Service Marketing Chapter 08

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 1

Chapter 8:Designing and Managing Service Processes


Overview of Chapter 8

1.Blueprinting Services to Create Valued Experiences and Productive Operations*

– Service Process Redesign– The Customer as Co-Producer*– Dysfunctional Customer Behavior


1. Blueprinting Services to Create Valued Experiences and

Productive Operations


Developing a Blueprint

1. Identify key activities in creating and delivering service2. Define “big picture” before “drilling down” to obtain a

higher level of detail3. Distinguish between “front stage” and “backstage”4. Clarify interactions between customers and staff, and

support by backstage activities and systems 5. Identify potential fail points; take preventive measures;

prepare contingency6. Develop standards for execution of each activity—

times for task completion, maximum wait times, and scripts to guide interactions between employees and customers


Key Components of a Service Blueprint(Figure 8.1: pp. 236-239)

1. Define standards for front-stage activities2. Specify physical evidence 3. Identify principal customer actions4. Line of interaction (customers and front-stage personnel) 5. Front-stage actions by customer-contact personnel6. Line of visibility (between front stage and backstage) 7. Backstage actions by customer contact personnel8. Support processes involving other service personnel9. Support processes involving IT

• Set service standards and do failure-proofing*• Identify fail points and risks of excessive waits*


Blueprinting the Restaurant Experience: A Three Act Performance

• Act 1: Prologue and Introductory Scenes*• Act 2: Delivery of Core Product

o Cocktails, seating, order food and wine, wine serviceo Potential fail points: Menu information complete? Menu intelligible?

Everything on the menu actually available?o Mistakes in transmitting information a common cause of quality failure—e.g.

bad handwriting; poor verbal communicationo Customers may not only evaluate quality of food and drink, but how promptly

it is served, serving staff attitudes, or style of service• Act 3: The Drama Concludes

o Remaining actions should move quickly and smoothly, with no surprises at the end

o Customer expectations: Accurate, intelligible and prompt bill, payment handled politely, guest are thanked for their patronage


Blueprinting the Restaurant Experience: Act 1 (Fig 8.1)

Make Reservation

Coat RoomValet Parking

Accept reservation

Greet customer, take

car keys

Greet, take coat, coat

checks

Check availability,

insert booking

Take car to parking lot

Hang coat with visible check

numbers

Maintain reservation

system

Maintain (or rent)

facilities

Maintain facilities/

equipment

Line of interaction

Line of visibility

Line of internal physical

interaction

Contact person (visible actions)

Contact person (invisible actions)

Front - Stage

Back - Stage

…

Timeline Act 1

Physical Evidence

Service Standards and Scripts

Support Processes

W W W


Setting Service Standards

1. Service providers should design standards for each step sufficiently high to satisfy and even delight customers 1. Standards may include time parameters, script for a technically

correct performance, and prescriptions for appropriate style and demeanor

2. Must be expressed in ways that permit objective measurement 2. First impression is important as it affects customer’s evaluations of

quality during later stages of service delivery 1. Research by Marriott Hotels: four of five top factors contributing

to customer loyalty come into play during the first 10 minutes of service delivery

3. Customer perceptions of service experiences tend to be cumulative 4. For low-contact service, a single failure committed front stage is

relatively more serious than in high-contact service1. Viewed more seriously because there are fewer subsequent

opportunities to create a favorable impression


Improving Reliability of Processes by Failure Proofing

1. Analysis of reasons for failure often reveals opportunities for failure proofing to

2. Need fail-safe methods for both employees and customers

3. Errors include:1. Treatment errors—human failures during contact with customer

1.e.g., lack of courteous or professional behavior, failure to acknowledge, listen to, or react appropriately to the customer

2. Tangible errors—failures in physical elements of service1.e.g., noise pollution, improper standards for cleaning of facilities and

uniforms, equipment breakdown

4. Goal of fail-safe procedures is to prevent errors such as:1. Performing tasks incorrectly, in the wrong order, too slowly2. Doing work that wasn’t requested in the first place


2. Redesigning Service Processes


Mitchell T. Rabkin MD, formerly president of

Boston’s Beth Israel Hospital

Why Redesign? (1)

“Institutions are like steel beams—they tend to rust. What was once smooth and shiny and nice

tends to become rusty.”


