19MMT506A - Services Marketing - Unit10

Course Code: 19MMT506A
Course Title: Services Marketing
Course Leader:
Prof H N Nagesha
E-mail: hnagesha.ms.mc@msruas.ac.in
1
Faculty of Management and Commerce © Ramaiah University of Applied Sciences
Unit 10
Managing People for Service Advantage
• Service Employees
• Frontline Work Is Difficult and Stressful
• Cycles of Failure, Mediocrity, and Success
2
Service Employees Are Crucially Important
• Service staff /front line employees: important

• Span the boundary between inside and
outside the organization
• Sources of differentiation and competitive
advantage
3
• Employees are expected to be:
– Fast and efficient in executing operational tasks
– Courteous and helpful in dealing with customers
• Strength frontline employee can be an

important driver of customer loyalty
4
• Successful service organizations are committed

to effective management of Human Resources
– Recruitment, selection, training, motivation, and
retention
– Harder for competitors to duplicate high
performance human assets
5
• Service levels and the way service is delivered

is crucial
• Service /Front line staff is the:
1. Core part of a product: most visible part of the
service, delivers the service, and significantly
determines the service quality
2. Service firm: Represent the service firm
6
3. Brand: Staff determines whether the brand

promise gets delivered
4. Affects Sales: crucially important for generating
sales, cross-sales, and up-sales
5. Determine productivity: Have heavy influence on
the productivity of frontline operations
7
• Employees drives customer loyalty

• Play key role in anticipating customer needs,
customizing service delivery and building personalized
relationships
• Highly motivated employees are at the core of service
excellence
• Ex:
8
Frontline in Low-Contact Services
• Many routine transactions are conducted

• Growing trend is toward low-contact delivery
channels
• Ex- call centres, web-sites, automatic teller
machines (ATMs), interactive voice response
(IVR) system
9
Frontline in Low-Contact Services
• Quality and technology are core for low-contact

service delivery
• Customer interaction with employees is rare
and specific
• Low interaction will drive the customer
perception of the service firm
10
Frontline Work is Difficult and Stressful
• The service-profit chain requires high-performing,

satisfied employees
• Customer facing employees work in most demanding
jobs in service firms
• Examples:
– Health care, Hospitality, retailing, and travel industries
11
• Service link inside of an organisation to the

outside world
• Also called ‘boundary spanners’
• Often has multiplicity of roles and pursue
both operational and marketing goals
12
Boundary Spanning Roles
External Environment
Internal Environment
13
13
• Boundary spanners often have conflicting roles

• Customer contact personnel must attend to both
operational and marketing goals
• Multiplicity of roles in service jobs often leads to role
conflict and role stress among employees
14
• Sources of Conflict: Causes of role stress -

– Organization Vs Client conflicts
– Person Vs Role conflicts
– Inter-client conflicts
15
Role Stress in the Frontline
1. Organization vs. Clint: Dilemma whether to follow

company rules or to satisfy customer demands
2. Person vs. Role: Conflicts between what jobs require

and employee’s own personality and beliefs
3. Clint vs. Clint: Conflicts between customers that

demand service staff intervention
16
• Consider management expectations of restaurant servers:

 Deliver a highly satisfying dining experience to their customers
 Be fast and efficient at executing operational task of serving
customers
 Do selling and cross selling, e.g. “We have some nice desserts to
follow your main course”
17
Emotional Labour
• Emotional Labour: Arises from the

discrepancy between the way frontline staff
feel inside and the emotions they are
expected to portray in front of customers
• “The act of expressing socially desired
emotions during service transactions” (Arlie
Hochschild-, The Managed Heart)
18
Emotional Labour
19
Emotional Labour
• Three approaches used by employees
1. Surface acting
2. Deep acting
3. Spontaneous response
• Performing emotional labour in response to

society’s or management’s display rules can
be stressful
20
Emotional Labour
• Good HR practice emphasises selective
recruitment, training, counseling, strategies to
alleviate stress
21
The Cycles of Failure, Mediocrity and Success
• Poor working environments results in dreadful service
• Employees treat customers the way their managers

treat them
• Businesses:
– With high employee turnover stuck in the cycle of failure
– Offering job security but little scope for personal
initiative, are in the cycle of mediocrity
– With well managed working environment achieve cycle
of success
22
The Cycles of Failure
• Firms try to simplify work routines and hire

workers as cheaply as possible
• Repetitive work tasks are carried out with little or
no training
• Ex: Department stores, fast-food restaurants, and
call center operations
23
• Has two concentric but interactive cycles:

