What is productivity?
!  Efforts you put into work and the final result
!  Efficiency
!  How many service you produce in a certain amount of time
!  Productivity vs. Service Quality
!  Productivity is cost related
!  Quality is perceived
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
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Integrating Service Quality and
Productivity Strategies
"  Quality and productivity are twin paths to creating value
for both customers and companies
"  Quality focuses on the benefits created for customers;
productivity addresses financial costs incurred by firm
"  Importance of productivity:
!  Keeps costs down to improve profits and/or reduce prices
!  Enables firms to spend more on improving customer service and
supplementary services
!  Secures firm’s future
!  May impact service experience
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
13
What can you do to increase productivity in
your business?
Discuss with your neighbor (don’t have to be your group member)
!  Train your employee better
!  Partnering with companies (Gas-station, …)
!  Specialized jobs for just serving in a bar
!  Partnering with a parking lot to keep the tables full
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
14
Improving Service Productivity:
(1) Operations-driven Strategies
"  Control costs, reduce waste
"  Set productive capacity to match average demand
"  Automate labor tasks
"  Upgrade equipment and systems
"  Train employees
"  Broadening array of tasks that a service worker can perform
"  Leverage less-skilled employees through expert systems
"  Service process redesign
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
16
Improving Service Productivity:
(2) Customer-driven Strategies
"  Change timing of customer demand
!  By shifting demand away from peaks, managers can make better
use of firm’s productive assets and provide better service
"  Involve customers more in production
!  Get customers to self-serve
!  Encourage customers to obtain information and buy from firm’s
corporate websites
"  Ask customers to use third parties
!  Delegate delivery of supplementary service elements to
intermediary organizations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
17
Generic Productivity
Improvement Strategies
"  Typical strategies to improve service productivity:
!  Careful control of costs at every step in process
!  Efforts to reduce wasteful use of materials or labor
!  Replacing workers by automated machines
!  Installing expert systems that allow paraprofessionals to take on
work previously performed by professionals who earn higher salaries
"  Although improving productivity can be approached
incrementally, major gains often require redesigning
entire processes
?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
?
Kunz - Services Marketing
?
18
Long Waiting Times May Indicate Need
for Service Process Redesign (Fig 14.8)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
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Questions When Developing Strategies
to Improve Service Productivity
"
How to transform inputs into outputs efficiently?
"
Will improving quality hurt productivity?
"
Will improving productivity hurt quality?
"
Are employees or technology the key to productivity?
"
Can customers contribute to higher productivity?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
20
Tools to Analyze and Address
Service Quality & Profitability Problems
"  Pareto Chart
!  Separating the trivial from the important. Often, a majority of
problems is caused by a minority of causes (i.e. the 80/20 rule)
"  Fishbone diagram
!  Cause-and-effect diagram to identify potential causes of problems
"  Blueprinting
!  Visualization of service delivery, identifying points where failures
are most likely to occur
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
21
When Does Improving Service Reliability
Become Uneconomical? (Fig 14.7)
Satisfy Target
Customers through
Service Recovery
Service Reliability
100%
Optimal Point of
Reliability: Cost of
Failure = Service
Recovery
A
B C
Small Cost,
Large Improvement
Satisfy Target
Customers through
Service Delivery as
Planned
D
Large Cost,
Small Improvement
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Investment
Assumption: Customers are equally (or even more)
satisfied with the service recovery provided than with a
service that is delivered as planned.
Kunz - Services Marketing
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Cause-and-Effect Chart for
Flight Departure Delays (Fig 14.5)
Facilities,
Equipment
Arrive late
Oversized bags
Customers
Customers
Frontstage
Front-Stage
Personnel
Personnel
Procedures
Procedures
Delayed check-in
Aircraft late to Gate agents
procedure
gate
cannot process
fast enough
Mechanical
Acceptance of late
Failures
passengers
Late/unavailable
Late pushback
airline crew
Delayed
Departures
Late food
service
Other Causes
Weather
Air traffic
Late cabin
cleaners
Poor announcement of
departures
Late baggage
Weight and balance
sheet late
Late fuel
Materials,
Materials,
Supplies
Supplies
Backstage
Personnel
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Information
Kunz - Services Marketing
23
Cause-and-Effect Chart for
Flight Departure Delays (Fig 14.5)
Facilities,
Equipment
Arrive late
Oversized bags
Customers
Customers
Frontstage
Front-Stage
Personnel
Personnel
Procedures
Procedures
Delayed check-in
Aircraft late to Gate agents
procedure
gate
cannot process
fast
enough
Mechanical
Acceptance of late
Failures
passengers
Late/unavailable
Late pushback
airline crew
Delayed
Departures
Late food
service
Other Causes
Weather
Air traffic
Late cabin
cleaners
Poor announcement of
departures
Late baggage
Weight and balance
sheet late
Late fuel
Materials,
Materials,
Supplies
Supplies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Backstage
Personnel
Information
Kunz - Services Marketing
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When Does Improving Service Reliability
Become Uneconomical? (Fig 14.7)
Satisfy Target
Customers through
Service Recovery
Service Reliability
100%
Optimal Point of
Reliability: Cost of
Failure = Service
Recovery
A
B C
Small Cost,
Large Improvement
Satisfy Target
Customers through
Service Delivery as
Planned
D
Large Cost,
Small Improvement
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Investment
Assumption: Customers are equally (or even more)
satisfied with the service recovery provided than with a
service that is delivered as planned.
