Chapter 8: Designing and Managing Service Processes

Chapter 8: Designing and Managing Service Processes

Core and Supplementary Services at Luxury Hotel (Offering Much More than Cheap Motel!) Reservation Valet Parking Cashier Business Center Reception A Bed for the Night in an Elegant Private Room with a Bathroom Room Service Baggage Service Cocktail Bar Wake-up Call Entertainment/ Sports/ Exercise Internet Restaurant

What Happens, When, in What Sequence? Time Dimension in Augmented Product (Fig 3.3) Reservation internet Parking Get car Check out Check in Internet Internet Use room USE GUESTROOM OVERNIGHT Porter Pay TV Meal Room service Time Frame of An Overnight Hotel Stay (Real-time service use) Before Visit

Spend Night in Room Check Out Check In Park Car Breakfast Maid Makes up Room Breakfast Prepared Simple Flowchart for Delivery of a People-Processing Service (Fig 3.4) People Processing – Stay at Motel

Technician Examines Player, Diagnoses Problem (Later) Play DVDs at Home Travel to Store Return, Pick up Player and Pay Leave Store Technician Repairs Player Simple Flowchart for Delivery of a Possession-Processing Service (Fig 3.4) Possession Processing – Repair a DVD Player

View Presentation of Weather Forecast Turn on TV, Select Channel TV Weatherperson Prepares Local Forecast Meteorologists Input Data to Models and Creates Forecast from Output Collect Weather Data Confirm Plans for Picnic Simple Flowchart for Delivery of Mental Stimulus-Processing Service (Fig 3.4) Mental Stimulus Processing – Weather Forecast

Weather Forecasting Is a Service Directed at Customers’ Minds (Fig 3.5)

Information Processing – Health Insurance Select Plan, Complete Forms Printed Policy Documents Arrive Insurance Coverage Begins Learn about Options Pay University and Insurance Company Agree on Terms of Coverage Customer Information Entered in Database Simple Flowchart for Delivery of An Information-Processing Service (Fig 3.4)

The Flower of Service (Fig 3.6) Information Payment Consultation Core Billing Order Taking Exceptions Hospitality Safekeeping KEY: Facilitating elements Enhancing elements

Core The Flower of Service: Facilitating Services—Information • Customers often require information about how to obtain and use a product or service. • Examples of elements: • Directions to service site • Schedule/service hours • Prices • Conditions of sale • Usage instructions

Core The Flower of Service:Facilitating Services—Order Taking • Customers need to know what is available and may want to secure commitment to delivery. The process should be fast and smooth. • Examples of elements: • Applications • Order entry • Reservations and check-in

Core The Flower of Service:Facilitating Services—Billing • “How much do I owe you?” • Bills should be clear, • Accurate, and intelligible. • Examples of elements: • Periodic statements of • account activity • Machine display of amount • due

Core The Flower of Service:Facilitating Services—Payment • Customers may pay faster • and more cheerfully if you • make transactions simple • and convenient for them. • Examples of elements: • Self service payment • Direct to payee or intermediary • Automatic deduction

Core The Flower of Service:Enhancing Services—Consultation • Value can be added to goods and services by offering advice and consultation tailored to • each customer’s needs and situation. • Examples of elements: • Customized advice • Personal counseling • Management consulting

Core The Flower of Service:Enhancing Services—Hospitality • Customers who invest time and effort in visiting a business and using its services deserve to be • treated as welcome guests— • after all, marketing invited them! • Examples of elements: • Greeting • Waiting facilities and amenities • Food and beverages • Toilets and washrooms • Security

Core The Flower of Service:Enhancing Services—Safekeeping • Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site. • Examples of elements: • Looking after possessions • customers bring with them • Caring for goods purchased • (or rented) by customers

Core The Flower of Service:Enhancing Services—Exceptions • Customers appreciate some • flexibility when they make special requests and expect responsiveness when things don’t go according to plan. • Examples of elements: • Special requests in advance • Complaints or compliments • Problem solving • Restitution

