Sample Answers to Exercises and Thought Questions: Chapter 17
EX 17.1.
Define the service process flow for a service of interest to you. Some suggestions are purchasing a new automobile, going to a coffee shop, booking a vacation, buying a new computer, purchasing music, dining in a restaurant, going to the movies, staying at a hotel, applying to graduate school, or shopping for clothing.
Sample Answer:
Define the service process flow for a service of interest to you. Some suggestions are purchasing a new automobile, going to a coffee shop, booking a vacation, buying a new computer, purchasing music, dining in a restaurant, going to the movies, staying at a hotel, applying to graduate school, or shopping for clothing.
Sample Answer:
Service Process Flow for "going to the movies"
EX 17.2.
Identify opportunities for innovation or areas of recent innovation in the service process described in Exercise 17.1.
Sample Answer:
Identify opportunities for innovation or areas of recent innovation in the service process described in Exercise 17.1.
Sample Answer:
|
Process Step
|
Innovation
|
|
Advertising
|
Online marketing, on-demand trailers
|
|
Comparison Shopping
|
Online seller offers and compares times, pricing, and amenities at all nearby theatres
|
|
Arrive
|
Arrange for Uber or limo service with ticket purchase
|
|
Ticket Purchase
|
Online with digital ticket on smartphone
|
|
Food Purchase
|
Order online, table service, reorder from your seat
|
|
Seating
|
Better seats, seats for couples, family seating, actuated seats to feel the bass sounds, device charging (and silencing)
|
|
Departure
|
Uber or taxi service is ready and waiting after the film
|
|
Word of mouth
|
Incentive discounts for sharing your experience with friends
|
EX 17.3.
List five products that benefitted from the introduction of necessary or complementary services in terms of market success and customer satisfaction.
Sample Answer:
List five products that benefitted from the introduction of necessary or complementary services in terms of market success and customer satisfaction.
Sample Answer:
|
Product
|
Service
|
|
GoPro video camera
|
GoPro YouTube channel
|
|
Apple iPod
|
Apple iTunes
|
|
Automobile
|
Manufacturer's warranty
|
|
M&Ms
|
Custom Printing
|
|
Pitney Bowes mailing system
|
Mail room service
|
|
Smartphone
|
Voice and data services
|
Thought Questions
TQ17.1.
What are the differences and similarities between the product development process and the process of designing services? Illustrate your answer with representative development process diagrams.
Sample Answer:
An online image search for publicly available product development process diagrams finds hundreds of examples. However most are from consultants and academics. Finding diagrams from service and product firms takes more advanced searching but did yield some results. Two examples are shown below (with URLs).
Similarities:
Differences:
Lucas TVS (automobile components example)
TQ17.1.
What are the differences and similarities between the product development process and the process of designing services? Illustrate your answer with representative development process diagrams.
Sample Answer:
An online image search for publicly available product development process diagrams finds hundreds of examples. However most are from consultants and academics. Finding diagrams from service and product firms takes more advanced searching but did yield some results. Two examples are shown below (with URLs).
Similarities:
- At the high level, most of the processes found are very similar and follow the process laid out in the textbook.
- There is a specific phase at the start of the process for concept development. This is followed by detailed design and testing before implementation.
Differences:
- At the high level, the primary difference is use of the terms “service” and “solution”.
- Most of the service development processes named fewer detailed methods.
Lucas TVS (automobile components example)
IBM (telecommunication service example)
TQ17.2.
Draw the Zipcar process flow diagram in a way that explicitly delineates process flows for customer actions, visible employee actions, back-office employee activities, and IT-based systems. What is the relationship between the company’s service process flow and the customer’s service experience?
Sample Answer:
Zipcar has a customer-centric process, as illustrated by the process flow diagram below, which is coded (per legend) to differentiate between customer, employee, and IT system actions. Zipcar customers may not realize that so many activities are taking place behind the scene to handle the vehicles an to support each customer transaction.
Draw the Zipcar process flow diagram in a way that explicitly delineates process flows for customer actions, visible employee actions, back-office employee activities, and IT-based systems. What is the relationship between the company’s service process flow and the customer’s service experience?
Sample Answer:
Zipcar has a customer-centric process, as illustrated by the process flow diagram below, which is coded (per legend) to differentiate between customer, employee, and IT system actions. Zipcar customers may not realize that so many activities are taking place behind the scene to handle the vehicles an to support each customer transaction.
TQ17.3.
For a product-service system such as a mobile phone or an automobile, consider the relative pricing of the product and the service. How would you optimize pricing to maximize profits? What are some of the challenges that make this very difficult to do in practice?
Sample Answer:
Automobile retailers face the trade-off of sales versus service pricing. Say they have the option to price (and sell) the vehicle between $20,000 and $25,000, with a corresponding profit of $0 and $5,000, respectively. They also expect (most) of their sales customers to return for service. Let’s say the profit margin on service could range from 10% to 90%, depending how they price the service and parts. Further assume that customers consume $10,000 of service cost over the time they own the vehicle, representing a service profit range of $1,000 to $9,000. Of course, they would love to reap maximum profit from both sales and service. However they know that the higher they price the sales, the fewer sales they will win, losing out also on the service. Similarly, the higher they price the service, the fewer customers will return for service.
Based on certain assumptions of elasticity to sales price and to service price, we can develop a table showing expected profit for various margin combinations. For the parameters used, profit is maximized with sales and service margins of 10% and 75%, respectively.
For a product-service system such as a mobile phone or an automobile, consider the relative pricing of the product and the service. How would you optimize pricing to maximize profits? What are some of the challenges that make this very difficult to do in practice?
Sample Answer:
Automobile retailers face the trade-off of sales versus service pricing. Say they have the option to price (and sell) the vehicle between $20,000 and $25,000, with a corresponding profit of $0 and $5,000, respectively. They also expect (most) of their sales customers to return for service. Let’s say the profit margin on service could range from 10% to 90%, depending how they price the service and parts. Further assume that customers consume $10,000 of service cost over the time they own the vehicle, representing a service profit range of $1,000 to $9,000. Of course, they would love to reap maximum profit from both sales and service. However they know that the higher they price the sales, the fewer sales they will win, losing out also on the service. Similarly, the higher they price the service, the fewer customers will return for service.
Based on certain assumptions of elasticity to sales price and to service price, we can develop a table showing expected profit for various margin combinations. For the parameters used, profit is maximized with sales and service margins of 10% and 75%, respectively.
Some of the many challenges in implementing this approach in practice include the following:
- There are many possible combinations of margins, and it would be very difficult to know the elasticity for each one.
- Dealers sell many different vehicles, not just one as in the example. Each one could have different parameters.
- Generally sales staff have incentives to sell with little regard to overall profits.
- Elasticities would change as competitors adjust their margins too.