Kunz - Services Marketing
26
What Happens, When, in What Sequence?
Time Dimension in Augmented Product (Fig 3.3)
Reservation
Parking
Get car
Check out
Internet
Check in
Internet
Use
room
USE
GUESTROOM OVERNIGHT
internet
Porter
Meal
Before Visit
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Pay TV
Room service
Time Frame of An Overnight Hotel Stay
(Real-time service use)
Kunz - Services Marketing
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Blueprinting the Restaurant
Experience: A Three Act Performance
"  Act 1: Prologue and Introductory Scenes
"  Act 2: Delivery of Core Product
!  Cocktails, seating, order food and wine, wine service
!  Potential fail points: Menu information complete? Menu intelligible?
Everything on the menu actually available?
!  Mistakes in transmitting information a common cause of quality failure—
e.g. bad handwriting; poor verbal communication
!  Customers may not only evaluate quality of food and drink, but how
promptly it is served, serving staff attitudes, or style of service
"  Act 3: The Drama Concludes
!  Remaining actions should move quickly and smoothly, with no surprises at
the end
!  Customer expectations: Accurate, intelligible and prompt bill, payment
handled politely, guest are thanked for their patronage
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
28
Developing a Blueprint
Define big picture before drilling down to obtain a higher
level of detail
"  Identify key activities in creating and delivering service
"  Which persons are involved?
"  Distinguish between front stage and backstage
"  Clarify interactions between customers and staff, and
support by backstage activities and systems (key elements
of the script).
"  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
Kunz - Services Marketing
29
Key Components of a Service Blueprint
1. Identify principal customer actions
2.  Front-stage actions by customer-contact personnel
3. Identify & define scripts (detailed)
4. Define standards for front-stage activities
5. Specify physical evidence
6. Line of interaction (customers and front-stage personnel)
7. Line of visibility (between front stage and backstage)
8.  Backstage actions by customer contact personnel
9. Support processes involving other service personnel
10. Support processes involving IT
-  Identify fail points and risks of excessive waits
-  Set service standards and do failure-proofing (detailed)
-  Points to improve profitability (e.g. SST)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
30
Exercise
"  Develop a detailed blueprint for your service company
Including customer
actions, Front-stage
actions, scripts
(detailed), standards,
physical evidence,
Line of interaction,
Line of visibility,
Backstage actions,
Support processes
involving other service
personnel, Support
processes involving IT,
Fail Points, Waiting
time
"  E-mail me till Monday your blueprint (e.g. ppt, photo, scan)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
31
Developing a Blueprint
Define big picture before drilling down to obtain a higher
level of detail
"  Identify key activities in creating and delivering service
"  Which persons are involved?
"  Distinguish between front stage and backstage
"  Clarify interactions between customers and staff, and
support by backstage activities and systems (key elements
of the script).
"  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
Kunz - Services Marketing
33
Benefits of Blue Printing
"  Provides a platform for innovation.
"  Recognizes roles and interdependencies among functions, people,
and organizations.
"  Transfers and stores service knowledge.
"  Designs moments of truth from the customer s point of view.
"  Suggests critical points for measurement and feedback in the service
process
"  Clarifies competitive positioning
"  Provides understanding of the ideal customer experience.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
34
Where are
Failure points, Standards, Physical evidence
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
35
Different Services – Different Flow Charts
(Blueprints)
People Processing – Stay at Motel
Park
Car
Check
In
Possession Processing – Repair a DVD Player
Spend
Night in
Room
Breakfa
st
Maid
Makes
up Room
Check
Out
Collec
t
Weat
her
Data
View Presentation
of Weather
Forecast
Meteorologists Input
Data to Models and
Creates Forecast
from Output
Technician
Examines
Player,
Diagnoses
Problem
Breakfa
st
Prepare
d
TV
Weatherperso
n Prepares
Local Forecast
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Return, Pick
up Player
and Pay
Leave
Store
(Later) Play
DVDs at
Home
Technician Repairs
Player
Information Processing – Health
Insurance
Mental Stimulus Processing – Weather Forecast
Turn on TV,
Select Channel
Travel
to
Store
Confirm Plans
for Picnic
Learn
about
Options
Select Plan,
Complete
Forms
University and
Insurance Company
Agree on Terms of
Coverage
Kunz - Services Marketing
Pay
Insurance
Coverage
Begins
Customer
Information
Entered in
Database
36
Printed
Policy
Document
s Arrive
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
Kunz - Services Marketing
37
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
Kunz - Services Marketing
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Where might be possibility
to redesign this process?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
39
Redesigning Service Processes
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
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Why Redesign?
"
Not profitable anymore
"
Rising Quality issues (e.g. waiting time)
"
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
-
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
Kunz - Services Marketing
41
Process Redesign: Approaches and
Potential Benefits
"  Eliminating non-value-adding steps
"  Delivering direct service
"  Bundling services
"  Redesigning physical aspects of service processes
"  Shifting to more customer participation
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Kunz - Services Marketing
42
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
Kunz - Services Marketing
43
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 welldefined 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
Kunz - Services Marketing
44
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
Kunz - Services Marketing
45
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
Kunz - Services Marketing
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