7

Service Management (5e)

Operations, Strategy, Information Technology
By
Fitzsimmons and Fitzsimmons

Chapter 7
The Service Encounter

7-2

Learning Objectives

Use the service encounter triad to describe a service firms delivery

process.
Discuss the role of organizational control systems for employee
empowerment.
Prepare abstract questions and write situational vignettes.
Discuss the role of customer as coproducer.
Describe how elements of the service profit chain lead to revenue growth
and profitability.

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The Service Encounter Triad

Service
Organization
Efficiency
versus
autonomy

Efficiency
versus
satisfaction

Contact
Personnel

Customer

Perceived
control

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Continued.
Service

manager wants efficiency in service delivery to

increase profits. They will impose rules and procedures on
contact personnel (service provider) to bring standardization,
which may result in dissatisfied customers.
Alternatively, service provider wants to control the behavior
of the customer to make their own work manageable and
less stressful.
However, the customer wants to control the service
encounter to derive the most benefit from it.
Ideally,, all three should work together to create a beneficial
service encounter.

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Encounter dominated by the service organization

To achieve

efficiency and follow a cost leadership strategy,

an organization may standardize service delivery by
imposing strict operating procedures and limit the discretion
of contact personnel, example, McDonalds.
Success here can come from teaching the customer what
not to expect from their service.

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Contact personnel-dominated encounter

Service

personnel attempt to limit the scope of the service

encounter to reduce their own stress in meeting demanding
customers.
The customer is expected to place considerable trust in the
contact persons judgment because of the service providers
perceived expertise. Example doctor-patient.

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Customer-dominated encounter
In

standardized service, self-service is an option that gives

the customer complete control over the limited service that is
provided. Example, gas station that is equipped with a
credit-card reader, the customer need not interact with
anyone.
The result can be very efficient and satisfying to the
customer who needs or desires very little service.

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Balance of control
A satisfactory

and effective encounter should balance the

need for control by all three participants.
The organizations need for efficiency can be satisfied when
contact personnel are trained properly and the customers
expectations and role in the delivery process are
communicated effectively.

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The Service Organization

Culture
Empowerment
Control

Systems

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Culture
Interaction between customer and contact personnel occurs within
the context of an organizations culture and physical surroundings.
For example, Disneys culture affects their interaction with
customers. In other words, an organizations values when
consistently communicated by management, permit contact
personnel to act with considerable autonomy, because their
judgment is based on shared set of values.
Definition of culture:

Schwartz and Davis (1981) - Culture is a pattern of beliefs and expectations

shared by the organizations 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.

7-11

Empowerment
The

discretion of contact personnel is limited by procedures and

design. The organizations structure is a pyramid-shaped, with
layers of supervision to ensure consistency of service delivery
across all locations.
A new model supported with technology has inverted T
organizational structure, where layers of supervision are
significantly reduced because contact personnel are well trained,
motivated, and supplied with timely information.
People want to do good work if they are given the opportunity.
Therefore:

Invest in people (training)

Use IT to enable personnel
Recruitment and training is critical
Link compensation to performance

7-12

Control systems
Table

7.1 describes four organizational control systems to

encourage creative employee empowerment
Belief

system articulated through organizational culture

Boundary defines limits to employee initiatives
Diagnostic defines measurable goal to achieve performance
Interactive pressures from customers for creative solutions

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Contact Personnel
Ideally

, customer contact personnel should have personality

attributes that include:
Flexibility
Tolerance for ambiguity
An ability to monitor change
Empathy for customers

7-14

Continued
Selection

1. Abstract Questioning
2. Situational Vignette
3. Role Playing

7-15

Continued.
Training

Unrealistic customer expectations

Unreasonable demands
Demands against policies
Unacceptable treatment of employees
Drunkenness
Breaking of societal norms
Special-needs customers

Unexpected service failure

Unavailable service due to failure

Slow performance (capacity issues)
Unacceptable service (low standards)

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The Customer
Every

interaction is important for the customer, but is routine

for the service provider. Therefore, the attitude and
expectations maybe different.
Expectations and Attitudes

Economizing customer
Customer wants to maximize the value obtained for his or her
expenditures of time, effort, and money.
Loss of these customers is an early warning of potential
competitive threats.

Ethical customer
Patronize socially responsible firms

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Continued.

Personalizing customer
These customers want interpersonal gratification such as
recognition, respect, etc.

Convenience customer
These customers have no interest in shopping for the serive;
convenience is most important.

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Customer as Co-Producer
Both

customer and service provider have role to play in

transacting the service.
Customers role maybe defined by societal norms or implied
by the particular design of the service offered. If and when
these roles change due to re-design and/or technology
then there is resistance.
See figure 7.2 it presents some success factors for
categories of service encounter, where the service provider
could be a machine serving a human being (ex. ATM
machine), or a machine serving another machine (ex. EDI),
or a human being serving a machine (ex. Elevator repair).

7-19

Continued.
Study

of the bank revealed:

When

employees perceive a strong service orientation, customers

report superior service
Customers perceived better service in branches where employees
were more enthusiastic, good training of tellers, well maintained
equipment, service is considered important.
After a bank employee gets to know the customer, the cost of
serving that customer decreases because time is saved in identity
verification and the customer needs can be better anticipated.

7-20

Satisfaction Mirror

More
Repeat
Purchase
s
Stronger
Tendency to
Complain about
Service Errors

More Familiarity with

Customer Needs
and Ways of
Meeting Them
Greater Opportunity
for Recovery
from Errors

Higher Customer
Satisfaction

Lower
Costs
Better
Results

Higher Employee
Satisfaction
Higher
Productivity
Improved Quality
of Service

7-21

Service Profit Chain

Internal
Operating strategy and
service delivery system

External
Service
concept

Target market

Loyalty

Customers
Satisfaction

Productivity
&
Employees
Output
quality
Capability

Service
value

Satisfaction

Loyalty
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

Revenue
growth

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

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Is attitude emphasized?
Are job previews utilized?
Are customers screened?

Careful Employee
and Customer
Selection

Are employees
encouraged to
refer friends?
Are referrals from
the best
employees given
priority?
Is satisfaction
measured
periodically?
Are measurements
linked to other
functions on
the cycle?

Are they linked to

service objectives?
Are they balanced
between monetary
and non-monetary?

Is training for job and

life?

(and Self-selection))
Employee
Referrals of
Potential
Job
Candidates

Satisfied
Employees

HighQuality
Training

Cycle
of Capability

Appropriate
Rewards
and Frequent
Recognition

Well-Designed
Support
Systems
Information
Facilities

Greater Latitude
to Meet
Customers
Needs
Clear Limits
on, and
Expectations
of, Employees
Do they limit the right risks?
Are they logical to employees?

Is it an important
element of quality of
work life?

Do they reflect
needs of the
service encounter?
Are they designed
to foster
relationships?

Does it reflect top

management
talk?
Is it enough to
allow delivery of
results to
customers?

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Topics for Discussion

How

does the historical image of service as servitude affect

todays 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
If

does use of a service script relate to service quality?

the roles played by customers are determined by cultural

norms, how can services be exported?