Edwin N. Torres, Tingting Zhang - Customer Service Marketing - Managing The Customer Experience-Routledge (2022)

“This new book on customer service marketing offers a refreshing and insightful look at
innovations and new developments in the field set within the broader ‘Servicescape’. The
authors have taken trends such as co-creation and customization, attitudes and emotions,
and electronic word of mouth, among others, and offered insight and strategies to be
applied across a range of service settings. Authored by two highly experienced professors
in the field, this new and exciting text is a must-read for those interested in the future
dynamics of customer service marketing.”
Alan Fyall, Associate Dean, Academic Affairs and Visit Orlando
Endowed Chair of Tourism Marketing, UCF Rosen College of Hospi-
tality Management, USA
“Customer experience management is more crucial today than ever before, especially for
tourism-related sectors. This book sheds light on theories associated with consumers and
their behavior and highlights effective tools and strategies employed by successful enter-
prises. It will be an essential textbook well worth reading in that it covers major theories
and best practices in the field of customer experience management. It is highly recom-
mended for students intending to pursue a career in the tourism industry.”
BAO Jigang, Professor, Founding Dean of School of Tourism Manage-
ment, Sun Yat-sen University, P.R.China
“This new book on consumer service marketing provides an extensive review of the
services’ universe from consumers’ perspective. It offers a broad coverage of the key
issues contributing to the strategic management of services from its key characteristics
to consumers processing of quality, satisfaction, and loyalty up to the services’ strategic
dimensions. The book provides a comprehensive overview of services concepts, tools, and
applications. A must-read for graduate students and practitioners alike.”
Isabelle Frochot, University Savoie Mont Blanc, France
“In the rapidly changing society and marketplace, the traditional understanding of services
and the role of marketing has become obsolete. Industry professionals need a comprehen-
sive understanding of the contemporary nature of relationships between customers and
businesses. A holistic overview of the nature of B2C interactions is a background for devel-
oping a competitive market strategy. This book summarizes the key aspects of contempo-
rary B2C relationships. It explains the nature of service from a customer perspective and
highlights the key components of marketing strategy required for increasing customer loy-
alty. The book is advantageous as an introduction to marketing and service management.”
Katerina Volchek, Professor and Manager of the DigiHealth & Smart
Tourism lab at Deggendorf Institute of Technology, Germany
“This book provides an important contribution to the understanding of customer service
by explaining the benefits of customer service as a strategic focus for an organization
(online or offline) to successfully compete in the market. The authors clearly illustrate
how quality of service and experience are essential to building trust and relationships with
all stakeholders of the organization. This book on customer service marketing will provide
critical knowledge to help hospitality and tourism students become effective managers in
the industry.”
Jay Kandampully, Professor of Service Management, The Ohio State
University, Editor-in-Chief of Journal of Service Management, USA
“Today’s service businesses have seen an increase in digital transformation with many
technological advancements. Service technologies play a critical role in redefining cus-
tomer service management strategies and service quality control procedures. This new
book provides a focused review of the concepts, business practices, and research findings
about service technologies. Students and industry practitioners who would like to learn
how service technologies are adopted and implemented in a service business setting will
find this book very useful and helpful.”
Dimitrios Buhalis, Professor in Marketing, Strategy and Innovation,
Director of the eTourism Lab and Deputy Director of the International
Centre for Tourism and Hospitality Research, Bournemouth Univer-
sity Business School, UK
“Dr Torres and Dr Zhang have produced a superb all-round service marketing text, blend-
ing classical ideas and contemporary developments in theory and practice. They introduce
a comprehensive set of principles that can be applied across a range of sectors to create
value and memorable experiences.”
Peter Lugosi, Professor of Culture and Organisation, Oxford Brookes
University, UK
Customer Service Marketing
This timely book is a comprehensive overview of customer service principles, theories,

and practices. It looks at the best practices of service enterprises and the delivery of supe-
rior customer service. It also includes classic and contemporary theories relating to the
consumers, managers, and their behaviors in organizational setting. The book uses real-life
applications through examples from business enterprises in various service sectors, includ-
ing hotels, restaurants, theme parks, event management, airlines, cruises, (e-)retailers, and
finance.
This book covers important concepts in service design and delivery including customer
experiences, peer-to-peer services, the organization’s servicescape, quality measurement
tools, and use of technologies. The book also gives insights into consumers including their
expectations, attitudes, emotions, word-of-mouth behaviors, and strategies to ensure their
loyalty. It also looks at developments in service theory and practice which remain rela-
tively unexplored by existing textbooks.
Filled with real-world case studies in various service sectors, this textbook will be par-
ticularly useful for students in hospitality guest services and services marketing.
Edwin N. Torres, Ph.D., is the Chair and Associate Professor at the Department of Inter-
national Hospitality and Service Innovation, Saunders College of Business at the Roches-
ter Institute of Technology.
Tingting Zhang, Ph.D., is Associate Professor at the Rosen College of Hospitality Manage-
ment, University of Central Florida.
Customer Service
Marketing
Managing the Customer Experience
Edwin N. Torres and Tingting Zhang

Cover image: © Getty Images
First published 2023
by Routledge
4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2023 Edwin N. Torres and Tingting Zhang
The right of Edwin N. Torres and Tingting Zhang to be identified as authors of this work has been
asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by
any electronic, mechanical, or other means, now known or hereafter invented, including photocopying
and recording, or in any information storage or retrieval system, without permission in writing from the
publishers.
Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used
only for identification and explanation without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Torres, Edwin N., author. | Zhang, Tingting (College teacher), author.
Title: Customer service marketing : managing the customer experience /
Edwin N. Torres and Tingting Zhang.
Description: Milton Park, Abingdon, Oxon ; New York, NY : Routledge, 2023. |
Includes bibliographical references and index. |
Identifiers: LCCN 2022025890 (print) | LCCN 2022025891 (ebook) |
ISBN 9780367208929 (hardback) | ISBN 9780367208936 (paperback) |
ISBN 9780429263965 (ebook)
Subjects: LCSH: Customer services. | Consumer satisfaction. | Marketing.
Classification: LCC HF5415.5 .T677 2023 (print) | LCC HF5415.5 (ebook) |
DDC 658.8/12—dc23/eng/20220616
LC record available at https://lccn.loc.gov/2022025890
LC ebook record available at https://lccn.loc.gov/2022025891
ISBN: 9780367208929 (hbk)
ISBN: 9780367208936 (pbk)
ISBN: 9780429263965 (ebk)
DOI: 10.4324/9780429263965
Typeset in Berling and Futura
by codeMantra
Contents
Preface ix
1 What is service? The origin and evolution of customer experiences 1
2 Servicescape: Visualizing service quality and value 25
3 Service quality: Tools and strategies 41
4 Customer attitudes and emotions: From delight to outrage 62
5 Waiting for service: Strategies to reduce waits and the perception

of waiting 80
6 Co-creation and customization: Engaging the customer in value

creation 96
7 Electronic word of mouth: Understanding the customer’s voice 113
8 The sharing economy/peer-to-peer services: Revolutionizing the

service market 127
9 Subscription services and new business models 143
10 Service technologies: Delivering a seamless experience 158
11 Cross-cultural guest interactions: Appealing to a broad customer base 177
12 Recovery strategies for service managers 193
13 Recruiting, training, and engaging talent for service organizations 213
14 Customer loyalty, analytics, and relationship management 233
15 Service innovation: The key to business growth and sustainability 250
Index 269
Preface
Service is about giving; giving our time, talent, skills, effort, expertise, hospitality, and cre-
ativity. Giving is an expression of dedication, respect, care, and love of neighbor. Everyday
service workers around the world give a part of themselves to others. Customers and
guests alike enjoy the benefit of such labor and in exchange they reward service providers
with their resources, time, participation, and ideas. This textbook is our humble contribu-
tion to the tireless efforts of those who serve. Within its pages, we hope that those manag-
ing customer experiences will acquire and enhance their skills to delight their customers.
Whereas the basic principles of service such as friendliness, courtesy, and profession-
alism remain the same, the science of services marketing, hospitality management, and
consumer behavior has evolved significantly to offer the promise of creating more sophis-
ticated service enterprises. Furthermore, best industry practices have advanced as busi-
nesses become smarter and more innovative. This textbook combines theory and practice
to provide recommendations for current and future leaders to transform their organiza-
tions. We offer the latest research findings and provide specific examples of organizations
that excel in customer service.
This textbook is for those who create the conditions where exceptional service can
flourish. The target audience includes students in management, marketing, and hospi-
tality programs as well as current practitioners in those fields wishing to enhance their
skills and expand their knowledge. We believe that some of the essential tools needed to
manage service organizations are articulated in this book: how to set the physical scene
for services (servicescape), tools for service quality management, the theory and practice
on customer satisfaction and delight, and engaging in effective service recovery efforts, as
well as involving customers in co-creating service experiences. We wanted to produce a
book that considered the evolution of services and use of technology. Therefore, the book
contains principles and practices regarding service innovation, subscriptions, and peer-to-
peer services. Additionally, this book provides insights on how to train and develop service
workers and how to manage cross-cultural guest interactions. Ultimately, service enter-
prises need loyal customers who will show preference and re-patronage toward a business
or brand. Consequently, we provide practical implications for organizations who wish to
achieve customer loyalty through useful tools and strategies.
As we conclude the writing of this textbook, we’re excited about the future of the ser-
vices industries. As new business models develop, new enterprises grow, and the next gen-
eration of leaders takes the helm, we hope that this book can act as a thought-provoking
x Preface
resource. Every year, research expands what we know and creates questions about what
we are yet to understand. With each passing day, companies find different ways of oper-
ating, training, and marketing themselves. It is our hope that this resource brings new
perspective into this evolving field.
To those who serve and those who lead and to those who educate and those who seek
knowledge, we present Customer Service Marketing: Managing the Customer Experience.
Edwin N. Torres and Tingting Zhang

CHAPTER 1
What is service? The origin

and evolution of customer
experiences
FIGURE 1.1 Customer experiences provide people several benefits, including relaxation,
escape from the ordinary, and connection to one another.
Source: Shutterstock.
LEARNING OBJECTIVES
• Differentiate between commodities, products, services, and experiences

• Evaluate the unique characteristics of services as compared to products
• Explain the benefits and value generated by services
DOI: 10.4324/9780429263965-1
2 What is service? The origin and evolution of customer experiences
• List different types of customer experiences

• Analyze the interface between various products and services
• Apply service theories in the design and delivery of customer experiences
KEYWORDS
• Customer Service
• Customer Experience
• Value
• Product
• Commodity
• Service Features
• Intangibility
• Perishability
• Inseparability/Simultaneous Consumption
• Variability/Heterogeneity
• Interaction
• Distribution Channels
• Benefits of Service
• Types of Services
• Types of Experiences
• Interface between Products and Services
• Service Encounter
• Moments of Truth
• Business Services
OPENING STATEMENT
Delight us; entertain us; show us that you care. Make us feel special, unique, and valued;
anticipate our needs. Take us on a journey to a place that we haven’t dreamed of. Listen
to us, be empathetic, and guide us through the challenges of a complex world. Make our
life more convenient, luxurious, and innovative. Involve us on the creation of something
truly personal, unique, and beautiful. Help us connect with one another and with our-
selves. Make us feel thrilled, excited, joyful, and enthusiastic. And when everything has
concluded, give us cherished memories to recall, to share, to relive (Figure 1.1).
What if every customer clearly articulated what service is? What if they could state in
a concise manner what they expect from their service providers? While we don’t presume
to speak for every customer, we believe that the emerging statement would read like
the preceding paragraph. Having accrued both the theoretical research and best industry
practices, we present in this chapter and throughout this book the meaning of service, its
What is service? The origin and evolution of customer experiences 3
critical components, challenges, and opportunities. Most customers experience the bene-
fits of service and most service providers understand the individual components that make
their operation function. This book is about both the customer experience and the deliv-
ery of service. Nevertheless, this book goes beyond the customer and operator viewpoints,
to present the intersection between the two and explain how service and experiences can
be created and transformed.
This book presents topics of customer attitudes and emotions: “delight us…make us feel
special…make us feel thrilled; excited”.The book also explains the process of service recovery:
“Listen to us; be empathetic, and guide us through the challenges of a complex world”. Cus-
tomer expectations is yet another central topic of this textbook: “anticipate our needs”. The
design of the physical space of service and sensory experiences that transform an intangible
experience into a tangible place is also discussed: “Take us on a journey to a place that we
haven’t dreamed of”. Involving customers in co-creation of value throughout services is yet
another theme presented: “Involve us on the creation of something truly personal, unique,
and beautiful”. The book also explores how customers influence one another and their role
on how they consume services: “Help us connect with one another and with ourselves”. Ulti-
mately, customer experiences are psychological in nature, and thus a truly memorable expe-
rience remains in the customer’s memory, hence the statement: “And when everything has
concluded, give us cherished memories to recall; to share; to relive”. For now, let us begin by
exploring the definitions of customer service and experience and deconstructing their most
critical components.
SERVICE DEFINITION AND ITS BENEFITS
As people engage in the exchange process, they create value for one another. Through-
out history, human beings have traded goods (i.e., physical products) for other goods or
currency. However, value can also be provided in a more intangible manner. More specifi-
cally, people and organizations can create, deliver, and exchange valuable services for one
another. Services can come in many different forms. In fact, in many developed econo-
mies, service-related industries produce the majority of employment and Gross Domestic
Product (GDP). Entrepreneurs and corporate executives have developed the concept of
service into national and international business entities that serve millions of people on a
daily basis and create economic impacts for the locations in which they operate.
In a broad sense, service can be defined as the provision of economic value that is intan-
gible in nature. In a more specific sense, services can fulfill various necessities and desires
for different types of people. A service may entail a friendly welcome, a smile, and an ele-
ment of human charisma. For instance, when a customer takes a cruise vacation, he or she
might expect more than a cabin and amenities. Customers will likely expect cruise staff
to provide timely assistance, engage in appropriate conversation, greet and smile as they
interact with one another, and take care of many of the tasks they would do back at home
(e.g., cooking, cleaning, laundry, etc.). Services may entail an entertainment component.
For instance, visitors to a theme park may expect to be amazed by creative rides, amusing
shows, and an amazing display of fireworks. In short, part of offering services is to create
amusement, stimulate curiosity, and inspire customers (Figures 1.2 and 1.3).
FIGURE 1.2 Friendliness is an important attribute of customer service and one of the reasons
why customers keep coming back.
Source: Shutter Stock.
FIGURE 1.3 Visitors to Walt Disney World are entertained by their evening fireworks display.
Source: Unsplash/Vinayak Sharma.
In a time-starved world, many customers seek convenience within the services they
purchase. One way in which the business community has reacted to this need is by creating
quick service restaurants (QSRs). When visiting a QSR, a customer will not likely expect
a gourmet five-course dining experience. Instead, they’re buying time and sponsoring a
service that delivers a quick meal at a reasonable price. As customers experience services,
they often expect empathy from their providers. For example, a patient at a hospital may
need medicine, surgery, and the use of medical equipment. However, they may also want
empathy from nurses, doctors, and other medical personnel. Consequently, another way
in which services add value to the human experience is by engaging in a journey together
toward better health and demonstrating compassion in the process (Figures 1.4 and 1.5).
Customers often want to feel unique and special. Therefore, services can provide a
sense of luxury and heightened social status. Consider a guest staying at a 5-star hotel.
Other (inexpensive) hotels can provide the need for accommodation. However, the lux-
ury hotel stay contains the implicit promise that the staff will do whatever it takes (within
what is moral and ethical) to make the guest stay better. The sense of exclusivity and
uniqueness of both the facilities and the higher quality of service delivered is just another
reason why people desire services. A service can also provide expertise when needed.
Consider the role of a financial/investment advisor. The advisor does not sell a tangible
product; instead, he or she sells their knowledge, skills, and experience in helping clients
attain their financial objectives. Since we live in complex world, we often rely on the
services provided by others with different skill set in order to improve the quality of our
lives (Figures 1.6 and 1.7).
FIGURE 1.4 The drive-thru at Starbucks and other restaurants is an example of how services
provide convenience to their customers.
Source: Pixabay.
FIGURE 1.5 Empathy is an important benefit of service, especially when people are in a vul-
nerable position as exemplified by this hospital picture.
Source: Stocksnap/Direct Media.
FIGURE 1.6 In addition to obtaining a room for the night, guests at luxury resorts often enjoy a
sense of luxury and status.
Source: Stocksnap/World Travel Adventures.
FIGURE 1.7 Some services rely on expertise, as is the case of Financial Advisors.
The need for affiliation is yet another need that service providers can assist with.
Consider a customer who purchases a guided tour. While the customer is buying into
the expertise of the tour guide, purchasing/pricing power of the operator, and conve-
nience in planning, customers may also desire to enjoy the vacation experience with
one another. Interactions with both friends and family and other customers they meet
along the way can enhance the experience. Given the amount of time spent at work
and interacting with technology, services can help us connect with one another. A ser-
vice may also bring relaxation in a stressful world. For instance, a customer visiting a
spa seeks to decompress and have a relaxing experience. Through the use of various
environmental queues (e.g., music, lighting, scents) and human elements (e.g., ther-
apist offering a massage), customers can obtain something which might be harder to
attain through products alone: a sense of relaxation. Finally, services often present a
solution to a problem. Consider the services offered by insurance providers. A single
individual might have difficulty building enough cash reserves to deal with unexpected
events. A hurricane may cause damage to a home and an accident can destroy a car
and cause injuries to people. Consequently, insurance is the intangible product which
helps restore assets and compensate for damages when the unexpected happens. Con-
sequently, services can provide peace of mind and solutions to common human dilem-
mas (Figures 1.8 and 1.9).
FIGURE 1.8 Customer experiences allow people to connect with one another.
FIGURE 1.9 The services of a spa bring a sense of relaxation to their customers.
SERVICE COMPONENTS
Some of the early research in the field of services marketing sought to establish a frame-
work of characteristics that differentiate services from products. The four traits of ser-
vice initially identified include intangibility, inseparability (also known as simultaneous
consumption), heterogeneity (also known as variability), and perishability (Zeithaml
et al., 1985). Many of the components initially proposed still hold true today. However,
please take caution and understand that services and products are often connected to one
another. That is to say, a service often involves the purchase of related products and a
product often has supporting services attached to it. Consequently, we explain the char-
acteristics of service from the classic frameworks, but also explain some of their limita-
tions. The first trait to be presented as a unique service feature is Intangibility. Services
are intangible because the customer can’t touch them or take them home. The feature
of intangibility implies that “because services are performances, rather than objects, they
cannot be seen, felt, tasted, or touched in the same manner in which goods can be sensed”
(Zeithaml et al., 1985, p. 33). It is worthwhile mentioning that many service providers
make their service tangible by appealing to the human senses of sight, taste, scent, touch,
and sound. Hotels have rooms with décor, furniture, and tangible amenities. Restaurants
serve food and theme parks use music, sound, and architecture to make their service more
tangible. Marketers often use appealing images and sounds to promote services including
resorts, cruises, restaurants, and theme parks. Compared to a product, services can be con-
strued as intangible; however, take note of the fact that service providers often use tangible
queues in the process of delivering customer experiences.
Another classical feature of service is that of simultaneous consumption (also referred
to as inseparability). Unlike products, services can’t be stored in a warehouse. Physical
products are often created, produced, and stored at a different time and place than that
which the customer uses (i.e., consumes) them. In contrast, services are often “produced”
and consumed at the same time. In explaining the concept of inseparability, Zeithaml
et al. (1985) argued that “whereas goods are first produced, then sold and then consumed,
services are first sold, then produced and consumed simultaneously” (p. 33). Consider a
person taking a ballroom dance lesson. The lesson is offered by the instructor at the same
time and location in which it is being taken (consumed) by the dance student. The con-
cept of simultaneous consumption holds true in many service scenarios. However, at times
customers can take pictures, videos, and purchase a product that reminds them of a certain
experience. For example, a tourist may visit a destination once. He or she would have “con-
sumed” the experience when they’re at the city or attraction. However, they may come back
home with stories to tell, pictures to share, and a souvenir to display. All of these can help
the former tourist recall and in a sense relive the psychological benefits of the vacation itself.
Most services involve the element of human interaction. In most circumstances, ser-
vices are delivered face-to-face from the service provider to the service recipient. For
example, a customer getting a haircut from a hairdresser will inevitably have to interact
with the service provider. Similarly, a patient at a hospital will likely interact with a nurse.
It is worthwhile noting that with the advent of many self-service technologies (SST),
service can be either mediated or completely delivered via technological interface. For
example, a hotel guest may choose to stop by the front desk in order to check out of a
hotel. However, the same customer may use a smartphone application (app) or a kiosk in
the lobby to check out without ever talking to another human being.
Getting products to the right customers at the right time has traditionally been a criti-
cal element of a company’s marketing mix (the quintessential “p” for place in the five “p’s”
of marketing). With regards to tangible products, they are distributed via air, sea, and land.
Many times, these products make their way to a retail store where they are subsequently
sold to the final customer. Online retailers still need logistics to get their products from
the manufacturer to the processing locations and eventually delivered to the consumer’s
home. In contrast, services don’t need to be shipped via air, sea, and land. Therefore, their
distribution channels are different than those of tangible products. Take the example of
a hotel visit. A customer will not get the hotel room in their mail or visit a retail store in
order to acquire it. Instead, he or she could dial into a call center or visit the company’s
proprietary website to make a reservation. The same customer may use the services of an
Online Travel Agency (OTA) such as Booking.com or Expedia.com in order to secure their
reservation. Perhaps the customer is part of a tour group in which case, the customer will
not even make the reservation him/herself. The tour operator will book these rooms at a
wholesale basis from the hotel at a discounted rate.
Services have been conceptualized as being perishable. Some commodities and prod-
ucts are perishable as well. In fact, many food products have expiration dates. Services
are perishable because of their extremely limited “shelf life”. Zeithaml et al. (1985) argue
that “because services are performances that cannot be stored, service businesses find it
difficult to synchronize supply and demand” (p. 34). Consider the example of a cruise
ship. The cruise operator will endeavor to sell most of its cabins before the cruise sets sails.
After the cruise departs, any unsold cabins have essentially perished. That is to say, once
that cruise leaves the port, the cruise line will no longer be able to sell these empty cabins
and the cruise fares locked in for the journey. While the cruise can still sell excursions,
beverages, and other related services, they will not be able to get any additional customers
on the ship. Airlines face a similar dilemma. Once the gate door is closed, the airplane has
all the passengers it will ever have in that flight. Any unsold seats have “perished” and will
not be able to be sold at a later time. One way in which service providers manage their
supply and demand is by adjusting their pricing so as to match supply and demand better.
Practices of revenue management have become entrenched in the service sector. Beneficial
in some aspects (e.g., increasing revenues during busy seasons) and controversial in others
(e.g., overbooking practices causing customers distress), service operators attempt to max-
imize the use of a very perishable product.
The final feature which has been used to differentiate products and services is that
of heterogeneity or variability. Many products are standardized and their quality can be
measured partially in terms of adherence to technical specifications. Many car tires are
produced using a series of standards and their benefits can be measured in terms of the
durability (e.g., number of miles the tires can last), comfort (e.g., lack of road noise), and
stopping distance in both dry and wet conditions. In contrast, services tend to be more
variable. While many chains attempt to manage their variability through standard oper-
ating procedures and training, producing consistent services is a challenge for the best of
corporations. Many franchised QSRs struggle with this issue. Operating in different cities,
states, and countries with different employees, management teams, and suppliers can make
creating a standardized product (e.g., hamburger) challenging throughout the chain. In
describing the concept of heterogeneity, Zeithaml et al. (1985) state that “the quality and
essence of a service can vary from producer to producer, from customer to customer, and
from day to day” (p. 34). In some cases, this variability can be a unique strength of services.
Consider a hotel concierge; throughout the interaction with the customer, this individual
can secure services and experiences that are uniquely tailored to one particular hotel guest.
Throughout the interactive process, a customer may end up obtaining a service which is
more suited to their needs and desires, as opposed to a standardized product. Indeed, the
heterogeneity that makes services highly customizable and unique can also make the mea-
surement of service quality more challenging. Later in this book, we address different ways
in which service organizations can measure their quality.
Services possess unique characteristics as compared to products. Intangibility, simulta-
neous consumption/inseparability, interaction, distribution channels, perishability, and vari-
ability/heterogeneity are all traits unique to services. Caution should be exercised in making
broad generalizations about services. As noted, this framework has its limitations. The inter-
face between products and services is one of the reasons why these traits have limitations. In
fact, one prominent service researcher noted that “all produce and sell both goods and ser-
vices, although the ratio might be different between the two” (Gummesson, 1991, pp. 5–6).
Let us consider the example of an automobile. The car itself is a product. However, for
this highly complex product, several supporting services are necessary. For instance, the
car dealership offers maintenance services and sales for a vehicle. Customers will likely
need other services such as financing and insurance to protect their purchase. Roadside
assistance and car washing are yet other services related to the purchase of the original
product. On the opposite end of the spectrum, let’s consider a couple that want to com-
pete in ballroom dancing. The main service they would need to obtain is dance lessons.
These lessons may be individual, group lessons, or a combination of both. Dance lessons
would constitute a service in this example. In order to attend the competition, they will
likely travel and stay at a hotel (another service). Styling and make-up would be needed
to make the couple look their best. So far, all of these components seem to entail services.
However, in order to dance, the couple in this scenario will need dance shoes (i.e., a prod-
uct). The same couple will need attire/costuming, accessories, and other more tangible
elements (Figures 1.10 and 1.11).
Hoteliers might think they’re in the service business and in a broad sense they are. Nev-
ertheless, this broad stroke may neglect to consider that the hotel itself has product-like fea-
tures. A lobby has interior design elements, lighting, temperature, music, and at times aromas
which are tangible to the human senses. Guests will feel the sheets in the bed, glance at the
view from their room, taste the food at the hotel’s restaurant, and hear the music playing
in the lobby. Hotel guests will also obtain luggage assistance from a bellhop, help with mak-
ing reservations from the concierge, a welcome and orientation from the front desk clerk,
cleaning services from housekeeping, and timely repairs from the engineering department.
Restaurants are yet another clear example of the intersection of products and services. A
customized product is created in the kitchen (e.g., entrée, dessert). Restaurant patrons will
be able to notice (see) the presentation of the meal, taste its flavor, sense its temperature,
and smell its aroma. Customers at that same restaurant will be able to ask questions of the
Car Sales
(service) Car Insurance
(service)
Car Wash Roadside

(service) Assistance
(service)
Car
Maintenance Car Financing
(service) (service)
Car
(product)
FIGURE 1.10 Products and services are connected.

Source: Shutterstock/Grzegorz Czapski.
Lessons
Dance shoes
(service)
(product)
Dance attire Styling and

(product) makeup
(service)
Jewelry /
accessories
(product) Travel to
competition
(service)
Ballroom Dancing
Competition
(Experience)
FIGURE 1.11 Products and services are connected.

server, engage in appropriate conversation with the staff, and communicate any discrepan-
cies between what was ordered and received. These are all services provided by the staff at
the restaurant (e.g., server, server assistant, host/hostess, sommelier, etc.), as noted products
and services are related in more ways than apparent. To add complexity to these concepts,
in the past three decades the concept of customer “experiences” was introduced along with
its definition and framework (Pine & Gilmore, 1999). We now turn our attention to under-
standing the unique characteristics of customer experiences, how they’re designed by pro-
viders and experienced by customers (Figures 1.12 and 1.13).
Service Product
FIGURE 1.12 Hotel product and service.

Service Product
FIGURE 1.13 Restaurant product and service.

WHAT ARE CUSTOMER EXPERIENCES? DIFFERENCES

BETWEEN PRODUCTS, SERVICES, EXPERIENCES, AND
TYPES OF CUSTOMER EXPERIENCES
Between the 1990s and early 2000s, service researchers and managers began conversation
on the topic of “customer experiences”. In the book The Experience Economy, authors Pine
and Gilmore (1999) define, classify, and explain the concept of experiences. Accordingly,
experiences are a distinct economic proposition as compared to products and services.
At the most basic level of value creation is the concept of a commodity. A commodity is
an undifferentiated item which can be used as an input in the manufacturing process. For
example, gold, coffee beans, wood, and popcorn pebbles are all examples of commodi-
ties. These items can be used by people for different purposes. However, in its raw form,
they are traded at lower prices than their product counterparts. In contrast, a product
is a physical item which has received some level of processing and differentiation. For
example, gold can be transformed into a unique piece of jewelry sold at a retailer; coffee
beans can be processed, ground, and transformed into your favorite coffee brand sold
at the supermarket shelves; wood is transformed into furniture which can be sold by a
furniture store or an online retailer; and popcorn pebbles can be processed and mixed
with other ingredients, packaged, branded, and placed on the supermarket shelves. These
are all examples of products. As noted, these items typically involve a manufacturing or
artisanal process, features (both tangible and psychological) which set them apart from
other items, a specific name or brand, and marketing to facilitate the exchange process.
Products often demand higher prices than commodities due to their differentiation and
processing.
Services are the next level of value generation in the continuum which starts with com-
modities and follows with products. In contrast to products, services are often believed
to be intangible, inseparable, interactive, perishable, and variable (Zeithaml et al., 1985).
Services often require a greater element of human interaction, greater customization,
and more psychological features as compared to products. As mentioned earlier in this
chapter, services can generate many benefits, including convenience, relaxation, entertain-
ment, expertise, solutions to problems, and friendliness. An airline offering transportation
to passengers from one city to the next is an example of a service. Customers don’t own
the airplane, but they will benefit from both the transportation and customer service
offered by the airline. A service can also be provided by a car repair shop. Instead of buy-
ing products (e.g., oil, brakes) and fixing the car yourself, you can rely on the expertise
of a trained technician to maintain your vehicle. Pizza delivery is yet another example of
service: it saves time and effort by having someone else both cook and deliver the pizza to
your front door. The services of a mechanical repair shop will inevitably be more expen-
sive than buying the products and fixing the car yourself. A pizza delivered to your door
will also be more expensive than making the pizza yourself with raw ingredients (not
to mention the labor of purchasing the items and transporting them home). Therefore,
services often command higher prices as compared to products. It should be noted that
delivering as service also involves costs for the provider. The car repair shop must hire
qualified technicians; the airline must hire pilots, flight attendants, and reservation agents;
and the pizza delivery service must compensate drivers for vehicle usage, gas, and related
expenses.
At the highest level of economic value lies the provision of customer experiences.
Researchers and industry managers have differing definitions of what an experience is and
how it can be attained. Pine and Gilmore (1999) argue that “an experience occurs when
a company intentionally uses services as a stage, and goods as props, to engage individual
customers in a way that creates a memorable event” (p. 98). Furthermore, they describe
the key differentiating feature of experiences to be memorability. Subsequent studies
have shed light on the meaning of customer experiences. Berry et al. (2002) argued that
experiences involve the integration of a series of clues that appeal to the customer’s emo-
tions. Rageh et al. (2011) define customer experiences as “emotions provoked, sensations
felt, knowledge gained and skills acquired through active involvement with the firm pre,
during, and post consumption” (p. 208). Another way to explain the differences between
products is as follows:
Experiential purchases are those made with the primary intention of acquiring a life
experience: an event or series of events that one lives through. Material purchases
are those made with the primary intention of acquiring a material good: a tangible
object that is kept in one’s possession.
(Van Boven & Gilovich, 2003, p. 1194)
Mascarenhas et al. (2006), who analyzed the concept of “Total Customer Experience”,
summarized its components including physical moments, emotional moments, and value
chain moments. Customer experiences are social in nature (Lemon & Verhoef, 2016).
Furthermore, psychologists contend that experiences make people happier than material
possessions (Van Boven & Gilovich, 2003). Both the anticipation of an experience and
recalling an experience after the fact generated more positive emotions as compared to
the acquisition of products. Furthermore, experiences are theorized to be more central to
an individual’s identity, are more open to interpretation, and they carry greater social value
(Van Boven & Gilovich, 2003).
In order to illustrate the unique nature of experiences, we provide several examples.
Theme parks are a prime setting for the stating of customer experiences. Customers
who visit the park will encounter unique design elements such as architecture and inte-
rior design relative to the theme the company wishes to portray. As guests walk through
various attractions, they will listen to music related to the area, interact with characters,
immerse themselves in rides, and watch carefully planned shows. Employees will wear
special costuming, use verbiage appropriate to the theme, and sell food items and mer-
chandise designed to enhance and extend the customer experience while generating
additional cash flows for the provider. When explaining the progression of economic
value (Pine & Gilmore, 1999), we used an example of a popcorn pebble – a commodity.
Furthermore, we pointed out that this pebble could be mixed with different ingredients,
packaged and marketed in a way that creates a differentiated product (e.g., microwave
popcorn). This popcorn can be sold as part of a customer experience: visiting the movie
theater. The experience of going to the movies involves a social element (e.g., interac-
tions with friends, family, and occasionally other customers). Movie theaters also feature
a larger screen, enhanced sound, comfortable seating, unique interior décor, service pro-
vided by staff, and the scent of popcorn as guests walk through the connection stand.
In light of the elements involved, popcorn sold in the movie theater is part of a larger
experience which commands a premium price. Cruise lines are yet a third example of
a carefully orchestrated customer experience. While on a cruise, passengers are able to
witness shows and other forms of entertainment, they visit different ports of call, eat
at various restaurants, enjoy the scent of the ocean, sense of movement in the ship, the
friendly service offered by the staff, and interactions with both friends and family and
other guests (Figures 1.14–1.16).
FIGURE 1.14 Popcorn pebbles are considered a commodity.

Source: Pixabay.
FIGURE 1.15 Microwave popcorn is considered a product.

Source: ShutterStock.
FIGURE 1.16 Popcorn at the movie theater is part of a broader experience.

