Chapter – 7

The Service Encounter

7

Service Management (5e)

Operations, Strategy, Information Technology

By

Fitzsimmons and Fitzsimmons

7-2

Use the service encounter triad to describe a service firm’s delivery process.

Discuss the role of organizational control systems for employee empowerment.

Prepare abstract questions and write situational vignettes. Discuss the role of customer as coproducer. Describe how elements of the service profit chain lead to revenue

growth and profitability.

Learning ObjectivesLearning Objectives

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Service

Organization

Efficiencyversus

satisfaction

Efficiencyversus

autonomy

CustomerContact

Personnel Perceived control

The Service Encounter TriadThe Service Encounter Triad

Continued….Continued….

Service manager wants efficiency in service delivery to increase profits. They will impose rules and procedures on contact personnel (service provider) to bring standardization, which may result in dissatisfied customers.

Alternatively, service provider wants to control the behavior of the customer to make their own work manageable and less stressful.

However, the customer wants to control the service encounter to derive the most benefit from it.

Ideally,, all three should work together to create a beneficial service encounter.

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Encounter dominated by the service organizationEncounter dominated by the service organization

To achieve efficiency and follow a cost leadership strategy, an organization may standardize service delivery by imposing strict operating procedures and limit the discretion of contact personnel, example, McDonald’s.

Success here can come from teaching the customer what not to expect from their service.

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Contact personnel-dominated encounterContact personnel-dominated encounter

Service personnel attempt to limit the scope of the service encounter to reduce their own stress in meeting demanding customers.

The customer is expected to place considerable trust in the contact person’s judgment because of the service provider’s perceived expertise. Example doctor-patient.

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Customer-dominated encounterCustomer-dominated encounter

In standardized service, self-service is an option that gives the customer complete control over the limited service that is provided. Example, gas station that is equipped with a credit-card reader, the customer need not interact with anyone.

The result can be very efficient and satisfying to the customer who needs or desires very little service.

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Balance of controlBalance of control

A satisfactory and effective encounter should balance the need for control by all three participants.

The organization’s need for efficiency can be satisfied when contact personnel are trained properly and the customer’s expectations and role in the delivery process are communicated effectively.

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7-9

Culture Empowerment Control Systems

The Service OrganizationThe Service Organization

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Interaction between customer and contact personnel occurs within the context of an organization’s culture and physical surroundings.

For example, Disney’s culture affects their interaction with customers. In other words, an organization’s values when consistently communicated by management, permit contact personnel to act with considerable autonomy, because their judgment is based on shared set of values.

Definition of culture: Schwartz and Davis (1981) - Culture is a pattern of beliefs and expectations

shared by the organization’s members. Mintzberg (1989) - Culture is the traditions and beliefs of an organization that

distinguish it from others. Hoy and Miskel (1991) - Culture is shared orientations that hold the unit

together and give a distinctive identity.

CultureCulture

EmpowermentEmpowerment

The discretion of contact personnel is limited by procedures and design. The organization’s structure is a pyramid-shaped, with layers of supervision to ensure consistency of service delivery across all locations.

A new model supported with technology has inverted ‘T’ organizational structure, where layers of supervision are significantly reduced because contact personnel are well trained, motivated, and supplied with timely information.

‘People want to do good work if they are given the opportunity’. Therefore: Invest in people (training) Use IT to enable personnel Recruitment and training is critical Link compensation to performance

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Control systemsControl systems

Table 7.1 describes four organizational control systems to encourage creative employee empowerment Belief system – articulated through organizational culture Boundary – defines limits to employee initiatives Diagnostic – defines measurable goal to achieve performance Interactive – pressures from customers for creative solutions

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7-13

Ideally , customer contact personnel should have personality attributes that include: Flexibility Tolerance for ambiguity An ability to monitor change Empathy for customers

Contact PersonnelContact Personnel

Continued…Continued…

Selection1. Abstract Questioning2. Situational Vignette3. Role Playing

7-14

Continued….Continued….

