Three questions on the bottom. Thank you!

Chapter 3 New Service Development 89 TABLE 3.5 Commuter Cleaning Economie Analysis Expense Item Transit station rent Delivery van Station Customer service representatives Monthly Amount $ 2,800 500 5,544 Assumptions 7 locations at $400 each 1 minivan (includes loose payment and insurance) 7 locations, 2 shifts averaging 3 hours per shift at $15 per hour 1 driver, 2 shifts averaging 2 hours per shift at $15 per hour 30 miles per shift at 12 mpg and $2.75 per gallon Driver 528 165 Fuel Business insurance Office customer service representatives Laundry bags 100 4.000 167 2 office workers each paid $24,000 a year Cost of 1,000 laundry bags at $2 each, amortized over one year 22-day month Total monthly expenses $13.804 credit cards billed automatically. Each month, statements will certain day. For example, Friday might be the busiest day of be sent to all customers with transactions to verify the bill and the week and Monday and Tuesday the slowest in this case. request payment from those who do not use a credit card. If the customer base could be divided leg. alphabetically and customer is late in paying, a customer service representative each segment offered a discount price on a particular day. will call and ask if he or she would like to begin paying with other ideas include providing a complimentary cup of coffee credit card. Repeatedly delinquent customers will be required to anyone bringing in laundry on Monday. These promotions to pay at the time of pickup, a stipulation that will be included can be implemented once demand fluctuations are observed in the customer's initial agreement for service. The customer Attention also must be given to holidays, which might create service representatives will be responsible for answering all temporary surges or lulls in business. customer inquiries, including the initiation of service, and one Customer service representative wel be responsible for cus Questions temer bings. Each day, the laundry delivered to the plant will 1. Prepare a service blueprint for Commuter Cleaning be entered into a database that accumulates each customer's 2. What generic approach to service system design is transactions for the month. Wustrated by Commuter Cleaning, and what competitive A smooth demand throughout the week is desirable to advantages does this design offer? create a stable workdond; however, actions likely will be 3. Using the data in Table 3.5. calculate a break-even price needed to control fluctuations in demand and to avoid imbal per shirt monthly demand is expected to be 20.000 shirts ances in the worldond. One method of controlling demand is and the contract with a cleaning plant stipulates a charge of through price specials and promotions. Offering a discount on SO SO per shirt certain days of the week is common practice for dry cleaners and one approach would be to offer special prices to different 4. Critique the business concept and make suggestions for customer segments to entice them to bring in their laundry on improvement Amazon.com 12 CASE 3.3 Like many entrepreneurs, Jeffrey Besos, founder of Amaron. com had an idea, did his homework, and developed a new service. Amazon opened its virtual doors in July 1995. Since then, the retailer has served milions of customers worldwide and, in 2015. generated more than $100 billion in annual sales through its retaling operation and nearly $10 billion through is Web Services (AWS) operation. Many people regard Ama ton as the golden child of the internet. Unlike many entre: preneurs, however, Beros was not content with just gaining market share for his initial concept. More than 20 years after opening is doors, Amaron stil is developing new services The young CEO started Amazon with the intention of establishing a strong brand name that he could leverage into other products. He marketed books first because he believed they were ideal cyberspace products. Customers do not need much physical interaction with the product or with a salesper son to purchase books. Books, therefore, are well suited to marketing over the web A key success factor for Amazon is that it captures ar ket share and fosters brend loyalty by focusing on customer needs. Besos believes that paying too much attention to short-term gains means forgeting about long-term customer 90 Part Two Designing the Service Enterprise satisfactions. Loss of this long-term customer focus comes at order page so the customer can indicate If the item is a git a price, however Another problem can arise because the power of collaborative Despite Impressive sales growth, Amazon did not turn filtering is based on the customer's history. If a person changes a profit quickly, but that didn't stop it from becoming e-mail addresses frequently and uses a new Amazon identif dominant force in online retailing. In addition to books, the cation, all of the data are lost Amazon website now includes products and services such as in addition to collaborative filtering, the company uses electronics, music, software, toys, clothing, and B2B services other strategies to achieve its mission. When repeat custom for other businesses. Some items are available from Amazon's ers log on to the website, a personalized web page greets inventory, and other products and services are supplied by the customer by name and allows him or her to view the new third-party sellers through its Marketplace capability. These recommendations made by the collaborative filtering tool. sellers, In turn, pay a portion of their revenues to Amazon. Bezos compares