These three examples reveal specific features of experiences which distinguish them
from commodities, products, and services. Customer experiences often appeal to the senses.
What does a movie theater taste like? For many, it tastes like popcorn. What does a visit to
the Magic Kingdom in Disney World look like? To many, it looks like Cinderella’s castle.
What does a visit to Starbuck’s smell like? Most people would remember the scent of coffee.
What does a visit to the Rainforest café sound like? For many, it sounds like rain, thunder,
and the sounds of jungle animals. What does a visit to the spa feel like? To many, it feels like
warm oil and stones and a calming touch. Besides appealing to the senses, experiences are
often shared with others. Although a person can watch a movie at home by him or herself,
they might prefer to share the experience with a date at the movies. Theme park visitors
often interact with their friends and family throughout the visit. Cruise passengers often
interact with other guests while dining and using the multiple shared amenities of the ship.
Even people that travel solo will likely interact with others during their journey.
Experiences are described as memorable (Pine & Gilmore, 1999). This means that they
can be recalled at future times. Although experiences may take place at a physical loca-
tion and a determined time in history; they often transcend the place and time in which
they took place. The cruise passenger may share stories about their journey with others.
The movie theater visitor might recall previous movie experiences by the smell of fresh
popcorn. The theme park visitor might be “brought back” to their last visit when viewing
the pictures taken. Customer experiences often involve an element of human creativity or
human touch. Just like a performance by your favorite artist, those involve in the design
of service spaces and processes; carefully think about what the service is and how it might
be perceived. Architects, interior designers, choreographers, fashion experts, composers,

illustrators, and many others contribute their talent to create unique experiences. In that
regard, imagination and creativity can be a differentiating factor for one organization.
Schmitt (1999) classified customer experiences in five types: feel, think, act, sense, and
relate. Indeed, service providers can stage successful customer experiences by appealing
to their emotions, senses, need for affiliation, and desire for knowledge. Pine and Gilmore
(1999) argued that experiences can be classified by the degree of customer participation
(active vs. passive) and the degree of connection with the environment (absorption vs.
immersion). Their framework proposes four types of experiences to include entertain-
ment (high absorption, passive participation), educational (high absorption, active partic-
ipation), esthetic (high immersion, passive participation), and escapist (high immersion,
active participation). Using concepts of “flow” and “peak experience”, researchers have also
proposed the concept of a Transcendent Customer Experience (TCE). Customer expe-
riences are ultimately a psychological construct that result from the careful orchestration
of various tangible and intangible elements. From a psychological viewpoint, participation
in certain activities has been demonstrated to cause optimal levels of arousal in the brain
(Andersson, 2007).
Customer experiences can take place in both the live and virtual environment (Bleier
et al., 2019). Furthermore, online customer experiences can be categorized in four distinct
areas: informative experiences, entertaining experiences, social experiences, and sensory
experiences. Informative experiences rely on providing more descriptive details, com-
parisons, and providing recommendations and focusing on key attributes (Bleier et al.,
2019). Informative experiences appeal to the customer’s cognition. Entertaining expe-
riences focus on engaging customer participation and engaging in the “spectacle” of the
online activities by adding fun and emotionally appealing activities and content. Social
experiences are those that involve the element of human interaction and thus appeal to a
customer’s need for belongingness. Sensory experiences appeal to the human senses such
as sight, smell, and hearing. In the online realm, these can be evoked through imagery
(Bleier et al., 2019).
MOMENTS OF TRUTH
Many manufactured products are used throughout the course of several months or years.
In contrast, services are often produced and consumed simultaneously. In the service
industries, many managers use the concept of “moments of truth” to refer to critical ser-
vice encounters which have the potential to make or break the experience. The concept
of moments of truth is frequently attributed to Jan Carlzon, the former CEO of Scandina-
vian Airlines, who wrote a book titled Moments of Truth. Carlzon (1987) argued that the
success of his company came down to thousands of customer interactions, each of which
lasted seconds. Ever since Carlzon proposed the concept, many have argued that there are
multiple moments of truth (Moran et al., 2014). Some argue that there is a “zero moment
of truth” which takes place during the online information search consumers engage in. The
second and third moment of truth take place during the purchase and experience of using
the product and service. During the first moment of truth, companies focus on obtaining
the consumer’s attention and communicating the benefits of the service. During the sec-
ond moment of truth, companies focus on the customer experiencing the benefits of the
product or service (Löfgren, 2005). Finally, a third moment of truth occurs when consum-
ers engage in word-of-mouth communications with other consumers (Moran et al., 2014).
It is important to know that many use the term moment of truth, service encounter, or
touchpoints interchangeably (Figure 1.17).
Every service business needs to understand the nature and timing of their customer
interactions. Some companies may benefit from mapping the customer journey. Accord-
ingly, creating a customer journey map allows service organizations to visualize how con-
sumers search for information and ultimately make a purchase decision. The customer
journey can be mapped in a diagram. In many instances, the customer journey mapping
includes the following steps: Awareness, Consideration, Preference, Action, and Loyalty
(Terra & Casais, 2021). Another way to examine this journey is by studying the steps in
the purchase process to include discovery, research, decision, purchase, and postexperi-
ence (Terra & Casais, 2021). In order for each moment of truth to be successful, managers
need to examine both their human resource practices and operational procedures. By rely-
ing on the existing related to service encounters, training programs and standard operating
procedures can be developed to further these goals. For example, Lloyd and Lusk (2011)
classified the behaviors that led to successful service encounters and in turn resulted in
FIGURE 1.17 Many service industries such as airlines are characterized by short yet impactful
interactions, which are often called “moments of truth”.
Source: Shutterstock/RUBEN M RAMOS.
FIGURE 1.18 Service organizations find value in mapping their customer’s journey as they
gain awareness, research, consume, and evaluate the service.
consumers feeling a sense of comfort within these moments of truth. Accordingly, two
broad categories called “service manner” and “need identification” emerged. Service man-
ners included showing patience toward customers, being helpful, smiling, politeness,
cheerfulness, and demonstrating passion for the job. Items included in the need identifica-
tion category included asking for customer preference, fulfilling their needs, anticipating
needs, and demonstrating knowledge (Lloyd & Lusk, 2011, p. 182). Using these categories
of positive service encounters, trainers can develop scenarios and similar training materials
to illustrate the best ways to generate value for the customer and establish a sense of com-
fort during these moments of truth (Figure 1.18).
THE SERVICE BUSINESS
Service organizations span a variety of economic sectors, local and international busi-
nesses, and value-generating activities. Services can be provided to the consumer directly
or to another business entity. The consumer is the final recipient of the value generated by
the service organization. When a customer stays in a hotel, he or she has become a con-
sumer of the lodging industry. In contrast, when a company creates customized software
for another business, they have provided a business service. In other words, the software
developer is providing a service directed at another business. The final user of this service
will be the employees of the organization purchasing the software.
The businesses involved in providing services can be a major part of a country’s econ-
omy. One way to measure the size of the service industries is by analyzing the stock
market. In this regard, the S&P 500 provides an index of the top 500 publicly traded com-
panies in the United States. Economic sectors are typically categorized as communica-
tions, consumer discretionary, consumer staples, energy, financials, health care, industrial,
information technology, utilities, and real estate. In 2018, industrials (i.e., manufacturing-
based operations) accounted for less than 10% of the index and other sectors which typi-
cally generate products such as consumer staples (7%) and commodities such as materials
(2%) accounted for relatively small weightings of this index. In contrast, several sectors
dominated by service organizations such as healthcare (15%), information technology
(21%), communications (10%), and consumer discretionary (10%) accounted for the bulk
of these large publicly traded corporations (Sibilis Research, 2019). Another way to mea-
sure the impact of services to an economy is by looking at the percentage of the GDP of
that country generated by services. For instance, in 2021 in the United States, the service
sector generated 67% of the country’s GDP (The Atlantic 2022). Other countries with
large service sectors include China, Japan, Germany, the United Kingdom, France, Italy,
Brazil, and India. Today, the bulk of US exports are comprised of services, including travel
and transportation, finance and insurance, movies, software, media, and intellectual prop-
erty (Isidore, 2018).
Given the number of service enterprises, we don’t attempt to enumerate all of them.
However, we do provide an overview of the main types of service-oriented enterprises.
Perhaps the most familiar service industry to most consumers is retailing. The retail indus-
try includes supermarkets, clothing stores, online shopping, furniture stores, car dealer-
ships, and many others. It is estimated that the retail industry generates $22 trillion in
worldwide sales (Emarketer, 2014). Another important service sector is the restaurant
or foodservice industry. This economic sector includes restaurants of many types (casual,
fine dining, quick service), catering services, managed food services (e.g., a third party
company that manages an employee cafeteria), coffee shops, and many others. According
to the American Restaurant Association, the US restaurant industry generates $825 billion
in revenues and employs 15 million workers (ARA, 2019).
As people travel, they often need the services provided by several industries, includ-
ing lodging, transportation, cruises, and various tourist attractions. The lodging industry
includes hotels of various kinds (e.g., economy, luxury, resort, city center, extended stay),
shared ownership (time share) properties, peer-to-peer accommodation (e.g., Airbnb),
hostels, campgrounds, and many others. The lodging industry generates $168 billion in
annual revenue in the United States (AH&LA, 2022) and $801 billion globally (Globe
Newswire, 2021). The transportation industry includes those who facilitate the timely
movement of people and merchandise. Airlines, taxis, shuttle bus services, and peer-to-
peer transportation (e.g., Uber and Lyft) are all players in this economic sector. The airline
industry is estimated to generate $1,336 billion worldwide (The Business Research Com-
pany, 2022). Presenting an interesting mix between transportation, attractions, and lodging,
the cruise industry is a growing economic sector that appeals to vacationers worldwide.
Cruises present an example of an industry with significant amount of consolidation. For
example, in the cruise industry, the three largest companies (Carnival, Royal Caribbean,
and Norwegian along with all the brands in their portfolios) accounted for most of the
cruise travelers. Travel attractions can include a variety of venues which provide enter-
tainment to visitors. The theme park industry is a popular sector among those that wish
to be amused, entertained, and thrilled. Other attractions may include museums, national
parks (nature-based attractions), amusement parks, historical sites, sport venues, and many
others may be classified as part of this sector. The global theme park industry is estimated
to generate $63 billion each year (PR Newswire, 2021). Events are yet another industry
that is important as people interact with one another. The events industry is intricately
connected to other service sectors. For instance, an event can take place at a convention
center, a hotel, wedding venue, restaurant, cruise, or a popular attraction. Furthermore,
individuals provide event-related services such as the rental of audiovisual equipment,
decorating, meeting planning, catering, photography, and many others.
Another large international set of industries providing services to the public are those
involved in finance. The financial industries include retail banking, commercial bank-
ing, investment banking, investment advisory services (i.e., wealth management), insur-
ance, venture capital, and investment services such as mutual funds, hedge funds, stock
trading, and many others. The financial sector is particularly critical for the national and
international economy as it facilitates the flow of funds from various parties. In today’s
knowledge-based economy, the technology sector has gained greater relevance. In fact,
Information Technology has the largest sector weight in the S&P 500. Although some
in the technology sector manufactured products (i.e., computer hardware), this industry
is largely dominated by service-related organizations. In fact, technology services span a
variety of businesses that create software and develop applications (apps), electronic mar-
keting, search engines, and electronic commerce solutions. The communications sector is
another one you might be familiar with. Many service organizations provide the ability to
communicate via cellphone, internet, television, and many others. Finally, there are those
people and entities that keep us healthy throughout our life spans. The healthcare indus-
try includes hospitals, physician offices, rehabilitation centers, outpatient facilities, and
senior living communities. The global healthcare industry is estimated at $8 trillion and
accounts for approximately 10% of GDP in developed countries (Stasha, 2021).
DISCUSSION QUESTIONS
• What are some differences between commodities, products, services, and experiences?
• Why might a customer purchase a service instead of product? What benefits might he
or she derive from services?
• How can you stage a customer experience? What elements might you want to develop
in creating a memorable experience for the guest?
• Products and services are often related to one another. Can you provide some examples
of products that have supporting services? Alternatively, can you provide some exam-
ples of services that have a product component?
• What are some unique characteristics of services?
• At times it might be challenging to differentiate between products and services: why do
you think these challenges exist?
• What is value? What might make a product, service, or experience valuable for a
customer?
• There are different types of customer experiences: what are they?
• There are different types of services: can you name some of them?
• Why are “moments of truth” so critical for service organizations?
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CHAPTER 2
Servicescape
Visualizing service quality and value
FIGURE 2.1 The architecture, design, and other servicescape elements are an important part
of the guest experience. In this picture is Hogwarts’s Castle at Universal Orlando
Resort.
LEARNING OBJECTIVES
• Understand the concept of “servicescape”

• Articulate the dimensions of “servicescape”
• Elucidate the role of servicescapes in service organizations
DOI: 10.4324/9780429263965-2
26 Servicescape: Visualizing service quality and value
• Analyze the critical factors in establishing a successful servicescape

• Connect servicescape with branding strategies and promotions for service
organizations
KEYWORDS
• Servicescape
• Physical Environments
• Social Environments
• Scent
• Color
• Décor
• Space
• Spatial Layout
• Functionality
• Functional Congruence
• Signs, Symbols, and Artifacts
• Lean Servicescape
• Elaborate Servicescape
• Emotional Response
• Cognitive Response
• Physiological Response
WHAT IS A SERVICESCAPE?
A servicescape is the environment in which the service is assembled and in which the
seller and customer interact combined with tangible commodities that facilitate the per-
formance or communication of the service (Harris & Ezeh, 2008). A typical servicescape
framework consists of seven factors (Ben Haobin et al., 2021) (Figure 2.1):
• Ambience
• Temperature
• Lighting
• Furnishings
• Color
• Scent
• Music
The concept denotes the use of space in the quality, delivery, and perception of services.
Because service within organizations typically involves a physical location or environ-
ment, whether it be a restaurant, hotel, or coffee shop, it is extremely important that
Servicescape: Visualizing service quality and value 27
these organizations ensure that their servicescape has positive effects on their consumers
during all service interactions. In the first chapter, we introduced “intangibility” as one of
the key features of services. Although service is intangible, most services are delivered in a
physical location. Consequently, the servicescape is a critical part of the overall customer
experience. In conceptualizing customer experiences, Pine and Gilmore argued that “work
is theater and every business a stage”. The stage where service takes place is the services-
cape, a set of physical features that ultimately create the feelings, thoughts, and memories
associated with the service.
The servicescape model explains the behavior of customers within an environment. It
includes the attributes and features in an environment that cause a consumer to want to
make a purchase or that drive them to a conclusion. A big part of the servicescape is the
initial impression between the company and the client (Bitner, 1992). It needs to encourage
consumers to want to return to the business for future services. Therefore, the servicescape
is critical toward the consumer’s first impression of the service. As customers see, smell, taste,
and hear the environment around them, they will typically create expectations for the service
they’re about to receive.
Dimensions of the servicescape

There have been multiple discussions regarding the various components of a servicescape
(Harris & Goode, 2010; Lin et al., 2020). Kloosterman (2017) explained that an organiza-
tion’s servicescape includes many physical environmental aspects, such as ambience, space
layout, and functionality as well as signs, symbols, and artifacts. The ambience of an orga-
nization includes the general atmosphere, sounds, smell, and temperature (Kloosterman,
2017). Ambience is extremely important as it can make consumers feel welcome, relaxed,
and comfortable. Space and functionality also play an instrumental role in an effective ser-
vicescape. Therefore, it is important that the layout positively contributes to efficient and
successful service interactions. Signs and symbols are crucial tools for organizations to use
to communicate with consumers. When the quality of these signs and symbols is high, it
creates a great first impression of the organization. It is important that organizations focus
on ensuring that these physical aspects have an overall positive effect on the consumer
and their service interaction. When the physical environment of a servicescape meets the
needs and expectations of consumers, it leads to customer satisfaction and, as a result,
generates a positive perception of the brand image.
In addition to physical environment, the social environment is equally important in
a servicescape (Garmaroudi et al., 2021). This is particularly applicable to service orga-
nizations; they’re extremely people orientated. It is important that service organizations
focus on the way in which their customers perceive the employees, as employees alone
can be responsible for delivering services that can have either a negative or positive impact
on the organization’s brand image (Garmaroudi et al., 2021). Consequently, it is crucial
that hospitality organizations ensure that the interaction that takes place between their
employees and their customers within the servicescape is taken into consideration. This
can influence the way in which consumers assess and perceive a brand and its image. By
doing so, companies are able to differentiate themselves from other competitive brands.
Generally speaking, there are three important dimensions of the servicescape. The first
aspect is the spatial layout and functionality. Spatial layout refers to how the company
arranges furniture and equipment in the space. Functionality is the ability to easily per-
form the service being provided and to have easy access to equipment. This aspect is vital
in companies where customers perform the service themselves. When a setup isn’t visually
pleasing, it can bother a customer and make them not want to use the service. Therefore,
it is important for a company to keep equipment and furniture easily accessible to con-
sumers. The easier the process is for consumers, the more likely they are to return and
recommend it to their friends. Consider the layout of an IKEA store; a pathway directs
customers through the entire showroom without missing a section. Items are carefully
labeled and named. Once the customer finishes the journey through the showroom, they
end their journey in a series of shelves which include the unassembled furniture (also
clearly labeled). Another key example of a great spatial layout can be found at the Magic
Kingdom Theme Park within the Walt Disney World. At the center of the park, guests can
find “the hub”, this circular design directs guests efficiently to the various themed sections
of the park. Designers use the concept of functional congruence to refer to the extent to
which the service environment fits its intended purpose. While the aesthetic qualities of
the environment are important, so too is the ability of that environment to be of practical
use. From time to time, designers would want to create a contrast or incongruent effect
between the design elements and the overall sense of place. For example, the Marques de
Riscal winery is set in Spanish town with medieval architecture. Nevertheless, the winery’s
visitor center and hotel features a modern design by renowned architect Frank Gehry. The
design amidst a very different landscape makes the building stand out, for example, in a
restaurant (Figures 2.2 and 2.3).
The next aspect is signs, symbols, and artifacts. These are important for direct commu-
nication with customers. The purpose of signs and symbols is for the customer to know
where they are and where to go to get the service they are looking for. They help to point
them in the right direction. Signs may also clearly state any rules within the building. This
can also help with consumer safety. While traveling at an airport, customers rely heavily
on signage in order to move from one terminal to the next, claim their luggage, and find
ground transportation. Consider using icons to the signs and using the language(s) most
spoken by your visitors. Artifacts can help make a consumer feel more at home or com-
fortable in the environment. This could involve photography, for instance. For example,
hotels hang wall art and other decorations to make people feel more comfortable and at
home when they travel. This can help create a connection between the company and the
customer, which then creates consumers loyal to the brand who will want to continue to
frequent specific hotels due to that loyalty. They truly feel like the company cares about
them and their well-being. The last aspect is ambience. The ambience is the sound, color,
and lighting of the environment. This helps immerse the consumer in the experience by
triggering their senses. The importance of ambiance is that it can draw people in. It also
helps to make the experience memorable and to create word of mouth or returning con-
sumers. A perfect example of this could be any of the world showcases at Walt Disney
World’s EPCOT. The Italy Pavilion looks like a section of Naples in Italy, and visitors can
smell the expensive perfume from the gift shop when they first walk in. These aspects
trigger the senses, which create an immersive experience. As visitors travel further into the
pavilion, they can see the statue of Neptune next to a Sicilian-style cart. Visitors can buy
authentic Italian drinks such as Bellini, Limoncello, Rossini, and Orangecello. These can
FIGURE 2.2 The layout of an IKEA store allows customers to visit their entire showroom without
missing an item.
FIGURE 2.3 Sitting in the middle medieval Spanish architecture sits the Marques de Riscal
winery, which stands out for its unique design created by architect Frank Gehry.
help trigger their sense of taste and really reinforce the ambiance, making the experience
truly memorable.
Service environments
There are two different types of service environments: lean servicescapes and elaborate
servicescapes. A lean servicescape is an environment that is designed to be spacious and
to limit the interaction between employees and customers. This would be when the con-
sumer is using a do-it-yourself kiosk. For example, when a customer wants to print photos,
they will go up to the kiosk and select what they want printed and the machine will print
it for them. They do not have to interact with anyone. Many hotels are also adopting this
kind of environment with check-in. They now have options for guests to check in online,
and they never have to interact with the front desk if they do not want to. The second
type of environment is an elaborate servicescape. Elaborate servicescapes include multiple
spaces for work to be conducted, and they require teamwork and interactions between
consumers and employees. A great example of this in hospitality is a casual dining restau-
rant. These restaurants tend to have multiple spaces or tables for consumers to sit at
and eat. They also have servers who take consumers’ orders and address anything that is
needed while dining. There is a direct interaction between the two. Servers must be skilled
at their jobs and work with others to communicate to make sure everything comes quickly
and correctly for the guest.
ESTABLISHING A SERVICESCAPE
The approach of servicescape can also be very influential in how businesses are marketed
to their target audience. There are four different types of approaches. The first approach
is direct observation. Direct observation is when the company hires employees to observe
and take notes on consumer and employee behavior. This provides the company with
insight into what is and is not working in the workplace. The employee can note the inter-
action and explore any reactions that may occur. This can help indicate when and in what
way a business redesign is needed. The second approach is the environment survey. This is
when the company conducts surveys with both employees and consumers. This allows the
company to gauge the needs and wants of both groups to help make the business better.
It helps answer questions about social conditions, design, and ambiance. This information
can allow companies to make the necessary adjustments to make the experience more
enjoyable for consumers and employees. The third type of approach is the photographic
blueprint. This can be used as a way of assessing the service process. Its purpose is to
highlight the consumers’ point of view of the experience. This can help companies learn
and understand consumers. The last type of approach is experiments. The experimental
method can help measure the employees’ and consumers’ reactions to environmental
changes. Many times, companies do not know if a method will work unless they try it. It
is important for the company to be innovative and always try new things. This will help to
keep both consumers and employees excited and on their toes.
THE ROLE OF THE SERVICESCAPE IN SERVICE

ORGANIZATIONS
Servicescapes are important within service organizations, particularly within hotels.

Because the needs and expectations of consumers are constantly changing, the hotel
industry needs to focus on all aspects of the servicescape. Hotel guests prefer to stay at
hotels where the environment is pleasant and makes them feel comfortable and happy.
This can be delivered through the creation of a service interaction that is unique and
provides a satisfying experience. Lee and Chuang further stated that the most crucial ele-
ments in a hospitality or tourism organization’s servicescape are its ambience, consumer’s
engagement with employees, and originality. This is because these organizations involve
a physical environment in which the service interaction takes place. This is especially
important in the hotel industry, as hotel guests tend to co-create their hotel experiences.
The aspects of the servicescape also create four roles for it to fulfill. The first role is
as a facilitator. The servicescape can act as a facilitator because it can assist customers to
understand the layout of a facility and provide directions to access certain places custom-
ers want. It can also help create a pleasurable mindset for both employees and customers.
The next role is as a package. Servicescape as a package refers to the company’s image
to the outside world. The company’s objective with its image is to use it to convey the
company’s goals and mission to consumers. An excellent example of this is Apple. When
consumers see the Apple logo on a product, they expect it to be a high-quality product
that will last a long time because of the perception of the brand. The last role of the servi-
cescape is to be a differentiator. It fills this role by making the company stand out among
its competitors. The setup of the company could also differentiate it and attract more peo-
ple. For example, a brewery that is set up with plenty of space at the bar, plenty of seating,
an outside area, and a stage for live music is more attractive than a smaller brewery with
limited seating and few other features or activities (Figure 2.4).
The functionality of the servicescape is vital. The two functions of servicescape are cat-
egorized as image, differentiation, and positioning and facilitation of service encounters and
increasing productivity. Regarding image, differentiation, and positioning, all of these elements
have to do with the service experience and value proposition. The way a company looks and
handles a situation affects its image and positioning in the market and to its consumers. For
example, at Disney World, regardless of which restaurant, hotel, or attraction the consumer is
at, all the employees are focused on creating a whimsical environment that pleases the con-
sumers. As far as facilitating service encounters and increasing productivity, this means design-
ing the facility to maximize productivity and profitability. For example, shopping malls often
have a play area for children or some kind of day care system for parents to drop their kids
off while they shop. This allows them to shop quickly and more efficiently without distrac-
tions, which can prevent rushing through the store and result in them buying more products.
Using space wisely is another important aspect of a servicescape. Consider the case of cruise
ships; cabins are often smaller as compared to a hotel room. Over the years, cruise lines have
become adept at making these cabins functional and appealing to their guests (Figure 2.5).
In tourism in particular, there are some thoughts about functional congruence and its
effects on travelers’ post-travel evaluations (e.g., word-of-mouth intention, satisfaction,
FIGURE 2.4 Lighting is an important part of the servicescape. Those working in the events
industry are adept at using various kinds of lighting to create unique customer
experiences.
loyalty, etc.) (Ahn et al., 2013). Functional congruence denotes the (mis)match between
perceived performances of the destination’s functional attributes and the travelers’
expected performances of the destination’s functional attributes. The servicescape in the
destination can serve as important cues for travelers to expect its functional performances.
With high congruence between servicescape and functional attributes, there is no doubt
that the travelers will experience the destination as they have expected, which leads to
great satisfaction and positive post-consumption behaviors (e.g., positive word-of-mouth,
revisit, and destination loyalty).
According to Kloosterman (2017), the physical environment generates a response from
consumers that may be emotional, cognitive, and psychological. These responses affect the
way in which consumers behave and feel toward a brand image. When an organization’s
physical environment is pleasing, it can generate an emotional response that can influence
consumers to purchase more and perceive its products in a positive manner. A cognitive
response is generated by the physical aspects of a servicescape and results in consumers
having either a positive or negative outlook on the organization and its product offerings.
Psychological responses to a servicescape are impacted by a consumer’s perception of the
physical environment. It is vital that organizations focus on creating a servicescape that
FIGURE 2.5 Cruise lines have become experts in the efficient use of space, as demonstrated
by this cabin.
triggers positive emotional, cognitive, and psychological responses from its customers, as
doing so influences their behavior in a positive way and creates a positive perception of
the organization’s brand image.
It is vital that service organizations deliver a servicescape to guests that is original and
satisfying and meets the needs and expectations of guests, as this is what ensures that
guests continue to return to the establishment and continue to choose a given business
instead of its competitors. Jani and Han determined ambience to be one of the most essen-
tial elements of a servicescape. When a service organization has a pleasant and satisfying
ambience, it creates a stronger bond between the guest and the brand, increases consumer
loyalty, and positively impacts the way guests assess the service itself. Another vital ele-
ment that has an effect on a guest’s perception and assessment of a brand and its image is
originality. When a service organization is authentic in delivering a service interaction to
its customers, it creates an effective and positive image of the brand. When this occurs, it
can also lead to an increase in repeat business and customer retention.
PROMOTING BRANDS THROUGH SERVICESCAPES
A service organization can create a successful brand image through a servicescape that
results in consumer satisfaction. Consumer satisfaction is extremely crucial for an organi-
zation to develop a strong brand image and to be successful, as it leads to repeat purchases,
marketing through word of mouth, and customer retention and loyalty. In the specific
example of hotels, there are many elements that the hotel needs to focus on for its ser-
vicescape to satisfy the needs of its customers. These can include, but are not limited to,
room quality and condition, services and amenities provided, safety, quality of service
provided by employees, and cleanliness. Other factors that can enhance the servicescape
for hotels and lead to customer satisfaction include music, lighting, scent, and decor. These
factors create a positive and attractive environment for consumers if delivered successfully
and are particularly impactful when used in other hospitality organizations, such as fast-
food chains and casual dining restaurants. This positive impact influences the behavior of
consumers and contributes to an organization’s brand image.
The servicescape of an organization can be very influential and have a powerful impact
on the way consumers behave and how they perceive and react to a brand image. According
to Kloosterman (2017), it is vital that hospitality and tourism organizations provide a servi-
cescape that differentiates them from their competitors. This can include the use of special,
distinctive, and individual ideas in both a tangible and intangible way during the customer
service experience. When a servicescape is designed in a way that positively affects how cus-
tomers view an organization, it leads to the creation of a more attractive brand image.
Servicescapes impact two major components of a service organization: perceived
quality and customer behavior. Research indicates that consumer quality perception is
determined by the following criteria: reliability, responsiveness, assurance, empathy, and
tangible items (Reimer & Kuehn, 2005). When consumers cannot obtain too much public
information from the company, they tend to rely on cues and elements they could access
about the company to make judgment. When consumers seek out information, perception
lies in the organization’s servicescape (Reimer & Kuehn, 2005). The aesthetic presented
by an organization often leads a customer to expect a particular level of quality before
ever interacting with any representative of the establishment.
In addition to quality, the servicescape presented by a hospitality or tourism organiza-
tion will impact the customers’ behavior within the establishment. For example, hotels
that create a sense of serenity in their lobbies through the use of gentle colors, running
water, and soft music will likely appeal to customers who move about quietly and calmly.
In contrast, hotels that create a more energetic space through color and sound will likely
find themselves with a livelier bunch, expressing excitement about visiting the pool or get-
ting their vacation started. The Ritz Carlton is a well-known hotel that presents a classic
and more traditional lodging experience for its guests. From the doormen who greet you
at the entrance to the bellhops who happily take guests’ bags to their rooms, the hotel
provides a luxurious and more personalized experience.
Hotel servicescapes play a key role in the customers’ interactions. When a servicescape
elicits a positive emotional response, the customer is likely to develop loyalty to the estab-
lishment. This is good for the company’s brand image because when a customer develops
loyalty, they may also engage in non-transactional behaviors like blogging, referring friends,
and writing reviews.
A servicescape can build a consistent brand promise that can span multiple properties,
regardless of the theme. Additionally, it determines the guests’ perceptions of the resort
experience, influences the interactions between employees and guests, and is one of the
only controlling factors of a brand’s image within the hospitality industry. Many options
are now available to consumers. Brands must leverage their servicescapes to please their
guests and continue to stay competitive.
Selective business cases

The Royal Hawaiian and Antica Farmavista: Leveraging
scents to impress customers
Hotels and resorts have a desire to leave a lasting impression and create positive memories
with its guests. While there are multiple reasons for this, the primary reason is the desire
for guests to return to their establishment. The Royal Hawaiian and Antica Farmavista
hotel has been investing in its scent marketing because it has been shown that when a per-
son smells something that’s connected to a meaningful event in their past, they will first
have an emotional response to the sensation and then a memory might follow.
Antica Farmavista made an exclusive scent for the Royal Hawaiian. The scent congru-
ence is a blend of night-blooming jasmine, plumeria, tuberose, and gardenia, which are
all flowers that can be found in Hawaii. While guests of the Royal Hawaiian may not be
able to visit the hotel frequently, their senses can transport them back to the space and
time when they were able to visit. The ability to recall a beautiful memory is priceless.
The Royal Hawaiian saw the importance of scent congruence within the hospitality and
tourism servicescapes. By investing in scent marketing, the resort has created memories
for a lifetime (Figure 2.6).
FIGURE 2.6 The Royal Hawaiian has invested in creating a unique scent in order to enhance
their servicescape.
Starbucks
Each Starbucks chain or store delivers a servicescape that makes service interactions pleas-
ant and successful. The physical layout in each store, including the furniture used, creates
a space that makes consumers feel relaxed, comfortable, and at home. Their design, decor,
lighting, and signage are also extremely appealing and attractive to the eye and effec-
tively communicate information about the company to consumers. The ambience within
Starbucks locations is pleasant, warm, lively, friendly, and welcoming. For example, cus-
tomers may smell coffee and see high-end coffee décor in the store. The employees wear
uniforms that convey the message “we are selling high-quality coffee”. It is this pleasant
environment that continues to influence consumers to return. The servicescape delivered
by Starbucks is what makes the company stand out from its competitors and is one of the
many reasons why its brand image is so strong and admired (Figure 2.7).
Dream Hotels
Dream Hotel Group is a management company that has had much success in the most
competitive hotel markets through both its own line of hotels and its partnerships with
other hotels. Dream adapts its design aesthetics based on location and market. Dream
Hollywood presents a grand entrance to its lobby as guests enter through the floor-to-ceiling
FIGURE 2.7 Starbucks pays careful attention to its servicescape from interior design and fur-
nishings to store layout and employee uniforms.
glass doors, which are manned by security. When they arrive at the hotel, the bar counter
precedes the lobby counter, catering to a more vivacious crowd. The hotel gives guests the
freedom to move throughout the property at their leisure by offering a minimalist-style
service. The hotel staff are readily available if guests need assistance, but they don’t initiate
engagement. Dream Hollywood comes equipped with a lounge and bar on the rooftop
and is located on Hollywood’s hottest entertainment strip, making it obvious that this
hotel caters to a younger crowd looking for a night out in the city. Its servicescape was
designed to entice consumers through visual attraction. The walls of the hotel lobby are
glass, which allows individuals passing by to see the luxurious environment. The lobby is
marbled, including the bar, which gives the perception of an upscale environment that
potential patrons can identify immediately. Though the aesthetics of the Hollywood loca-
tion are as such, other locations can often look and feel different.
Disney World theme parks

Disney theme parks do a fantastic job of creating servicescapes that elicit desired behav-
iors from customers. The “Go Away Green” uses color psychology to deter customers from
prohibited areas. The dark-colored streets attract heat and keep traffic flowing, while the
heavily air-conditioned retail spaces lure customers in. Sweet smells create a sense of joy
and happiness, and these feelings keep customers of all ages wanting to return year after
year. A well-recognized design decision in Disney theme parks is the creation of multi-
ple servicescapes within the park to influence guest perceptions and create many unique
experiences.
Disney’s Vero Beach Resort

