MODULE SERVICE OPERATIONS MANAGEMENT

MODULE:
SERVICE OPERATIONS
MANAGEMENT

NOR HASLIZA MD SAAD

SCHOOL OF MANAGEMENT,
UNIVERSITI SAINS MALAYSIA

SERVICE OPERATIONS MANAGEMENT 2

MODULE SUMMARY

The course is design to provide students with specialized knowledge and skills required for the
effective management of service operations. Specifically, this course will emphasize on the analysis,
challenges, decision making and implementation issues of managing the operational aspects of a
service. The course will address the strategic aspects of designing, assessing and improving the
effectiveness of service processes, while achieving operational excellence. The objectives of this
course are to provide an in-depth insight in managing and delivering quality services, including to
identify critical issues related to service design, such as identifying and managing customer service
experience, expectations, perceptions and outcomes.

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TABLE OF CONTENTS

INTRODUCTION TO SERVICE OPERATIONS MANAGEMENT ________________ 4

Definition of Services ______________________________________________________ 5

Definition of Service Management ____________________________________________ 5

Service Management from Operations and Customer Perspectives _________________ 6

Distinctives Characteristic from Service Operations ______________________________ 7

The Service Package ______________________________________________________ 8

Createria for Evaluating Service Package ______________________________________ 9

SERVICE STRATEGY __________________________________________ ____ 10

Introduction to Service Strategy_____________________________________________ 11

The Strategic Service Vision _______________________________________________ 11

Understanding the Competitive Environment of Services _________________________ 13

Competitive Strategies____________________________________________________ 14

Porter’s Five Forces Analysis ______________________________________________ 15

SWOT Analysis _________________________________________________________ 15

Winning Customers in the Marketplace _______________________________________ 16

Four Stages of Service Firms Competitiveness_________________________________ 18

NEW SERVICE DEVELOPMENT _____________________________________________ 19
Service Design Elements: Structural _________________________________________ 20
Service Design Elements: Managerial________________________________________ 21
Service Blueprints _______________________________________________________ 22
Generic Approaches to Service Design _______________________________________ 22
Data Analytics in Services _________________________________________________ 23

SERVICE QUALITY________________________________________________________ 24
Moments of Truth ________________________________________________________ 25
Dimension of Service Quality_______________________________________________ 26
Perceived Service Quality _________________________________________________ 27
Gaps in Service Quality ___________________________________________________ 28
Measuring Service Quality _________________________________________________ 29
Phases in Service Recovery _______________________________________________ 30
Approaches in Service Recovery____________________________________________ 31

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PART 1

Services have distinctive features that
present unique challenges for

management. Perhaps the most
important characteristic of service
operations is the presence of the
customer in the service delivery
system. Focusing on the customer and
serving his or her needs is the basis for
a service-dominant logic that is an
alternative to the traditional goods-

centered paradigm.

INTRODUCTION
TO SERVICE
OPERATIONS

MANAGEMENT

SERVICE OPERATIONS MANAGEMENT 5

DEFINITIONS OF SERVICES

• “Services are deeds, processes, and performances” - (Valarie Zeithaml & Mary Jo
Bitner)

• “A service is a time-perishable, intangible experience performed for a customer acting
in the role of a coproducer” - (James Fitzsimmons)

• “A service is an activity or series of activities of more or less intangible nature that
normally, but not necessarily, take place in interactions between customer and service
employees and/or physical resources or goods and/or systems of the service provider,
which are provided as solutions to customer problems” - (Gronroos, 1990)

DEFINITIONS OF SERVICE MANAGEMENT

• Service management is a set of specialized organizational capabilities for improving
value to customers in the form of service.

Developing the specialized capability for an organization requires better understanding
of;

- the value and its nature.
- the scope and nature of the stakeholders who are involved.
- how the co-creation of value is enabled through services.

• Service management takes the form of a set of functions and processes for managing
services over their Lifecycle. Service Management.

• Service Management is also a professional practice supported by an extensive body of
knowledge, experiences and skills.

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SERVICE OPERATIONS MANAGEMENT

SERVICE MANAGEMENT FROM OPERATIONS AND CUSTOMER PERSPECTIVES

• From operation’s perspective: the service provided is the
- service process & its outputs which have been designed,
- created & enacted by the operation using its many input
- resources, including the customer, where the customer also takes some part in
the service process.

