Understanding Professional Services

Professional Services 
Professional services firms (e.g., law, consulting, accounting firms, advertising agencies) deliver products that are almost entirely dependent upon the quality of the employees. Unlike travel, communications, and other services, the quality of the product delivered is a combination of a number of factors-not only the people involved but the underlying technology (quality of the digital cellular connection), equipment (aircraft used), and so on. While barriers to entry are high, intangibility of the product is still a problem as is the inseparability of production and consumption, to some extent, as clients have to partici­pate in the creation of tax returns, consulting reports, and other products of professional service firms.
A high overall level of technical expertise is a given for a competitive services firm.
Key dimensions for differentiation are: specialized technical expertise (e.g., an accounting firm specializing in performing audits of universities), reputation, and integrity. For professional services, reputation is the key asset because it is the basis for positive word of mouth and reduces the amount of uncertainty inherent in service products. Reputation is the sum effect of the RATER dimensions: reliability, assurance, tangibles (expertise), empathy, and responsiveness. Reputation can also be viewed as the sum of the competitive strategy components of excellence in employee recruiting (inbound logistics), service operations, marketing and sales, and service quality.
Integrity has entered the limelight with the demise of the once-powerful Arthur Andersen accounting firm.
However, technical expertise, reputation, and integrity usually only get a profes­sional services firm into the client's evoked set. To win the account, the challenge is to make the firm's accomplishments tangible to the prospective client. As noted earlier, advertising agencies can create portfolios and reels of their creative work. Consulting firms tout money saved through new processes instituted, law firms note significant cases won, and so on. In addition, expertise can be made tangible. For example, consulting firms often sponsor symposia in their areas of expertise. The us-ual strategy of brand-building works. An example of this is the consulting firm McKinsey, which is one of the most powerful brands in the world. Finally CRM is critical, particularly in a person-to-person business such as professional services.

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Service Design

Service Design 
Because services are intangible, they are difficult to describe and, therefore, to design and redesign if a new service is desired. Perhaps the best way to understand this is to think of the design of a manufactured item. Physical goods can be blueprinted; that is, either on paper or using computer software, the physical nature of the product (width, length, circuitry design, etc.) can be described. As a result, physical product attributes can be shown, communicated, and understood easily. Service blueprinting involves creating a flowchart that describes the flow of activity from the time the customer first contacts the service provider to the time the customer receives the service.
An example of a service blueprint is a blueprint for a mail delivery service. The process or flow of the service begins when the customer calls the firm. The customer speaks with a customer service representative and then a variety of activities occur, culminating with the arrival of the package at its destination.
What is interesting about the figure is that the activities are broken down into three types. The first type, above the top line, is the parts involving customers: calling the company, giving the package for delivery, and receiving the package. The middle two types of activities describe customer contact points (what we called "moments of truth" in Chapter 14). Some of these contact points are observable to the customer, or "onstage," These include the customer interactions with the drivers picking up and delivering the package. "Backstage" contact points are those in which the contact is not face-to-face as, in this instance, this is limited to the person taking the order. If there was a problem with the delivery, a backstage contact would be with a customer service representative handling customer complaints or problems. For this service, much of the activity is below the third line, invisible to the customer.
These blueprints or flowcharts are extremely valuable to service companies. Perhaps the most valuable aspect of blueprints is simply the exercise of creating one. The act of creating a service flowchart forces you to put yourself in the shoes of the customer and thereby develop better insights about the service encounter. As a result, the moments of truth become clear. In addition, the key areas for potential service failure and thus the need for backup and recovery systems are highlighted. When the customer calls the service center to place an order, how is she greeted? How many phone rings are acceptable? After the order is placed, the com­pany needs a system to give the order efficiently and quickly to the dispatcher to get a driver to pick up the package. When the driver has the order and goes to the customer's home or place of work, how is the driver dressed? Is she or he polite and knowledge­able? These kinds of questions can be extended to the other boxes and arrows in the blueprint.
As a result. blueprints are useful tools for understanding the design of the service and for redesigning it. For example, FedEx and UPS have information systems in place, so the large space in the top half of Figure 15.11 between "Customer Gives Package" and "Customer Receives Package" could have a box labeled "Customer Tracks Package." Bar coding on each package enables the companies to know where every package is at a given time. Customers can input the package ID number using PC-based sofu,-are or the companies' web sites and obtain that location information for themselves.
To better understand customer needs, the company undertook two activities. The first was a blueprinting operation.
Their activities are divided into three parts: preflight, in-flight, and postarrival. Singapore Airlines used this flowchart in two ways. First, each block in the activity sequence was separately analyzed from a customer service, moment-of-truth perspective. Second, the airline also evaluated each block to see where technological enhancements could improve its customers' experiences and provide additional ways to differentiate from the competition.

