Variability

Because services depend on who provides them and when and where they are provided, they are highly variable. Knowing this, service firms can take three steps toward quality control. The first is recruiting the right service employees and providing them with excellent training. This is crucial regardless of whether employees are highly skilled professionals or low-skilled workers.

For example, the California-based Horn Group handles public relations for high-powered Silicon Valley software makers and technology consultants. Founder Sabrina Horn invests heavily in training her employees and in building morale and enthusiasm. She has developed education programs that include lunchtime seminars on everything from how to write a press release to how to manage an account. Employees also receive tuition reimbursement for continuing education.8

The second step is standardizing the service-performance process throughout the organization. Companies can do this by preparing a flowchart that depicts every service event and process. Using this flowchart, management can identify potential fail points and then plan improvements. The third step—taken by Priceline.com and many other service firms—is monitoring customer satisfaction through suggestion and complaint systems, customer surveys, and comparison shopping.

Table 4.3 Strategies for Improving the Match between Demand and Supply

Demand-Side Strategies

Supply-Side Strategies

Use differential pricing to shift demand from peak to off-peak periods; movie theaters and car rental firms do this by lowering prices during off-peak periods. Cultivate nonpeak demand to build sales during off-peak periods; hotels do this with their weekend minivacation packages.

Develop complementary services to provide alternatives for customers during peak periods; many banks do this by providing drop-off boxes for deposits and payments.

Install reservation systems to better manage demand levels; airlines, hotels, and physicians employ such systems extensively.

Hire part-time employees to meet peak demand; restaurants, stores, and Web-based businesses often bring in temporary staffers to help out during holidays and other peak periods. Introduce peak-time efficiency routines to keep productivity high during periods of high demand; paramedics often assist physicians during busy periods. Increase consumer participation to speed transactions; this is one reason why supermarkets are experimenting with selfservice checkouts where shoppers scan and bag their own groceries. Plan facilities for future expansion to increase supply; an amusement park can buy surrounding land for later development as demand increases.

Share services with other providers to help manage demand; hospitals can do this by sharing medical-equipment purchases and scheduling.

Source: Adapted from W. Earl Sasser, "Match Supply and Demand in Service Industries," Harvard Business Review, November-December 1976, pp. 133—40.

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