1. Involving failures with employees
2. With customers
24
Cycle of Failure
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
No continuity in Use of technology Emphasis on

relationship for to control quality rules rather
customer Employee dissatisfaction; than service
poor service attitude
Payment of
low wages
Employees
Minimization of
become bored
Customer selection effort
dissatisfaction Minimization
of training
Employees can’t
respond to customer
problems
Source: Schlesinger and Heskett 25

Cycle of Failure
The employee cycle The customer cycle

i. Low skill levels i. Repeat emphasis on
ii. An emphasis on rules rather than attracting new customers
service ii. High customer turnover
iii. Use of technology to control quality iii. Failure to develop
iv. Low wages customer loyalty
v. Minimised training iv. No continuity in

relationship with
vi. Minimised selection effort customer
vii. Employee dissatisfaction v. Customer dissatisfaction
viii. High employee turnover, poor
service quality
26
Costs of short-sighted policies are ignored:

i. Costs of constant recruiting, hiring & training
ii. Lower productivity & lower sales of new workers
iii. Costs of disruptions to a service while a job remains
unfilled
iv. Loss of departing person’s knowledge of business and
customers
v. Cost of dissatisfied customers
27
Service Sabotage
• Low levels of employee morale may engage in

“Service Sabotage”
• Service sabotages can be classified along two
dimensions:
1. Covert or overt
2. Routinised or intermittent
28
Service Sabotage
‘Openness’ of Service
Covert Overt
Sabotage Behaviors
Routinised Customary-Private Service Customer-Public Service

Sabotage Sabotage
e.g. Waiters serving smaller e.g. Talking to guests like
servings, bad beer or sour wine young kids and putting them
‘Normality’
of Service down
Sabotage
Behaviors Sporadic-Private Service Sporadic-Public Service
Sabotage Sabotage
e.g. Chef occasionally e.g. Waiters spilling soup onto
purposefully slowing down laps, gravy onto sleeves, or hot
Intermittent orders plates into someone’s hands
29
The Cycles of Mediocrity
• Likely to find in large, bureaucratic organisations

• State monopolies, industrial cartels, regulated
oligopolies
• Little market pressure to improve performance
• Fear of entrenched unions discourage management
from adopting more innovative labor practices
30
• Rigid rule-books provide service delivery

standards
• Oriented toward standardized service
• Job responsibilities are unimaginatively defined
and rigidified by union work rules
• Salary increase and promotions are based on
longevity
31
• Training in Mediocre Firms:

– Learning the rules and the technical aspects of the
job
– Minimal or No allowances for flexibility or employee
initiative
– No focus on Improving human interactions with
customers and coworkers
32
• Jobs tend to be boring and repetitive

• Provide adequate pay and with high security,
hence employees are reluctant to leave
33
Cycle of Mediocrity
Customers trade
horror stories
Other suppliers (if any)
seen as equally poor
Employees spend
working life
in environment
Employee of mediocrity
dissatisfaction
(but can’t easily quit) Emphasis
on rules
Narrow design
vs. pleasing
of jobs
customers
No incentive for Complaints met by
cooperative relationship Training emphasizes
indifference or Success =
to obtain better service hostility learning rules
not making
mistakes
Service not focused
Jobs are boring and on customers’ needs
repetitive; employees
unresponsive Good wages/benefits
high job security
Resentment at inflexibility and E
lack of employee initiative; Promotion
and pay
complaints to employees increases based Initiative is
on longevity, discouraged
lack of mistakes
Customer dissatisfaction
34
The Cycles of Success
• Firms take a longer term view of financial

performance
• Prosper by investing in their people in order to
create a cycle of success
• Organizations focus marketing efforts on
reinforcing customer loyalty through customer
retention strategies
35
The Cycles of Success
• Key Features of Cycle of Success are:

– Attractive compensation package
– Broadened job designs
– Focused and Intensive training
– Low turnover of employees and customer
– Loyal customer
– High profit
36
Cycle of Success
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
relationship with Train, empower frontline
customer Employee satisfaction, personnel to control quality
positive service attitude
Above average
Extensive wages
training
High customer Intensified
satisfaction selection effort
Source: Heskett and Schlesinger
37
37
Human Resource Management
• Rational managers operate in the cycle of success