Developing a Blueprint • Identify key activities in creating and delivering service • Define “big picture” before “drilling down” to obtain a higher level of detail • Distinguish between “front stage” and “backstage” • Clarify interactions between customers and staff, and support by backstage activities and systems • Identify potential fail points; take preventive measures; prepare contingency • Develop standards for execution of each activity— times for task completion, maximum wait times, and scripts to guide interactions between employees and customers

Key Components of a Service Blueprint 1. Define standards for front-stage activities 2. Specify physical evidence 3. Identify principal customer actions 4. Line of interaction (customers and front-stage personnel) 5. Front-stage actions by customer-contact personnel 6. Line of visibility (between front stage and backstage) 7. Backstage actions by customer contact personnel 8. Support processes involving other service personnel 9. Support processes involving IT • Identify fail points and risks of excessive waits • Set service standards and do failure-proofing

Blueprinting the Restaurant Experience: Act 1 (Fig 8.1) Timeline Act 1 Service Standards and Scripts W W … W Make Reservation Valet Parking Coat Room Physical Evidence Line of interaction Front - Stage Greet customer, take car keys Greet, take coat, coat checks Accept reservation Contact person (visible actions) Line of visibility Check availability, insert booking Hang coat with visible check numbers Contact person (invisible actions) Take car to parking lot Back - Stage Line of internal physical interaction Maintain reservation system Maintain (or rent) facilities Maintain facilities/ equipment Support Processes

Blueprinting the Restaurant Experience: A Three Act Performance • Act 1: Prologue and Introductory Scenes • Act 2: Delivery of Core Product • Cocktails, seating, order food and wine, wine service • Potential fail points: Menu information complete? Menu intelligible? Everything on the menu actually available? • Mistakes in transmitting information a common cause of quality failure—e.g. bad handwriting; poor verbal communication • Customers may not only evaluate quality of food and drink, but how promptly it is served, serving staff attitudes, or style of service • Act 3: The Drama Concludes • Remaining actions should move quickly and smoothly, with no surprises at the end • Customer expectations: Accurate, intelligible and prompt bill, payment handled politely, guest are thanked for their patronage

Setting Service Standards • Service providers should design standards for each step sufficiently high to satisfy and even delight customers • Standards may include time parameters, script for a technically correct performance, and prescriptions for appropriate style and demeanor • Must be expressed in ways that permit objective measurement • First impression is important as it affects customer’s evaluations of quality during later stages of service delivery • Customer perceptions of service experiences tend to be cumulative • For low-contact service, a single failure committed front stage is relatively more serious than in high-contact service • Viewed more seriously because there are fewer subsequent opportunities to create a favorable impression

Improving Reliability of Processes by Failure Proofing • Errors include: • Treatment errors—human failures during contact with customer • e.g., lack of courteous or professional behavior, failure to acknowledge, listen to, or react appropriately to the customer • Tangible errors—failures in physical elements of service • e.g., noise pollution, improper standards for cleaning of facilities and uniforms, equipment breakdown • Goal of fail-safe procedures is to prevent errors such as: • Performing tasks incorrectly, in the wrong order, too slowly • Doing work that wasn’t requested in the first place

Redesigning Service Processes

Why Redesign? Mitchell T. Rabkin MD, formerly president of Boston’s Beth Israel Hospital “Institutions are like steel beams—they tend to rust. What was once smooth and shiny and nice tends to become rusty.”

Why Redesign? • Revitalizes process that has become outdated • Changes in external environment make existing practices obsolete and require redesign of underlying processes • Creation of brand-new processes to stay relevant • Rusting occurs internally • Natural deterioration of internal processes; creeping bureaucracy; evolution of spurious, unofficial standards • Symptoms: • Extensive information exchange • Data redundancy • High ratio of checking or control activities to value-adding activities, increased exception processing • Customer complaints about inconvenient and unnecessary procedures

Process Redesign: Approaches and Potential Benefits • Eliminating non-value-adding steps • Streamline front-end and back-end processes of services with goal of focusing on benefit-producing part of service encounter • Eliminate non-value-adding steps • Improve efficiency • More customized service • Differentiate company • Delivering direct service • Bring service to customers instead of bringing customers to provider • Improve convenience for customers • Productivity can be improved if companies can eliminate expensive retail locations • Increase customer base

