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Crafting the Service Environment

Crafting the Service Environment

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Crafting the Service Environment

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  1. Crafting the Service Environment

  2. Overview of the session • What Is the Purpose of Service Environments? • Understanding Consumer Responses to Service Environments • Dimensions of the Service Environment • Putting It All Together

  3. What Is the Purpose of Service Environments?

  4. Purpose of Service Environments • Helps firm to create distinctive image and unique positioning • Service environment affects buyer behavior in three ways: • Message-creating medium: Symbolic cues to communicate the distinctive nature and quality of the service experience • Attention-creating medium: Make servicescape stand out from competition and attract customers from target segments • Effect-creating medium: Use colors, textures, sounds, scents and spatial design to enhance desired service experience

  5. Comparison of Hotel Lobbies Each servicescape clearly communicates and reinforces its hotel’s respective positioning and sets service expectations as guests arrive Orbit Hotel and Hostel, Los Angeles Four Seasons Hotel, New York

  6. Servicescape as Part of Value Proposition • Physical surroundings help shape appropriate feelings and reactions in customers and employees • For example: Disneyland • Servicescapes form a core part of the value proposition • For example: Las Vegas, Florida-based Muvico • Las Vegas: Repositioned itself to a somewhat more wholesome fun resort, visually striking entertainment center • Florida-based Muvico: Builds extravagant movie theatres and offers plush amenities. “What sets you apart is how you package it..” (Muvico’s CEO, Hamid Hashemi) • The power of servicescapes is being discovered

  7. Understanding Consumer Responses to Service Environments

  8. The Mehrabian-Russell Stimulus-Response Model Feelings Are a Key Driver of Customer Responses to Service Environments Dimensions of Affect: Pleasure and Arousal Response/ Behavior: Approach Avoidance and Cognitive Processes Environmental Stimuli and Cognitive Processes

  9. Insights from Mehrabian-Russell Stimulus-Response Model • Simple yet fundamental model of how people respond to environments • The environment, its conscious and unconscious perceptions, and interpretation influence how people feel in that environment • Feelings, rather than perceptions/thoughts drive behavior • Typical outcome variable is “approach” or “avoidance” of an environment, but other possible outcomes can be added to model

  10. Arousing Distressing Exciting Unpleasant Pleasant Relaxing Boring Sleepy The Russell Model of Affect

  11. Insights from Russell Model of Affect • Emotional responses to environments can be described along two main dimensions: • Pleasure: Direct, subjective, depending on how much individual likes or dislikes environment • Arousal: How stimulated individual feels, depends largely on information rate or load of an environment • Russell separated cognitive part of emotions from these two emotional dimensions • Advantage: simplicity, allows a direct assessment of how customers feel • Firms can set targets for affective states

  12. Drivers of Affect • Affect can be caused by perceptions and cognitive processes of any degree of complexity • It’s the simple cognitive processes that determine how people feel in a service setting • If higher levels of cognitive processes are triggered, the interpretation of this process determines people’s feelings • The morecomplex a cognitive process becomes, the more powerful its potential impact on affect. • However, most service encounters are routine and simple processes can determine affect.

  13. Behavioral Consequence of Affect • Pleasant environments result in approach, whereas unpleasant ones result in avoidance • Arousal amplifies the basic effect of pleasure on behavior • If environment is pleasant, increasing arousal can generate excitement, leading to a stronger positive consumer response • If environment is unpleasant, increasing arousal level will move customers into the “distressed” region • Feelings during service encounters are an important driver of customer loyalty

  14. Approach • Affiliation • Exploration • Stay longer • Satisfaction Avoid (opposite of approach) Cognitive Emotional Psychological Employee Response Moderator Employee Responses An Integrative Framework: Bitner’s Servicescape Model ENVIRONMENTAL DIMENSIONS MODERATORS INTERNAL RESPONSES BEHAVIOR HOLISTIC ENVIRONMENT Ambient Conditions Space/ Function Signs, Symbols, and Artifacts Social Interaction Between Customers and Employees Perceived Servicescape Customer Responses Approach • Attraction • Stay/Explore • Spend More $$$ • Satisfaction Avoid (opposite of approach) Customer Response Moderator Cognitive Emotional Psychological Source: Mary J. Bitner, “Servicescapes: The Impact of Physical Surroundings on Customers and Employees,” Journal of Marketing 56 (April 1992), pp. 57-71.

