GOODS AND SERVICE DESIGN

CHAPTER IV

GOODS AND SERVICE DESIGN

OVERVIEW OF CLASS
MODULE
In this module, you will learn the different types of technology and their roles in manufacturing
and service operations, the advantages and disadvantages of using technology today. Respectively,
the reason behind why manufacturing and service technology and analytics strengthen the value
chain, and the different key technology decisions will also be discussed.

LEARNING
OBJECTIVES
By the end of this module, the students should be able to:
1. Described the steps involved in designing goods and services;
2. Explained the concept and application of function development;
3. Explained the five elements of service delivery system design; and
4. Described the four elements of service encounter design.

LEARNING
CONTEXT

DESIGNING GOODS AND SERVICES

To design and improve goods and services, most companies use some type of structured process.
In general, the designs of both goods and services a similar path. The critical differences lie in the
detailed product and process design phrases.

 Steps 1 and 2—Strategic Mission, Analysis, and Competitive Priorities

Strategic decisions and competitive priorities should be consistent with and support the
firm’s mission and vision. These steps require a significant amount of research and innovation
involving marketing, engineering, operations, and sales functions, and should involve customers,
suppliers, and employees throughout the value chain.

 Steps 3—Customer Benefit Package Design and Configuration

Clearly, firms have a large variety of possible choices in configuring a customer benefit
package (CBP). For example, when buying a new vehicle, an automobile dealer might include
such options as leasing, free oil changes and/or maintenance, loaner cars, and so on.

Essentially, CBP design and configuration choices revolve around a solid understanding of
customer needs and target markets, and the value that customers place on such attributes as the
following:

a. Time

Many grocery stores now offer self-service checkout to reduce customer

waiting time. Manufacturers such as Dell use the Internet to acquire customer
information for more responsive product design.

b. Place

UPS has UPS stores strategically located for customer convenience that also
provide packaging services; many companies offer day-care centers-on-site to
provide convenience to their employees.

c. Information

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A business dedicated to providing guitar music books and videos offers a
telephone hotline to speak with a professional guitarist for questions on selecting the
proper instructional and performance material.

d. Entertainment

A pianist serenades shoppers at Nordstrom’s department stores. Some

minivans have built-in DVD players.

e. Exchange

Retails stores such as Best Buy allow customers to travel to the store and buy
the goods, purchase goods on their websites and have them delivered, or purchase
goods on their websites and have them ready to be picked up at the store.

f. Form

An interior designer might use methods such as sketches, photographs,

physical samples, or even computer-simulated renderings to show how a kitchen
might be transformed.

 Step 4—Detailed Goods, Services, and Process Design

If a proposal survives the concept stage—and

Every design project—a new automobile:
many do not—each good and service in the CBP, as
between technology and functionality,
well as the process that creates it, must be designed between ambition and affordability,
in more detail. This is where the designs of goods and between the desires of the people
services differ. The design of manufactured goods creating the object and the needs of the
focuses on its physical characteristics—dimensions, people using it.
materials, color, and so on. Much of this work is done
by artists and engineers to translate customer
requirements into physical specifications.

For both goods and services, this phase usually includes prototype testing,
this is a process by which a model is constructed to test the product’s performance
under actual operating conditions, as well as consumer reactions to the prototypes.

 Step 5—Market Introduction/Development

In this step, the final bundle of goods and services—the customer benefit
package—is advertised, marketed, and offered to customers.

 Step 6—Marketplace Evaluation

The marketplace is a graveyard of missed opportunities: poorly designed goods and

services and failed execution resulting from ineffective operations. The final step in designing and
delivering a customer benefit package is to constantly evaluate how well the goods and services
are selling, and customers’ reactions to them.

SERVICE-DELIVERY SYSTEM DESIGN

It includes facility location and layout, the servicescape, service process and job design, and
technology and information support systems. Integrating all of these elements is necessary to design a
service that provides a value to customers and can create a competitive advantage. A poor choice on
any of these components, such as technology or job design, can degrade service system efficiency and
effectiveness.

Facility Location and Layout

Location affects a customer’s travel time and is an important competitive priority in a service
business. Health clinics, emergency service facilities, rental car firms, post offices, branch banks, and
many other types of service facilities depend on good location decisions. The layout of a facility affects
process flow, costs, and customer perception and satisfaction.

Servicescape

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It is all the physical evidence a customer might use to form an impression. This servicescape also
provides the behavioral setting where service encounters take place. A servicescape has three
principal dimensions:

 Ambient Conditions—made manifest by sight, sound, smell, touch, and temperature. These
are designed into a servicescape to please the five human senses. For example, Starbucks
decided to quit serving a breakfast in all Starbucks stores because the egg-and-cheese
breakfast sandwiches are interfering with the aroma of the coffee in stores.

