Service Vision & Strategy

Courtesy
School of Management, NIT Rourkela
MBA (Marketing) and Ph.D (Marketing Management)
Lectures
 Learning Objectives

• Formulate a strategic service vision.

• Describe how a service has addressed each element in the

strategic service concept.

• Discuss the competitive environment of services.

 Service Vision

• Vision is a description of the business

• Futuristic & “ where do we want to go”
• “ a mental image produced by the imagination”
• Affects the decision making process & service delivery
• Envisioning is the “act of establishing a vision”
Good visions are:

• inspiring & exhilarating

• helps in creation of common identity
• competitive, original & unique
• enhance experimentation
• foster long term thinking
• used for benefit of people (inspiration for better future)
 ELEMENTS OF SERVICE VISION
Vision is realistic, credible & attractive future state. Its elements consist
of:

1. Identification of a Target market segment

2. Development of a Service concept to address customer’s need
3. Codification of Operating strategy to support the Service concept
4. Design of a Service delivery system to support the Operating strategy
 Target Market Segmentation

“Market Segmentation” is the process of dividing the whole market into various
homogeneous sub-segment.
Generally two approaches are considered to identify market segment:

• Consumer personal characteristic (User characteristics)

demographic, geographic & psychographics

• Responses towards a service (Usage behavior)

benefits, loyalty, volume
Geographic Segmentation:
Divides consumers on the basis of countries, regions, states, cities and towns.

Bases Possible Segment

Population of people
Location N, S, E, W,
Domestic/International
Size Large, Medium, Small
Type Urban, Rural, Suburban
Cost of Living High, Moderate, Low
Demographic Segmentation:

Study of people in the aggregate, including population, size, age, income,

occupation & family life cycle.

Bases Possible Segment

Age Child, Young Adult, Adult, Older Adult

Gender Male, Female
Education Less than 10+2, 10+2, College
Income High, Middle, Low
Occupation Blue collar, White collar, Professional
Marital status Single, Married, Divorced, Widowed
Religion Hindu, Sikh, Muslim, Christian
Psychographic Segmentation:

Process of dividing markets into segments on the basis of

consumer life styles, social class or personality profile.

Bases Possible Segment

Social Class Lower, Lower to Upper, Upper

Personality Introverted, Extroverted
Attitude Neutral, Positive, Negative
Volume Segmentation:

Segmenting the final consumers & organizational consumers on the basis

of usage rates, usage experience & brand loyalty .

Bases Possible Segment

Usage rate Light, Medium, Heavy

Usage Experience None, Some, Extensive
Brand Loyalty None, Some, Total

PARETO PRINCIPLE:

80% of the profit comes from 20% of the customers

Benefit Segmentation:

Process of grouping consumers on the basis of different benefits sought

from the service.

E.g: A bank might target the segment that seek the benefit of speed and
convenience by promoting internet transfer, telephone loan services.

Opel Car Mega Offer: Bring old car & exchange with a new Opel. 30 minutes
loan approval and open on Sunday.
 Strategic Service Vision
Target Market Segments

What are we serving & why ?

• What are common characteristics of important market segments?

• What dimensions can be used to segment the market, demographic,
psychographic?
• How important are various customer groups?
• What needs does each have?
• How well are these needs being served, in what manner, by whom?
 Strategic Service Vision
Service Concepts
What are we providing them?
• What are important elements of the service to be provided, stated in
terms of results produced for customers?
• How are these elements supposed to be perceived by the target
market segment, by the market in general, by employees, by others?
• How do customers perceive the service concept? (Experience)
• What efforts does this suggest in terms of the manner in which the
service is designed, delivered, marketed? (Outcome)

Heskett defined Service Concept as “the way in which an organization

would like to have its services perceived by the customers,
shareholders, employees and lenders.”
 Strategic Service Vision
Operating Strategy

• What are important elements of the strategy: operations, financing,

marketing, organization, human resources, control?
• On which will the most effort be concentrated?
• Where will investments be made?
• How will quality and cost be controlled: measures, incentives, rewards?
• What results will be expected versus competition in terms of, quality of
service, cost profile, productivity, morale/loyalty of servers?

Organization attempts to deliver the result what is promised in the service

concept.
 Strategic Service Vision
Service Delivery System
This communicates the vision of the organization as customers perceive
the value of services through its deliver system.
• What are important features of the service delivery system including: role
of people, technology, equipment, layout, procedures?
• What capacity does it provide, normally, at peak levels?
• To what extent does it, help insure quality standards, differentiate the
service from competition, provide barriers to entry by competitors?
 Service Strategy
Strategy is a step ahead that reflects how the vision would be released in
the real sense.

It originates from the firm’s vision of a service concept.

Strategy formulation is initiated by first scanning the environment for

opportunities & threats.

Strategy can be formulated at corporate or business level.

 Corporate level Strategy
Corporate Level strategies are Organizational wide and include:

Expansion: mergers, acquisitions, joint ventures

Concentration: NPD, market penetration
Restructuring: retrenchment, liquidation
 Business level Strategy
Business level strategies are formulated for a SBU and include:

Overall cost leadership

Differentiation
 Overall Cost Leadership
The service leadership focuses on keeping the cost of the
service low to the customer. This requires a focus on
efficiency and productivity, cost controls & mass technology
to reduce the costs considerably in comparison to the market.

Standardization : Public transportation

Automation: ATM, Vending machine

 Differentiation
Customer perceive the service as unique. To create
differentiation they may emphasize brand, the use of
technology, features, customer service, networking.

Tangibilizing the Service

Customization