• From customer’s perspective: the service received is the customer’s experience of the
service provided & their interaction with it, perception to it & response to it, which results in
outcomes such as ‘products’,benefits, emotions, judgments &intentions.

- Customer’s experience: customer’s direct personal & personal interpretation of,
& response to, their interaction with & participation in the service process. Aspects
of the customer experience include:
✓ the degree of personal interaction
✓ the responsiveness of the service organization
✓ the flexibility of customer-facing staff
✓ customer intimacy
✓ the easy of access to service personnel or information systems

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SERVICE OPERATIONS MANAGEMENT

DISTINCTIVE CHARACTERISTICS OF SERVICE OPERATIONS

In services, a distinction must be made between inputs and resources. For services, inputs are
the customers themselves, and resources are the facilitating goods, employee labor, and
capital at the command of the service manager. Thus, to function, the service system must
interact with the customers as participants in the service process. Because customers typically
arrive at their own discretion and with unique demands on the service system,
matching service capacity with demand is a challenge.
For some services, such as banking, however, the focus of activity is on processing information
instead of people. In these situations, information technology, such as electronic funds transfer,
can be substituted for physically depositing a payroll check; thus, the presence of the customer
at the bank is unnecessary. Such exceptions will be noted as we discuss the distinctive
characteristics of service operations. Note here that many of the unique characteristics of
services, such as customer participation and perishability, are interrelated.

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SERVICE OPERATIONS MANAGEMENT

THE SERVICE PACKAGE

The service package is defined as a bundle of goods and services with information that is
provided in some environment. This bundle consists of five features (as shown in Figure 2) in
the shape of an onion with the service experience at the core.

FIGURE 2

Service Package

1. Supporting facility. The physical resources that must be in place before a service can be
offered. Examples are a golf course, a ski lift, a hospital, and an airplane.

2. Facilitating goods. The material purchased or consumed by the buyer, or the items
provided by the customer. Examples are golf clubs, skis, food items, replacement auto
parts, legal documents, and medical supplies.

3. Information. Data that is available from the customer or provider to enable efficient and
customized service. Examples include electronic patient medical records, airline
showing seats available on a flight, customer preferences from prior visits, GPS website
location of customer to dispatch a taxi, and Google map link on a hotel website.

4. Explicit services. The benefits that are readily observable by the senses and that consist
of the essential or intrinsic features of the service. Examples are the absence of pain
when a tooth is repaired, a smooth-running automobile after a tuneup, and the response
time of a fire department.

5. Implicit services. Psychological benefits that the customer may sense only vaguely, or
the extrinsic features of the service. Examples are the status of a degree

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SERVICE OPERATIONS MANAGEMENT

CRITERIA FOR EVALUATING THE SERVICE PACKAGE

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PART 2

Service Strategy, with a discussion of the
strategic service vision, a framework
in the form of questions about the

purpose and place of a service firm in its
market. The well-known generic

competitive strategies—overall cost
leadership, differentiation, and focus—are
applied to services. Porter’s five forces and
SWOT analysis are applied to service firms.

SERVICE
STRATEGY

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SERVICE OPERATIONS MANAGEMENT

INTRODUCTION TO SERVICE STRATEGY

Service strategy begins with a vision of the place and purpose of the enterprise. A strategic service vision is
formulated by addressing questions about the target market, service concept, operating strategy, and delivery
system.

The Strategic Service Vision

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SERVICE OPERATIONS MANAGEMENT

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SERVICE OPERATIONS MANAGEMENT

UNDERSTANDING THE COMPETITIVE ENVIRONMENT OF SERVICES

In general, service firms compete in a difficult economic environment, and there are many
reasons for this difficulty:

• Relatively low overall entry barriers. Service innovations are not patentable, and in most
cases, services are not capital-intensive. Thus, innovations can easily be copied by
competitors. However, other types of entry barriers exist, such as locating a resort hotel
on the best beach on an island (e.g., Club Med’s former location on the island of Moorea
in French Polynesia).

• Minimal opportunities for economies of scale. The necessity of physical travel for many
services limits the market area and results in small-scale outlets. Franchised firms can
realize some economies of scale by sharing purchasing or advertising costs; in other
instances, using the Internet can be a substitute for physical travel (e.g., ordering from
Amazon.com).

