OPSM 405 Service Management Class 2: Introduction: Service encounters Koç University Zeynep Aksin

The service system Customer needs Service organization mission, strategies, policies Environment Operations Marketing Human resources Design of service package and delivery system Service delivery System Front room: Service providers Processes Equipment Line of visibility Back room: Personnel Processes Equipment Customers and/or customer assets Enhanced Customers and/or customer assets

Recall: Services and service processes (Lovelock) PEOPLE PROCESSING  Passenger transportation  Heart transplant  Immunization  Criminal justice system MENTAL STIMULUS PROCESSING  Entertainment  Education  Art exhibit  Concerts POSSESSION PROCESSING  Repair and maintenance  Dry cleaning  Housecleaning  Landscaping INFORMATION PROCESSING  Internet services  Banking  Financial services  Software development Inputs TANGIBLEINTANGIBLE CUSTOMER ASSETS

Service encounters Customer’s contacts with the service organization where her body, mind, assets, or information are processed

Service encounter or moment of truth Any episode in which the customer comes into contact with any aspect of the organization and gets an impression of the quality of its service. (K. Albrecht)

Jan Carlzon as president of SAS Last year each of our 10 million customers came into contact with approximately five SAS employees, and this contact lasted an average of 15 seconds each time. Thus SAS is created in the minds of our customers 50 million times a year, 15 seconds at a time. These 50 million moments of truth are the moments that ultimately determine whether SAS will succeed or fail as a company. These are the moments when we must prove to our customers that SAS is their best alternative.

What does this mean?  Service encounters: any place any time –Entering facility, asking for directions, filling a form etc. –Watching ads, hearing people talk about the service, etc.  Contact person/thing = organization –Rude service employee = rude organization –Employee late for visit = unreliable organization –Etc.

Going to a rock concert ( Haksever et al. ) 1.Music lover sees ad of a concert in newspaper 2.Calls arena for price, schedule, and directions; gets information from recording 3.Calls another number to reserve ticket with credit card 4.Local TV news shows rock group arrival in town 5.Day of the concert she drives to arena, sees banners of the group at the entrance 6.Security personnel direct her to entranceof parking lot 7.She pays for parking and parks her car 8.She arrives at ticket window where she picks up her reserved ticket 9.At the entrance she sees security personnel and a crowd 10.She gives her ticket and goes in 11.She buys a T-shirt 12.She buys some beer from a concession stand 13.She receives help from an usher to find her seat 14.She enjoys the concert

More generally  Service encounters may be simple or complex processes  Consist of a series of episodes  Occur with multiple facets of an organization  May occur with other organizations associated with service provision

Characteristics of human interaction  Service encounters are purposeful or goal oriented  Service providers are not altruistic, the encounter is work for them  Prior acquaintance is not required  Encounters are limited in scope: not much time spent on nontask issues  task-related information exchange dominates  Client and provider roles well defined  Temporary status differential may occur

Service encounter as a social encounter  Human contact  Greeting, courtesy  Small talk  Task related interaction  Expectation of fairness

Service encounter as an economic exchange  Service organization gives up –Labor –Skill –Technology –Information  Customer sacrifices –Time –Money –Labor

Service encounter as a production process  Resources transformed into satisfaction and benefits for the customer  Customer resources may also be used

Service encounter as a contractual relationship  Customer hires service organization to perform service  Delegates some authority to service provider  Or partial employment –Service organization makes use of customer labor –Eg. Salad bar: Customer is “paid” through lower salad/ food prices

Elements of a service encounter: customer  Minimum requirement: courtesy, respect, fairness  For people processing systems: safety, comfort, overall well-being  Asset processing systems: focus on efficiency, customer convenience, minimize time and effort spent for service by customer  Co-production: clear instructions, good equipment

Elements of a service encounter: service provider  Service provider is also human: –expects courtesy and respect, –needs to have required knowledge and training  Boundary spanners between firm and customer  What is a single encounter for the customer may be one of many for provider –Understanding customer, empathy, warmth, friendliness –Suppress own feelings  Quality control implies finding the right employees and making them happy

Elements of a service encounter: delivery system  Consists of equipment, supplies, processes, programs, procedures, rules, regulations, organizational culture  Design front office parts with customer needs in mind  Design back office parts with most efficient support of front office parts in mind  Focus on the core service

Elements of a service encounter: physical evidence  All tangible aspects of a service organization that a customer experiences: facility, forms, employee dresses, etc.  “Servicescape”: physical facility in which service is consumed  Important for people-processing services  Relationship between servicescape and customer behavior  Relationship between servicescape and employee morale and satisfaction

The service value chain internal quality employee satisfaction employee loyalty employee productivity Value customer satisfaction customer loyalty $ $ $ Euro $ $ $ YTL

The Value Profit Chain  Direct and strong links between: –Profit –Growth –Customer Loyalty –Customer Satisfaction –Value of goods/services to customer –Employee capability, satisfaction, loyalty and productivity

The Value Profit Chain - Sasser  Customer Loyalty –Conventional theory is that share of market is the primary driver of profitability –Sasser’s research found customer loyalty was more frequently associated with high profits and rapid growth.

The Value Profit Chain - Schlesinger  Determinants of employee and customer loyalty –cycle of failure - low wages, little training, => limited customer loyalty, high turnover –cycle of capability - share of profits, greater control, => highly productive employees, satisfied customers

What is the learning?  Service driven service: the link between employee satisfaction and customer satisfaction  well aligned resources: HR, IT, processes  what makes boundary spanning employees happy?  resources to give good service  happy customers  remuneration and working conditions  Customer centric view  all details matter  Short encounters may determine everything