this personalized front page with "walking Amazon also manufactures and sells several versions of its into your favorite store and finding only items that you want on Kindle e-book reader, which has made Amazon the leader in the shelves near the door" Amazon also allows customers to e-book sales store information on the company's secure server. AMAZON'S GUIDING FORCE-THE CUSTOMER Customers can authorize Amazon to keep a record of their credit cards and mailing addresses, for example. This technol- Amazon's guiding philosophy is to provide superior service called 1-click streamlines the service so that customers to its customers. Bezos and his management team spent don't have to reenter the information every time they make one year creating the website and database programs that purchases drove Amazon in the beginning. They sought to create a friendly Amazon doesn't wait for customers to come to its site to site that would not demand a high level of computer teracy. provides service Customers receive periodic e-mails encour Beros recognized that internet commerce would shift the saing them to visit Amazon.com and giving a list of recommen balance of power toward consumers. Consequently, Amazon cations for items to check out on the next visit built customer relationships by customizing its service, Involy ing its website visitors in the service, and creating a commu- OTHER UNIQUE USES OF TECHNOLOGY nal spirit. Focus on the consumer still is the cornerstone for FOR THE CUSTOMER developing customer loyalty. Amazon not only has used technology to personalize the customer experience, but also has designed its site with CUSTOMER AS COPRODUCER AND SERVICE customers in mind. The pages are easy to understand and CUSTOMIZATION use. The website avoids large graphics, which can take a Amazon integrates customers into the service delivery y long time to load. process in several ways. Customers can review Hems they powerful search engine is another unique feature of have purchased and answer other customers' questions. The Amazon. The company employs a "do what I mean" (DWIM wish list is another service that Amazon offers. For example search function. The site recognizes the misspellings that a customer can enter titles of books he or she would like to customers make frequently and changes the search function to have into a personal wish list. Afriend who wants to give that account for these mistakes. If a customer misspells the author's customer a book as a gift then can make a selection from the m e Fitzsimmons as Filtrsimons, for example, Amaron still displays the book Service Management Amazon also makes personalized recommendations to Individual customers. Some of these recommendations are MORE THAN JUST FRIENDLY TECHNOLOGY based on the customer's past purchases, and other recom Amazon's technology has helped to create loyal customers mendations are based on the behavior of past customers who not only visit the site, but as we have noted, also interact who have made purchases similar to those of the customer with it. Amazon is an active virtual community that involves the If a consumer purchases a book on Amish quilts, for example, customer Amazon's software will search for all of the people who pur. As noted, the company encourages visitors and customers chased this same book Using a mathematical process devel to post reviews of any book or product on the site. This review oped by Amazon called item-based collaborative itering, the process involves the customers in developing the content on software determines what other books are popular with people the website and creates an information tool for other website who read the Amish quilt book. The customer then receives a visitors. To help its kindle users, Amazon hosts a customer list of proposed titles based on this information Amazon uses forum website where customers can ask and answer questions this technique to provide the same friendly and personalized and participate in online discussions reading advice that a local bricks-and-mortar bookstore oper- Amazon employees go to great lengths for the custom tion can, but it achieves greater accuracy and convenience at ers and consider them as part of a community. One customer a fraction of the cost reported with joy that a copy of his father's book, 20 years out One flow of this early collaborative filtering was its inabit of print, had been located for him by Amazon. ity to distinguish gift purchases. Someone buying his or her The Associates Program expands this community mother a book on quilting, for example, would receive recom- beyond the websites under Amazon's direct control. Amazon mendations on this topic despite a lack of personal interest allows registered websites, such as Yahoo.com, Drugstore. Amazon solved this problem by including a check box on the com, and Zappos.com, to recommend specific books, CDs. Chapter 3 New Senior Derwent 91 be taking paying tourists for short trips as early as 2018 in its short life thus far, Blue Origin has enjoyed the taste of suc cess and failure, and researchers look forward-and upward- to matching Amaron's achievements videos, and other Amazon products to their visitors using a hyperlink. If customers follow the hyperlink and purchase the product on Amazon.com, these associates receive a modest commission Amazon claims tens of thousands of associates are participating in its programs, which expands Amazon's presence and publicity on the web, but it also means that Amazon could lose some control of its brand and Image Amazon has encountered some other