1. Today’s Class
Mini Research Update
Data Collection Update

2. Gap 3: The Service Performance Gap service designs and standards
Provider Gap 3
CUSTOMER
Service delivery
COMPANY
Gap 3: The Service Performance Gap
Customer-driven
service designs and standards
11-2

3. Key Factors Leading to Provider Gap 3
11-3

4. Closing Performance Gaps
Employee
Customers
Intermediaries and Technologies
Balancing Capacity and Demand

5. 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 Grönroos
11-5

6. The Critical Importance of Service Employees
They are the service.
They are the organization in the customer’s 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
They are the service.
in many cases, the contact employee is the service
- we often DO NOT DISTINGUISH between the person and the firm
(haircutting, child care, counseling, legal services)
in these cases, the offering is the employee
- other examples?
They are the organization in the customer’s eyes.
employees represent the firm to the client
may be the ONLY contact they have with the firm
e.g., Dixon Pest Control
everything they say and do can influence perceptions of the organization
even “off-duty” employees can influence perceptions
They are marketers.
they are walking “billboards”
they represent the company and influence customer satisfaction
they are salespersons
(waiters selling dessert; AT&T operators cross-selling)
11-6

7. The Service Marketing Triangle
11-7

8. Aligning the Triangle
Organizations that seek to provide consistently high levels of service excellence will continuously work to align the three sides of the triangle.
Aligning the sides of the triangle is an ongoing process.
11-8

9. Services Marketing Triangle Applications
11-9

10. Making Promises Understanding customer needs Managing expectations
Traditional marketing communications
Sales and promotion
Advertising
Internet and web site communication
11-10

11. Keeping Promises Service delivery
Reliability, responsiveness, empathy, assurance, tangibles, recovery, flexibility
Face-to-face, telephone & online interactions
The Customer Experience
Customer interactions with sub-contractors or business partners
The “moment of truth”
11-11

12. Enabling Promises Hiring the right people
Training and developing people to deliver service
Employee empowerment
Support systems
Appropriate technology and equipment
Rewards and incentives
11-12

13. 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?
11-13

14. The Service Profit Chain
11-14

15. Boundary Spanners Interact with Both Internal and External Constituents
11-15

16. Boundary-spanning Roles
Boundary spanners:
Provide a critical link between the external customer environment and the internal operations of the organization
Serve a critical function in understanding, filtering, interpreting information and resources to and from the organization and its external constituencies
High stress!!!
11-16

17. Boundary-spanning Roles
What are these jobs like?
Emotional labor
The labor that goes beyond the physical or mental skills needed to deliver quality service.
Often requires suppression of true feelings
Many sources of potential conflict
person/role
organization/client
interclient
Quality/productivity tradeoffs
11-17

18. What can be Strategies for Delivering Service Quality through People?

19. Strategies for Delivering Service Quality through People
11-19

20. Is employee empowerment good or bad?

21. Traditional Organizational Chart
Manager
Supervisor
Supervisor
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
11-21

22. Customer-Focused Organizational Chart
11-22

23. Inverted Services Marketing Triangle
11-23

24. Delivering Happiness – Creating A Company with the best Customer Service
What did Tony Hsieh did to create the best customer service company – think in terms of employees, customers and technology!!!

25. Customer’s role in service delivery

26. 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
12-26

27. How Customers Widen the Service Performance Gap
You as Customer of KUSOM
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
12-27

28. Customer Participation across Different Services
12-28

29. Customer Roles in Service Delivery
Productive Resources
Contributors to Service Quality and Satisfaction
Competitors
12-29

30. 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 organization’s productivity
Key issue:
Should customers’ roles be expanded? reduced?
12-30

31. 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
12-31

32. Customers as Competitors
Customers may “compete” with the service provider
“Internal exchange” vs. “external exchange”
Internal/external decision often based on:
Expertise capacity
Resource capacity
Time capacity
Economic rewards
Psychic rewards
Trust
Control
12-32

33. A Proliferation of Self-Service Technologies
ATMs
Pay at the pump
Airline check-in
Hotel check-in, out
Automated car rental
Blood pressure machines
Tax prep software
Self-checkout
Online banking
Online vehicle registration
Online auctions
Home and car buying online
Package tracking
Internet shopping
IVR phone systems
Distance education
12-33

34. What can be Strategies for Enhancing Customer Participation?

35. Strategies for Enhancing Customer Participation
12-35

36. Strategies for Enhancing Customer Participation
What can KUSOM do?
12-36

37. Strategies for Enhancing Customer Participation
Define customers’ roles
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
12-37

