Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 1 CHAPTER 15 Organizing for Change Management and S ervice Leadership

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 2 Overview of Chapter 15  Effective Marketing Lies at the Heart of Value Creation  Integrating Marketing, Operations, and Human Resources  Creating a Leading Service Organization  In Search of Human Leadership

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 3 Effective Marketing Lies at the Heart of Value Creation

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 4 The Service Profit Chain (Fig. 15.3)

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 5 Links in the Service Profit Chain (Table 15.1)

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 6 Firm Value Created by Customer Satisfaction (Fig. 15.4)

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 7 Integrating Marketing, Operations, and Human Resources

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 8 Interdependence Between Functions (Fig. 15.5)

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 9 Service Leaders Integrate Functions  Implementation of Service Profit Chain requires complete understanding of how marketing, operations and human resource functions relate to a firm’s strategy  Integrated functions create value for the firm  Strategies are defined and driven by a strong, effective leadership team  Has a coherent vision of what it takes to succeed

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 10 Defining the Three Functions  Marketing Function  Target “ right ” customers and build relationships  Offer solutions that meet their needs  Define quality package with competitive advantage  Operations Function  Create, deliver specified service to target customers  Adhere to consistent quality standards  Achieve high productivity to ensure acceptable costs  Human Resource Function  Recruit and retain the best employees for each job  Train and motivate them to work well together  Achieve both productivity & customer satisfaction

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 11 Creating a Leading Service Organization

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 12 From Losers to Leaders: Four Levels of Service Performance (1)  Service Losers  Bottom of the barrel from both customer and managerial perspectives  Customers patronize them because there is no viable alternative  New technology introduced only under duress; uncaring workforce  Service Nonentities  Dominated by a traditional operations mindset  Unsophisticated marketing strategies  Consumers neither seek out nor avoid them

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 13 From Losers to Leaders: Four Levels of Service Performance (2)  Service Professionals  Clear market positioning strategy  Customers within target segment(s) seek them out  Research used to measure customer satisfaction  Operations and marketing work together  Proactive, investment-oriented approach to HRM  Service Leaders  The crème da la crème of their respective industries  Names synonymous with outstanding service, customer delight  Service delivery is seamless process organized around customers  Employees empowered and committed to firm’s values and goals

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 14 Moving to a Higher Level of Performance  Firms can move either up or down the performance ladder  Organizations that are devoted to satisfying their current customers may miss important shifts in the marketplace  As a result, they may face difficulties attracting demanding new consumers with different expectations  Companies defending their control of their competitive edge may have encouraged competitors to find higher-performing alternatives  Organizations with a service-oriented culture may turn otherwise as a result of a merger or acquisition that brings in new leaders who emphasize short-term profits

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 15 In Search of Human Leadership

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 16 Leadership vs. Management  Leadership  Concerned with development of vision and strategies, and empowerment of people to overcome obstacles, make vision happen  Emphasis on emotional and spiritual resources  Works through people and culture  Produces useful change, especially non-incremental change  Management  Involves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving  Emphasizes physical resources—raw materials, technology, capital  Works through hierarchy and systems  Keeps current system functioning

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 17 Setting Direction vs. Planning  Planning  a management process, designed to produce orderly results, not change  Setting direction  involves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal  Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy  “Stretch” – a challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organization’s reach  Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution  See Service Insights 15.2 : Can Cirque du Soleil Stretch Further?

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 18 Individual Leadership Qualities  Love for the business  See service quality as foundation for competing  Recognize key role of employees  Driven by a set of core values they pass on  Make communication a priority  Work with a team on decision-making  Know when to change when necessary  Walk the talk

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 19 Leadership, Culture and Climate (1)  Leadership traits are needed of everyone in supervisory or managerial positions, including those heading teams  Effective communication is essential for a leader  Organizational culture:  Shares understanding regarding what is important in the organization  Shares values about what is right or wrong  Shares understanding about what works and what doesn’t work  Shares beliefs, and assumptions about why things are important  Shares styles of working and relating to others

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 20 Leadership, Culture and Climate (2)  Organizational climate  The tangible surface layer on top of the organization’s underlying culture  Factors of influence: -Flexibility, Responsibility, Standards that people set, Perceived aptness of rewards, Clarity people have about mission and values, Level of commitment to a common purpose  Creating a new climate for service, based on understanding of what is needed for market success, may require  radical rethinking of HRM activities, operational procedures, and the firm’s reward and recognition policies

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 21 Summary of Chapter 15: Change Management and Service Leadership (1)  Service profit chain provides useful summary of behaviors required of service leaders to manage effectively  Marketing, operations, and human resource management functions need to be closely coordinated and integrated in service businesses  Four levels of service performance  Service losers  Service nonentitites  Service professionals  Service leaders  Service leadership is not based on outstanding performance within a single dimension, but must cut across marketing, operations and human resources

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 22 Summary of Chapter 15: Change Management and Service Leadership (2)  To be effective, leaders need to understand difference between leadership vs. management, as well as setting direction vs. planning  Role modeling is one of traits of successful leaders  Leaders play a big part in nurturing an effective organizational culture that transforms an organization into a successful one