitors, it is very unlikely that a new product will
be a success.

Challenges of Adopting New Technology in Services

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SERVICE BLUEPRINT:

Definition: A service blueprint is a diagram that visualizes the relationships between

different service components — people, props (physical or digital evidence), and
processes — that are directly tied to touchpoints in a specific customer journey.

Think of service blueprints as a part two to customer journey maps. Similar to

customer-journey maps, blueprints are instrumental in complex scenarios spanning
many service-related offerings. Blueprinting is an ideal approach to experiences that are
omnichannel, involve multiple touchpoints, or require a cross functional effort (that is,
coordination of multiple departments).

A service blueprint corresponds to a specific customer journey and the specific user
goals associated to that journey. This journey can vary in scope. Thus, for the same
service, you may have multiple blueprints if there are several different scenarios that it
can accommodate. For example, with a restaurant business, you may have separate
service blueprints for the tasks of ordering food for takeout versus dining in the
restaurant.
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Service blueprints should always align to a business goal: reducing redundancies,

improving the employee experience, or converging siloed processes.

Benefits of Service Blueprinting

Service blueprints give an organization a comprehensive understanding of its service

and the underlying resources and processes — seen and unseen to the user — that
make it possible. Focusing on this larger understanding (alongside more typical usability
aspects and individual touchpoint design) provides strategic benefits for the business.

Blueprints are treasure maps that help businesses discover weaknesses. Poor user
experiences are often due to an internal organizational shortcoming — a weak link in
the ecosystem. While we can quickly understand what may be wrong in a user interface
(bad design or a broken button), determining the root cause of a systemic issue (such
as corrupted data or long wait times) is much more difficult. Blueprinting exposes the big
picture and offers a map of dependencies, thus allowing a business to discover a weak
leak at its roots.

In this same way, blueprints help identify opportunities for optimization. The visualization
of relationships in blueprints uncovers potential improvements and ways to eliminate
redundancy. For example, information gathered early on in the customer’s journey could
possibly be repurposed later on backstage. This approach has three positive effects: (1)
customers are delighted when they are recognized the second time — the service feels
personal and they save time and effort; (2) employee time and effort are not wasted
regathering information; (3) no risk of inconsistent data when the same question isn’t
asked twice.

Blueprinting is most useful when coordinating complex services because it bridges

cross department efforts. Often, a department’s success is measured by the touchpoint
it owns. However, users encounter many touchpoints throughout one journey and don’t
know (or care) which department owns which touchpoint. While a department could
meet its goal, the big-picture, organization-level objectives may not be reached.
Blueprinting forces businesses to capture what occurs internally throughout the totality
of the customer journey — giving them insight to overlaps and dependencies that
departments alone could not see.
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Key Elements of a Service Blueprint

Service blueprints take different visual forms, some more graphic than others.
Regardless of visual form and scope, every service blueprint comprises some key
elements:

Customer Actions

Steps, choices, activities, and interactions that customers perform while interacting with
a service to reach a particular goal. Customer actions are derived from research or a
customer-journey map.
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In our blueprint for an appliance retailer, customer actions include visiting the
website, visiting the store and browsing for appliances, discussing options
and features with a sales assistant, appliance purchase, getting a
delivery-date notification, and finally receiving the appliance.

Frontstage Actions

Actions that occur directly in view of the customer. These actions can be
human-to-human or human-to-computer actions. Human-to-human actions are the
steps and activities that the contact employee (the person who interacts with the
customer) performs. Human-to-computer actions are carried out when the customer
interacts with self-service technology (for example, a mobile app or an ATM).

In our appliance company example, the frontstage actions are directly linked
to customer’s actions: the store worker meets and greets customers, a chat
assistant on the website informs them which units have which features, and
a trader partner contacts customers to schedule delivery.

Note that there is not always a parallel frontstage action for every customer
touchpoint. A customer can interact directly with a service without
encountering a frontstage actor, like it’s the case with the appliance delivery
in our example blueprint. Each time a customer interacts with a service
(through an employee or via technology), a moment of truth occurs. During
these moments of truth, customers judge your quality and make decisions
regarding future purchases.

Backstage Actions

Steps and activities that occur behind the scenes to support onstage happenings.
These actions could be performed by a backstage employee (e.g., a cook in the
kitchen) or by a frontstage employee who does something not visible to the customer
(e.g., a waiter entering an order into the kitchen display system).