38. Compatibility Management
“a process of first attracting homogeneous consumers to the service environment, then actively managing both the physical environment and customer-to-customer encounters in such a way as to enhance satisfying encounters and minimize dissatisfying encounters” (Martin and Pranter 1989)
12-38

39. Importance of Other (“Fellow”) Customers in Service Delivery
Other customers can detract from satisfaction:
Disruptive behaviors
Overly demanding behaviors
Excessive crowding
Incompatible needs
Other customers can enhance satisfaction:
Mere presence
Socialization/friendships
Roles: assistants, teachers, supporters, mentors
12-39

40. Characteristics of Service that Increase the Importance of Compatible Segments
12-40

41. Delivering Service Through Intermediaries & Electronic Channels

42. Delivering Service Through Intermediaries & Electronic Channels
Chapter 14
Delivering Service Through Intermediaries & Electronic Channels
Service Distribution
Direct or Company-Owned Channels
Franchising
Agents and Brokers
Electronic Channels
Common Issues Involving Intermediaries
Strategies for Effective Service Delivery Through Intermediaries

43. 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)

44. Services Intermediaries
Franchisees
service outlets licensed by a principal to deliver a unique service concept it has created
e.g., Jiffy Lube, Blockbuster, McDonald’s
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

45. Benefits and Challenges for Franchisers of Service

46. Benefits and Challenges for Franchisees of Service

47. Benefits and Challenges in Distributing Services through Agents and Brokers

48. Benefits and Challenges in Electronic Distribution of Services

49. Common Issues Involving Intermediaries
conflict over objectives and performance
difficulty controlling quality and consistency across outlets
tension between empowerment and control
channel ambiguity

50. So what shall we do with the intermediaries
So what shall we do with the intermediaries? What should be our strategy?

51. Strategies for Effective Service Delivery Through Intermediaries
Control Strategies:
Measurement
Review
Partnering Strategies:
Alignment of goals
Consultation and cooperation
Empowerment Strategies:
Help the intermediary develop customer-oriented service processes
Provide needed support systems
Develop intermediaries to deliver service quality
Change to a cooperative management structure

52. Managing Capacity and Demand

53. Variations in Demand Relative to Capacity
13-53

54. Variations in Demand Relative to Capacity
Excess demand: the level of demand exceeds max capacity.
Some customers will be turned away.
For customers who do receive service, quality may be lacking because of crowding or overtaxing of staff and facilities
Demand exceeds optimum capacity.
No one is turned away, but quality may still suffer.
13-54

55. Variations in Demand Relative to Capacity
Demand and supply are balanced at optimum capacity.
Staff and facilities are occupied at ideal level.
No one is overworked, facilities can be maintained, customers are receiving quality.
Excess capacity: demand is below optimum.
Resources are underutilized resulting in lower profits.
Some customers may receive high quality service, but if quality depends on the presence of other customers, customers may be disappointed.
13-55

56. Demand and Capacity for Service Providers
13-56

57. Understanding Capacity Constraints and Demand Patterns
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
13-57

58. Constraints on Capacity
13-58

59. Strategies for Shifting Demand to Match Capacity
13-59

60. Strategies for Adjusting Capacity to Match Demand
13-60

61. Yield Management YIELD = Definition
“The process of allocating the right type of capacity to the right kind of customer at the right price so as to maximize revenue or yield.”
Actual revenue
Potential revenue
Where Actual revenue = actual capacity x average actual price
Potential revenue = total capacity x maximum price
Most effective when: 1) different segments make reservations at different times and 2) customers who arrive/reserve early are more price sensitive than those who arrive/reserve late.
YIELD =
13-61

62. Yield Management Example
200-room Hotel
Max room rate = $100/night
Potential Revenue = 200 x $100 = $20,000
All rooms sold at discounted rate ($50/night)
Yield = 200 x $50 /$20,000 = $10,000 = 50%
Full rate charged, but only 80 rooms sold
Yield = 80 x $100/$20,000 = $8,000 = 40%
Full rate charged for 80 rooms, discount for remaining 120 rooms
Yield = [(80 x $100) + (120 x $50)]/$20,000 = $14,000= 70%
13-62

63. Challenges and Risks in Using Yield Management
Loss of competitive focus
Customer alienation
Overbooking
Incompatible incentive and reward systems
Inappropriate organization of the yield management function
13-63

64. Waiting Line Strategies
Employ operational logic to reduce wait
How to configure the queue?
Multiple Queue
Single Queue
Take a Number
13-64

65. Waiting Line Configurations
13-65

66. Waiting Line Strategies
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 more pleasurable
13-66

67. Issues to Consider in Making Waiting More Pleasurable
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.
13-67

68. Thank you!