Week 4

THE SERVICE ENCOUNTER

Efficiency Efficiency
versus versus
autonomy satisfaction

Contact
Customer
Personnel Perceived
control

7-3
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.

7-4
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.

7-5
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.

7-6
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.

7-7
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.

7-8
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.

7-9
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

7-10
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)

7-11
Service Encounter Success Factors

Customer Service Provider

Easy to access Compatibility

8-12
The Customer
Every interaction is important for the customer, but is routine for the service provider. Therefore,
the attitude and expectations maybe different.

7-13
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

 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.

7-14
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.

7-15
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.

7-16
  

Satisfaction Mirror
 
 
 
 
  
More More Familiarity with
Repeat Customer Needs
Purchase and Ways of
s Meeting Them
Stronger Greater Opportunity
Tendency to for Recovery
Complain about from Errors
Service Errors
Higher Customer Higher Employee
Satisfaction Satisfaction

Lower Higher
Costs Productivity

Better Improved Quality

7-17
 Internal
Service Profit Chain
External
Operating strategy and   Service
concept Target market
service delivery system

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

7-18
Service Profit Chain
• Internal quality drives employee satisfaction
• Employee satisfaction drives retention and
productivity
• Employee retention and productivity drives
service value.
• Service value drives customer satisfaction.
• Customer satisfaction drives customer loyalty.
• Customer loyalty drives profitability and growth.
 The Links in the Service-Profit Chain

Operating Strategy and

Employee
Retention Revenue
Growth
Internal External Customer
Service Employee Service Customer
Satisfaction Satisfaction Loyalty
Quality Value
Employee
Productivity
Profitability

•retention
• workplace design •Service concept: •repeat business
• job design results for customers •referral
• employee selection
and development •service designed
• employee rewards and delivered to
and recognition meet targeted
• tools for serving customers' needs
customers