A prime example of using servicescape to ensure a positive brand image is Disney’s Vero
Beach Resort, which is located two hours away from the Orlando, Florida, theme parks.
Because of this, Disney relies on the servicescape to continue to build a positive brand
image that makes the resort feel like the Disney brand, even though the property is an off-
site location. Because this is a vacation ownership property, the phrase “Welcome Home”
is found at most entryways and on the floor mats in front of rooms with exterior entrances.
This element of the servicescape is a brand standard that also encourages cast members
to use this greeting when they approach guests. Outside the main entrance is a topiary of
Tick-Tock the Crocodile from Peter Pan (1953). Topiaries are staple servicescape elements
in the Disney brand that can be seen throughout the Orlando theme parks and resorts,
such as EPCOT and Disney’s Wilderness Lodge. The lobby is about to undergo a light
refurbishment, where the long front desk that stretches from one wall to another will be
converted into multiple smaller desks. This design feature allows front desk agents to walk
around and be approachable for guests.
Throughout the hotel’s atrium, guests can find a community library, board games,
lounging areas with televisions, and a jar of shells with stories written by previous guests.
All of these physical amenities help guests develop a perception of community and that
they truly are at their home away from home, a primary goal for the Disney Vacation
Club brand. The design of the atrium with rooms on the floors above the lobby is also a
familiar physical element for Disney Vacation Club guests, as it is reminiscent of lobbies in
Orlando, such as those at Disney’s Animal Kingdom Lodge and Disney’s Grand Floridian
Resort and Spa. Another iconic element that Disney Vacation Club guests are accustomed
to is the use of lobby fragrances. At this resort, the scent of orange blossoms with a hint
of suntan lotion is piped into the lobby to elicit feelings of being at the beach. Guests
also enter their rooms with the television turned to a welcome channel with music from
Disney movies. These elements help guests who venture away from the Orlando resorts
maintain the impression of being at an authentic Disney Vacation Club Resort, regardless
of the distance.
Being located in Florida’s Treasure Coast, the resort is themed to pirates, treasure, and
the environment, primarily sea turtles. The expected over-the-top theming should make
guests also perceive the property and service they are receiving as being over the top.
The lobby has a replica of a pirate ship, and the floors appear damaged with slash marks,
representing a treasure chest that was dragged through the lobby. There is also a replica
cannon with cannonballs. A pirate ship splash pad and lighthouse-themed waterslide can
be found on the pool deck. Additionally, cast members partake in the theme by ringing
bells that look and sound like they belong on a pirate ship at the front desk to advise
the next guest in line to visit them. Since the Walt Disney Company is well known for
its storytelling abilities through theming in physical spaces, guests will expect this to be
part of the servicescape. The level of theming also supports cast members in taking the
initiative to act creatively, fulfilling the company’s brand promise of immersive themed
experiences.
In the hallways going toward the guest rooms, the carpets are patterned with blue
waves and sea turtles swimming on the edges. The artwork inside the rooms is all based
on sea turtles, the chairs on the balconies have a sea turtle design, the soap dish is in the
shape of a seashell, and the floor lamps appear to be made out of seashells. The theming
helps support the guests’ perception of Disney’s commitment to the environment. This
assists the housekeepers in servicing guest rooms by encouraging the reuse of towels and
the practice of recycling. The sea turtle theming also helps cast members to motivate
guests to turn off exterior lighting and close their blinds when it is sea turtle season to
help mother sea turtles and hatchlings return back to the ocean. The combination of these
environmental practices will give guests a positive perception and image of the resort and
have them leave with a sincere and warm feeling. The costumes for cast members are also
themed with a rustic beach pattern. This costume is something most would not normally
wear as part of their casual attire, making cast members easily identifiable. This becomes
a guest satisfier in their experience by allowing them to know who they can speak to for
additional assistance.
Marriott Hotel groups

By carrying an array of hotel brands with different servicescapes under one company,
Marriott is able to attract a variety of customers. This further speaks to the brand that a
customer can comfortably stay with Marriott, regardless of whether they are looking for
a luxurious night in New York City or an extended stay in Richmond, Virginia, for a work
project. Marriott is able to maintain brand loyalty since there are likely multiple Marriott
locations at a given destination that cater to various consumer needs. This contributes to
Marriott’s brand image as a reliable brand. By continuing to provide exceptional service
at each different brand of hotel, customers begin to adopt the perception that Marriott is
a great hotel to stay in, regardless of the brand. A large concern for customers staying in
non-chain hotels is the potential for bad customer service and the mystery of the hotel
experience. By providing consistently exceptional service, guests can feel secure and com-
fortable when staying with Marriott, eliminating uncertainty and concerns about having
a bad hotel stay.
Marriott Bonvoy’s portfolio has 30 different brands of hotels. Though these various
brands fall under one umbrella company, they all cater individually to differing markets.
Their luxury hotels offer thoughtfully crafted experiences and premium amenities, often
in desirable destinations. Luxury hotels are at the top; they also carry brands of hotels at
lower tiers, some premium and some more casual. Amenities such as in-hotel spas, restau-
rants, bars, lounges, rooftop spaces, valet parking, and room service are more commonly
found in more luxurious brands. Moreover, Marriott also carries a longer-stays collection
that targets guests looking for long-term accommodations. These hotels are more likely
to offer free overnight parking, free continental breakfast, kitchenettes in guest rooms,
and other convenience amenities. Long-term stays tend to have larger rooms with a living
room space and TV separate from the bedroom. Since long-term stays also tend to be less
expensive than regular or premium hotels, guests looking for a larger room at a lower price
can find themselves staying in long-term stays.
Marriott is, of course, not the only company to achieve a diversified portfolio of hotel
brands catering to various needs and desires. However, the idea of holding different hotel
brands under one umbrella company allows for synergies between the various brands,
as customer service with one brand or hotel location translates to another within the
umbrella company itself. If a hotel can impress and delight the guest, the chance of a cus-
tomer returning to a hotel under the same company is high. The stakes for good service at
hotels are high and can have a direct impact on incoming revenue.
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CHAPTER 3
Service quality
Tools and strategies
FIGURE 3.1 Rating systems such as the ones used in the hotel industry are one of many import-
ant approaches to service quality.
LEARNING OBJECTIVES
• Define service quality

• Explain the various dimensions of quality
• Differentiate between product quality and service quality
• Explain the principles of Total Quality Management (TQM)
DOI: 10.4324/9780429263965-3
42 Service quality: Tools and strategies
• Apply quality tools to improve quality in service enterprises

• Analyze quality problems using quality tools
• List the steps involved in benchmarking
• Differentiate quality from customer satisfaction
KEYWORDS
• Service Quality
• Defect (Error)
• Benchmarking
• Rating Systems
• Mystery Shopping
• Quality Audits
• Quality Awards
• Quality Circles
• SERVQUAL
• Root Cause Analysis
• Six Sigma
• Standard Operating Procedure
• Total Quality Management (TQM)
• Intrinsic Quality
• Perceived Quality
• Ideal Service
• Desired Service
OPENING STATEMENT
Flawless or broken, clean or dirty, friendly or rude, present or lost, timely or late, durable
or dysfunctional, valuable or expensive, high or low, perfect or defective. These are some
of the words that people use to describe the presence or absence of quality. The service
industries live and die and are created and destroyed by these very concepts. The absence
of quality is often easy to spot: a suitcase misplaced by an airline, a broken air-conditioning
unit at a hotel, a cold meal at a restaurant, and an out of stock item at a retailer. These
examples of flawed service delivery can be called “errors” in quality jargon. An error is a
deviation in the standard of quality a company has established. Indeed, things can and
do go wrong in the service business. Later in this book, we devote a chapter to the topic
of service recovery, which is the process of correcting errors, mistakes, or problems in
the service environment. Whereas service recovery focuses on “putting out fires”, service
quality prevents fires from ever taking place. We believe that by spending greater energy
and attention in ensuring quality, less effort, attention, and resources will have to be spent
resolving problems. Defining and operationalizing service quality can be a challenge.
Service quality: Tools and strategies 43
A customer might view service quality in terms of a flight departing on time, a clean
hotel room, a well-stocked retailer, money-saving advice from a financial professional, or
friendly service at a theme park. As demonstrated by these examples, service quality can
take many shapes such as timeliness, cleanliness, and friendliness. However, in order to
accomplish these and many other outcomes visible by the customer, managers must prop-
erly design and improve the service environment, operating procedures, and train staff to
deliver quality service. Furthermore, a good understanding of quality tools and measures
can aid service providers in properly diagnosing challenges with quality and making prog-
ress toward a flawless customer experience (Figure 3.1).
QUALITY AND ITS DIMENSIONS
The formal study of management traces its roots to the industrial revolution. In that time
period, the emphasis of most companies was to mass produce goods for a growing econ-
omy. As the decades elapsed, manufacturers gained greater awareness of the problems
and costs related to quality. Mass production often came at the cost of product quality. In
the 1950s and onwards, a new school of thought in management emerged: Total Quality
Management (TQM). Although many thinkers contributed to the growth of this move-
ment, some key players (often referred to as the “gurus” of quality) included W. Edwards
Deming, Joseph M. Juran, Philip Crosby, and Karou Ishikawa. Whereas the old paradigm
of manufacturing was to produce first and inspect for defects later, the new paradigm was
focused on building quality products from the start by detecting and preventing the causes
of errors. The TQM philosophy consisted of the following tenets (Reid & Sanders, 2002):
• Customer focus
• Continuous improvement
• Quality at the source
• Employee empowerment
• Understanding quality tools
• Using a team approach
• Benchmarking
• Managing supplier quality
Customer focus means that a quality product or service needs to take into account the
needs and wants of customers. Continuous improvement signals that a company does
not settle for having attained a good level of quality, but rather constantly strives toward
becoming better. Quality at the source entails preventing the causes of problems before
they result in errors. Empowerment involves allowing employees to make quality deci-
sions, encouraging workers in uncovering quality problems, and giving them the tools to
attain higher levels of quality. Managers must also understand the use of various quality
management tools. Later in this chapter, we will discuss root cause analysis, quality audits,
six sigma, and many other tools that help managers achieve high levels of quality in their
organizations. A team approach is another important principle of TQM. In fact, propo-
nents of TQM suggested creating quality circles, which are groups of employees that meet
on a regular basis to discuss challenges to quality and ways to improve upon them. Bench-
marking, a central idea of TQM, entails examining the practices of other companies that
are best in what they do in order to emulate them. Later in this chapter, we will provide
details on the methodology behind benchmarking. Finally, managing supplier quality is
also critical to attain quality. A problem with the raw material can yield a problem with
the final product. For example, if a restaurant works with bad ingredients (e.g., not fresh),
no matter how great the recipe or talented the culinary team, the outcome will likely be
of low quality (Figure 3.2).
In the 1980s, the quality movement made its way to the service sector. Many argued that the
way in which quality was defined and measured in the manufacturing industry was not always
applicable to services. It is the view of the authors of this book that some principles of product
quality do have their place in the assessment of service quality. However, customer services
and experiences have unique features (as demonstrated in Chapter 1), and as such, additional
considerations should be made in the evaluation of service quality. Particularly the issue of
simultaneous consumption or inseparability brings about some interesting quality challenges.
Whenever a service is created and consumed at the same time, the customer gets intimately
involved in determining whether the service is of quality or not. With customer perceptions
and psychological criteria added to the equation, measuring service quality becomes more
challenging than doing the same for tangible goods. One of the earliest perspectives on service
quality suggests that service quality has three dimensions (Gronroos, 1984):
• Technical quality
• Functional quality
• Image
FIGURE 3.2 One of the principles of TQM is the establishment of quality circles, which are
employee groups that regularly analyze quality problems and propose solutions.
Technical quality relates to the outcome of the service, functional quality entails the pro-
cess to attain the outcome, and image involves the perception of the customer regarding
quality. A hotel guest that is greeted by a friendly front desk clerk, escorted by a helpful
bellhop, and introduced to a beautifully decorated room with a view of the ocean is an
example of a service with high levels of technical quality. A hotel with a standard operating
procedure (SOP) which indicates that a phone call must be answered within three rings
is an example of functional quality. Finally, the image factor is perhaps the most difficult
to quantify. A customer’s perception is indeed affected by the service and its providers.
However, customer perceptions might be influenced by marketing, other customers, the
mood they’re in at a particular point in time, previous experiences with the same service
category, and many other factors.
Perhaps the most cited and used tool within the greater service quality conversation
was the development of SERVQUAL (Parasuraman et al., 1988). According to this para-
digm, service quality resulted from a customer’s comparison between their expectations
and the performance of the service. The distance between expectations and performance
was called a “gap”, and thus gap analysis was a central notion to the SERVQUAL model.
SERVQUAL deconstructs service quality into five dimensions (Parasuraman et al., 1988):
• Tangibles
• Reliability
• Responsiveness
• Assurance
• Empathy
Tangibles refers to the appearance of both physical elements and human elements. When
the service environment is beautifully designed, meticulously cleaned, and diligently
maintained, it can attain high levels of the tangible dimension. Similarly, when employee
uniforms are crisp and staff is well groomed, this contributes to high scores on tangibles.
Reliability entails performing a service in an efficient and accurate manner. Whenever
restaurant food is served at the right temperature or alternatively when flight leaves at
the scheduled departure time, the service can be said to be reliable. The responsiveness
dimension of SERVQUAL relates to the ability and willingness of service workers to offer
helpful assistance to customers. Whenever a customer makes a request, is it quickly and
effectively handled or is it ignored by the person receiving it? If a customer dials a call
center and is promptly answered by an employee who effectively answers all the ques-
tions, the service can be said to have high levels of responsiveness. Assurance means that
employees act in a professional way and have the knowledge and skills to execute their
jobs. An example of this might be a wedding planner who is familiar with all the details
of the event, appropriately communicates with the client, and promptly handles any chal-
lenges that might emerge. Finally, the dimension of empathy relates to an organization’s
ability to care for the needs of its customers. An example of this would be a doctor at a
hospital taking the time to go beyond the facts and figures in the medical chart toward
understanding the patient’s situation and providing compassionate care.
Notwithstanding the important contribution of SERVQUAL to initiate conversation
on service quality, many have critiqued the model on various grounds. For instance, some
researchers argue that there is no sufficient evidence to suggest that customers evaluate
services based on gaps between expectations and performance (Cronin & Taylor, 1992).
Furthermore, a distinction can be made between ideal service (i.e., what service ought to
be) and desired service (i.e., what the customer thinks he or she will likely receive) (Oli-
ver, 1993). Another criticism stems from the definition of service under the SERVQUAL
being very similar to the definition of customer satisfaction (Iacobucci et al., 1995).
One limitation of SERVQUAL is that it ignores the concept of intrinsic quality.
Accordingly, intrinsic qualities are those that:
are intrinsic to the design of what is offered, and how, and that consequently serve to
define and shape what is provided to, and experienced by the customer, but which
may not be observable to this or capable of being appreciated by the customer.
(Walker et al., 2006, p. 24)
SERVQUAL relies primarily on self-reports of experiences by former customers. Conse-

quently, the element of human perception (and by extension perceptual biases) comes
into play. Given this dilemma, some have proposed a quality framework which took into
account quality related information and tools from three sources: customers, experts, and
internal sources (Torres, 2014). Expert sources of quality information may include formal
rating systems, mystery shopping, consultants, professional critics or bloggers, and quality
awards. Internal sources of quality information may include SOPs, quality circles, quality
audits, franchisor operating standards, and many others. Finally, consumers may be able
to provide quality feedback through electronic word of mouth, SERVQUAL surveys, and
many others. We now turn our attention to explaining these and other quality tools which
can help the organizations in their quest for continuous improvement.
QUALITY TOOLS
Benchmarking
One of the most popular tools for quality management is benchmarking. Many trace the
origins of benchmarking to the Xerox Corporation between the late 1970s and early
1980s. The idea behind benchmarking is to learn best practices from companies that are
considered to be “best in class”. It is human nature to inquire from others in areas where
we believe they excel. For instance, you might ask a fellow student who obtains good
grades in an exam for study advice or perhaps you can ask a really fashionable friend
for guidance as you go shopping for new clothes. Benchmarking takes that concept and
applies to the corporate level. Anecdotally, we know that there are companies that do very
well in various aspects of their business. For example, a company that wins the title one
of the top 100 “Best companies to work for” by Fortune magazine will be a good example
of a company that is best in class when it comes to managing human talent. A company
that receives accolades from an industry group for its customer service might be a good
company to examine if one wishes to improve upon this area.
There are three forms of benchmarking: internal, competitive, and functional (also known
as best practices benchmarking). Internal benchmarking entails comparisons within the same
company. For example, if a quick service restaurant was interested in knowing whether the
wait times in their drive-thru were adequate, they might compare themselves against other
restaurants in the same chain. Are they above, below, or just about average when compared to
other restaurants within their company? This is one way to determine whether a company is
doing well managing its processes. When engaging in competitive benchmarking, a company
looks outside of itself to ascertain how they’re doing regarding a specific area of quality. For
instance, a company interested in determining whether it offers adequate pay to its employ-
ees might compare their salary structure to various salary surveys of the local area. This
information will provide guidance in adjusting compensation levels to remain competitive
in the labor market. The third type of benchmarking, functional, compares best practices in
a specific area or process. This type of benchmarking can take place in a related or unrelated
industry; the main focus is how the business process followed by the benchmarked organiza-
tion(s) can help improve practices at your place of business. For example, if a company seeks
to improve in the area of digital marketing, it might be worthwhile to explore the practices
of a company that’s really good at that aspect of business (Figure 3.3).
In order to engage in a systematic benchmarking initiative, a company can follow the
following steps:
1. Identify problem area(s)

2. Identify companies or industries with similar processes
FIGURE 3.3 Airlines lose 0.4% of all the luggage they handle. This metric can be used by
other airlines to compare their quality efforts and learn best practices to minimize
errors.
3. Identify leaders in the process

4. Survey companies for methods and practices
5. Visit best practice companies to identify leading-edge practices
6. Implement new and improved business practices
There are multiple sources of information in order to conduct a benchmarking study.

Surveys are a prime example of data which can be used for benchmarking purposes.
A survey might be initiated by either the company doing the benchmarking study, a
consultant, or an industry or trade association. In many cases, the industry association
might find it easier to collect data, since they’re perceived to be impartial and respectful
of a company’s privacy and trade secrets. Focus groups and interviews with customers,
employees, and industry managers can be another way to obtain the needed information.
A company’s financial statements can be a source of guidance for projects that seek to
improve performance. At times, companies engage in “friendly competition” or “friendly
warfare”, which is to say that though they realize they’re competitors, they might collab-
orate with one another in supplying information about their best practices. This should
not be confused with a strategic alliance partnership where the companies share the
benefits and drawbacks of success or failure. Companies should be cautious in discerning
what is good functional benchmarking and those practices which might violate the law.
For example, companies can collude to fix prices in a product or service category which
would violate anti-trust legislation in most countries. However, it is perfectly legitimate
for the operator of a theme park to inquire from another theme park operator or theme
park trade organization on what practices can be followed to minimize wait times at
popular attractions.
RATING SYSTEMS AND MYSTERY SHOPPING
Despite an organization’s best attempts to monitor its own quality, it is often helpful
to get the perspective of an outside party. Since one of the characteristics of service is
“variability”, performance can change from day to day and from one employee to the
next. In many instances, the idea of being observed can change the candor of interactions
between customers and employees, thus not portraying an accurate picture of service
quality. Given these limitations, organizations can participate in rating systems or mys-
tery shopping evaluations. Rating systems come in many forms. They can be mandatory
or voluntary. That is to say, in some countries, certain industries (e.g., hotels) might be
mandated to participate in a rating system, whereas in others, it is completely voluntary.
Rating systems can be administered by a private organization, industry or trade associ-
ations, or government entities. The purpose of the rating system is to evaluate multiple
businesses with the same criteria in order to establish a grade-level or threshold of
quality.
In the hotel industry, for instance, rating systems are widespread. In the United States
there are two private organizations that rate hotels: the American Automobile Association
(AAA) and Forbes Travel Guide. These two entities assign a diamond and star award rang-
ing from one to five. AAA (2019) describes their hotel rating as follows:
One Diamond means a bed, a pillow and a bargain. Two Diamonds mean a familiar,
casual, affordable setting. Three Diamonds deliver the comforts of home, minus the
effort. Four Diamonds provide a notable splurge for a special occasion. And Five
Diamonds are the crown jewel.
The preceding statement presents some basic definition, but at the very best is an over-
simplification of a very complex quality assurance system. When a hotel gets a 5-diamond
award, inspectors visit the hotel and stay unannounced. They have an extensive checklist
that grades everything from the bedsheets to the ice bucket, to the service offered by
reception, and the knowledge of the concierge staff. No aspect of the hotel is overlooked
as the inspector meticulously gathers data and provides a final report to the hotelier
(Figure 3.4).
The lodging industry is not the only one to get formal ratings. Restaurants can obtain
Michelin stars for their efforts. Simply receiving one Michelin star is considered a high
accolade among fine dining establishments. A restaurant receiving three Michelin stars can
be considered as one of the top culinary destinations in the world. According to Michelin
(2017), restaurants are evaluated based on: “a) quality of products, b) mastery of flavor
and cooking techniques, c) the personality of the chef in his (or her) cuisine, d) value for
money, e) consistency among visits”. Just like many other rating systems, inspections are
FIGURE 3.4 The Wynn Hotel in Las Vegas has received the prestigious 5-star award from
Forbes Travel Guide.
anonymous. You can expect an inspector to have extensive experience visiting numerous
restaurants and a very specific set of criteria as set by their rating agency.
Another means of quality assurance for service organizations is mystery shopping.
Companies engaged in mystery shopping will send an inspector posing as a customer in
order to test the quality of the services offered. The name and identity of the inspector
is unknown to the service employees beforehand, thus the “mystery” part of their title.
Mystery shopping can be done either internally or externally. Some large organizations
may decide to hire full-time employees to shop at their various hotels, restaurants, retail
stores, and similar service businesses. The advantage of an internal mystery shopper is their
knowledge with the company’s SOPs. However, the internal inspector may be narrowly
focused on the company’s criteria (thus ignoring factors that lead to success of competing
businesses). Furthermore, maintaining the anonymity of an internal mystery shopper can
be a challenge. An external mystery shopper can be advantageous, in that they shop with
multiple companies, and thus have a broader perspective of the marketplace. Similarly,
an external company can send a different mystery shopper on different occasions, thus
minimizing the possibility of an identity breach.
Much like a formal rating system, mystery shoppers use an extensive checklist with
specific criteria. In addition to the checklists, mystery shoppers often provide an extensive
narrative explaining each employee interaction. The names of employees, location of ser-
vice, and time it took to receive service are recorded. The knowledge of service workers
is put to the test by asking questions about the facility, local area, and services offered by
the company. Special requests might be made to verify the level of flexibility in accom-
modating guests (Figure 3.5).
Both formal rating systems and mystery shopping evaluations use preestablished crite-
ria. In a way, these can be categorized as “expert systems” of quality management, as they
rely on professionals (as opposed to customers) to measure service quality. As an example
of how a rating system inspector or a mystery shopper might approach a dining experi-
ence, they might ask:
• Did the host/hostess made eye contact when approached?

• Was the host/hostess wearing proper uniform and name tag?
• Did the host/hostess use appropriate time of the day greeting?
• Did the host/hostess ascertain whether a reservation was made
• Did the host/hostess escort the guest to the table?
• Did the host/hostess introduce the server by name?
• Did the host/hostess hand the menu (as opposed to leaving it at the table)?
• Did the host/hostess use proper etiquette in delivering the menu (i.e., ladies first)?
• Did the server arrive within a few (insert specific standard) minutes of being seated?
• Did the server offer appropriate greeting?
• Did the server use the guest name?
• Was the server dressed in proper uniform and wearing a nametag?
• Did the server explain the menu (as opposed to simply asking for an order)?
• Did the server use appropriate etiquette when taking an order (i.e., ladies first)?
• Did the server bring beverages within (insert standard) number of minutes?
FIGURE 3.5 Mystery shopping is an important tool to ensure service quality in service
organizations.
• Did the server make appropriate use of American style of service (i.e., served meals
from the left using the left hand and removed meals from the right using the right
hand…. Beverages always served from the right using the right hand)?
• Did the appetizers arrive within (insert standard) minutes of being ordered?
• Did the meal arrive within (insert standard) minutes of being ordered?
• Did the server offer desert?
• Did the dessert arrive within (insert standard) number of minutes of being ordered?
• Were the silverware properly laid out on the table?
• Were the silverware polished/free of spots?
• Was the temperature in the dining room comfortable?
• When the (inspector, shopper) asked questions of the server was he/she knowledgeable?
• Were special requests accommodated?
The preceding list has 26 items that an inspector might look at. Seems extensive? Actually,
this is not an exhaustive list: an inspector or mystery shopper can look at double or triple
the criteria listed here. Therefore, if you work for an organization that uses a rating system
or a mystery shopper program, it would be worthwhile for you to familiarize yourself with
the criteria they use. If your company does not use a mystery shopping program or rating
system, it might be worthwhile considering this approach to quality. An advantage of this
type of system is that it helps the organization focus on improving quality by following
the standards. The challenge behind these systems is that experts and consumers might
not always agree on what quality is. This is why it is always a good idea to have more than
one way of measuring quality.
QUALITY AUDITS AND ROOT CAUSE ANALYSIS
The use of quality management tools can provide internal stakeholders the ability to eval-
uate their quality. The systematic use of their procedures enables managers to ascertain
the main quality challenges and their causes. One way in which this can be attained is by
performing a service quality audit. A quality audit usually involves the following steps
(Luchars & Hinkin, 1996):
• Identify the source of errors: Earlier in this chapter, we introduced the term “error” as a
deviation in the standard of quality set by an organization. The first step in the quality
audit is to determine what are the quality problems facing the organization. For exam-
ple, an error in an airline might be luggage that was not returned to the guest on time.
• Determine frequency of errors: In this step, the organization will determine how perva-
sive these errors are? How often do they occur? Is it 20% or 10% of the time, 5% or
less than 1% of the time? A company might have several quality challenges; thus it’s
important to prioritize which ones are more urgent.
• Assign the specific costs involved for correction: This part can be divided into direct and
indirect cost. A direct cost is what it cost the organization to fix the short-term prob-
lem. In the case of the airline, did they have to deliver the luggage via courier to the
guest’s hotel or home address? There’s a cost involved. If the airline could not find
the luggage, they will have to compensate the guest: how much do they compensate
on average? Furthermore, there is the indirect cost, which is related to the probability
that the customer will not return again. In this case, the service provider will have to
estimate what is the probability that the customer will defect to another airline, thus
losing a future stream of cash flows attributable to that particular customer.
• Establish probability of the consequences: How likely is it that the guest will leave?
• Determine total annual cost for each error: If we were to ask the cost for each error (in
this case, lost luggage) of all the passengers of every flight the airline does in a given
year, what will that number be? This can present a powerful argument for the need to
change processes and improve quality.
• Identify steps to prevent in the future: What can we do to ensure it does not happen
again? Although no airline will deliver luggage at the right place and time 100% of the
time, how close can we get to a 100%? If we decrease the number of lost luggage from
5% of customers to 1%, how much savings will we have and what impact can it make
on satisfaction and loyalty? Quality circles and other groups can help the organization
identify steps on how to prevent problems in the future.
Another approach to assessing quality problems is the use of root cause analysis. This
method is commonly used in several fields such as engineering and project management
in order to ascertain the true origin of a quality problem. Root cause analysis is a “a sys-
tematic process used to address problems or non-conformance to identify the source of
the problem” (Connelly, 2012, p. 316). Suppose that a roof is leaking and someone places
a bucket underneath the leak in order to hold the water. After a few days, the bucket over-
flows into the floor. An unsuspecting customer walks around the area with the wet floor,
slips and falls. What is the cause of the problem? If a person were to look at first glance,
he or she might conclude that the cause of the customer’s fall was the bucket which over-
flowed. However, this is not the true origin of the problem. The bucket will not be full if
the ceiling wasn’t leaking. In fact, if the ceiling wasn’t leaking, there wouldn’t be a need for
the bucket. This is where root cause analysis comes in handy: it helps managers, engineers,
project managers, and others involved in the quality management process to determine
the reason behind common problems in organizations.
Root cause focuses exclusively on “why” a phenomenon occurs as opposed to “how” it
occurs. The process involves the steps of “data collection, causal factor charting, root cause
identification, and recommendation generation, and implementation” (Rooney & Vanden
Heuvel, 2004, pp. 46–48). Let’s return to the example of the customer that slips and fall.
A person in charge of quality might ask: “why” did the customer fall? The first answer
might be because “the floor is wet”. However, this question leads to another question:
“why is the floor wet”? From the example above, we know the floor is wet because the
bucket overflowed. At this point, we can ask two relevant questions: why did the bucket
overflow and why is there even a bucket? The bucket overflowed because the problem
wasn’t fixed on time and no one checked the bucket periodically to see whether it was
reaching capacity. Similarly, the bucket is there in the first place because there is a leak in
the ceiling. The next question might be “why is there a leak in the ceiling”? There could
be different reasons for this. Perhaps there was a storm that damaged the ceiling a few
days ago. Maybe the building is old and management failed to perform preventive main-
tenance. Perhaps the leak from the ceiling is not really due to a roofing problem; maybe it
emanates from a plumbing issue or a broken air-conditioning unit. A true quality expert
would ask “why” until he or she gets to the bottom of the problem. Although the tradi-
tional approach is to ask “why” five times, you might find that after four times, the cause
of the problem was revealed. Alternatively, you might see yourself asking “why” six or
seven times to get to the origin of the issue. Regardless, root cause analysis is a great tool
to determine causation when faced with quality dilemmas. Understanding causation helps
managers come to appropriate conclusions and address the problem at its root (as opposed
to the surface) (Figure 3.6).
QUALITY AWARDS AND STATISTICAL CONTROL TOOLS
Recognition feels good: people seek acknowledgment for the great things they do. Although
the motivation might be altruistic, it never hurts to show some appreciation. At the orga-
nizational level, companies also like to get recognized for the good work they do. Once
again, they might do it without the recognition, titles, or acknowledgment; however, an
award confirms a company’s practices in a certain area of their operation. Quality awards
recognize best-in-class companies for their exceptional commitment to quality and best
FIGURE 3.6 The five Why’s is a popular way to conduct root analysis. Rather than
diagnose a problem superficially, service managers should strive to
uncover its root causes.
practices in attaining quality outcomes. For many of the most prestigious awards, compa-
nies have to apply and go through a rigorous review process. There are different award
programs that acknowledge the work of companies in the area of quality management.
In the United States, the Malcolm Baldrige National Quality Award is a great distinction
for an organization seeking to be an example of quality. In Europe, the European Founda-
tion for Quality Management also acknowledges an organization’s commitment to quality.
Worldwide, the International Organization for Standardization (ISO) offers different lev-
els of distinction for attainment in the area of quality. There are advantages and limitations
to applying for a quality award. The main benefit for many organizations is that in striving
to attain the award’s criteria, they would have attained a higher level of quality. The main
challenge of participating in a quality award is the amount of time, effort, and resources
that go into the application process. If the benefits of quality outweigh the costs to the
organization, participating in a quality award might be advantageous.
Each quality award has its own selection criteria. In the case of the Malcolm Baldrige
National Quality Award, some of the key criteria are as follows (ASQ, 2019):
• Leadership
• Strategy
• Measurement, analysis, and knowledge management
• Workforce
• Operations
The first service organization to attain the Malcolm Baldrige Award was the Ritz Carlton.
The hotel group received the award twice: in the early and late 1990s. Regarding the
process followed by the Ritz Carlton, the National Institute of Standards and Technology
(NIST) stated:
Daily quality production reports, derived from data submitted from each of the 720
work areas in the hotel system, serve as an early warning system for identifying prob-
lems that can impede progress towards meeting quality and customer-satisfaction
goals coupled with quarterly summaries of guest and meeting planner reactions.
The combined data are compared with predetermined customer expectations to
improve services.
(NIST, n.d.)
As noted, following the standards of a quality award can be a laborious endeavor. How-
ever, it may also lead to better quality as set forth by the standards of the issuing orga-
nization. Another award system for quality is that of the ISO. This organization certifies
companies every three years. In order to get certified, businesses provide documentation
regarding their methods to monitor quality, frequency of worker training, job descrip-
tions, inspection programs, and statistical quality control tools (Reid & Sanders, 2002).
According to the International Standardization Organization: “ISO creates documents
that provide requirements, specifications, guidelines or characteristics that can be used
consistently to ensure that materials, products, processes and services are fit for their pur-
pose” (ISO, 2019). Examples of service organizations that have attained ISO 9001 certifi-
cation include Swissotel Hotels and Resorts and Hilton Worldwide (Figure 3.7).
In order to quantify the effects of quality initiatives, managers may use various statis-
tical tools. The use of statistics has been used in manufacturing for a long period of time.
However, the service industry has been catching up with the use of statistics for quality
control over the last two decades. In the manufacturing setting, a manager might look at
the mean or average size of a part based on its technical specifications. If the part is too
big or too small, narrow or wide, the part may be considered “defective” (in other words,
an error). The object of quality is to minimize (and ideally eliminate) these mistakes.
Therefore, measurement will be used to see how many parts differ from the set standard.
Using a bell curve, a statistician can determine the amount of parts that deviate from the
mean. In a standard bell curve, 68% of all products are within two standard deviations of
the mean (one standard deviation to the right and one to the left). At four standard devi-
ations (two on each side of the mean), the statistician should be able to observe 95% of
all units. Finally, at six standard deviations (three on each side), the same statistician will
find 99.7% of all units. A standard deviation is denoted with the symbol σ, which reads
“sigma” in the Greek language. In order to minimize mistakes, many seek to establish a six
sigma process. The purpose of six sigma is to minimize the occurrence of errors by using
statistical quality control. When all “good units” (that is to say, they fall within the standard
of quality) fall within six standard deviation of the mean, quality occurs 99.7% of the time
and errors occur less than 0.3% of the time. The origins of six sigma can be attributed to
the Motorola Corporation in the 1980s (Reid & Sanders, 2002). When using this method,
managers engage in projects to improve quality and constantly measure progress toward
quality using statistical tools. The six sigma standard of quality means that only 3.4 parts
FIGURE 3.7 The Ritz Carlton was the first service company to earn the prestigious Malcolm
Baldrige Quality Award.
will be defective for every million produced (Reid & Sanders, 2002). Six Sigma uses the
acronym “DMAIC” to summarize its process. The acronym stands for: define, measure,
analyze, improve, and control. In the service sector, companies such as Bank of America
(finance), Target (retail), and Caesar’s Entertainment (casino/gaming) have successfully
implemented six sigma in their organizations.
At this point, you might be wondering, how can a seemingly rigid mathematical
approach to quality control be adopted in the service industries? Biolos (2003) presents
examples of three specific areas in which service quality can be measured and deviations
from the standard be minimized. Accordingly, service turnaround times, customer sat-
isfaction ratings, and service defections (i.e., lost customers) can all be measured in the
service setting. Let’s take the example of service turnaround times in the restaurant sector.
Assume that a casual restaurant would like to set their standard for the length of time it
takes for a meal to be prepared from the time it is ordered by the customer. After examin-
ing its data and researching average wait times at casual restaurants, the managers decide
that ten minutes is the goal they would strive for. From this point forward, the culinary
team would likely use its information systems to track the number of orders placed, wait
times for each, and average wait times. Perhaps during the first week the process is imple-
mented, the average time is 12 minutes. Managers would then look at the reasons behind
the delays and devise strategies to speed up the turnaround time without compromising
the integrity of the process. As time elapses, the wait times might go down to 11 minutes
in the first week and ten minutes the following. Though this might overlook all the opera-
tional challenges (e.g., complexity of menu items, amount of training received by culinary
team, kitchen layout issues, etc.), it does provide an idea of how a service organization
might take statistical tools and apply them to an everyday challenge (Figure 3.8).
STANDARD OPERATING PROCEDURES
As demonstrated throughout this chapter, companies have a variety of means to ensure

quality. They can rely on the knowledge of experts such as mystery shoppers, critics, and
inspectors from formal rating systems. Organizations may use quality tools and approaches
such as root cause analysis and six sigma to improve the quality of the services they offer.
Similarly, they can apply for and obtain quality awards with the expectation that following
these standards would help them attain higher levels of quality. Internally, companies are
often task with developing their own internal procedures in order to create consistency in
the way they deliver services. In fact, JW Marriott famously stated: “success is in the sys-
tems” (Marriott & Brown, 1997, p. 14). Most medium to large organizations have systems
in place which instruct employees on how to perform a certain aspect of the operation.
FIGURE 3.8 Restaurants carefully monitor their ticket times to ensure customers get their orders
on time.
A SOP is a process established by the company in order to ensure quality and consistency
in the delivery if its services. A SOP can take several shapes and forms. Consider the task of
cleaning a hotel room. Every large hotel chain has an SOP which might include an exten-
sive list of the actions needed to thoroughly clean the guest room. Similarly, a restaurant
might have standardized recipes and cooking methods for its signature items. A theme
park can have a very detailed description of its dress code and appearance standard for
its employees. A wealth management firm will likely have a standard set of questions to
ask its customers in order to determine their risk tolerance before providing investment
advice. Most large retailers prescribe a means to conduct inventory and order merchan-
dise. All these are examples of SOPs. In essence, a good SOP indicates how a certain task
is to be carried and at what level it needs to be executed (Figure 3.9).
SOPs can provide consistency from one location to another and from one customer to
the next. In this regard, they minimize the element of “variability” which is inherent to
many services, thus ensuring higher levels of quality. One challenge from following stan-
dard procedures is the possibility that a service might become “robotic” or less natural. For
example, an employee might use certain verbiage in answering a phone call which might
sound too contrived or scripted from a customer’s viewpoint. At the other extreme, lack
FIGURE 3.9 Hotel housekeepers have checklists which guide them through the company’s
standard operating procedures for cleaning a room.
of procedures can cause an employee to answer a call with a colloquial phrase such as
“what’s up”? which would not sit well in a more formal setting such as a luxury hotel or
a bank. The other challenge with SOP is that they may leave little room for creativity or
personalization. In other words; offering standard service might not leave customers feel-
ing “warm and fuzzy”. Furthermore, they may stifle the creativity and ability of workers to
provide service in a superior manner than prescribed by the SOP. Consequently, it can be
stated that a great organization should have solid SOPs while at the same time allow the
space for creativity and innovation (Figure 3.10).
Many service organizations face quality challenges in two fronts. First, they’re large in
size and operate in multiple countries. Second, they have expanded by relying on indi-
vidual investors to operate their businesses under a franchise agreement. Franchising is
a business model whereby a company with a successful product or service offers other
companies the ability to operate a business unit under its brand name and using its operat-
ing procedures and systems in exchange for a fee or schedule of fees. There are two main
parties in a franchising agreement: the franchisee and the franchisor. The franchisor is the
company that owns the brand name, product, or service and wishes to expand its name
and recognition by allowing other investor to operate units of its business. The franchi-
see is an independent business owner or entity that seeks to operate under the business
model created by the franchisor. One of the most known franchises around the world is
McDonald’s. The parent company owns the name, recipes, and operating systems. They
FIGURE 3.10 Chefs and cooks at upscale restaurants strive to create flawless dishes in a
consistent manner.
offer training to the managers of the franchise in its corporate university called “Ham-
burger University”. McDonalds has systems for purchasing, knowledge of the best types of
kitchen equipment, and the ability to conduct marketing campaigns benefiting all its fran-
chisees in a local area. The knowledge, expertise, and reputation of the franchisor come at
a cost. The franchisee pays a schedule of fees. Furthermore, some franchisees may disagree
with new products or services promoted by the franchisor or its pricing strategy. A good
standard set forth by the franchisor may indicate to the franchisee how often a bathroom
is to be cleaned and inspected and which detergents to use. This type of standard is meant
to ensure quality and consistency throughout the brand. However, other standards set
forth by the franchisor may be considered onerous or restrictive by the franchisees.
• What are the advantages and disadvantages of the various quality management tools
explained throughout the chapter?
• Think about an industry and write a brief (2–4 sentences) SOP to ensure high levels of
service quality.
• What are some common sources of errors or mistakes?
• Think about a problem and apply the five “Why’s” to arrive at its root cause.
• What is different about the measurement of service quality as compared to product
quality?
• What are some “best-in-class” companies when it comes to customer service? What can
we learn from them?
• Each country has its own rating system. Compare the hotel rating systems of two differ-
ent countries. What is similar or different between them?
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Award?RetrievedelectronicallyonMarch22,2019from:https://asq.org/quality-resources/
malcolm-baldrige-national-quality-award
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Quality, 16 (1), 23–36.
CHAPTER 4
Customer attitudes and

emotions
From delight to outrage
FIGURE 4.1 According to a recent JD Power Associates Survey, Delta has the highest satisfac-
tion among airlines in North America.
LEARNING OBJECTIVES
• Define customer satisfaction

