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Provider Gap 3

Service Delivery

Service Performance Gap Customer-Driven Service Designs and Standards

Part 5 Opener

Employees Roles in Service Delivery

Demonstrate the importance of creating a service culture in which providing excellent service to both internal and external customers is a way of life. Illustrate the critical importance of service employees in creating customer satisfaction and service quality. Identify the challenges inherent in boundaryspanning roles.

Provide examples of strategies for creating customer-oriented service delivery through hiring the right people, developing employees to deliver service quality, providing needed support systems, and retaining the best service employees.

Service Culture
A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization. - Christian Gronroos (1990)

The Critical Importance of Service Employees

They are the service. They are the organization in the customers eyes. They are the brand. They are marketers. Their importance is evident in:
the services marketing mix (people) the service-profit chain the services triangle

The Services Marketing Triangle

Company (Management)

Internal Marketing
Enabling the promise

External Marketing
Making the promise

Interactive Marketing
Delivering the promise

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Ways to Use the Services Marketing Triangle

Overall Strategic Assessment
How is the service organization doing on all three sides of the triangle? Where are the weaknesses? What are the strengths?

Specific Service Implementation

What is being promoted and by whom? How will it be delivered and by whom? Are the supporting systems in place to deliver the promised service?

The Service Profit Chain

Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, Putting the Service -Profit Chain to Work, Harvard Business Review, March-April 1994, p. 166.

Service Employees
Who are they?
boundary spanners

What are these jobs like?

emotional labor many sources of potential conflict
person/role organization/client interclient

quality/productivity tradeoffs

Boundary Spanners Interact with Both Internal and External Constituents

External Environment

Internal Environment

Boundary-Spanning Workers Juggle Many Issues

Person versus role Organization versus client Client versus client

Human Resource Strategies for Delivering Service Quality through People

Compete for the best people Measure and reward strong service performers Hire for service competencies and service inclination Be the preferred employer Train for technical and interactive skills

Hire the right people

Treat employees as customers

Retain the best people

CustomerOriented Service Delivery

Develop people to deliver service quality

Empower employees

Include employees in the companys vision Develop service-oriented internal processes

Provide needed support systems

Promote teamwork

Provide supportive technology and equipment

Measure internal service quality

quicker responses to customer needs during service delivery quicker responses to dissatisfied customers during service recovery employees feel better about their jobs and themselves employees tend to interact with warmth/enthusiasm empowered employees are a great source of ideas great word-of-mouth advertising from customers

potentially greater dollar investment in selection and training higher labor costs potentially slower or inconsistent service delivery may violate customers perceptions of fair play employees may give away the store or make bad decisions

Traditional Organizational Chart




Front-line Employee

Front-line Employee

Front-line Employee

Front-line Employee

Front-line Employee

Front-line Employee

Front-line Employee

Front-line Employee


Customer-Focused Organizational Chart

Front-line Employee Front-line Employee Front-line Employee Front-line Employee
Front-line Employee Front-line Employee Front-line Employee Front-line Employee




Customers Roles in Service Delivery

Illustrate the importance of customers in successful service delivery and cocreation of service experiences. Discuss the variety of roles that service customers play: productive resources for the organization; contributors to quality and satisfaction; competitors. Explain strategies for involving service customers effectively to increase both quality and productivity.

Table 13.1

Levels of Customer Participation across Different Services

Source: Adapted from A. R. Hubbert, Customer Co-Creation of Service Outcomes: Effects of Locus of Causality Attributions, doctoral dissertation, Arizona State University, Tempe, Arizona, 1995.

How Customers Widen the Service Performance Gap

Lack of understanding of their roles Not being willing or able to perform their roles No rewards for good performance

Interfering with other customers

Incompatible market segments

Other customers can detract from satisfaction:

disruptive behaviors overly demanding behaviors excessive crowding incompatible needs

Importance of Other (Fellow) Customers in Service Delivery

Other customers can enhance satisfaction:

mere presence socialization/friendships roles: assistants, teachers, supporters, mentors

Customer Roles in Service Delivery

Productive Resources

Contributors to Service Quality and Satisfaction


Services Production Continuum

Customer Production Joint Production Firm Production

Gas Station Illustration 1. Customer pumps gas and pays at the pump with automation 2. Customer pumps gas and goes inside to pay attendant 3. Customer pumps gas and attendant takes payment at the pump 4. Attendant pumps gas and customer pays at the pump with automation 5. Attendant pumps gas and customer goes inside to pay attendant 6. Attendant pumps gas and attendant takes payment at the pump

Customers as Productive Resources

customers can be thought of as partial employees
contributing effort, time, or other resources to the production process

customer inputs can affect organizations productivity key issue:

should customers roles be expanded? reduced?

Customers as Contributors to Service Quality and Satisfaction

Customers can contribute to:
their own satisfaction with the service
by performing their role effectively by working with the service provider

the quality of the service they receive

by asking questions by taking responsibility for their own satisfaction by complaining when there is a service failure

Customers as Competitors
customers may compete with the service provider internal exchange vs. external exchange internal/external decision often based on:
expertise capacity resources capacity time capacity economic rewards psychic rewards trust control

Strategies for Enhancing Customer Participation

Strategies for Enhancing Customer Participation

Define customers jobs
helping oneself helping others promoting the company

Recruit, educate, and reward customers

recruit the right customers educate and train customers to perform effectively reward customers for their contributions avoid negative outcomes of inappropriate customer participation

Manage the customer mix

Characteristics of Service that Increase the Importance of Compatible Segments

Source: Adapted from C. I. Martin and C. A. Pranter, Compatibility Management: Customer-to-Customer Relationships in Service Environm ents, Journal of Services Marketing, 3, no. 3 (Summer 1989), pp. 515.

