Service Recovery

<div style="text-align: justify;"> Table 6.8 contains some statistics on the behavior of dissatisfied customers that suggests a quick resolution to service failure is an important way to create loyal customers. Because customers participate in the service delivery process, an alert employee trained in service recovery techniques can turn a potential disaster into a loyal customer. A service failure can be turned into a service delight by empowering frontline employees with the discretion to “make things right.” For example, when an airplane full of anxious passengers is delayed for some minor mechanical problem, it’s time to break out complimentary drinks. More heroic efforts become legends, such as the story of a Federal Express employee who hired a helicopter to repair a downed telephone line during a snowstorm. Expenses incurred to accomplish a recovery are “pennies on the dollar” compared with the possible adverse ”word-of-mouth” stories that are now turned into good stories of how an employee went the extra mile to accommodate a customer. Training employees in approaches to service recovery should be the first line of defense against defections and “poor word-of-mouth.<br /><br />The service recovery framework shown in Figure 6.12 is illustrated by the example of Club Med, an all inclusive resort for guests who want to worry about nothing except relaxing and enjoying themselves. In the pre-recovery phase, expectations are set high by past experience or word-of-mouth. However, weather is an uncontrollable variable for Club Med and storms have the potential of ruining expectations of sunbathing on the beach. The immediate recovery phase requires initiative by the staff to guarantee a pleasant experience for the guests despite poor weather. Stories abound about the creative responses to poor weather, such as organizing group games and putting on stage shows.  This ability of the staff to create a memorable experience for guests is called “the Club Med magic.” In the follow-up phase, guests receive photographs and trinkets of the vacation and in severe cases a discounted invitation to return the following year.<br /><br />Approaches to Service Recovery <br />There are four basic approaches to service recovery: the case-by-case, the systematicresponse, the early intervention, and the substitute service recovery approaches. The case-by-case approach addresses each customer’s complaint individually. This inexpensive approach is easy to implement, but it can be haphazard. The most persistent or aggressive complainers, for example, often receive satisfactory responses while more “reasonable” complainers do not. The haphazardness of this approach can generate perceptions of unfairness.<br /> </div> <div style="text-align: justify;"> The systematic-response approach uses a protocol to handle customer complaints. It is more reliable than the case-by-case approach because it is a planned response based on identification of critical failure points and prior determination of appropriate recovery criteria. As long as the response guidelines are continuously updated, this approach can be very beneficial because it offers a consistent and timely response.</div> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-5mvdHhg-O94myCDxZip_cnA6xQW-rUIQ53mIGNqmDGYtolUGlf8l7puNO8CGISX-f-2mdL0FiX3Y5hJAk86jvFYexYinTkkCjuaQ197LC6uCcQI4Pw0CgiDJeWFXgy5KK6jtEhqXnbTq/s1600/cost+1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="148" data-original-width="500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-5mvdHhg-O94myCDxZip_cnA6xQW-rUIQ53mIGNqmDGYtolUGlf8l7puNO8CGISX-f-2mdL0FiX3Y5hJAk86jvFYexYinTkkCjuaQ197LC6uCcQI4Pw0CgiDJeWFXgy5KK6jtEhqXnbTq/s1600/cost+1.png" /></a></div> <br /> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDffkiJhKd-A27kOmsh4z41YdCnbrFPP0s4Z0Wr8V55k3ChFtIZ0niKyAvF9z-lSJtBww01F1KtxjX48SHme_d02RV92VkwiFVyXoWotTLveIJsbVjxV3_MfQNDg9r-3f0aGztqx4wd3a2/s1600/cost+2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="299" data-original-width="500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDffkiJhKd-A27kOmsh4z41YdCnbrFPP0s4Z0Wr8V55k3ChFtIZ0niKyAvF9z-lSJtBww01F1KtxjX48SHme_d02RV92VkwiFVyXoWotTLveIJsbVjxV3_MfQNDg9r-3f0aGztqx4wd3a2/s1600/cost+2.png" /></a></div> <div style="text-align: justify;"> An early intervention approach adds another component to the systematic-response approach by attempting to intervene and fix service-process problems before they affect the customer. A shipper who realizes that a shipment is being held up by a truck breakdown, for example, can choose to notify the customer immediately so the customer can develop alternative plans if necessary.<br /><br />An alternate approach capitalizes on the failure of a rival to win the competitor’s customer by providing a substitute service recovery. At times the rival firm may support this approach. A desk person at an overbooked hotel, for example, may send a customer to a rival hotel. The rival hotel may be able to capitalize on such an opportunity if it can provide a timely and quality service. This approach is difficult to implement because information about a competitor’s service failures is usually<br /><br /><br />Complaint Handling Policy<br />A customer complaint should be treated as a gift. A complaining customer is volunteering her time to make the firm aware of an error because she cares. This opportunity should be seized upon not just to satisfy the customer but also to create a relationship with someone who will become an advocate for the firm. A complaint- handling policy  should be incorporated into the training of all customer-contact employees. An example policy might include the following features:<br /><br />Every complaint is treated as a gift.</div> <ul style="text-align: justify;"> <li>We welcome complaints.</li> <li>We encourage customers to complain.</li> <li>We make it easy to complain.</li> <li>We handle complaints fast.</li> <li>We treat complaints in a fair manner.</li> <li>We empower our employees to handle complaints.</li> <li>We have customer- and employee-friendly systems to handle complaints.</li> <li>We reward employees who handle complaints well.</li> <li>We keep records of complaints and learn from them. closely guarded.</li> </ul>

