Lecture 3

STRATEGIC SERVICE VISION

Learning objectives
To formulate strategic service vision in achieving
competitive advantage

2.6 Strategic Service Vision

Strategic service vision was developed by James L. Heskett
Strategic service vision is comprised of four basic elements as shown in
Figure 2.8:

FIGURE 2.8: ELEMENTS OF STRATEGIC SERVICE VISION

Service strategy should have a vision of the place and purpose of the service firm,
which is met with basic elements and element integration of Strategic Service
Vision.

Customer segmentation
Select & identify customers which service organization is able &
willing to serve
Customers which will perceive value in the offered service
Identify a group of customers with common characteristics
Needs, purchasing behavior, consumption pattern

Differentiate various segments & devise service strategy appropriately

Geographic, demographic

Setting target market will help customers in defining their expectations and helps
employees to know which customers to go the extra mile for.

Why customers prefer a particular service organization?

Service perceived by
Internal customers
External customers
Stakeholders
Plan or devise efforts in designing / delivery & marketing service so as to
meet perception of above mentioned entities as shown in Figure 2.9.

FIGURE 2.9: SERVICE CONCEPT PERCEIVED BY ALL

STAKEHOLDERS

How should the firm be structured to produce the service concept?

Set of strategies, plans and policies and allocate resources on organizations
- Operations, Financing, Marketing, Human resources

Where efforts & investments are concentrated?

 Specific decisions made by service organization to handle service encounters

- personnel, job descriptions and procedures, equipment, capacity, facilities,
technology
How a service organization is placed in competition?
- Quality standards
- Differentiate from competitors
- Provide barriers to entry by competitions

Integration of Elements of Strategic Service Vision

All the elements of Strategic service vision are integrated in form of positioning,
value leveraging and strategy system integration as presented with basic elements
in Figure 2.10 and described in Figure 2.11

FIGURE 2.10: INTEGRATIVE ELEMENTS OF STRATEGIC SERVICE

VISION

FIGURE 2.11: BASIC AND INTEGRATIVE ELEMENTS OF STRATEGIC

SERVICE VISION

2.6.1 Strategic Service Vision: Example of DHL

DHL is a global market leader in logistics industry with 220 countries linked
in global network. DHL provides parcel and express shipment globally by
road, rail and air.
DHL has reoriented Strategic Service Vision by following steps:
1. Develop service concept model.
2. Utilize service concept to segment market or target market.
3. Redesign the service delivery system.

DHL Service Concept Model

DHL utilize discrete choice preference analysis to capture the relative
importance of core and peripheral services perceived by the customers on
various attributes:
1. Reliable performance
2. Price
3. Customer interaction
4. Customer service recovery
5. Supply chain capacity
6. Supply chain innovation
7. Professionalism

DHL Target Market Segments

Offer different service packages to different segments
Segmentation was done based on
1. Customer operating platform: Global, regional or local
2. Revenue potential: Large customers, medium customers and small
customers
DHL allocated similar resources to each segment
1. Segment 1: Dominated by price and supply chain capacity

2. Segment 2: Customers prefer reliable service

3. Segment 3: Prefer broader value based attributes such as customer
interaction, customer service recovery and supply chain innovation
Each segment exhibit similar preferences regarding the attributes

DHL Service Delivery Systems

Decisions required regarding service delivery system
Type of value added services
Location and frequency of customer contact points
Allocation of service tasks
Number and type of distribution channels
Distribution channels based on service desks, customer visits and dedicated
key account personnel
DHL develop Service Delivery System for different Segments as presented in
Table 2.1.

