MKTG 29 : Service Marketing Management

Chapter 3 : Managing Service Encounters

Professor : Mr. Abelito T. Quiwa. MBASchool Year : 2010 - 2011

We will explore the following questions in this particular chapter1. How does reducing (or increasing ) the level of

customer contact impact on decisions relating to service design and delivery strategies?

2. What is the distinction between back-stage and front-stage operations?

3. What are the critical incidents and what is their significance for customer satisfaction?

4. What insight can be gained from viewing service delivery as a form of theatre?

5. When customers behave badly, what problems do they cause for the firms, its employees and other customers?

6. What is the potential role of customers as co-producers of service?

Customer and the Service OperationIn service businesses, customers are often involved in

the production of the service. Suppliers of people-processing services usually expect their customers to come to what Theodore Levitt has called “factories in the field” – sites where service production, delivery and consumption are all rolled into one.

Customers who are actively involved in the service operation, can have a significant impact on the organization’s productivity.

Sometimes they are expected to cooperate closely with service employees, while at other times they may be given the option of undertaking self-service.

In both such instances, the customer becomes deeply involved in the service operation.

Technology and Customer ContactDevelopment in technology often offer radically new ways

for a business to create and deliver its services, particularly those core and supplementary services that are information -based.

For instance, to attract new business and take advantage of cost-saving advance in internet technology like introduce Internet banking.

Many service problems revolve around unsatisfactory incidents between customers and service personnel. In an effort to simplify service delivery, improve productivity and reduce some of the threats to service quality, some firms are using technology to minimize or even eliminate contact between customers and employees.

Thus, face-to-face encounters are giving way to telephone encounters.

Service Encounters: Differing Levels of Customer Contact

• Nursing Home • Haircut

• Four Star Hotel

High

• Good Restaurant

• Airline Travel

• Management Consulting

• Retail Banking • Telephone Banking

• Motel • Car Repair

• Dry Cleaning • Fast Food• Movie Theatre

• City Bus

• Insurance

• Cable TV

• Home Banking • Mail-Based Repairs

• Internet-Based Sservices

Low

Empahsises Encounter withService Personnel

Empahsises Encounter withEquipment

High-contact services tend to be those in which customers visit the service facility in person. Customers are actively involved with the service organization and its personnel throughout service delivery (e.g. Hairdressing or medical services).

Most people-processing services are high-contact ones. Services from the other three processes based categories may also involve high levels of customer contact, when customers go to the service site and remina there until service delivery is completed.

Service Encounters: Differing Levels of Customer Contact

Medium-contact services entail less involvement with service providers. They involve situations in which customers visit the service provider’s facilities ( or are visited at home or at a third- party location specified by that provider) but either do not remain throughout service delivery or else have only moderate contact with service personnel.

The purpose of such contacts is often limited to 1) establishing a relationship and defining a service need (e.g.

Management consulting, insurance or personal financial advice, where clients make an intial visit to the firm’s office but then have relatively limited interactions with the provider during service production.

2) Dropping off and picking up a physical possession that is being serviced; or

3) Trying to resolve a problem.

Service Encounters: Differing Levels of Customer Contact

Low-contact services involves every little, if any, physical contact between customers and service providers. Instead, contact takes place at arm’s length througn electronic or physical distribution channel – a fast-growing trend in today’s convenience oriented society.

o Also included are possession-processing services in which the item requiring service can be shipped to the service site or subjected to “ remote fixes “ delivered electronically to the customers’ premises from a distant location. This is becoming incresingly common for resolving software problems.

o Finally, many high-contact and medium-contact services are being transformed into low-contact services.

Service Encounters: Differing Levels of Customer Contact

Service As a SystemThe level of contact that a service business intends to

have with its customers is a major factor in defining the total service system. Within such a system, these are three overlapping sub-systems:

1) Service operations ( where inputs are processed and the elements of the service product are created)

2) Service delivery ( where final “assembly “ of these elements takes palce and the product is delivered to the customers)

3) Service marketing which embraces all points of contact with customers, including advertising, billing and market research ( Figure 3.2)

Parts of this system are visible or otherwise apparent to customers, while other parts are hidden in what is sometimes referred to as the technical core and the customer may not even know of the existence.