Training Unrealistic customer expectations

Unreasonable demands Demands against policies Unacceptable treatment of employees Drunkenness Breaking of societal norms Special-needs customers

Unexpected service failure Unavailable service due to failure Slow performance (capacity issues) Unacceptable service (low standards)

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Every interaction is important for the customer, but is routine for the service provider. Therefore, the attitude and expectations maybe different.

Expectations and Attitudes Economizing customer

Customer wants to maximize the value obtained for his or her expenditures of time, effort, and money.

Loss of these customers is an early warning of potential competitive threats.

Ethical customer Patronize socially responsible firms

The CustomerThe Customer

Continued….Continued….

Personalizing customer These customers want interpersonal gratification such as

recognition, respect, etc.

Convenience customer These customers have no interest in shopping for the serive;

convenience is most important.

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Customer as Co-ProducerCustomer as Co-Producer

Both customer and service provider have role to play in transacting the service.

Customers role maybe defined by societal norms or implied by the particular design of the service offered. If and when these roles change due to re-design and/or technology – then there is resistance.

See figure 7.2 – it presents some success factors for categories of service encounter, where the service provider could be a machine serving a human being (ex. ATM machine), or a machine serving another machine (ex. EDI), or a human being serving a machine (ex. Elevator repair).

7-18

Continued….Continued….

Study of the bank revealed: When employees perceive a strong service orientation, customers

report superior service Customers perceived better service in branches where employees

were more enthusiastic, good training of tellers, well maintained equipment, service is considered important.

After a bank employee gets to know the customer, the cost of serving that customer decreases because time is saved in identity verification and the customer needs can be better anticipated.

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Higher Customer Satisfaction

More Familiarity with Customer Needs and Ways of Meeting Them

Greater Opportunity for Recoveryfrom Errors

Higher EmployeeSatisfaction

Higher Productivity

Improved Quality of Service

MoreRepeatPurchases

Stronger Tendency to Complain about Service Errors

Lower Costs

Better Results

Satisfaction Mirror Satisfaction Mirror

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Internal

Operating strategy andservice delivery system

  Service concept Target market

Servicevalue

Customers

Loyalty

Productivity&

Outputquality

Servicequality

Capability

Satisfaction

Employees Satisfaction Loyalty

Revenuegrowth

External

Profitability

Customer orientation/quality emphasisAllow decision-making latitudeSelection and developmentRewards and recognitionInformation and communicationProvide support systemsFoster teamwork

Quality & productivity improvements yield higher service quality and lower cost

Attractive Value Service designed& delivered tomeet targetedcustomers’ needsSolicit customerfeedback

Lifetime valueRetentionRepeat BusinessReferrals

                    

Service Profit Chain Service Profit Chain

7-22Is attitude emphasized?Are job previews utilized?Are customers screened?

Are employees encouraged to refer friends?

 Are referrals from the “best” employees given priority?

Is satisfactionmeasured periodically? Are measurements linked to other functions on the cycle?

Careful Employeeand Customer

Selection 

(and Self-selection))

High-Quality Training

Well-DesignedSupport Systems Information Facilities

Greater Latitude to Meet

Customer’s Needs

Clear Limits on, and

Expectations of, Employees

AppropriateRewards

and FrequentRecognition

SatisfiedEmployees

EmployeeReferrals of

Potential Job

Candidates

Is training for job and life? Is it an important element of quality of work life?

Do they reflect needs of the service encounter?

Are they designed to foster relationships?

Does it reflect top management “talk”? Is it enough to allow delivery of results to customers?

Do they limit the “right” risks?Are they logical to employees?

Cycle of Capability

Are they linked toservice objectives? Are they balanced between monetary and non-monetary?

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Topics for DiscussionTopics for Discussion

How does the historical image of service as servitude affect today’s customer expectations and service employee behavior?

What are the organizational and marketing implications of considering a customer as a “partial employee”?

Comment on the different dynamics of one-on-one service and group service.

How does use of a “service script” relate to service quality?

If the roles played by customers are determined by cultural norms, how can services be exported?