1. MKTG 29 : Service Marketing Management
Chapter 3 : Managing Service Encounters
Professor : Mr. Abelito T. Quiwa. MBA
School Year : 2010 - 2011
2. We will explore the following questions
in this particular chapter
1. How does reducing (or increasing ) the level of
customer contact impact on decisions relating to
service design and delivery strategies?
2. What is the distinction between back-stage and
front-stage operations?
3. What are the critical incidents and what is their
significance for customer satisfaction?
4. What insight can be gained from viewing service
delivery as a form of theatre?
5. When customers behave badly, what problems do
they cause for the firms, its employees and other
customers?
6. What is the potential role of customers as co-
producers of service?
3. Customer and the Service Operation
In service businesses, customers are often involved in
the production of the service. Suppliers of people-
processing services usually expect their customers to
come to what Theodore Levitt has called “factories in the
field” – sites where service production, delivery and
consumption are all rolled into one.
Customers who are actively involved in the service
operation, can have a significant impact on the
organization’s productivity.
Sometimes they are expected to cooperate closely with
service employees, while at other times they may be
given the option of undertaking self-service.
In both such instances, the customer becomes deeply
involved in the service operation.
4. Technology and Customer Contact
Development in technology often offer radically new ways
for a business to create and deliver its services,
particularly those core and supplementary services that
are information -based.
For instance, to attract new business and take advantage
of cost-saving advance in internet technology like
introduce Internet banking.
Many service problems revolve around unsatisfactory
incidents between customers and service personnel. In
an effort to simplify service delivery, improve productivity
and reduce some of the threats to service quality, some
firms are using technology to minimize or even eliminate
contact between customers and employees.
Thus, face-to-face encounters are giving way to
telephone encounters.
5. Service Encounters: Differing Levels of Customer Contact
Empahsises
Encounter with
• Nursing Home Service Personnel
High
• Haircut
• Four Star Hotel
• Management Consulting
• Good Restaurant
• Airline Travel
• Retail Banking
• Telephone Banking
• Motel • Car Repair
• Insurance
• Fast Food • Dry Cleaning
• Movie Theatre • Cable TV
• City Bus
• Home Banking
• Mail-Based Repairs
• Internet-Based Low
Empahsises
Encounter with Sservices
Equipment
6. Service Encounters: Differing Levels of Customer
Contact
High-contact services tend to be those in which
customers visit the service facility in person.
Customers are actively involved with the service
organization and its personnel throughout
service delivery (e.g. Hairdressing or medical
services).
Most people-processing services are high-
contact ones. Services from the other three
processes based categories may also involve
high levels of customer contact, when customers
go to the service site and remina there until
service delivery is completed.
7. Service Encounters: Differing Levels of Customer
Contact
Medium-contact services entail less involvement with service
providers. They involve situations in which customers visit the
service provider’s facilities ( or are visited at home or at a third-
party location specified by that provider) but either do not remain
throughout service delivery or else have only moderate contact
with service personnel.
The purpose of such contacts is often limited to
1) establishing a relationship and defining a service need (e.g.
Management consulting, insurance or personal financial advice,
where clients make an intial visit to the firm’s office but then
have relatively limited interactions with the provider during
service production.
2) Dropping off and picking up a physical possession that is being
serviced; or
3) Trying to resolve a problem.
8. Service Encounters: Differing Levels of Customer
Contact
Low-contact services involves every little, if any,
physical contact between customers and service
providers. Instead, contact takes place at arm’s length
througn electronic or physical distribution channel – a
fast-growing trend in today’s convenience oriented
society.
o Also included are possession-processing services in
which the item requiring service can be shipped to the
service site or subjected to “ remote fixes “ delivered
electronically to the customers’ premises from a
distant location. This is becoming incresingly common
for resolving software problems.
o Finally, many high-contact and medium-contact
services are being transformed into low-contact
services.
9. Service As a System
The level of contact that a service business intends to
have with its customers is a major factor in defining
the total service system. Within such a system, these
are three overlapping sub-systems:
1) Service operations ( where inputs are processed and
the elements of the service product are created)
2) Service delivery ( where final “assembly “ of these
elements takes palce and the product is delivered to
the customers)
3) Service marketing which embraces all points of
contact with customers, including advertising, billing
and market research ( Figure 3.2)
10. Service As a System
Parts of this system are visible or otherwise apparent to
customers, while other parts are hidden in what is sometimes
referred to as the technical core and the customer may not even
know of the existence.
