Module III- Service Development & Productivity

Prof. (Dr.) Swaroop Mohanty

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Agenda / Contents
01 Managing service operations Physical Evidence and Servicescape.

02 Concept of productivity and its improvement.

03 Managing demand and capacity: Understanding capacity constraints

04 Understanding demand patterns,

05 Strategies for matching demand and supply.

06 Consumer decision-making process.

05 Case Study

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01 Managing service operations Physical
Evidence and Servicescape.

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 Physical Evidence in Service Operations
Definition:
Physical Evidence refers to the tangible elements that a customer experiences during a service
interaction. It helps shape their perceptions of the service quality and brand image.

Key Aspects of Physical Evidence:

1. Ambiance – Lighting, music, scents, and temperature.
2. Facilities & Equipment – Cleanliness, modernity, and functionality.
3. Signage & Branding – Clear signage, logos, and visuals that represent the brand.
4. Employees – Professional appearance, uniforms, and interactions.
5. Marketing Materials – Brochures, websites, business cards, and advertisements.
Importance:
• Reinforces service quality.
• Builds brand image and customer trust.
• Enhances the overall customer experience.

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 Servicescape in Service Operations
Definition:
Servicescape refers to the physical environment in which a service is delivered, including all elements that
customers interact with and that affect their behavior and perceptions of the service.
Key Elements of Servicescape:
1. Ambient Conditions: Temperature, lighting, sound, and scent.
2. Spatial Layout & Functionality: Arrangement of furniture, space flow, and ease of movement.
3. Signs, Symbols, and Artifacts: Clarity of instructions, visual aids, and aesthetic design.
4. Social Factors: Employee-customer interactions, customer seating arrangement.
Managing Servicescape:
• Design for Comfort & Convenience: Ensure the space supports both functional and emotional needs.
• Consistency with Brand Image: Align the physical environment with the brand's values and positioning.
• Influence on Behavior: Control the environment to enhance customer satisfaction and encourage
desirable behaviors (e.g., longer visits, repeat customers).
Importance:
• Affects customer satisfaction and loyalty.
• Influences perceptions of service quality.
• Can impact employee behavior and performance.

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 Servicescape
• Marriott Creates Uniquely Branded Experiences with Distinctive Servicescapes – (Pg. no. 281)
• Technology Spotlight Virtual Servicescapes: Experiencing Services through the Internet- (Pg. no. 284)

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Service Triangle

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02 Concept of productivity and its improvement.

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Definition:
Productivity in services marketing refers to the efficiency with which a service organization delivers output
(services) relative to the input (resources) used in delivering that service.
Key Factors Affecting Service Productivity:
1. Intangibility of Services:
– Unlike physical products, services are intangible, making it difficult to measure productivity directly.
2. Customer Participation:
– Customers' involvement in the service process (e.g., self-service kiosks) affects overall productivity.
3. Service Variability:
– Services often vary from one customer to another, making standardization and efficiency
challenging.
4. Human Resources:
– Employees are often the key drivers of service productivity, but managing their efficiency can be
difficult due to the human element.
Productivity Formula:
• Productivity = Output (Services Delivered) / Input (Resources Used)
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 Customers as Creators and Cocreators
of Service Value
• In today’s economy, customers play increasingly active roles in service value creation
and cocreation—more than they ever have before.
• These expanded customer roles are probably most apparent in the world of Internet
based services and apps, where customers play active roles in producing service
value for themselves with little or no personal interaction with the service provider.
• Global retailer IKEA is a company that has built its strategy around expanded
customer roles since the company opened its doors in the 1950s. Headquartered in
Sweden, IKEA is today the world’s largest home furnishings retailer, operating in 28
countries with over 300 physical stores and a major online presence including
products and services. Known for its “do-it-yourself” or “DIY” business model, IKEA
engages customers in tasks that are not typical for a furniture retailer.

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• Strategy Insight Customer Cocreation of Value: An Important Strategy Frontier (Pg. 352)

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• Exhibit 12.1 Client Cocreation of Value in Business-to-Business Services – Pg.356
• Exhibit 12.2 Which Customer (A or B) Will Be Most Satisfied? – Pg. 359
• Global Feature At Sweden’s IKEA, Customers around the World Cocreate Customized
Value – Pg. 360

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Technology Spotlight Technology Facilitates Customer Participation in Health Care – Pg. 368
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 Improving Productivity in Services Marketing
Key Strategies to Improve Productivity:
1. Employee Training & Development:
• Upskill employees for better efficiency, quality service delivery, and faster turnaround times.
• Empower employees with decision-making authority for quicker problem-solving.
2. Technology Integration:
• Use automation, digital tools, and self-service options (e.g., mobile apps, self-checkout) to reduce human effort
and streamline processes.
• Implement CRM systems to manage customer data and enhance personalized service delivery.
3. Service Standardization:
• Streamline and standardize processes where possible to reduce variability and improve service consistency.
• Develop clear procedures to handle common service requests quickly.
4. Outsourcing Non-Core Activities:
• Outsource administrative or routine tasks (e.g., customer inquiries) to specialized partners to allow employees
to focus on value-adding tasks.
5. Customer Involvement:
• Encourage customer participation in service delivery (e.g., using online platforms, self-service stations) to
reduce the burden on staff and speed up service.
Outcome of Improved Productivity:
• Reduced costs, enhanced customer satisfaction, faster service delivery, and improved profitability.

