Slide 4.

Understanding customers
and relationships
Slide 4.2

To understand and develop ‘customer’

relationship
Slide 4.3

Connect Deliver

Implement Improve
Slide 4.4

 A recipient and a provider in a service

process.
 Individual, unit, even or organization are the
customer.
 Service involve customer means is a two-way
or multiple-way of process.
Slide 4.5

 Supply chains are quite easy to define for

manufacturing organizations where each
participant in the chain receives inputs from a set
of suppliers, processes those inputs, and delivers
them to a distinct set of customers.
Slide 4.6

 For service organizations, one of the primary

suppliers of process inputs is customers
themselves, who provide their bodies, minds,
belongings, or information as inputs to the
service processes.
 We refer to this concept of customers being
suppliers as “customer-supplier duality”. The
duality implies that service supply chains are
bidirectional, which is that production flows
in both directions.
Slide 4.7

Suppliers

Disposal
Recycling/Remanufacturing

Product and Manufacturing Distribution Retailing After-sales

Consumer
Process Design Service

Material Transfer Information Transfer

Slide 4.8

Service Customer >Input Service

Category -Supplier Output> Provider

Minds Student >Mind Professor

Knowledge>
Bodies Patient >Tooth Dentist
Filling>
Belongings Investor >Money Bank
Interest>
Information Client >Documents Tax Preparer
1040>
Slide 4.9

Supplier

Service Service
Provider Customer
Design

Material transfer Information transfer

Slide 4.10

 Customer-Supplier Duality
 Service Supply Relationships are Hubs, not
Chains
 Customer Supplied Inputs Can Vary In Quality
 Slide 4.11

Figure 4.1 Customers and services in booking a holiday

Slide 4.12

 External or internal customers

 Intermediaries or end users or consumers

 Stakeholders: Payers, beneficiaries or

participant

 Valuable or not-so valuable customers

Slide 4.13

Figure 4.2 Customer types

Slide 4.14

 Easy to deal with

 Act as advocates and provide positive word-of-
mouth advertising
 Assist in service provision
 Reduce operating coast
 Increase revenues
 Help organization maintain and improve its services
 Do not place undue demands on the service
 Generate long-term revenue streams
 Spend more than other customers
 Increase spending over time
 May pay premium prices
Slide 4.15

 Managing customer relationship is about

establishing, maintaining and enhancing
relationship with customer for mutual
benefits. (relationship marketing)
 Develop relationship with individual
customers, one-to-one marketing, and with
groups of like-minded people; rather than
seeing a one-off transaction.
 However, many customers do not wish for a
relationship with some organizations and
their staff for so many reason.
 Slide 4.16
Professional service: management
consultant
Communication •Two-way
•Free flowing
•Transfer of knowledge
•Relates to business possibilities as well as
current contracts
•A significant amount of time is devoted to
communication
Trust •Built between individuals (client and
consultants) in the course of the involvement
•May involve significant amounts of
confidential and sensitive information
Intimacy •Consultants become completely involved
with the life of the client’s organization and
are often regarded as semi-permanent
employees
•Part of the team
Rules •May be developed as part of the initial
relationship-forming process
•Negotiation as to who does what is often
part of initial evaluation, but the brief may
change as the relationship develops
Customer service: restaurant chain
•Largely one-way – from provider to
customer, apart from order-giving and paying
•Formal communication
•Relates to formal service offer
•No budget for significant informal
communication
•Built between customer and organization
largely by reliability (delivery by promise)
•Scope strictly limited to providing value-for-
money meals in safe surroundings
•Involvement between employees and
customers may be limited to order-taking
and basic service
•Customer intimacy is often linked to
fortuitous discovery of common interests
•Largely set by the organization or service
sector
•Based on established ‘script’, expected
behaviour and assumed knowledge
Slide 4.17

Weak relationship Strong relationship

(transaction-based) (partnership-based)
High •Opportunity •Protect
customer
perceived
risk

Low •Buy loyalty •Familiarity

customer
perceived
risk

BK video
Slide 4.18

 Contract
 Partnership
 Strategic alliances
 Partnering
 Joint ventures
 Networks
Slide 4.19

 Supply chain
◦ The set of network that join together internal and
external suppliers with internal and external
consumer
 Supply chain management (SCM)
◦ Managing the network and the flow of information,
materials, services and customer
Slide 4.20

A simple supply chain

Slide 4.21

Multi-tiered supply chain

Slide 4.22

 Requires consideration:
◦ Cultural differences
◦ Technology transfer
◦ Operations organizational structure
◦ The role of each unit in the network
◦ Location decisions
◦ Choice of partners and suppliers.
Slide 4.23
Slide 4.24

MANAGING MANAGING
DEMAND CAPACITY

Partitioning Increasing
demand customer
Developing participation
Sharing
complementary
capacity
services
Establishing
Scheduling
price
Cross- work shifts
Developing incentives
reservation training
systems employees
Promoting Creating
off-peak adjustable
Using
demand capacity
part-time
employees

Yield
management
11-24
Slide 4.25

 Other word is ‘capacity management’.