Physical Support
Technical Other
Core Customer Customers
Contact Personnel
Back Stage Front Stage
(Invicible ) (Visible to Customer)
Figure 3.2 The Service Business as a System
11. Service Operation System
Like a play in a theather, the visible components of service
operations can be divided into those relating to the actors ( or
service personnel) and those relating to the stage set ( or
physical facilities, equipment and other tangibles)
What goes on back stage is of little interest to customers. Like
any audience, they evaluate the production on those elements
they actually experience during service delivery and, of course,
on the perceived service outcome.
Naturally, if the backstage personnel and system( e.g. Billing,
ordering, account keeping) fail to perform their support tasks
properly in ways that affect the quality of frontstage activities,
customers will notice.
The proportion of the overall service operation that is visible to
customers varies according to the level of customer contac.
Since high-contact services directly involves the customer in
person, either customers must enter the service “factory”, or
service workers and their tools must leave their back stage and
come to the customer’’s chosen location.
12. Service Delivery Service
Service delivery is concerned with where, when and
how the service product is delivered to the customer.
Traditionally, service providers had direct interactions
with their customers. But to achieve cost reductions,
productivity improvements and greater customer
convenience, many services that do not need the
customers to be physically present in the factory now
seek to reduce direct contact. As a result, the visible
components of the service operation system is
shrinking in many industries.
Although self-service delivery often offers customers
greater convenience than face-to-face contact, the
shift from personal service ( sometimes referred to as
13. The Dramaturgy of Service Delivery
Figure 3.3 shows the relative important of theatrical dimensions
for different types of service businesses. As you can see, watch
repair services have very few frontstage theatrical components
compared to services like airlines and spectator sports.
Contact
Low High
(1) (2)
Car Repair Physician
Audience Size
Low Watch Repair Barber
Shoe Repair Lawyer
(3) (4)
Utility Airline
High Insurance Spectator Sports
Discount Retailer Restaurants
Audience Size = Number of people receiving the service simultaneously
Contact = Amount of time front stage/amount of time back stage
Figure 3.3 Relative Importance of Theatrical Dimensions
14. Role and Script Theories
Role and script theories offer some interesting insights for
service providers. It we view service delivery as a theatrical
experience, then both employees and customers act out
their parts in the performance according to predetermined
roles.
Roles have also been defined as combinations of social
cues, or expectations of society, that guide behaviour in a
specific setting or context.
Scripts are sequences of behaviour that both employees
and customers are expected to learn and follow during
service delivery. Script are learned through experience,
education and communication with others. Much like a
movie script, a service script provides detailed actions that
customers and employees are expected to perform.
15. Service Marketing System
The scope and structure of the service-marketing system
often varies sharply from one type of organization to
another. Other Advertksing
Customer Sales Calls
Interior & Market Research Surveys
Exterior Billing/Statements
Facilities
Miscellaneous Mail. Telephone
Technical Calls, Faxes, etc.
Core Equipment The
Customer Random Exposures to Facilities/
Vehicles
Service Chance Encounters with Service
People Personnel
Other
Back Stage Front Stage Customer Word-of- Mouth
(invisible) (visible)
Figure 3.4 The Service Marketing System for a High-Contact Service
16. Service Marketing System
The scope and structure of the service-marketing system
often varies sharply from one type of organization to
another.
Service Service Delivery
Other Contact Points
Operation System System
Advertising
Mail
Market Research Surveys
Billing/ Statements
Technical
Self Service The
Equipment Customer Random Exposure to
The
Facilities, Personnel
Customer
Telephone, Fax
Website, etc. Word –of-Mouth
Back Stage Front Stage
(invisible) (visible)
Figure 3.5 The Service Marketing System for a Low-Contact Service
17. Physical Evicence
Since many service performance are inherently
intangible, they are often hard to evaluate. As a result,
customers often look for tangible clues as to the
nature of the service. Sometimes, encounters are
random rather than planned.
Because service performance are intangible, physical
evidence gives clues as to the quality of service and
in some cases will strongly influence how customers,
especially inexperienced ones, evaluate the service.
Hence, managers need to think carefully about the
nature of the physical evidence provided to customers
by the service marketing system.
18. Physical Evicence
Table 3.2 Tangible Elements and Communication
Components in the Service Marketing System
1. Service personnel. Contacts with customers may be face-
to-face, by telecommunications( telephone, fax, telegram,
telex, electronic mail) or by mail and express delivery
services.
