7

Service Management (5e)

Operations, Strategy, Information Technology
By
Fitzsimmons and Fitzsimmons

Chapter – 7
The Service Encounter
 7-2

Learning Objectives
 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.
 7-3

The Service Encounter Triad

Service
Organization

Efficiency Efficiency
versus versus
autonomy satisfaction

Contact
Customer
Personnel Perceived
control
 7-4

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.
 7-5

Encounter 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.
 7-6

Contact 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.
 7-7

Customer-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.
 7-8

Balance 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.
 7-9

The Service Organization

 Culture
 Empowerment
 Control Systems
 7-10

Culture
 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.
 7-11

Empowerment
 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
 7-12

Control systems
 Table
7.1 describes four organizational control systems to
encourage creative employee empowerment
 Beliefsystem – articulated through organizational culture
 Boundary – defines limits to employee initiatives
 Diagnostic – defines measurable goal to achieve performance
 Interactive – pressures from customers for creative solutions
 7-13

Contact Personnel
 Ideally, customer contact personnel should have personality
attributes that include:
 Flexibility
 Tolerance for ambiguity
 An ability to monitor change
 Empathy for customers
 7-14

Continued…
 Selection
1. Abstract Questioning
2. Situational Vignette
3. Role Playing
 7-15

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)
 7-16

The Customer
 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
 7-17

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.
 7-18

Customer 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).
 7-19

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.
 7-20

Satisfaction Mirror

More More Familiarity with

Repeat Customer Needs
Purchase and Ways of
s Meeting Them
Stronger Greater Opportunity
Tendency to for Recovery
Complain about from Errors
Service Errors
Higher Customer Higher Employee
Satisfaction Satisfaction
Lower Higher
Costs Productivity

Better Improved Quality

Results of Service
 7-21

Service Profit Chain

Internal External
Operating strategy and Service
concept Target market
service delivery system

Loyalty
Customers Revenue
Satisfaction growth
Productivity
& Service
Employees Satisfaction Loyalty
Output value
Capability quality
Profitability

Service
quality

Customer orientation/quality emphasis Quality & productivity Attractive Value Lifetime value
Allow decision-making latitude improvements yield Service designed Retention
Selection and development higher service quality & delivered to Repeat
Rewards and recognition and lower cost meet targeted Business
Information and communication customers’ needs Referrals
Provide support systems Solicit customer
Foster teamwork feedback
 Is attitude emphasized? 7-22
Are job previews utilized?
Are customers screened?

Careful Employee
Are employees and Customer
encouraged to Selection
refer friends? Is training for job and
life?
(and Self-selection))
Are referrals from
the “best” Employee High-
Is it an important
employees given Referrals of element of quality of
Quality
priority? Potential work life?
Training
Job
Is satisfaction Candidates
measured
Do they reflect
periodically? Well-Designed
needs of the
Support
service encounter?
Are measurements Cycle Systems
Satisfied
linked to other  Information
functions on Employees of Capability  Facilities
Are they designed
to foster
the cycle?
relationships?

Appropriate Greater Latitude

Rewards to Meet
and Frequent Customer’s Does it reflect top
Are they linked to Recognition Needs management
service objectives? “talk”?
Clear Limits
Are they balanced on, and Is it enough to
between monetary Expectations allow delivery of
and non-monetary? of, Employees results to
customers?
Do they limit the “right” risks?
Are they logical to employees?
 7-23

Topics 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?