 Capacity management is concerned with
putting a plan in place that makes the best
use of resources to deal with expected
demand for services.
 Service capacity is defined as the maximum
level of value-added activity over a period
of time that the service process can
consistently achieve under normal
operating conditions.
 Capacity is influenced by a range of factors
including service mix, location, intangibility
and resource constraints.
Slide 4.26

 My fuel tank at home is 5000 litres

 The capacity of the car boot is 466 litres,
while the car can transport 5 people
 The hospital has 1100 beds
 The aeroplane on the daily flight between
Brussels and New York contains 320 seats
 Inspection centre has 11 inspection lines
 The food only for 500 people at one time
Slide 4.27

Value
• cost
• waiting time
• quality of service (perceived)
experience

Capacity scheduling
‘How to use capacity?’ Customer
•Staffing • Price
•Case management • Customer satisfaction
•Material management
Service
concept

Capacity planning
‘How much capacity Demand management
to make available’ • demand pattern
• personnel • appropriate policy
• equipment • segmentation
• infrastructure
Slide 4.28

 Involve two decisions:

1. How much capacity to make available

(=capacity planning)
2. How to utilize the existing capacity
(=capacity scheduling)
Slide 4.29

 Arrival: customer arrivals are independent decisions

not evenly spaced.

 Capability: level of knowledge and skills vary

resulting in some hand-holding.

 Request: uneven service times result from unique

demands.

 Effort: level of commitment to coproduction or self-

service varies.

 Subjective Preference: personal preferences

introduce unpredictability.
11-29
Slide 4.30
Slide 4.31

In a life time, the average

person will spend:

SIX MONTHS Waiting at stoplights

EIGHT MONTHS Opening junk mail

ONE YEAR Looking for misplaced objects

TWO YEARS Reading E-mail

FOUR YEARS Doing housework

FIVE YEARS Waiting in line

SIX YEARS Eating

12-31
Slide 4.32

 “Americans hate to wait. So business is trying a trick

or two to make lines seem shorter…” The New York Times,
September 25, 1988
 “An Englishman, even when he is by himself, will form
an orderly queue of one…” George Mikes, “How to be an
Alien”
 “In the Soviet Union, waiting lines were used as a
rationing device…” Hedrick Smith, “The Russians”

12-32
Slide 4.33

 Inevitability of Waiting: Waiting results from

variations in arrival rates and service rates
 Economics of Waiting: High utilization purchased at
the price of customer waiting. Make waiting
productive (salad bar) or profitable (drinking bar).

12-33
Slide 4.34

 I am the person who goes into a restaurant, sits down,

and patiently waits while the wait - staff does
everything but take my order.
 I am the person that waits in line for the clerk to
finish chatting with his buddy.
 I am the one who never comes back and it amuses me
to see money spent to get me back.
 I was there in the first place, all you had to do was
show me some courtesy and service.
The Customer

12-34
Slide 4.35

 That Old Empty Feeling: Unoccupied time goes

slowly
 A Foot in the Door: Pre-service waits seem longer
that in-service waits
 The Light at the End of the Tunnel: Reduce anxiety
with attention
 Excuse Me, But I Was First: Social justice with
FCFS queue discipline
 They Also Serve, Who Sit and Wait: Avoids idle
service capacity

12-35
Slide 4.36
Slide 4.37

 Reliability: Perform promised service

dependably and accurately. Example:
receive mail at same time each day.

 Responsiveness: Willingness to help

customers promptly. Example: avoid
keeping customers waiting for no apparent
reason.

6-37
Slide 4.38

 Assurance: Ability to convey trust and

confidence.
◦ Example: being polite and showing respect for
customer.

 Empathy: Ability to be approachable.

◦ Example: being a good listener.

 Tangibles: Physical facilities and facilitating

goods.
◦ Example: cleanliness.

6-38
Slide 4.39
Slide 4.40

Think of the last time you arranged an event

or a service, such as a holiday, dinner party,
wedding event and etc. What were the issues
you faced in coordination the various inputs,
including participants, and activities and
suppliers?
Slide 4.41