These personnel may include
Sales representatives
Customer service staff
Accounting/billing staff
Operations staff who do not normally provide service to
customers (e.g. Engineers, janitors)
Designated intermediaries whom customers perceive as
directly representing the service firm
19. Physical Evicence
Table 3.2 Tangible Elements and Communication Components in
the Service Marketing System
2. Service facilities and equipment
Building exteriors, parking areas, landscaping
Building interiors and furnishings
Vehicles
Self-service equipment operated by customers
Other equipment
3. Non-personnel communications
Form letters
Brochures/catalogues/instruction manuals/websites
Advertising
Signage
News stories/editorials in the mass media
4. Other people
Felllo customers encountered during service delivery
Word-of-mouth comments from friends, acquaintances, or ever
strangers
20. Managing People in Service Encounters
Increasingly, high-contact employees in what have
traditionally been service-delivery jobs with no sales
content are now expected to play a selling role, too.
This role shift requires them to be both producers and
marketers of a service. As a result, waiters, bank clerks,
and even auditors in accounting firms are being asked to
promote new services, encourage customers to purchase
additional items or refer them to sales specialists.
To cope effectively with all of these challenges, managers
should brief employees on what the firm is trying to
achieve in the marketplace. Service employees also need
training, authority and management support to ensure that
their important but often brief encounters with customers
result in satisfactory outcomes.
This implies that instead of striving to control emoloyees
behaviour, managers should be acting as coaches and role
models to help them provide better service.
21. Critical Incidents in Service Encounters
Critical incidents ares specific encounters between
customers and service employees that are
especially satisfying or dissatisfying for one or both
parties.
The Critical Incident Technique (CIT) is a
methodology for collecting and categorising such
incidents in service encounters. Such an analysis
offers an opportunity to determine what types of
incidents during service delivery are likely to be
particularly significant in determining customer
satisfaction.
22. The Customer’s Perspective
Finding from a CIT study can be very helpful in
pinpointing opportunities for future improvements in
service delivery processes.
Determining the most likely “ failure points” in service
encounters, where there is a risk of upsetting
customers significantly, is the first step in taking
corrective action to avoid such incidents.
Semilarly, CIT findings concerning the nature of
incidents that customers seem to find very satisfying
may enable managers to train their employees to
replicate such positive experiences.
23. The Customer’s Perspective
Negatice critical incidents that are satisfactorily resolved
have great potential for enhancing loyalty, because they
demonstrate to customers that the organization really
cares about them. But the reverse is also true.
We can divide critical incidents into two stages, pre-
consumption and post-consumption. Pre- consumption
incidens are important, because they are assoicated with
first impressions. A bad pre-consumption incident may
lead the customer to teminate the encounter without even
trying the core service.
A positive incident, on the other hand, gets the customer
off to an excellent start. Positive post-consumption
incidents either serve as the icing on the cake of an overall
good experience of help the firm to recover from problems
during service delivery.
In contrast, negative post-consumption experience either
spoil what had , until then, been a satisfactory encounter,
or add insult to the injury of earlier problems during
service delivery.
24. The Employee’s Perspective
Customer-employee contact is a two-way street.
Understanding the employee’s view of the situation is
really important, because thought-less or poorly behaved
customers can oftern cause needless problems for service
personnel who are trying hard to serve them well.
Continuing dissatisfaction with a series of negative
incidents can even drive good employees to quit their jobs.
Another CIT study, examined hundreds of critical incidents
from the employees’ perspective. The results showed that
more than 20% of all incidents that employees found
unsatisfactory were related to problem customers, whose
bad behaviour included drunkennes, verbal and physical
abuse, breaking of laws or company policies and failing to
cooperate with service personnel. It is simply not true that “
the customer is always right”.
25. The Problem of Customer Misbehaviour
Customers who act in uncooperative or abusive ways
are a problem for any company, but they have more
potential for mischief in service businesses,
particularly those in which the customer comes to the
service factory.
Addressing the Challenge of Jaycustomers
The prefix”Jay” comes from a nineteenth century
slang term for a stupid person. We can create a whole
vocabulary of derogatory terms by adding the
prefix”Jay” to existing nouns and verbs. We define a
jaycustomer as one who acts in a thoughtless or
abusive way, causing problems for the firm, its
employees and other customers.
26. The Problem of Customer Misbehaviour
Addressing the Challenge of Jaycustomers
Every service encounters its share of jaycustomers, but
opinions on this topic seem to be polarised round two
opposing views.