In our appliance-company example, numerous backstage actions occur: A

warehouse employee inputs and updates inventory numbers into the
point-of-sale software; a shipping employee checks the unit’s condition and
quality; a chat assistant contacts the factory to confirm lead times;
employees maintain and update the company’s website with the newest
units; the marketing team creates advertising material.
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​Processes

Internal steps, and interactions that support the employees in delivering the service.

This element includes anything that must occur for all of the above to take
place. Processes for the appliance company include credit-card verification,
pricing, delivery of units to the store from the factory, writing quality tests,
and so on.

Lines

In a service blueprint, key elements are organized into clusters with lines that separate
them. There are three primary lines:

1. The line of interaction depicts the direct interactions between the customer and
the organization.
2. The line of visibility separates all service activities that are visible to the customer
from those that are not visible. Everything frontstage (visible) appears above this
line, while everything backstage (not visible) appears below this line.
3. The line of internal interaction separates contact employees from those who do
not directly support interactions with customers/users.

The last layer of a service blueprint is evidence, which is made of the props and places
that anyone in the blueprint has an exchange with. Evidence can be involved in both
frontstage and backstage processes and actions.

In our appliance example, evidence includes the appliances themselves,

signage, physical stores, website, tutorial video, or email inboxes.

Type of Customer Contact,

The different types of customer service

Customer service refers to the assistance and support that a business offers to anyone
who buys and engages with their products and/or services. It covers the entire lifecycle
of the customer journey, from guiding a potential buyer in making better-informed
decisions around their purchases, all the way to building customer loyalty.

In today’s digital age, there are a number of different types of service that a business
can use to engage with its customers. The most commonly applied ones are:

● Phone
● Live chat
● Email
● Online support portals
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● Social media
● Self-service
● In-person/on-site support
It’s important to consider how people will respond to each of these different types of
communication in customer service. There’s a difference between what customers need
and what they want — but both are just as important.

Generally, the average hierarchy of preferred customer communication is as follows:

1. Self-service: 40% of customers 1

2. Phone: 36% of customers 2
3. Live chat: 33% of customers
4. Email: 25% of customers
5. In-person/on-site support: 18% of customers (though worth noting that this is less
of a preference for customers and moreso something they’d be willing to do) 3
6. Online support portal: 5% of customers
7. Social media: 2% of customers
What’s also important to note is that different demographics like age hugely affect
customer preference. While it’s important to understand what customers generally want,
you must focus on what specific demographics prefer and what they’re looking for:

● Younger customers: Higher value is placed on customer service via social media
and online communication channels, with 52% of millennials preferring live chat.
They also appreciate quick response times and 58% expect to be able to engage
with a brand whenever they choose.4 Focus on pleasing millennials because
74% of them would switch to a different service or brand if they encountered poor
customer service.5
● Older customers: Alternatively, customers from an older generation tend to prefer
phone calls. Providing knowledgeable service agents is key, with 40% of
consumers over 55 believing that informed representatives are the most
important customer service factor.6
There is one consistent preference across all demographics that’s important to
remember: the ability to speak to a real person.

While self-service has seen a rise in popularity, 59% of customers still want some form
of person-to-person contact out of their customer service. So regardless of which
customer service types you elect to include in your service strategy, always consider
how you can ensure you’re matching your customers with highly-skilled, qualified
agents.
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The four customer service models

Customer service models are critical in achieving the best customer experience
possible as you can apply a true strategy to how you offer your customer service. The
majority of businesses split their customer service operation into four categories, from
levels 0-3:

Level 0: Self-serve and automated functions

These include providing FAQ pages, chatbots, password resets, and onboarding
documents for complex products or services. Implementing these will help you preempt
customer issues, resolve issues efficiently, and reduce the costs of unsatisfied
customers.

Level 1: Front-line support

This is where more moderately skilled customer service agents are positioned to
resolve the common problems that your customers have. It serves as the first human
touchpoint that a business can offer and is valuable in adding a personal touch to your
customer service experience.

Level 2: Problem-solving
This level comes into play when there are problems or requests that a customer has
that can’t be properly actioned by the above level. Senior agents are key here to give
customers detailed responses and to fix more complex issues efficiently and smoothly.

Level 3: Technical support

This is the most specialised level and requires agents that are experts on your products
and services and can clearly communicate that expertise to customers.

