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employees •Actively seek feedback from employees and
customers •Exceptional at anticipating and resolving problems •Take a long term view
© Lovelock Associates
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.”
© Lovelock Associates
Understanding the Customer Experience: Flowcharting a Hotel Visit
Front stage
Customer Actions
Make reservation
Employee Actions Face-to-face
productivity
© Lovelock Associates
Ten Characteristics of Successful Service Businesses (cont)
•Make intelligent use of technology •Invest in recruitment, training, and motivation of
•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
•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
ADDING VALUE THROUGH SERVICE: STRATEGIES FOR COMPETITIVE ADVANTAGE
Dr Christopher Lovelock
Yale University Beijing
© Lovelock Associates
Overview
Success factors in service-driven businesses Creating value for customers through service The Flower of Service: core and supplementary
•Internal services -- within firm to other departments, branches, employees (e.g. legal, accounting, human resources)
© Lovelock Associates
Ten Characteristics of Successful Service Businesses
• “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
• More demand for services from domestic consumers
as per capita income rises • Tourism stimulates demand for many services • Increased sophistication in acturing may
© Lovelock Associates
Customers Weigh Perceived Benefits against Perceived Costs to Assess “Net Value”
© Lovelock Associates
Perceived Benefits
EffortTime e
Some Strategies to Improve Success
© Lovelock Associates
Creating and Keeping Customers: Value is the Key
“There can be no corporate strategy that is not
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
involve emphasis on value-added services • Entry of international service firms into Chinese
market transfers expertise • Government economic and social policies often
with bag,
Backstage
Enter data
Valet Parks Car
Register guest data
Make up Room
© Lovelock Associates
Increasing Net Value by Reducing Non-financial Costs of Service
© Lovelock Associates
“Time is Money”
•There are no time billionaires •Busy people have less disposable time •We use the same verbs for time and money:
© Lovelock Associates
3
Success factors in service-driven businesses Creating value for customers through service The Flower of Service: core and supplementary
•Service supplements and adds value to a manufactured good – manufacturer provides service to end users – intermediary provides the service (e.g., retailer)
Arrive
Doorman greets, valet takes car
Phone Contact
Rep. records, confirms
Check-in at reception
Go to room
Receptionist verifies, gives key to room
Bellhop leads way to room
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
•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
emphasise improved services
© Lovelock Associates
The Many Faces of Service
•Service is the core product of the industry (e.g., insurance, transport, hotels, banking)
© Lovelock Associates
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
elements Customer loyalty creates value for the firm Some strategies to improve success
© Lovelock Associates
Why Effective Management of Services Will Become More Important for China
Perceived Costs
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
—Spend —Save —Invest —Lose —Waste
•Are you stealing your customers’ time?
© Lovelock Associates
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
customers •Exceptional at anticipating and resolving problems •Take a long term view
© Lovelock Associates
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.”
© Lovelock Associates
Understanding the Customer Experience: Flowcharting a Hotel Visit
Front stage
Customer Actions
Make reservation
Employee Actions Face-to-face
productivity
© Lovelock Associates
Ten Characteristics of Successful Service Businesses (cont)
•Make intelligent use of technology •Invest in recruitment, training, and motivation of
•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
•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
ADDING VALUE THROUGH SERVICE: STRATEGIES FOR COMPETITIVE ADVANTAGE
Dr Christopher Lovelock
Yale University Beijing
© Lovelock Associates
Overview
Success factors in service-driven businesses Creating value for customers through service The Flower of Service: core and supplementary
•Internal services -- within firm to other departments, branches, employees (e.g. legal, accounting, human resources)
© Lovelock Associates
Ten Characteristics of Successful Service Businesses
• “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
• More demand for services from domestic consumers
as per capita income rises • Tourism stimulates demand for many services • Increased sophistication in acturing may
© Lovelock Associates
Customers Weigh Perceived Benefits against Perceived Costs to Assess “Net Value”
© Lovelock Associates
Perceived Benefits
EffortTime e
Some Strategies to Improve Success
© Lovelock Associates
Creating and Keeping Customers: Value is the Key
“There can be no corporate strategy that is not
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
involve emphasis on value-added services • Entry of international service firms into Chinese
market transfers expertise • Government economic and social policies often
with bag,
Backstage
Enter data
Valet Parks Car
Register guest data
Make up Room
© Lovelock Associates
Increasing Net Value by Reducing Non-financial Costs of Service
© Lovelock Associates
“Time is Money”
•There are no time billionaires •Busy people have less disposable time •We use the same verbs for time and money:
© Lovelock Associates
3
Success factors in service-driven businesses Creating value for customers through service The Flower of Service: core and supplementary
•Service supplements and adds value to a manufactured good – manufacturer provides service to end users – intermediary provides the service (e.g., retailer)
Arrive
Doorman greets, valet takes car
Phone Contact
Rep. records, confirms
Check-in at reception
Go to room
Receptionist verifies, gives key to room
Bellhop leads way to room
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
•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
emphasise improved services
© Lovelock Associates
The Many Faces of Service
•Service is the core product of the industry (e.g., insurance, transport, hotels, banking)
© Lovelock Associates
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
elements Customer loyalty creates value for the firm Some strategies to improve success
© Lovelock Associates
Why Effective Management of Services Will Become More Important for China
Perceived Costs
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
—Spend —Save —Invest —Lose —Waste
•Are you stealing your customers’ time?
© Lovelock Associates
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