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03 Managing demand and capacity: Understanding capacity
constraints

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Managing Demand and Capacity in Service Marketing

•Definition: Balancing customer demand with available service

capacity to optimize efficiency.
•Why It Matters: Services are perishable (e.g., unsold hotel rooms,
unfilled airline seats) and cannot be stored.
•Key Challenge: Matching demand fluctuations with service capacity.

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• Balancing the supply and demand sides of a service industry is not easy,
and whether a manager does it well or not makes all the difference.
W. Earl Sasser,
Professor at Harvard Business School

• They also serve who only stand and wait.

John Milton,
English poet, 1608–1674

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 Capacity Constraints in Service Marketing
Types of Capacity Constraints:

• Time-Based – Limited service hours (e.g., restaurants, hospitals).

• Labor-Based – Staff availability (e.g., consulting firms, hospitals).
• Equipment-Based – Limited physical resources (e.g., gym equipment, airline seats).
• Space-Based – Limited seating or accommodation (e.g., hotels, theaters).

Strategies to Manage Constraints:

• Adjust pricing to manage demand.

• Implement reservation systems.
• Use part-time staff or automation.

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04 Understanding demand patterns

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• How to Fill Over 600 Rooms 365 Days of the Year – Pg. 382

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The problem of fluctuating demand

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Although service firms may encounter capacity limitations due to varying demand, there are a number of
ways in which capacity can be adjusted to reduce the problem. Capacity can be stretched and adjusted
(i.e., increased or reduced) to match demand.

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Global Feature Cemex Creatively Manages Chaotic Demand
for Its Services – Pg. 391

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05 Strategies for matching demand and supply.

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Strategy Insight Combining Demand (Marketing) and Capacity (Operations) Strategies to Increase Profits-
Pg. 398

Exhibit 13.2 Overflow in the ED: Managing Capacity Constraints and Excess Demand in Hospital Emergency
Departments- Pg 405

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06 Consumer decision-making process.

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 Introduction to Consumer Decision-Making in Services

Title: Consumer Decision-Making in Service Marketing

Content:
•Definition: The process consumers go through when selecting, purchasing,
and using a service.

Key Difference from Product Purchase: Services are intangible,

heterogeneous, and involve greater perceived risk.

Importance: Understanding this process helps service providers improve

customer experience and satisfaction.

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 Stages of the Consumer Decision-Making Process

Title: Five Stages of the Decision-Making Process

Content:
1. Need Recognition – Consumer realizes a need for a service.
2. Information Search – Researching available service providers.
3. Evaluation of Alternatives – Comparing service quality,
pricing, and reputation.
4. Purchase Decision – Choosing a specific service provider.
5. Post-Purchase Evaluation – Assessing satisfaction and
likelihood of repeat purchase.
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Waiting lines and queuing systems
Alternative queuing configurations
 Discussion Questions
1. Why do service organizations lack the capability to inventory their services?
Compare a car repair and maintenance service with an automobile
manufacturer/dealer in terms of inventory capability.
2. Discuss the four common types of constraints (time, labor, equipment, facilities)
facing service businesses, and give an example of each (real or hypothetical).
3. Choose a local restaurant or some other type of service with fluctuating demand.
What is the likely underlying pattern of demand? What causes the pattern? Is it
predictable or random?
4. Describe the two basic strategies for matching supply and demand, and give at
least two specific examples of each. What is yield management? Discuss the risks in
adopting a yield management strategy.

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1. Describe the four basic waiting line strategies, and give an
example of each one, preferably based on your own
experiences as a consumer.
2. Choose a local service organization that is challenged by fixed
capacity and fluctuating demand. Interview the marketing
manager (or other knowledgeable person) to learn (a) in what
ways capacity is constrained, (b) the basic patterns of
demand, and (c) strategies the organization has used to align
supply and demand. Write up the answers to these questions,
and make your own recommendations regarding other
strategies the organization might use.

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 Case Study

• Group 3: Co-create a Smart Phone Brand with Consumers via

Social Media: A Case Study of Xiaomi in China

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Thank You

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