Because learning changes everything.

Chapter 4

Tachnology in services
The Service Encounter

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
 5-2

Role of Technology in the Service Encounter

Technology Technology Technology

Face
To
Customer Server Customer Server Customer Server face

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

Service Encounter Service Encounter Service Encounter

Hair dressers, law consulting X ray at dentist, eye Bank investments

Technology Technology

Face
Customer Server Customer Server
To screen

D. Technology-Mediated E. Technology-Generated
Service Encounter Service Encounter
Tele booking ATM, on line reservations
 Table 4.1 Evolution of Self-Service
Service Industry Human Contact Machine Assisted Internet Facilitated
Banking Teller ATM Online banking
Grocery Checkout clerk Self-checkout Online order/ pickup
station
Airlines Ticket agent Check-in kiosk Print boarding pass
Restaurants Wait person Vending machine Online order/
delivery
Movie theater Ticket sale Kiosk ticketing Pay-for-view
Book store Information clerk Stock-availability Online shopping
terminal
Education Teacher Computer tutorial Distance learning
Gambling Poker dealer Computer poker Online poker

© McGraw Hill, LLC 3

 5-4

Self-service Technologies (SST)

➢ Does self-service follow a predictable pattern?

➢ How do we measure self-service quality

➢ ease of use, enjoyment, control

➢ What is the optimal mix of SST and personal service for a

service delivery system?
➢ Howdo we achieve continuous improvement when using
SST?
➢ self-service - the loss of human interaction
 5-5

Classification of Service Automation

➢ Fixed-sequence (F) –
✓ A machine that repetitively performs successive steps according to a
predetermined sequence, condition, and position,
✓ Example, automatic parking lot gate

➢ Variable-sequence (V) –
✓ A machine that is the same as a fixed-sequence robot
✓ but whose set information can be changed easily.
✓ Example, ATM machine
➢ Playback (P) –
✓ A machine that can produce operations from memory that were
originally executed under human control.
✓ Example, answering machine
 5-6

Continued…..
➢ Numerical controlled (N) –
✓ A machine that can perform a given task according to a sequence,
conditions, and a position as commanded by stored instructions
✓ that can be reprogrammed easily
✓ Rail ticket at metro
✓ Animated characters in game /race car

➢ Intelligent (I) –
✓ A machine with sensors, that can detect changes in the work
environment or task by itself
✓ has its own decision-making abilities.
✓ Example, autopilot for a commercial plane
 5-7

Continued…..

➢ Expert system (E) –

✓ A computer program that has a decision rule / knowledge base to
diagnose problems.

✓ Example: Trouble shooting for machine /elevators

➢ Totally automated system (T) –

✓ A system of machines and computers performs all the physical and
intellectual tasks that are required to produce or deliver a service.

✓ Example, electronic funds transfer

 5-8

Effect of automation

 More capital intensive

 Low skilled, labour intensive operations of old era are

redundant now ,can be automated

 More sophisticated skills to programs /operations/ maint

 Employee flexibility

Examples of automation
F Newspaper
I Self service check out
v Optimal mail sorter
V MRI scan
N Language translation
V Copier
V Elevators
F Movie theatre projector
5-9
I RFID inventory tracking
T telemarketing
T Nuclear power plant
I heart pacemaker
T Online classes
T Video conferencing
T Online reservations
P Morning wake up call
V ATM
T Google search
T Cell Phone network
 5-10

Purpose of Web-site……
➢ Internet is ideal to connect with customer at low cost
➢A retail channel (Amazon.com)
✓ These firms sell exclusively through the Internet
➢ Supplemental channel (Barnes & Nobel)
✓ Buy in-store or on-line,- click and mortar
➢ Technical support (Dell Computer)
➢ Making existing services attractive
✓ on-line instead of typically being mailed
➢ To process orders (Delta Airline)
✓ Electronic tickets
 5-11

Continued…..
➢ To Convey information (contact data)
➢ Communicate with membership (POMS.org)
➢ To play games (Treeloot.com)
 5-12

Electronic and Traditional Services

Features Electronic Traditional
Encounter Screen-to-face Face-to-face
Availability Anytime Working hours
Access From anywhere Travel to location
Market Area Worldwide Local
Ambiance Electronic Physical
interface environment
Payment Credit card Cash or check
Differentiation Convenience Personalization
Privacy Anonymity Social interaction
 5-13

Difference between online and offline

 5-14

Technology Convergence Enabling

E-Business
➢ Internet

➢ Global telephone system

➢ Communications standard TCP/IP
(Transfer Control Protocol/Internet Protocol)
➢ Addressing system of URLs
➢ Personal computers and cable TV
➢ Customer databases
➢ Sound and graphics
➢ User-friendly free browser
 5-15

E-Business Models
(Weill & Vitale, Place to Space, HBS Press, 2001)
➢ Content Provider:
✓ Provides content (information, digital products, and services). Example,
Reuters, PTI,ANI

➢ Direct to Customer:
✓ Provides goods or services directly to the customer. Example, Dell

➢ Full-Service Provider:
✓ Provides a full range of services in one domain. Example, financial, health,
industrial, chemical) directly and via allies. Example, General Electric Supply.

