Download - 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 2
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 3
Blueprinting Services to Create Valued Experiences and Productive Operations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 4
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 5
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 6
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 7
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 8
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 9
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 10
Redesigning Service Processes
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 11
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.”
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 12
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 13
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 14
Process Redesign: Approaches and Potential Benefits (2) (Table 8.1)
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 15
Process Redesign: Approaches and Potential Benefits (3) (Table 8.1)
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 16
The Customer as Co-Producer
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 17
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)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 18
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 19
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 20
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 21
HSBC: “The world’s local bank” (Fig 8.2)
Source: Courtesy HSBC
Global site brought to customer’s local computer
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 22
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 23
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 24
Dysfunctional Customer Behavior Disrupts Service
Process
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 25
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 26
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 27
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 28
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 29
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 30
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 31
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 32
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)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 33
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
Summary for Chapter 8: Designing and Managing Service Processes (2)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 34
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
Summary for Chapter 8: Designing and Managing Service Processes (3)