  15. An Integrative Framework: Bitner’s Servicescape Model (2) • Identifies the main dimensions in a service environment and views them holistically • Internal customer and employee responses can be categorized into cognitive, emotional, and psychological responses, which lead to overt behavioral responses towards the environment • Key to effective design is how well each individual dimension fits together with everything else

  16. Dimensions of the Service Environment

  17. Main Dimensions in Servicescape Model • Ambient Conditions • Characteristics of environment pertaining to our five senses • Spatial Layout and Functionality • Spatial layout: • Floorplan • Size and shape of furnishings, counters, machinery,equipment, and how they are arranged • Functionality: Ability of those items to facilitate performance • Signs, Symbols, and Artifacts • Explicit or implicit signals to: • Communicate firm’s image • Help consumers find their way • Convey rules of behavior

  18. Impact of Ambient Conditions • Ambient environment is composed of hundreds of design elements and details that must work together to create desired service environment • Ambient conditions are perceived both separately and holistically, and include: • Lighting and color schemes • Size and shape perceptions • Sounds such as noise and music • Temperature • Scents • Clever design of these conditions can elicit desired behavioral responses among consumers

  19. Impact of Music • In service settings, music can have a powerful effect on perceptions and behaviors, even if played at barely audible levels • Structural characteristics of music―such as tempo, volume, and harmony―are perceived holistically • Fast tempo music and high volume music increase arousal levels • People tend to adjust their pace, either voluntarily or involuntarily, to match tempo of music • Careful selection of music can deter wrong type of customers

  20. Impact of Music on Restaurant Diners Restaurant Patron Behavior Fast-beat Music Environment Slow-beat Music Environment Difference between Slow- and Fast-beat Environments Absolute Difference % Difference Consumer time spent at table 45min 56min +11min +24% Spending on food $55.12 $55.81 +$0.69 +1% Spending on beverages $21.62 $30.47 +$8.85 +41% Total spending $76.74 $86.28 +$9.54 +12% Estimated gross margin $48.62 $55.82 +$7.20 +15% Source: Ronald E. Milliman (1982), “Using Background Music to Affect the Behavior of Supermarket Shoppers,” Journal Of Marketing, 56 (3): pp. 86–91

  21. Impact of Scent • An ambient smell is one that pervades an environment • May or may not be consciously perceived by customers • Not related to any particular product • Scents have distinct characteristics and can be used to solicit emotional, physiological, and behavioral responses • In service settings, research has shown that scents can have significant effect on customer perceptions, attitudes, and behaviors

  22. Effects of Scents on Perceptions of Store Environments (1) Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80.

  23. Effects of Scents on Perceptions of Store Environments (2) Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80

  24. Aromatherapy: Effects of Selected Fragrances on People (Table 10.2)

  25. Impact of Color • Colors can be stimulating, calming, expressive, disturbing, impressional, cultural, exuberant, symbolic • Color pervades every aspect of our lives, embellishes the ordinary, gives beauty and drama to everyday objects • Colors have a strong impact on people’s feelings • Colors can be defined into three dimensions: • Hue is the pigment of the color • Value is the degree of lightness or darkness of the color • Chroma refers to hue-intensity, saturation, or brilliance

  26. Common Associations and Human Responses to Colors (Table 10.3)

  27. Impact of Signs, Symbols, and Artifacts • Guide customers clearly through process of service delivery • Customers will automatically try to draw meaning from the signs, symbols, and artifacts • Unclear signals from a servicescape can result in anxiety and uncertainty about how to proceed and obtain the desired service • For instance, signs can be used to reinforce behavioral rules (see picture on next slide)

  28. Signs Teach and Reinforce Behavioral Rules in Service Settings

  29. People Are Part of the Service Environment Distinctive Servicescapes Create Customer Expectations

  30. Putting It All Together

  31. Selection of Environmental Design Elements • Consumers perceive service environments holistically • Design with a holistic view • Servicescapes have to be seen holistically: No dimension of design can be optimized in isolation, because everything depends on everything else • Holistic characteristic of environments makes designing service environment an art • Must design from a customer’s perspective

  32. Tools to Guide Servicescape Design • Keen observation of customers’ behavior and responses to the service environment by management, supervisors, branch managers, and frontline staff • Feedback and ideas from frontline staff and customers, using a broad array of research tools from suggestion boxes to focus groups and surveys. • Field experiments can be used to manipulate specific dimensions in an environment and the effects observed. • Blueprinting or service mapping—extended to include physical evidence in the environment.

  33. Managing People for Service Advantage

  34. Overview of Session • Service Employees Are Crucially Important • Frontline Work Is Difficult and Stressful • Cycles of Failure, Mediocrity, and Success • Human Resources Management: How to Get It Right? • Service Leadership and Culture

  35. Service Employees Are Crucially Important

  36. Service Personnel: Source of Customer Loyalty and Competitive Advantage • Customer’s perspective: Encounter with service staff is most important aspect of a service • Firm’s perspective: Frontline is an important source of differentiation and competitive advantage. It is: • A core part of the product • the service firm • The brand • Frontline is an important driver of customer loyalty • Anticipating customer needs • Customizing service delivery • Building personalized relationships

  37. Frontline in Low-Contact Services • Many routine transactions are now conducted without involving frontline staff, e.g., • ATMs (Automated Teller Machines) • IVR (Interactive Voice Response) systems • Websites for reservations/ordering, payment, etc. • Though technology and self-service interface is becoming a key engine for service delivery, frontline employees remain crucially important • “Moments of truth” drive customer’s perception of the service firm