Dividing customer service options like this enables you to properly triage customer
queries, create appropriate tickets, and share information for training purposes.
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UNIT - III The Service Encounter

Service Encounters : From the customer’s point of view, the most vivid impression of
service occurs in the service encounters or “Moment Of Truth,” when the customer
interacts with the service firm. This is the foundation to “Satisfaction of Service Quality”
— it is where the promises are kept or broken. The concept of service encounter was
put forth by Richard Norman, taking the metaphor from BullFighting. Most services are
results of social acts, which take place in direct contact between the customer and the
service provider. At this stage the customer realizes the perceived service quality.

Types of Service Encounters

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A service encounter occurs every time a customer interacts with the service
organization. There are three general types of service encounters – remote encounters,
phone encounters, and face-to-face encounters. A customer may experience any of
these types of service encounters, or a combination of all three in his/her relations with
a service firm.

1. Remote Encounter: Encounters can occur without any direct human contact
called Remote Encounters. Such as, when a customer interacts with a bank
through the ATM system, or with a mail-order service through automated dial-in
ordering.
2. Phone Encounters:- In many organizations, the most frequent type of encounter
between a customer and the firm occurs over the telephone is called a phone
encounter.
3. Face-to-Face Encounters: A third type of encounter is the one that occurs
between an employee and a customer in direct contact is called a Face-to-Face
Encounter. In a hotel, face—to—face encounters occur between customers and
maintenance personnel, receptionist, bellboy, food and beverage servers and
others.
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The Service-Profit Chain

The service-profit chain establishes relationships between profitability, customer loyalty,

and employee satisfaction, loyalty, and productivity. The links in the chain (which should
be regarded as propositions) are as follows: Profit and growth are stimulated primarily
by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is
largely influenced by the value of services provided to customers. Value is created by
satisfied, loyal, and productive employees. Employee satisfaction, in turn, results
primarily from high-quality support services and policies that enable employees to
deliver results to customers. (See the exhibit “The Links in the Service-Profit Chain.”)
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UNIT- IV - Service Facility Location

Service Facility Location: Strategic Location Considerations

What are the Considerations for a Facility Location?

Facility location considerations include:

● Proximity to Customers: This relates to the cost of delivery of product or service.

● Proximity to suppliers: This involves the need for raw materials and resources. It
also involves logistics channels and costs.
● Proximity to labor: This involves population, skills, and wage/benefit costs.
● Government policy: This involves zoning laws, tax policies, activity regulations,
etc.
● Availability of the necessary infrastructure: This involves access to usable space,
logistics systems, etc.

Facility Location - Factors Influencing the Location

Facility Location is the right location for the manufacturing facility, it will have sufficient
access to the customers, workers, transportation, etc. For commercial success, and
competitive advantage following are the critical factors:

Overall objective of an organization is to satisfy and delight customers with its product
and services. Therefore, for an organization it becomes important to have strategy
formulated around its manufacturing unit. A manufacturing unit is the place where all
inputs such as raw material, equipment, skilled labors, etc. come together and
manufacture products for customers. One of the most critical factors determining the
success of the manufacturing unit is the location.

Facility location determination is a business critical strategic decision. There are several
factors, which determine the location of facility among them competition, cost and
corresponding associated effects. Facility location is a scientific process utilizing various
techniques.

Location Selection Factors

For a company which operates in a global environment; cost, available infrastructure,

labor skill, government policies and environment are very important factors.

A right location provides adequate access to customers, skilled labors, transportation,

etc. A right location ensures success of the organization in current global competitive
environment.

Industrialization
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A geographic area becomes a focal point for various facility locations based on many
factors, parameters and issues. These factors are can be divided into primary factors
and secondary factors.

A primary factor which leads to industrialization of a particular area for particular

manufacturing of products is material, labor and presence of similar manufacturing
facilities. Secondary factors are available of credit finance, communication infrastructure
and insurance.

Errors in Location Selection

Facility location is critical for business continuity and success of the organization. So it
is important to avoid mistakes while making selection for a location. Errors in selection
can be divided into two broad categories behavioral and non-behavioral.

1. Behavioral errors are decision made by executives of the company where

personal factors are considered before success of location, for example,
movement of personal establishment from hometown to new location facility.
2. Non-behavioral errors include lack of proper investigative practice and analysis,
ignoring critical factors and characteristics of the industry.

Location Strategy

The goal of an organization is customer delight for that it needs access to the customers
at minimum possible cost. This is achieved by developing location strategy. Location
strategy helps the company in determining product offering, market, demand forecast in
different markets, best location to access customers and best manufacturing and
service location.

Factors Influencing Facility Location

If the organization can configure the right location for the manufacturing facility, it will
have sufficient access to the customers, workers, transportation, etc. For commercial
success, and competitive advantage following are the critical factors:

Customer Proximity: Facility locations are selected closer to the customer as to reduce
transportation cost and decrease time in reaching the customer.