Delivering Service Through Intermediaries

Identify the primary channels through which services are delivered to end customers. Provide examples of each of the key service intermediaries. View delivery of service from two perspectivesthe service provider and the service deliverer. Discuss the benefits and challenges of each method of service delivery.

Service Provider Participants

service principal (originator)
creates the service concept
(like a manufacturer)

service deliverer (intermediary)

entity that interacts with the customer in the execution of the service
(like a distributor/wholesaler)

Services Intermediaries
service outlets licensed by a principal to deliver a unique service concept it has created
e.g., Jiffy Lube, Blockbuster, McDonalds

Agents and Brokers

representatives who distribute and sell the services of one or more service suppliers
e.g., travel agents, independent insurance agents

Electronic Channels
all forms of service provision through electronic means
e.g., ATMs, university video courses, TaxCut software

Benefits and Challenges for Franchisers of Service

Leveraged business format for greater expansion and revenues Consistency in outlets Knowledge of local markets Shared financial risk and more working capital

Difficulty in maintaining and motivating franchisees Highly publicized disputes and conflict Inconsistent quality Control of customer relationship by intermediary

Benefits and Challenges for Franchisees of Service

An established business format National or regional brand marketing Minimized risk of starting a business

Encroachment Disappointing profits and revenues Lack of perceived control over operations High fees


Benefits and Challenges in Distributing Services through Agents and Brokers

Reduced selling and distribution costs Intermediarys possession of special skills and knowledge Wide representation Knowledge of local markets Customer choice Loss of control over pricing Representation of multiple service principals

Benefits and Challenges in Electronic Distribution of Services

Consistent delivery for standardized services Low cost Customer convenience Wide distribution Customer choice and ability to customize Quick customer feedback

Price competition Inability to customize with highly standardized services Lack of consistency due to customer involvement Changes in consumer behavior Security concerns Competition from widening geographies

Common Issues Involving Intermediaries

conflict over objectives and performance difficulty controlling quality and consistency across outlets tension between empowerment and control channel ambiguity

Strategies for Effective Service Delivery Through Intermediaries

Control Strategies:
Measurement Review

Empowerment Strategies:
Help the intermediary develop customeroriented service processes Provide needed support systems Develop intermediaries to deliver service quality Change to a cooperative management structure

Partnering Strategies:
Alignment of goals Consultation and cooperation

Managing Demand and Capacity

Explain the underlying issue for capacityconstrained services: lack of inventory capability. Present the implications of time, labor, equipment, and facilities constraints combined with variations in demand patterns. Lay out strategies for matching supply and demand through (a) shifting demand to match capacity or (b) adjusting capacity to meet demand.

Demonstrate the benefits and risks of yield management strategies in forging a balance among capacity utilization, pricing, market segmentation, and financial return. Provide strategies for managing waiting lines for times when capacity and demand cannot be aligned.

Variations in Demand Relative to Capacity

Source: C. Lovelock, Getting the Most Out of Your Productive Capacity, in Product Plus (Boston: McGraw Hill, 1994), chap. 16, p. 241.

Understanding Capacity Constraints and Demand Patterns

Capacity Constraints
Time, labor, equipment, and facilities Optimal versus maximum use of capacity Demand Patterns Charting demand patterns Predictable cycles Random demand fluctuations Demand patterns by market segment

Demand versus Supply

Source: C. H. Lovelock, Classifying Services to Gain Strategic Marketing Insights, Journal of Marketing 47, (Summer 1983): 17.

Constraints on Capacity
Nature of the Constraint

Type of Service
Legal Consulting Accounting Medical Law firm Accounting firm Consulting firm Health clinic Delivery services Telecommunication Network services Utilities Health club Hotels Restaurants Hospitals Airlines Schools Theaters Churches




Strategies for Shifting Demand to Match Capacity

Demand Too High
Shift Demand

Demand Too Low

Use sales and advertising to increase business from current market segments. Modify the service offering to appeal to new market segments. Offer discounts or price reductions. Modify hours of operation. Bring the service to the customer.

Use signage to communicate busy days and times. Offer incentives to customers for usage during nonpeak times. Take care of loyal or regular customers first. Advertise peak usage times and benefits of nonpeak use.

Strategies for Adjusting Capacity to Match Demand

Demand Too High
Adjust Capacity

Demand Too Low

Perform maintenance, renovations. Schedule vacations. Schedule employee training. Lay off employees.

Stretch time, labor, facilities and equipment. Cross-train employees. Hire part-time employees. Request overtime work from employees. Rent or share facilities. Rent or share equipment. Subcontract or outsource activities.

Challenges and Risks in Using Yield Management

Loss of competitive focus Customer alienation

Employee morale problems

Incompatible incentive and reward systems

Lack of employee training

Inappropriate organization of the yield management function

Waiting Line Strategies

Employ operational logic
modify operations adjust queuing system

Establish a reservation process Differentiate waiting customers

importance of the customer urgency of the job duration of the service transaction payment of a premium price

Make waiting fun, or at least tolerable

Issues to Consider in Making Waiting More Tolerable

unoccupied time feels longer than occupied time preprocess waits feel longer than in-process waits anxiety makes waits seem longer uncertain waits seem longer than known, finite waits unexplained waits seem longer than explained waits unfair waits feel longer than equitable waits the more valuable the service, the longer the customer will wait solo waits feel longer than group waits

Waiting Line Configurations

Source: J. A. Fitzsimmons and M. J. Fitzsimmons, Service Management, 4th ed. (New York: Irwin/McGraw-Hill, 2004), chap. 11, p. 296.