The Service Encounter Time McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives Use the service encounter triad to describe a service firm’s delivery process. Explain how the culture and level of employee empowerment in an organization affect the service encounter. Differentiate four organizational control systems for employee empowerment. Describe the classification of customers into four groups based on their attitudes and expectations. Prepare abstract questions and write situational vignettes to screen recruits. Describe how the creation of an ethical climate leads to job satisfaction and service quality. Discuss the role scripts in customer coproduction. Describe how elements of the service profit chain lead to revenue growth and profitability. 9-2

The Service Encounter Triad Organization Customer Contact Personnel Efficiency Versus Satisfaction Autonomy Service Delivery - Culture - Empowerment - Control Systems - Supporting Technology - Performance Evaluation - Selection - Training - Ethical Climate - Expectations - Attitudes - Coproduction - Perceived Control - Role of Scripts - Outcome - Failure Recovery 9-3

Service Encounter Success Factors 9-4

The Customer Expectations and Attitudes Economizing customer Ethical customer Personalizing customer Convenience customer Customer as Coproducer 9-5

Definitions 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. 9-6

The Service Organization Culture ServiceMaster (Service to the Master) Disney (Choice of language) Empowerment Invest in people Use IT to enable personnel Recruitment and training critical Pay for performance 9-7

Organizational Control System Objective Employee Challenge Management Key Issues Belief Contribute Uncertainty about purpose Communicate core values and mission Identify core values Boundary Compliance Pressure or temptation Specify and enforce rules Risks to be avoided Diagnostic Achieve Lack of focus Build and support clear targets Critical performance variables Interactive Create Lack of opportunity or fear of risk taking Open organizational dialogue to encourage learning Strategic Uncertainties 9-8

Contact Personnel Selection 1. Abstract Questioning 2. Situational Vignette 3. Role Playing Training Unrealistic customer expectations Unexpected service failure 9-9

Challenges Facing Customer Contact Personnel Problem Customers Service failure 1. Unreasonable demands 1. Unavailable service 2. Abusive or hostile attitude 2. Slow performance 3. Inappropriate behavior 3. Unacceptable service 4. Unanticipated demands 5. Demands contrary to policies Use scripts to train for proper response 9-10

Examples of Unethical Behaviors Misrepresenting the Nature of the Service Customer Manipulation General Honesty and Integrity • Promising a nonsmoking room when none is available • Using bait-and-switch tactics • Creating a false need for service • Misrepresenting the credentials of the service provider • Exaggerating the benefits of a specific service offering • Giving away a guaranteed reservation • Performing unnecessary services • Padding a bill with hidden charges • Hiding damage to customer possessions • Making it difficult to invoke a service guarantee • Treating customers unfairly or rudely • Being unresponsive to customer requests • Failing to follow stated company policies • Stealing customer credit card information • Sharing customer information with third parties 9-11

Employee Perceptions of Customer Service at a Branch Bank Outstanding Terrible Terrible Outstanding 9-12

Satisfaction Mirror Higher Customer Satisfaction Higher Employee   Satisfaction Mirror      More Familiarity with Customer Needs and Ways of Meeting Them Greater Opportunity for Recovery from Errors Higher Employee Satisfaction Higher Productivity Improved Quality of Service More Repeat Purchases Stronger Tendency to Complain about Service Errors Lower Costs Better Results Higher Customer Satisfaction 9-13

Service Profit Chain Internal External Customers Employees Operating strategy and service delivery system   Service concept Target market Loyalty Customers Revenue growth Satisfaction Productivity & Output quality Service value Employees Satisfaction Loyalty Capability 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 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   9-14

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 does use of a “service script” relate to service quality? If the roles played by customers are determined by cultural norms, how can services be exported? 9-15

Interactive Exercise The class breaks into small groups and each group comes up with an example from each of the four organizational control systems (i.e., belief, boundary, diagnostic, and interactive) 9-16

Amy’s Ice Cream Describe the service organization culture at Amy’s Ice Cream. What are the personality attribute of the employees who are sought by Amy’s Ice Cream? Design a personnel selection procedure for Amy’s Ice Cream using abstract questioning, a situational vignette, and/or role playing. 9-17

Amy’s Ice Cream Facility 9-18

AMY’S ICE CREAM Abstract Questions What was your most rewarding past experience and why? What are you looking for in your next job? What have you done in the past to irritate a customer? What flavor of ice cream best describes your personality? 9-19

AMY’S ICE CREAM Situational Vignette A particular customer has the irritating habit of always showing up about two minutes before closing and staying late. Often this occurs on the night when weekly store meeting are held after closing time. This delays starting the meeting and furthermore employees are on the clock waiting for the customer to leave. What would you do? 9-20

AMY’S ICE CREAM Situational Vignette As a new employee at a busy store, you have been routinely performing clean-up tasks (garbage removal and restroom cleaning). Company policy dictates that these are tasks to be shared. It has become clear that two employees consistently avoid these jobs in favor of more pleasant duties. How would you handle this situation? 9-21

Succeeding in a Mature Market 9-22

Discussion Questions How has Enterprise Rent-A-Car defined (ERAC) its service differently than the typical national car rental company? What features of this business concept allow ERAC to effectively compete with the existing national rental car companies? Use the service profit chain to explain the success of ERAC. 9-23

Enterprise Service Concept Target Market Customer Value -convenience -rates -selection Corporate Culture -hiring -rewards 9-24

Enterprise Success Factors Virtual Car Relationship with repair shops Upgrade by replacement car customer On site dealer locations Fleet management Age of rental car fleet Motivated employees 9-25

Service Profit Chain How Does Enterprise Rent-A- Car Illustrate the Service Profit Chain? Operating strategy and service delivery system (employees) Service concept (service value) Target market (customers) 9-26