Table 6.8 contains some statistics on the behavior of dissatisfied customers that suggests a quick resolution to service failure is an impo...

Defining service Quality

<div style="text-align: justify;"> For services, the assessment of quality is made during the service delivery process. Each customer contact is referred to as a moment of truth, an opportunity to satisfy or dissatisfy the customer. Customer satisfaction with a service can be defined by comparing perceptions of service received with expectations of service desired. When expectations are exceeded, service is perceived to be of exceptional quality and also to be a pleasant surprise. When expectations are not met, however, service quality is deemed unacceptable. When expectations are confirmed by perceived service, quality is satisfactory. As shown in Figure 6.1 , these expectations are based on several sources, including word of mouth, personal needs, and past experience.<br /><br />Dimensions of Service Quality<br />The dimensions of service quality as shown in Figure 6.1 were identified by marketing researchers studying several different service categories: appliance repair, retail banking, long-distance telephone service, securities brokerage, and credit card companies. They identified five principal dimensions that customers use to judge service quality reliability, responsiveness, assurance, empathy, and tangibles, which are listed in order of declining relative importance to customers</div> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkcH9JDAwGa7fUP5xzscficp-6xVe14rN0MUAMkdkbTJ6NV-_ComEdahmHHy1jTNX3hy_wEr9py3WFYsZpRWEs9Jq0XuX0J1haTmM2_XG8f0_WPkAE1i5DHfIHa5OovYfb-dqAI1KqXFyj/s1600/qua+1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="141" data-original-width="500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkcH9JDAwGa7fUP5xzscficp-6xVe14rN0MUAMkdkbTJ6NV-_ComEdahmHHy1jTNX3hy_wEr9py3WFYsZpRWEs9Jq0XuX0J1haTmM2_XG8f0_WPkAE1i5DHfIHa5OovYfb-dqAI1KqXFyj/s1600/qua+1.png" /></a></div> <div style="text-align: justify;"> Reliability. The ability to perform the promised service both dependably and accurately. Reliable service performance is a customer expectation and means that the service is accomplished on time, in the same manner, and without errors every time. For example, receiving mail at approximately the same time each day is important to most people. Reliability also extends into the back office, where accuracy in billing and record keeping is expected.<br /><br />Responsiveness. The willingness to help customers and to provide prompt service. Keeping customers waiting, particularly for no apparent reason, creates unnecessary negative perceptions of quality. If a service failure occurs, the ability to recover quickly and with professionalism can create very positive perceptions of quality. For example, serving complimentary drinks on a delayed flight can turn a potentially poor customer experience into one that is remembered favorably<br /><br />Assurance. The knowledge and courtesy of employees as well as their ability to convey trust and confidence. The assurance dimension includes the following features: competence to perform the service, politeness and respect for the customer, effective communication with the customer, and the general attitude that the server has the customer’s best interests at heart.<br /><br />Empathy. The provision of caring, individualized attention to customers. Empathy includes the following features: approachability, sensitivity, and effort to understand the customer’s needs. One example of empathy is the ability of an airline gate attendant to make a customer’s missed connection the attendant’s own problem and to find a solution.<br /><br />Tangibles. The appearance of physical facilities, equipment, personnel, and communication materials. The condition of the physical surroundings (e.g., cleanliness) is tangible evidence of the care and attention to detail that are exhibited by the service provider. This assessment dimension also can extend to the conduct of other customers in the service (e.g., a noisy guest in the next room at a hotel).