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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
1.Blueprinting Services to Create Valued Experiences and Productive Operations*
– Service Process Redesign– The Customer as Co-Producer*– Dysfunctional Customer Behavior
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 3
1. 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
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 5
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*
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 6
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 7
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 8
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 9
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 10
2. 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 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
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 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
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-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
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 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 16
3. The Customer as Co-Producer*
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 17
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)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 18
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
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-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
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…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
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? 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
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 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 24
4. Dysfunctional Customer Behavior
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 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 26
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 27
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
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 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
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: 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 30
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
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 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