Service As a System

Technical Core

Physical Support

Contact Personnel

CustomerOther

Customers

Back Stage (Invicible )

Front Stage(Visible to Customer)

Figure 3.2 The Service Business as a System

Service Operation System Like a play in a theather, the visible components of service

operations can be divided into those relating to the actors ( or service personnel) and those relating to the stage set ( or physical facilities, equipment and other tangibles)

What goes on back stage is of little interest to customers. Like any audience, they evaluate the production on those elements they actually experience during service delivery and, of course, on the perceived service outcome.

Naturally, if the backstage personnel and system( e.g. Billing, ordering, account keeping) fail to perform their support tasks properly in ways that affect the quality of frontstage activities, customers will notice.

The proportion of the overall service operation that is visible to customers varies according to the level of customer contac. Since high-contact services directly involves the customer in person, either customers must enter the service “factory”, or service workers and their tools must leave their back stage and come to the customer’’s chosen location.

Service Delivery ServiceService delivery is concerned with where, when and

how the service product is delivered to the customer. Traditionally, service providers had direct interactions

with their customers. But to achieve cost reductions, productivity improvements and greater customer convenience, many services that do not need the customers to be physically present in the factory now seek to reduce direct contact. As a result, the visible components of the service operation system is shrinking in many industries.

Although self-service delivery often offers customers greater convenience than face-to-face contact, the shift from personal service ( sometimes referred to as

The Dramaturgy of Service Delivery Figure 3.3 shows the relative important of theatrical dimensions

for different types of service businesses. As you can see, watch repair services have very few frontstage theatrical components compared to services like airlines and spectator sports.

Car RepairWatch RepairShoe Repair

(1) (2)

(3) (4)Airline

Spectator SportsRestaurants

UtilityInsurance

Discount Retailer

Physician BarberLawyer

ContactLow High

High

Low

Aud

ienc

e S

ize

Audience Size = Number of people receiving the service simultaneously Contact = Amount of time front stage/amount of time back stage

Figure 3.3 Relative Importance of Theatrical Dimensions

Role and Script Theories Role and script theories offer some interesting insights for

service providers. It we view service delivery as a theatrical experience, then both employees and customers act out their parts in the performance according to predetermined roles.

Roles have also been defined as combinations of social cues, or expectations of society, that guide behaviour in a specific setting or context.

Scripts are sequences of behaviour that both employees and customers are expected to learn and follow during service delivery. Script are learned through experience, education and communication with others. Much like a movie script, a service script provides detailed actions that customers and employees are expected to perform.

Service Marketing SystemThe scope and structure of the service-marketing system

often varies sharply from one type of organization to another.

TechnicalCore

Interior & ExteriorFacilities

Equipment

ServicePeople

Other Customer

Other Customer

The Customer

Advertksing Sales CallsMarket Research SurveysBilling/Statements

Miscellaneous Mail. TelephoneCalls, Faxes, etc.

Random Exposures to Facilities/Vehicles

Chance Encounters with ServicePersonnel

Word-of- MouthBack Stage(invisible)

Front Stage(visible)

Figure 3.4 The Service Marketing System for a High-Contact Service

The scope and structure of the service-marketing system often varies sharply from one type of organization to another.

Service Marketing System

TechnicalSelf ServiceEquipment

Telephone, FaxWebsite, etc.

Mail

The Customer

The Customer

AdvertisingMarket Research SurveysBilling/ Statements

Random Exposure to Facilities, Personnel

Word –of-Mouth

ServiceOperation System

Service Delivery System Other Contact Points

Back Stage(invisible)

Front Stage(visible)

Figure 3.5 The Service Marketing System for a Low-Contact Service

Physical EvicenceSince many service performance are inherently

intangible, they are often hard to evaluate. As a result, customers often look for tangible clues as to the nature of the service. Sometimes, encounters are random rather than planned.

Because service performance are intangible, physical evidence gives clues as to the quality of service and in some cases will strongly influence how customers, especially inexperienced ones, evaluate the service.

Hence, managers need to think carefully about the nature of the physical evidence provided to customers by the service marketing system.

Table 3.2 Tangible Elements and Communication Components in the Service Marketing System

1. Service personnel. Contacts with customers may be face-to-face, by telecommunications( telephone, fax, telegram, telex, electronic mail) or by mail and express delivery services.