Business Area: Presence of other similar manufacturing units around makes business
area conducive for facility establishment.

Availability of Skill Labor: Education, experience and skill of available labor are another
important, which determines facility location.

Free Trade Zone/Agreement: Free-trade zones promote the establishment of

manufacturing facilities by providing incentives in custom duties and levies. On another
hand free trade agreements are among countries providing an incentive to establish
business, in particular, countries.
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Suppliers: Continuous and quality supply of the raw materials is another critical factor in
determining the location of a manufacturing facility.

Environmental Policy: In current globalized world pollution, control is very important,

therefore understanding of environmental policy for the facility location is another critical
factor.

Marketing Intermediaries
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Huff Model for a Retail Outlet

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UNIT - 5 - Service Facility and Process Flows

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Process Analysis, Types of Processes,

The Service Process: Definition and Types

The Service Process Defined

We can define the service process as the way in which a company works so that a
customer receives service. To standardize this in line with the company’s identity and
aims, managers will work on:

● Determining procedures which contribute to the process

● Allocating tasks and responsibilities
● Formulating effective schedules and routines
● Defining service mechanisms and process flows

The shape that the service process will assume will depend on two primary factors:

● The type of service process

● The degree of customer contact

Types of Service Process

1. Line operations
Line operations progress in a linear fashion. Thus, the client passes through a
sequential experience beginning at point A, when they first enter the store or contact the
business. Now, service delivery passes through a number of processes before finalizing
the transaction.

Although this is perhaps the simplest of the service processes to understand, it has
several drawbacks. If one element in the linear operation is flawed or bottlenecked, the
client will judge the service as a whole based on this weak area.

It’s also not a service process that allows for much flexibility. That does make controlling
it easier, but it would only suit a standard offering that implements repetitive processes
with little or no variation. This type of service process is the easiest to automate
because it is so standardized. Every customer has a similar customer experience, and
the service process does not vary.

2. Job Shop Operations

This type of service model provides customer satisfaction by tailoring the service to the
client’s needs. For example, a professional organization such as a law firm or a
bespoke service such as that which a carpenter may provide is only open to a limited
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level of standardization. Each client’s needs will vary to some degree, and the service
process must, therefore, vary accordingly.

Being able to offer flexibility makes this model attractive, but it can complicate
scheduling and workflows.

3. Intermittent Operations
Some service projects are unique and seldom repeated. For example, construction
projects or branding initiatives would fall under this category. In most instances, the
projects themselves are of a relatively large scale. They will involve bringing together
several elements so that they can work harmoniously.

Planning will be key, and managers would evaluate each project independently in order
to determine what process flows would contribute to the final result: providing the
desired service to its clients. Critical path analysis is often used in this context.

Degree of Contact
The human element of contact with the client influences the complexity and variability of
the service process. When there is little customer contact, it is easier to adopt a linear
approach. However, high contact service processes will require greater flexibility, and
managers and operational staff can expect a degree of disruption.

In high contact service processes, clients will:

● Expect some input into the business processes that affect the service
● Expect similar service levels regardless of current demand
● Judge the quality of the business based on their experience of the people with
whom they interacted

High contact systems are the most demanding for businesses to manage effectively
because:

● Scheduling becomes more complicated

● The processes can be difficult to standardize or automate
● They may need to coordinate low and high contact service systems
simultaneously

Developing and Maintaining the Service Process

Developing a service process may sound easy. After all, you merely need to map the
process that employees will follow when serving their clients. A low contact, linear
service would be the easiest to map. For example, when entering a self-service
restaurant, clients would collect a tray at the door, collect a plate and eating utensils,
select the foods they want, and proceed to the checkout.
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Or, it can also be extremely complex, with multiple, completely different, interactions
with the client throughout the lifetime of the relationship.

Mapping every step of interaction with the customer using a workflow diagram can be
extremely helpful in designing the right service process.

Digital Tools: Develop, Evaluate, Allocate, Monitor

For companies with a few, high-profile clients, you’d want to take special care of each
one. A single mistake could result in losing an important client.

Workflow management tools such as Tallyfy allow you to design the general service
process, which you can then re-use for each new client. This streamlines the entire
experience, leaves no room for error, and ensures customer satisfaction. So, why don’t
you schedule a free demonstration?

GANTT CHART FOR SERVICE INDUSTRY

What Is a Gantt Chart?