➢ Intermediary:
✓ Brings together buyers and suppliers by concentrating information. Example,
eBay
 5-16

Continued…..
➢ Shared Infrastructure:
✓ Brings together multiple competitors to cooperate by sharing common
IT infrastructure. Example, SABRE reservations system
➢ Value Net Integrator:
✓ Coordinates activities across the net by gathering, synthesizing, and
distributing information. Example, 7-Eleven Japan
➢ Virtual Community:
✓ Creates and facilitates an online community of people with a common
interest, enabling interaction. Example, naukari.com, the job
placement firm.
➢ Whole-of-Enterprise:
✓ Provides a single point of contact,
✓ Consolidating all services provided by a large multiunit organization.
Example, Government
 5-17

 31/8/2022
 5-18

Scalability

 Ability of the firm to improve revenue and margin

 Infinite scalability is possible when variable cost is zero

 Three ways
 Conduct only data information/transfer

 Allow customer to serve themselves

 Let customer serve other customers

 5-19

Economics of Scalability
Dimensions High Scalability Low

E-commerce Selling Selling value- Selling Selling goods

continuum information added service services with (E-commerce)
(E-service) goods
Information vs. Information Information Goods with Goods dominate
Goods Content dominates with some support services
service
Degree of Self-service Call center Call center Call center order
Customer backup support processing
Content
Standardization Mass Some Limited Fill individual
vs. distribution personalization customization orders
Customization
Shipping and Digital asset Mailing Shipping Shipping, order
Handling Costs fulfillment, and
warehousing
After-sales None Answer Remote Returns possible
service questions maintenance

Example Service Used car Online travel Computer Online retailer

prices agent support

Example Firm Kbb.com Biztravel.com Everdream.com Amazon.com

 5-20

Economics of E-Business
➢ Sources of Revenue:
✓ Transaction fees
✓ Information and advice
✓ Fees for services and commissions
✓ Advertising and listing fees

➢ Ownership
✓ Customer relationship
✓ Customer data
✓ Customer transaction
 5-21

Service Product Dimensions

➢ Electronic services are intangible

➢ Heterogeneity due to different perceptions of customers

(depends on your speed of connection, your computer’s
ability, your level of knowledge)

➢ Simultaneous delivery and consumption of electronic

services
 5-22

Service Process Dimensions

➢ Service processes can be categorized by
✓ Degree of customer contact and interaction
✓ Degree of labor intensity
✓ Degree of customization

➢ Electronic services differ from traditional service

✓ Customer contact
✓ Customization
✓ Labor intensity

➢ To provide electronic service a firm has

✓ On-line part, where the customer interacts (like front-office)
✓ Of-line part, which helps on-line part to happen (like back-office)
 5-23

Adoption of New Technology in Services

➢ Challenges of Adopting New Technology
✓ Customer education of the use of technology
✓ Customer acceptance-propensity to embrace newt techhnology
✓ Employee training
✓ Integration with existing technology
✓ Industry standards
✓ Managing change
 5-24

Application of RFID

 Passport: first RFID by Malesia in 1998

 Transport ; Paris1995

 Human implant : Barcelona /Rotterdam

 Library

 Patient identification
 5-25

Continued…..
➢ Managing the New Technology Adoption Process
✓ Ten step with concern for employees and customers
1. Orientation and education
2. Technology opportunity analysis
3. Application requirements analysis
4. Functional specifications
5. Design specifications
6. Implementation planning
7. Equipment selection and control commitments
8. Implementation
9. Testing of technology
10. Review of results
 5-26

Thank you

5-27
 Encounter

 Customer is evaluating services & forming opinion

 Moment of truth –Richard Norman

 An opportunities to influence the customers’ perception on

quality

 Critical in achieving reputation for quality

 Org Chart where Customer encounter personnel at top of

organization

 Allow Manager to be close to customer

28
 29

Figure 4.2 The Service Encounter Triad

 Access the text alternative for slide

images.
 Domination
 Encounter dominated by service organization
 To be efficient
 Strict rules
 Limit the discretion of customer-Mc Donald
 Teaches what not to expect

 Encounter dominated by contact personnel

 When in autonomous mode
 Physician -patient

 Dominated by customer
 Extreme standardization /customization lead to this
 Standardized : ATM-satisfactory and efficient result
 Customized: legal defense
 Website : efficiency, availability, ,fulfillment. privacy,
30
 The Service Organization
Culture.
• ServiceMaster (Service to the Master).
• Disney (choice of language ) cast member.