<br /><br />Customers use these five dimensions to form their judgments of service quality, which are based on a comparison between expected and perceived service. The gap between expected and perceived service is a measure of service quality; satisfaction is either negative or positive.<br /><br /><br />Gaps in Service Quality<br />Measuring the gap between expected service and perceived service is a routine customer feedback process that is practiced by leading service companies. For example, Club Med, an international hotel chain operating resort villages worldwide, uses the questionnaire shown in Figure 6.2 . This questionnaire is mailed to all guests immediately after their departure from a Club Med vacation to assess the quality of their experience. Note that the first question explicitly asks the guest to evaluate the gap between his or her expectations and the actual Club Med experience<br /><br />In Figure 6.3 , the gap between customer expectations and perceptions is defined as GAP 5. Customer satisfaction is dependent on minimizing gaps 1 through 4 that are associated with delivery of the service. The market research gap is the discrepancy between customer expectations and management perceptions of these expectations. GAP 1 arises from management’s lack of full understanding about how customers formulate their expectations on the basis of a number of sources: advertising, past experience with the firm and its competitors, personal needs, and communications with friends. Strategies for closing this gap include improving market research, fostering better communication between management and its contact  employees, and reducing the number of levels of management.<br /><br />The service design gap results from management’s inability to formulate target levels of service quality to meet perceptions of customer expectations and translate these into workable specifications. GAP 2 may result from a lack of management commitment to service quality or a perception of the unfeasibility of meeting customers’ expectations; however, setting goals and standardizing service delivery tasks can close this gap. The conformance gap occurs because actual delivery of the service does not meet the specifications set by management. GAP 3 can arise for a number of reasons, including lack of teamwork, poor employee selection, inadequate training, and inappropriate job design. Customer expectations of the service are formed by media advertising and other communications from the firm. GAP 4 is the discrepancy between service delivery and external communications in the form of exaggerated promises and lack of information provided to contact personnel.</div> <div style="text-align: justify;">  </div> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDgA0TSEUsF_HfpRVj8JYIfaY5z3JKRuPVGHQvLlE8MwpEv7VJ20pSz2HRNaX5cGIamJvLNgNhXdHqusyUsPHmNZT46ujLaxHXeHhkOGmxdGHdEjP-AJNlfaHoGvUw9GVmvf1pbq3SPmaT/s1600/qua+3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="581" data-original-width="457" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDgA0TSEUsF_HfpRVj8JYIfaY5z3JKRuPVGHQvLlE8MwpEv7VJ20pSz2HRNaX5cGIamJvLNgNhXdHqusyUsPHmNZT46ujLaxHXeHhkOGmxdGHdEjP-AJNlfaHoGvUw9GVmvf1pbq3SPmaT/s1600/qua+3.png" /></a></div> <br /> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIaW_9UQ-aLIBsEfnQDCG5BZqDv2jl1Rwrz4FW1AxLDBbA6tANpyCZNBg4Xb2qDv9HtGBK8sEVp5AYLPq5qjGALRcsg7ARXi0q8YbSrRpdIlFQ4oswwv4T-Cjcsnr996GN_wxOmxfpqDYK/s1600/qua+2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="207" data-original-width="500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIaW_9UQ-aLIBsEfnQDCG5BZqDv2jl1Rwrz4FW1AxLDBbA6tANpyCZNBg4Xb2qDv9HtGBK8sEVp5AYLPq5qjGALRcsg7ARXi0q8YbSrRpdIlFQ4oswwv4T-Cjcsnr996GN_wxOmxfpqDYK/s1600/qua+2.png" /></a></div> <div style="text-align: justify;"> The numbering of the gaps from 1 to 5 represents the sequence of steps (i.e., market research, design, conformance, communication, and customer satisfaction) that should be followed in new service process design. The remainder of this chapter will address ways of closing these gaps in service quality. We begin by considering approaches to measuring service quality.</div>