Why Redesign? (2)

• Revitalizes process that has become outdated• Changes in external environment make existing practices obsolete

and require redesign of underlying processeso Creation of brand-new processes to stay relevant

• Rusting occurs internallyo Natural deterioration of internal processes; creeping bureaucracy;

evolution of spurious, unofficial standards o Symptoms:

Extensive information exchange Data redundancy High ratio of checking or control activities to value-adding activities, increased exception processing Customer complaints about inconvenient and unnecessary

procedures


Process Redesign: Approaches and Potential Benefits (1) (Table 8.1)

• Eliminating non-value-adding stepso Streamline front-end and back-end processes of services with goal of

focusing on benefit-producing part of service encounter o Eliminate non-value-adding steps o Improve efficiency o More customized serviceo Differentiate company

• Delivering direct serviceo Bring service to customers instead of bringing customers to providero Improve convenience for customerso Productivity can be improved if companies can eliminate expensive retail locationso Increase customer base



• Shifting to self-serviceo Increase in productivity and service quality o Lower costs and perhaps priceso Enhance technology reputationo Greater convenience

• Bundling serviceso Involves grouping multiple services into one offer, focusing on a well-

defined customer group o Often has a better fit to the needs of target segment o Increase productivityo Add value for customers through lower transaction costs o Customize serviceo Increase per capita service use



• Redesigning physical aspects of service processeso Focus on tangible elements of service process; include changes to

facilities and equipment to improve service experience o Increase convenienceo Enhance the satisfaction and productivity of front-line staff o Cultivate interest in customerso Differentiate company


3. The Customer as Co-Producer*


Levels of Customer Participation

• Three Levels o Low—Employees and systems do all the work

Often involves standardized serviceo Medium—Customer inputs required to assist provider

Provide needed information and instructions Make some personal effort; share physical

possessionso High—Customer works actively with provider to co-produce

the service Service cannot be created without customer’s active

participation Customer can jeopardize quality of service outcome

(e.g., weight loss, marriage counseling)


Self-Service Technologies (SSTs)*

• Ultimate form of customer involvement o Customers undertake specific activities using facilities or systems provided

by service suppliero Customer’s time and effort replace those of employees

e.g. Internet-based services, ATMs, self-service gasoline pumps• Information-based services lend selves particularly well to SSTs

o Used in both supplementary services and delivery of core product e.g. eBay—no human auctioneer needed between sellers and

buyers• Many companies and government organizations seek to divert customers

from employee contact to Internet-based self-serviceo Economic trade-off between declining cost of these self-service systems and

rising cost of labor o Challenge: Getting customers to try this technology


Psychological Factors in Customer Co-Production

• Economic rationale of self-serviceo Productivity gains and cost savings result when customers take over

work previously performed by employees • Lower prices, reflecting lower costs, induce customer

to use SSTs• Critical to understand how consumers decide between

using an SST option and relying on a human provider• SSTs present both advantages and disadvantages

o Benefits: Time and cost savings, flexibility, convenience of location, greater control over service delivery, and a higher perceived level of customization

o Disadvantages: Anxiety and stress experienced by customers who are uncomfortable with using them


What Aspects of SSTs Please or Annoy Customers?

• People love SSTs when…o SST machines are conveniently located and accessible 24/7—often

as close as nearest computer!o Obtaining detailed information and completing transactions can be

done faster than through face-to-face or telephone contact o People in awe of what technology can do for them when it works well

• People hate SSTs when…o SSTs fail—system is down, PIN numbers not accepted, etco They mess up—forgetting passwords, failing to provide information as

requested, simply hitting wrong buttons • Key weakness of SSTs: Too few incorporate service recovery

systemso Customers still forced to make telephone calls or personal visitso Blame service provider for not providing more user-friendly system


HSBC: “The world’s local bank” (Fig 8.2)

Source: Courtesy HSBC

Global site brought to customer’s local computer


Putting SSTs to Test by Asking a Few Simple Questions

• Does the SST work reliably? o Firms must ensure that SSTs are dependable and user-

friendly • Is the SST better than interpersonal alternatives?

