1. Chapter – 7 The Service Encounter
Service Management (5e)
Operations, Strategy, Information Technology By
Fitzsimmons and Fitzsimmons
Chapter – 7
The Service Encounter

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.

3. The Service Encounter Triad
Organization
Efficiency
versus
satisfaction
autonomy
Customer
Contact
Personnel
Perceived
control

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.

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.

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. 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.

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.

9. The Service Organization
Culture
Empowerment
Control Systems

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.

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

12. Control systems
Table 7.1 describes four organizational control systems to encourage creative employee empowerment
Belief system – articulated through organizational culture
Boundary – defines limits to employee initiatives
Diagnostic – defines measurable goal to achieve performance
Interactive – pressures from customers for creative solutions

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

14. Continued…
Selection 1. Abstract Questioning 2. Situational Vignette 3. Role Playing

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)

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

17. Continued…. Personalizing customer Convenience 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.

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).

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.

20. Satisfaction Mirror Higher Customer Satisfaction Higher Employee  
Higher Customer Satisfaction
More Familiarity with Customer Needs and Ways of Meeting Them
Greater Opportunity for Recovery
from Errors
Higher Employee
Satisfaction
Higher Productivity
Improved Quality
of Service
More
Repeat
Purchases
Stronger Tendency to Complain about Service Errors
Lower Costs
Better Results

21. Service Profit Chain Internal Customers Employees External
Operating strategy and
service delivery system
Service concept
Target market
Service
value
Customers
Loyalty
Productivity
&
Output
quality
Capability
Satisfaction
Employees
Revenue
growth
External
Profitability
Customer orientation/quality emphasis
Allow decision-making latitude
Selection and development
Rewards and recognition
Information and communication
Provide support systems
Foster teamwork
Quality & productivity improvements yield higher service quality and lower cost
Attractive Value 
Service designed
& delivered to
meet targeted
customers’ needs
Solicit customer
feedback
Lifetime value
Retention
Repeat Business
Referrals

22. Cycle of Capability Is attitude emphasized? Are job previews utilized?
Are customers screened?
Are employees encouraged to
refer friends?
Are referrals from
the “best” employees given priority?
Is satisfaction
measured periodically?
Are measurements linked to other functions on
the cycle?
Careful Employee
and Customer Selection
(and Self-selection))
High-Quality Training
Well-Designed
Support Systems
Information
Facilities
Greater Latitude to Meet
Customer’s Needs
Clear Limits on, and Expectations of, Employees
Appropriate
Rewards
and Frequent
Recognition
Satisfied
Employees
Employee
Referrals of
Potential Job
Candidates
Is training for job and life?
Is it an important element of quality of work life?
Do they reflect
needs of the
service encounter?
Are they designed to foster relationships?
Does it reflect top management “talk”?
Is it enough to allow delivery of results to customers?
Do they limit the “right” risks?
Are they logical to employees?
Cycle
of Capability
Are they linked to
service objectives?
Are they balanced
between monetary
and non-monetary?

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?