For services, the assessment of quality is made during the service delivery process. Each customer contact is referred to as a moment of tr...

Technological innovation in services

<div style="text-align: justify;"> Innovation is a destroyer of tradition; thus, it requires careful planning to ensure success. By necessity, the productivity benefits of new technology will change the nature of work. Any introduction of new technology should include employee familiarization to prepare workers for new tasks and to provide input into the technology interface design (e.g., will typing skill be required, or will employees just point and click?). For services, the impact of new technology might not be limited to the back office. It could require a change in the role that customers play in the service delivery process. Customer reaction to the new technology, determined through focus groups or interviews, also could provide input into the design to avoid future problems of acceptance (e.g., consider the need for surveillance cameras at automated teller machines).</div> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigWjQUhM5n90lWrRj6JCLb399CtK4vBqJ7fPGf8qW1ghr7tEUrbi_g7zbvWakyxJJDLuAx9FwRZfoBkx5ZVP7HsSqz7G2rv38pJKxVD2yKrS8fxh-nneQ9zqgVioDRkjLcTu2QCsXbZs91/s1600/13.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="205" data-original-width="500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigWjQUhM5n90lWrRj6JCLb399CtK4vBqJ7fPGf8qW1ghr7tEUrbi_g7zbvWakyxJJDLuAx9FwRZfoBkx5ZVP7HsSqz7G2rv38pJKxVD2yKrS8fxh-nneQ9zqgVioDRkjLcTu2QCsXbZs91/s1600/13.png" /></a></div> <div style="text-align: justify;"> Challenges of Adopting New Technology in Services<br />For services, “the process is the product” because customers participate directly in the service delivery. Therefore, the success of technological innovations, particularly for the front office, depends on customer acceptance. The impact on customers is not always limited to a loss of personal attention. Customers also might need to learn new skills (e.g., how to operate an automatic teller machine or pump gasoline), or they might have to forgo some benefit (e.g., loss of float through the use of electronic funds transfer). The contribution of customers as active participants or coproducers in the service process must be considered when making changes in the service delivery system.<br /><br />As internal customers, employees also are affected by new technology and often need retraining. The example of scanning in retail stores was minor compared with the adoption of word processing by secretaries, who were used to typewriters. Back-office innovation that does not directly affect the customer may raise complications of a different sort. For example, consider the use of magnetic-ink-character recognition equipment in banking. This technological innovation did not affect the customer at all; instead, it made the “hidden” check-clearing process more productive. The full benefits, however, could not be realized until all banks agreed to imprint their checks using a universal character code. Without such an agreement, the checks of uncooperative banks would need to be sorted by hand, which would limit severely the effectiveness of this technology. When all banks in the United States finally agreed on the use of the same magnetic-ink-character imprints on checks, the check-clearing process became much more efficient. The Bank of America took a leadership role in gaining acceptance for the concept, but the self-interest of banks was a principal motivation. The volume of check processing had exceeded their manual sorting capacity. The incentive to innovate in services is hampered, however, because many ideas cannot be patented. One example is the idea of self-serve retailing. Much of the potential for technological and organizational progress is in this area. The prospective rewards for innovations are diminished, however, because the innovations may be imitated freely and implemented quickly by the competition.<br /><br />Readiness to Embrace New Technology <br />Technology readiness refers to a person’s propensity to embrace and use new technologies for accomplishing goals in his/herlife at home or at work. Research on people’s reactions to technology identified eight technology-related paradoxes: control/ chaos, freedom/enslavement, new/obsolete, competence/incompetence, efficiency/inefficiency, fulfills/creates needs, assimilation/ isolation, and engaging/disengaging. These paradoxes imply that technology may trigger both positive and negative feelings. For example, the paradox competence/incompetence can facilitate feelings of intelligence and efficacy, or lead to feelings of ignorance and ineptitude.<br /><br />The implications for managers introducing<br />new technology are two-fold. First, what is the overall level of readiness of the customer base affected by the new technology-based service? Once this level of readiness is assessed, the extent and appropriate technology to implement, the pace of implementation, and support needed to assist customers will be realized. Second, understanding the technology readiness of employees is important for making the right choices in terms of designing, implementing, and managing the employee interface. The issue of technology readiness is especially important for contact employees to whom customers may turn for assistance when problems arise. Employees who rate high on both interpersonal skills and technology readiness are likely to be good candidates for tech-support roles.<br /><br />The Case of Radio Frequency Identification 8<br />Radio frequency identification (RFID) is an automatic identification method, relying on storing and remotely retrieving data using devices called RFID tags or transponders. The tag consists of an integrated circuit on a silicon chip with an antenna. A reader emits a radio signal to activate the tag, read the stored data, and in some cases write data as well. For monitoring inventory in supply chains, the tags are attached to shipping pallets but could be incorporated into a product and implanted in an animal or human being. RFID technology is similar to bar codes, but conveys much more information and does not require line-of-sight reading.<br /><br />Today airlines, for example, use barcode readers on baggage belts, but the readers miss a high percentage of the tagged luggage. A hand-held scanner works better but slows loading. Because a passive RFID tag can be read up to a few meters, bags could be identified as they pass a baggage-belt reader and luggage could be sorted and routed to the correct flight automatically. Airlines plan worldwide deployment when RFID readers and tags become affordable. In 2005, the average cost of a single tag ranged from about 10 cents to 20 cents, with a typical reader going for about $1,000. RFID tags currently are used in several service industry applications:<br /></div> <ul style="text-align: justify;"> <li>Passports. The first RFID passport was issued by Malaysia in 1998.</li> <li>Transport payments. RFID passes were introduced in Paris in 1995 and are now usedthrough Europe. </li> <li>Human implants. Night clubs in Barcelona and Rotterdam use an implanted chip to identify their VIP customers, who then use it to pay for drinks.</li> <li>Libraries. RFID is replacing barcodes on library items. Patient identification. Implanted RFID tags help to avoid mistakes</li> </ul>

Innovation is a destroyer of tradition; thus, it requires careful planning to ensure success. By necessity, the productivity benefits of ne...

