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Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 15 - 1

Chapter 15

Organizing for Service Leadership


Customer-Led versus Market-OrientedPhilosophies of Management

Firms may lose market leader position if listen too closely to current customers

Service leadership requires curiosity, risk taking Customer-led businesses focus on understanding expressed

desires of customers in currently served markets Market-oriented businesses commit to understand current/

latent customer desires plus competitors’ plans, capabilities Scan market more broadly, have longer-term focus Work closely with lead users (windows to future vs. anchors to

past) Combine traditional research with experimentation, observation

Conclusion: Pursue customer satisfaction, but set limits on being led by customers, especially during rapid change


The Service Profit Chain (Fig. 15.1)

Loyalty

Service Quality

Productivity& OutputQuality

EMPLOYEES

Capability

Satisfaction

ServiceValue

CUSTOMERS

Satisfaction Loyalty

RevenueGrowth

Profitability

Operating strategy andservice delivery system

Serviceconcept

Target MarketInternal External

• Workplace design• Job design• Selection and development• Rewards and recognition• Information and communication• Tools for serving customers

Quality and productivityimprovements yieldhigher service qualityand lower costs

• Lifetime value• Retention• Repeat business• Referral


Causal Links in the Service Profit Chain (Table 15.1)

Customer loyalty drives profitability and growth

Customer satisfaction drives customer loyalty

Value drives customer satisfaction

Employee productivity and retention drive value

Employee loyalty drives productivity

Employee satisfaction drives loyalty and productivity

Internal quality drives employee satisfaction

Top management leadership underlies chain’s success


Integrating Three Functional Imperatives(recap from Chapter 1)

Customers

Marketing Imperative

Human Resources Imperative

Operations Imperative


Defining Three Functional Imperatives

Marketing Imperative Target “right” customers and build relationships Offer solutions that meet their needs Define quality package with competitive advantage

Operations Imperative Create, deliver specified service to target customers Adhere to consistent quality standards Achieve high productivity to ensure acceptable costs

Human Resource Imperative Recruit and retain the best employees for each job Train and motivate them to work well together Achieve both productivity and customer satisfaction


Reducing Intra-Organizational Tension

Transfers and cross training

Cross functional taskforces

New tasks and new people

Process management teams

Gain-sharing programs


The Search for Synergy:A Top Management Perspective

What do we want?

What can we do?

What do ourcustomers want?

What do our employees,intermediaries, and

other partners want?


From Losers to Leaders: Moving Up the Service Performance Ladder

Service LeadersService Leaders Crème de la crème of their respective industries Names synonymous with outstanding service, customer delight

Service Professionals Clear positioning strategy Sustained reputation for meeting customer expectations

Service Non-entities Traditional operations mindset Rudimentary marketing, often emphasizing price discounts

Service Losers Only survive because of lack of viable alternatives in marketplace


Achieving Service Leadership by Focusing on Role of Each Functional Area

Marketing: move from tactical to innovative and strategic

Operations: move from reactive/cost oriented to focused, innovative, well coordinated with marketing and HR

Human Resources: move from tight control of low-cost workers to quality of employees as strategic advantage


Leadership for Change Management Involves Eight Stages

Create sense of urgency to develop impetus for change

Put together strong team to direct process

Create appropriate vision of where organization must go

Communicate new vision broadly

Empower employees to act on vision

Produce sufficient short term results to create credibility

Build momentum to tackle tougher problems

Anchor new behaviors in the organizational cultureSource: John Kotter


Leadership Qualities Needed in Service Organizations

Vision, charisma, persistence, high expectations, expertise, empathy, persuasiveness, integrity

Ability to visualize quality of service as foundation for competing

Believe in people who work for the firm, make good communications a priority

Possess a natural enthusiasm for the business, teach it to others, pass on nuances, secrets, crafts of operating

Cultivate leadership qualities of others in organization

Use values to navigate firms through difficult times


Transformational Leadership May Require Changing Corporate Culture

Corporate Culture: Shared perceptions regarding what is important Shared values about what is right and wrong Shared understanding about what works and what doesn’t Shared beliefs about why these things are important Shared styles of working and relating to others

Climate for Service--Tangible working environment atop underlying culture. Influential factors include: Shared perceptions concerning practices, procedures and types of

behaviors that get rewarded Clarity about mission and values, level of commitment to common

purpose Flexibility: freedom to innovate, sense of responsibility, standards

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