Process Redesign: Approaches and Potential Benefits • Shifting to self-service • Increase in productivity and service quality • Lower costs and perhaps prices • Enhance technology reputation • Greater convenience • Bundling services • Involves grouping multiple services into one offer, focusing on a well-defined customer group • Often has a better fit to the needs of target segment • Increase productivity • Add value for customers through lower transaction costs • Customize service • Increase per capita service use

Process Redesign: Approaches and Potential Benefits • Redesigning physical aspects of service processes • Focus on tangible elements of service process; include changes to facilities and equipment to improve service experience • Increase convenience • Enhance the satisfaction and productivity of front-line staff • Cultivate interest in customers • Differentiate company

The Customer as Co-Producer

Levels of Customer Participation • Customer Participation • Actions and resources supplied by customers during service production and/or delivery • Includes mental, physical, and even emotional inputs • Three Levels • Low—Employees and systems do all the work • Often involves standardized service • Medium—Customer inputs required to assist provider • Provide needed information and instructions • Make some personal effort; share physical possessions • High—Customer works actively with provider to co-produce the service • Service cannot be created without customer’s active participation • Customer can jeopardize quality of service outcome (e.g., weight loss, marriage counseling)

Self-Service Technologies (SSTs) • Ultimate form of customer involvement • Customers undertake specific activities using facilities or systems provided by service supplier • Customer’s time and effort replace those of employees • e.g. Internet-based services, ATMs, self-service gasoline pumps • Information-based services lend selves particularly well to SSTs • Used in both supplementary services and delivery of core product • e.g. eBay—no human auctioneer needed between sellers and buyers

Psychological Factors in Customer Co-Production • Economic rationale of self-service • Productivity gains and cost savings result when customers take over work previously performed by employees • Lower prices, reflecting lower costs, induce customer to use SSTs • SSTs present both advantages and disadvantages • Benefits: Time and cost savings, flexibility, convenience of location, greater control over service delivery, and a higher perceived level of customization • Disadvantages: Anxiety and stress experienced bycustomers who are uncomfortable with using them

What Aspects of SSTs Please or Annoy Customers? • People love SSTs when… • SST machines are conveniently located and accessible 24/7—often as close as nearest computer! • Obtaining detailed information and completing transactions can be done faster than through face-to-face or telephone contact • People in awe of what technology can do for them when it works well • People hate SSTs when… • SSTs fail—system is down, PIN numbers not accepted, etc • They mess up—forgetting passwords, failing to provide information as requested, simply hitting wrong buttons • Key weakness of SSTs: Too few incorporate service recovery systems • Customers still forced to make telephone calls or personal visits • Blame service provider for not providing more user-friendly system

HSBC: “The world’s local bank” Source: Courtesy HSBC Global site brought to customer’s local computer

Putting SSTs to Test by Asking a Few Simple Questions • Does the SST work reliably? • Firms must ensure that SSTs are dependable and user-friendly • Is the SST better than interpersonal alternatives? • Customers will stick to conventional methods if SST doesn’t create benefits for them • If it fails, what systems are in place to recover? • Always provide systems, structures, and technologies that will enable prompt service recovery when things go wrong

Dysfunctional Customer Behavior Disrupts Service Process

Addressing the Challenge of Jaycustomers • Jaycustomer: A customer who behaves in a thoughtless or abusive fashion, causing problems for the firm, its employees, and other customers • Divergent views on jaycustomers • “The customer is king and can do no wrong.” • Marketplace is overpopulated with nasty people who cannot be trusted to behave in ways that self-respecting services firms should expect and require • Insight: There’s truth in both perspectives • No organization wants an ongoing relationship with an abusive customer

Six Types of Jaycustomers: • The Thief • The Rulebreaker • The Belligerent • The Deadbeat • Family Feuders • Vandals

Chapter 8: Designing and Managing Service Processes