• Human Resource strategies can help service firms
• Staff performance is a function of both ability and
motivation
• Service firms are required to get able service
employees who are motivated to productively
deliver service excellence
38
1. Hire the
Right People
3. Motivate & Be the preferred employer
& compete for talent market
Energize Your People
share
Intensify the
Utilize the full range Service Excellence selection process
of rewards & Productivity
2. Enable Your People

Empower Frontline
Build high performance service
delivery teams
Extensive Training
39
1. Hire the right people

2. Identify the best candidate
3. Train service employees actively
4. Empower the front line
5. Build high-performance service delivery teams
6. Motivate and energize people
40
Hire the Right People
“The old saying ‘People are your most

important asset’ is wrong.
The RIGHT people are your

most important asset.”
Jim Collins
41
• The right people are a firm’s most important asset

• A focused, marketing-like approach to recruitment is
needed
• Clarify what must be hired versus what can be taught
• Clarify nature of the working environment, corporate
values and style, in addition to job specifications
• Ensure candidates have/can obtain needed
qualifications
42
• Evaluate candidate’s fit with firm’s culture and values

• Fit personalities, styles, energies to the appropriate
jobs
• To attract best employees, firm has to:-
Be the preferred employer
Offer attractive value propositions and above-average
compensation package
Compete for talent market share
43
• Factors influencing a firm’s applicant pool

 Positive image in the community as place to work
 Quality of its services
 The firm’s perceived status
44
• There is no perfect employee

 Different jobs are best filled by people with different
skills, styles or personalities
 Hire candidates that fit firm’s core values and culture
 Focus on recruiting naturally warm personalities
“The right people are those who would exhibit the desired behaviors
anyway, as a natural extension of their character and attitude,
regardless of any control and incentive system.”
45
Identify the Best Candidates
Observe Behaviour
i. Hire based on observed behavior, not words you hear
ii. Behaviour can be observed directly or indirectly
iii. Best predictor of future behavior is past behavior
iv. Consider group hiring sessions where candidates are
given group tasks
46
Personality Testing : Relevant for a particular job

1. Willingness to treat co-workers and customers with
courtesy
2. Consideration and tact
3. Perceptiveness regarding customer needs
4. Ability to communicate accurately and pleasantly
47
• Employ Multiple, Structured Interviews

i. Use structured interviews built around job requirements
ii. Use more than one interviewer to reduce ‘similar to me
effects’
• Give Applicants a Realistic Preview of the Job

i. Chance to have “hands-on” with the job
ii. Assess how the candidates respond to job realities
iii. Allow candidates to self-select themselves out of the job
48
Train Service Employees
 Investment on training yield outstanding results

 Training has to result in tangible changes in
behaviour
 Practice and reinforcement are needed
 Training is effective in reducing person/role stress
49
• Services employee need to learn:

1. The Organizational Culture, Purpose and Strategy
• Promote core values, get emotional commitment to
strategy
• To teach “why”, “what” and “how” of job
50
2. Interpersonal and Technical Skills

• Both are necessary but neither alone is sufficient for
optimal job performance
3. Product/Service Knowledge
• Staff’s product knowledge is a key aspect of service quality
• Staff need to be able to explain product features and to
position products correctly
51
Empower the Front line
• Employee self-direction is very important

• Providing employees with greater discretion can
enable them to:
– Provide superior service on the spot
– Find solutions to service problems
– Make appropriate decisions about customising
service delivery
52
Factors Favoring Employee Empowerment are:

• Firm’s business strategy based on competitive
differentiation and personalized, customized service
• Emphasis on long-term relationships
• Use of complex and non-routine technologies
• Able to manage surprises as environment is unpredictable
53
• Managers let employees work independently for

benefit of firm and customers
• Employees seek to deepen skills, like working
with others, and are good at group processes
54
Control vs. Involvement Model
New approaches to management and team building:
• Control Model:
– There are clearly defined roles
– Top-down control systems
– Hierarchical pyramid structures
– Assumption- the management knows best
Source: Bowen and Lawler
55
Control vs. Involvement Model
Empowerment:
(based involvement or commitment)
• Assumes that employees can:-
1. Make good decisions and produce good ideas for
operating the business if they are properly socialised,
trained, and informed
2. Be internally motivated to perform effectively and that
they are capable of self-control and self-direction
56
Control vs. Involvement
Four Features of empowerment are:
1. Information about operating results and measures of
competitive performance
2. Knowledge/skills enabling employees to understand and
contribute to organizational performance
3. Power to influence work procedures and organizational
direction (e.g. quality circles, self-managing teams)
4. Rewards based on organizational performance (e.g. profit
sharing, stock ownership)
57
Levels of Employee Involvement
2. Job involvement: In complex