• Explain disconfirmation theory
• Explain the concept of a “zone of tolerance”
• Assess the effectiveness of customer satisfaction measures
DOI: 10.4324/9780429263965-4
Customer attitudes and emotions: From delight to outrage 63
• List the various means of collecting customer satisfaction data

• Identify trends and patterns in customer satisfaction data
• Determine appropriate course of action based on satisfaction data
• Explain the problems/challenges/limitations of customer satisfaction
• Differentiate the psychological constructs of “attitude” and “affect”
• Define customer delight
• Define customer outrage
• Explain the various ways in which customers can be delighted
KEYWORDS
• Customer Satisfaction
• Customer Satisfaction Survey
• Disconfirmation Theory
• Zone of Tolerance
• Leniency Bias
• Strictness Bias
• Central Tendency Bias
• Response Rate
• Net Promoter Score
• Customer Delight
• Charismatic Delight
• Professional Delight
• Problem-Resolution Delight
• Fulfillment Delight
• Customer Outrage
• Attitude
• Affect
• Emotion
• Amenity Creep
• Problem-Focused Anger
• Vengeful Anger
• Raucous Rage
• Retaliatory Rage
WHAT IS CUSTOMER SATISFACTION?
In the service industries, customer satisfaction is often used as a key metric of the orga-
nization’s performance. Satisfaction is measured, tracked, compared, and disseminated in
an effort to understand a key stakeholder to any service business: its customers. Service
64 Customer attitudes and emotions: From delight to outrage
managers often receive monetary incentives (i.e., bonuses), and one of the criteria by
which they’re judged is their customer satisfaction metrics. Despite the widespread use
of customer satisfaction surveys, there are substantial differences regarding how to define
and measure this important concept. Throughout this chapter, we present various defini-
tions of customer satisfaction, different ways to measure its occurrence, and, more impor-
tantly, the various ways in which this data can be used to improve daily operations. Later,
we discuss the challenges to customer satisfaction and the benefits of measuring customer
emotions such as delight and outrage. The specific ways to delight customers are outlined
along with some suggestions on how to avoid outrage (Figure 4.1).
The formal study of customer satisfaction begins around the 1960s and is ongoing.
Cardozo (1965) suggested that “satisfaction results when customers either confirm their
pre-purchase expectations for a purchased service or positively disconfirm (exceed) their
expectations regarding the purchased services”. This definition implies that customers make
a judgment or evaluation regarding the services received and, in turn, arrive at the conclusion
that they’re either satisfied or dissatisfied. Howard and Sheth (1969) defined satisfaction as
“the buyer’s cognitive state of being adequately or inadequately rewarded for the sacrifices
he or she has undergone”. The purchase and consumption of services offers benefits to cus-
tomers but also implies costs. For example, a family traveling on a vacation will likely spend
various resources (e.g., time, effort, money) in order to make a trip possible. Air fare will be
purchased, hotels will be booked, time will be set aside for vacation, and energy will be spent
throughout the planning process. At the end of the vacation, the family will likely evaluate
their experience. Was it worth the money they spent? Was this trip the best use of their
time? Could there have been other destinations, airlines, hotels, and attractions which would
have presented a better use of their resources? Since time, money, and other resources are
limited, a key question in determining satisfaction would be whether customers think that
their expenditures of time, effort, and energy are worth what they obtained in exchange.
Since what they obtained in receiving a service is primarily intangible, the calculation of
satisfaction is psychological and somewhat subjective in nature.
One of the most prominent figures in the study of satisfaction, Oliver (1981), proposed
that satisfaction is “the summary psychological state resulting when the emotion sur-
rounding a disconfirmed expectation is coupled with the consumer’s prior feeling about
the consumption experience” (p. 27). This definition implies that customers compare
expectations in the context of the service they actually received. This notion is consistent
with disconfirmation theory. Accordingly, when the customer confirms his or her expecta-
tion, satisfaction will be the outcome. Positive disconfirmation (meaning service exceeded
expectations) can also lead to satisfaction. In contrast, negative disconfirmation (actual
service fell below expectations) will lead to customer dissatisfaction.
Another model which explains how customers become satisfied is the zone of toler-
ance. Accordingly, customers have an upper and lower threshold for what they consider is
acceptable service. If the actual service is somewhat between these two lines or thresholds,
customers will be satisfied. If service goes significantly above or below, customer delight or
outrage might emerge (Keiningham et al., 1999). We will discuss the concepts of delight
and outrage later in this chapter. For now, it is important to note that the zone of tolerance
implies that expectations are not exact, but rather exist within a range of acceptability. For
example, a restaurant customer might expect the food to be ready within ten minutes of
ordering. Perhaps the food arrived within nine minutes or 11 minutes. In both these sce-
narios, the customer will likely remain satisfied. Assume for a moment, that the food took
25 minutes to arrive; this will likely fall below a customer’s lower threshold of tolerance,
thus resulting in dissatisfaction (Figures 4.2 and 4.3).
GATHERING DATA ON CUSTOMER SATISFACTION
There are multiple ways in which service providers can gather information on customer
satisfaction. Arguably, the most popular one is the customer satisfaction survey. The ben-
efit of a survey is that all the questions are carefully written ahead of time and consistently
delivered to various customers. Information can be aggregated and analyzed against other
types of data (e.g., repeat purchases). A customer satisfaction survey may be given in a
traditional form (e.g., hard copy) or electronically (e.g., soft copy). Surveys can be sent
via e-mail, web applications, text messaging, phone calls, and many others. Satisfaction
surveys can be prepared internally by the company offering the service or externally by a
third party consultant. In either scenario, you might want to consider the following:
• Are the questions asked a true representation of customer satisfaction?

• What is the length of the survey?
Yes Satisfaction
Was service according

to expectations?
No Dissatisfaction
FIGURE 4.2 Visual aid for disconfirmation theory.

Source: Author.
Satisfied Customers
FIGURE 4.3 Zone of tolerance illustrated.

Source: Author.
• How will this survey be distributed?

• What is the response rate?
• What is the cost of gathering and analyzing customer satisfaction data?
• What is the cost of not evaluating customer satisfaction?
• What is an appropriate benchmark to compare a company’s satisfaction scores against?
• What actions (if any) can be taken based on the feedback received?
Some surveys answer the satisfaction question by asking one simple question: “are you sat-
isfied”? In some cases, the question will be asked in a Likert-type scale in which numbers
are assigned to various levels of satisfaction such as “very dissatisfied”, “dissatisfied”, “satis-
fied”, or “very satisfied”. The Likert scale can be attributed to psychologist Rensis Likert,
who developed a scale to measure attitudes. Other surveys are much more detailed and
asked multiple questions regarding a customer’s satisfaction. For example, a hotel satisfac-
tion survey can ask about the satisfaction with the cleanliness of the room, the comfort of
the room, the friendliness of the staff, the professionalism of staff, the location of the hotel,
the value for the price paid, and so forth. The advantage of asking multiple questions is the
attainment of more nuanced information. However, the challenge might exist where some
customers mark the same answers throughout the survey without careful consideration
to each aspect. Perhaps a customer found the hotel room to be dirty and subsequently
marked all other aspects of the survey as “very dissatisfied”. When a customer is very harsh
on every aspect of the survey, this is called a strictness bias. If the same customer marks
everything as “very satisfied”, it is possible that the customer suffers from leniency bias.
This bias takes place when an individual is overly forgiving or “too nice” when evaluating
items on a survey. Finally, when the customer marks all answers right in the middle of the
Likert scale (e.g., neutral), it is called a central tendency bias. These biases are not unique
to customer satisfaction survey; they can permeate to any other survey in which people
are asked about their attitudes. The important thing is to acknowledge these possibilities
and scan responses for any sings of bias.
Another important element to consider is the length of the survey. It is the preference
of the authors of this book to design shorter surveys which the customers can answer
in a maximum of 15 minutes, even less if possible. If the survey is longer than that, the
service provider might want to offer compensation to participants and provide an accu-
rate estimate for the survey length at the beginning. While a longer survey can capture a
greater amount of detail, it also poses the risk of non-completion. This takes place when
the customer begins the survey, but does not finish. The timing of a survey is yet another
important aspect when measuring customer satisfaction. Ideally, the survey should take
place shortly after they experience a service or even while enjoying the service itself. If a
long time elapses (e.g., more than a year) between the time they experienced the service
and the time in which they were surveyed, there is the potential for poor recollection
and memory biases. When analyzing the results of the survey, managers should consider
the response rate. The response rate is the percentage of people who filled the survey as
compared to the surveys distributed. If the response rate is too small (e.g., less than 5%),
this can bring into question issues of response bias. A manager might question whether
such a small percentage of survey-takers are a true representation of all of their custom-
ers. In our modern society, people are constantly receiving surveys, thus issues of clutter
might emerge. Therefore, it would be unreasonable to expect that all customers answer
a satisfaction survey. While there is no hard and fast rule for response rates, managers
might desire to obtain at least a 10% response rate in order to garner meaningful results
(Figure 4.4).
Customer satisfaction surveys can be administered in a variety of settings. Customers
might be asked questions toward the end of their visit. For example, in some theme parks
employees intercept guests as they’re exiting and ask several questions to verify their
levels of satisfaction. The advantage of this tactic is that the customer’s memories are still
fresh. The challenge of intercepting guests on their way out is that they might be tired
or in a rush to get to their next destination. Some service organizations also have a kiosk
which asks satisfaction questions. In several quick service restaurants, you may be able to
observe this kiosk next to a door or a cash register. The advantage of this method is similar
to the intercept technique: the customer is receiving the service, so their memories will be
fresh. The drawback of the kiosk is also similar, in that guests might be in a hurry or might
not desire to interrupt their meal in order to take a survey. Similarly, this method suffers
from self-selection bias. This bias occurs when customers select their own participation
instead of the company randomly selecting a group of customers to survey.
Following the receipt of a survey, some companies make a quick phone call to cus-
tomers in order to ascertain their satisfaction. For example, the service department at a
car dealership might call a customer two days after a repair has taken place. During such
FIGURE 4.4 Today, companies have many tools at their disposal to collect customer satisfac-
tion data.
call, they might ask about their satisfaction with the repair itself, their wait time, and so
forth. The benefit of this technique is the personalized nature of the call. During the call,
both standardized and open-ended questions can be asked to get a true sense of the cus-
tomer experience. Furthermore, if dissatisfaction exists, the company has an opportunity
to engage in service recovery efforts. The challenge with phone surveys is that many indi-
viduals will not answer their phone if they don’t recognize the number they’re receiving
the call from. Furthermore, even if they answer, the timing might not be appropriate for
them to engage in a longer conversation. Therefore, these types of surveys are especially
sensitive to time constraints.
Since many younger customers are more likely to engage in texting as opposed to a
phone call, some companies have attempted surveys via text messaging. This mode of
delivery allows for rapid response and reduces problems associated with memory bias.
Furthermore, they can be more interactive by enabling the system to ask follow-up ques-
tions based on customer responses. The disadvantage of sending a survey via text message
is that the amount of information that service providers can capture is limited. Alterna-
tively, a link to a web-based satisfaction survey can be sent via text messaging or some
messaging application (i.e., WhatsApp) (Figure 4.5).
One of the most popular ways to deliver customer satisfaction survey in recent years
has been through the use of e-mail. This method is inexpensive and quick. It also allows the
respondent to answer both structured and open-ended questions similar to a paper-based
FIGURE 4.5 The wholesale club Costco has one of the highest levels of customer satisfaction in
the retail industry.
survey. A great challenge that service providers face with e-mails is clutter: most cus-
tomers receive many e-mails from various businesses. Therefore, they might overlook the
satisfaction survey. Response rate is yet another challenge associated with e-mail survey,
since a small number of customers is likely to respond. The various methods of collecting
satisfaction data come with different costs for service providers. Intercepting guests at the
end of their stay entails the labor cost of the survey administrator. In contrast, an e-mail
survey is relatively inexpensive. However, different distribution strategies might also entail
different benefits and drawbacks; thus, these should be considered in making a decision.
Whereas some companies like to develop their own satisfaction surveys, others might
opt for a standardized survey which they can purchase from a third-party vendor. The
advantage of a standardized survey is that it has been used in different companies and
makes internal and external comparisons easier. The main challenge is that these surveys
might not be as customized to your operation. The Net Promoter Score (NPS) is a pop-
ular survey used by many companies in the service industry. This tool classifies customers
into three groups: promoters, passive, and detractors based on their scores. According to
the survey’s developer, promoters tend to spend more, defect less, and spread positive
word of mouth (NICE Satmetrix, 2022). This information can be used to benchmark
internally and externally. NPS is also used as a tool for continuous improvement. Feed-
back from customers is gathered on a regular basis and shared with relevant stakeholders
in order to continually improve operations. The three core groups identified by their NPS
are (NICE Satmetrix, 2022):
• Promoters. People who score 9–10 in the 10-point scale of the NPS are considered
promoters, as they’re likely to advocate for the business and its products.
• Passives are customers who score between 7 and 8 points. These customers like the prod-
ucts and services offered by a company, but are considered vulnerable to competitors.
• Detractors. These customers are dissatisfied with your company and have the poten-
tial to spread negative word of mouth. NPS considers a detractor any customer who
scores between 0 and 6 points (on a 10-point scale) (Figure 4.6).
In addition to the quantitative data generated by customer satisfaction surveys, there are
other ways in which service providers can get information from their customers. One way
to obtain richer data and greater depth of conversation is through interviews and focus
groups. Customer interviews allow service providers to ask open-ended questions in order
to obtain important insights about their experiences. The advantage of an interview is that
customers might reveal feedback which the service provider hasn’t really asked about in
a satisfaction survey. Interviews are highly personalized and offer service providers the
opportunity to ask follow-up questions. However, interviews typically entail greater time
commitment from customers. Furthermore, service providers need to take into account
the labor cost of the interviewer and the cost of analyzing the data and putting it into
useful patterns which are actionable to managers. Focus groups also allow for in-depth
exploration of customer experiences. The advantage of focus groups is the ability for cus-
tomers to interact with one another and generate synergies in their conversations. Focus
groups are used frequently in marketing research and there are consulting firms specializ-
ing in gathering this information. When organizing a focus group, compensation is often
FIGURE 4.6 The Net Promoter Score (NPS) is a popular way to measure customer satisfaction.
given to customers for their participation. Compensation might be a direct payment of

cash, but it may also entail free product, discounts, or other products or services of value
to customers (Figure 4.7).
The ultimate objective of collecting customer satisfaction information is to make
informed business decisions. Once managers receive satisfaction data, it can be analyzed
and conclusions drawn. One of the uses of customer satisfaction data is for internal and
external comparison. For instance, a business unit can compare its customer satisfaction
scores to those they received last month or last year. Similarly, a business unit (e.g., a
branch of a banking institution) can compare its scores to other units. This is consistent
with the idea of internal benchmarking, which is highlighted in the chapter on service
quality. Finally, comparisons can be made with other businesses. For instance, the same
bank can compare its satisfaction scores to other banks which are not owned by the same
company.
Customer satisfaction data can be used to detect areas of a business that are doing well
and others which might need greater attention. For instance, a hotel might find that it
receives great scores in room cleanliness, but its poolside service receives low satisfaction
marks. In this instance, managers might want to delve deeper into the reasons why this
area of the business is not performing well with regards to customer satisfaction. It might
be that the pool bar is understaffed. Perhaps the pool bar closes too early, thus leaving
the pool without service when customer demand still exists. Maybe the quality of mixed
drinks is not up to customer expectations. Each one of these possibilities requires a differ-
ent managerial response. Reexamining scheduling can be the solution if lack of service or
slow service is the main problem. Revising the hours of operation might be another solu-
tion. If the problem is regarding the quality of mixed drinks, then the Beverage Manager
FIGURE 4.7 Focus groups can be a helpful source to obtain customer satisfaction feedback.
might want to consider new beverage suppliers or retrain bartenders on the appropriate
way to make signature drinks.
A customer satisfaction survey can provide data to guide future capital investment
projects. Let’s assume visitors to a popular theme park take a satisfaction survey which
asks about the various attractions they visited. After some analysis, the theme park com-
pany realizes that one particular attraction is receiving low satisfaction scores. Further-
more, their analysis revealed that customers described this ride as “old” and “outdated”.
Whenever the theme park is considering capital investments to improve its operations,
managers can prioritize which attractions to refurbish or replace based on customer sat-
isfaction data.
Companies can use customer satisfaction data to make changes in their standard oper-
ating procedures (SOPs). If a certain process yields many mistakes or delays, management
may want to revisit this process. If a restaurant is constantly receiving meals back because
they did not honor guest specifications, this might signal to management that processes
need to be revised. Alternatively, it might also be an opportunity to retrain employees,
improve communications within the kitchen and service staff, and review information sys-
tems for accuracy. Despite the multiple uses of customer satisfaction information, caution
must be exercised not to misinterpret findings. For example, a jump or drop of 1% or 2%
in the course of a month is probably not significant enough to make important decisions.
Similarly, if a survey was only answered by a small number of customers, it may suffer
from issues of self-selection bias. Finally, customer satisfaction is not the only way in which
a customer can measure its customer engagement. In fact, the link between customer
satisfaction and loyalty is not as strong as most would assume (Skogland & Siguaw, 2004).
Other ways to measure customer-related outcomes include the study of customer delight
(more on this in the next section) and electronic word of mouth.
FROM CUSTOMER ATTITUDES TO EMOTIONS: UNDERSTAND-

ING CUSTOMER DELIGHT AND OUTRAGE
Whereas satisfaction measures a customer’s attitude, customer delight measures a cus-

tomer’s emotions. Both attitudes and emotions are important in order to understand con-
sumers. More specifically, an attitude is a cognitive evaluation concerning an object or
situation. In the service context, customer satisfaction seeks to answer the question: “what
does the customer think”? Emotions are a psychological state. This means they’re tempo-
ral or momentary. In other words, you might feel one way in the morning and completely
different in the evening. Emotions are also experiential. This means that people experi-
ence the emotions (they not only think, but live a particular sensation). In many cases,
discrete events trigger an emotion. For example, the news of a new job offer might make
a person happy or joyful, whereas a traffic jam or rude drivers might make a person angry.
Emotions have physiological components. A nervous person might sweat profusely, a sad
person might cry, and a happy person might smile. These are all physical signs of the psy-
chological state the person is experiencing. Emotions are directed toward an object. The
object of an emotion might be a person or an organization, but an emotion will typically
have directionality. For example, a spouse might be upset at the other because he or she
forgot an anniversary. An employee might be upset at his or her boss, because he or she
took disciplinary action against them. A student might feel grateful to a scholarship donor
upon finding out he or she received a scholarship. Emotions have a hedonic tone – this
means that emotions can be good, positive, uplifting, or alternatively a bad or negative
feeling. As people we typically take news and quickly appraise the hedonic tone for us
(Figure 4.8).
Understanding the concept of an emotion can help service providers identify them
throughout their daily operations. It is with this backdrop that we introduce the concept
of customer delight. For many years, managers have suggested that employees ought to
“delight customers”. But what does that mean? In the late 1990s, researchers started the
formal study of this subject and have provided a few answers. Initially, it was thought that
customer delight was attained by exceeding expectations (Keiningham et al., 1999). Later
research revealed that delight was obtained when customers experienced the emotions of
joy, thrill, exuberance, and exhilaration (Kumar et al., 2001). Another approach to delight
suggested that it can be achieved by fulfilling a customer’s need for self-esteem (Schnei-
der & Bowen, 1999). The need for esteem is the human desire to feel special, welcome,
unique, and valued as a person (and more specifically, as a customer in the services con-
text). Taking both the motivational (i.e., fulfilling the need for self-esteem) and affective
FIGURE 4.8 Water parks are designed to create fun experiences which generate positive
customer emotions.
(i.e., generating emotions of joy, thrill, and exuberance) perspectives of customer delight,
it can be formally defined as (Figure 4.9):
the highest state of engagement experienced by the guest. It represents a higher

state of emotional arousal and excitement [towards a company] than customer sat-
isfaction. Delight is caused by satisfying the guest’s higher order needs, namely, the
need for self-esteem.
(Torres & Kline, 2013, p. 648)
There are different ways to delight a customer. One approach is to elegantly solve a prob-
lem, especially when the problem is not the service provider’s fault (Arnold et al., 2005;
Guchait et al., 2014; Torres & Kline, 2013). This strategy is called “problem resolution
delight”. Another way to delight customers is by being extremely professional in the exe-
cution of one’s duties (Beauchamp & Barnes, 2015; Torres & Kline, 2013). This is called
professional delight. A professional individual is knowledgeable, courteous, and highly
competent in their profession or occupation. Employees that are very friendly can be a
source of delight to their customers: this is called charismatic delight (Torres & Kline,
2013). Often, the characteristics of the service provider are transferred to the service itself.
Therefore, a person’s traits and charisma can deeply influence a customer’s perceptions
of the organization they represent. In fact, studies suggest that the positive emotions of
FIGURE 4.9 Service organizations should go beyond satisfaction toward achieving customer
delight.
employees often lead to positive customer emotions, which result in delight (Beauchamp
& Barnes, 2015). Probably one of the most important ways to delight guests is to appeal to
their need for self-esteem. This is called fulfillment delight (Torres & Kline, 2013). When
a customer is made to feel unique as opposed to a number, special as opposed to ordinary,
and welcomed as opposed to ignored, they will likely emerge delighted. In addition to
these four strategies, research has suggested that flexibility (Torres et al., 2014) and pos-
itive surprises (Bartl et al., 2013; Crotts & Magnini, 2011) can lead to customer delight.
It should be noted that there are several criticisms to customer delight. Some argue that
satisfaction is enough to obtain desirable customer outcomes such as loyalty (Bowden &
Dagger, 2011). However, most studies demonstrate a positive relationship between cus-
tomer delight and customer loyalty (Ahrholdt et al., 2017; Arnold et al., 2005; Barnes
et al., 2010; Crotts & Magnini, 2011; Dey et al., 2017; Loureiro & Kastenholz, 2011;
Wang, 2011). Another potential challenge to delighting guests is the potential for raised
expectations. In services marketing, this is often called an amenity creep and it occurs
when an amenity ceases to be an amenity and creeps (e.g., rises) to become an expecta-
tion. Under this scenario, the service provider is setting an increasingly higher bar to reach
in order to delight its customers. It should be noted that while some ways of delighting
a guest might lead to an amenity creep (e.g., leaving a complimentary bottle of wine in a
guest room), other ways of delight (e.g., being friendly and charismatic) will not always
result in higher expectations.
The practice of achieving customer delight can at times be more challenging than its
theory. Whereas theory calls for hiring individuals who are naturally friendly, not every
employee will be happy all the time. There are factors related to the organization such
as organizational culture, supervision, compensation, and other terms and conditions of
employment which might influence their happiness. Furthermore, forcing unhappy employ-
ees to act in a friendly way might lead to emotional labor. The phenomenon of emotional
labor takes place when people are encouraged to display emotions different than those they
really feel. Employees who are constantly engaged in this type of predicament are likely to
use a lot of their cognitive resources to cope with such a discrepancy and might be otherwise
depleted or eventually burn out. Many organizations seek to hire employees who are prone
to be friendly and might even employ personality tests to do so. Yet, another impediment
might be seen in that friendliness might take a back seat to other qualifications such as
knowledge of computer systems, experience at the job, technical skills, and more. Achieving
customer delight requires highly professional and knowledgeable employees. This can be
attained through the training and development efforts of a firm and can be solidified by high
levels of employee retention. However, many of the service industries face higher levels of
employee turnover in comparison to other economic sectors (e.g., manufacturing, govern-
ment, education, etc.). The high levels of turnover can lead to the loss of Knowledge, Skills,
and Abilities (KSA’s) which are critical to achieve great customer service.
Employees who are empowered to solve customer problems can more readily delight
them. However, not every organization does a good job empowering their employees. Fur-
thermore, even empowered employees can question the extent of their authority. At times,
employees might take the words and actions of customers personally, thus rendering them
less willing to provide assistance in resolving their problems. The theory on customer delight
suggests that employees treat their guests as unique individuals. However, many large orga-
nizations operate by using SOPs. As mentioned in the chapter on service quality, SOPs have
multiple advantages in attaining high-quality service on a consistent basis. However, stan-
dardization can lead to a depersonalization of service. Have you ever heard the phrase “this
is how we do things”, or “that is the rule”, or “our policy does not allow for that”. How did
that make you feel? Granted, there are certain areas in which company policies should be
adhered to in a strict manner (e.g., safety and security issues), there might be other realms of
the customer interaction where some flexibility is built into the standard procedure.
Customers can be delighted by having unique servicescapes which stimulate their
imagination. In fact, research in the theme park industry suggests that elements of archi-
tecture, interior design, and theming can all lead to delighted customers (Torres et al.,
2021). Despite the importance of unique environments, many service organizations today
operate under a chain or franchise models. These models have the advantage of creating
a solid brand name based on a consistent product and service. However, they might also
limit the amount of uniqueness in design elements which might trigger the emotion of
delight. There are also outside forces which might act against the best planning efforts of
service managers. For example, natural disasters, mechanical failures, and similar items
can cause dissatisfaction or even outrage among customers, though they’re not under the
control of a company’s management.
The goal of every service organization should be to delight its customers. Additionally,
they should also seek to avoid customer outrage or anger. Formally defined, “Customer
anger is triggered by a service failure that the customer perceives as the service provider’s
fault. Customer anger at the service provider will be moderated by: a) goal relevance,
b) goal incongruence, c) ego-involvement” (Nguyen & McColl-Kennedy, 2003, p. 52).
Outrage goes beyond simply dissatisfaction. A dissatisfied customer thinks that service fell
below their expectations. However, customer outrage is a moral emotion, thus requiring
an evaluation in light of a customer’s moral compass (Lindenmeier et al., 2012). For exam-
ple, when a company is dishonest in its marketing campaigns, or causes negative environ-
mental impact, or perhaps fails to communicate critical information to its customers, or
causes harm or injury to its customers, these actions are likely to result in customer out-
rage. Enraged customers likely experience feelings of deprivation and victimization (Liu &
Tat Keh, 2015). Furthermore, it has been suggested that outraged customers might engage
in pro-social behaviors such as boycotting (Lindenmeier et al., 2012), negative word-of-
mouth communications, direct complaints, interruptions in repeat purchasing behaviors,
and even retaliation (McColl-Kennedy et al., 2009).
There are different shapes in which customer anger manifest itself. Two of these types
of customer anger are problem-focused anger and vengeful anger. When a customer expe-
riences problem-focused anger, the feeling is less intent and focuses on resolving the issue
at hand. For example, a hotel guest with a broken air-conditioning unit might be angry
and stop by the front desk. However, they might still be focused on finding a solution. The
solution might be fixing the air conditioning unit or being transferred to another room. In
contrast, vengeful anger often involves a desire to hurt service firm and may even result
in customer deviance (Antonetti, 2016). It is noteworthy that an enraged customer might
have continuing thoughts of anger toward the company that can last for days or weeks after
the incident, which triggered the initial emotional response (McColl-Kennedy et al., 2009).
Therefore, early action by the service organization might prevent further damage. Another
way to understand customer outrage is to classify it as either raucous rage or retaliatory rage.
This concept is akin to the idea of problem-focused anger and vengeful anger. Rancorous
Rage is “characterized by intense fillings of ill will or animosity and by acrimonious, malev-
olent, anger”. In contrast, Retaliatory Rage is “characterized by feelings of fierceness and by
destructive violent anger” (McColl-Kennedy et al., 2009, p. 232) (Figure 4.10).
Service recovery strategy might help neutralize or even transform the feelings of
outrage into delight. However, it is also important to focus on the strategies to prevent
outrage from emerging. First, a company should have protocols to ensure service quality
and operating procedures to minimize errors. Second, companies need to be truthful and
transparent with their customers. Marketing campaigns that are both enticing and hon-
est can help these efforts. Furthermore, communicating with customers concerning any
problems, failures, or mistakes which might affect service is important. Having a sense of
social responsibility toward the communities they serve, their employees, the environ-
ment, and society in general can prevent them from being perceived as perpetrators of
unethical corporate behavior. Admitting responsibility for errors and seeking ways to seek
reconciliation are important to prevent customer anger from festering in the collective
psyche. Delight and anger are powerful customer emotions with strong consequences for
their organizations. Therefore, efforts to promote delight, avoid outrage, and stimulate
positive relationships between the company, its employees, and customers will go a long
way toward generating goodwill and engagement with its stakeholders.
FIGURE 4.10 Identifying and diffusing customer anger is an important skillset for service
managers.
• What is the difference between service quality and customer satisfaction?

• What are some important considerations when designing and delivering a customer
satisfaction survey?
• What can management do with customer satisfaction data?
• What is the NPS? What does it measure?
• What is the difference between a customer attitude and an emotion?
• What are some ways in which customer delight can be attained?
• What are some challenges which make the goal of customer satisfaction and delight
challenging?
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CHAPTER 5
Waiting for service

Strategies to reduce waits and the
perception of waiting
FIGURE 5.1 Shoppers wait in line at a supermarket.