1. One is denial: “ the customer is king and can do no wrong”.
The other view sees the marketplace of customers as
positively overpopulated with nasty people (and even
nastier corporate purchasers) who simply cannot be
trusted to behave in ways that self-respecting suppliers
should expect and requir.
2. The second view, however, often appears to be the more
widely held among cynical managers who have been
bruised at some point in their professional lives. As with so
many opposing viewpoints in life, there are important
grains of truth in both perspective.
27. The Problem of Customer Misbehaviour
Addressing the Challenge of Jaycustomers
Six Types of Jaycustomers
Jaycustomers are undesirable. At worst, a firm needs to control
or prevent their abusive behaviour. At best, it would like to avoid
attracting them in the first place. Since defining the problem is
the first step in resolving it, let us start considering the different
types (segments) of jaycustomers.
1. The thief (shoplifting)
2. The rulebreaker (“Don’t Jaywalk”)
3. The bellingerent (He is red in the face and shouting)
4. The family feuders ( a subcategory of belligerents are those
who get into arguments with members of their own family)
5. The vandal ( The level of physical abuse to which service
facilities and equipment can be subjective is astonishing)
6. The Deadbeat (Leaving aside those individuals who never
intended to pay in the first place ( we call them “thieves”)
28. The Customer As Co-Producer
This involvement may take two forms. Some times, you are
given the tools and equipment to serve yourself, as when
you take your cothes to a laundromat, while at other time,
such as at a health service, you work jointly with health
professionals as “co-producers” of the service form which
you wish to benefit.
Service Frims As Teachers
The more the work that customers are expected to do, the
greater their need for information about how to perform for
best results. In such situations, the firm should take
responsibility for educating inexperienced customers. Lack
of knowledge can lead to frustration with the porcess,
unsatisfactory results and even put the customer at risk-
think about the unpleasant things that might happen to a
customer who smokes a cigarette and spills petrol while
refuelling a car at a self-service pump.
29. Increasing Productivity and Quality
when Customers are Co - Producers
The greater the customers’ involvement in service
production, the greater their potential of influnce the
processes in which they are engaged.
Some researchers argue that firms should view customers as “
partial employees”, who can influence the productivity and
quality of service processes and outputs.
They go on to suggest that customers who are offered an
opportunity to particpate actively are more likely to be
satisfied, regardless of whether they actually choose the more
active role, because it is gratifying to be offered a choice.
30. Increasing Productivity and Quality when
Customers are Co - Producers
Managing customers as partial employees requires using the same
human-resource approaches as managing a firm’s paid employees
and should follow these four steps.
1. A “ job analysis” of customers’ current roles in the business and a
comparison withe the roles that the firm would like them to play.
2. Determining whether customers possess an awarness of how they
are expected to perform and whether they have the required skills.
3. Motivating customers by ensuring that they will be rewarded for
performing well ( for example,satisfaction from better quality and
more customised output, enjoyment of participating in the actual
process and a belief that their own productivity speeds the process
and keeps cost down)
4. Regular appraisal of customers’ performance. If this is
unsatisfactory, their role and the procedures in which they are
involved should be changed. Alternatively, they can be “terminated”
and new ones sought.
31. Conclusion
Service encounters cover a spectrum from high-contact and are
often being determined by the nature of the operational
processes used to create an deliver the service in question. With
the growing trend to deliver information-based services factory,
many service encounters are shifting to a lower- contact mode
than previously, with important implications for the nature of the
customer’s experience.
Service businesses can be divided into three overlapping
required to run the service operation and create the service
product. Only part of this system, described here as “front
stage”, is visible to the customer. The delivery system
incorporates the visible operations elements and the customers
who , in self-service operaitons, take an active role in helping to
create the service product, instead of being passively waited on.
Finally, the marketing system includes not only the delivery
system, which essentially comprises the product and distribution
elements of the traditional marketing mix, but also additional
components such as billing and payments systems, exposure to
advertising and sales people, and word-of-mouth comments
from other people.
32. Conclusion
In all types of services, understanding and managing
service encounters between customers and service
personnel is central to creating satisfied customers. The
higher the level o contact, the more we can apply theatrical
analogies to the process of “staging “ service delivery. This
is where employees and customers play a role, often
following well-defined scripts. This is where employees and
customers are exposed to many more tangible cues and
experiences than they are in medium contact and low-
contact situations.
In some instances, including self-services, cuatomera play
an active role in the process of creating and delivering
services, effectively working as “partial employees” whose
performance will effect the productivity and quality of
output. Under these circumstances, service managers
needs to educate and train customers so that they have
the skills needed to perform well.
