4517-4374 Lovelock PPT 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

Blueprinting Services to Create Valued Experiences and Productive Operations

Service Process Redesign

The Customer as Co-Producer

Dysfunctional Customer Behavior Disrupts Service Processes


Blueprinting Services to Create Valued Experiences and Productive Operations


Developing a Blueprint

Identify key activities in creating and delivering service

Define “big picture” before “drilling down” to obtain a higher level of detail

Distinguish between “front stage” and “backstage”

Clarify interactions between customers and staff, and support by backstage activities and systems

Identify potential fail points; take preventive measures; prepare contingency

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

1. Define standards for front-stage activities

2. Specify physical evidence

3. Identify principal customer actions

4. Line of interaction (customers and front-stage personnel)

5. Front-stage actions by customer-contact personnel

6. Line of visibility (between front stage and backstage)

7. Backstage actions by customer contact personnel

8. Support processes involving other service personnel

9. Support processes involving IT- Identify fail points and risks of excessive waits

- Set service standards and do failure-proofing


Blueprinting the Restaurant Experience: Act 1 (Fig 8.1)

Make Reservatio

n

Coat Room

Valet Parking

Accept reservati

on

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 reservati

on system

Maintain (or rent) facilities

Maintain facilities/ equipme

nt

Line of interaction

Line of visibility

Line of internal physical

interaction

Contact person (visible actions)

Contact person

(invisible actions)

Fro

nt

-

Sta

ge

Back -

Sta

ge

…

Timeline Act 1

Physical Evidence

Service Standards and

Scripts

Support Processes

WW WW WW


Blueprinting the Restaurant Experience: A Three Act Performance Act 1: Prologue and Introductory Scenes

Act 2: Delivery of Core Product

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

Everything on the menu actually available? Mistakes in transmitting information a common cause of quality

failure—e.g. bad handwriting; poor verbal communication 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

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

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


Setting Service Standards

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

performance, and prescriptions for appropriate style and demeanor

Must be expressed in ways that permit objective measurement

First impression is important as it affects customer’s evaluations of quality during later stages of service delivery Research by Marriott Hotels indicates that four of five top factors

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

Customer perceptions of service experiences tend to be cumulative

For low-contact service, a single failure committed front stage is relatively more serious than in high-contact service Viewed more seriously because there are fewer subsequent

opportunities to create a favorable impression


Improving Reliability of Processes by Failure Proofing

Analysis of reasons for failure often reveals opportunities for failure proofing to reduce/eliminate future risk of errors

Need fail-safe methods for both employees and customers Errors include:

Treatment errors—human failures during contact with customer― e.g., lack of courteous or professional behavior, failure to

acknowledge, listen to, or react appropriately to the customer

Tangible errors—failures in physical elements of service― e.g., noise pollution, improper standards for cleaning of facilities

and uniforms, equipment breakdown

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

See Service Perspectives 8.1 – Poka Yokes


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 processes

Creation of brand-new processes to stay relevant

Rusting occurs internally

Natural deterioration of internal processes; creeping bureaucracy; evolution of spurious, unofficial standards

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 steps

Streamline front-end and back-end processes of services with goal of focusing on benefit-producing part of service encounter

Eliminate non-value-adding steps Improve efficiency More customized service Differentiate company

Delivering direct service

Bring service to customers instead of bringing customers to provider

Improve convenience for customers Productivity can be improved if companies can eliminate expensive

retail locations Increase customer base



Shifting to self-service

Increase in productivity and service quality Lower costs and perhaps prices Enhance technology reputation Greater convenience

Bundling services

Involves grouping multiple services into one offer, focusing on a well-defined customer group

Often has a better fit to the needs of target segment Increase productivity Add value for customers through lower transaction costs Customize service Increase per capita service use



Redesigning physical aspects of service processes

Focus on tangible elements of service process; include changes to facilities and equipment to improve service experience

Increase convenience Enhance the satisfaction and productivity of front-line staff Cultivate interest in customers Differentiate company


The Customer as Co-Producer


Levels of Customer Participation

Customer Participation

Actions and resources supplied by customers during service production

and/or delivery

Includes mental, physical, and even emotional inputs

Three Levels

Low—Employees and systems do all the work- Often involves standardized service

Medium—Customer inputs required to assist provider- Provide needed information and instructions

- Make some personal effort; share physical possessions

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 Customers undertake specific activities using facilities or systems

provided by service supplier 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 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-service Economic trade-off between declining cost of these self-service systems

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


Psychological Factors in Customer Co-Production

Economic rationale of self-service 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

Research shows that customers tend to take credit for successful outcomes, but not blame for unsuccessful ones

Critical to understand how consumers decide between using an SST option and relying on a human provider

SSTs present both advantages and disadvantages

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

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…

SST machines are conveniently located and accessible 24/7—often as close as nearest computer!