LEARNING OBJECTIVES
• Explain the relationship between capacity management and demand management

• Analyze the different types of short- and long-term capacity management choices
faced by designers and managers
• Analyze the different options managers have to cope with varying levels of demand
• Describe the best features of successful waits
• Explain the various types of information (i.e., inputs) managers should consider in
estimating waiting times
DOI: 10.4324/9780429263965-5
Strategies to reduce waits and the perception of waiting 81
• Explain the advantages and disadvantages to different types of queues

• Explain the psychological aspects associated with queue design
• Apply queue design concepts to reduce actual waiting times and to reduce percep-
tions of waiting
• Provide (create) solutions to capacity and demands imbalances in the various ser-
vice industries
KEYWORDS
• Capacity Management
• Capacity Size
• Carrying Capacity
• Capacity Flexibility
• Level Capacity Approach
• Chase Capacity Approach
• Human Capacity
• Physical Capacity
• Demand Management
• Crowding
• Density
• Abandonment Rate
• Single Channel, Single Phase Queue
• Single Channel, Multiphase Queue
• Multichannel, Single Phase Queue
• Multichannel, Multiphase Queue
• Virtual Queue
OPENING STATEMENT
Most of us have waited by standing in line, sitting down at an office, being placed on hold
during a phone call, or riding a vehicle during traffic. Since time is a limited resource for
human beings, we like to spend it in a way that is worthwhile. Statisticians have gone as
far as to calculate the average amount of our lives that we spent waiting in line, with one
estimate at 235 days (Campbell, 2017). In the United States, the average person waits on
average 32 minutes in the doctor’s office, 13 minutes on hold for a customer service phone
line, and 28 minutes in airport security (Businesswire, 2012). Waiting can be undesirable
for many reasons, most importantly because it halts our desire for immediate gratification.
Long waits can be negative for service providers, as they might stimulate dissatisfaction or
even outrage among customers. Additionally, long waits can lead to high rates of abandon-
ment. Essentially, abandonment takes place when a consumer decides not to wait for the
service, thus the business loses the opportunity for additional revenue. Why then do waits
82 Strategies to reduce waits and the perception of waiting
take place? And if businesses have such a vested interest in reducing waits, why are waits
a commonplace? (Figure 5.1).
Waits take place whenever there is a mismatch between consumer demand and a busi-
ness’ ability to meet such demand. In a perfect world, service providers would be able to
meet consumer demand perfectly, leading to no waits. However, this seldom takes place as
it requires a large amount of resources from service providers, which could render service
uneconomical. Any business has a limited amount of resources: financial, physical, and
human. Managers make choices on how to best deploy these resources to meet the con-
sumer’s needs. This task can be challenging, as consumers do not always arrive at an even
pattern throughout any given day or year. A quick service restaurant would experience a
strong inflow of customers during the lunchtime; a ski resort would have strong demand
during the winter months; a tax preparation service would inevitably have substantial
demand as the tax filing deadline nears; and a hospital could be overwhelmed during a
global pandemic. In addition to seasonality and variable arrival patterns, delivering each
service or experience takes a certain amount of time. For example, a popular theme ride
might take eight minutes from beginning to end. Similarly, a doctor might take 20 minutes
per patient to interact, diagnose, prescribe, and take notes. A hotel housekeeper might
take 25 minutes on average to clean a room. Managers use data to predict three important
determinants of a wait (Dickson et al., 2005):
• The amount of people that would arrive at any given time

• The arrival pattern
• The rate at which customers can be served given the existing capacity
While these estimates are critical, they’re far from perfect. For example, a warm sunny
day can cause a higher than average demand at an ice cream shop. A cancelled cruise ship
can cause hotels near the port of departure to experience a sudden rush of guest arrivals.
The amount of time it takes to serve a guest can be even more difficult to predict highly
customized services. For example, not all tax returns take the same amount of time to
prepare; some of them are more complex than others. In a restaurant, not every dish takes
the same amount of time to prepare and not every customer spends the same amount
of time dining. Research in call centers has demonstrated precisely how difficult it is to
estimate the volume of calls for every single hour or minute of a given day (Betts et al.,
2000) (Figure 5.2).
MANAGING CAPACITY AND DEMAND
Every service firm has a set of resources which would enable them to meet consumer
demand. The organization’s ability to meet customer demand is called capacity. Therefore,
the goal of capacity management is “to minimize customer waiting time and to avoid idle
capacity, with the goal of attending to demand in time and in the most efficient way possi-
ble” (Adenso-Diaz et al., 2002, p. 287). Capacity management is related, but not the same
as “demand management”. The aim of demand management is to shift demand patterns,
whereas capacity management seeks to respond to demand. To illustrate this difference,
FIGURE 5.2 Not all waits are the same; waiting at a hospital can be particularly stressful, as
people might be in pain and the amount of wait time is uncertain.
let’s use an example from the hotel industry. A Revenue Manager might manage demand
by offering variable pricing at different times of the year. In contrast, a Hotel Manager
might manage capacity by expanding (i.e. adding more) the number of hotel rooms over
the long term or increasing staffing levels.
There are three important dimensions to capacity management: capacity size, carrying
capacity, and capacity flexibility. Capacity size decisions relate to the physical size of a
facility or optimal staffing levels (Pullman & Rodgers, 2010). Before a business opens its
doors, designers and investors have made decisions about its size. They might ask: How
many square feet will the convention center have? How many rooms will a hotel possess?
How large is the size of kitchen facilities in a restaurant? How many operating rooms in
a hospital? How many seats on an airplane? Decisions about capacity size are considered
long term, as it is difficult to alter them in a short period of time. For instance, a hotel will
not be able to increase its number of rooms by next week. The second important aspect of
managing capacity is carrying capacity. Carrying capacity is optimal level of utilization for
a given resource (Pullman & Rodgers, 2010). For instance, too many people at a nature-
based attraction can cause problems for the environment, disruption for the wildlife, and a
negative experience for guests. Too many guests at a theme park can increase density lev-
els and give the impression of crowding. Finally, designers and managers should consider
capacity flexibility as an important choice in services. Capacity flexibility is the service
provider’s ability to respond to changing demand by adjusting their servicescape or labor
practices (Pullman & Rodgers, 2010). Some service operations have built-in flexibilities
which allow them to quickly react to changes in demand. For instance, conference centers
have wall dividers which enable staff to split a large ballroom into smaller rooms. Similarly,
some restaurants have expandable tables and extra chairs which allow them to accom-
modate larger groups. Cruise line operators are able to use their ships more optimally by
shifting their routes throughout the year (Figure 5.3).
Companies use their assets with varying levels of efficiency. A company that uses its
resources (both physical and human) in a more efficient way could in theory handle more
capacity with assets comparable to their competitors. For example, Southwest Airlines is
known for their quick turnaround time. Airplanes are expensive pieces of equipment, thus
airlines seek to use them in the most optimal manner. The more time the airplane is in the
skies, the more revenues the airline is likely to collect. Therefore, an airplane that is stuck
in the airport for long periods of time is not the most efficient use of the company’s assets.
It is noteworthy that some time in the ground is needed to unload the plane’s passengers
and luggage, reload the plane, get fuel, and perform safety inspections. Let’s say that airline
A uses one of its planes to do an average of five domestic flights per day and airline B is
able to perform an average of seven flights per day, airline B would have a competitive
advantage. Multiply this efficiency differential time’s hundreds of planes and you could
see how the numbers add up. Southwest Airlines has prided itself in a 20–25 minute
turnaround time. This turnaround time is lower than other airlines who can take 30–40
FIGURE 5.3 Many conference rooms and ballrooms have removable partition walls. This de-
sign feature allows them to open or close the room depending on the group size.
This is an example of capacity flexibility.
minutes and sometimes even longer to turn around their planes. Consequently, Southwest
can handle more capacity with the same number of planes than many of its competitors.
In addition to long-term or strategic capacity decisions, service organizations must
also make short-term choices concerning their capacity. These decisions are often associ-
ated with managing its human resources. Managers might choose to keep staffing levels
evenly distributed throughout the year; this is called a level strategy (Pullman & Rodgers,
2010). On the opposite end of the spectrum, companies might change its staffing levels as
demand occurs; this is called a chase strategy (Pullman & Rodgers, 2010). Finally, a third
set of service provider chooses a strategy that falls in between steady staffing and variable
staffing levels; this is called a mixed strategy (Pullman & Rodgers, 2010). Some businesses
also cross-train their employees in an effort to create some flexibilities in their capacity
(Klassen & Rohleder, 2002). A level strategy works great for services which receive consis-
tent demand throughout the year. By maintaining a larger set of staff employed through-
out the year, a firm can ensure its ability to rapidly respond to customer needs and attain
lower employee turnover. It is noteworthy that such an approach might also imply higher
labor costs. In contrast, a chase strategy might be more economical as staffing levels vary
throughout the year. However, responding to a sudden uptick in demand might be more
challenging, since it may take time to increase staffing levels. Additionally, this strategy
might rely on a greater number of contingent, seasonal, and part-time workers, which are
known to have higher rates of turnover. In practice, many businesses fall somewhere in
between these two extremes and adopt a mixed strategy. It is noteworthy that even in the
most variable of scenarios, operators must have a minimum level of staff to operate. For
example, a hotel front desk could have five stations operated by five associates on a heavy
arrival day. If a hotel faces a smaller number of arrivals, it can move staffing levels down-
wards to two or three employees. However, even in the least busy day of the year, the hotel
must have at least one employee at the front desk. Therefore, there is a minimum level of
staff that is required to operate no matter how low the demand might be.
In addition to a level, chase, and mixed strategies; service operators must also consider the
role of cross-training, technology, and subcontractors. A business has the capacity to redeploy
its own staff by offering cross-training. While there is a cost associated with cross-training, the
business will also benefit with the enhanced flexibility to meet demand (Klassen & Rohleder,
2002). For example, a bartender at a restaurant can be trained to be a server and vice versa.
Technology can also enable extra capacity. An example of this would be several self-service
kiosks along with automated cashiers at a retailer. Finally, subcontractors can help during a
busy period. As an example, a wedding venue might subcontract additional banquet servers
when handling a larger than usual wedding.
In addition to managing its capacity, it’s critical for service managers to manage their
demand. Creating events during nonpeak period is one way in which theme parks man-
agers meet their demand. For instance Walt Disney World creates festivals (e.g., food and
wine festival, flower and garden festival) to attract guests at times of the year where they
would have experienced lower demand. Running events also fill up the park and hotels
during off-peak periods at the theme parks. Elsewhere, resorts might target their services
to leisure guests at certain times of the year and convention guests during others. Restau-
rants offer happy hour or early bird special to spread demand more evenly throughout
the afternoon and evening. Educating customers is yet another strategy which seeks to
FIGURE 5.4 Customer demand for ski resort is seasonal in nature. As demands dwindle in the
summer months, some of these resorts may attract guests interested in hiking, host
special events, and offer special packages.
manage demand (Klassen & Rohleder, 2002). For example, a fitness center might inform
its members of their peak periods in an effort to persuade customers to arrive at different
times of the day. Changing the hours of operation can also help service providers match
demand (Klassen & Rohleder, 2002). For example, a restaurant can operate longer hours
on peak days of the week and shorter hours during nonpeak days. Price differentials can
help service providers even out demand as well (Klassen & Rohleder, 2002). An example
of this would be a movie theater offering a lower price for a matinée or during a Tuesday
night. A Mexican restaurant can offer a “Taco Tuesday” special in order to drive customers
to its doors on a day that is not typically known for strong demand (Figure 5.4).
TYPES OF QUEUES
In order to manage their waits, service managers have created different types of queues.
These queues can be categorized by:
• The ability (or lack thereof) for customers to choose where to line up
• The number phases, stages, or interactions in services experienced
• The need (or lack thereof) for a physical line
In some scenarios, customers are allowed to choose which queue to line up at. Many
supermarkets operate that way. Suppose there are ten cash registers in a supermarket
and the customer is allowed to choose between one of the available cashiers. This is an
arrangement whereby customers are allowed to choose, often referred to as a single queue
(Rafaeli et al., 2002). In other instances, the customer has no choice: there is only one line
which feeds to multiple cashiers. Picture a busy retailer where customers line up follow-
ing a serpentine belt. They will progressively move until reaching the end of the line. At
this point, the first available cashier greets them and begins the transaction. This type of
arrangement is called a multiple queue (Rafaeli et al., 2002). Whereas the single queue
empowers customers to choose, it is not the most efficient arrangement and will result in
higher average waiting times for all customers. Some customers will wait less and some
will wait more, but on average everyone will experience longer waits since the system
is less than optimal. Furthermore, customers might perceive other customers as waiting
less, thus increasing the sense of injustice (Rafaeli et al., 2002). Multiple queues elimi-
nate a customer’s ability to pick a line. However, they reduce average waiting times and
keep customers moving, thus increasing their perception of progress (Rafaeli et al., 2002).
A multiple queue arrangement will also improve the perception of fairness.
In addition to categorizing lines by the customer’s ability to choose; service researchers
also categorize lines by the amount of interactions or transactions experienced by the
customer (Ford et al., 2012). In the supermarket example, guests choose one line (single
channel) and will be greeted by one cashier (single phase). After the cashier has tallied
all the items, the customer pays and exits the supermarket. Therefore, this queue is called
single channel, single phase. Some services require more than one step, transaction, or
interaction. Picture a car wash where the customer pays at the entrance (first phase),
then an employee wipes down windows and larger debris (second phase), followed by a
machine washing, rinsing, and drying the car (third, fourth, and fifth phase). This type of
queue is called single channel, multiphase. You will also see this in several quick service
drive-thru. Cars typically line up in the same line, followed by placing the order in the
first phase, then paying for the order in the second phase, and getting the food in a third
phase (Figures 5.5 and 5.6).
In many service settings, customers are not afforded an option of which line to choose.
Instead, one line serves as the conduit for many different employees. As mentioned earlier,
FIGURE 5.5 Single channel, single phase queue.

Source: Author.
FIGURE 5.6 Single channel, multiphase queue.

Source: Author.
a large retailer that sets up a serpentine belt which feeds into ten different cashiers is an
example of this. Since the customer will only be greeted by one cashier who will scan
each item and collect payment (one phase), this type of queue is referred to as a multi-
channel, single phase line. There are some services that use a multichannel arrangement,
meaning that they will form only one line that feeds into multiple individuals capable of
assisting them and will also have multiple phases to their service. Some airport security
lines are examples of multichannel, multiphase queues. Guests line up through a serpen-
tine fashion (all of them in the same line) and be greeted by someone who checks their
passport and similar credentials (phase 1), another person who will scan them for the
presence of weapons and other metallic items (phase 2), someone scanning their carry-on
FIGURE 5.7 Multichannel, singe phase queue.

Source: Author.
FIGURE 5.8 Multichannel, multiphase queue.

Source: Author.
bags (phase 3), and potentially someone else conducting additional screening if needed
(phase 4) (Figures 5.7 and 5.8).
Waiting can be done without the presence of a physical line. Virtual queues allow for
customers to wait for service via technological interface. Walt Disney World is a prime
example of the use of virtual queues. Prior to their visit, guests can utilize the park’s web-
based application (app) to choose an attraction they’d like to visit using an expedited/
shorter/priority line. Visitors are given a window of time to use the attraction. Upon arriv-
ing at the attraction, they will make a shorter line and enjoy. In technical terms, the cus-
tomer has waited: he or she has to wait until the time window in which they’re permitted
to visit the attraction. However, the perception of the wait shifts since guests don’t have to
stand in line for a prolonged period of time. Instead of being in the queue, visitors might
enjoy a meal at a restaurant, purchase merchandise at the stores, or simply visit another
attraction. Having instituted these changes, guests have waited less in a traditional queue,
increased expenditures inside the parks, and visited more number of attractions on a given
day (Dickson et al., 2005). Virtual queues are also prevalent in call centers. Traditionally,
callers would wait on the line until an operator offers assistance. Today, many call centers
offer the option of a callback in a specified window of time. Make no mistake; customers
are still waiting as their call is not answered immediately. However, the perception of the
wait might be reduced, since they can go on to other activities while waiting for a callback
(Figure 5.9).
FIGURE 5.9 My Disney Experience is a web-based application (app) which allows visitors to
the Walt Disney World to view wait times at the parks, select a return time for an
expedited line, and make mobile food orders among others. This app has the
capacity to create a virtual queue.
BEST PRACTICES TO MANAGE WAITS
Not all waits are the same: some waits appear longer than others. For instance, waiting
for the results of an important laboratory results at your doctor’s office might seem lon-
ger than waiting the same amount of time for a ride at the theme park. Some waits are
incredibly dull, as in the case of most driver motor bureaus (DMVs) in order to obtain a
driver’s license. In many cases, people sit with little information about how long the wait
would be and no diversions to keep their minds occupied. Compare that to waiting for a
movie to begin at the movie theater. Typically, you will see previews of new films to come
or take the opportunity to buy popcorn at the concession stand. Waits can be enhanced
with (Norman, 2009):
• Entertainment
• Information
• A sense of progress
Theme parks are masters of entertaining guests during their waits. Queues are designed
to be part of the attraction, music and videos play in the background. Furthermore, many
theme parks attractions feature a preshow, which distracts guests while they wait. Infor-
mation is critical to a successful wait. Customers will be more willing to wait when they
know the reasons why they are waiting; otherwise, they might arrive at the worse possible
conclusion (Norman, 2009). If an airplane is delayed, the airline might do well to explain
why the delay has taken place. Similarly, offering guests information about the expected
wait at the beginning can serve to create a reasonable expectation. Many call centers will
alert callers waiting on hold of how long the wait is likely to be. A sense of progress is
equally important to a successful wait. If people perceive that “the line is moving”, they
would likely be more patient with the process. Therefore, lines that allow for a sense of
progress are more likely to keep the customers mentally stimulated, thus more satisfied
(Rafaeli et al., 2002) (Figure 5.10).
When designing a wait, service managers should consider that both customer’s expec-
tations of waiting and their perceptions are critical to a better experience. Maister (1985)
in Katz et al. (1991, p. 45) proposed several principles to guide designers and managers in
creating waits that appear shorter than they are. Some of these principles include:
• noccupied time feels longer than occupied time;

• Preprocess waits feel longer than in-process waits;
• Anxiety makes waits feel longer;
• Uncertain waits are longer than known, finite waits;
• Unexplained waits are longer than explained waits;
• Unfair waits are longer than equitable waits;
• The more valuable the service, the longer people are willing to wait;
• Solo waiting’s feels longer than group waiting”
Given these principles, a series of managerial implications emerge. First, it is critical to

entertain guests and create diversion during the wait times. This is very important for
FIGURE 5.10 Many theme park rides feature entertainment to reduce the perception of
waiting. At Universal Studios, the queue for “Harry Potter and the Escape from
Gringott’s” features set designs from the film and animatronics.
longer waits. Second, informing guests about the wait times can help set expectations.
Third, it is important to properly inform customers of the reasons behind their wait,
especially in a service failure scenario. Fourth, the perception of fairness in waits is critical.
Making guests pay for a shorter wait time, for example, will violate this principle. It should
also be noted that not all waits can or should be sequential. In a hospital emergency room,
those patients with more life-threatening illnesses or injuries will be seen before those
whose wait will not be as detrimental to their health. Fifth is having a service that cus-
tomers truly desire. People are more likely to wait in line for the best cupcake in town or
the best ride in the theme park. Finally, there’s the social element of waiting. Some people
arrive with others in the servicescape and thus are more likely to engage in conversation
or even play a game to pass time. Solo waits can be longer, thus service providers could do
more to foster customer-to-customer interactions which would enhance the experience
for single customers.
Service managers can focus their attention in a variety of places to reduce both the
actual and perceived waiting time. By far, the most influential factor in perceived wait
times is actual wait times (Durrande-Moreau, 1999). Actual waiting times may be
improved by taking one or more of the following steps: “increasing resources, improving
the use of resources, modifying the product, and modifying demand” (Meredith, 1992 in
Adenso-Diaz et al., 2002). Increasing resources might entail hiring more workers, asking
current employees to work overtime, adding physical capacity, and subcontract parts
of the operation. Improving the use of resources means being smarter about how the
resource is utilized. Earlier in this chapter, we discussed how Southwest uses airplanes
more efficiently by reducing the turnaround time. A theme park might try a more effi-
cient way of loading the attraction, a doctor’s office might use a new system to schedule
appointments, and many other service organizations will establish physical and virtual
queues. Modifying the product means that the service could be altered in a way to encour-
age more efficiency. For example, most quick service restaurants have a limited menu
which allows them to improve operational efficiency and produce food quickly. Compare
this with a fine dining experience, whereby customers receive multiple courses of food
over a prolonged period of time. Tactics aimed at modifying demand can also impact wait
times. By using variable pricing, service organizations can distribute demand more evenly,
thus reducing wait times during peak periods. While most service organizations will be
eager to find ways to address a surplus in consumer demand, other businesses will decide
to keep their operations as it is or even “close the door”. There are many popular small
businesses which experience surplus demand, yet it is not within the owner’s mission or
goals to grow the operation.
While reducing the actual wait times is the most effective option to enhance satisfac-
tion, this is sometimes difficult to do in the short term or may not be financially feasible.
Consider the problem of parking that many college campuses face. The problem may be
resolved by building more parking garages. Nevertheless, building one single spot inside
a parking garage costs an estimated $15,000. In order to increase capacity, the campus
might have to raise parking fees to levels which might be unaffordable to students. Beyond
managing actual waits and adding capacity, a business might try to manage customer
expectations. This is the notion behind establishing wait times in front of theme park
attractions. However, this can also lead to customers being more aware of the time spent
waiting (Durrande-Moreau, 1999). Designers often use color to communicate different
things in the service environment. In the context of waiting in line, there are colors which
might make the waits appear longer and others which can make customers perceive waits
to be shorter. More specifically, the color red has been shown to make perceptions of time
appear longer, while the color green makes the perceived waiting time shorter (Bilgili
et al., 2020). It should be noted that color is often interpreted differently based on an
individual’s national origin and culture (Figure 5.11).
Some customers are more prone to waiting than others. Because of demographics, life-
styles, and personalities, some people are more likely to accept a wait than others. Katz
et al. (1991) describe how some customers are “watchers” who pass time by engaging in
watching other customers. A second group of customers can be called “impatients”, for
whom the wait is one of the dullest experiences of daily living. Finally, there are customers
who fall in the middle of these two extremes and are thus called “neutrals”. Research has
also revealed that motivation has an impact on perceived waits. For example, customers
who enjoy shopping will perceive waiting times as shorter at a retailer (Durrande-Moreau,
1999). Similarly, a person’s mood while waiting and the time pressure they might be on
are influential on how long they perceive waits to be. Unfortunately, pre-consumption
mood, a customer’s itinerary, and their motivation fall outside of management’s control
(Durrande-Moreau, 1999). Regardless of customer type, service organizations can manage
FIGURE 5.11 Theme parks typically post the expected wait times at the beginning of their
attractions.
their waits more successfully by providing entertainment, making the wait more comfort-
able, improving value perceptions among customers, and providing relevant information
(Chambers & Kouvelis, 2006).
WHY WAITING IS NOT ALWAYS NEGATIVE
Whereas waiting can induce a series of negative effects for organizations, it is also possible
for them to produce positive ones. Waiting fundamentally alters the experience for cus-
tomers, and in some cases, this is not such a negative thing. Think about the typical fine
dining experience. If each course arrived after a minute or two of the order being placed,
customers might feel rushed. Furthermore, the quick pacing of the meal might suggest
that the dishes were hastily prepared by the culinary team. Therefore, some amount of
waiting is expected and enhances the experience of fine dining. Recent research reveals
that waits and queues might attract more customers, increase perceived value, improve
customer evaluations, and stimulate positive anticipation (Ryan et al., 2018).
Consumers look for clues that a service is of high quality. When they see that other
consumers are lining up and willing to wait for a certain service, they might be prone to
do the same thing. A longer line outside of a restaurant, a concert hall, or a movie theater
might communicate to others that this is a highly desired service. An undecided consumer
can utilize this information to make a choice of where to dine, which movie to watch, or
which show to attend. An empty restaurant might render the perception of “bad food”.
However, this may not necessarily be the case. The consumer has generated negative per-
ception from the excess capacity the restaurant has at a given point in time. Increased
crowding might be desirable in certain situations, as it creates a unique social atmosphere.
While walking in a busy downtown area at night, people might prefer to visit a busy
nightclub as opposed to an empty one. One of the most popular places to welcome the
New Year is Times Square at New York City. In order to be part of the event, tourists will
pick a spot as early as 10 a.m. Once inside a secure area, visitors will have to remain there
until midnight. Waiting an entire day increases the sense of anticipation. Furthermore, the
interaction between visitors makes the event even more memorable despite the long wait
times.
Offering fast and efficient service works for some service organizations. However, there
are some services where speed is not desirable (Ryan et al., 2018). For instance, the spa
experience is about relaxation and taking a break from the fast-paced world. In a fine
dining restaurant, patrons might derive pleasure from watching food being prepared via
a show kitchen, chef’s table, or tableside service. When a server explains to the guest that
the chocolate soufflé takes 30 minutes to prepare, some might place additional value on
the slow process that leads to a succulent result. The final reason why waiting might turn
out to be a positive thing leads with the psychological arousal generated from anticipation
(Ryan et al., 2018). Many of us eagerly anticipate major life events such as a graduation,
birthday, or a wedding. Likewise, time placed between the choice of a service and its enjoy-
ment increases the sense of anticipation. For example, planning a vacation several months
in advance can provide positive feelings to consumers. These months provide an opportu-
nity to view images, make reservations, talk to other consumers, and even buy new outfits.
• What is the difference between supply management and capacity management?

• Select a service process which typically involves waiting. How will you apply queue
design principles to improve the wait times and reduce the perception of waiting?
• Select a company that is known for its best practices in managing waits. What can you
learn from them?
• In what circumstances can waiting be a positive thing?
• How can a company have some capacity flexibility? Why would this be advantageous?
REFERENCES
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in service industries. International Journal of Service Industry Management, 13 (3),
286–302.
Betts, A., Meadows, M., & Walley, P. (2000). Call centre capacity management. Interna-
tional Journal of Service Industry Management, 11 (2), 185–196.
Bilgili, B., Ozkul, E., & Koc, E. (2020). The influence of colour of lighting on customers’
waiting time perceptions. Total Quality Management & Business Excellence, 31 (9–10),
1098–1111.
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survey detailing how Americans spend their time. Retrieved electronically on Feb-
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en/Where-Does-the-Time-Go-Timex-Releases-Results-of-Survey-Detailing-How-
Americans-Spend-Their-Time
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doing tasks. Huffington Post. Retrieved electronically on February 3, 2022 from:
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spent-doing-tasks_n_61087617e4b0999d2084fec5
Chambers, C., & Kouvelis, P. (2006). Modeling and managing the percentage of satisfied
customers in hidden and revealed waiting line systems. Production and Operations
Management, 15 (1), 103–116.
Dickson, D., Ford, R. C., & Laval, B. (2005). Managing real and virtual waits in hospitality
organizations. Cornell Hotel and Restaurant Administration Quarterly, 46 (1), 52–68.
Durrande-Moreau, A. (1999). Waiting for service: Ten years of empirical research. Interna-
tional Journal of Service Industry Management, 10 (2), 171–189.
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How to achieve excellence in the guest experience. Clifton Park, NY: Delmar, Cengage
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CHAPTER 6
Co-creation and customization

Engaging the customer in value creation
FIGURE 6.1 Swedish retailer IKEA encourages co-creation in the design and functionality of its
furniture and home goods. By collaborating with university students specializing
in design, innovation labs, and customers in general, they’re able to co-create
unique products.
LEARNING OBJECTIVES
• Understand the concepts of co-creation and customization

• Articulate the intricate linkages between co-creation and customization
• Analyze business strategies of co-creating values with customers
• Apply technology innovations to design co-creation and customization activities
DOI: 10.4324/9780429263965-6
Engaging the customer in value creation 97
KEYWORDS
• Co-Creation
• Customization
• Mass Customization
• Technology Innovations
• Dialogue
• Access
• Risk
• Transparency
• Co-Destruction
• Customer Education
WHAT ARE CO-CREATION AND CUSTOMIZATION?
Co-creation is the participation of customers in the entire process of product/service

design, production, consumption, delivery, and disposal (Buhalis & Sinarta, 2019). Co-
creation gives customers a sense of ownership (Cabiddu et al., 2013), the feeling of “taking
the wheel” from time to time, as they take part in the process to achieve mutual benefit
and valuable products/services. In contrast, customization is the action of or an approach
to adjusting a particular feature of a product or service to suit the customer better. In these
cases, companies’ products/services are presented in different ways in order to fit custom-
ers’ preferences and wants better. There is a difference between co-creation and custom-
ization. Customization is made to feel personal; certain modifications are made so that
customers feel like the product is their own. Co-creation, in theory, should have a greater
feeling of importance that fuels culture and community. While this chapter focuses on the
service industry, it is important to note that customization can also take place for physical
products. When a company employs a variable manufacturing process to enable customers
to choose among a set of product features, this is called mass customization. One of the
first companies to engage in mass customization was Dell Computers. As computers gained
popularity, they remained a standardized product. Dell was an innovator, in that it allowed
customers to choose a base model computer and then add extra features such as a larger
memory, faster processing speed, different color exterior, and more. Today, many manufac-
tured products can be mass customized. For example, a customer might visit a Lexus dealer
and buy a car off the lot. However, they can also visit their website and choose the trim,
colors, features, and amenities they’d like to have in their new vehicle (Figures 6.1–6.3).
Co-creation is being adopted in the service industry to give guests the ability to be
involved in creating their experiences (Chathoth et al., 2016). Co-creation creates a
unique customer experience. During co-creation, customers or employees participate in
a design or problem-solving process for a company. Consider the example of a customer
getting a haircut. In consultation with the stylist, the customer can co-create the final cut.
The stylist uses his or her skills and talents to envision the final “product” and the process
98 Engaging the customer in value creation
FIGURE 6.2 Dell computers was a pioneer in mass customization of its products.
FIGURE 6.3 The Coca-Cola freestyle machine allows customers to create hundreds of different
soda combinations by using the various flavors provided by the company.
to achieve it. The customer brings their ideas, preferences, and desires to the conversation.
Together, they create a unique style which fulfills the customer needs. Customization
occurs when something is specifically altered to meet a customer’s preferences. Consider
the example of customers visiting Blaze Pizza. Instead of providing customers with a list
of pizzas the company thinks they’ll want, Blaze allows customers to customize their
pizza before their eyes. The employees and customers interact with one another as they
choose the base, sauce, and toppings to each pizza. Once the selection is complete, the
pizza is placed in the oven and a few minutes later the customer gets a page informing
them that their customized order is ready. With the help of technology and innovations,
these aspects are able to be improved on and advanced. Service organizations can use the
internet to easily access customer reviews and get firsthand feedback of what customers
want. With this information, they can then alter their services to make customers happier
with their experiences. Customization and co-creation are two things that make most cus-
tomers’ experiences personal, and technology only advances that further. A few years ago,
Marriott launched its “Travel Brilliantly” site with the objective of co-creating the room of
the future along with their guests. The site featured a section to “co-create with us” and
provide “your ideas” to make the hotel experience better and more in line with the needs
and desires of customers (Figure 6.4).
When confronted with the idea of co-creation, most people think of collaboration, which
requires more than one person putting their ideas and resources together to create a new
system or product. Co-creation can be found in many industries, including fashion, music,
FIGURE 6.4 Customers interact with employees at Blaze Pizza as they customize their orders.
marketing, and hospitality. It is a business strategy that allows and encourages more active
involvement from the customer to create a value-rich experience, entailing the collaborative
development of new values together with experts. Product innovation is one of the most
well-known forms of co-creation. Brands are able to engage their customers in the products
they are building. One of the best examples of this is the LEGO company. Customers send
in ideas and requests for new kits to build. It is a win-win situation: the customer can get
what they want and the company can do it in a way that seems fun and innovative. The
company is happy with its income and the customers are happy with their purchases. Cus-
tomization is the action of modifying something to suit an individual or task and presents
another win-win situation. Customers can build something they want and that is catered to
them. Companies can work off this and give the people what they want and need, all the
while receiving the income they desire. For example, hotels are now offering personalized
visits, giving customers a greater sense of control while allowing companies to learn more
about guests’ preferences. Everyone in the process gets what they desire (Figure 6.5).
Co-creation and customization are slightly different customer experiences in the ser-
vice industry. The similarity between both is that they allow the customer to customize
the already premade parts of an order or a product. This is why the two concepts may be
perceived as the same or similar. In fact, they have two different meanings. Customization
occurs when a consumer is becoming his own creator by adding ideas to the product or
service he is receiving. It is not completely remaking or rebuilding the product from the
FIGURE 6.5 LEGO actively engages with its customers by encouraging co-creation of new
designs and concepts.
bottom; the customer remains the customer, just adding some modifications. Co-creation
is a completely different process in which the consumer becomes the designer of a prod-
uct he wants to create, changing some parts of it or adding some ideas, creating and build-
ing his own design. Customization has been a part of the industry for a very long time: we
have long been able to change the milk in our coffee from dairy to alternative. Co-creation
a slightly newer and developing concept under which the customer becomes more than
just a consumer: he becomes a partner with the ability to control and co-create. The final
output of customization is a standardized service which is then is adjusted, modified, or
altered to fit the needs of various customers. For example, as cruise ships grow, they have
multiple options for customers to customize their experience. They may attend a musi-
cal or a comedy show, eat Japanese or Italian cuisine, play mini golf or swim at the pool,
and choose among a wide array of offshore excursions. In theory, two customers could’ve
visited the same cruise, but end up engaging in totally different activities. Importantly,
customers are choosing between alternatives previously conceived by the service organi-
zation. In contrast, co-creation will likely result in a new or different experience. Consider
the attraction “Turtle Talk with Crush” at Disney’s Epcot theme park. On one side of the
screen is technology and people creating a show. On the other side of the screen are kids
and their parents. The animation portrayed on the screen has the ability to ask questions,
make statements, and express emotion as it interacts with those present at the show.
Because each show has different people and they all have different questions and answers,
each show is different than the other. This is an example of how a service organization can
leverage its people, technology, and customers to create unique experiences.
WHY ARE CO-CREATION AND CUSTOMIZATION