The Internet as a service enabler

<div style="text-align: justify;">  E-commerce </div> <div style="text-align: justify;"> E-commerce became a reality following a convergence of several technologies, including the Internet, global telephone systems, communications standard TCP/IP, addressing system of URLs, personal computers and cable TV, customer databases, sound and graphics, and user-friendly free browsers. A Web site can serve different purposes for different businesses. Some organizations use the Internet solely to communicate with employees, suppliers of raw materials, or suppliers of supporting services, such as bookkeeping, legal advice, or research materials. Local and national governments around the world maintain Web sites that are of interest to both tourists and businesses. Other organizations use Web sites to sell products and services directly to the customer. Clearly, Web sites can be used in many different ways:<br /><br />As a Channel to Sell a Product or Service<br />Some retailers, such as Amazon.com and Newegg.com, do not have physical stores. These firms sell exclusively through the Internet, and either distribute goods locally or deliver by mail or shipping service.<br /><br />As a Supplemental Channel<br />“Click-and-mortar” firms represent traditional retailers, such as Barnes & Noble, that have extended their market reach by adding a Web site. Delivery of items can be made from a regional warehouse by mail or within urban areas by truck from the local store. Purchasers in an area served by a “bricks-and-mortar” Barnes & Noble store, for example, can order a book, either by phone or online, and it will be delivered to the local store that day. Home Depot has plans to offer a similar service.<br /><br />For Technical Support<br />Product firms that offer after-sales technical support find the Internet to be an inexpensive avenue to help customers solve common problems. Answers to questions about setting up a new computer, for example, can be found on the Dell Computer Web site (ht*p://www.dell.com).<br /><br />To Embellish Existing Service<br />Services that traditionally have been offered by mail can be augmented by using a Web site. Harvard Business School Press, for example, uses a Web site to distribute business cases that faculty can review prior to adoption or view past issues of the Harvard Business Review at http://harvardbusinessonline.hbsp.harvard.edu.<br /><br />To Process Orders<br />A Web site can be a convenient link for customers to order services. Airlines quickly made use of Web sites to allow customers to order electronic tickets. This service bypasses travel agents as a distribution channel and saves the airlines the cost of commissions. The airline Web sites also give customers access to schedules and a way to comparison shop for the lowest fare. This direct connection with customers also allows  airlines to “ advertise” discounted fares (i.e., unsold seats) for the coming weekend via e-mail.<br /><br />To Convey Information<br />Many companies use their Web sites to convey information about the organization (e.g., names of officers, addresses, phone numbers, and technical assistance). Other Web sites serve as information repositories. The kbb.com site, for example, provides a source of information for people interested in buying a car.<br /><br />To Communicate with Membership<br />Organizations use a Web site to communicate information such as conference program announcements, job listings, and question postings to their membership. POMS, for example, is an academic organization for production and operations management faculty that provides information for members at http://www.POMS.org.<br /><br />To Play Games<br />Online games provide a convenient outlet of entertainment. Treeloot.com is a game site that obviously is supported by forcing players to view advertisements, but other sitesfocus just on games.<br /><br />Virtual versus Physical Services<br />A comparison of virtual and physical services is shown in Table 5.3 . The features represent general characteristics that vividly differentiate the alternative delivery systems. Table 5.4 displays the advantages and disadvantages of online and traditional grocery shopping, an activity in which almost everyone participates.<br /><br />E-Service Product Dimensions<br />Electronic (virtual) services share many of the characteristics of traditional (physical) services. Electronic services are intangible, because the service transactions and experiences delivered via electronic channels are difficult to measure, inventory, or describe fully. The differing needs, expectations, self-service capabilities, willingness to interact,</div> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKZY8Lp1S_nzaacWk7hjCh5ksAz1DcO7TTQYNe-Mmt1OIxLfXFG3-57SDUq5Ich3mR0VOz8R8jiMnJhIkux4-gXcOz6Qk210fn7gwCf0eoifBItGdRS1kTNUP8z629fnLcoTiP9SsbHPGd/s1600/12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="279" data-original-width="500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKZY8Lp1S_nzaacWk7hjCh5ksAz1DcO7TTQYNe-Mmt1OIxLfXFG3-57SDUq5Ich3mR0VOz8R8jiMnJhIkux4-gXcOz6Qk210fn7gwCf0eoifBItGdRS1kTNUP8z629fnLcoTiP9SsbHPGd/s1600/12.png" /></a></div> <div style="text-align: justify;"> and perceptions of customers contribute to the heterogeneity of electronic services. A customer’s modem capability or Internet connection to the electronic service provider, for example, contributes to the heterogeneity in speed of delivery. Finally, the consumption and delivery of electronic services are simultaneous and, thus, inseparable in both traditional and electronic services. Traditional and electronic services both have core and auxiliary elements. Core elements of a service are central to the product, but auxiliary elements provide less important service dimensions. Electronic services can include both core and auxiliary dimensions, which may occur as both online offerings, such as multiplayer-gaming services, and offline offerings, such as delivery of food items from a local supermarket.<br /><br />E-Service Process Dimensions<br />Service processes include front-office processes that involve direct interaction with customers and back-office processes that have little customer contact. Service processes can be characterized according to degree of contact and interaction, degree of labor intensity, and degree of labor customization. In addition, service processes include customer participation in the service delivery. Electronic services differ in the extent to which customer contact, customization, interaction, labor intensity, service inputs, and technology can be used to differentiate between operations. Electronic-service offerings are composed of online interactive service dimensions and offline noninteractive service dimensions. The online service dimensions involve continuous customer contact with the service system, and offline elements involve little customer contact. Customization can occur during online customer interactions with the electronic service and through offline back-office processes that are separated from the customer. Online customization might use technologies, such as video-conferencing systems and others that connect customizable technologies directly to online service operations. Labor and technology in traditional back-office service operations can be used to accomplish offline  customization.<br /><br /></div>

