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 engers. 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 . 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

SBI

Operating Strategy International  Branches

ATMs and  High Cost  Credit Cards Formal setting Located in CBD Hindi  Location not Speaking  important Traditional Branches in  Urban & Rural

Service Concept

Target Market Segments Fee based  Elite &  services Business  Class Facilities for  Corporate  Corporates Clients Extremely  All types Low fees Low interest    rates

Southwest Airlines  

Service Delivery System Cabin Crew  with  interpersonal  skills Southwest No assigned  Airlines seating

Operating Strategy

Service Concept

Airport  turnaround  time very less

on-time  performance

frquent departure frequent  departure

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

Target Market Segments Interstate  business  traveller

short-flights

customer who  travel on auto  and train  

 

 

 

 

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, Sam’s 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. Batra’s 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 Club c Switching Costs Revenue Foc Internal (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 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 · 18-30 year  · Meal and 2nd  old, male,  run or cult film alcohol  · Single screen  consumers, cult theater with  film appeal  ever other row  · 25-40 year  olds with  sophisticated  taste in films

Operating Strategy · Low cost old  theater

Service Delivery · Unobtrusive  wait people

· Inexpensive  · Acceptable  2nd run movies sound and  · Food made to  projection  replaced with  order with less  equipment narrow table waste · Excess  capacity midday 

THANKS