TABLE 2.1: DIFFERENT SEGMENTS OF DHL SERVICE DELIVERY

SYSTEM

Segment 1 named
Collaborators
Products and services required

Segment 2 named
Perfectionist
Products and service required

Core product, onboard couriers, next- Core product, global mail, time
flight-out and charter options,
and day definite services.
shippers intrest insurance, global
mail, logistic, inventory
management, time and day definite
services.
Value-added services
Shippers interest insurance, sale in
transit, neutral delivery service,
delivery duty paid, shipment
consolidation, special deliveries and
pickups, free storage for three days,
e-com tools, e-billing, and key
account desk.
Current DHL practices
Insurance, trade services, pre-export
clearance shipment handling,
regular pickup service, late pickups,
early deliveries, coordination with
third parties for onboard couriers,
and flight-out and charter needs.

Value-added services
E-solutions, delivery duty paid,
neutral delivery service, drop
shipment, break bulk express,
cross docking, one-stop
clearance and key account
desk.
Current DHL practices
Regular pickup service, data
exchange process, late
pickups, early deliveries, onsite support, e-com tool, ebilling, special billing,
re-weight report, and daily
shipment e-reports.

Segment 3 named
Price Zealots
Products and services required
Onsite mailroom staff,
customization of
billing/operation/IT solutions,
key account desk (dedicated
customer service), and project
management of customer
solution.
Value-added services
Domestic service, mailroom
service, and program
management of solution
implementation.

Current DHL practices

IT Solutions and EDI for
billing, regular pickup and
delivery, track and
trace/regular activity
reporting, and same-duty
uplift.

2.7 Customer Criteria for Selecting a Service Provider

Availability

(24 hour ATM)

Convenience

(Site location)

Dependability

(On-time performance)

Personalization

(Know customers name)

Price

(Quality surrogate)

Quality

(Perceptions important)

Reputation

(Word-of-mouth)

Safety

(Customer well-being)

Speed

(Avoid excessive waiting)

2.8 Levels of ServiceCompetitive Dimension

A service organization can be rated as Qualifiers, service winners or service losers based
on the service competition dimension as shown in Figure 2.12 and examples are shown in
Figure 2.13.

FIGURE 2.12: LEVELS OF SERVICECOMPETITIVE DIMENSION

FIGURE 2.13 EXAMPLES: LEVELS OF SERVICECOMPETITIVE

DIMENSION

Examples from service industry for Strategic Service Vision

ITeS
Target market segment

Service concept

Operating strategy

Mobile communications
service provider
Target customers need IT Target customers can be
solutions including
segmented as
hardware and services can
Pre-paid and postbe segmented as
paid connections
Size of the
Corporate
customer based on
connections and
their annual
individual user
turnover
connection
Different verticals
like banking,
construction, Retail
Public versus
private sectors
Geographical
location of clients
whether domestic
or multi national
Provide integrated end-to- Provide voice telephony
end solution to the clients with good signal and wide
by collaborating with the coverage with low cost
customer to improve the
tariffs customized as per
process in cost effective users requirements with
manner
additional features of
internet
Human resource
Managing
intensive sector
infrastructure and
which involves
networking costs
selection of right
including location
skill
of towers
Proper training is
Distribution cost of
required to allocate
selling talk time
right employee to
through retailers.
right project
Human resources
Huge investments
having good
command of
are required in
introducing
building offices,
providing
attractive schemes

workstations to the
employees and
acquiring other
companies
Productivity of
teams in terms of
completing the
project on time

Service delivery system

Technical
knowledge, process
orientation and
project
management skills
of the employees of
any ITeS company
can create barriers
to entry to such
business
Winning over
major projects and
completing the
projects on time in
a cost effective
manner for both
service provider
and client leads to
competitive
advantage

Finance handling
dealing with
various banks and
retailers through
various modes of
payments
Abiding regulations
in
telecommunication
industry
Cost effective
Strategies to be
creative in
introducing internet
and entertainment
related features
Provide wide
coverage of
recharge facilities
through retailers
Winning over latest
spectrum related
deals like 3G or 4G
to create entry
barriers
Customized talk
time based on the
requirements of
customers like
frequency of
international calls
made, SMS usage,
local calls etc.
Strategic locations
of towers