• Erratic sales fluctuations. Service demand varies as a function of the time of day and the
day of the week (and sometimes seasonally), with random arrivals. Can you think of
some exceptions?

• No advantage of size in dealing with buyers or suppliers. The small size of many service
firms places them at a disadvantage in bargaining with powerful buyers or suppliers.
Many exceptions should come to mind, however, such as McDonald’s buying beef and
Marriott buying mattresses.

• Product substitution. Product innovations can be a substitute for services (e.g., the
home pregnancy test). Thus, service firms must not only watch other service
competitors but also anticipate potential product innovations that might make their
services obsolete.

• Customer loyalty. Established firms can use personalized service to create a loyal
customer base, which becomes a barrier to entry by new services. For example, a
hospital supply firm may place its own ordering computer terminals at customers’ sites.
These terminals then facilitate the placement of new orders to the extent that
competitors are effectively excluded.

• Exit barriers. Marginal service firms may continue to operate despite low, or even
nonexistent, profits. For example, a privately held firm may have employment of family
members rather than maximizing profit as its goal. Other service firms, such as antique
stores or scuba diving shops, have a hobby or romantic appeal that provides their
owners with enough job satisfaction to offset low financial compensation. Thus, profit-
motivated competitors would find it difficult to drive these privately held firms from the
market.

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SERVICE OPERATIONS MANAGEMENT

COMPETITIVE STRATEGIES

There are three generic competitive strategies: overall cost leadership, differentiation, and
focus. Each strategy will be described in turn, with examples of how service firms use them to
outperform their competition

Overall Cost Leadership
An overall cost leadership strategy requires efficient-scale facilities, tight cost and overhead
control, and often innovative technology as well. Having a low-cost position provides a defense
against competition, because less efficient competitors will suffer first from competitive
pressures. Implementing a low-cost strategy usually requires high capital investment in state-
of-the-art equipment, aggressive pricing, and start-up losses to build market share. A cost
leadership strategy sometimes can revolutionize an industry, as illustrated by the success of
McDonald’s, Walmart, and Southwest Airlines. Moreover, service firms have been able to
achieve low-cost leadership using a variety of approaches.

Differentiation
The essence of the differentiation strategy lies in creating a service that is perceived as being
unique. Approaches to differentiation can take many forms: brand image (e.g., McDonald’s
golden arches), technology (e.g., Sprint’s fiber-optic network), features (e.g., American
Express’s travel services), customer service (e.g., Nordstrom’s reputation among department
stores), dealer network (e.g., Century 21’s nationwide real estate presence), and other
dimensions. A differentiation strategy does not ignore costs, but its primary thrust lies in
creating customer loyalty. As illustrated here, differentiation to enhance the service often is
achieved at some cost that the targeted customer is willing to pay.

Focus
The focus strategy is built around the idea of servicing a particular target market very well by
addressing customers’ specific needs. The market segment could be a particular buyer group
(e.g., USAA and the military community), service (e.g., Shouldice Hospital and patients with
inguinal hernias), Motel 6 (budget travelers), Federal Express (people who need guaranteed
overnight package delivery), or geographic region (e.g., community college or neighborhood
restaurant). The focus strategy rests on the premise that the firm can serve its narrow target
market more effectively and/or efficiently than other firms trying to serve a broad market. As a
result, the firm achieves competitive advantage in its market segment by meeting specific
customer needs and/or by lower costs through specialization. Thus, the focus strategy is the
application of differentiation and/or overall cost leadershipto a particular market segment rather
than the entire market.

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SERVICE OPERATIONS MANAGEMENT

Porter’s Five Forces Analysis

SWOT Analysis

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SERVICE OPERATIONS MANAGEMENT

WINNING CUSTOMERS IN THE MARKETPLACE

Depending on the competition and personal needs, customers select a service provider using
criteria listed here. This list is not intended to be complete, because the very addition of a new
dimension by a firm represents an attempt to engage in a strategy of differentiation.

• Availability. How accessible is the service? The use of ATMs by banks has created 24-
hour availability of some banking services (i.e., service beyond the traditional “banker’s
hours”). Use of 800 numbers and websites by service firms facilitates access to
information and personal accounts 24/7.

• Convenience. The location of the service defines convenience for customers who must
travel to that service. Gasoline stations, fast-food restaurants, and dry cleaners are
examples of services that must select locations on busy streets if they are to succeed.