problems in the past reporter once revealed that Amazon was selling space to pub lishers on a list of favorite books. Amazon also was accused of selling authors extra e-mail support on the website for various titles. The company was flooded with outraged e-mails and stopped all paid promotions in response to the outcry. This Incident raises the question: Will the loyal customer base of Amazon or any other electronic service tolerate being used for financial gain? The ability to provide the broad spectrum of services for millions of customers seamlessly and consistently depends on very sophisticated technology, much of which was pioneered by Amazon engineers and architects. The highly personal ized page that greets a returning customer contains hundreds of bits of software logic, and is a testament to their work Referring to software and technology capabilities, Bezos says in a 2010 letter to shareholders issued in early 2011. "Many of the problems we face have no textbook solutions, and so we happily invent new approaches. IT'S A BIRD, IT'S A PLANE, NO-IT'S AMAZON Amazon has been a leader in retailing and customer service from its very beginning. Since those early days it has ploneered a host of services, most recently its Amazon Web Services (AWS) that provides cloud technology for businesses and some brick- and mortar stores. What more can it possibly do? Think drones We can chuckle at the idea of a drone dellvering a book or dog food to our doorstep, but Amazon is not laughing about that possibility. Shipping is the backbone of Amazon's retail success, so it is not surprising that much attention goes into facilitating that part of the company's operation. Amazon now has its own fleet of delivery trucks, robot powered warehouses. and the first of a fleet of transport planes. These new capabil ties might represent a threat to UPS's long-time dominance in the field of home delivery. And, the company really is exploring ways to use drones, also NOT JUST A BOOKSELLER ANYMORE Amazon Web Services (AWS) is a plvotal addition to the com- pany's offerings. This program, which began about 10 years ago as a simple cloud storage system, supplies other busi nesses with a web-based platform for all of their operations In fact, Amazon is the single largest supplier of cloud support technology for businesses, large and small. The company's cloud computing services are available in 2015 in 12 geo graphic regions of the world. In addition to basic infrastruc ture technology, Amazon's 2015 Annual Report says that the company offers more than 70 related services. Among these services we a new database engine, Aurora, and Redshift, managed data warehouse service. Other new offerings include Quicksight a new Business Intelligence computing capabil ity, EC2 Container Service, and Lambda, a pioneering server less computing service. Amazon states that developers and systems administrators can ... collect and track metrics, gain Insight, and react immediately to keep their applications and businesses running smoothly.*17 An alliance with Viacom, a company that provides online access to many entertainment venues, was announced in early 2012. This alliance allows Amazon Prime members to stream movies and television programs instantly and commercial free Amazon has gone beyond this service and is producing its own video programming for customers to stream in accordance with his firm belief that successful entrepre neurs must take a long-term view of their businesses and the world, Bezos founded Blue Origin, a company dedicated and determined to provide affordable suborbital and orbital space travel Early in 2016 Bezos predicted that the company might AS AMAZON LOOKS TO THE FUTURE-WILLIT BECOME THE WALMART OF THE INTERNET? Amazon has been very successful turning a profit since 2004 Amazon's personalized customer service and online commu- nity strategy work well. The company claims its sales of elec tronic books have surpassed the sales of its printed books, and It is the largest seller of videos and music on the web. Early skepties suggested that price-sensitive buyers would con stantly search the net for the lowest prices and leave comps nies without any pricing power or brand loyalty, Amazon has not suffered this predicted pattern in part because it has taken a long-range view of the business and invested heavily in creating a loyal customer base. Fast expansion into a variety of retailing areas reinforces Amazon's goal to be a one-stop shopping site on the Internet In 2012 some sources suggested that Amazon might venture into the brick-and-morts arena by establishing Apple-type stores to sell its kindle e-readers, and, also, might introduce a smartphone. 2. This prediction has come true. Amazon's first brick-and-mortar store is located in Seattle, WA, and a second store will be opened in San Diego, CA The Seattle store sells books and electronic devices including Kindles and Echa, which is sort of a home companion who can answer your questions, make dinner reservations at your favorite restau rant, but who doesn't need care or watering Future stores might sell other types of products. As for the smartphone, the Amazon culture values taures as well as successes Questions 1. How does Amazon.com illustrate the sources of service sec tor growth? Comment on Information technology, the Inter net as an enable, innovation, and changing demographics 2. What generic approaches to service design does Amon com illustrate, and what competitive advantages does this design offer? 3. Is Amazon.com a model for the future of reading