IMPORTANT?
Co-creation and customization are crucial elements for a company to remain relevant in
today’s world. They fill an important role by improving services and value through inter-
acting and co-producing. Both customer and brand can benefit through communication.
For example, if a customer wants to hold a birthday party and notifies a hotel in advance,
the hotel can cook and decorate jointly with the customer. Through this joint production,
both the consumer and the hotel improve service satisfaction.
With many service products becoming commoditized, two important ways for compa-
nies to stand out from their competitors are to allow their customers to co-create the value
of their service and to enable the customer to customize different aspects of his experience
(Prebensen & Foss, 2011). Co-creation of service refers to the customers and employees of a
company working together to enhance the quality of the guest’s experience. Customization
refers to guests changing aspects of their experiences to be more suitable for them. Prahalad
and Ramaswamy (2002) suggested that there are four key elements to successful co-creation.
The first element is dialogue; effective communication between the service provider and
customer is necessary for co-creation to occur. In the old paradigm of doing business, a
company would create products and services they believe customers would desire without
much dialogue. Companies need to listen and react to their customer’s feedback and ideas
in order for co-creation to take place. The second element is access; this entails empowering
the customer to benefit from the company’s products and services in a way which suit their
needs. In the past, companies would package goods a certain way and offer limited options
for customers to choose how they’d like to use (think traditional records where the cus-
tomers would buy the entire record instead of just a song they’d like). Co-creation flips the
script on service providers by allowing greater access in a way that suits the customer. The
third element is risk reduction; responsible companies make customers aware of the risk of
using their products as well as the risk of co-creating with them. In the past, many compa-
nies did not make their customers aware of the risks of using their products and services.
For example, today’s consumers are accustomed to being aware of the origin and nutritional
information of their food. Finally, there’s transparency; co-creation requires that companies
are forthcoming with their customers about the nature of their products and services, the
ownership of any new ideas, and the use of customer data, among others.
Co-creation positively affects customers by allowing companies to access the depth
of customer capabilities, knowledge, and assets (Aarikka-Stenroos & Jaakkola, 2012). In
other words, it is a way for companies to strategically form different possible ways to gen-
erate revenue and build profits. Customers are looking for more engaging and interactive
experiences (Bowden et al., 2018; Zhang et al., 2017), especially experiences that they
choose specifically to participate in. Providing guests with the ability to customize their
experiences allows for a more special and personalized encounter. Co-creation is smart
(Aarikka-Stenroos & Jaakkola, 2012) because it allows guests to have a say in what they
want to see. A good example of this was when in 2014, Lays (a potato chip brand owned
by the Frito Lay company) created a competition for new and innovative chip flavors. The
contestants who won had their ideas produced and distributed to the public. This was a
great idea for Lays to get some new ideas and customer feedback, but also for guests to
feel like they were involved in the production process.
Experience and value are the primary things customers look for. Customers from all
corners of the hospitality industry are looking for good quality and value in their experi-
ences (Lee & Kim, 2018). However, all customers are different, and by offering custom-
ization, industry leaders can add more value to customer experiences. A customer who
goes to a nice restaurant for dinner should be able to customize his experience when it
comes to the menu, such as substituting dressings for a salad. Co-creation aims to give the
customer a more engaging experience by allowing him or her to add their own value. It is a
great way to bring in willing customers to different areas of hospitality and make a unique
and valuable experience.
It should be noted that co-creation comes with its own challenges. A company might
receive negative feedback when attempting to co-create with its customers. Not every
idea or concept is actionable. Sometimes an idea is good, but its execution is difficult
because present-day technology does not allow it or because its costs would make the
concept prohibitively expensive. A company can also loose control of the creative process.
For example, a previous study which followed theme park customers engaged in a social
community noted that some of their behaviors, activities, and ideas resulted in both posi-
tive and negative outcomes (Torres et al., 2018). The theme park group created scavenger
hunts and other fun activities which enhanced and customized the exiting experience.
However, some ideas such as a bar crawl around the theme park’s resorts was slightly out
of line with the family image the company was trying to portray.
Whereas customers and service companies can co-create, it is also possible to co-
destruct value. Formally defined, co-destruction is “an interactional process between ser-
vice systems that results in a decline in at least one of the systems’ well-being” (Plé &
Cáceres, 2010, p. 431). Value co-destruction can take place in a variety of different ways.
For example, the service firm may be unable (absence of information) or unwilling to pro-
vide the right information (lack of trust), the customer could act selfishly, mistakes happen
during the interactive process, a company does not deliver what its promised (inability to
serve), the company fails to adopt feedback or the customer is unable to adapt (inability
to change), there’s a lack of clear expectations, and the customer misbehaves by acting
disruptively or misusing the product.
APPROACHES TO CO-CREATING VALUE WITH CUSTOMERS
The best way to co-create value is to focus on the experiences of all customers. Most
organizations focus on creating economic value. Successful co-creators, however, explicitly
focus on providing rewarding experiences for customers. Because of newer innovations
and technology, service firms can raise operational efficiency and build more value for
customers by bettering the quality of their services and offering more customized expe-
riences for guests. Co-creation also requires that firms think differently about the roles of
customers and employees. In the early 1990s, Bowers et al. (1990) argued that companies
should engage in the exercise of thinking about their customers as employees and their
employees as customers. Organizations can think about their customers as employees by
educating them on how to obtain the best service, using their ideas as input for new and
innovative services, providing them choices, and using them as quality control agents by
pointing out any problems with the company’s services. In a similar manner, companies
can think of their employees as customers by providing them great internal service, valu-
ing their feedback, and thinking of ways to improve the employee experience.
The service industry has always been dedicated to the experience and satisfaction of
the customer. Co-creation and customization are essential aspects of this. We have seen
this through lodging operations like Airbnb that allow the customer to customize his
experience and select his stay according to his preferences, such as the number of guests,
amenities, facilities, and accessibilities. Furthermore, the interaction between hosts and
guests may foster a co-creation of value different than those created by the traditional
hotel sector Hospitality industries such as hotels and restaurants have developed the
concept of co-creation by developing and establishing relationships with consumers. Co-
creation focuses on consumers’ relationships and allowing consumers to have a voice in
what is being created. Co-creation goes far and beyond just customer reviews; it focuses
on the consumer having the ability to make partnerships with businesses through social
media or ads in which their input can facilitate a relationship with a business. Techno-
logical advances have created opportunities for co-creation via social media (Carlson
et al., 2018), smartphones, tablets (Gibbs et al., 2016), and video conferencing (Breid-
bach & Maglio, 2016). Consumers and users can create content themselves and contribute
to what happens on the web in a two-way communication with many companies and
organizations.
Today, the addition of technology has enabled customers to be present and close to
the creation of products for many brands. Technology innovation is a tool that influences
co-creation and customization because it empowers consumers (Buhalis & Foerste, 2015),
increases connectivity, and opens doors to more in-depth information. For instance, service
organizations like Netflix have allowed their customers to customize services by selecting
a few shows they like; they are then presented with a list of similar options based on the
choices they made. Technology innovation has indeed improved co-creation and custom-
ization for hospitality customers by allowing guests to participate and challenge those
existing boundaries to create a product that will mutually benefit guest and company
(Figure 6.6).
Giving customers the opportunity to customize their experiences is something that only
started about a decade ago. Before that, “what you see is what you get” reigned, whether
for vacations, hotel stays, or flights. Changes toward customization and co-creation have
brought more and more traffic to companies that have adopted these practices since many
times, families and guests would choose none of the available options because they were
not exactly what the customer was looking for. Take Disney and Universal for examples.
They have now introduced “create-your-own” vacation packages: guests can choose how
many days they want to stay, how many tickets they want for how many parks, and other
options, such as if they would like PhotoPass or transportation to and from the airport.
This has given customers and guests more flexibility when planning their vacations.
FIGURE 6.6 Streaming platforms such as Netflix provide customized recommendations based
on a customer’s prior viewing history.
For hotels, this is less common, but some resorts offer packages with which a guest can
decide if he wants to add a spa package, a golf package, or even a restaurant voucher to his
stay. Introducing this co-creation and customization movement to the hospitality industry
opened a lot of doors for different companies to be more personable with their guests
and customers. Technology enhances this possibility and introduces efficiency. In the past,
most forms of co-creation would be in the form of, for example, written surveys that
guests would either fill out on the premises or would mail to the organization in question.
These may have been seen as time-consuming and inconvenient because they required the
guest to go somewhat out of his or her way to submit feedback to the organization. With
technology, suggestions can be made quickly and easily online. In terms of customization
of the service experiences, it can certainly be difficult considering the number of guests a
hotel receives; a 100% unique experience for each seems impossible. However, hospital-
ity organizations have been improving the customizability of the guest experience. Take,
for example, hotels that have begun including in-room guest service tablets, which allow
the guest a modicum of control over his guest experience from the comfort of his hotel
room. Other hotels are integrating smart technology in combination with in-room tablets,
allowing for easy control of their rooms’ features from one digital location. On a broader
scale, hotels also use technology to record guest preferences so that they may be remem-
bered in the future, like a favorite bottle of wine or a coffee delivered to the guest’s room
in the morning. These are just a few ways that hospitality organizations are embracing
FIGURE 6.7 Each room at CitizenM hotels has a tablet which allows guests to customize multi-
ple room features.
co-creation and customization. One example of how hotels allow customers to customize
experiences via tablet technology can be found in CitizenM hotels. Each room has a tablet
which allows guests to change the color and intensity of lights, shades, temperature, and
music, as well as to create different “moods” (i.e., calm, energetic) (Figure 6.7).
LEVERAGING CUTTING-EDGE TECHNOLOGIES TO

INNOVATE MEANS OF CO-CREATION AND CUSTOMIZATION
Customers play the biggest role in technology innovations. Without the new needs and
desires of customers, there is no necessity to create new or improved products. As technol-
ogy continues to evolve, people have greater needs in the hospitality industry. Listening to
these needs aids in the creation or innovation of products that will better suite customers’
new needs, which will deepen customer satisfaction and loyalty. When visiting any service
provider, everyone expects a unique experience that is personalized for them. Guests want
to feel understood and want their lives to be made easier. Technology allows customers
to have personalized and easy experiences by allowing guests to take control of their own
stays (e.g., using smart control systems and voice-controlled rooms). Guests are allowed to
control every aspect of their stays, like check-in, room temperature, room service, parental
controls, and checkout. Collecting data from the technology used can help companies see
trends of what is common among guests, which will further aid in innovating technology
that will better satisfy guests.
Technology innovations enable and improve co-creation and customization for cus-
tomers by enhancing operational efficiency (Buhalis & Foerste, 2015), reducing labor
costs, and replacing expensive human labor with technological labor. For instance, tech-
nology innovations such as mobile keys, devices that allow guests to unlock their room
doors using their smartphones; in-room tablets; smart check-in and checkout systems;
wireless charging pads; smart drapes and lighting; smart TVs; and virtual reality are ways
to improve customization for hospitality customers. These technology innovations require
Bluetooth connections from customers’ personal devices, which enables co-creation for
customers. In order for these technological advancements to be successful, hospitality cus-
tomers should approve of and enjoy these advancements since they are connecting their
personal devices to take advantage of them. Technology has shifted toward being more
individualized and personal, which has helped to improve customization for hospitality
customers.
Technology innovations enable and improve co-creation and customization for hospi-
tality customers by making it a quick, seamless development for partnerships with cus-
tomers to actively collaborate to create and deliver products and services that can capture
greater value with lower risk than traditional product development approaches. Along
with technology innovation, enabling co-creation and customization provides a blend of
control and costs on one platform, enhancing convenience. Convenience is crucial, and
these innovations are essential for facilitating communication that can get lost in transla-
tion due to having so many moving parts in the hospitality industry, which is large and dis-
persed. By letting these technology innovations improve and streamline communication,
staff and customers stay connected.
Technology has been helpful in elevating the service industry. It makes communication
easier, allows for efficient interaction, and shortens the time customers have to wait for help.
Technology has also had a huge role in allowing guests to co-create or customize their expe-
riences. Co-creation is the involvement of the guest, allowing them to take part in creating
value and quality for their experiences. Guests are involved in the design of experiences
through focus groups or by providing feedback on their prior experiences, giving them the
opportunity to co-create new experiences before they occur. Customization occurs when
guests are able to pick and choose, which provided elements of a hospitality business they
want to include in their experience. Both co-creation and customization allow guests more
control over the experiences provided by a business and are more likely to give guests what
they want. A great example of technology improving these strategies is Crumbl cookies.
Crumbl gained a huge following through TikTok and has used it to gain an advantage. One
unique way that Crumbl allows its customers to co-create their experiences is by allowing
followers to vote for new types of cookies to be produced. Whichever cookie combination
gets the most votes Crumbl puts through its test kitchen and releases it to the public.
LEGO does something similar when they allow the community to vote for new builds to
be produced for the public. In a similar vein, the My Disney Experience app allows guests
to customize their experiences by scheduling when they want to go on rides or have their
food prepared through mobile ordering. This allows guests to customize their days to their
liking. Technology makes this possible because it makes all the decisions accessible.
Over time, the introduction of technology innovations and a platform for guests to
co-create and customize experiences provides the opportunity for them to have expe-
riences they genuinely want to be a part of. For example, with the implementation of
MagicBands, FastPass+, and Genie+, Disney is able to track their guests through RFID
technology and find out what experiences are drawing the biggest crowds and what is
being added to guests’ itineraries most frequently. They can then take that information
and attract people to rides or restaurants that are similar to what they have previously
been to by promoting low wait times or new menu items.
The innovations of technology can create a welcoming and efficient space and commu-
nity for hospitality customers. For example, the use of digital tickets on customers’ phones
helps them track and easily access their information without needing to print anything or
risk losing their data. This can be used for airline tickets, theme park tickets, and more.
The additional ability to book a flight or a hotel room or create a reservation on a phone
or computer helps provide an organized and stress-free way to navigate for both the cus-
tomer and the facility.
Social media
Social media networks (Simon & Tossan, 2018) are one of the most useful technological
innovations when it comes to allowing guests to co-create their experiences. Whether on
social networking websites, like Twitter or Facebook, or on official company blogs, cus-
tomers can share their ideas for new hospitality service products and opinions on current
service delivery systems. This allows customers to influence how organizations provide
services to guests, which is an important way for customers to use technology to improve
the co-creation of their experiences.
Mobile technology
Mobile self-check-in technology is another method companies are using to enable cus-
tomers to co-create their service experiences. This can be done by a guest on a hospitality
organization’s website before arrival or at a kiosk in the lobby when the guest arrives at
the property. In either case, self-check-in technology allows guests to select how long
they will be staying and how many room keys they need, while some organizations go
even further to allow guests to select which rooms they would like and which in-room
amenities they would prefer. This lets guests move at their own pace and maintain control
of many aspects of the services they will receive during their stays, important values for
guests who want to play a part in creating value. Overall, technology is a fantastic medium
for guests to use to co-create their experiences because it allows guests to communicate
more quickly within the service organization and to play a bigger role in creating great
experiences for themselves.
Online customer accounts

Co-creation is open innovation with customers, meaning any products that are in devel-
opment are being developed with users and customers being actively involved and kept
in mind when creating the design. Technology is important to the service industry; it
allows companies to find out what can be improved in order for guests to keep coming
back, and coming back happy. Many different types of technology have been intro-
duced to the hospitality industry to allow customers to customize their experiences.
One of these is online accounts guests can create to allow organizations to keep track of
their preferences. When customers create accounts, they can input certain details about
themselves, such as their favorite drinks or favorite kinds of music, and the next time
guests stay at one of the organization’s properties, their preferences will be referenced
when preparing rooms for their arrival. This is most common in luxury chain hotels,
since maintaining this level of guest customization would be difficult for hotels with
lower service levels.
Kiosks at restaurants
In the restaurant industry, especially in the quick service market, kiosks that allow cus-
tomers to customize their order are becoming more popular. Restaurants like McDon-
ald’s and pizza restaurants like Pizza Hut have kiosks in some locations and online that
allow customers to create their own burgers or pizzas from scratch or customize exist-
ing menu items however they wish. In upscale and luxury hotels, an in-room control
system, commonly a tablet, is a great way to allow guests to customize their rooms and
services. The system can allow guests to change the temperature in their rooms, call
for specific amenities to be brought to their rooms, and many more services that make
the hotel room feel more homelike to guests. In the hospitality industry, technology
is one of the most important ways for guests to customize aspects of the services they
receive by offering a way for guests to communicate which amenities they prefer and
which services they enjoy. The way that the hospitality industry enables co-creation
and customization for their customers is truly unique. An example is theme parks that
use apps to create personalized experiences for their guests. The Universal app makes
every guest’s experience personal via personal customer accounts. When guests use
hotels, they can request specific experiences that are to their tastes to create a more
personal experience. Guests going on cruises can book excursions for whatever they
like to make it their own. Booking websites make customizing vacations easy. Every-
thing is what the guests like because they were able to choose before the vacation even
started.
SELECTIVE BUSINESS CASES
Hershey Park
Guests are always searching for experiences that are tailored to their needs, wants, and
expectations for their stays. Technology assists in this process by allowing guests to build
their own customized experiences. Through filters on reservation portals and endless
options for dietary restrictions and modifications in a Point of Sale (POS) system, a
guest’s experience is tailored to them in every way possible. Additionally, some expe-
riences use technology as a focus of the experience to customize and co-create with
the guest firsthand. At Hershey Park in Hershey, Pennsylvania, there is an experience
FIGURE 6.8 At Hershey Park, customers are able to use technology to create their own candy
bars.
available in which guests make their own customized chocolate bars while being assisted
by technology. Through a system of video projections and custom choices, they co-create
every step of making the chocolate bar. This experience is technology guided with min-
imal employees working the experience. First, guests watch a demonstration on how to
make selections and the overall process. Next, they answer the guided questions for their
Hershey chocolate bars on a tablet. This includes what type of chocolate they would like,
additional toppings, and designing their own wrapping for the chocolate bar, which can
even include a picture taken from the tablet. After that, guests walk by the conveyor belt
as their chocolate bars are made by the technology. Many guests build their trips based
solely around this offering from Hershey Park. By each guest making his own Hershey
chocolate bar however he would like, almost every guest leaves having enjoyed his expe-
rience and having made memories. This unique experience exemplifies how technology
innovations in the hospitality industry have enhanced guest experiences at Hershey Park
(Figure 6.8).
Walt Disney World’s Genie service

Another great example of a technology that supports co-creation and customization in
the hospitality sector is Walt Disney World’s Genie service, which allows guests to create
and customize a day at the park using their mobile devices. This is similar to an itinerary
that guests mold to work best for their own needs and accommodations, giving a sense
of ownership to the guest. Before this service, guests had to rely on mental notes of what
they wanted to achieve on any given day at the park. Now, inside the mobile application
is a list of everything, from attractions and dining to souvenir shops, making it convenient
for guests to plan out their days and have an easy guide to read.
Guests are able to pre-check-in to their hotel through the mobile applications and con-
tact the front desk through messaging. It has enabled guests to have a much more pleasant
and faster experience with checking in and out. Waiting in long lines to come in or out is no
longer a hassle that guests have to choose. Disney has customized its services to benefit its
customers and engage them in using the mobile application. On the Disney Cruise lines, the
menu for food is included on the application as well as all the activities provided on the ship.
In addition, many restaurants have started using QR (quick response) codes to scan for their
menus instead of using handheld menus.
Technology innovations are game changers for co-creation and customization for hos-
pitality customers. With today’s technology, a guest can completely customize his expe-
rience. For example, at Disney, guests can customize their experiences from the moment
they set foot on the property to the moment they leave, with little details accommodated,
such as guests’ names being known by the cast members or having custom name tags at the
reservation. Disney also provides another great example of technology and co-creation. Its
newest attraction at Hollywood Studios is the Star Wars Galactic Star cruiser. It is a com-
pletely interactive experience that varies based on the guest, and practically every detail
of the experience is tailored specifically to each individual and how he wants his journey
to map out. Using technology to allow such innovative and personal experiences that are
unique to the guests allows the guests to build better relationships with companies and
create unforgettable experiences.
Chick-Fil-A
Chick-Fil-A uses its app for online orders to ensure guest satisfaction by allowing them
to customize their meals exactly how they like to deliver the best food experience that
can be offered. When guests order in-house, at the end of their purchase, the receipt is
printed and occasionally contains a link to a survey regarding their experience for that
visit. This opportunity for guest-worker interaction through reviews yields new, innova-
tive roads to improvement. Not only are these surveys helpful for the business, but they
offer rewards to the guests doing the surveys, which is usually a free food item for their
next visit. This use of technology brings in more customers and aids in further restaurant
enhancements in experience and quality. Guests will get back the same amount of effort
they put into the co-creation and customization from the industry; everyone benefits from
these interactions.
Converse
Converse implemented co-creation/customization ideas by allowing its customers to
share how they would design Converse shoes in a unique way for a chance to be featured
on Converse’s popular social media accounts. The post would include the picture of the
designed shoe, the name and signature of the creator, and the campaign slogan “Made by
you”. The ideas that stem from co-creation and customization are possible because of the
advanced technologies, and it is a good way to show customer appreciation.
Panera Bread
Many Panera Bread restaurants now offer tablets at the front of the restaurant for easy
ordering. This allows for enhanced customization options as well as co-creation as the
guest is completing a task that would conventionally be performed by an employee.
Because a barrier of communication is broken (i.e., relating an order to the cashier), the
likelihood of customers getting exactly what they ordered is much higher.
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CHAPTER 7
Electronic word of mouth

Understanding the customer’s voice
FIGURE 7.1 Electronic word of mouth is an important source of information for consumer
decision-making.

LEARNING OBJECTIVES
• Define electronic Word of Mouth (eWOM)

• Explain the importance of eWOM to service organizations
• Differentiate eWOM from marketer-initiated communications
• Explain the reasons why customers engage in eWOM
• Explain the impact of eWOM on business results
DOI: 10.4324/9780429263965-7
114 Electronic word of mouth: Understanding the customer’s voice
• Analyze patterns and trends in eWOM

• Evaluate different courses of action given eWOM
• Develop a response strategy regarding eWOM
• Describe the role of a social media manager
KEYWORDS
• Word of Mouth
• Electronic Word of Mouth
• User-Generated Content
• Consumer (Customer) Involvement
• Influencer (Social Media Influencer)
• Universal Set
• Consideration Set
• Social Media Manager
OPENING STATEMENT
“Asking a friend”… perhaps you’ve heard this phrase used comically when posing an awk-
ward question. People often ask their friends and family for opinions on matters trivial and
consequential. However, have you ever thought to ask a stranger? The internet has opened
the possibility of gaining opinions and expertise from people from near and distant loca-
tions. The wisdom of the crowds is easy to obtain in our age, though not every opinion may
be wise, accurate, or aligned with our own values. As consumers, we purchase multiple prod-
ucts and services. Sometimes, these purchases involve some uncertainty or risk. In the case
of services, their intangibility and heterogeneity make them a bit more challenging to pur-
chase. Without the ability to taste, see, and feel a service beforehand, people rely on various
sources of information, including their past experiences, advertising, price, and the advice
given by other consumers. This chapter will address the topic of word of mouth (WOM)
and its impact toward the purchase, enjoyment, and evaluation of services. There are many
ways in which people seek advice, including review sites, blogs, search engines, social media,
and many others. In this regard, you may wonder: Why do people share their opinions
with the online world? Why do prospective customers rely heavily on consumer postings to
decide? What are some problems associated with electronic word of mouth (eWOM)? And
how can service providers use this information to improve their operations? (Figure 7.1)
WHAT IS ELECTRONIC WORD OF MOUTH?
It is human nature to share feedback concerning many of our daily choices. When those
choices involve the purchase of certain products and services, they’re called WOM
Electronic word of mouth: Understanding the customer’s voice 115
communications. Formally defined word of mouth are: “Informal communications directed

at other consumers about the ownership, usage, or characteristics of particular goods and
services and/or their sellers” (Westbrook, 1987, p. 261). WOM differs from other forms of
communications which are directed by marketers. For instance, when a marketer creates
an advertising campaign, he or she will choose what to communicate, how to transfer the
information, and where to relay the message. Consequently, advertising is within the full
control of business marketers. In contrast, WOM is not initiated or controlled by the orga-
nization. While a company might try to influence these communications, they are initiated
by individuals and their content and delivery rest within the discretion of consumers.
Traditionally, WOM was delivered through live interactions. A friend might tell another
friend about a certain product or service while attending an event or taking a walk through
the park. With the advent of the internet, the potential to communicate and spread WOM
communications grew exponentially. Online review sites, blogs, and social media plat-
forms are among some of the main ways in which customers can express their message to
the world. When a consumer uses technology to spread their message regarding products
and services, it is called electronic Word of Mouth. Much like traditional WOM, eWOM
is within the control of the consumer, not the marketer. Unlike WOM, eWOM has the
potential to reach an audience that surpasses the consumer’s inner circle. The same mes-
sage can be read by thousands or millions of other consumers, which can then utilize
this information to influence their decision-making process. In addition to using the term
eWOM, several industry professionals use some related terms, including user-generated
content. The logic behind this term is fairly straightforward: the message is initiated and
produced by the user (i.e., consumer) as opposed to the company (i.e., marketer).
Consumers might be motivated to spread WOM for different reasons. Research sug-
gests that consumers spread positive WOM because of involvement, self-enhancement, and
helping the company. In contrast, negative WOM is spread due to altruism, anxiety reduc-
tion, vengeance, and advice-seeking (Sundaram et al., 1998). Consumer involvement is the
degree to which a person might be engaged with a certain product or service. A foodie might
be very involved with restaurants, meaning that the individual will visit frequently, read on
the latest trends, and perhaps have their own food blog. A business traveler might be highly
involved with airlines and a car aficionado with vehicles. All these consumers are more likely
to spread WOM and eWOM within those particular product and service categories. The
self-enhancement motivation relates to a person’s desire to boost their ego or feel import-
ant via the production of user-generated content. Posting, blogging, and even producing a
video review will likely generate a certain amount of attention, which the consumer might
find desirable. Yet, other consumers might just be motivated to do good: to promote a new
restaurant that they love or to endorse their favorite hairdresser. Regarding negative WOM,
anxiety reduction is one of the reasons why individuals engage in this behavior. Expressing
feedback might release some of the stress associated with the negative service encounter.
Ironically, writing or talking about an event repeatedly might, in fact, perpetuate a person’s
anxiety. Some customers might want to “get even” with the company. These individuals
feel that an injustice was committed, thus expressing that negative WOM evens the field
or provides some sense of control. Some people simply seek advice via eWOM: perhaps
they’re shopping online, and they’d like to know whether a shirt fits big, small, or true to
size. Maybe someone is booking a hotel and they’d like to know how easy or difficult it is to
get to the local attractions. Customers may also use eWOM to compare any gaps between
the service they desired versus the one they experienced. More specifically, a customer may
express what they wanted (desired) from the service provider, what were their require-
ments (needs) from the said service, their level of expectations before the interaction, and
how service should’ve taken place based on social norms (Kietzmann & Canhoto, 2013).
In order to make a review credible, consumers might make certain claims about them-
selves. For instance, a customer might claim to be an expert, be familiar with a certain
product category, or even claim to have a profession or affiliation which makes them par-
ticularly knowledgeable (Mackiewicz, 2010). Furthermore, personal information about
the reviewer tends to increase the credibility of such feedback (Xie et al., 2011). When
writing an online review about a theme park, a customer might state that they’re an annual
pass holder. Similarly, a person critiquing a restaurant online might state that they’re a chef
to enhance the credibility of the review. A person reviewing a pair of sneakers online
might state that they run marathons. These statements are directed toward enhancing the
credibility of the reviewer and by extension, the review itself. It is noteworthy that these
claims don’t have to be verified and may even be exaggerated. Some review sites such
as Yelp and TripAdvisor allow users to read previous reviews by the same person. This,
in turn, can improve the credibility of a reviewer or alternatively call it into question if
they’re hypercritical of every company (Figure 7.2).
FIGURE 7.2 People often make themselves more credible by asserting their expertise online.
Many bloggers and social media influencers have a distinct area of expertise
such as makeup, fashion, food, or travel.
There are different sources of eWOM. Customers might generate content through
an online review site. A former hotel guest might post their feedback on sites such as
TripAdvisor and a former restaurant patron might post a comment on Yelp. There are
online review sites for many different products and categories. For instance, prospective
car purchasers can look for information on Kelly Blue Book, homeowners can turn to Angi
(formerly Angie’s list) for help finding different home maintenance and repair services.
Movie fans can visit Rotten Tomatoes for reviews on the latest blockbuster film. College
students can turn to Rate my Professors for information concerning the teaching style of
a faculty member. Looking for a doctor in your area? Health grades allow for patients to
post feedback concerning their favorite or least favorite physician. There are several mar-
ketplaces that allow for consumers to post feedback. For instance, online travel agencies
such as Booking and Expedia allow for consumers to post comments regarding different
hotels. The advantage of these sites is that they can verify whether a person visited the
hotel by targeting those that booked through their platform. In a similar fashion, Amazon
allows for customers to post feedback concerning various products they shop; these can
be marked as a “verified review”.
In addition to the aforementioned review sites, consumers can also create their own
blogs. A person who enjoys travel, might have a blog where they post information regard-
ing their favorite destinations, preferred tour operators, best places to stay, and the most
durable luggage. Review sites and blogs are two popular ways to relay information regard-
ing various products and services. Consumers may also post videos whereby they express
feedback and share images concerning various products and services. Websites like You-
Tube are full of reviews in many different product categories. It should be noted that
not every review is completely unbiased. Some companies might furnish free product
to people who review often. A service organization might also provide free travel, meals,
accommodation, cruises, and other important consideration to bloggers, critics, and other
people who might be particularly influential. This is especially true for people with many
followers in social media platforms. These individuals are often referred to as influencers
by marketers. Influencers may obtain celebrity status as they grow in size and their opin-
ions often influence their followers, thus their namesake. A company might offer influenc-
ers compensation, products, and services in exchange for displaying them in their social
media, blogging, posting, or otherwise spreading WOM. This is a subtle way organizations
use to influence WOM.
THE IMPORTANCE OF ELECTRONIC WORD OF MOUTH
eWOM can be particularly important for service organizations. Unlike physical products
where the customer can touch, feel, and see before purchasing, the intangible nature of
services makes many of these prepurchase sensory experiences limited. Therefore, eWOM
has been found to be even more influential in the purchase of experiential products as
opposed to tangible ones (Senecal & Nantel, 2004). The importance of eWOM is partic-
ularly relevant in the information search part of a purchase decision process (Cox et al.,
2009). Beyond providing general information regarding various services, eWOM can help
consumers move from a universal set of choices to a consideration set (Vermeulen &
Seegers, 2009). A universal set is the entire array of service providers. For instance, a
prospective visitor might evaluate all the hotels in the Orlando, Florida, area. However,
this number is too large to evaluate by a single person. It is almost impossible to obtain
detailed information about every hotel within a reasonable time frame. Consequently,
there are various ways in which the prospective customer may narrow their search. They
might look at location, price point, star level, and in many cases, online reviews. In fact,
eWOM may allow the customer to narrow down their choice to a set of three hotels.
This would be called the consideration set, a more manageable number of establishments
which the consumer can obtain more detailed information in order to make a final choice
(Figure 7.3).
The impact of eWOM on a company’s top and bottom line has been demonstrated in
various industries. For example, the number of reviews in Yahoo! Movies was positively
related to national box office sales (Chintagunta et al., 2010). Similarly, positive reviews in
online retailing giant Amazon were found to be a positive influence on the sale of digital
cameras (Gu et al., 2012). Better online reviews can also lead to increase visits to a compa-
ny’s proprietary website in the case of restaurants (Zhang et al., 2011). Some studies have
quantified the impact of eWOM and concluded that a 10% improvement in reviews led to
a 4.4% increase in sales (Ye et al., 2009). Consumer reviews have been positively related to
the price accommodations in two popular tourist destinations: Paris and London (Ogut &
Tas, 2012). Ratings in review sites have been known to influence the size (in USD) of an
online booking transaction (Torres et al., 2015) and revenue per available room (Blal &
Sturman, 2014).
Beyond the financial impact of eWOM, it is important to know the behaviors of con-
sumers as they utilize the feedback. Studies reveal that people seldom read beyond the
FIGURE 7.3 Electronic word of mouth can help consumers move from a universal set to a con-
sideration set and ultimately make a final purchase decision.
first two pages of a review site (Pavlou & Dimoka, 2006). Consequently, more recent
reviews are more relevant (and perhaps more influential) to prospective consumers. WOM
communications are strengthened as the source has a closer relationship to the receiver,
the expression is stronger, the sender is demographically more similar to the receiver, and
the information confirms the previously held views of a product or service (East et al.,
2008). The number of reviews is also another relevant factor in determining the overall
online reputation of an establishment. In fact, research suggests that as the number of
reviews increases, so too the overall rating of a hotel (Melian-Gomez et al., 2013). There-
fore, hotels and other service organizations are often better served with more (as opposed
to less) customers posting their feedback online. It is also important to note that online
feedback sites such as TripAdvisor employ their own proprietary algorithm to determine
which hotels are ranked near the top. Accordingly:
“The TripAdvisor Popularity Index incorporates traveler ratings to determine overall

