Breaking the trade-off between efficiency and services
- 1. BreakingtheTrade-offbetweenEfficiency&Services Group 4 Abhishek Kumar Digvijay Jayant Madhav M Neeraj Kumar
- 2. Breaking the Trade-off between Efficiency & Services • Wide variety of service companies were studied • This article captures the five distinct types of variability that customers can introduce as a result of their presence in production • Paper aimed to develop a framework to help managers make better decisions about how & how much to accommodate the variability customers introduce Author-FrancesX.Frei “Research aimed at helping organizations overcome the challenge of customer- introduced variability” 2
- 3. Customerintroducedvariability Five Types of variability Arrival Variability- Service not together-appointments Request Variability- Not in standard pipeline Capability Variability-some performs easily, others handholding Patient to Doctor Effort Variability Effort customers are willing to exert – brining trolleys from parking area Subjective preference variability Subjective preference of customers for how service should be delivered. 3
- 4. OvercomingtheTrade-Off Either accommodate customers’ various desires and behaviors at high cost or refuse to accommodate variability & risk customer defection 4
- 5. 5 Uncompromised Reduction Classic Accommodation Classic Reduction Low cost Accommodation Cost to serve QualityofServiceExperience Four basic strategies Strategies for Managing Customer Introducedvariability UR – College student segregation LCA – ebay properties
- 6. Add a footer 6 2. Request Train employees Automate Tasks Persuade customers to compromise Target customers as per their requests 4. Effort 1. Arrival •Plenty of employees to handle •Self-service / hire low cost - labor •Off-peak pricing •Create complimentary demand 3. Capability Employee adapt to customers varied level of skill levels Self service Requires customers to increase their capability Target 5. Subjective Preferences Use rewards & penalties. Target on the basis of motivation. Use normative approach to get customers to increase their effort Persuade Customers to adjust their expectation to match the value proposition Target specific. StrategiesforManagingCustomerIntroducedvariability
- 7. Business scenarios Dell Customer service operations (Low cost accommodation) • High Arrival & request variability • Expanding servers • Outsource On-site customer service to 3rd party providers Add a footer 7 Starbucks (Uncompromised reduction in variability) • Capability Variability • Train counter clerks to call out orders to beverage makers in desired sequence • Teach customers its ordering protocol using “guide to ordering” pamphlet Tiffany & Company(Failed) • Subjective Preference variability • Increased footfall undermining traditional customer experience • Failed to distinguish prestige from mass customers – use of beepers • Silver jewellery (segmented service on basis of product type)
- 8. SouthwestAirlines • Unusual boarding policy – No assigned seats • Reason: SA prefers Efficiency over customer experience. To reduce average turnaround time. (40% lesser than competitors.) • Problem: Not suitable for Business Travelers who board last minute & customer who value experience • Problem Description: • In June 2006, SA experimented assigned seats in few flight services without considering its effect on customer experience. It raised lots of criticism among its loyal customers who are accommodated to “No assigned seats” policy.
- 9. Reason–Managementofcustomerinducedvariability • While trying to cater the preference of elite flyers, SA introduced a system which threatened a negative feedback from its loyal customer base. • Without identifying the customers mindset, making such decisions would hamper the customer relationship, SA has been enjoying over the years. • Management of variability in service operations requires a company to influence customer’s behavior.
- 10. ManagingOperationalBehaviorofCustomers • Diagnose the problem – Understand the root cause of problematic customer behavior • E.g., When the self-service options such as ATM, Voice response units of Retail bank First Union failed, the managers assumed that the problem is lack of knowledge to use those options and used Greeters to train them. But when the problem was traced back to its cause the identified that most customer preferred effortless experience over time saving. • Factors to be considered: Customer’s current problematic behavior, Hypotheses of cause of behavior, Validity of hypotheses.
- 11. Test&Improvesolution Mistakes: 1. Dissimilarity between real and testing environments 2. Creating incentives for the test to have positive outcome 3. Designing a test without controls Solution: Challenger Champion model For new initiative select a sample to test (Challenger sample) and simply matched sample (Champion sample). Test challenger sample and compare difference in behavior between the two samples.
- 12. Throwingacustomerintheworks • Netflix’s understanding of customer, led to its success over rental DVDs. • Traditional rentals levied fines on customers who make late return of DVDs, which was creating anxiety to customers and strong dissatisfaction. Netflix made late fee obsolete by allowing people to keep movies long as they want. The incentive to return is being able to get the next movie on their request list, because they figured that customers prefer to have control over how long they keep a movie. • Hence deeper understanding customer behavior helps service businesses to thrive and vice versa.
- 13. ThankYou 13