1. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 1 The Customer as Co-Producer

2. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 2 Levels of Customer Participation  Customer Participation  Actions and resources supplied by customers during service production and/or delivery  Includes mental, physical, and even emotional inputs  Three Levels  Low—Employees and systems do all the work - Often involves standardized service  Medium—Customer inputs required to assist provider - Provide needed information and instructions - Make some personal effort; share physical possessions  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)

3. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 3 Self-Service Technologies (SSTs)  Ultimate form of customer involvement  Customers undertake specific activities using facilities or systems provided by service supplier  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  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-service  Economic trade-off between declining cost of these self-service systems and rising cost of labor  Challenge: Getting customers to try this technology

4. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 4 Psychological Factors in Customer Co-Production  Economic rationale of self-service  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  Research shows that customers tend to take credit for successful outcomes, but not blame for unsuccessful ones  Critical to understand how consumers decide between using an SST option and relying on a human provider  SSTs present both advantages and disadvantages  Benefits: Time and cost savings, flexibility, convenience of location, greater control over service delivery, and a higher perceived level of customization  Disadvantages: Anxiety and stress experienced by customers who are uncomfortable with using them

5. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 5 What Aspects of SSTs Please or Annoy Customers?  People love SSTs when …  SST machines are conveniently located and accessible 24/7 — often as close as nearest computer!  Obtaining detailed information and completing transactions can be done faster than through face-to-face or telephone contact  People in awe of what technology can do for them when it works well  People hate SSTs when …  SSTs fail — system is down, PIN numbers not accepted, etc  They mess up — forgetting passwords, failing to provide information as requested, simply hitting wrong buttons  Key weakness of SSTs: Too few incorporate service recovery systems  Customers still forced to make telephone calls or personal visits  Blame service provider for not providing more user-friendly system

6. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 6 HSBC: “The world’s local bank” (Fig 8.2) Source: Courtesy HSBC Global site brought to customer’s local computer

7. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 7 Putting SSTs to Test by Asking a Few Simple Questions  Does the SST work reliably?  Firms must ensure that SSTs are dependable and user-friendly  Is the SST better than interpersonal alternatives?  Customers will stick to conventional methods if SST doesn ’ t create benefits for them  If it fails, what systems are in place to recover?  Always provide systems, structures, and technologies that will enable prompt service recovery when things go wrong

8. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 8 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 problems  Difficult to recover from instances of customer failure  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 failures  Conduct “ job analysis ” of customer ’ s present role in business — compare against role that firm would like customers to play  Educate customers on how expected to perform and skills needed  Motivate customers by ensuring that rewarded if they perform well  Appraise customers ’ performance regularly

9. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 9 Dysfunctional Customer Behavior Disrupts Service Process

10. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 10 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 jaycustomers  “ The customer is king and can do no wrong. ”  Marketplace is overpopulated with nasty people who cannot be trusted to behave in ways that self- respecting services firms should expect and require  Insight: There ’ s truth in both perspectives  No organization wants an ongoing relationship with an abusive customer

11. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 11 Six Types of Jaycustomers: The Thief  No intention of paying — sets out to steal or pay less  Services lend themselves to clever schemes to avoid payment  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 experience  Make allowances for honest but absent-minded customers

12. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 12 Six Types of Jaycustomers: 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  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

13. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 13  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 situations  In a public environment, priority is to remove person from other customers  May be better to make a public stand on behalf of employees than conceal for fear of bad publicity  See Service Perspectives 8.2: Air Rage Six Types of Jaycustomers: The Belligerent Confrontations between Customers and Service Employees Can Easily Escalate

14. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 14  Family Feuders: People who get into arguments with other customers — often members of their own family  The Vandal:  Service vandalism includes pouring soft drinks into bank cash machines; slashing bus seats, breaking hotel furniture  Bored and drunk young people are a common source of vandalism  Unhappy customers who feel mistreated by service providers take revenge  Prevention is the best cure Six Types Of Jaycustomers: Family Feuders and Vandals

15. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 15 Six Types Of Jaycustomers: The Deadbeat  Customers who fail to pay (as distinct from “ thieves ” who never intended to pay in the first place)  Preventive action is better than cure — for example: insisting on prepayment; asking for credit card number when order is taken  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

16. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 16 Consequences of Dysfunctional Customer Behavior  Consequences for staff working front stage  Abused employees may find their emotions negatively affected and/or suffer long-term psychological damage  Productivity and quality may suffer  Consequences for customers can be both negative and positive  Exposure to unpleasant incidents can spoil consumption experience; some customers may even terminate their use of the service  Bad behavior can be contagious  But customers may rally to support of abused employee  Consequences for organization  Unmotivated employees may work less effectively  Abused employees may take medical leave  Direct financial costs of restoring damaged property, legal fees, paying fraudulent claims

17. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 17  Service blueprinting can be used to design a service and create a satisfying experience for customers. Key components of the blueprint include:  Definition of standards for each front-stage activity  Physical and other evidence for front-stage activities  Principal customer actions  Line of interaction  Front-stage actions by customer-contact personnel  Line of visibility  Backstage actions by customer-contact personnel  Support processes involving other service personnel  Support processes involving information technology  Blueprinting a restaurant (or other service) can be a three-act performance  Prologue and introductory scenes  Delivery of the core product  Conclusion of the drama Summary for Chapter 8: Designing and Managing Service Processes (1)

18. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 18  Service standards need to be expressed in measurable terms and failure proofing designed into service processes to improve reliability  Service process redesign can be categorized into five kinds:  Eliminating non-value-adding steps  Shifting to self-service  Delivering direct service  Bundling services  Redesigning the physical aspect of service processes  When the customer is a co-producer, issues to consider are:  Levels of customer participation  Self-service technologies (SST)  Psychological factors in customer co-production  Aspects of SST that please or annoy customers  Customers as partial employees Summary for Chapter 8: Designing and Managing Service Processes (2)

19. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 8 - 19  Dysfunctional customer behavior of jaycustomers disrupts service processes  Six types of jaycustomers:  Thief  Rulebreaker  Belligerent  Family Feuders  Vandal  Deadbeat  Dysfunctional behavior can have consequences for staff, and positive or negative consequences for customers Summary for Chapter 8: Designing and Managing Service Processes (3)