These personnel may include Sales representatives Customer service staff Accounting/billing staff Operations staff who do not normally provide service to

customers (e.g. Engineers, janitors) Designated intermediaries whom customers perceive as

directly representing the service firm

Physical Evicence

Table 3.2 Tangible Elements and Communication Components in the Service Marketing System

2. Service facilities and equipment Building exteriors, parking areas, landscaping Building interiors and furnishings Vehicles Self-service equipment operated by customers Other equipment3. Non-personnel communications Form letters Brochures/catalogues/instruction manuals/websites Advertising Signage News stories/editorials in the mass media4. Other people Felllo customers encountered during service delivery Word-of-mouth comments from friends, acquaintances, or ever

strangers

Physical Evicence

Managing People in Service Encounters Increasingly, high-contact employees in what have

traditionally been service-delivery jobs with no sales content are now expected to play a selling role, too.

This role shift requires them to be both producers and marketers of a service. As a result, waiters, bank clerks, and even auditors in accounting firms are being asked to promote new services, encourage customers to purchase additional items or refer them to sales specialists.

To cope effectively with all of these challenges, managers should brief employees on what the firm is trying to achieve in the marketplace. Service employees also need training, authority and management support to ensure that their important but often brief encounters with customers result in satisfactory outcomes.

This implies that instead of striving to control emoloyeesbehaviour, managers should be acting as coaches and role models to help them provide better service.

Critical Incidents in Service Encounters

Critical incidents ares specific encounters between customers and service employees that are especially satisfying or dissatisfying for one or both parties.

The Critical Incident Technique (CIT) is a methodology for collecting and categorising such incidents in service encounters. Such an analysis offers an opportunity to determine what types of incidents during service delivery are likely to be particularly significant in determining customer satisfaction.

The Customer’s PerspectiveFinding from a CIT study can be very helpful in

pinpointing opportunities for future improvements in service delivery processes.

Determining the most likely “ failure points” in service encounters, where there is a risk of upsetting customers significantly, is the first step in taking corrective action to avoid such incidents.

Semilarly, CIT findings concerning the nature of incidents that customers seem to find very satisfying may enable managers to train their employees to replicate such positive experiences.

Negatice critical incidents that are satisfactorily resolved have great potential for enhancing loyalty, because they demonstrate to customers that the organization really cares about them. But the reverse is also true.

We can divide critical incidents into two stages, pre-consumption and post-consumption. Pre- consumption incidens are important, because they are assoicated with first impressions. A bad pre-consumption incident may lead the customer to teminate the encounter without even trying the core service.

A positive incident, on the other hand, gets the customer off to an excellent start. Positive post-consumption incidents either serve as the icing on the cake of an overall good experience of help the firm to recover from problems during service delivery.

In contrast, negative post-consumption experience either spoil what had , until then, been a satisfactory encounter, or add insult to the injury of earlier problems during service delivery.

The Customer’s Perspective

The Employee’s PerspectiveCustomer-employee contact is a two-way street.

Understanding the employee’s view of the situation is really important, because thought-less or poorly behaved customers can oftern cause needless problems for service personnel who are trying hard to serve them well. Continuing dissatisfaction with a series of negative incidents can even drive good employees to quit their jobs.

Another CIT study, examined hundreds of critical incidents from the employees’ perspective. The results showed that more than 20% of all incidents that employees found unsatisfactory were related to problem customers, whose bad behaviour included drunkennes, verbal and physical abuse, breaking of laws or company policies and failing to cooperate with service personnel. It is simply not true that “ the customer is always right”.

The Problem of Customer Misbehaviour Customers who act in uncooperative or abusive ways

are a problem for any company, but they have more potential for mischief in service businesses, particularly those in which the customer comes to the service factory.

Addressing the Challenge of Jaycustomers The prefix”Jay” comes from a nineteenth century

slang term for a stupid person. We can create a whole vocabulary of derogatory terms by adding the prefix”Jay” to existing nouns and verbs. We define a jaycustomer as one who acts in a thoughtless or abusive way, causing problems for the firm, its employees and other customers.

Addressing the Challenge of Jaycustomers Every service encounters its share of jaycustomers, but

opinions on this topic seem to be polarised round two opposing views.

1. One is denial: “ the customer is king and can do no wrong”. The other view sees the marketplace of customers as positively overpopulated with nasty people (and even nastier corporate purchasers) who simply cannot be trusted to behave in ways that self-respecting suppliers should expect and requir.

