MKT 346: Marketing of Services Dr. Houston Chapter 11: Managing People for Service Advantage

Importance of Service Personnel  Help maintain firm’s positioning  Important driver of customer loyalty  Key driver of front-line productivity  Important for generating sales

Front Line in Low-Contact Services  Many routine transactions are now conducted without involving front-line staff  ATMs (Automated Teller Machines)  IVR (Interactive Voice Response) systems  Websites for reservations/ordering, payment etc.  Front-line employees still remain crucially important  “Moments of truth” affect customer views of service

Boundary Spanning and Role Stress  Boundary spanners  front-line staff  link inside of organization to outside world  often experience role stress

Boundary Spanning and Role Stress  Three main causes of role stress:  Organization vs. Client  Person vs. Role  Client vs. Client Organization Client Person (Employee)

Emotional Labor What management expects employees to display to customers What employees feel inside

Good Human Resource Practices Can Alleviate Emotional Labor  Selective recruitment  Employee training  Employee counseling

Cycle of Failure (Fig 11.6, Page 282)

 The employee cycle of failure  Narrow job design for low skill levels  Emphasis on rules rather than service  Use of technology to control quality  Bored employees lack ability to respond to customers  Dissatisfied with poor service attitude  Low service quality  High employee turnover Cycle of Failure (Fig. 11.6)

 The customer cycle of failure  Repeated emphasis on attracting new customers  Customers dissatisfied with employee performance  Customers always served by new faces  Fast customer turnover  Search for new customers to maintain sales volume Cycle of Failure (Fig. 11.6)

 Costs of short-sighted policies are ignored  Constant expense of recruiting, hiring, training  Lower productivity of inexperienced new workers  Higher costs of winning new customers to replace those lost  Loss of revenue stream from dissatisfied customers who leave  Loss of customers turned off by negative word-of-mouth Cycle of Failure (Fig. 11.6)

Cycle Of Mediocrity (Fig. 11.8, Page 283)

 Most commonly found in large, bureaucratic organizations  Service delivery is oriented towards  Standardized service  Operational efficiencies  Promotions based on long service  Success measured by absence of mistakes  Rule-based training  Narrow and repetitive jobs Cycle Of Mediocrity (Fig. 11.8)

 Customers find dealing with organizations is frustrating  Little incentive for customers to cooperate with organizations to achieve better service  Complaints are often made to already unhappy employees  Customers often stay only because of lack of choice Cycle of Mediocrity (Fig. 11.8)

Cycle of Success (Fig. 11.9, Page 284)

 Longer-term view of financial performance  Firm seeks to prosper by investing in people  Attractive pay and benefits attract better job applicants  More focused recruitment, intensive training, and higher wages make it more likely that employees are:  Happier in their work  Provide higher quality, customer-pleasing service Cycle of Success (Fig. 11.9)

 Broadened job descriptions with empowerment practices enable front-line staff to control quality, facilitate service recovery  Regular customers more likely to remain loyal because:  Appreciate continuity in service relationships  Have higher satisfaction due to higher quality Cycle of Success (Fig. 11.9)

The Service Talent Cycle for Service Firms (Fig )

Hiring the Right People  Be the preferred employer  Select the right people

 Observe behavior  Conduct personality tests  Employ multiple, structured interviews  Give applicants a realistic preview of the job Tools to Identify the Best Candidates

 Organizational culture, purpose and strategy  Interpersonal and technical skills  Product/service knowledge Actively Train Service Employees

Is Employee Empowerment Always Appropriate? Yes, if the company’s business strategy is based on:  Personalized, customized service  Competitive differentiation  Extended relationships rather than short-term transactions  Uses complex and non-routine technologies  Service failures are non-routine and sometimes unavoidable  Unpredictable business environment  Managers who are comfortable with independent employees  Employees who have good interpersonal & group process skills

Levels of Employee Involvement Suggestion Involvement Job Involvement High Involvement

Build High-Performance Service Delivery Teams  Excellent service delivery requires cross-functional coordination  Teams, training, & empowerment go hand-in-hand  Creating successful service delivery teams  Emphasis on cooperation, listening, coaching and encouraging  Know how to air differences, tell hard truths, ask tough questions  Management sets up a structure to steer teams towards success

Motivate And Energize The Frontline  Job content  Feedback and recognition  Goal achievement

Service Leadership and Culture  Service culture:  Shared perceptions of what is important  Shared values and beliefs of why they are important  Strong service culture:  focuses the entire organization on the frontline  Has an informed and actively involved top management  Inverted organizational pyramid

The Inverted Organizational Pyramid (Fig )

MKT 346 Key Concepts: Chapter 11  Importance of service personnel  Boundary spanners and role stress  Three main causes of role stress  Cycle of failure  Cycle of mediocrity  Cycle of success  Service talent cycle and its components  Levels of employee involvement  High performance service delivery teams  Motivate and energize the front line  Service leadership and culture  Inverted organizational pyramid