Obtaining detailed information and completing transactions can be done faster than through face-to-face or telephone contact

People in awe of what technology can do for them when it works well

People hate SSTs when…

SSTs fail—system is down, PIN numbers not accepted, etc They mess up—forgetting passwords, failing to provide information

as requested, simply hitting wrong buttons

Key weakness of SSTs: Too few incorporate service recovery systems

Customers still forced to make telephone calls or personal visits 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?

Firms must ensure that SSTs are dependable and user-friendly

Is the SST better than interpersonal alternatives?

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

If it fails, what systems are in place to recover?

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 problems Difficult to recover from instances of customer failure 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 failures Conduct “job analysis” of customer’s present role in business—

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


Dysfunctional Customer Behavior Disrupts Service

Process


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 jaycustomers “The customer is king and can do no wrong.”

Marketplace is overpopulated with nasty people who cannot be trusted to behave in ways that self-respecting services firms should expect and require

Insight: There’s truth in both perspectives

No organization wants an ongoing relationship with an abusive customer


Six Types of Jaycustomers: The Thief

No intention of paying—sets out to steal or pay less

Services lend themselves to clever schemes to avoid payment

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 experience

Make allowances for honest but absent-minded customers


Six Types of Jaycustomers: 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

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 situations

In a public environment, priority is to remove person from other customers

May be better to make a public stand on behalf of employees than conceal for fear of bad publicity

See Service Perspectives 8.2: Air Rage

Six Types of Jaycustomers: 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:

Service vandalism includes pouring soft drinks into bank cash machines; slashing bus seats, breaking hotel furniture

Bored and drunk young people are a common source of vandalism

Unhappy customers who feel mistreated by service providers take revenge

Prevention is the best cure

Six Types Of Jaycustomers:Family Feuders and Vandals


Six Types Of Jaycustomers: The Deadbeat

Customers who fail to pay (as distinct from “thieves” who never intended to pay in the first place)

Preventive action is better than cure—for example: insisting on prepayment; asking for credit card number when order is taken

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 stage Abused employees may find their emotions negatively affected and/or

suffer long-term psychological damage Productivity and quality may suffer

Consequences for customers can be both negative and positive

Exposure to unpleasant incidents can spoil consumption experience; some customers may even terminate their use of the service

Bad behavior can be contagious But customers may rally to support of abused employee

Consequences for organization

Unmotivated employees may work less effectively Abused employees may take medical leave Direct financial costs of restoring damaged property, legal fees,

paying fraudulent claims


Service blueprinting can be used to design a service and create a satisfying experience for customers. Key components of the blueprint include: Definition of standards for each front-stage activity Physical and other evidence for front-stage activities Principal customer actions Line of interaction Front-stage actions by customer-contact personnel Line of visibility Backstage actions by customer-contact personnel Support processes involving other service personnel Support processes involving information technology

Blueprinting a restaurant (or other service) can be a three-act performance Prologue and introductory scenes Delivery of the core product Conclusion of the drama

Summary for Chapter 8: Designing and Managing Service Processes (1)


Service standards need to be expressed in measurable terms and failure proofing designed into service processes to improve reliability

Service process redesign can be categorized into five kinds: Eliminating non-value-adding steps Shifting to self-service Delivering direct service Bundling services Redesigning the physical aspect of service processes

When the customer is a co-producer, issues to consider are: Levels of customer participation Self-service technologies (SST) Psychological factors in customer co-production Aspects of SST that please or annoy customers Customers as partial employees



Dysfunctional customer behavior of jaycustomers disrupts service processes

Six types of jaycustomers: Thief Rulebreaker Belligerent Family Feuders Vandal Deadbeat

Dysfunctional behavior can have consequences for staff, and positive or negative consequences for customers


Documents

4517-4374 Lovelock PPT Chapter 08