The Science of The Service

Encounter and New Service

Development and Design
Frameworks and Applications

Suri Gurumurthi, Ph.D. (2020) 1

Service “Diamond”
Customers
Internal Customers
External Customers or End Users

Competitive Financial
Strategic
Analysis Analysis
Analysis

Manager
Operations
Management
n
td esig
Service
cep
Con Management

Orders
Marketing Server Backroom
Resources

Information Service Dec

ou pling
about needs Performance

External Internal
Environment Environment
Customer

2
The Internal Environment

Service
Organization

- Culture Efficiency
Efficiency
- Empowerment Versus
Versus
- Control Systems Satisfaction
Autonomy
- Supporting Technology
- Performance Evaluation

Contact Customer
Personnel
Service Delivery
- Selection - Expectations
- Training - Perceived Control - Attitudes
- Ethical Climate - Role of Scripts - Coproduction
- Outcome
- Failure Recovery

4-3
Role of Technology in the Service Encounter

Technology Technology Technology

Customer Server Customer Server Customer Server

A. Technology-Free B. Technology-Assisted C. Technology-Facilitated

Service Encounter Service Encounter Service Encounter

Technology Technology

Customer Server Customer Server

D. Technology-Mediated E. Technology-Generated
Service Encounter Service Encounter

4-4
 The Service Organization
• Culture
• ServiceMaster (Service to the
Master)
• Disney (Choice of language)
• Empowerment
• Invest in people
• Use IT to enable personnel
• Recruitment and training critical
• Pay for performance
 Schwartz and Davis (1981) - Culture
is a pattern of beliefs and
expectations shared by the
organization’s 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.
4-6
 Herb Simon’s Levers of Organizational Control
Growth vs Control
Belief Systems Boundary Systems

Core Values Risks to be

Avoided

Exploration Strategy Exploitation

Strategic Critical
Uncertainties Performance
Variables

Interactive Systems Diagnostic Systems

Innovation vs Efficiency
4-7
Organizational Control

Control Objective Employee Management Key Issues

System Challenge Challenge
Belief Contribute Uncertainty about Communicate core Identify core
purpose values and mission values

Boundary Compliance Pressure or Specify and enforce Risks to be

temptation rules avoided
Diagnostic Achieve Lack of focus Build and support Critical
clear targets performance
variables
Interactive Create Lack of Open organizational Strategic
opportunity or fear dialogue to Uncertainties
of risk taking encourage learning

4-8
 Understanding the Customer and Role of Contact Personnel
• Personnel selection based on: Problem Customers Service failure
1. Abstract Questioning
2. Situational Vignette 1. Unreasonable demands 1. Unavailable service
3. Role Playing 2. Abusive or hostile attitude 2. Slow performance
• Then training personnel for: 3. Inappropriate behavior 3. Unacceptable service
• Unrealistic customer expectations 4. Unanticipated demands
• Unexpected service failure 5. Demands contrary to policies

Use scripts to train for proper response

• Expectations and Attitudes

• Economizing customer
• Ethical customer
• Personalizing customer
• Convenience customer
• Role of Scripts in Coproduction
4-9
 Examples of Unethical Behaviors
Misrepresenting the Nature of
the Service
• Promising stellar returns when
market is volatile (Bernie
Madoff)
• Using bait-and-switch tactics
(Mortgage Loans)
• Creating a false need for service
(Wells Fargo)
• Misrepresenting the credentials
of the service provider
(https://www.sec.gov/oiea/investor-alerts-
bulletins/ia_credentials.html )
• Exaggerating the benefits of a
specific service offering (Penny
stocks, Stratton Oakmont)
Customer Manipulation
• Giving away a guaranteed
reservation (Options fraud)
• Performing unnecessary
services (asset management
and advisory fees)
• Padding a bill with hidden
charges (hidden loan fees)
• Hiding damage to customer
possessions (annual
performance report
manipulation)
• Making it difficult to invoke a
service guarantee (trading
limits and clauses)
General Honesty and
Integrity
• Treating customers unfairly or
rudely (home foreclosures)
• Being unresponsive to
customer requests (Lehman
Brothers)
• Failing to follow stated
company policies (JPM Chase
whale trade)
• Stealing customer credit card
information
• Sharing customer information
with third parties (real estate
loans)
4-10
 Service Encounter Success Factors

Customer Service Provider Higher Customer Higher Employee

Human Machine Satisfaction Satisfaction
More repeat purchases ↔ More familiarity with
Employee selection Intuitive interface
customer needs and ways
Interpersonal skills Verification
Human Support technology Security of meeting them
Engender trust Easy to access Stronger tendency to ↔ Greater opportunity for
complain about service recovery from errors
Easy to access Compatibility
Fast response Tracking errors
Machine Verification Verification Lower costs ↔ Higher productivity
Remote monitoring Security
Failsafe Better results ↔ Improved quality of
service