Empowerment begins with trust and not delegation

• Permission /not power
• Invest in people., no need to supervise
• Use IT to enable personnel.
• Recruitment and training critical.
• Pay for performance.

© McGraw Hill, LLC 31

 Language communicate the culture

© McGraw Hill, LLC

 Definitions of Culture
• 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.

© McGraw Hill, LLC 33

 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 To Achieve a Lack of focus Build and support Critical
Goal clear targets performance
variables
Interactive Create Lack of Open organizational Strategic
( IT opportunity or fear dialogue to Uncertainties
industry of risk taking encourage learning
)

4-34
© McGraw Hill, LLC
 Contact Personnel
Attributes: flexibility, tolerance for ambiguity, empathy

Selection
1. Abstract Questioning-open ended
2. Situational Vignette
3. Role Playing- to check performance under stress

Training:
Unrealistic customer expectations
Unexpected service failure

4-35
© McGraw Hill, LLC
 Challenges Facing Customer Contact
Personnel

Problem Customers Service failure

1. Unreasonable demands. 1. Unavailable
2. Abusive or hostile service.
attitude. 2. Slow performance.
3. Inappropriate behavior. 3. Unacceptable
4. Unanticipated demands. service.

5. Demands contrary to
policies.

Use scripts to train for proper response

© McGraw Hill, LLC 36
 Ethics

Formal controls
• Enforcement of ethical codes
• Punishment for ethical violations
Informal controls
• Discussion of ethics,
• Internalization of a code of ethics,
• Ethical climate

© McGraw Hill, LLC 37

 Examples of Unethical Behaviors
Misrepresenting the Customer Manipulation General Honesty and
Nature of the Service Integrity
• Promising a nonsmoking • Giving away a • Treating customers
room when none is guaranteed reservation unfairly or rudely
available • Performing unnecessary • Being unresponsive to
• Using bait-and-switch services customer requests
tactics • Padding a bill with • Failing to follow stated
• Creating a false need for hidden charges company policies
service • Hiding damage to • Stealing customer credit
• Misrepresenting the customer possessions card information
credentials of the service • Making it difficult to • Sharing customer
provider invoke a service information with third
• Exaggerating the benefits guarantee parties
of a specific service
offering

4-38
© McGraw Hill, LLC
 The Customer
Expectations and Attitudes.
• Economizing customer.
• Ethical customer.
• Personalizing customer.
• Convenience customer.

Role of Scripts in Coproduction.

Customer Behavior Changes Following COVID-19.

© McGraw Hill, LLC 39

 Attitude of customer towards self service

Self service or traditional service?

Customers is using the following dimensions in their selection:
1. Amount of time involved,
2. Customer’s control of the situation,
3. Efficiency of the process,
4. Amount of human contact involved,
5. Risk involved,
6. Amount of effort involved,
7. Customer’s need to depend on others.

© McGraw Hill, LLC 40

 Service Encounter Success Factors

Customer Service Provider Service Provider

Human Machine
Human Employee selection Intuitive interface
Interpersonal skills Verification
Support technology Security
Engender trust Easy to access
Machine Easy to access Compatibility
Fast response Tracking
Verification Verification
Remote monitoring Security
Failsafe

© McGraw Hill, LLC 41

Customers revealed following:
• Customer received better perception where
• There is more enthusiasm

• Manager emphasize on performance

• Efforts to retain customers

• Sufficient & well-trained staff

• Equipment are well maintained

42
 Figure 4.3 Relationship between Customer
and Employee Perceptions of Customer
Service

Access the text alternative for slide images.

