exam_2_study_guide

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Information Systems

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Oct 30, 2023

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Exam 2 Study Guide Service Blueprint Service Design: the activity of planning and organizing a business’s resources (the people, physical evidence, and processes) in order to improve the employee’s(directly) and customer’s (indirectly) experience. Design Components: - Physical evidence -> ( used throughout the service) artifacts, physical space, digital environment, webpages, products, blogs, social media - People -> (anyone who creates or uses the service, or the people who may be indirectly affected by the service) employees, customers, partners - Process -> ( workflow, procedures, or rules needed to perform the service successfully) sharing files, interviews, issue resolution, atm withdrawal Service blueprint: diagram that visualizes the relationship between different service components that are directly tied to the touchpoints throughout the customer's journey. - Components: o Physical evidence o Customer journey ▪ Line of Interaction o Visible contact employee actions ▪ Line of visibility o Invisible contact employee actions ▪ Line of internal interaction o Support processes Steps in creating a service blueprint: 1) Identify the process to be blue printed a. What service process are you focusing on? 2) Identify the customer or customer segment a. Who are your customers, why did you choose them? 3) Map the process from the customer’s point of view 4) Map contact employee actions, onstage, and backstage 5) Link customer and contact person activities needed to support functions 6) Add evidence of service at each customer action step - Benefits = understanding customers, understanding employee’s roles, understanding the integration of various elements, platform innovation, service redesign opportunities Customer Journey Map : the way your customers interact with your brand from start to finish

Service Standards Service standard : specifies requirements that should be fulfilled by a service to establish its fitness for purpose Examples: responsiveness, accountability, washing hands, greeting customers Benefits - Ensuring the service to be delivered consistently - Regulate employees and consumer behaviors, managing services easily - Achieve mass production and economies of scale Challenges - Subjective o “Be nice to customers...” “be flexible and responsive to customers” - Standardization o Usually implies a non-varying sequential process similar to the production of goods - Customization o Usually refers to some level of adaptation or tailoring of the process to the individual customer o More favorable by customers Company-defined standards : established to reach internal company goals for productivity, efficient, or cost Customer-defined standards : based on pivotal customer requirements identified by customers Hard measures -> things that can be counted, times, or observed through audits or operating data Ex: time, defect rate, number of events Soft measures -> opinion-based measures that cannot be directly observed, must be collected by talking to customers, employees, or others Ex: customer feeling and satisfaction, transaction-based surveys Service Pricing It’s challenging to determine the pricing of services because there are service and customer variations. Customers have different situations and needs; each interaction is unique. Therefore, the service may be different pertaining to each new customer or patient (doctors, insurance and quotes). It is also difficult to get price information because service providers may be unwilling/unable to estimate the price. The information search for the pricing as well may be overwhelming for the customer (like airplane pricing). Cost-based Pricing : a cost-oriented pricing approach that sets a service price based on all the costs plus a desirable profit. → Markup is expressed as a percentage of the cost o = (unit selling price-cost per unit) / cost per unit o Price = cost + (cost * markup)

→ Margin is expressed as a percentage of the revenue or price o = (unit selling price-cost per unit) / unit selling price o Price = cost / (1-margin) Fixed costs : don’t vary with production or sales revenue Ex: rent, utilities Variable costs : vary directly with the production volume Ex: material used in production, labor Break-even: analysis examines the relationships among cost, price, revenue, and profit over different production levels. The B/E point is the number of units sold at which the total revenue equals the total costs or when the profit is $0 “quantity sold at which profit = 0” Price -> = Fixed costs / (Price – Variable cost per unit) Price -> = (Fixed costs + Target profit) / (Price – Variable cost per unit) Non-monetary costs: sacrifices and efforts that consumers make, which do not involve direct financial expenditure, costs are associated with the decision-making process and the experience of acquiring a product or service Ex: time costs (waiting times for a service), convenience costs (cognitive and physical efforts a consumer makes, psychological costs (uncertainty or fear towards a service) Differentiation Premium Pricing: incorporates the competitor’s pricing and firm’s competitive advantages - Differentiation Premium: the premium that a firm can earn by differentiating itself from competitors; (-1,1) o ACP: average competitor's price o Ap: availability premium - higher service available o Rp: reputation premium – better reputation and less perceived risk of services o Cp: commitment incentive premium – stronger commitment of being loyal and long- term relationships o Psp: price sensitivity premium – less price sensitivity - Companies can charge a higher price by having a positive differentiation premium (DP) Price-> = (1+DP) *ACP DP= f (Ap, Rp, Cp, Psp) Price elasticity: how a change in price affects the product demand, how sensitive the customer is to a price change Ed = | % change in the qty. Demanded for product x / % change in the price of product x | % change in quantity= (Q2-Q1)/((Q2+Q1)/2) * 100 % change in price = (P2-P1)/((P2+P1)/2) * 100 - Elastic demand (E>1, price sensitive)

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o Like with the price of meat or price for movie theatres - Inelastic demand (E<1, not sensitive to price changes) o Like with the price of water, electrical charges, salt - Unitary demand (E=1,) Bundle Pricing: selling more than one product for a single, lower price than all items’ individual prices adding together Ex: McDonalds meals Benefits - Maximize revenue - Encourages customers to stock up so they won’t purchase competing brands - Encourages the trial of a new product - Provides an incentive to purchase a less desirable product Usually used for new product service pricing is skimming and penetration Skimming : sets a high initial price and lowers it gradually so profit and price discrimination are maximized (high quality products) Penetration: sets a very low initial price to gain market share (attract new customers, entering the market rapidly to grow a loyal client base Price discrimination comes based on searching cost, with the effect from coupons and rebates Coupons : vouchers or codes to allow customer to receive discount on their purchase at a time of their purchase- Immediate discount Rebates : discount or incentive is received after the purchase, requires the customer to act after the purchase, purchases are made at full price and the saving occur only after the target is met