traveler satisfaction. Unlike sites that simply rank a hotel by price or hotel class, we
use a proprietary algorithm to take into account what real travelers like you think -
quantity, quality and recency of TripAdvisor reviews.”
(TripAdvisor, 2013)
FIGURE 7.4 Trip Advisor, one of the most prominent review sites, takes several pieces of infor-
mation including the quality of customer reviews and using its own algorithm to
rank hotels, restaurants, and other services.
Despite the growing relevance of eWOM, many question its accuracy. Some challenges
typically related to the use of eWOM include information overload and the potential
for bias (O’Mahony & Smyth, 2010). At the present time, there is debate concerning
the amount of eWOM which is accurate versus that which is deceitful. Estimates range
anywhere from 1% to 10% of reviews (Hu et al., 2012; O’Connor, 2010) that may be sub-
ject to manipulation. Considering these challenges, care should be taken when reviewing
eWOM. Although most consumers will provide legitimate feedback to service providers,
the lack of verification process in many sites makes it possible for inaccurate statements
to occasionally slip in. Additionally, perceptions might change from one customer to the
next. For instance, a customer might state that their hotel room was “small”, but that is
a relative term: small compared to other rooms in the same city? Rooms in their home
country? Rooms in luxury versus economy hotels? Since “small” is not an objective unit of
measure and different customers might have different expectations, one customer might
be perfectly happy with the size of the hotel room and another one dissatisfied to the
point of writing an online review (Figure 7.4).
THE CONTENT OF ELECTRONIC WORD OF MOUTH
As consumers express their feedback via eWOM, some important themes emerge. It is
important for managers to identify trends and patterns within the hundreds (and even
thousands) of messages in order to take specific steps toward improving quality. Large
organizations often employ a Social Media Manager, whose job is to help promote the
organization via social networking and monitor online activity such as online reviews,
consumer posts in social media, and other eWOM. Given the large number of postings,
large companies often employ specialized software to summarize the data and generate
reports. Revinate (https://www.revinate.com/) is an example of this type of technology,
which facilitates gathering of information and making sense of what can potentially be an
overwhelming number of consumer comments.
When examining eWOM, special attention should be paid to key words of phrases used
by consumers. In a hotel industry study using TripAdvisor data (Magnini et al., 2011), it was
revealed that some of the more negative comments contained words such as “dirt”, “stain”,
and “mold”. These words point out to cleanliness and housekeeping issues. In contrast,
positive feedback featured words such as “courteous”, “attentive”, and “accommodating”.
These positive attributes relate to the service provided by the hotel’s staff. Similar data
has been gathered from the theme park industry (Torres et al., 2018). Positive feedback
often involved the core product (i.e., rides, shows, and entertainment), positive emotions
(i.e., fun), limited waits, quality food and beverage, servicescape (including architecture
and interior design), and positive customer-to-customer interaction. In contrast, extremely
negative comments (those scoring 1 star on TripAdvisor) revealed problems with a core
product (e.g., malfunctioning ride, closed attraction), long waits, complaints about the
pricing of the theme park experience, poor service, and low-quality food and beverage.
As noted in these two examples from the hotel and theme park industries respectively,
the factors which account for exceptional or alternatively deficient customer experiences
can vary. It is noteworthy that while an industry might be doing poorly in one aspect of
customer service, a particular hotel or theme park might do an above average job. There-
fore, it might not be a bad idea to look for trends in both the feedback that you receive
(i.e., individual hotel, restaurant, theme park, retailer, bank office branch, beauty salon,
etc.), but also to engage in some competitive intelligence by monitoring the online repu-
tation of your competitors.
Not every organization is part of the Fortune 500 list and thus might not have the resources
to hire a staff devoted to managing their social media. Therefore, it is up to that independent
restaurant manager or the owner of a new retail boutique or the staff at a local tour opera-
tor to monitor various web sources in the search for customer feedback. Understanding the
reasons behind both positive feedback can help perpetuate the actions and behaviors which
lead to customer delight. Similarly, comprehending negative feedback patterns and trends
can help solve common quality problems and prevent customer outrage in the future.
WHAT TO DO WITH ELECTRONIC WORD OF MOUTH?
Following the receipt of eWOM, managers can take different actions and adopt varying
approaches. A key question which emerges concerning eWOM is: Should I respond to cus-
tomers online? And if so; how should I respond? The response strategy can be consequen-
tial for firms, yet many struggle in approaching this sensitive topic. Studies suggest that
less than 4% of reviews receive a response by a manager (Yu et al., 2010). When it comes
to responding to eWOM, there are three types of service organizations: nonresponders,
infrequent responders, and frequent responders. It is typical for frequent responders to
hold the belief that eWOM is a fair representation of the service received by custom-
ers. In contrast, infrequent responders and nonresponders are more likely to believe that
eWOM is biased or inaccurate (Park & Allen, 2013). The quality of response is also rele-
vant. Whereas many businesses send a generic response, this is not the best practice. More
personalized responses are likely to yield better customer engagement (Wei et al., 2013).
Although responding in a personalized manner might take more time and effort, it will
result in better customer outcomes.
A related issue regarding eWOM is whether to encourage customers to post online.
Some companies advocate for customer’s expressing their positive eWOM. In fact, more
number of reviews tends to yield a better overall evaluation (Melian-Gomez et al., 2013).
Organizations might send a link to customers who provide them a favorable evaluation
in a satisfaction survey. Similarly, employees can encourage customers to post online
whenever they express positive feedback to them in person. However, there are situations
where too much encouragement may lead to ethical issues. Some companies have been
known to have their own employees post positive reviews about their firm, yet others have
provided negative information about a competitor. Businesses have also paid experienced
bloggers to depict their firm in a positive manner. All of these practices raise questions:
How far should a business go in order to obtain a good reputation? When has an organiza-
tion manipulated the system to the point in which it can no longer be trusted?
eWOM can help managers with several actions regarding their human resources. Posi-
tive feedback can be used to recognize top-performing employees. Similarly, both positive
and negative feedback can be used as examples to provide training and development or
adjust some operating procedures. Comments related to long waits can signal to a com-
pany that staffing levels need to be adjusted. As companies make decisions about capital
allocation for various projects, eWOM can help identify priority areas. For example, if a lot
of hotel guests complain about the outdated facilities and equipment at the fitness center,
this might be an area of priority to refurbish.
So far, we’ve learned that companies can use eWOM to identify patterns of praise and
complain, adjust staffing levels, make improvements in training programs, and prioritize
capital investments. More recently, companies have also utilized various eWOM platforms
to encourage customers to share videos, stories, create photo contests, and socialize with
other customers (Kasavana et al., 2010). Indeed, firms can create authentic conversations
with their customers and stimulate excitement for their brands. eWOM can be a help-
ful tool in the benchmarking process. Since information about a variety of companies is
publicly available, managers might want to compare how they perform vis-à-vis their
competitors. Managers may also dispute false reviews. This practice can be challenging, as
many technology companies might be hesitant to delete the information posted by their
customers. In these cases, the company would have to prove with overwhelming evidence
that the post in question was not from a real customer who visited the establishment
(Figure 7.5).
With the increasing use of eWOM, it is important for managers to have clear action
plans with objectives, strategies, and performance indicators (Torres, 2012). A key person
(or set of individuals for larger firms) should be assigned the responsibility of monitoring
FIGURE 7.5 Companies can engage customers via social media by creating contests.
eWOM and reporting back to the rest of the management team. While many managers
review eWOM sources, not all of them act based on the feedback (Torres, 2012). It is also
important to recognize that many different platforms exist in various languages which
allow customers to express themselves online. Therefore, focusing on one platform alone
might not work in the best interest of the firm. User-generated content is only one piece
of information in the complete picture of a company’s performance. Managers need to
analyze these comments in comparison to their customer satisfaction scores, reviews from
experts such as consultants and mystery shoppers, and internal audits and evaluations
from franchisors. Studies suggest that although consumers (i.e., customers) and experts
(i.e., those with a related profession to the service being provided) use different criteria,
their overall evaluations tend to coincide (Torres et al., 2014).
Given the importance of eWOM for service companies and the information presented
throughout this chapter, here’s a short list of things to consider as you approach this topic:
1 Which sites to focus, prioritize, and review – There are multiple sources of eWOM.
While each of them has the potential to generate positive and negative impact, it is
worthwhile asking which are the most critical. Since there’s only so much time, atten-
tion, and resources you can allocate, prioritizing the source of eWOM is important.
2 Gathering data and using tools – The internet provides both qualitative and quanti-
tative data about a service and its users. Quantitative information can be tracked and
compared across platforms and across companies. Furthermore, statistical analysis can
be used to make sense of the data. Qualitative data may reveal key words and pat-
terns. Using software and a trained professional can yield important themes regarding
the customer experience. In addition to quantitative and qualitative software, several
online tools exist to help companies gather, summarize, and interpret eWOM. Con-
sequently, a key part of the eWOM management strategy is to decide whether soft-
ware will be utilized and which is the best platform to suit the company’s needs and
budget.
3 Response strategy – Not every review receives a response, and while some compa-
nies are more diligent than others, they should all decide when and how to respond.
Because not all reviews are equal in content, some should receive more attention
from the company’s representative (Kietzmann & Canhoto, 2013). The objective
here would be to minimize the potential for negative eWOM to become viral and to
obtain the best possible marketing effect from positive eWOM. How to respond is
very important as well, since personalized responses tend to have a better effect (Wei
et al., 2013).
4 Accountability – It’s important to answer “who will manage eWOM”? at various lev-
els of the organization. Some companies have a social media manager handle this,
others have the manager for a specific site (i.e., hotel manager or restaurant manager)
respond, and yet others use employees at various levels. Regardless of who handles
eWOM, it’s important that these individuals receive proper training.
5 Operations feedback – The information from eWOM can yield very important man-
agerial insights (Torres et al., 2014). Consequently, it’s important to distill the topics
and themes which can make an impact in improving the operation and its processes.
6 Marketing feedback – How can marketing leverage the power of eWOM? User-
generated content yields a plethora of content which can help an organization’s
marketing efforts. Furthermore, some marketers have become adept at encouraging
positive feedback from opinion leaders and influencers.
7 Benchmarking – Companies often overlook the opportunity to engage in competitive
benchmarking by using eWOM. Spending some effort in periodically examining how
your company is doing (regarding customer service) as compared to the competition
both in quantitative and qualitative terms can be beneficial.
• Which consumers are more likely to engage in eWOM?

• What are some actions companies can take following the receipt of eWOM?
• Who should monitor eWOM within a company? What are the benefits and drawbacks
of selecting one of multiple individuals?
• How is eWOM different than other types of customer and expert feedback (e.g., cus-
tomer satisfaction surveys, mystery shopping evaluations)?
• How does eWOM affect purchase decision-making?
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CHAPTER 8
The sharing economy/peer-to-

peer services
Revolutionizing the service market
FIGURE 8.1 Seeking unique and authentic experiences, many customers have turned to P2P
accommodations such as this one. Technology platforms such as Airbnb and
VRBO connect individual owners and consumers.
LEARNING OBJECTIVES
• Define the sharing economy

• Explain the components of a sharing economy/peer-to-peer services
• Elucidate business examples of a sharing economy/peer-to-peer services
• Articulate the pros and cons of a sharing economy/peer-to-peer services
• Analyze the branding strategies for a sharing economy/peer-to-peer services
DOI: 10.4324/9780429263965-8
128 The sharing economy/peer-to-peer services
KEYWORDS
• Sharing Economy
• Peer-to-Peer Services
• Authenticity
• Sustainability
• Value
• Sharing Idealists
• Sharing Opponents
• Sharing Normatives
• Sharing Pragmatists
• Technology Innovation
WHAT IS SHARING ECONOMY/PEER-TO-PEER SERVICES?
Over the past two decades, economies around the world have witnessed an increase in peer-
to-peer (P2P) services and the sharing economy. Many brands and companies have emerged
at the forefront of this realm in which they have become strong and popular. The ascendency
of these companies can be partly attributed to the rise of the internet and various tech-
nological advances (Akbar & Tracogna, 2018). As dependence on and the use of personal
smartphones has increased (Zhang et al., 2017), companies have capitalized on this trend by
creating easy-to-use applications that encourage users to become their consumers. Moreover,
as the convenience of these services appeals to consumers, competition between different
companies has intensified. The term “sharing” comes from the tendency or preference of
individuals to share (including renting, borrowing, or otherwise using) a product or service
rather than purchasing them (Tucci, 2018). These services are often called “peer-to-peer”, as
they’re often produced by an individual instead of an established corporate entity. As we will
learn later in this chapter, the terms “sharing” and “peer-to-peer” can at times be misleading,
as entrepreneurs have used the technology platforms available to generate entrepreneurial
ventures, thus launching a new form of capitalism (Dorgu et al., 2020a) (Figure 8.1).
To understand how the concept of the sharing economy is connected to the service
industry and how it contributes to strengthening brands, it is important to understand
some concepts. This type of economy started to increase globally at the beginning of
2000, affecting both businesses and society (Fatma et al., 2020). A key milestone in the
development of P2P services occurred between 2011 and 2012 with the development
of Uber and Airbnb (Belk, 2014). The sharing economy involves the connection of some
three key concepts: access, platforms, and a community-based economy based on the type
of industry (Acquier et al., 2017). This concept is usually correlated with P2P transaction
systems, where individuals exchange products and services (not necessarily just informa-
tion) (Weber, 2014). The development of appropriate technologies was an advantage that
assisted in the accessibility and engagement of these transactions. Platforms make use of
digital technology to delegate most production tasks to individuals (who engage on a P2P
The sharing economy/peer-to-peer services 129
basis) and to protect and manage transactions remotely. Further, due to these technologies,
transaction expenses that previously hampered market trade have been reduced (Hamari
et al., 2016). Multiple companies and individuals involved in exchange economy transac-
tions use mobile apps. With these apps, users can effectively monitor data, utilize grading
systems and insurance mechanisms to reduce opportunistic behavior and uncertainty, and
build trust while coordinating algorithms (such as reviews and sale prices). Consequently,
these pioneering companies and individuals take market logic to a new level by establish-
ing new marketplaces, with small operations being substantially amplified.
The sharing economy can be defined as an economic model that allows consumers to
share in the creation or use of products, goods, and services (Chang & Wang, 2018). This
sharing often occurs across digital platforms, such as online communities (Zhang et al.,
2018) or mobile apps (Zhang et al., 2017). Examples of these include ride-sharing services,
delivery services, property rentals, and selling goods online. Some companies that fall into
these categories are Uber, Lyft, Airbnb, GoFundMe, Instacart, and Postmates. The sharing
economy works through mutual cooperation, with digital platforms (such as websites or
apps) rendering it possible for people to connect with each other to share services or goods.
For example, Uber is a company that specializes (and has become the frontrunner) in
ride-sharing services. Essentially, this is a service in which a consumer opens an application
and inputs a destination. Within seconds, they are connected with a driver who will arrive
to pick them up and drive them to their desired destination. It is the convenience provided
by these services that has projected the companies to where they are today (Figure 8.2).
FIGURE 8.2 Web-applications such as Uber allow for ride-sharing services between individual
car owners/drivers and consumers.
As technology has advanced over the past few years, the ability to connect with others
and use other people as resources has become more readily available. This has created a
market opening for P2P services, allowing individuals to provide the product being sold
without having to use “middlemen”. Some companies have made themselves intermedi-
aries in terms of providing technological support to establish and maintain these connec-
tions, even though they do not provide any products. For example, when booking a stay
at Airbnb, it is the individual (i.e., peer or entrepreneur) who owns the vacation rental
property and not the company who owns the platform. Airbnb serves as an intermediary
between the owner and the user by helping with marketing and managing the transaction,
among other services. Lyft does not own cars; they simply act as the platform which facil-
itates rides between individual owners/drivers and consumers. As an increasing number
of these types of services emerge in the future, we predict that this trend will continue to
move forward as connective technologies evolve and grow.
Over the last couple of years, participation in the sharing economy has become a nor-
mal way of life. The sharing economy has created significant revenue increases in various
sectors, such as travel, car sharing, finance, staffing, and entertainment streaming (Muñoz
& Cohen, 2017). The sharing economy presents an opportunity for a more sustainable
world by creating feasible solutions to overconsumption and income inequality (Muñoz
& Cohen, 2017). This structure of collaboration provides communal access to underused
items or assets, which attract participants by typically having lower associated costs. When
we think about how the sharing economy has evolved, it can be perceived as an enhance-
ment of P2P sharing. As examples of simple transactions, someone you know has a lake
house and they let you use it for trips when it is not being used, or maybe a friend allows
you to borrow their car. However, the sharing economy functions with a complex network
of people and companies that extends beyond personal acquaintances. In yet another
example, Task Rabbit is a web-based service which allows individuals to sell their services
directly to consumers. Some examples done by the “taskers” include pet sitting, moving
help, assembling furniture, yard work, editing, and even waiting in line. Similarly, the web-
based application Rover allows pet owners to schedule a sitter or a dog walker. These
services connect the demand for services (i.e., pet sitting) and the supply of providers (i.e.,
individuals willing to engage in pet sitting for a fee) (Figure 8.3).
Altinay and Taheri (2018) defined sharing as the act and process of distributing what
is ours to others for their use and/or the act and process of receiving or taking something
from others for our use. The concept of a sharing economy (Altinay & Taheri, 2018)
involves a unified partnership that enables intercommunication, exchanges, and relation-
ships between people, which is why it is also known as P2P services. The sharing economy/
P2P services are readily available throughout the hospitality and tourism industry and are
used by many popular companies, such as Airbnb, Uber, and Couch Surfing. These sharing
platforms have a significant impact on the way human interactions occur and offer many
benefits for both suppliers and consumers. Lodging providers under the sharing economy
paradigm compete with the hotel industry vis-à-vis the guest experience (Mody et al.,
2017). Many companies that make use of sharing economy/P2P services (such as Lyft,
Airbnb, Guest to Guest, Fairbnb, Uber, Eatwith, and Vayable) are provided with many
advantages when utilizing such platforms. These platforms not only provide consumers
(or guests) with an effective and timely means of accessing products or services, they
FIGURE 8.3 Busy pet owners can find sitters and walkers through Rover, a web-based applica-
tion specializing in pet care.
also allow the organizations to gain a competitive advantage against hotel establishments
and other travel and tourism companies. Some of these platforms are growing at a rapid
pace. In fact, a recent study suggested that Airbnb accounts for 10.5% of lodging revenues
(Dogru et al., 2020a). Paradoxically, the ascendance of P2P accommodation coincides
with a growth in employment and demand for traditional travel services (i.e., hotels) in
key tourism markets (Dogru et al., 2020b). Many P2P hosts are multiunit hosts, especially
in large cities. Consequently, some have come to question whether this remains a sharing
platform or a new form of lodging enterprise (Dogru et al., 2020a).
BEHIND THE RISE OF THE SHARING ECONOMY/PEER-TO-PEER

SERVICES
The main reasons that consumers make use of P2P services are: value, authenticity, sus-
tainability, and unique experiences. For example, P2P accommodation allows people to
stay at a local neighborhood and even communicate with a local host. This, in turn, can
create the more authentic experience and greater interaction with the locals and their
culture often sought by many. Research suggests that Airbnb has a competitive advantage
(as compared to hotels) due to its experiential authenticity. This sense of authenticity is
fueled by authentic interactions as well as authentic locations and objects, and tends to
enhance feelings of self-actualization among travelers (Mody et al., 2019). P2P services
can be sustainable, in that they use existing resources. For example, instead of putting one
more car in a congested city, ride-sharing services enable people who already own a car
to use it to generate extra income while reducing the overall carbon footprint. Some use
P2P services for the value they bring, as reflected in lower price for comparable services
available through a commercial player. Finally, P2P services can offer unique experiences.
For example, the website “withlocals.com” allows users to book private tours and unique
experiences in new destinations. In spite of these benefits, it’s worthwhile stating that the
services offered through these applications and websites can interfere with many estab-
lishments within the service industry, such as restaurants, tour operators, hotels, airlines,
and car rental companies. Consequently, some of these technologies have been called
“disruptive”, as they have the potential to disrupt existing business sectors.
The increased development of the sharing economy/P2P services is largely due to
socioeconomic elements. These include advancements in technology, networking, and dig-
italization; increasing consumer perspectives toward products and services and the need
for personal connections; profit-making and the need for service quality; and trust. Addi-
tionally, consumer behavior has changed significantly following the COVID-19 pandemic.
Some trends such as online ordering and delivery of groceries through third-party apps
(i.e., Instacart) accelerated during this period and are likely to persist. The hospitality
and tourism industries in particular have been greatly influenced by the sharing economy
through making their products and services accessible to guests and consumers online.
P2P services generate advantages and benefits by eliminating the demand for ownership
(Kuhzady et al., 2020). Moreover, the hospitality and tourism sector delivers an opti-
mistic platform that allows organizations to make available and share vehicle, home, and
food services with their consumers or guests. Another feature of the sharing economy
for hospitality and tourism consumers is that it offers an economical option for products
and services compared to regular tourism services. The sharing economy is also a great
way of enabling guests to have an experience that is original and genuine, as it facili-
tates engagement between consumers and the community. A recent study suggests that
P2P accommodation is already influencing travel behaviors. For example, usage of P2P
accommodation is associated with increased length of stay, increased frequency of travel,
expanding available destinations, and an increase in activity participation (Tussyadiah &
Pesonen, 2016). Users of P2P accommodation cite several benefits, including social and
economic, while some of the challenges include trust, cost, efficacy, and familiarity with
the system (Tussyadiah & Pesonen, 2016). For their part, Airbnb hosts engage in a series of
tactics to enhance their credibility. More specifically, successful hosts present themselves
as having a profession, extensive travel experience, and willingness to meet new people
(Tussyadiah & Park, 2018) (Figure 8.4).
Consumers have different motivations to engage in the sharing economy. Prior research
categorized users of P2P services into four unique groups (Hellwig et al., 2015):
• Sharing idealists: These consumers are the most likely to share and are characterized
by their generosity, sociability, and intrinsic motivation. People in this group are most
likely to be short on resources. The characteristic of generosity makes it natural for
these individuals to share.
FIGURE 8.4 In a busy world, convenient P2P services such as online grocery shopping and
delivery are becoming increasingly popular.
• Sharing opponents: Among all groups, these consumers have the lowest frequency
usage of P2P services. Consumers in this cluster are highly perfectionistic, exhibit a
“tit for tat” reciprocity, and are extrinsically motivated. Furthermore, this group of
consumers is more likely to have ample resources (i.e., comfortable or wealthy) and
is less likely to use social media.
• Sharing pragmatists: Consumers in this group are extrinsically motivated, highly
sociable, low in perfectionism, and have average resources. This group has an average
amount of sharing behavior. The pragmatic part comes into play, as they will engage
in sharing whenever practical.
• Normative sharers: These individuals are highly generous, perfectionists, and expect
to be reciprocated. Normative sharers tend to be scarce in resources (i.e., limited
financial resources) and see sharing as a socially desirable behavior (Hellwig et al.,
2015).
Piscicelli et al. (2015) stated that the sharing economy has developed as a socioeconomic
ecosystem model based on sharing, renting, swapping, lending, exchanging, collective pur-
chasing, co-creation, and borrowing. Many digital platforms facilitate P2P services that
provide opportunities for people to become entrepreneurs on short-term or part-time
basis. This enables them to share their culture with guests or tourists by becoming local
guides, providing traditional meals, providing reliable transportation, and sharing space in
their homes. These P2P services are particularly desirable for consumers who are looking
for affordable places to stay and unique travel experiences. In addition, the sharing econ-
omy/P2P services provide many advantages, including entrepreneurship (Piscicelli et al.,
2015), social collaboration, lower costs, and an increase in employment opportunities.
Zhang and her research team et al. conducted a qualitative study which explored the prac-
tices of micro-entrepreneurship in Airbnb businesses. The findings identified eight motiva-
tions these sharing economy micro-entrepreneurs usually consider when establishing a sharing
economy service business, namely social, financial, and cultural benefit; ease of operation;
availability of resources; freedom; flexibility; and excitement about future perspectives. This
study also articulated five positive outcomes of their micro-entrepreneurship: financial gain,
social connection, cultural learning, personal growth, and feelings of achievement. Zhang
et al. (2019) also uncovered the challenges micro-entrepreneurs in the sharing economy
setting might encounter such as risk, lack of privacy, and emotional stress resulting from
guest reviews. Furthermore, the increasing digitalization advancement has resulted in a
changed living environment which has features of urbanity, openness to new solutions,
changed working situations, and new mindsets (Richter et al., 2017). These four distinct
characteristics of today’s digitalized environments significantly drive the sharing economy.
ADVANTAGES AND DISADVANTAGES OF THE SHARING

ECONOMY/PEER-TO-PEER SERVICES
As with most new technologies and business models, there are pros and cons to the sharing
economy. Positives about the sharing economy include potentially lower prices for goods
and services, work to provide extra income, and increased access to goods and services.
For example, if someone needs to rent or own a car, there are many inherent expenses
(such as monthly fees, constant refueling, insurance, and maintenance costs). While some
people need a car to function in their daily lives, many people who live in cities travel
predominantly by foot and only require a car occasionally. For these people, ride-sharing
services can decrease their cost of living by eliminating typical car ownership expenses.
Instead of spending hundreds of dollars on a car they only use a handful of times, costs can
be reduced significantly by using a ride-sharing service.
Another positive aspect of the sharing economy is the added option of having more
income. Many people who have full-time jobs still require other ways of earning money.
Ride-sharing services and delivery services provide an easy way to achieve this aim. Essen-
tially, people can work whenever they desire with these services, including on their days off
work or after their shift has finished. Given the practice of engaging workers for one particular
task or job (i.e., one car-sharing ride or one dog walk), some refer to the sharing economy as
the “gig economy”. The image comes from musicians who traditionally work for a “gig” or one
specific show. Proponents and detractors from the gig economy have cited several reasons
for their support or objection. From a labor perspective, some of the primary benefits include:
• Freedom: The gig economy allows people to select a schedule that fits their needs
• Flexibility: Workers choose which types of work to take on, when to work, and how
to work
• Tax benefits: As a contractor, gig economy workers can deduct legitimate business
expenses from their taxes
• No boss: People work without any direct supervision
• No traditional work rules: Workers have no rules on attendance, punctuality, dress
code, forms to fill, and more
• Efficient use of resources/sustainability: The gig economy serves to create a more
optimal use of underutilized physical resources (e.g., car) and human resources (e.g.,
workers needing work)
There are several problems and challenges with the gig economy, including:
• Lack of employer-sponsored benefits: As part of an employment relationship, full-

time workers often get benefits such as healthcare, disability insurance, and retire-
ment benefits. Employees working on a contract basis are responsible for supplying
their own benefits.
• Lack of paid time off: Gig economy workers don’t get paid sick days or vacation days.
• Use of individual’s tools and equipment: Some platforms require workers to use their
own vehicle or tools. The depreciation on these vehicles, insurance, gas, and other
expenses are all the responsibility of the worker.
FIGURE 8.5 As P2P accommodation gains popularity, some cities face the challenges of hous-
ing scarcity for its residents. This image depicts a social movement critical of the
sharing economy.
• Variability in demand for services: While it is true that the gig economy allows some
flexibility, there are periods of higher and lower demand for certain services. Com-
panies who own the platform can create incentives or disincentives to work during
certain hours. Additionally, there is no guarantee of a certain volume of business on a
daily basis, thus placing a lot of the business risk on the worker.
• No ability/limited ability to set price: Many applications set the price for their ser-
vices with no input from those providing the service (i.e., workers). Therefore, work-
ers can take the work or leave it, but they can’t negotiate their pay. Traditionally, a
small business owner is able to set his or her pricing or at least negotiate pricing with
a client. The gig economy puts that ability in the hands of technology companies.
There are also disadvantages to the sharing economy, with the main one being centered
around safety concerns (Gu et al., 2021). For example, when strangers are picking you up
in their personal cars or bringing you food or groceries, anything can happen. While there
are systems in place to try and stop situations that could jeopardize safety, nothing is 100%
effective. With food delivery services, such as Uber Eats and DoorDash, restaurants usually
seal their bags so that the consumer can tell if the food has been altered or opened prior
to delivery. However, monitoring these practices can be a challenge as they rely on the
customer to report any problems. Accordingly, there is no way to determine whether the
driver has interfered with the food (Figure 8.5).
BRANDING WITHIN THE SHARING ECONOMY/PEER-TO-PEER

SERVICES
Branding within the sharing economy is more complicated than in traditional business
scenarios. Moreover, many P2P service platforms are based on the use of and partnership
with other companies. For example, Instacart relies on various grocery stores and Door-
Dash relies on different restaurants to build content on their platform. Without these
participants, the platform would be empty and purposeless. Accordingly, sharing economy
platforms must strategically choose which brands are best to partner with to strategically
build their own platforms and attract more consumers. Additionally, with the use of free-
lance labor in the gig economy, it is difficult for organizations to control the narrative
pertaining to their brand standards and expectations. Consumers in the sharing economy
have demonstrated that there may be little importance attached to brand creation. For
example, with regard to ride-sharing services, it was found that consumers are not loyal
to one brand as they continually seek the lowest-priced option (Eckhardt et al., 2019).
However, it should be noted that although it appears that consumers do not rely on brands
in the sharing economy, this does not mean that the development of a strong brand would
not significantly benefit companies. Importantly, branding promotes differentiation among
competitors, growing the value propositions from which consumers can select.
Carlson and Johansson (2006) noted that strong brands feature two main components:
brand depth and brand reach. Brand depth is affiliated with loyalty (Carlson & Johansson,
2006), manifesting as repeat purchases and the relationship a brand builds with consumers.
However, convenience and availability often dominate any feeling of loyalty. Companies
can also benefit from positive judgments and feelings pertaining to a brand, even among
consumers who are not completely loyal. The sharing economy focuses on convenience
because everything can be completed rapidly from a smartphone. Here, consumers can
browse and engage with multiple options, such as restaurants for food delivery systems and
rooms and locations for lodging services. With brand reach, it is important that the brand
is widely recognizable. However, when recognizing a brand, consumers must know its
functionality, how it behaves, and its potential uses. Brand personality should also become
more recognizable (Moreno et al., 2021). Brand reach is significantly more important than
brand loyalty within the sharing economy, particularly when companies attempt to take
a share of the market (Moreno et al., 2021). Since a consumer may not be loyal to one
brand, companies would like as many consumers as possible to know about their brand
in the market when comparing alternatives. Additionally, while personality, identity, and
value are important criteria for consumers, companies must also be as convenient to access
and utilize as possible.
Although convenience and price are significant factors in the success of the sharing
economy, it appears that there is a social element that is lacking with regular transac-
tions (i.e., business-to-customers [B2C]), which is valued with these app-based platforms
(Clauss et al., 2019). The addition of interactions between providers and consumers cre-
ates comradery that has the potential to form relationships through trust. Accordingly, this
will help customer bonding and the formation of loyalty, something that was lacking when
businesses were selling products on behalf of consumers in B2C. This truly differentiates
the sharing economy since nothing is owned (they are only borrowed). This interactivity
and the co-creation of experiences constitute a central part of the hospitality industry and
its branding.
For consumers to have become so comfortable and to consistently engage in the sharing
economy, there must be some strong brands. These are characterized as having a high level
of recognition, being notable in at least one segment of the market and possessing a clear
identity. While the idea of renting a space in someone’s private home is comparatively new,
services such as Airbnb have made it incredibly common. Home-sharing or short-term rentals
have revolutionized the tourism industry, turning cities that do not normally experience large
tourist populations (due to a lack of accommodation) into tourist hot spots. By suddenly allow-
ing what are essentially micro-hotels with comparable pricing, visitors have significantly more
options in terms of travel as well as access to unique amenities. These include full-home rent-
als for larger parties, pet-friendly homes, bikes or kayaks, and personalized recommendations
from their host. These unique touches not only make rentals stand out to potential visitors,
they also set home-sharing services apart from standard hotels, as many of these amenities
would be extremely difficult to maintain on a larger scale. By offering unique experiences with
specialized amenities, home-sharing platforms have created a strong brand for themselves.
Ultimately, sharing economy platforms are highly supported by brand reach rather than
brand depth. However, to be considered strong, brands must also have strong brand depth
through loyalty and relationships built with their consumers. Although not impossible,
achieving strong brand depth is challenging due to the nature of having freelance labor and
a resource as the central product in P2P services. Being freelance labor, this prevents organi-
zations from having more control over the messaging and creation of brand standards, which
is critical when consumers are seeking social elements that the sharing economy can provide
in its services. Successful P2P services (such as Uber and Uber Eats) can create marketing and
promotional strategies that push through the recognition and perception stages to create
consumer bonding, solidifying themselves as a strong brand and differentiating themselves
from their competitors.Without striving to continue expanding brand reach and brand depth,
a brand will appear to have a lack of significant value when consumers make their decisions
about which platform to utilize when a myriad of other platforms are available.
Many brands (such as Uber and Lyft) have seen their companies become stronger and their
brands have become household names. Instead of people saying “I am going to pay to get a
ride there”, they are now heard saying “I am going to Uber there” and people instantly know
what they mean. It has also helped to add some extra income in people’s pockets by offering
a new and quick way of making money on the side. Overall, the sharing economy has added
many benefits to our society.
SELECTED BUSINESS CASE ILLUSTRATIONS IN THE SHARING

ECONOMY/PEER-TO-PEER SERVICES
Airbnb
Airbnb is a P2P service that has experienced immense growth in popularity. This service
was founded in 2008 and has become one of the most well-known accommodation rental
websites in the world. People tend to flock to Airbnb for an abundance of reasons. The
main reason that Airbnb enjoys such a good reputation is that regardless of the experience
required, the location, the size of the group, or the available budget, customers can find
somewhere that is perfect for their needs. Moreover, through the use of filters, customers
can choose exactly what they are looking for in a matter of minutes. People are starting to
prefer Airbnb to hotels because they often come with additional features, such as kitchens,
washers/dryers, pools, and garages. Staying downtown in a city can cause problems due to
parking fees and traffic. Hence, it is often preferable to have a driveway and be somewhere
that is far from the inner city and its inherent noise.
Airbnb is one of the pioneers in the sharing economy and has affected the hotel indus-
try, especially in terms of sustainability. The online aspect of booking a room was improved
with the creation of a mobile app and a mobile check-in option. This correlates with the
experience of creating a reservation and having guests go directly to their room without
the inherent bureaucracy of the check-in experience.
Uber
Uber is a mobile service provider in which everyday drivers can benefit from entrepre-
neurship opportunities. Uber simply serves as a platform for people to access car services,
as they do not own any vehicles, employ drivers, or maintain a work schedule. Many driv-
ers offer their services as a way of earning additional income. Moreover, they are free to
work whenever they want and for as long as they desire. Uber has created a strong brand
by being accessible, convenient, and opportunistic. Prior to the emergence of Uber, taxis
were the primary car service, which had a uniform look and required cash. To access these
services, there were phone numbers you could call or areas where they were readily avail-
able (such as airports).
Uber reimagined a car service where you could conveniently find a ride and have more
control over the process and eventual journey. The platform provides users with a plethora of
selection filters to indicate exactly what they are looking for, all of which are accessible using a
smartphone. This allows users to arrange travel “on the go” and be connected with a ride any-
time at a moment’s notice. Uber is also cognizant about safety, as users can view the profiles
of the drivers (including the license plate, name, and a photograph). In addition, riders can
share their trip details with family and friends as an added safety measure. This constitutes a
significant difference from taxi services,where riders have little (or no) identifying information
about their drivers.
Another defining component of Uber is that you can split the fare with other riders. When
riding with friends, all pay a portion of the ride, which further reduces travel costs. Further-
more, if there is a solo passenger, they can choose to ride in a pool where multiple riders can
be picked up and dropped off (also saving money).
Turo
Turo is a car-sharing marketplace (operating in the United States, Canada, Germany, and
the United Kingdom) where car owners rent their vehicles to customers for personal use.
Traditional rental car companies have their own set of rules and requirements pertaining
to the use of their cars, and often consumers have little (or no) choice of the car they will
receive. By comparison, Turo allows customers to search cars by make and model available
in the travel area. The consumer is then connected to the owner of the vehicle for book-
ing. The variety of cars available ranges from everyday cars to those that are most coveted.
This provides consumers with the opportunity to experience a vehicle that they otherwise
would never have the opportunity to use.
Another perk that many consumers appreciate with Turo is the lack of age-related fees.
Traditional rental car companies often charge substantial fees for consumers under the age
of 25. When using this sharing economy service, consumers can expect savings of approx-
imately 50% compared to renting from a traditional agency. The model of this business is
very similar to Uber, as Turo does not own any of the vehicles or establish the terms of use.
Turo accepts all makes and models of vehicles, providing people with the opportunity to
make a profit from cars they no longer need or are rarely used (Figure 8.6).
Business case: Uber Eats

