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Strategy to break the trade off between service and efficiency

Paper Type: Free Essay Subject: Marketing
Wordcount: 1619 words Published: 18th Apr 2017

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Nowadays we see that strategy makers face a major problem of breaking the trade- off between service and efficiency. This happens because of customer interface with the company’s operations. So in order to deliver consistent quality at sustainable cost companies must learn to manage that involvement.

Today we see that customers are not just open wallets at the end of a very efficient supply chain but are directly involved in the ongoing operations. The customers introduce a tremendous amount of variability in the overall supply chain activity. The only way to deal with this is to eliminate the variability. But customers judge the quality of their experience in large part by how much of the variability they introduce is accommodated, not how sternly it is denied. Beside this eliminating the variability completely is not possible because customers themselves are key inputs in the production process and this input by its nature, capricious, emotional, and adamantly disinterested in the company’s profit agenda.

There are different types of variability:

Arrival variability. This variability that creates challenges for service companies is an obvious one. Customers do not want all service at the same time or at times necessarily convenient for the company.

Capability variability. There are certain businesses that must also work with customers whose own capabilities differ. It might be because of greater knowledge, skill, physical abilities, or resources, some customers perform tasks easily and others require hand-holding.

Effort variability. There are areas where customers must perform a role in a service interaction, it’s up to them how much effort they apply to the task and the level of effort applied varies widely.

Subjective preference variability. We also see that customers vary in their opinions about what it means to be treated well in a service environment. The personal preferences introduce a large number of other variable which makes everything very complicated.

The companies now have to make a choice of either accommodating the variability or reducing it. companies that emphasize the service experience tend toward accommodation, and those that emphasize operational simplicity – usually as a means to keep costs low – tend toward reduction . Here the strategies are

1) Classic Accommodation (High cost and high quality of service)

2) Low-cost Accommodation (Low cost and high quality of service)

3) Uncompromised Reduction (Low cost and medium quality of service)

4)Classic Reduction ( Low cost and low quality of service)

Companies that achieve low-cost accommodation strategy most often do it by persuading customers to serve themselves. This strategy is very effective for high arrival or request variability, both of which complicate labor scheduling. Obviously, when the customer is responsible for much of the labor, the right labor is provided at the right moment. Further, by having customers serve themselves, companies are allowing the service experience to vary with customers’ capability and effort and giving customers control of the service environment. Here companies need to hire lower-cost labor and automate task if the cost of labor is too high. Out-sourcing customer contract can also be done but here attention should be given to quality maintenance.

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In case of classic accommodation strategy we will have to make sure that plenty of employees are on hand. We should also be sure that the employees have specialized skills which will make them experts in their own fields. We also need to train employees to handle many kinds of requests efficiently and effectively. We will have to make sure that make sure employees are on hand who can adapt to customers’ varied skill levels. For this the employees must be flexible enough to adapt to the changed circumstances. The whole objective of the company should be to work for the customers. We also need to make sure that employees who are on hand who can compensate for customers’ lack of effort. We should also be sure that the employees who are on hand have the capacity of judgment and diagonise the difference between expectations and adapt accordingly. Effort variability can be solved using this approach. Like most other accommodation strategies, this one also forces the company to bear the brunt of the variability. So the success of an accommodation strategy usually depends on a company’s ability to persuade customers to pay more to cover the added expense which might be incurred in the overall process.

Classic reductions strategies can be done in the following ways: We should create a mentality among customers that they are required to make reservations for specific types of services. We should try our best to provide off-peak pricing. We should also limit the availability of the service otherwise profit making would become impossible. We will also have to persuade customers to compromise their requests. We should make the customers aware that they must increase their level of capability before they start using the service. We would also have to use rewards and penalties in order to encourage customers to increase their efforts. By using various media we will have to persuade the customers to adjust their expectations to match the value proposition.

There are several ways to introduce uncompromised reductions strategies. I have discussed some of them here. Here first we need to create a complementary demand so that there is a smooth transition without requiring customers to change their behavior. Here we need to reduce the service breadth. Then we need to target customers on the basis of their requests so that our efforts can be channelized in the right direction. We also need to target customers on the basis of their capabilities and their motivations to choose the product. Then we need to use a normative approach to get customers to increase their efforts. While following this approach some companies nowadays are targeting customers on the basis of their subjective preferences. Normative means relying more on shame, blame and pride. Here companies are required to create an atmosphere where customers will care about the impact of their behavior on others. This measure is very effective when other instrumental measures have failed.

In order to see the effectiveness of the strategies a pilot program can be introduced in the organization. But there the strategic manager should answer the following questions.

a) Are the pilot programs being tested under typical circumstances?

b) Whether the employees, customers, and resources consistent with the company’s real operating environment?

c) Whether the goal is definite and clear to all the concerned persons?

d) Whether customers and frontline employees are involved in evaluating the circumstances of the test?

Profitably managing the variability implicit in customer heterogeneity, and developing effective strategies to influence it, is a central challenge for any modern businesses. Byextending this concept we can say, it is also a central challenge for any competitive market also. In the competitive market, service providers conduct more than 70% of commerce in all major economies of the world- yet the frameworks and tools for managing these businesses lag behind those developed for manufacturing environments. What needed is a thorough understanding of the workings of modern businesses by identifying the characteristics that make them different from those of the earlier ones . Chief among these is the presence of the customer in the overall operations. Customers perform various important roles that are either well or poorly designed for them and engage in behaviors that either benefit or harm the company in the long run. All these make it nearly impossible to manage production in isolation from consumption in modern companies. Companies that learn to frame strategies to manage the variability that the customers bring to the works will find that customers are the key to competitive advantage.

From the above process it can be said that management of variability in modern day business requires the management to influence the customer’s behavior. Here the problem is company’s operational concerns are not given importance in its customers’ minds. Here the manager must understand the root cause of the customer’s problematic behavior. Unless there is no proper diagnosis of the root cause no subsequent action to correct it can be taken. The management then should decide what will happen if the behavior is not changed. Then they should find out the hypothesis of the cause of the behavior. Then they must select which hypothesis makes the most sense. After this they should find ways to test the hypothesis. Then the strategy of the management would be to design a mutually beneficial operating role for the customers. The new role should create explicit values for both the parties. After all this it is necessary to determine whether it would be realistic to believe that the customers would behave in the way the management wants. We can see that the customer behavior is inherently very complicated so it is essential to test all the alternative strategies before they are being rolled out on a broad scale. Here the pilot test mentioned earlier will play a very important role. From this it can be concluded that building a winning strategy is based on the proper understanding of the true drivers of customer behavior.


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