 E-commerce E-commerce became a reality following a convergence of several technologies, including the Internet, global telephone systems...

Taxonomy for service process design

<div style="text-align: justify;">  Service processes can be classified using the concept of divergence, the object toward which the service activity is directed, and the degree of customer contact. In Table 4.5 , services are broadly divided into low divergence (i.e., standardized service) and high divergence (i.e., customized service). Within these two categories, the object of the service process is identified as goods, information, or people. The degree of customer contact ranges from no contact to indirect contact to direct contact (and is divided further into self-service and personal interaction with the service worker).<br /> </div> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHK4VOVhgPALtYwsuhEB12VF-l2DJYISxGhF4tLlqOAsrCxJw0p0KNNjVz8DaEjWWjQ_DCgD5xpH6uYzh8e8_x9g7liB_kLEVA8yrXSrZ-Jm63pmher-aMoUz4pwdKFCA1AVyx_Xcf9wRV/s1600/tab+1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="467" data-original-width="500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHK4VOVhgPALtYwsuhEB12VF-l2DJYISxGhF4tLlqOAsrCxJw0p0KNNjVz8DaEjWWjQ_DCgD5xpH6uYzh8e8_x9g7liB_kLEVA8yrXSrZ-Jm63pmher-aMoUz4pwdKFCA1AVyx_Xcf9wRV/s1600/tab+1.png" /></a></div> <div style="text-align: justify;"> Degree of Divergence<br />A standardized service (i.e., low divergence) is designed for high volumes with a narrowly defined and focused service. The tasks are routine and require a workforce with relatively low levels of technical skills. Because of the repetitive nature of the service, opportunities to substitute automation for labor abound (e.g., use of vending machines, automatic car wash). Reducing the discretion of service workers is one approach to achieving consistent service quality, but one that also has possible negative consequences. These concepts will be referred to later as the production-line approach to service design. For customized services (i.e., high divergence), more flexibility and judgment are required to perform the service tasks. In addition, more information is exchanged between the customer and the service worker. These characteristics of customized services require high levels of technical and analytic skills, because the service process is unprogrammed and not well defined (e.g., counseling, landscaping). To achieve customer satisfaction, decision making is delegated to service workers who can perform their tasks with some autonomy and discretion (i.e., the workers are empowered).<br /><br />Object of the Service Process<br />When goods are processed, a distinction must be made between goods that belong to the customer and goods that are provided by the service firm (i.e., facilitating goods ). For services such as dry cleaning or auto repair, the service is performed on the property of the customer; in this case, the property must be secured from damage or loss. Other services such as restaurants supply facilitating goods as a significant part of the service package. Therefore, appropriate stock levels and the quality of these facilitating goods become a concern, as illustrated by McDonald’s attention to the purchase of food items. Processing information (i.e., receiving, handling, and manipulating data) occurs in all service systems. In some cases, this is a back-office activity, such as check processing at a bank. For other services, the information is communicated indirectly by electronic means, as with telephone-based account balance verification. Customer service representatives in call centers may spend hours before a video screen performing routine tasks,  and motivation becomes a challenge. There are services such as counseling, however, in which information is processed through direct interactions between the client and the project team. For highly skilled employees in these services, the challenge of dealing with unstructured problems is important to job satisfaction.<br /><br />Processing people involves physical changes (e.g., a haircut or a surgical operation) or geographic changes (e.g., a bus ride or a car rental). Because of the “high-touch” nature of these services, workers must possess interpersonal as well as technical skills. Attention also must be paid to service facility design and location, because the customer is physically  present in the system.<br /><br />Type of Customer Contact<br />Customer contact with the service delivery system can occur in three basic ways. First, the customer can be physically present and interact directly with the service providers in the creation of the service. In this instance, the customer has full sensory awareness of the service surroundings. Second, the contact may be indirect and occur via the Internet from the customer’s home or office. Third, some service activities can be performed with no customer contact at all. Banking provides an example where all three options occur: making an application for an automobile loan requires an interview with a loan officer, payment on the loan can be accomplished by electronic funds transfer, and the financial record keeping for the loan is conducted in a back office of the bank. Direct customer contact is subdivided into two categories: no interaction with service workers (i.e., self-service) and customer interaction with service workers. Self-service often is particularly attractive because customers provide the necessary labor at the appropriate time. Many cost-effective applications of technology in services, such as direct dialing and automatic teller machines, have relied on a market segment of customers who are willing to learn how to interact with machines. </div> <div style="text-align: justify;"> <br /></div> <div style="text-align: justify;"> When customers desire direct interaction with service providers, all the issues addressed earlier concerning the processing of people (i.e., training in interpersonal skills and facility issues of location, layout, and design) become important to ensure a successful service experience. When customers are in the service process physically, additional management problems (e.g., managing queues to avoid creating a negative image) arise. Service processes with indirect customer contact or with no customer contact need not be constrained by issues that arise from the physical presence of the customer in the system. Because the customer is decoupled from the service delivery system, a more manufacturing type of approach can be taken. Decisions regarding site location, facility design, work scheduling, and training of employees all can be driven by efficiency considerations. In fact, the no-customer-contact and goods-processing combination creates categories that normally are thought of as manufacturing. For example, dry cleaning is a batch process, and auto repair is a job shop. This taxonomy of service processes presents a way to organize the various types of processes that are encountered in service systems and helps us to understand the design and management of services. This taxonomy also serves as a strategic positioning map for service processes and, thus, as an aid in the design or redesign of service systems.</div>

