SESSION 6 & 7 Competitive Environment of Services

By Dr. Nripendra Singh Jaypee Business School, Noida Agenda

Strategic Service Vision Competitive Service Strategies Winning Customers Role of Information in Services

STRATEGIC SERVICE VISION

Examples: Kmart first retail giant to use private satellite network (VSAT) Southwest Airlines
Southwest Airlines began as a small intrastate Texas airline, operating commuter length routes between Dallas (Love Field), Houston, and San Antonio. In June 1971, having overcome legal hurdles raised by entrenched Braniff and Texas International, Southwest inaugurates service with a massive promotional campaign and many innovations designed to attract passengers. On February 1, 1973, Southwest must decide how to respond to Braniff's "Half Price Sale.

United Services Automobile Association (USAA)

USAA is well known for its pioneering spirit in providing insurance products and financial services to its members. That same spirit and innovative attitude is evident in the use of information technology (IT) to reduce operating costs, accommodate growth, and improve services. USAA has been the pacesetter for insurance industry automation.

STRATEGIC SERVICE VISION

Examples: British Airways: Using Information Systems to Better Serve the Customer
British Airways develops an information system, Customer Analysis and Retention System (CARESS) to ensure rapid response to customer complaints. The case explores how this system is able to melt the complaint iceberg in order to resolve customer complaints quickly and improve retention as well as provide data for root-cause-analysis of problems.

Ritz Carlton: Using Information Systems to Better Serve the Customer

Ritz-Carlton, a Malcolm Baldrige National Quality Award winner, relies on two information systems to promote customer loyalty: COVIA to handle centralized reservations and Encore, a local system that keeps track of guest preferences.

ELEMENTS OF STRATEGIC SERVICE VISION

Service strategy must begin with a vision of place and purpose of the enterprise. Elements of the Strategic Service Vision: - Target Market Segment - Service Concept - Operating Strategy - Delivery System

STANDARD CHARTERED BANK (when started its operations in India) Vs SBI Service Delivery System Stan English Chart Speaking Operating Strategy International Branches Target Market Segments Feebased Elite& services Business Class Facilitiesfor Corporate Corporates Clients Extremely Alltypes Lowfees Lowinterest rates Service Concept

SBI

ATMsand HighCost CreditCards Formalsetting LocatedinCBD Hindi Locationnot Speaking important Traditional Branchesin Urban&Rural

Southwest Airlines
Service Delivery System CabinCrew with interpersonal skills Southwest Noassigned Airlines seating Operating Strategy Airport turnaround timeveryless Service Concept on-time performance Target Market Segments Interstate business traveller customerwho travelonauto andtrain

frquentdeparture frequent departure short-flights

On-time Type of performance aircrafts used Lost luggage low-cost producer only carry- employee on satisfaction

Competitive Service Strategies

M. Porter has argued that 3 generic competitive strategies exist:

Overall cost leadership Differentiation Focus

Southwest Airlines employ the strategies of focus and overall cost leadership. Southwest concentrates on serving a select geographic region at low cost. It achieves low cost by providing no-frills service, and it maximizes utilization of its assets by maintaining a quick turnaround practice at airports. The United Services Automobile Association (USAA) has a welldefined focus, primarily that of providing insurance and financial services for American military officers and their families. It is able to provide the lowest possible rates in the industry to its customers, in part, by doing business over the phone instead of using field agents.

Competitive Service Strategies

Overall cost leadership
- Seeking Out Low-cost Customers (Big Bazzar, Sams Club) - Standardizing a Custom Service (TALLY) - Reducing the Personal Element in Service Delivery (ATMs, Digital Kiosks, Vending Machines) - Reducing Network Costs (FedEx - Hub & Spoke n/w) - Taking Service Operations Offline (Shoe repair, Laundry, Bill collection Drop Box)

Differentiation (brand, technology, features, service, n/w)

- Making the Intangible Tangible (complimentary items like calendar, diaries, toiletries with co. names on it) - Customizing the Standard Product (Calling by Name, Barber personal style) - Reducing Perceived Risk (Auto repair-SOP) - Giving Attention to Personnel Training (NIIT, Hamburger Univ) - Controlling Quality (Tunde Ke Kabab Recipe)

Competitive Service Strategies

Focus - By Buyer Group (Citi Bank, Palace on wheels, Haldiram) - By Service (Dr. Batras Clinic, Choki Dhani, Essel World) - By Geographical Region (City Montesori School)

Winning Customers
Depending on the competition and personal needs, customers select a service provider using different criteria. These criterias like safety, speed, personalization, quality, reputation etc. are used for differentiating themselves. They may be clubbed under three heads: - Service winners (eg. price, convenience, reputation that sell products). But situation dependent, choosing restaurant for which occasion dinner or anniversary. - Qualifiers (criteria whose presence is necessary for the product to enter the market place) - Service Losers (eg. dependability, personalization, speed whose absence will dissatisfy the customer)

Role of Information in Services

Productivity enhancement is the most powerful use of information for achieving cost leadership, because it allows firms to reduce inventory, reduce waste, and eliminate paperwork, all of which save money. Eg. retail shelf space. Creating barriers to entry is the most powerful use of information for protecting a differentiation strategy. When customer loyalty is high, cost cutting by competitors is less effective. Switching costs can also create barriers to entry. Eg. Use of computer network by courier cos. Database assets are the most powerful use of information for building a focus strategy. These assets allow a company to develop profiles of their customers and their buying habits. This information allows the firm to develop new services and to be seen as responsive to its customers' needs. Eg. Advertising and distribution.

Role of Information in Services Competitive Use of Information

Online (Real time) Offline (Analysis) External Creation of Stra (Custom Barriers to entry: Database Asset: er) Selling Information

tegi Reservation System Frequent User Club c Switching Costs Foc Internal Revenue (Operati Generation: ons) us
Yield Management Point of Sales Expert Systems

Development of Services Micromarketing

Productivity Enhancement:
Inventory Status Data Envelopment Analysis (DEA)

Case Study: Alamo Drafthouse

1. Marketing analysts use market position maps to display visually the customers' perceptions of a firm in relation to its competitors regarding two attributes. Prepare a market position map for Alamo Drafthouse using "food quality" and "movie selection as axes". 2. Use the "Strategic Service Vision" framework to describe Alamo Drafthouse in terms of target market segments, service concept, operating strategy, and service delivery system. 3. Identify the service qualifiers, winners, and service losers for Alamo Drafthouse. Are the Alamo purchase decision criteria appropriate for the multiplex movie theater market? What do you conclude?

Case Study: Alamo Drafthouse

Target MarketService Concept 18-30year Mealand2nd old,male, runorcultfilm alcohol Singlescreen consumers,culttheaterwith filmappeal everotherrow 25-40year oldswith sophisticated tasteinfilms Operating Strategy Lowcostold theater Service Delivery Unobtrusive waitpeople

Inexpensive Acceptable 2ndrunmovies soundand Foodmadeto projection replacedwith orderwithless equipment narrowtable waste Excess capacitymidday

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