4-11
 Innovation in Services
• Information Technology
• Internet as a Service Enabler
• Innovation
• Push theory (e.g. social impact bonds)
• Pull theory (e.g. Risk management
and Credit Default Swaps)
• Services derived from products
(managed investment accounts)
• Exploiting information (e.g. upselling)
• Difficulty of testing service prototypes
• Changing Demographics
• Basic Research: Pursue a
planned search for new
knowledge regardless of
possible application.
• Applied Research: Apply
existing knowledge to
problems in creation of new
service.
• Development: Apply
knowledge to problems to
improve a current service.
3-12
 Levels of Service Innovation and Challenges
Radical Innovations Ability to protect intellectual and property
• Major Innovation: new service that technologies
customers did not know they needed.
• Start-up Business: new service for Incremental nature of innovation
underserved market.
• New Services for the Market Presently Degree of integration required
Served: new services to customers of
an organization.
Incremental Innovations Ability to build prototypes or conduct tests in
a controlled environment
• Service Line Extensions: augmentation
of existing service line (e.g. proprietary
to client asset trading). Challenges of Adopting New Technology
• Service Improvements: changes in • The Process is the Product
service delivery process (e.g. mobile • Back Office vs Front Office
and self-service banking). • Need for Standardization
• Style Changes: modest visible changes
in appearances (e.g. website redesigns). Readiness to Embrace New Technology

3-13
 14

New Service Development Cycle

• Full-scale launch
• Post-launch review

Full Launch Enablers Development

• Formulation
of new services
objective / strategy
People
• Idea generation
• Service design
and screening
and testing
• Concept
• Process and system
development and
design and testing Product testing
• Marketing program
design and testing
• Personnel training Technology Systems
• Service testing and
pilot run
• Test marketing Tools

Design Analysis
• Business analysis
• Project authorization
3-14
 𝐕𝐕𝐕𝐕𝐕𝐕𝐕𝐕𝐕𝐕
Service Design Elements =
𝐑𝐑𝐑𝐑𝐑𝐑𝐮𝐮𝐮𝐮𝐮𝐮𝐮𝐮 𝐏𝐏𝐏𝐏𝐏𝐏𝐝𝐝𝐝𝐝𝐝𝐝𝐝𝐝𝐝𝐝 + 𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏 𝐐𝐐𝐐𝐐𝐐𝐐𝐐𝐐𝐐𝐐𝐐𝐐𝐐𝐐
𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏𝐏 + 𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂 𝐨𝐨𝐨𝐨 𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀 𝐒𝐒𝐒𝐒𝐒𝐒𝐒𝐒𝐒𝐒𝐒𝐒𝐒𝐒
Design Elements Topics

Structural

Delivery system Process structure, service blueprint, strategic

positioning
Facility design Servicescapes, architecture, process flows, layout
Location Geographic demand, site selection, location strategy
Capacity planning Strategic role, queuing models, planning criteria
Managerial

Information Technology, scalability, use of Internet

Quality Measurement, design quality, recovery, tools, six-sigma
Service encounter Encounter triad, culture, supply relationships,
outsourcing
Managing capacity and Strategies, yield management, queue management
demand 3-15
 Strategic Positioning Through Process Structure

• Degree of Complexity: Measured by the number of steps in the service

blueprint, e.g., a trade is less complex than a merger

• Degree of Divergence: Amount of discretion permitted the server to

customize the service, e.g., the activities of an investment banker as compared
to a stock-broker

3-16
 Service Blue-Print of Loan Services
10- 20 mins 0- 20 mins 20- 40 mins 30- 60 mins 1-3 days 1-3 days 1-2 days
Evidence
Physical

Website Branch Desk Tag Computer Notification Signature Loan Funding

LINE OF DELIVERY
Customer
Actions

Visit Visit Loan Loan Query Sign

website Branch Inquiry Apply status Loan

LINE OF INTERACTION

Inform Input/
Onstage
Actions

Loan Request
Welcome Greet loan type report
Status signature
& rates profile
LINE OF VISIBILITY
Backstage

Query
Actions

Message Under- Creating

loan
programs writing accounts
types
LINE OF INTERNAL INTERACTION
Processes
Backend

Credit
3rd party Internal
Chat bots pull
notaries accounts
system
3-17
 Generic Approaches to Service Design
• High Volume
• Limit Discretion of Personnel
• Division of Labor
• Substitute Technology for People
• Standardize the Service
• Customer as Coproducer
• Self Service
• Smoothing Service Demand
• Customer-Generated Content
 Customer Contact
• Degree of Customer Contact
• Separation of High and Low Contact Operations
• Sales Opportunity and Service Delivery Options
 Information Empowerment
• Employee
• Customer
3-18