Click to edit Master text styles,Second Level,Third Level,Fourth Level,Lovelock Associates,Click to edit Master title style,ADDING VALUE THROUGH SERVICE:STRATEGIES FOR COMPETITIVE ADVANTAGE,Dr Christopher Lovelock,Yale University,Beijing,Overview,Success factors in service-driven businesses,Creating value for customers through service,The Flower of Service:core and supplementary,elements,Customer loyalty creates value for the firm,Some strategies to improve success,Why Effective Management of Services Will Become More Important for China,More demand for services from domestic consumers,as per capita income rises,Tourism stimulates demand for many services,Increased sophistication in manufacturing may,involve emphasis on value-added services,Entry of international service firms into Chinese,market transfers expertise,Government economic and social policies often,emphasise,improved services,The Many Faces of Service,Service is the core product of the industry,(e.g.,insurance,transport,hotels,banking),Service supplements and adds value to a manufactured good,manufacturer provides service to end users,intermediary provides the service(e.g.,retailer),Service to intermediaries,-help them to do a better job selling products to end users,Service to suppliers,-builds relationships and makes purchaser an attractive customer,Internal services,-within firm to other departments,branches,employees(e.g.legal,accounting,human resources),Ten Characteristics of Successful Service Businesses,Clear statement of market position relative to competitors and target customers,Easy to do business with for customers and suppliers,Focus on building customer loyalty by creating value,Open to innovation and new ways of working,Seek continuous improvements on quality and productivity,Ten Characteristics of Successful Service Businesses,(cont),Make intelligent use of technology,Invest in recruitment,training,and motivation of employees,Actively seek feedback from employees and customers,Exceptional at anticipating and resolving problems,Take a long term view,2,Success factors in service-driven businesses,Creating value for customers through service,The Flower of Service:core and supplementary,elements,Customer loyalty creates value for the firm,Some Strategies to Improve Success,Creating and Keeping Customers:Value is the Key,“,There can be no corporate strategy that is not marketing oriented.,The purpose of a business is to create and keep a customer.,To do that you have to do those things that will make people want to do business with you.”,THEODORE LEVITT,THE MARKETING IMAGINATION,How Perceived Value Affects Customer Choice,Customers relate value of benefits received from,a good or service to the costs of acquisition/usage,“Bad value”or“good value”assessments relate to,net value,after deducting costs from benefits,Customers choices are shaped by:,what they can,afford,(more than just money),how well,benefits,offered match their,needs,which competing alternative offers the,highest perceived net value,Perceived,Benefits,P,e,r,c,e,i,v,e,d,Costs,Time,e,Effort,Customers Weigh Perceived Benefits against Perceived Costs to Assess“Net Value”,Five Types of Costs,Money,Time,Physical effort,Mental effort and negative feelings,Sensory burdens,Unattractive sights,Unwanted noises,Uncomfortable feel,Nasty taste,Unpleasant smell,“,Time is Money”,There are no time billionaires,Busy people have less disposable time,We use the same verbs for time and money:,Spend,Save,Invest,Lose,Waste,Are you,stealing,your customers time?,Net Value=(Benefits-Costs),Net value drives relationships,Net value is a function of both costs and benefits,Value can be added or lost at each step in service delivery,In a competitive market,higher financial prices must be justified by:,more benefits,and/or,better quality of benefits,and/or,lower time,effort,and sensory costs,Understanding the Customer Experience:Flowcharting a Hotel Visit,Customer,Actions,Employee,Actions,Face-to-face,Front stage,Phone,Contact,Backstage,Make,reservation,Rep.records,confirms,Arrive,Check-in,at reception,Doorman greets,valet takes car,Enter,data,Valet Parks Car,Make up,Room,Register,guest data,Receptionist,verifies,gives,key to room,Go to,room,Bellhop leads,way to room,with bag,Increasing Net Value by Reducing Non-financial Costs of Service,Consider each step in delivery of service,Reduce,time costs,of service at each step where customer sees passage of time as a burden,Minimize unwanted,psychological costs,of service,Eliminate unwanted,physical costs,of service,Decrease unpleasant,sensory costs,of service,3,Success factors in service-driven businesses,Creating value for customers through service,The Flower of Service:core and supplementary,elements,Customer loyalty creates value for the firm,Some strategies to improve success,Two Definitions of Service,“,A service is an act,a deed,a performance,rather than an object or a thing”,LEONARD BERRY,“,Service is all actions,and reactions that,customers percei