o Customers will stick to conventional methods if SST doesn’t create benefits for them

• If it fails, what systems are in place to recover?o Always provide systems, structures, and technologies

that will enable prompt service recovery when things go wrong


Customers as Partial Employees

• Customers can influence productivity and quality of service processes and outputs

• Customers who are offered opportunities to participate at active level are more likely to be satisfied

• However, customers cause one-third of all service problemso Difficult to recover from instances of customer failureo Focus on preventing customer failure by collecting data on problem

occurrence, analyzing root causes, and establishing preventive solutions

• Managing customers as employees helps to avoid customer failureso Conduct “job analysis” of customer’s present role in business—

compare against role that firm would like customers to playo Educate customers on how expected to perform and skills neededo Motivate customers by ensuring that rewarded if they perform wello Appraise customers’ performance regularly


4. Dysfunctional Customer Behavior


Addressing the Challenge of Jaycustomers

• Jaycustomer: A customer who behaves in a thoughtless or abusive fashion, causing problems for the firm, its employees, and other customers

• More potential for mischief in service businesses, especially when many customers are present

• Divergent views on jaycustomerso “The customer is king and can do no wrong.”o Marketplace is overpopulated with nasty people

who cannot be trusted to behave in ways that self-respecting services firms should expect and require

• No organization wants an ongoing relationship with an abusive customer


Six Types of Jaycustomers: 1. The Thief

• No intention of paying—sets out to steal or pay less• Services lend themselves to clever schemes to avoid

paymento For example: bypassing electricity meters, circumventing

TV cables, riding free on public transportation• Firms must take preventive actions against thieves, but

not alienate honest customers by degrading their service experienceo Make allowances for honest but absent-minded

customers


Six Types of Jaycustomers: 2. The Rulebreaker

• Many services need to establish rules to guide customers safely through the service encounter

• Government agencies may impose regulations that service suppliers must enforce

• Some rules protect other customers from dangerous behavior o For example: Vail and Beaver Creek, Colorado—ski

patrollers issue warnings to reckless skiers by attaching orange stickers on their lift tickets

• Ensure company rules are necessary, not bureaucratic


• Expresses resentment, abuses service employees verbally or even physically

• Confrontations between customers and service employees can easily escalate

• Firms should ensure employees have skills to deal with difficult situationso In a public environment, priority is to

remove person from other customerso May be better to make a public stand

on behalf of employees than conceal for fear of bad publicity

Six Types of Jaycustomers: 3. The Belligerent

Confrontations between Customers and Service Employees Can Easily Escalate


• Family Feuders: People who get into arguments with other customers—often members of their own family

• The Vandal: o Service vandalism includes pouring soft drinks into bank

cash machines; slashing bus seats, breaking hotel furniture

o Bored and drunk young people are a common source of vandalism

o Unhappy customers who feel mistreated by service providers take revenge

o Prevention is the best cure

Six Types Of Jaycustomers:4&5: Family Feuders and Vandals


Six Types Of Jaycustomers: 6. The Deadbeat

• Customers who fail to pay (as distinct from “thieves” who never intended to pay in the first place)o Preventive action is better than cure—for example:

insisting on prepayment; asking for credit card number when order is taken

o Customers may have good reasons for not paying If the client's problems are only temporary ones,

consider long-term value of maintaining the relationship

• For an industry-specific categorization, see Research Insights 8.1: Categorizing Jaycustomers in Hotels, Restaurants, and Bars


Consequences of Dysfunctional Customer Behavior

• Consequences for staff working front stageo Abused employees may find their emotions negatively affected and/or

suffer long-term psychological damageo Productivity and quality may suffer

• Consequences for customers can be both negative and positiveo Exposure to unpleasant incidents can spoil consumption experience;

some customers may even terminate their use of the serviceo Bad behavior can be contagiouso But customers may rally to support of abused employee

• Consequences for organizationo Unmotivated employees may work less effectivelyo Abused employees may take medical leaveo Direct financial costs of restoring damaged property, legal fees,

paying fraudulent claims

Documents

Service Marketing Chapter 08