• Dependability. How reliable is the service? For example, once the exterminator is gone,
how soon do the bugs return? A major complaint regarding automobile repair services
is the failure to fix the problem on the first visit. For airlines, on-time performance is a
statistic collected by the FAA.

• Personalization. Are you treated as an individual? For example, hotels have discovered
that repeat customers respond to being greeted by their name. The degree of
customization allowed in providing the service, no matter how slight, can be viewed as
more personalized service.

• Price. Competing on price is not as effective in services as it is with products, because
it often is difficult to compare the costs of services objectively. Comparing costs in the
delivery of routine services such as an oil change might be easy, but in professional
services, competition on price can be considered counterproductive because price often
is viewed as being a surrogate for quality.

• Quality. Service quality is a function of the relationship between a customer’s prior
expectations of the service and his or her perception of the service experience both
during and after the fact. Unlike product quality, service quality is judged by both the
process of service delivery and the outcome of the service.

• Reputation. The uncertainty that is associated with the selection of a service
provideroften is resolved by talking with others about their experiences before a
decision is made. Unlike a product, a poor service experience cannot be exchanged or
returned for a different model. Positive word-of-mouth is the most effective form of
advertising.

• Safety. Well-being and security are important considerations because in many services,
such as air travel and medicine, the customers are putting their lives in the hands of the
service provider.

• Speed. How long must I wait for service? For emergency services such as fire and police
protection, response time is the major criterion of performance. In other services, waiting
sometimes might be considered a trade-off for receiving more personalized services, or
in reduced rates.

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SERVICE OPERATIONS MANAGEMENT

Winning Customers in the Marketplace

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SERVICE OPERATIONS MANAGEMENT

FOUR STAGES OF SERVICE FIRM COMPETITIVENESS

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PART 3

New Service Development, begins with a
discussion of the new service

development process. Service blueprinting
is presented as a method to diagram a
service process that separates the front-
and back-office operations with a line of
visibility. We also explore generic
approaches to service design including
information empowerment.

NEW
SERVICE
DEVELOPMENT

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NewSSEeRrVvIiCceE DOePvEeRlAoTpImONeSntMANAGEMENT

SERVICE DESIGN ELEMENTS: STRUCTURAL

The structural elements of Shouldice’s service concept that support its strategy to target
customers suffering only from inguinal hernias are:

• Delivery system. A hallmark of the Shouldice approach is patient coproduction in all
aspects of the process. For example, patients shave themselves before the operation
and walk from the operating table to the recovery area.

• Facility design. The facility is intentionally designed to encourage exercise and rapid
recovery within four days, providing a return-to-normal-activity time that is
approximately one-half the time at traditional hospitals. Hospital rooms are devoid of
amenities, such as telephones or TVs, and patients must walk to lounges, showers, and
the cafeteria. The extensive hospital grounds are landscaped to encourage strolling,
and the interior is carpeted and decorated to avoid any typical hospital “associations.”

• Location. Being located in a large metropolitan community with excellent air service
gives Shouldice access to a worldwide market. The large local population also provides
a source of patients who can be scheduled on short notice to fill any cancelled bookings.

• Capacity planning. Because hernia operations are elective procedures, patients can be
scheduled in batches to fill the operating time available; thus, capacity is utilized to its
maximum. This ease in scheduling operations allows Shouldice to operate like a fully
occupied hotel; thus, the supporting activities, such as housekeeping and food service,
also can be employed fully.

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SERVICE OPERATIONS MANAGEMENT

SERVICE DESIGN ELEMENTS: MANAGERIAL

The managerial elements of the Shouldice service concept also support the strategy of
delivering a quality medical procedure:

• Information. A unique feature of the Shouldice service is the annual alumni reunion,
which represents a continuing relationship of the hospital with its patients. Keeping
information on patients allows Shouldice to build a loyal customer base that is an
effective word-of-mouth advertising medium. Providing free annual check-ups also
allows Shouldice to build a unique database on its procedure.

• Quality. The most important quality feature is the adherence of all physicians to the
Shouldice method of hernia repair, which results in the low recurrence rate of inguinal
hernias among these patients. In addition, patients with difficulties are referred back to
the doctor who performed the procedure. Perceived quality is enhanced by the
Shouldice experience, which is more like a short holiday than a typical hospital stay.