© McGraw Hill, LLC 43
 Table 4.5 Satisfaction Duality
Higher Customer
Satisfaction
More repeat purchases
Stronger tendency to
complain about service errors
Lower costs
Better results
© McGraw Hill, LLC
Higher Employee
Satisfaction
↔ More familiarity with
customer needs and
ways of meeting them
↔ Greater opportunity for
recovery from errors
↔ Higher productivity
↔ Improved quality of
service
44
 Service Profit Chain

4-45
© McGraw Hill, LLC
 Service profit chain
1. Internal quality drives employee satisfaction: environment

2. Employee satisfaction drives retention and productivity

3. Employee retention and productivity drive service value

4. Service value drives customer satisfaction

5. Customer satisfaction drives customer loyalty.

6. Customer loyalty drives profitability and growth-.5% increase in

loyalty increases- 25% profitability

© McGraw Hill, LLC

 THANK YOU

© McGraw Hill, LLC 47

© McGraw Hill, LLC 48
 Topics for Discussion
• How can we design for self-recovery when self-service
failure occurs?
• 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 does use of a “service script” relate to service
quality?
• If the roles played by customers are determined by
cultural norms, how can services be exported?

© McGraw Hill, LLC 49

 Interactive Exercise
The class breaks into small groups and each group
comes up with an example from each of the four
organizational control systems (that is, belief,
boundary, diagnostic, and interactive)

© McGraw Hill, LLC 50

 Amy’s Ice Cream
1. Describe the service organization culture at
Amy’s Ice Cream.
2. What are the personality attribute of the
employees who are sought by Amy’s Ice
Cream?
3. Design a personnel selection procedure for
Amy’s Ice Cream using abstract questioning, a
situational vignette, and/or role playing.

© McGraw Hill, LLC 51

 AMY’S ICE CREAM Abstract Questions

• What was your most rewarding past experience

and why?
• What are you looking for in your next job?
• What have you done in the past to irritate a
customer?
• What flavor of ice cream best describes your
personality?

© McGraw Hill, LLC 52

 AMY’S ICE CREAM Situational Vignette 1

A particular customer has the irritating habit of

always showing up about two minutes before
closing and staying late. Often this occurs on the
night when weekly store meeting are held after
closing time. This delays starting the meeting and
furthermore employees are on the clock waiting for
the customer to leave. What would you do?

© McGraw Hill, LLC 53

 AMY’S ICE CREAM Situational Vignette 2

As a new employee at a busy store, you have been

routinely performing clean-up tasks (garbage
removal and restroom cleaning). Company policy
dictates that these are tasks to be shared. It has
become clear that two employees consistently avoid
these jobs in favor of more pleasant duties. How
would you handle this situation?

© McGraw Hill, LLC 54

 Enterprise Rent-a-Car: Succeeding in
a Mature Market

© McGraw Hill, LLC 55

 Discussion Questions
1. How has Enterprise Rent-A-Car defined
(ERAC) its service differently than the
typical national car rental company?
2. What features of this business concept
allow ERAC to effectively compete with
the existing national rental car
companies?
3. Use the service profit chain to explain the
success of ERAC.

© McGraw Hill, LLC 56

 Enterprise Service Concept
Target Market.
Customer Value.
• Convenience.
• Rates.
• Selection.

Corporate Culture.
• Hiring.
• Rewards.

© McGraw Hill, LLC 57

 Enterprise Success Factors
• Virtual Car.
• Relationship with repair shops.
• Upgrade by replacement car customer.
• On site dealer locations.
• Fleet management.
• Age of rental car fleet.
• Motivated employees.

© McGraw Hill, LLC 58

 Service Profit Chain
How Does Enterprise Rent-A- Car Illustrate the
Service Profit Chain?
• Operating strategy and service delivery system
(employees).
• Service concept (service value).
• Target market (customers).

© McGraw Hill, LLC 59

 Because learning changes everything. ®

www.mheducation.com

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
 Learning Objectives
• Use service encounter triad to describe a service firm’s delivery process.
• Describe roles of technology in service encounter.
• Differentiate organizational control systems for employee empowerment.
• Classify customers into four groups based on their attitudes and
expectations.
• Prepare abstract questions and write situational vignettes to screen
recruits.
• Describe how creation of an ethical climate leads to job satisfaction and
service quality.
• Discuss role scripts in customer coproduction.
• Describe how elements of the service profit chain lead to revenue
growth and profitability.

