How to better manage the customer variability in services
The failure to deliver services is one of the greatest challenges in services. It is possible to deliver excellent services and fail at delivering what matters to customers. So, it’s important to understand the customer demand to improve the customer’s perceived value. Deming proposes to start on quality and that improvements in quality will lead towards lower costs, leading to higher productivity, leading towards increased market share....
But, one of the key challenge in Services is how to manage the customer variability. Finding a way to overcome customer-induced variability is the purpose of Frances X. Frei (“Breaking the Trade-Off Between Efficiency and Service”, November 2006, Harvard Business Review). It’s one of the most interesting articles I’ve read about customer variability in services. This article can help you to better design your capacity to fit the demands of your customers.
The first step proposed by F. Frei is to understand the 5 types of customer-induced variability. The second step is the trade-off decision: “Do you want to accommodate that variability or reduce it ?”
1. The five types of customer-induced variability to diagnose are :
· Arrival variability: the most obvious, the customer don’t place demands at the same time or at time convenient for the company.
· Request variability: the customer ask for many different things (in a bank, a customer may request different services / may ask for many different things)
· Capability variability: not all customers have the ability to perform tasks needed to receive the service (describe a technology problem to a service desk, describe our symptoms by the doctor,…)
· Effort variability :it is the effort the customer makes to receive the service
· Subjective preferences : customer vary in their opinions about what it means to be treated well.
Frei says that “it’s possible to think at these 5 forms of variability sequentialy because they reflect the process by which many service transactions unfold. The customer arrives, makes a request, plays a part in the process requiring some level of capability and effort, and assesses the experience according to personal preferences.”
When you understand your customer-induced variability, the question is how to manage it. “Will you accommodate or reduce the variability”.
2. The Trade Off
Don’t trade off between cost and quality is the message of Frei. He proposes other options than the classical trade-off : “accommodate customer demands at high cost versus refuse to accommodate customer demands and risk customer defection”. Other options exist allowing to offer accommodation at low cost or to reduce variability without damaging the service.
4 strategic responses are classic accommodation, classic reduction, low-cost accommodation and uncompromised reduction.
Effective management of variability in service operations didn’t mean that reducing variability is the right thing to do, Frei describes in his article how companies achieve both, low cost and variability accommodation.
However, I expect more in terms of solutions. ..