• Service encounter. A service culture that fosters a family-type atmosphere is reinforced
by communal dining for both staff and patients. All employees are trained to encourage
patient activity, which promotes rapid recovery. Patients who have had surgery that
morning are encouraged to discuss during dinner their experience with patients who are
scheduled for surgery the next day and, thus, alleviate preoperative fears.

• Managing capacity and demand. Patients are screened by means of a mail-in
questionnaire and are admitted by reservation only. Thus, the patient demand in terms
of timing and appropriateness can be controlled effectively. Walk-in patients or local
residents on a waiting list are used to fill vacancies created by cancelled reservations;
thus, full use of hospital capacity is ensured.

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SERVICE OPERATIONS MANAGEMENT

SERVICE BLUEPRINTS

Developing a new service based on the subjective ideas contained in the service concept can
lead to costly trial-and-error efforts to translate the concept into reality. For example, when a
building is developed, the design is captured on architectural drawings called blueprints,
because the reproduction is printed on special paper, creating blue lines. These blueprints
show what the building should look like and all of the specifications needed for its construction.
Likewise, a service delivery system can be captured in a similar manner with a focus on the
customer process flow showing the interactions among staff and support services.

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SERVICE OPERATIONS MANAGEMENT

DATA ANALYTICS IN SERVICES

Data analytics refers to the discovery, interpretation, and processing of meaningful patterns in
data for improved decision making. This process involves simultaneous application of statistics,
computer programming, and operations research to quantify an organization’s performance.
The broad subject of data analytics often is broken down into subordinate areas of descriptive
analytics, diagnostic analytics, predictive analytics, and prescriptive analytics as shown in
Figure 2.5. Businesses use analytics to describe, analyze, and predict business performance
to gain actionable insights that can foster smarter decisions and better outcomes.

Application of Data Analytics by Service Industry

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PART 4

This part will examine several approaches
to managing service quality, including
measurement issues, designing quality
into the service, and service recovery
when a failure occurs

SERVICE QUALITY

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SERVICE OPERATIONS MANAGEMENT

INTRODUCTION TO SERVICE QUALITY

Service quality is a complex topic, as shown by the need for a definition that includes five
dimensions: reliability, responsiveness, assurance, empathy, and tangibles. This module uses
these dimensions to introduce the concept of a service quality gap. This gap is based on the
difference between a customer’s expectations of a service and the perceptions of the service
that is delivered.

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SERVICE OPERATIONS MANAGEMENT

MOMENTS OF TRUTH

• Each customer contact is call a moment of truth.
• You have the ability either to satisfy or dissatisfy customers when you contact them.
• A service recovery is satisfying a previously dissatisfied customers and making

them loyal customers.

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SERVICE OPERATIONS MANAGEMENT

DIMENSIONS OF SERVICE QUALITY

• 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.

• 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.

PERCEIVED SERVICE QUALITY

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SERVICE OPERATIONS MANAGEMENT

GAPS IN SERVICE QUALITY

Measuring the gap between expected service and perceived service is a routine customer feedback process
that is practiced by leading service companies. The gap between customer expectations and perceptions is
defined as GAP 5. Customer satisfaction is dependent on minimizing gaps 1 through 4 that are associated
with delivery of the service.
The market research gap is the discrepancy between customer expectations and management perceptions
of these expectations. GAP 1 arises from management’s lack of full understanding about how customers
formulate their expectations on the basis of a number of sources: advertising, past experience with the firm
and its competitors, personal needs, and communications with friends. Strategies for closing this gap include
improving market research, fostering better communication between management and its contact
employees, and reducing the number of levels of management.
The design gap results from management’s inability to formulate a service design that meets perceptions of
customer expectations and translates these into workable service standards. GAP 2 might result from a lack
of management commitment to service quality or a perception of the practicality of meeting customers’
expectations; however, setting goals and standardizing service delivery tasks can close this gap.
The conformance gap occurs because actual delivery of the service does not meet the service standards set
by management. GAP 3 can arise for a number of reasons, including lack of teamwork, poor employee
selection, inadequate training, and inappropriate job design.
The communication gap results when customer perceptions are at odds with the intended service delivery.
GAP 4 results when operations management fails to manage the evidence (all the aspects of what the
customer experiences) at the point of service delivery. GAP 4 may result from lack of controls or poor
employee training.