 Spatial Layout and Functionality—how furniture, equipment, and office spaces are
arranged. This includes building footprints and facades, streets, and parking lots. A law firm
would probably design various conference areas for conversations to take place in a quiet and
private setting.

 Signs, symbols, and artifacts—the more explicit signals that communicate an image about
a firm. Examples include mission statements and diplomas on wall, a prominently displayed
company logo on company vehicles.

Some servicescapes, termed lean servicescape environments, are very simple. More
complicated designs and service systems are termed elaborate servicescape environments.

Service Process and Job Design

This is the activity of developing an efficient sequence of activities to satisfy both internal and
external customer requirements. Service process designers must concentrate on developing
procedures to ensure that things are done right the first time that interactions between customers and
service providers are simple and quick, and that human error is avoided.

Technology and Information Support System

Hard and soft technologies are important factors in designing services to ensure speed, accuracy,
customization, and flexibility. Nurses, bank tellers, engineers, financial portfolio managers are just a
few examples of job designs that are highly dependent on accurate and timely information.

SERVICE-ENCOUNTER DESIGN

It focuses on the interaction, directly or indirectly, between the service providers and the
customers. It is during these points of contact with the customer that perceptions of the firm and its
goods and services are created. The principal elements of service-encounter designs are:

- Customer-contact behavior and skills;

- Service-provider selection, development, and empowerment;
- Recognition and reward, and
- Service recovery and guarantees.

These elements are necessary to support excellent performance and create customer value and
satisfaction.

Customer-Contact Behavior and Skills

Customer contact refers to the physical or virtual presence of the customer in the service-
delivery system during a service experience. Customer contact is measured by the percentage of time
the customer must be in the system relative to the total time it takes to provide the service. Systems in
which the percentage of customer contact is high are called high-contact systems; those in which it
is low are called low-contact systems.

Customer contact requirements are measurable performance levels or expectations that

define the quality of customer contact with representatives of an organization. These might include
such technical requirements as response time, service management skills such as cross-selling other
services and/or behavioral requirements.

Service-Provider Selection, Development, and Empowerment

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Major companies such as Procter & Gamble seek people with excellent interpersonal and
communication skills, strong problem-solving and analytical skills, assertiveness, stress tolerance,
patience and empathy, accuracy and attention to detail, and computer literacy.

Empowerment means giving people authority to make decisions based on what they feel is
right, to have control over their work, to take risks and learn from mistakes, and to promote change.

Recognition and Reward

After a firm hires, trains, and empowers excellent service providers, the next challenge is how to
motivate and keep them. Research has identified key motivational factors to be recognition,
advancement, achievement, and the nature of the work itself. Other forms of recognition such as
formal and informal employee and team recognition, preferred parking spots, free trips, and extra
vacation days, discounts and gift certificates, and simple “thank you” from supervisors are vital to
achieving a high-performance workplace.

Service Guarantees and Recovery

Despite all efforts to satisfy customers, every business experience unhappy customers. A service
upset is any problem a customer has—real or perceived—with the service-delivery system and
includes terms such as service failure, error, defect, mistake, and crisis. Service upset can adversely
affect business if not dealt with effectively.

Service guarantee is a promise to reward and compensate a customer is a service upset occurs
during the service experience. Many organizations—for example, Federal Express and Disney—have
well-publicized service guarantees to gain competitive advantage. An explicit service guarantee is
in writing ad included in service provider publications and advertisements. Taco Bell and Hampton use
this to differentiate themselves from competitors. Implicit guarantees are not in writing but implied
in everything the service provider does.

Service-recovery processes should be clearly documented, and employees should be trained and
empowered to use them whenever necessary. Service providers need to listen carefully to
determine the customer’s feelings and then respond sympathetically, ensuring that the issue is
understood. They should make every effort to resolve the problem quickly, provide a simple
apology, and perhaps offer compensation.

Nevertheless, service upsets occasionally occurs. When this happens, companies need to recover
the customer’s trust and confidence. Service recovery is the process of correcting a service upset
and satisfying the customer. Service recovery should begin immediately after a service upset occurs
and when the customer is visibly upset; the longer the customers wait, the angrier they might get.

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SOURCES

 Collier, D.A. et.al (2020). Operations Management and Total Quality Management. Chicago
Business Press. Philippine Edition. Cengage Learning Asia Pte Ltd.

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