  38. Frontline Work Is Difficult and Stressful

  39. Boundary Spanning Roles • Boundary spanners link inside of organization to outside world • Multiplicity of roles often results in service staff having to pursue both operational and marketing goals • Consider management expectations of service staff: • Delight customers • Be fast and efficient in executing operational tasks • Do selling, cross selling, and up-selling • Enforce pricing schedules and rate integrity

  40. Role Stress in Frontline Employees Three main causes of role stress: • Person versus Role: Conflicts between what jobs require and employee’s own personality and beliefs • Organizations must instill “professionalism” in frontline staff • Organization versus Client: Dilemma whether to follow company rules or to satisfy customer demands • This conflict is especially acute in organizations that are not customer oriented • Client versus Client: Conflicts between customers that demand service staff intervention

  41. Emotional Labor • “The act of expressing socially desired emotions during service transactions” (Hochschild, The Managed Heart) • Three approaches used by employees: • Surface acting—simulate emotions they don’t actually feel • Deep acting—psych themselves into experiencing desired emotion, perhaps by imagining how customer is feeling • Spontaneous response • Performing emotional labor in response to society’s or management’s display rules can be stressful • Good HR practices emphasize selective recruitment, training, counseling, and strategies to alleviate stress

  42. Cycles of Failure, Mediocrity, and Success

  43. Cycle of Failure (1) • Customer • turnover • Repeat emphasis on • attracting new customers • Failure to develop • customer loyalty • Low profit • margins • Narrow design of • jobs to accommodate • low skill level • High employee turnover; • poor service quality • Use of technology • No continuity in • Emphasis on • to control quality • relationship for • rules rather • Employee dissatisfaction; • customer • than service • poor service attitude • Payment of • low wages Employee Cycle • Employees • Minimization of • become bored • selection effort • Customer • dissatisfaction • Minimization • of training • Employees can’t Customer Cycle • respond to customer • problems • Source: Schlesinger and Heskett

  44. Cycle of Failure (2) • The employee cycle of failure • Narrow job design for low skill levels • Emphasis on rules rather than service • Use of technology to control quality • The customer cycle of failure • Managers’ short-sighted assumptions about financial implications of low pay, high turnover human resource strategies

  45. Cycle of Failure (3) • Costs of short-sighted policies are ignored • Loss of expertise among departing employees • Disruption to service from unfilled jobs • Constant expense of recruiting, hiring, training • Lower productivity of inexperienced new workers • Loss of revenue stream from dissatisfied customers who go elsewhere • Loss of potential customers who are turned off by negative word-of-mouth • Higher costs of winning new customers to replace those lost—more need for advertising and promotional discounts

  46. “Openness” of Service Sabotage Behaviors Covert Overt Routinized Customary-Private Service Sabotage • Customer-Public Service • Sabotage • e.g. Waiters serving smaller servings, bad beer or sour wine • e.g. Talking to guests like • young kids and putting them down “Normality” of Service Sabotage Behaviors • Sporadic-Private Service • Sabotage • Sporadic-Public Service • Sabotage • e.g. Chef occasionally • purposefully slowing down orders • e.g. Waiters spilling soup onto • laps, gravy onto sleeves, or hot plates into someone’s hands Intermittent Service Sabotage (Fig 11a)

  47. Customers trade • horror stories • Other suppliers (if any) • seen as equally poor • Employees spend • working life • in environment • Employee • of mediocrity • dissatisfaction • Emphasis • (but can’t easily quit) • on rules • Narrow design • vs. pleasing • of jobs • customers • No incentive for • cooperative relationship • to obtain better service • Complaints met by • Training emphasizes • learning rules • indifference or • Success = • not making • mistakes • hostility • Service not focused • on customers’ needs • Jobs are boring and Employee Cycle • repetitive; employees • Good wages/benefits • unresponsive • high job security • Resentment at inflexibility and • lack of employee initiative; • complaints to employees • Promotion • and pay • Initiative is Customer Cycle • increases based • discouraged • on longevity, • lack of mistakes • Customer dissatisfaction Cycle Of Mediocrity (1)(Fig 11.5) • Source: Heskett and Schlesinger

  48. Cycle Of Mediocrity (2) • Most commonly found in large, bureaucratic organizations • Service delivery is oriented toward • Standardized service • Operational efficiencies • Prevention of employee fraud and favoritism toward specific customers

  49. Cycle of Mediocrity (3) • Job responsibilities narrowly and unimaginatively defined • Successful performance measured by absence of mistakes • Training focuses on learning rules and technical aspects of job—not on improving interactions with customers and co-workers

  50. Cycle of Success (1) • Low • customer • turnover • Repeat emphasis on • customer loyalty and • retention • Customer • loyalty • Higher • profit • margins • Broadened • Lowered turnover, • job designs • high service quality • Continuity in • Train, empower frontline • personnel to control quality • relationship with • customer • Employee satisfaction, • positive service attitude Employee Cycle • Above average • wages • Extensive • training • High customer • Intensified • satisfaction • selection effort Customer Cycle • Source: Heskett and Schlesinger