The numbering of the gaps from 1 to 5 represents the sequence of steps (i.e., market research, design,
conformance, communication, and customer satisfaction) that should be followed in new service process
design. The remainder of this chapter will address ways of closing these gaps in service quality. We begin
by considering approaches to measuring service quality.

Service Quality Gap Model

Source: Reprinted with permission of Professor Uttarayan Bagchi, University of Texas at Austin.

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SERVICE OPERATIONS MANAGEMENT

MEASURING SERVICE QUALITY

Measuring service quality is a challenge because customer satisfaction is determined by many
intangible factors. Unlike a product with physical features that can be measured objectively
(e.g., the fit and finish of a car), service quality contains many psychological features (e.g., the
ambiance of a restaurant). In addition, service quality often extends beyond the immediate
encounter because, as in the case of health care, it has an impact on a person’s future quality
of life.
• SERVQUAL3
The authors of the service quality gap model developed a multi-item scale called SERVQUAL
for measuring the five dimensions of service quality (i.e., reliability, responsiveness, assurance,
empathy, and tangibles).
• Walk-through Audit
Delivery of a service should conform to customers’ expectations from the beginning to the end
of the experience. Because the customer is a participant in the service process, his or her
impressions of the service quality are influenced by many observations. An environmental audit
can be a proactive management tool for the systematic evaluation of a customer’s view of the
service provided. The walk-through audit (WtA) is an opportunity to evaluate the service
experience from a customer’s perspective, because customers often become aware of cues
the employees and managers might overlook.

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SERVICE OPERATIONS MANAGEMENT

PHASES IN SERVICE RECOVERY

In the pre-recovery phase that occurs following a service failure but before the provider
becomes aware of the problem, the customer’s service recovery expectations are set. The
recovery expectation is formed by several factors: severity of failure, previous experience with
service quality, customer loyalty, and service guarantee. With dark clouds forming in the sky,
guests know outdoor activity will be cancelled, but they expect Club Med to have
alternative activities planned.
The immediate recovery phase that terminates with fair restitution requires initiative by the staff
to ensure a pleasant experience for the guests despite poor weather. The quality of the service
recovery is dependent upon several factors: staff empathy, appropriate response, speed of
recovery, and frontline discretion. Stories abound about creative responses to poor weather,
such as organizing group games and putting on stage shows. This ability of the staff to create
a memorable experience for guests is called “the Club Med magic.”
In the follow-up phase, guests receive photographs and trinkets of the vacation and, in severe
cases, a discount for a return visit. A well-executed service recovery can result in retaining
customers and increased loyalty because of the attention they received.

Phases in Service Recovery

Source: Adapted from Janis L. Miller, Christopher W. Craighead, and Kirk R. Karwan, “Service Recovery: A Framework and Empirical Investigation,” Journal of Operations
Management 18, 2000, p. 388.

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APPROACHES TO SERVICE RECOVERY

There are four basic approaches to service recovery: the case-by-case, the systematic
response, the early intervention, and the substitute-service recovery approaches.

1. The case-by-case approach addresses each customer’s complaint individually. This
inexpensive approach is easy to implement, but it can be haphazard. The most
persistent or aggressive complainers, for example, often receive satisfactory responses
while more “reasonable” complainers do not. The haphazardness of this approach can
generate perceptions of unfairness.

2. The systematic-response approach uses a protocol to handle customer complaints.
This technique is more reliable than the case-by-case approach because it is a planned
response based on identification of critical failure points and prior determination of
appropriate recovery criteria. As long as the response guidelines are continuously
updated, this approach can be very beneficial because it offers a consistent and timely
response.

3. An early intervention approach adds another component to the systematic-response
approach by attempting to intervene and fix service-process problems before they affect
the customer. A shipper who realizes that a shipment is being held up by a truck
breakdown, for example, can choose to notify the customer immediately so the
customer can develop alternative plans if necessary.

4. An alternate approach capitalizes on the failure of a rival to win the competitor’s
customer by providing a substitute service recovery. At times the rival firm may support
this approach. A check-in employee at an overbooked hotel, for example, might send a
customer to a rival hotel. The rival hotel then might be able to capitalize on such an
opportunity if it can provide a timely and quality service. This approach is difficult to
implement because information about a competitor’s service failures usually is closely
guarded.

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