2. The second view, however, often appears to be the more widely held among cynical managers who have been bruised at some point in their professional lives. As with so many opposing viewpoints in life, there are important grains of truth in both perspective.

The Problem of Customer Misbehaviour

Addressing the Challenge of Jaycustomers Six Types of Jaycustomers Jaycustomers are undesirable. At worst, a firm needs to control

or prevent their abusive behaviour. At best, it would like to avoid attracting them in the first place. Since defining the problem is the first step in resolving it, let us start considering the different types (segments) of jaycustomers.

1. The thief (shoplifting)2. The rulebreaker (“Don’t Jaywalk”)3. The bellingerent (He is red in the face and shouting)4. The family feuders ( a subcategory of belligerents are those

who get into arguments with members of their own family)5. The vandal ( The level of physical abuse to which service

facilities and equipment can be subjective is astonishing)6. The Deadbeat (Leaving aside those individuals who never

intended to pay in the first place ( we call them “thieves”)

The Problem of Customer Misbehaviour

The Customer As Co-ProducerThis involvement may take two forms. Some times, you are

given the tools and equipment to serve yourself, as when you take your cothes to a laundromat, while at other time, such as at a health service, you work jointly with health professionals as “co-producers” of the service form which you wish to benefit.

Service Frims As Teachers The more the work that customers are expected to do, the

greater their need for information about how to perform for best results. In such situations, the firm should take responsibility for educating inexperienced customers. Lack of knowledge can lead to frustration with the porcess, unsatisfactory results and even put the customer at risk-think about the unpleasant things that might happen to a customer who smokes a cigarette and spills petrol while refuelling a car at a self-service pump.

Increasing Productivity and Quality when Customers are Co - ProducersThe greater the customers’ involvement in service

production, the greater their potential of influnce the processes in which they are engaged.

Some researchers argue that firms should view customers as “ partial employees”, who can influence the productivity and quality of service processes and outputs.

They go on to suggest that customers who are offered an opportunity to particpate actively are more likely to be satisfied, regardless of whether they actually choose the more active role, because it is gratifying to be offered a choice.

Managing customers as partial employees requires using the same human-resource approaches as managing a firm’s paid employees and should follow these four steps.

1. A “ job analysis” of customers’ current roles in the business and a comparison withe the roles that the firm would like them to play.

2. Determining whether customers possess an awarness of how they are expected to perform and whether they have the required skills.

3. Motivating customers by ensuring that they will be rewarded for performing well ( for example,satisfaction from better quality and more customised output, enjoyment of participating in the actual process and a belief that their own productivity speeds the process and keeps cost down)

4. Regular appraisal of customers’ performance. If this is unsatisfactory, their role and the procedures in which they are involved should be changed. Alternatively, they can be “terminated” and new ones sought.

Increasing Productivity and Quality when Customers are Co - Producers

Conclusion Service encounters cover a spectrum from high-contact and are

often being determined by the nature of the operational processes used to create an deliver the service in question. With the growing trend to deliver information-based services factory, many service encounters are shifting to a lower- contact mode than previously, with important implications for the nature of the customer’s experience.

Service businesses can be divided into three overlapping required to run the service operation and create the service product. Only part of this system, described here as “front stage”, is visible to the customer. The delivery system incorporates the visible operations elements and the customers who , in self-service operaitons, take an active role in helping to create the service product, instead of being passively waited on. Finally, the marketing system includes not only the delivery system, which essentially comprises the product and distribution elements of the traditional marketing mix, but also additional components such as billing and payments systems, exposure to advertising and sales people, and word-of-mouth comments from other people.

In all types of services, understanding and managing service encounters between customers and service personnel is central to creating satisfied customers. The higher the level o contact, the more we can apply theatrical analogies to the process of “staging “ service delivery. This is where employees and customers play a role, often following well-defined scripts. This is where employees and customers are exposed to many more tangible cues and experiences than they are in medium contact and low-contact situations.

In some instances, including self-services, cuatomera play an active role in the process of creating and delivering services, effectively working as “partial employees” whose performance will effect the productivity and quality of output. Under these circumstances, service managers needs to educate and train customers so that they have the skills needed to perform well.

Conclusion

END OF CHAPTER 3 GOD BLESS YOU ALL