7
Service Management (5e)
Operations, Strategy, Information Technology
By
Fitzsimmons and Fitzsimmons
Chapter – 7
The Service Encounter
7-2
Learning Objectives
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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.
7-3
The Service Encounter Triad
Service
Organization
Efficiency
versus
autonomy
Efficiency
versus
satisfaction
Contact
Personnel
Customer
Perceived
control
7-4
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.
7-5
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.
7-6
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.
7-7
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.
7-8
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.
7-9
The Service Organization
 Culture
 Empowerment
 Control
Systems
7-10
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:
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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.
7-11
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
7-12
Control systems
 Table
7.1 describes four organizational control systems to
encourage creative employee empowerment
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
 Belief
7-13
Contact Personnel
 Ideally
, customer contact personnel should have personality
attributes that include:
Flexibility
 Tolerance for ambiguity
 An ability to monitor change
 Empathy for customers

7-14
Continued…
 Selection
1. Abstract Questioning
2. Situational Vignette
3. Role Playing
7-15
Continued….
 Training

Unrealistic customer expectations
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Unreasonable demands
Demands against policies
Unacceptable treatment of employees
Drunkenness
Breaking of societal norms
Special-needs customers
Unexpected service failure
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Unavailable service due to failure
Slow performance (capacity issues)
Unacceptable service (low standards)
7-16
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
7-17
Continued….

Personalizing 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.
7-18
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).
7-19
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.
7-20
Satisfaction Mirror
More
Repeat
Purchase
s
Stronger
Tendency to
Complain about
Service Errors
More Familiarity with
Customer Needs
and Ways of
Meeting Them
Greater Opportunity
for Recovery
from Errors
Higher Customer
Satisfaction
Lower
Costs
Better
Results
Higher Employee
Satisfaction
Higher
Productivity
Improved Quality
of Service
7-21
Service Profit Chain
Internal
Operating strategy and
service delivery system
External
Service
concept
Target market
Loyalty
Customers
Satisfaction
Productivity
&
Employees
Output
quality
Capability
Service
value
Satisfaction
Loyalty
Profitability
Service
quality
Customer orientation/quality emphasis
Allow decision-making latitude
Selection and development
Rewards and recognition
Information and communication
Provide support systems
Foster teamwork
Revenue
growth
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
7-22
Is attitude emphasized?
Are job previews utilized?
Are customers screened?
Careful Employee
and Customer
Selection
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?
Are they linked to
service objectives?
Are they balanced
between monetary
and non-monetary?
Is training for job and
life?
(and Self-selection))
Employee
Referrals of
Potential
Job
Candidates
Satisfied
Employees
HighQuality
Training
Cycle
of Capability
Appropriate
Rewards
and Frequent
Recognition
Well-Designed
Support
Systems
 Information
 Facilities
Greater Latitude
to Meet
Customer’s
Needs
Clear Limits
on, and
Expectations
of, Employees
Do they limit the “right” risks?
Are they logical to employees?
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?
7-23
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
 If
does use of a “service script” relate to service quality?
the roles played by customers are determined by cultural
norms, how can services be exported?