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Singapore Airlines

Singapore Airlines 
The Singapore is only 25 percent of the size of the state of Rhode Island, Singapore Airlines is one of the world's ten biggest airlines, as measured in international tons-kilometers of load carried. The airline became successful by concentrating on marketing. The goal of the airline's management was to create an international airline with a distinctly Asian personality. At the top of the priority list was an emphasis on customer service. The company used the island's main natural resource-the natural hospitality of its people-as a competitive advantage. Through comfortable seating, free drinks and movie headsets, and the hospitality of its flight attendants, Singapore Airlines has set the world standard for international air travel quality.
In 1991, the airline was facing increased competition and improved service quality from several Western and Asian airlines, including Cathay Pacific, Japan Airlines, Thai International, and Malaysia Airlines. The challenge facing the company was how to continue to maintain its outstanding reputation for customer service and technical innovation.

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Channels of Distribution

Channels of Distribution 
Because services are intangible, the notion of physical distribution channels does not apply. However, the general principle of channels offering customers access to the product does. Because services are characterized by the inseparability of production and consumption, service organizations must be physically present when the service is delivered or engage others to be present.Any time the product leaves the producing company's hands and is put under the control of others, there is the potential for the independent channel member to do a less effective job of marketing the product than the producer would. This is an even greater problem with services because they are often delivered by people. Nonstandardization of services increases when the service is being delivered by people who do not work for your company.
As a result, we can draw a distinction between the service principal (the company or person originating the service) and the service deliverer (the person or company that actually delivers the service to customers). As with physical goods, service deliverers or intermediaries can provide a number of benefits to the principal. Service deliverers can co-produce the service with the principal. For example, franchisees delivering auto­mobile lubrication services (e.g., Jiffy Lube) execute the principal's concepts by operating
the service centers and lubricating the cars (often other services are available as well). Service intermediaries also provide the customer with locations that make it easy to purchase services. Multiple Jiffy Lube outlets in a metro­politan area make it convenient for customers to purchase the lubricating services. These local retail outlets also promote the Jiffy Lube brand name and provide local presence for the service principal.
Because services are intangible, perishable, and gener­ally not storable, services must be brought to the customer. That is, the service principal must design a channel struc­ture that brings the customer and the provider together.
The three major approaches to service distribution are franchising, agents and brokers, and electronic channels.

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Franchising and Services

Franchising 
Franchising is an extremely popular form of retail service distribution covering a wide variety of consumer and business-to-business services. A franchise is a contractual agree­ment between the originator of the service concept (the franchiser) and an individual or organization that provides retail distribution for the service (the franchisee). It works particularly well when the service can be standardized across disparate geographic locations. Elements of a typical franchise agreement are:
the nature of the service to be supplied by the franchiser
the geographic territory within which the franchisee can market the service
the percentage of the revenue generated by the franchisee that must be paid to the
franchiser
the length of the agreement
the up-front fee paid by the franchisee to the franchiser
the terms by which the franchisee agrees to operate and deliver the service
an agreement by the franchisee not to sell another company's services
the promotional support provided by the franchiser to help develop the franchisee's market
the administrative and technical support provided by the franchiser
the conditions under which the agreement can be terminated.

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Agents and Brokers for Servies

Agents and Brokers 
Many service companies use independent agents or brokers to sell their services. Well­known examples are the insurance and travel industries. There are trade-offs with using these methods for distributing any kind of product. Major advantages include a wider distribution and the fact that agents and brokers know their local markets well. Disadvantages include the loss of control, as it is very difficult to deteTj:nine what agents and brokers are doing and what they are saying about your product.

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Electronic Channels of Services

Electronic Channels 
The growth of the Internet has spawned many opportunities for distributing services. Travel services (Expedia, Travelocity, Orbitz, for example) is the largest segment of the e-commerce industry with nearly $70 billion worth of services sold in 2005. The finan­cial services industry has also taken advantage of electronic channels through services such as home banking and stock brokerage. The advantage of electronic channels is their low cost and the ease of access (for those with Internet connections). For example, rather than using a large number of branch banks or automatic teller machines ("bricks and mortar"), customers of most major banks can now check their balances, move money between accounts, and pay bills using the banks' web sites. Entertainment companies, particularly in interactive gaming and gambling, have also taken advantage of the web.

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