 Service processes can be classified using the concept of divergence, the object toward which the service activity is directed, and the deg...

Stages in service firm competitiveness

<div style="text-align: justify;"> If a service firm is to remain competitive, continuous improvement in productivity and quality must be part of its strategy and corporate culture. The framework shown in Table 3.5 was developed by Chase and Hayes to describe the role of operations in the strategic development of service firms. This framework also is useful as an illustration of the many sources of productivity and quality improvement (i.e., new technology is only one source). In addition, the framework provides a way to measure and evaluate a firm’s progress in the development of its service delivery system. It organizes service firms into four different stages of development according to their competitiveness in service delivery, and for each stage, the management practices and attitudes of the firm are compared across key operational dimensions. It should be noted that services need not start at stage 1, but during their life cycle, they could revert to stage 1 out of neglect. For example, one might argue that Federal Express began service as a stage 3 competitor because of its innovative hub-and-spoke network concept, whereby all sorting is accomplished at the single Memphis hub (thus guaranteeing overnight delivery).<br /><br />Available for Service<br />Some service firms and, often, government services in particular fall into this category because they view operations as a necessary evil to be performed at minimum cost. There is little motivation to seek improvements in quality because the customers often have no alternatives. Workers require direct supervision because of their limited skills and the potential for poor performance that results from minimal investment in training. Investment in new technology is avoided until it is necessary for survival (e.g., consider the long-overdue adoption of Doppler radar by the Federal Aviation Administration for air traffic control). These firms are essentially noncompetitive, and they exist in this stage only until they are challenged by competitio.</div> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeiGQtXktMpayO_sGZfUlKRSQTOt849xsf_0FBC-nuyLaGWL7PnPN4hQwiGPrwGdG4NLqR_bIPn3C37v7JMAHWcrrqoBLt0NGsIPlZsCIza32dP8RLy4Tuw-RoxGg1sTjoy-Ir823yFnUS/s1600/s.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="513" data-original-width="407" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeiGQtXktMpayO_sGZfUlKRSQTOt849xsf_0FBC-nuyLaGWL7PnPN4hQwiGPrwGdG4NLqR_bIPn3C37v7JMAHWcrrqoBLt0NGsIPlZsCIza32dP8RLy4Tuw-RoxGg1sTjoy-Ir823yFnUS/s1600/s.png" /></a></div> <div style="text-align: justify;"> Journeyman<br />After maintaining a sheltered existence in stage 1, a service firm may face competition and, thus, may be forced to reevaluate its delivery system. Operations managers then must adopt industry practices to maintain parity with new competitors and avoid a significant loss of market share. For example, if all successful airlines used the same kind of plane, then a fledgling airline just entering the market also might be inclined to use that same aircraft. The contribution of operations in this hypothetical situation becomes competitive-neutral, because all the firms in the industry have adopted similar practices and even look like each other (because they have purchased equipment from the same supplier). When firms do not compete on operations effectiveness, they often are creative in competing along other dimensions (e.g., breadth of product line, peripheral services, advertising). The workforce is disciplined to follow standard procedures and is not expected to take any initiative when unusual circumstances arise. These firms have not yet recognized the potential contribution of operations to a firm’s competitiveness.<br /><br />Distinctive Competence Achieved<br />Firms in stage 3 are fortunate to have senior managers with a vision of what creates value for the customer and who understand the role that operations managers must play in delivering the service. For example, Jan Carlzon, CEO of Scandinavian Airlines (SAS), realized that recapturing the business-traveler market, which had been lost to aggressive competition, required improving on-time departure performance. To achieve this goal, he had to provide a leadership role that fostered operations innovations, which then would improve the delivery system. Operations managers are the typical advocates of continuous improvement (Six Sigma) in their firms and take the lead in instituting service guarantees, worker empowerment, and service-enhancing technologies. Workers in these organizations often are crosstrained and encouraged to take the initiative when necessary to achieve operational goals that are stated clearly (e.g., overnight delivery for Federal Express). Firms in this category implement management strategies to achieve the corporate vision and, thereby, differentiate themselves from their competition.<br /><br />World-Class Service Delivery<br />Not satisfied with just meeting customer expectations, world-class firms expand on these expectations to levels that competitors find difficult to meet. Management is proactive in promoting higher standards of performance and identifying new business opportunities by listening to customers. World-class service firms such as Disney, Marriott, and American Airlines define the quality standards by which others are judged. New technology no longer is viewed only as a means to reduce costs; it is considered to be a competitive advantage that is not easily duplicated. For example, Federal Express developed COSMOS ( C ustomer O perations S ervice M aster O n-line S ystem) to provide a system that tracks packages from pickup to delivery. Customers, using the Internet and the FedEx Web site, can receive information on the exact location of their packages. This system also can be used to tell a driver en route to make customer pickups. Working at a world-class firm is considered to be something special, and employees are encouraged to identify with the firm and its mission. For example, a Disney trash collector is considered to be a “cast member” who helps visitors to enjoy the experience. Sustaining superior performance throughout the delivery system is a major challenge.  Duplicating the service at multiple sites, however, and in particular overseas, is the true test of a world-class competitor</div>

