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SESSION – 6 & 7
Competitive Environment of Services
SESSION – 6 & 7
Competitive Environment of Services
By
Dr. Nripendra Singh
Jaypee Business School, Noida
By
Dr. Nripendra Singh
Jaypee Business School, Noida
Agenda
• Strategic Service Vision
• Competitive Service Strategies
• Winning Customers
• Role of Information in Services
• Case Study: America West Airlines & Alamo Drafthouse
Agenda
• Strategic Service Vision
• Competitive Service Strategies
• Winning Customers
• Role of Information in Services
• Case Study: America West Airlines & Alamo Drafthouse
STRATEGIC SERVICE VISIONExamples: 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 VISIONExamples:
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
Operating Strategy
Service Concept
Target Market
SegmentsStan Chart
English Speaking
International Branches
Fee based services
Elite & Business Class
ATMs and Credit Cards
High Cost Formal settingLocated in CBD
Facilities for Corporates
Corporate Clients
SBI Hindi Speaking
Location not important
Extremely Low fees
All types
Traditional Branches in Urban & Rural
Low interest rates
Service Delivery System
Operating Strategy
Service Concept
Target Market
Segments
Southwest Airlines
Cabin Crew with interpersonal skills
Airport turnaround time very less
on-time performance
Interstate business traveller
No assigned seating
frquent departure frequent departure
customer who travel on auto and train
On-time performance
Type of aircrafts used short-flights
Lost luggagelow-cost producer
only carry-on luggage
employee satisfaction
Southwest Airlines
Competitive Service StrategiesM. 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 well-
defined 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)
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
Role of Information in Services
Competitive Use of InformationOnline (Real time) Offline (Analysis)
Strategic
Focus
External (Customer)
Creation of Barriers to entry:
Reservation SystemFrequent User ClubSwitching Costs
Database Asset:
Selling InformationDevelopment of ServicesMicromarketing
Internal (Operations)
Revenue Generation:
Yield ManagementPoint of SalesExpert Systems
Productivity Enhancement:
Inventory StatusData 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 "foodquality" 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?
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 "foodquality" 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?
Target Market
Service Concept
Operating Strategy
Service Delivery
· 18-30 year old, male, alcohol consumers, cult film appeal
· 25-40 year olds with sophisticated taste in films
· Meal and 2nd run or cult film
· Single screen theater with ever other row replaced with narrow table
· Low cost old theater
· Inexpensive 2nd run movies
· Food made to order with less waste
· Unobtrusive wait people
· Acceptable sound and projection equipment
· Excess capacity mid-day
Case Study: Alamo Drafthouse
THANKS