service organisations, where
individual employees cannot
1.Suggestion involvement :
offer all facets of services, job
Employee recommendation:
involvement is accomplished
Ex-McDonald’s-Egg muffin,
through use of teams
methods of wrapping burgers
without leaving finger print on Ex: Airline, hospital
the bun
58
Levels of Employee Involvement
3.High involvement
 Information is shared
 Employees develop skill in

teamwork, problem solving etc.
 Participate in decisions
 Profit sharing and stock ownership
59
Motivate & Energise People
Use the full range of available rewards effectively, including:
• Job content: People are motivated and satisfied

simply by knowing that they are doing a good job.
Ex: Grateful customers /sales
• Feedback and recognition: from people around them
• Goal accomplishment: Goals that are specific, difficult
but attainable, and accepted by the staff are strong
motivators
60
Service Leadership and Culture
• A service culture is-

 Shared perception of what is important in a firm
 Shared value and beliefs about why those things are
important
• In strong service culture, the entire organisation

focuses on the front line and understands that it
is the lifeline of the business
61
The Inverted Organizational Pyramid
Customer Base
Top
Mgmt Frontline Staff
Middle
Mgmt
Middle Mgmt
Frontline & Top Mgmt
Staff Support Frontline
Traditional Inverted Pyramid with a

Organizational Pyramid Customer & Frontline Focus
Legend: = Service encounters, or ‘Moments of Truth.’
62
62
Service Leadership and Culture
• Top management get actively involved in frontline jobs

– Disney world: Management spends 2 weeks every year in
frontline staff job such as sweeping streets, selling ice cream,
or working as the ride attendant
– Southwest Airlines: Employees visit a different department
on their days off and spend a minimum of 6 hours
63
References
– Lovelock, Wirtz and Chatterji (2013), Services

Marketing - People, Technology and strategy, 7th
Edition, Pearson Education
64
Disclaimer
• All data and content provided in this presentation

are taken from the reference books, internet –
websites and links, for informational purposes only.
65

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Course Code: 19MMT506A

Course Title: Services Marketing

• Service staff /front line employees: important

• Strength frontline employee can be an

• Successful service organizations are committed

• Service levels and the way service is delivered

3. Brand: Staff determines whether the brand

• Employees drives customer loyalty

• Many routine transactions are conducted

• Quality and technology are core for low-contact

• The service-profit chain requires high-performing,

• Service link inside of an organisation to the

• Boundary spanners often have conflicting roles

• Sources of Conflict: Causes of role stress -

1. Organization vs. Clint: Dilemma whether to follow

2. Person vs. Role: Conflicts between what jobs require

3. Clint vs. Clint: Conflicts between customers that

• Consider management expectations of restaurant servers:

• Emotional Labour: Arises from the

• Performing emotional labour in response to

• Poor working environments results in dreadful service

• Employees treat customers the way their managers

• Firms try to simplify work routines and hire

call center operations

• Has two concentric but interactive cycles:

No continuity in Use of technology Emphasis on

Source: Schlesinger and Heskett 25

The employee cycle The customer cycle

v. Minimised training iv. No continuity in

Costs of short-sighted policies are ignored:

• Low levels of employee morale may engage in

Routinised Customary-Private Service Customer-Public Service

e.g. Waiters serving smaller e.g. Talking to guests like

• Likely to find in large, bureaucratic organisations

• Rigid rule-books provide service delivery

• Training in Mediocre Firms:

• Jobs tend to be boring and repetitive

• Firms take a longer term view of financial

• Key Features of Cycle of Success are:

Source: Heskett and Schlesinger

• Rational managers operate in the cycle of success

2. Enable Your People

1. Hire the right people

“The old saying ‘People are your most

The RIGHT people are your

• The right people are a firm’s most important asset

• Evaluate candidate’s fit with firm’s culture and values

• Factors influencing a firm’s applicant pool

• There is no perfect employee

Personality Testing : Relevant for a particular job

• Employ Multiple, Structured Interviews

• Give Applicants a Realistic Preview of the Job

 Investment on training yield outstanding results

• Services employee need to learn:

2. Interpersonal and Technical Skills

• Employee self-direction is very important

Factors Favoring Employee Empowerment are:

• Managers let employees work independently for

Source: Bowen and Lawler

2. Job involvement: In complex

 Employees develop skill in

 Profit sharing and stock ownership

• Job content: People are motivated and satisfied