If a service firm is to remain competitive, continuous improvement in productivity and quality must be part of its strategy and corporate c...

Limits in the use of information

<div style="text-align: justify;">  Anticompetitive<br />To create entry barriers, the use of reservation systems and frequent user programs has been identified as potentially anticompetitive. For example, how should a frequent flyer’s free-trip award be considered, particularly when the passenger has been traveling on business at corporate expense? The IRS is considering taxing the free trip as income in kind, and corporations believe that the free tickets belong to the company. The long-run implication, however, is the removal of price competition in air travel.<br /><br />Fairness<br />Perhaps the easiest way to start a riot is asking airline passengers on a flight how much their tickets cost. Under yield management, ticket prices can change every hour; therefore, price is a moving target and the ticketing process a lottery. At the extreme, is yield management fair and equitable to the public, or has every service price always been negotiable? Are customers only now becoming aware of their buying power?<br /><br />Invasion of Privacy<br />The concept of micromarketing has the potential to create the most violent backlash from consumers because of the perceived invasion of privacy. When a record of your every purchase at the local supermarket is shared with eager manufacturers, very manipulative sales practices, such as targeting buyers of a competitor’s soft drink with enticements to buy an alternative, could result. Lotus Development Corporation felt the sting of consumer displeasure after announcing the availability of its MarketPlace household database to anyone with a PC and modem. Lotus received more than 30,000 requests from irate persons wanting to be removed from this database. Lotus subsequently withdrew its offer of general availability, but it continues to sell access to the database to large corporations.<br /><br />Data Security<br />Allowing information to get into hands of others for inappropriate use is a significant problem for government agencies such as the IRS; however, releasing personal medical records to insurance firms or potential employers without the consent of the patient is far more common and damaging. Some businesses market lists of people who have filed worker compensation claims or medical malpractice suits, and such databases can be used to blackball prospective employees or patients.<br /><br />Reliability </div> <div style="text-align: justify;"> Are the data accurate? Data kept on individuals can be corrupted and create havoc in people’s lives. For example, a new law ameliorates such dilemmas by requiring credit-reportagencies to allow individuals to review their credit records for accuracy.</div>

 Anticompetitive To create entry barriers, the use of reservation systems and frequent user programs has been identified as potentially ant...