A Gantt chart is a commonly used graphical depiction of a project schedule. It's a type
of bar chart showing the start and finish dates of a project's elements such as
resources, planning, and dependencies.

Henry Gantt (1861-1919), an American mechanical engineer, designed the Gantt chart

Understanding Gantt Charts

The Gantt chart is the most widely used chart in project management. These charts are
useful in planning a project and defining the sequence of tasks that require completion.
In most instances, the chart is displayed as a horizontal bar chart.

Horizontal bars of different lengths represent the project timeline, which can include task
sequences, duration, and the start and end dates for each task. The horizontal bar also
shows how much of a task requires completion.

A Gantt chart helps in scheduling, managing, and monitoring specific tasks and
resources in a project. The chart shows the project timeline, which includes scheduled
and completed work over a period of time. The Gantt chart aids project managers in
communicating project status and completion rate of specific tasks within a project, and
also helps ensure the project remains on track. By convention, it is a standard tool that
makes communication unified among the engineering and project management
community.
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Benefits of a Gantt Chart

The chart identifies tasks that may be executed in parallel and those that can't be
started or finished until others are complete. It can help detect potential bottlenecks and
identify tasks that may have been excluded from the project timeline.

The chart depicts things like task slack time or additional time for completion of a task
that shouldn't delay the project; noncritical activities that may be delayed; and critical
activities that must be executed on time.

Gantt charts can be used in managing projects of all sizes and types. These may
include building infrastructures like dams, bridges, and highways. They may also
include software development and other technologies. Project management tools, such
as Microsoft Visio, Project, SharePoint, and Excel, or specialized software, such as
Gantto or Matchware, can help in designing Gantt charts.

Facility Layout - Objectives, Design and Factors Affecting the Layout

Introduction

For an organization to have an effective and efficient manufacturing unit, it is important

that special attention is given to facility layout.

Facility layout is an arrangement of different aspects of manufacturing in an appropriate

manner as to achieve desired production results. Facility layout considers available
space, final product, safety of users and facility and convenience of operations.
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An effective facility layout ensures that there is a smooth and steady flow of production
material, equipment and manpower at minimum cost.

Facility layout looks at physical allocation of space for economic activity in the plant.
Therefore, main objective of the facility layout planning is to design effective workflow as
to make equipment and workers more productive.

Facility Layout Objective

A model facility layout should be able to provide an ideal relationship between raw
material, equipment, manpower and final product at minimal cost under a safe and
comfortable environment. An efficient and effective facility layout can cover following
objectives:

● To provide optimum space to organize equipment and facilitate movement of

goods and to create a safe and comfortable work environment.
● To promote order in production towards a single objective
● To reduce movement of workers, raw material and equipment
● To promote safety of plant as well as its workers
● To facilitate extension or change in the layout to accommodate new product line
or technology upgradation
● To increase production capacity of the organization

An organization can achieve the above-mentioned objective by ensuring the following:

● Better training of the workers and supervisors.

● Creating awareness about of health hazard and safety standards
● Optimum utilization of workforce and equipment
● Encouraging empowerment and reducing administrative and other indirect work
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Factors affecting Facility Layout

Facility layout designing and implementation is influenced by various factors. These

factors vary from industry to industry but influence facility layout. These factors are as
follows:

● The design of the facility layout should consider overall objectives set by the
organization.
● Optimum space needs to be allocated for process and technology.
● A proper safety measure to avoid mishaps.
● Overall management policies and future direction of the organization

Design of Facility Layout

Principles which drive design of the facility layout need to take into consideration the
objective of facility layout, factors influencing facility layout and constraints of facility
layout. These principles are as follows:

● Flexibility: Facility layout should provide flexibility for expansion or modification.

● Space Utilization: Optimum space utilization reduces the time in material and
people movement and promotes safety.
● Capital: Capital investment should be minimal when finalizing different models of
facility layout.

Design Layout Techniques

There are three techniques of design layout, and they are as follows:

1. Two or Three Dimensional Templates: This technique utilizes development of a

scaled-down model based on approved drawings.
2. Sequence Analysis: This technique utilizes computer technology in designing the
facility layout by sequencing out all activities and then arranging them in circular
or in a straight line.
3. Line Balancing: This kind of technique is used for assembly lines.

Types of Facility Layout

There are six types of facility layout, and they are as follows:

● Line Layout
● Functional Layout
● Fixed Position Layout
● Cellular Technology Layout
● Combined Layout, and
● Computerized Relative Allocation of Facility Technique