Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Chapter 8: Designing and Managing Service Processes

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Overview of Chapter 8  Blueprinting Services to Create Valued Experiences and Productive Operations  Service Process Redesign  The Customer as Co-Producer  Dysfunctional Customer Behavior Disrupts Service Processes

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Developing a Blueprint  Identify key activities in creating and delivering service  Define “big picture” before “drilling down” to obtain a higher level of detail  Distinguish between “front stage” and “backstage”  Clarify interactions between customers and staff, and support by backstage activities and systems  Identify potential fail points; take preventive measures; prepare contingency  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 Key Components of a Service Blueprint 1. Define standards for front-stage activities 2. Specify physical evidence 3. Identify principal customer actions 4. Line of interaction (customers and front-stage personnel) 5. Front-stage actions by customer-contact personnel 6. Line of visibility (between front stage and backstage) 7. Backstage actions by customer contact personnel 8. Support processes involving other service personnel 9. Support processes involving IT - Identify fail points and risks of excessive waits - Set service standards and do failure-proofing

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Setting Service Standards  Service providers should design standards for each step sufficiently high to satisfy and even delight customers  Standards may include time parameters, script for a technically correct performance, and prescriptions for appropriate style and demeanor  Must be expressed in ways that permit objective measurement  First impression is important as it affects customer ’ s evaluations of quality during later stages of service delivery  Research by Marriott Hotels indicates that four of five top factors contributing to customer loyalty come into play during the first 10 minutes of service delivery  Customer perceptions of service experiences tend to be cumulative  For low-contact service, a single failure committed front stage is relatively more serious than in high-contact service  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 Improving Reliability of Processes by Failure Proofing  Analysis of reasons for failure often reveals opportunities for failure proofing to reduce/eliminate future risk of errors  Need fail-safe methods for both employees and customers  Errors include:  Treatment errors—human failures during contact with customer ― e.g., lack of courteous or professional behavior, failure to acknowledge, listen to, or react appropriately to the customer  Tangible errors—failures in physical elements of service ― e.g., noise pollution, improper standards for cleaning of facilities and uniforms, equipment breakdown  Goal of fail-safe procedures is to prevent errors such as:  Performing tasks incorrectly, in the wrong order, too slowly  Doing work that wasn ’ t requested in the first place  See Service Perspectives 8.1 – Poka Yokes

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Why Redesign? (2)  Revitalizes process that has become outdated  Changes in external environment make existing practices obsolete and require redesign of underlying processes  Creation of brand-new processes to stay relevant  Rusting occurs internally  Natural deterioration of internal processes; creeping bureaucracy; evolution of spurious, unofficial standards  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 Process Redesign: Approaches and Potential Benefits (1) (Table 8.1)  Eliminating non-value-adding steps  Streamline front-end and back-end processes of services with goal of focusing on benefit-producing part of service encounter  Eliminate non-value-adding steps  Improve efficiency  More customized service  Differentiate company  Delivering direct service  Bring service to customers instead of bringing customers to provider  Improve convenience for customers  Productivity can be improved if companies can eliminate expensive retail locations  Increase customer base

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Process Redesign: Approaches and Potential Benefits (2) (Table 8.1)  Shifting to self-service  Increase in productivity and service quality  Lower costs and perhaps prices  Enhance technology reputation  Greater convenience  Bundling services  Involves grouping multiple services into one offer, focusing on a well- defined customer group  Often has a better fit to the needs of target segment  Increase productivity  Add value for customers through lower transaction costs  Customize service  Increase per capita service use

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Process Redesign: Approaches and Potential Benefits (3) (Table 8.1)  Redesigning physical aspects of service processes  Focus on tangible elements of service process; include changes to facilities and equipment to improve service experience  Increase convenience  Enhance the satisfaction and productivity of front-line staff  Cultivate interest in customers  Differentiate company

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 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)

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 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

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 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

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 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