© McGraw Hill, LLC 66


Examples of automation
F Newspaper
I Self service check out
v Optimal mail sorter
V MRI scan
N Language translation
V Copier
V Elevators
F Movie theatre projector
5-67
I RFID inventory tracking
T telemarketing
T Nuclear power plant
I hear pacemaker
T Online classes
T Video conferencing
T Online reservations
P Morning wake up call
V ATM
T Google search
T Cell Phone network
 5-68

Technology Convergence Enabling

E-Business
➢ Internet

➢ Global telephone system

➢ Communications standard TCP/IP
(Transfer Control Protocol/Internet Protocol)
➢ Addressing system of URLs
➢ Personal computers and cable TV
➢ Customer databases
➢ Sound and graphics
➢ User-friendly free browser
 5-69

Internet Models
➢ Internet access providers
✓ Many Firms provide access to World Wide Web and email service.
➢ Portal
✓ They provide a variety of service that include information searching,
news, white and yellow pages, etc. – Example google, Yahoo.
➢ Information content
✓ Use Internet to provide news,
➢ Online Retailers
✓ Example, Amazon.com
➢ Transaction enablers
✓ Stock trading
➢ Market makers – online auction, example ebay
 5-70

E-Business Models
(Weill & Vitale, Place to Space, HBS Press, 2001)
➢ Content Provider:
✓ Provides content (information, digital products, and services). Example,
Reuters, a British news agency

➢ Direct to Customer:
✓ Provides goods or services directly to the customer. Example, Dell

➢ Full-Service Provider:
✓ Provides a full range of services in one domain. Example, financial, health,
industrial, chemical) directly and via allies. Example, General Electric Supply.

➢ Intermediary:
✓ Brings together buyers and suppliers by concentrating information. Example,
eBay
 5-71

Continued…..
➢ Shared Infrastructure:
✓ Brings together multiple competitors to cooperate by sharing common
IT infrastructure. Example, SABRE reservations system
➢ Value Net Integrator:
✓ Coordinates activities across the net by gathering, synthesizing, and
distributing information. Example, 7-Eleven Japan
➢ Virtual Community:
✓ Creates and facilitates an online community of people with a common
interest, enabling interaction. Example, naukari.com, the job
placement firm.
➢ Whole-of-Enterprise:
✓ Provides a single point of contact,
✓ Consolidating all services provided by a large multiunit organization.
Example, Government
 5-72

Scalability

 Ability of the firm to improve revenue in turn margin

 Infinite scalability is possible when variable cost is zero

 Three ways
 Conduct only data information/transfer

 Allow customer to serve themselves

 Let customer serve other customers

 5-73

Economics of Scalability
Dimensions High Scalability Low

E-commerce Selling Selling value- Selling Selling goods

continuum information added service services with (E-commerce)
(E-service) goods
Information vs. Information Information Goods with Goods dominate
Goods Content dominates with some support services
service
Degree of Self-service Call center Call center Call center order
Customer backup support processing
Content
Standardization Mass Some Limited Fill individual
vs. distribution personalization customization orders
Customization
Shipping and Digital asset Mailing Shipping Shipping, order
Handling Costs fulfillment, and
warehousing
After-sales None Answer Remote Returns possible
service questions maintenance

Example Service Used car Online travel Computer Online retailer

prices agent support

Example Firm Kbb.com Biztravel.com Everdream.com Amazon.com

 5-74

Economics of E-Business
➢ Sources of Revenue:
✓ Transaction fees
✓ Information and advice
✓ Fees for services and commissions
✓ Advertising and listing fees

➢ Ownership
✓ Customer relationship
✓ Customer data
✓ Customer transaction
 5-75

Service Product Dimensions

➢ Electronic services are intangible

➢ Heterogeneity due to different perceptions of customers

(depends on your speed of connection, your computer’s
ability, your level of knowledge)

➢ Simultaneous delivery and consumption of electronic

services
 5-76

Service Process Dimensions

➢ Service processes can be categorized by
✓ Degree of customer contact and interaction
✓ Degree of labor intensity
✓ Degree of customization

➢ Electronic services differ from traditional service

✓ Customer contact
✓ Customization
✓ Labor intensity

➢ To provide electronic service a firm has

✓ On-line part, where the customer interacts (like front-office)
✓ Of-line part, which helps on-line part to happen (like back-office)
 5-77

Adoption of New Technology in Services

➢ Challenges of Adopting New Technology
✓ Customer education of the use of technology
✓ Customer acceptance-propensity to embrace newt techhnology
✓ Employee training
✓ Integration with existing technology
✓ Industry standards
✓ Managing change
 5-78

Application of RFID

 Passport: first RFID by Malesia in 1998

 Transport ; Paris1995

 Human implant : Barcelona /Rotterdam

 Library

 Patient identification
 5-79

Continued…..
➢ Managing the New Technology Adoption Process
✓ Ten step process with concern for employees and customers
1. Orientation and education
2. Technology opportunity analysis
3. Application requirements analysis
4. Functional specifications
5. Design specifications
6. Implementation planning
7. Equipment selection and control commitments
8. Implementation
9. Testing of technology
10. Review of results