Importance of Operational excellence for services marketing
It is interesting that the link between “Marketing” and “Operations” is closest in “services marketing”. Why? Because of the way in which services are “simultaneously produced and consumed”. In comparison to product manufacturers that can produce, store, ship and then deliver…a services marketing role will make the service new at the same time as they are delivering it. For this reason (lack of time between production and sales), it is essential that a services marketing operation delivers 100% quality the first time. While this might be easy in a small operation, it is increasingly difficult as the company reaches economies of scale. The challenge is to design the operating procedures so that the same level of high quality is delivered each and every time a customer is serviced. For this reason, the link between marketing and operations gets even closer in services.
Other operations issues to consider in services marketing:
1. How much capacity will you plan for? In services this issue is critical because of the nature of demand of the services industry. As compared to the manufacturing industry where extra goods can be produced in slow times (inventory) to sell to consumers when demand picks up…. in services marketing, there is no way to store inventory (an airline seat not used today can not be sold tomorrow). So, for this reason, the capacity planning issues are even more critical for services marketing than they are for manufacturing. This investment decision is complicated and should not be taken lightly.
2. Location selection issues are even more critical for services marketing. When making a capacity investment decision for services, you will need to locate your investment in fixed assets near to the location of your expected customers. The opposite of manufacturing occurs in services, where you first need to distribute your capacity, and then later you need to produce your product (service). For example, a company will first need to distribute hotel room capacity to all of the locations that consumers might want to sleep, and then they will need to sell the services. Or, a telephone service provider will need to first invest to have transmission capacity distributed to each neighborhood before they can offer the services. On the contrary, a manufacturing company will first produce the product and will worry later about how to distribute it to consumers (storing it as inventory, and selling it at a later date).
3. Services marketing needs to be ready for high volatility of demand for their services. Rush hour at lunch time for example. So, peak capacity will spike much higher than for manufacturing. So, services marketing operations needs to plan for this. Also, the amount of time it takes to service one customer varies from customer to customer…whereas a manufacturing operation can precisely plan how much time they will spend on each product produced. This extra variability makes it more difficult to plan for capacity requirements of services industries. As a result, many services industries plan the capacity in short horizons; ie scheduling the level of support staff needed to staff an event only at the last minute, calling up extra temp workers as needed
4. Capacity utilization directly effects the perceived service quality. In industries such as concerts… a full sold out stadium makes the whole experience better for each individual consumer, but other services industries such as airlines… a full capacity used (a completely full plane) makes other customers uncomfortable…and decreases the level of experience of each customer.
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