Uber Eats is an example of a strong brand that has worked through the challenges of
brand reach, brand depth, and social interaction. Uber Eats is a food delivery service with
multiple participating restaurants. The P2P service emanates from Uber Eats carriers being
independent contractors who are performing freelance work. To retain consumers and
form relationships and loyalty through repetitive ordering, the Uber Eats app constantly
sends push notifications to smartphones and smart watches. Whether affiliated with a pro-
motion or not, this constant reminder of their services maintains this platform at the fore-
front of consumers’ minds. For certain restaurants on the platform, there are promotions
FIGURE 8.6 Turo, a car-sharing marketplace, is a prominent example of the sharing economy.
that reward repeat purchases only for purchases on the Uber Eats platform. This also
helps keep both the app and the restaurant’s brand at the forefront of customers’ minds.
In addition, to ensure widespread recognition, Uber Eats has partnerships with multiple
major chains (such as McDonald’s and Denny’s). Guests who visit these establishments
in person are exposed to promotional material that brings attention to these delivery
services and increases awareness. Since consumers already have loyalty and relationships
with certain brands, by having these restaurants as a part of their platform, Uber Eats can
take advantage of premade loyalty and move consumers toward their platform as a new
ordering medium.
One way to help consumers adopt loyalty is to improve their value perceptions. This
is where the brand can communicate its image, personality, and value as a company, with
the hope of differentiating itself from its competitors (Carlson & Johansson, 2006). The
ride-sharing side of Uber builds consumer perception by offering promotions that appear
as part of their corporate social responsibility. With Uber Eats in the same organization,
they also benefit from the narrative that Uber receives. For example, during the Coronavi-
rus pandemic, Uber provided complimentary rides for anyone who needed transportation
to receive their vaccine. This positive promotion and act of goodwill rendered Uber more
recognizable from the associated positive publicity, and it continues to build toward con-
sumer bonding and making themselves a preferred brand.
Uber Eats engages in the social element of the sharing economy by allowing providers
and consumers to text or call each other during delivery through the smartphone app.
This assists in coordination or problem-solving, ensuring that food orders are delivered in
an accurate and timely manner. In addition to helping with socializing, this also helps pre-
vent service breaks and can personify the brand by connecting a person to the organization.
To further promote the social aspect, consumers can also rate and provide feedback on
their service providers. This encourages providers to engage appropriately and to exceed
consumer expectations. With the expansion of Uber Eats’ services to include shopping at
convenience stores (such as Walgreens and CVS), communication and social interactions
between providers and consumers have become more essential when providing a service
and attempting to build loyalty. Trust needs to be formed through constant communica-
tion, such as when an item is out of stock, and the provider must think of alternatives to
suggest. Finally, appropriate social communication renders relationships and loyalty, as the
consumer knows that trust can be established during the service interactions.
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CHAPTER 9
Subscription services and new

business models
FIGURE 9.1 Meal kits such as the one offered by Hello Fresh is one example of products and
services delivered via the subscription business model.
LEARNING OBJECTIVES
• Explain the subscription business model

• Assess the benefits and drawbacks of subscriptions from a business perspective
• Compare the benefits and drawbacks of subscriptions from a customer’s perspective
• Classify the various subscription types
• Evaluate whether a business or sector should provide subscription services
DOI: 10.4324/9780429263965-9
144 Subscription services and new business models
• Demonstrate how a current product or service could adopt the subscription mode
successfully
• Develop new business ideas based on the subscription model
KEYWORDS
• Subscription
• Churn Rate
• Recurring Revenue
• Customer Acquisition Cost
• Utilization Rate
• Predefined Subscriptions
• Replenish Subscriptions
• Discovery Subscriptions
• Productivity Subscriptions
• Surprise Subscriptions
• Curated Subscriptions
• Revenue per Customer
• Omni Channel
• Upselling
• Cross-Selling
• Freemium
WHY ARE COMPANIES TURNING TO THE SUBSCRIPTION

BUSINESS MODEL?
In order to ensure frequency of purchase and a steady stream of revenue, many businesses
have turned to the subscription business model. In contrast to purchasing products or
services one at a time, subscriptions encourage customers to develop a long-term rela-
tionship with a company. Subscriptions are not a new concept. Several businesses have
used subscriptions to deliver service to customers for decades. Consider the typical fitness
center: members typically subscribe by paying a monthly recurring fee to the gym owner
in exchange for usage of the facilities. Cellphone service has also relied on subscribed
customers who receive a bill for communication services at the end of each billing cycle.
Similarly, membership clubs such as Costco allow access to merchandise at reduced prices
in exchange for a yearly membership (Figure 9.1).
Although subscriptions aren’t new, their digital delivery is. Today, several companies –
both old and new – are using e-commerce channels to sell products and services via the
subscription business model. Customers can now get a box of clothes which reflect their
personal style at their doorstep every month from companies such as Stitch Fix or the
Trunk Club. Similarly, those interested in cooking new recipes at home can get a box with
Subscription services and new business models 145
food ingredients with instructions delivered at their door from companies such as Blue
Apron, Plated, or Hello Fresh. Tired of going to the store to buy overpriced razor blades
for shaving? Harry’s Shave Club and the Dollar Shave Club will deliver these on an ongo-
ing basis for a lower price than brick-and-mortar retailers can offer. Makeup also comes
to customers via a monthly subscription to Birchbox. Subscriptions have even changed
the way we watch television with popular services, such as Netflix, Disney plus, and HBO
Max, presenting new ways to distribute entertainment content directly to the customer’s
home. Even the largest online retailer, Amazon, uses a subscription: Amazon Prime, to
offer benefits to its members while reducing barriers to commerce (e.g., included shipping
reduces customer’s hesitation to order online) (Figure 9.2).
Unlike the subscriptions of years past which relied on contracts and penalties to keep
customers from defecting, modern subscriptions are increasingly relying on data to establish
customer preferences and consistently deliver those products and services which will keep
customers engaged. Indeed, subscriptions allow companies to develop direct relationships
with consumers (as opposed to relying on traditional distribution channels) and gain greater
insights on consumer behavior (Tzo & Weisert, 2018). Companies such as Netflix can gain
insights into what consumers want to watch on their screens by analyzing the viewing
patterns of their subscribers. This, in turn, allows them to be more effective with launching
FIGURE 9.2 Customers can access a replenish subscription such as Harry’s Shave Club which
offers razor blades and related items on a recurring basis.
new shows as well as to provide customized recommendations. New, unique, and meaning-
ful content is necessary to keep customers engaged and gain a competitive advantage in the
subscription business (Kim & Kim, 2020a). The ultimate goal is not to simply change the
mode of delivery, but rather “creating fun, compelling subscription services that get smarter
and smarter over time” (Tzo & Weisert, 2018, p. 28). Adding to the idea of increased per-
sonalization and the changing business paradigm which subscriptions offer, Manu (2017)
argued: “what we want is for experts to curate our experience of life, personalized, ever
satisfying and endlessly surprising” (p. 109). Therefore, managers and marketers alike must
be committed to provide benefits of excitement and curiosity over time (Tao & Xu, 2020).
With the size of e-commerce growing at 15% per year (Tzo & Weisert, 2018), many
brick-and-mortar companies are turning to this business model for future growth. This
is part of an overall omni channel strategy, that is, when companies distribute goods and
services both through a traditional face-to-face interaction on a physical store or branch
and via electronic means. Consulting company McKinsey reports that 46% of consumers
have subscribed to an online streaming media service and 15% of them have subscribed
to an e-commerce service (Chen et al., 2018). Some of the most popular subscriptions
include: Amazon (online retail), Dollar Shave Club (shaving products), Ipsy (cosmetics),
Blue Apron (meal kit), Birchbox (cosmetics), Sephora Play (cosmetics), BarkBox (dog
products and services), JustFab (fashion), and Hello Fresh (meal kit) (Chen et al., 2018).
At the onset of this book, we argued that many products have a service component and
conversely many services have a product component. Subscriptions take many products
and turn them into services by adding value-generating activities for customers. For exam-
ple, Peloton sells fitness equipment (i.e., product) and a subscription to fitness instruction
(i.e., service). After getting the upscale stationary bike that is typically associated with
their brand, consumers use the fitness equipment by subscribing to a variety of classes
offered virtually by its instructors. Companies such as Uber have developed memberships
to their popular ride share service. In turn, this has made customers in major metropol-
itan areas question whether the ownership of a car is as critical as it once was. Fashion
boxes such as those provided by Stitch Fix not only offer a product (i.e., clothes), but also
create personalized recommendations (i.e., service). Even air travel can benefit from the
subscription model. For example, SurfAir offers subscription to air travel aimed at the
frequent business traveler. In a similar vein, Inspirato uses the subscription model to sell
luxury vacation home rentals. Consequently, managers and marketers alike might want to
consider the ultimate benefit people seek as opposed to the current means of fulfilling it
(Manu, 2017) (Figure 9.3).
Not all subscriptions are the same; they exist for products and services and in areas
that include food and beverage, fashion, beauty, and home living (Bischof et al., 2020).
One way to categorize subscriptions relates to how the contents are curated. Predefined
subscriptions offer customers a shipment of their chosen product for recurring delivery.
In contrast, surprise subscription will ship a box containing a mix of items curated by
an employee or a computer logarithm (Bischof et al., 2020). When it comes to subscrip-
tions of household essentials, these can be classified in three groups: refill and replenish
subscriptions (e.g., Dollar Shave Club provides refill razor blades), discovery subscrip-
tions (e.g., Little Passports provides children with a box of different activities which
allows them to explore new things each month), and productivity subscriptions (e.g.,
Dropbox and similar software that facilitates productivity) (Manu, 2017). Another way to
FIGURE 9.3 Peloton crosses the boundaries of product and service: ownership and subscrip-
tion. Their signature bike is a product owned by the customer; however, customers
also subscribe to access classes with fitness instructors.
categorize subscriptions is by considering the extent of personalization and the degree of

surprise (Bischof et al., 2020). Curated surprise subscriptions feature a product or service
that his highly personalized and the offerings are controlled by the service provider. When
customers purchase a general surprise subscription, they obtain a product or service with
a high level of surprise, yet low levels of customization. Similarly, access subscriptions
have low degrees of personalization, but high levels of control by the consumer. Finally,
predefined subscriptions offer customers a product or service they’ve selected and are
also highly personalized (Bischof et al., 2020).
BENEFITS OF SUBSCRIPTIONS
Subscriptions provide multiple benefits for both customers and organizations. Customers
enjoy new and more convenient ways to utilize products and services. Similarly, they can
enjoy increased personalization and customization of the products and services they buy.
Value is yet another benefit for customers who find themselves saving money with some
subscription-based services. Subscriptions offer consumers free time and peace of mind
(Manu, 2017), as they separate the shopping from use or consumption, thus releasing
the time and effort consumers usually spend visiting a store, moving from one point to
another, and so forth. In the specific case of fashion subscriptions, customers receive the
following benefits: economic, convenience, time-saving, style-related benefits, ease of use,

and perceived enjoyment (Tao & Xu, 2020). One additional benefit received from sub-
scriptions via e-commerce channels is the empowerment and participation of consumers
(Manu, 2017). Despite the advantages of consumer subscriptions, there are some chal-
lenges which exist. For instance, in the case of surprise subscriptions, the customer bares
the risk of obtaining a product they don’t like (Bischof et al., 2020). In order to ameliorate
the potential negative effects of obtaining an undesired product, many surprise subscrip-
tions offer consumers the option to return the product for free (Figure 9.4).
Companies can engage customers at a deeper level and even co-create the products,
services, and experiences of the future. Selling subscriptions has another distinct advan-
tage for business: the potential for a more stable revenue stream. Many companies in this
space start the year with recurring revenue, that is, the revenue expected in the current
year as a result of current memberships. Recurring revenue can also be known as Annual
Recurring Revenue or ARR (Tzo & Weisert, 2018). Having more predictability over such
revenues can allow firms to better plan for future demand and manage operating expenses
more efficiently. Yet another benefit from subscriptions is that customers will feel the
need (or obligation) to use them in order to gain their value from the product or service
(Barseghian, 2019). Companies engaged in the subscription business model have been
known to have higher valuations than other companies within the same industry, as the
investment community will often measure their subscriber base as a proxy for future
success (Williams, 2020).
FIGURE 9.4 Stitch Fix provides a curated fashion box to its subscribers.
Subscriptions offer businesses the option of upselling and cross-selling (Tzo & Weisert,
2018). For example, Harry’s Shave Club’s main product is razor blades. In addition to its
main product sold via subscription, the company provides customers with additional (and
related) products such as shaving gel, aftershave, and shampoo for an extra cost. MeUndies
sells underwear one piece per month on a subscription basis. However, members can also
purchase loungewear, T-shirts, socks, and related products. Furthermore, members receive
discounted pricing in all these which creates benefits for both the customer and the retailer.
Companies can also offer different levels of membership. For example, Spotify offers a basic
service free of cost. However, it also offers the option to subscribe for a fee and obtain an
enhanced service (e.g., no ads, ability to listen offline, higher audio quality, etc.). Some in the
industry call practices such as the one employed by Spotify as freemium, that is, an entry-
level service which is free and an enhanced service where customers pay a premium. Blue
Apron and Hello Fresh have also capitalized on the ability to upsell their products. Both of
these meal kit companies offer the ability to purchase a meal plan based on a paleo, vegan,
or gluten-free diets at a higher cost than their base product (Campbell, 2020). For many
companies in the software and web space making a decision of whether to offer their prod-
ucts for free or charge for them is a difficult one. Many firms receive advertising and other
forms of revenue by virtue of their large user base. However, they can also receive monetary
benefits by charging a subscription fee. Research suggests that the transition to fee-based
software and web service should take into account the momentum of free subscribers and
the market saturation as measured by management (Pauwels & Weis, 2008) (Figure 9.5).
FIGURE 9.5 Spotify is a prime example of freemium, as it offers a basic service for free and
an enhanced service for a premium.
CHALLENGES OF SUBSCRIPTIONS
Despite the growing popularity of subscriptions, not every one of them is successful. Con-
sider the once popular Movie Pass. This company launched an unlimited subscription to
movie theaters across the United States. Once priced at $9.95 per month, the company
quickly leaked cash, as it disbursed to theaters the full price for admissions. From the
failure of this once popular company, we learn that it’s critical to understand the utili-
zation rate of services and price them appropriately. Most Movie Pass members went to
the movies several times per month, whereas the $9.95 price point barely covered the
price of one admission ticket. Did the low price attract a large customer base? There’s no
doubt, since the company boasted approximately than three million subscribers at its peak
(Scribner, 2019). Although the company had plans to monetize their business in different
ways, ultimately their low price as it came to their expenses and member utilization rates
sealed the fate of this now defunct venture. It should be noted that theater owners such
as AMC launched their own subscription programs. For example, AMC’s Stubs A-List
features the ability to view up to three movies per week at any of its theaters for a mem-
bership fee ranging from $20 to $24 per month. This pricing has proven more sustainable
for the theater chain and has one more benefit: more frequency of utilization among its
members. The more customers visit a theater, the more likely they are to purchase pop-
corn, beverages, and other concession items which drive the profits of the typical theater.
Low levels of utilization can signal a problem, as customers might feel guilty when they’re
paying for a product or service they’re not using (Garlick, 2018). This is why the authors
of the popular book Subscribed advocate for companies to look for outliers within their
customer base – those who are using the service too little or too much and look for trends
(Tzo & Weisert, 2018). Some companies own the production or delivery system of their
product and service, yet others simply act as intermediaries between consumers and pro-
ducers. For those companies acting as intermediaries, it is critical to negotiate prices with
the producer and assure a steady supply of their product or service (Gregroy, 2019). As
noted earlier, Movie Pass was an example of a company that did not own the supply of the
service (e.g., they did not own any movie theaters) and AMC is an example of a company
that does own the supply (e.g., they own many theaters across the United States). Another
challenge from the consumer’s viewpoint is that they might be reluctant to make a com-
mitment to the products or services, as subscriptions typically entail a recurring billing
system (Chen et al., 2018) (Figure 9.6).
A growing challenge in the intensely competitive subscription space is the “churn” or
“churn rates” (Bischof et al., 2020). The Churn rate refers to the number of customers
that defect within a certain period, in most cases calculated on a yearly basis. Meal Kits,
for example, has suffered from high churn rates typically on the double digits annually
(Manning, 2020). Organizations need to figure out why they’re losing subscribers and
how to potentially win them back. It is possible that the consumer no longer needs the
product or service. Therefore, it is important to gain a deeper understanding of how
consumers use the product or service. Concerning meal kit companies, a key question
to ask is whether customers are indeed using all the ingredients and cooking the meals
included in each box. If items are going to waste, the consumer might be more inclined
FIGURE 9.6 AMC Stubs A-List is a subscription service which allows frequent moviegoers to
watch up to three movies per week at one of its theaters.
to cancel. There might also be problems with the product and service. Perhaps the cus-
tomer found the recipes to be overly burdensome or complicated. Maybe the customer
received a product that was not at its peak freshness. A consumer may also unsubscribe
on the basis of cost. When a business loses a large percentage of its customer base ever
year, it must acquire new customers in order to sustain or grow its revenue. This creates
yet another problem which is the cost of customer acquisition or the money spent in
marketing activities aimed at generating new customers. Higher churn rates mean lower
customer retention, which, in turn, lead to more marketing expenses and higher customer
acquisition costs.
A key challenge to overcome in making a transition to a subscription model is the
emotional attachment consumers might have to owning a product or service. For example,
research suggests that many customers are emotionally attached to their car (Szamato-
wicz & Pandura, 2019). Several car brands, including Cadillac, Porsche, Volvo, and Audi,
have launched car subscription services. Unlike a lease, car subscription allows consumers
to switch cars and tends to include additional services such as insurance. Consumers who
are more likely to think of cars as “ours” as opposed to “mine” will likely embrace this
model more readily (Szamatowicz & Pandura, 2019).
CONSUMER MOTIVATIONS TO USE SUBSCRIPTIONS
The subscription model can create value for customers in different ways. Furthermore,
with each customer having unique needs and desires, there are a variety of motivations to
engage with companies via subscriptions. In a recent study of retail customers (Bhatt et al.,
2021), several customer motivations emerged. Some customers use fashion subscriptions
because of the personalization they obtain. Some of these companies provide the ser-
vices of a stylist or use previous preferences to develop a profile of what customers like.
Therefore, providing insights and recommendations adds value to the customer in a way
which other e-commerce platforms were not able to in prior decades. With consumers
facing time constraints, they often find convenience in having the subscription delivered
to their doors. Furthermore, the subscription also provides value via discounts and other
incentives. Fashion subscriptions offer customers variety, which, in turn, reduces the pos-
sibility of satiation or boredom with the product or service. While some subscriptions are
“replenish” subscriptions and will offer customers the same product consistently, several
subscriptions have an element of surprise which creates anticipation and excitement for
the customers (Bhatt et al., 2021). For other customers, a subscription can be a gift to self.
Consequently, subscriptions act as a means of customers treating themselves or providing
a reward. Finally, consumers also use fashion subscriptions to begin conversations with
friends, family, and even to model their new outfits through social media (Figure 9.7).
FIGURE 9.7 Amazon Prime is a subscription which allows customers to get unlimited expedit-
ed shipping of products sold via Amazon’s e-commerce channels (among other
member benefits).
Since consumers can receive different benefits, they might be motivated to purchase
subscription services for various reasons. Social motivation is key toward understanding
why people subscribe to various services (Kim & Kim, 2020b). Therefore, some consum-
ers might like to purchase something that connects them to other consumers, receives
positive evaluations from others, and is used by people within their circle. Subscriptions
produce convenience for customers by saving them time, effort, or creating new ways
to use the product or service. Hedonic motivations refer to the pleasure and enjoyment
that people get from the service. For instance, the service might be tied to a hobby (e.g.,
traveling, cooking, movies) or interest (e.g., fashion) of the customer. Consumers may
also have economic motivations, that is, they’re motivated by the savings they obtain
from using subscriptions as compared to single purchases. This can be particularly true
for replenish subscriptions such as those involving household items. Finally, an innova-
tive motive points out to a consumer who enjoys being on the cutting edge of technol-
ogy or adopting the latest trend (Kim & Kim, 2020a). Research has been undertaken to
understand the role of self-concept in the purchase and retention of subscription services
(Savary & Dhar, 2020). Results demonstrated that individuals who are less certain about
their self-concept are more likely to retain subscriptions even if they’re not using them.
Regarding both the acquisition of new subscriptions and defection of existing subscrip-
tions, Savary and Dhar (2020) argue that “canceling a current subscription or signing up
for a new subscription are both signals of a change in identity that threaten the stability
of the self-concept” (p. 899).
SHOULD YOU ADOPT THE SUBSCRIPTION MODEL?
At this point, you’re familiar with some of the key advantages and drawbacks of the sub-
scription business model. Therefore, the question remains: is a subscription model good
for your business or the business you manage? Some argue that almost all of life’s necessity
can be transformed into a subscription model (Manu, 2017). It is also true that subscrip-
tions have thrived in some economic sectors more than others. Here are a few things
to consider in determining whether a product or service should be transformed into a
subscription:
1 How reliant is your business on frequent customers? Some purchases are made once
every few years and others happen every week or every month. Therefore, it might be
worthwhile determining how often your customer buys the product or service. Buy-
ing a home computer happens less often than buying razor blades. Therefore, it would
be more natural for the company that sells razor blades to engage in a subscription
model. Having said this, some big-ticket items such as automobiles have been sold on
a subscription basis. In these cases, consumers buy the usage of the product instead of
purchasing the product itself.
2 How much does your product or service change over time? If your product or service
is very dynamic, subscriptions might be a good idea. Netflix can produce a multitude
of shows per year. Similarly, meal kit companies such as Hello Fresh can have hun-
dreds of recipes to keep the customer engaged. MeUndies constantly creates new
designs and patterns in their underwear line to keep customers interested. It is note-
worthy that companies such as the Dollar Shave Club offer the same (or similar)
product and service, thus creating a refill subscription with the option for upgrades
and upsells. In these types of subscriptions, price is more critical.
3 Is personalization an important aspect of your product or service? To the extent that
you can use subscriptions to personalize services, they would be even more advanta-
geous. Remember, the subscription model allows you to know your customer better,
thus services will get more and more sophisticated as organizations receive more data on
consumer behavior. Data can be a powerful force in making evidence-based decisions.
4 What does the competition look like? Are there a lot of different businesses success-
fully serving customers via subscriptions? If so, it might be less attractive to enter
a crowded field. If your competitors are relying on different distribution networks,
then it might be more of an attractive business proposition to engage in subscriptions
to differentiate yourself. It is important to note that many companies enter estab-
lished industries and end up disrupting or transforming them. Therefore, competition
should not discourage new entrants to the marketplace as long as they have a clear
idea of how they will be different from the established players.
5 Is the price right? When adopting a subscription model, it might be worthwhile
studying what would be an attractive price to the customers. At that price level, will
a business be profitable or at the very least break even? Some subscription businesses
start offering their products or services at a price point which does not ensure profit-
ability. These organizations engage in this tactic as a means to increase their user base
and gain momentum. Eventually, every company needs to figure out how to monetize
their business. Consequently, pricing the product or service in a way that is attractive
for the market and profitable for the consumer is part science (e.g., an exercise in
accounting and supply chain management) and part art (e.g., assuring excitement
about the product and understanding consumer’s value perceptions) (Figure 9.8).
Succeeding in the new subscription economy means having clear goals and sound exe-
cution. Here are some things to consider when starting a new subscription business or
transforming an existing one toward a subscription model:
1 Establish your goals (are you seeking to grow market share? Profitability? Connect
better with your end user?)
2 Create better experiences which would retain customers (from the onset a com-
pany needs to be focused on how it can reduce churn and create a better product or
service)
3 Ensuring a smooth billing process
4 Developing strong customer relationships (remember that a key advantage of sub-
scriptions is the possibility to interact with consumers directly and learn from their
past behaviors)
5 Plan for future growth (it’s important to be ready to quickly scale operations as
needed; therefore having a plan for how to fulfill increased or unexpected demand is
important) (Campbell, 2020)
FIGURE 9.8 Streaming platforms such as HBO Max rely on subscribers. As users interact with
the content, the platform can provide more personalized recommendations.
In addition to the aforementioned steps, Andonova et al. (2021) propose five distinct
strategies to successfully manage a subscription business model. First is to leverage the
power of social media influencers. These individuals can be particularly helpful in creating
awareness and promoting the product or service to the target market, especially when the
product involves fashion trends. Second is to combine e-commerce and traditional brick-
and-mortar retail. For example, “Home Chef” meal kits can be purchased both on a sub-
scription delivery basis and at multiple Kroger supermarkets. This combination allows the
customer to try the product while minimizing risk perceptions. Third is to offer rewards
for customers to stay. Since churn is a big problem with subscriptions, offering different
types of incentives and rewards to keep customers engaged are an important consider-
ation. Fourth is to increase the perceptions of convenience by reminding customers of
time-savings and similar benefits offered by subscriptions. The fifth and final suggestion is
to improve the perceptions of value. For example, meal kit companies may highlight the
price of purchasing each item separately or the difficulty of finding certain specialty foods.
Other subscriptions providers may stress the uniqueness of their offering and the surprise
component (Andonova et al., 2021).
The subscription business model presents an opportunity for many businesses to
increase the frequency of their customers, personalize their offering, provide value, and
ensure a steady revenue stream. As pointed out in this chapter, several challenges exist,
thus careful consideration should be given to both the benefits and drawbacks of this
business model. This novel way of connecting to consumers will likely remain a business
trend for the coming years. Furthermore, subscriptions continue to blur the lines between
products and services. As the research and practice of the subscription business model con-
tinues to evolve, it is important for students, business leaders, and researchers to educate
themselves on how it works and how it can continue to transform the business landscape.
• What are the benefits and drawbacks of the subscription business model?
• What is “churn rate” and what can companies do to minimize it?
• Which products and services are more prone to subscriptions? Can you think of any
services that don’t offer subscriptions, but might benefit from doing so?
• What kinds of consumer insights might subscription economy companies have? How
can they use this information?
• What are some things to consider when deciding whether a subscription model is
appropriate for a company?
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business-models-can-they-work-your-company
CHAPTER 10
Service technologies
Delivering a seamless experience
FIGURE 10.1 Whereas customer service often entails human interaction, today’s organizations
are increasingly adopting technologies to facilitate service processes.
LEARNING OBJECTIVES
• Recognize the importance of service technologies in promoting business

• Articulate the approaches to adopting service technologies in a service setting
• Analyze the strategies of service technologies to deliver a seamless customer
experience
• Elucidate the contributions of service technologies to business success
DOI: 10.4324/9780429263965-10
Service technologies: Delivering a seamless experience 159
KEYWORDS
• Service Technology
• Property Management Systems
• In-Room Tablets
• Mobile Apps
• Contactless Services
• Seamless Customer Experience
• Online Reservation Systems
• Smart Guest Experience
WHAT IS SERVICE TECHNOLOGY?
As technology has become more powerful and widely used in recent decades, each indus-
try has become more reliant on technology. Service technologies play a major role in
service businesses, such as lodging operations (Buhalis & Cheng, 2020), restaurants (Ahn
& Seo, 2018), theme parks (Li et al., 2021), retailing (Adapa et al., 2020), banking (Zhang
et al., 2018), airline services (Gures et al., 2018), and many others. We are surrounded by
technologies and use them daily; almost everything is done through the operating system.
Each company has its own operating systems and technologies (Chahal & Kumar, 2014).
Each operating system differs to protect the company’s information and privacy policies.
There are multiple ways that business companies apply technology in their everyday lives
to enhance the quality of living and the comfort of their guests. Some examples of these
technologies are smart energy thermostats (Vastardis et al., 2014) that regulate tempera-
ture and can monitor and respond to fluctuations in occupancy. They can reduce energy
costs and increase the resale value of a hotel. Smart guest experiences powered by arti-
ficial intelligence technologies and advanced telecommunication and connection frame-
works (Amer & Alqhtani, 2019) can shape experiences and expectations by collecting
data to help better accommodate guests. They can automate guest experiences and make
them more comfortable throughout their stay, reducing costs for labor. For example, with
self-check-in kiosk at the front desk, the number of clerks on each shift can be reduced.
Another example would be in the restaurant, the self-ordering app would allow patrons
to place orders on their own without the help of waitresses, which here means reduces the
number of front-of-the-house staff. Throughout society, from automatic teller machines
(ATMs) to artificial intelligence, there is a variety of service technologies that we regularly
use. As technology evolves daily, so does the effort to keep up with trends and to imple-
ment them, more specifically, in the service sector, which has a long-standing principle
of providing premier levels of service with which customers or guests are familiar. More-
over, the commitment to include service technologies contributes to business success and
enhances preexisting practices (Figure 10.1).
Service technology is software that assists customer service teams in achieving cus-
tomer success, applying effective solutions, and accommodating guests. These systems give
160 Service technologies: Delivering a seamless experience
service managers leverage by enhancing their competitiveness in the sector (Yang et al.,
2021). These systems allow companies to see where they can improve and use feedback
from guests to enhance the overall experience. These companies can use the information
they obtain from the systems that are put into place to create a larger competitive pool for
customers to choose from. Hoteliers can learn the pricing of similar hotels to get a gauge
of competitive pricing ideas. This allows businesses to compete for guests and for hotels to
choose the best available competitive pricing. These technologies also create a decreased
workload for staff and a faster check-in experience for guests. Data collection has helped
hospitality businesses tremendously and has created an easier system for travel agencies to
create a more personalized experience for guests. For example, it helps create intelligent
destination recommendations based on age, gender, budget, and previous destinations.
Technology has grown tremendously and has created an easier way for customers and
businesses to connect.
WHY ARE SERVICE TECHNOLOGIES IMPORTANT?
The current generation of customers is much more reliant on technology for daily life than
previous generations. Technology has advanced to being involved in almost all our actions,
from brushing our teeth with a smart brush to attending an online university to meeting with
our manager via Zoom. With technology, life has become convenient, accessible, and quick.
A growing trend in the service industry is seamlessly incorporating technology with the guest
experience so that it enhances, but does not detract, from the human aspect of the company.
Technology is being increasingly integrated into our daily lives and can assist us with
many tasks. In the lodging industry, human interaction is important, but there are some
tasks that may benefit from being done through technology. Some hotels are now adding
self-check-in kiosks (Collier & Kimes, 2013) that bring some benefits, including contact-
less service, shorter queuing time, and more opportunity to upsell. Having a kiosk handle
routine tasks leaves employees time to handle more critical tasks. Especially with the pan-
demic, contactless solutions have become more important for guests, and they also cater
to those who prefer to have fewer interactions with others. Technology helps create less
confusion in communication, especially for those who do not speak the same language.
Having the option to use technology that can be translated into one’s own language can
lead to better service, improved understanding of what the guest wants, and encourages
guests to speak out more without embarrassment or fear of translation issues. Another
benefit is that communication between workers is much faster with technology. When a
staff member is needed, technology can allow you to notify that staff member within a
few seconds, instead of having to find that person, which wastes time. These service tech-
nologies save both guests and staff valuable time. It increases guest satisfaction, making it
likelier that the guests will come back to the hotel, contributing to the business success.
Technology and its advancements have made a significant impact and brought changes
in the service industry. The service industry consists of many different aspects, whether it
be lodging, cruise lines, entertainment, theme parks, retailing, banking, airline services, or
food and beverage. Business success comes after knowing what the end goals are and what
mechanisms can be used to achieve those goals. This is constantly changing, and businesses
FIGURE 10.2 Web-based applications (apps) are a form of self-service technology. Uses of
Norwegian Cruise Line (NCL) app can book restaurant reservations, book shore
excursions, and view entertainment offerings around the cruise.
need to be able to adapt. The computerization of service technologies has made the pro-
cess of collecting information easier, quicker, less labor intensive, and more efficient. They
take tasks that may take a human 15 hours to do and can be done in seconds (Collins et al.,
2017). Technology allows us to stay one step ahead and provide the best guest experience
possible (Figure 10.2).
The world of technology has influenced and changed everything in the world. One
industry that has been changing is the lodging industry. This has affected energy man-
agement. Energy management systems can keep track of and manage energy throughout
the physical plant of the lodging location with their smart technology. Smart technology
(defined as a technology which uses big data analysis, machine learning, and artificial intel-
ligence to provide cognitive awareness to the objects which were in the past considered as
inanimate) can also improve guest experiences (Almurbati & Ahmed, 2021) by enhancing
the way guests can interact with staff throughout their stay. Technology can also eliminate
hassles in the hotels, such as parking, room keys, and check-ins. Hotels can make mobile
keys (Newsroom, 2017) so that guests can keep their keys through their phones instead of
having a physical copy. Parking can become easier by having smart sensors (Perković et al.,
2020) and by allowing guests to reserve parking ahead. Remote check-in can provide a
more personalized guest experience and alert hotel staff to guest arrival and exit. Technol-
ogy has been making many advances toward improving efficiency in the lodging industry.
Many restaurants have added an online ordering option to their website. This not only
reduces human contact, it also shortens the amount of time it takes diners to receive food,
which allows the restaurant to serve more people. Customers benefit by not having to wait to
be served or pay. Many large chain restaurants, such as McDonald’s and Outback Steakhouse,
have introduced apps that allow customers to order food even faster than is possible on the
restaurant’s website, enhancing the customer experience even more. If customers want to
dine at the restaurant instead, websites and apps allow them to make a reservation for a spe-
cific time quickly without needing to make a phone call. Each use of a restaurant’s website or
app increases customer loyalty, because it makes it easier to interact with a restaurant and
enjoy its food, thus improving customers’ perceptions of the restaurant.
Tabletop tablet is another service technology that some restaurants have implemented.
They allow customers to do many things, such as check menu items’ nutritional content, place
food and beverage orders at any time, play games, and pay their bills. Checking the nutrition
facts of menu items can improve the customer experience by allowing them to verify there
are no allergens in what they are about to order, or by showing an item’s fat or salt content,
which is important data for people with certain medical conditions. When everyone at the
table knows what they want to order, they can quickly place their orders, and if anyone wants
anything during the meal, they can have it prepared without having to call a server. While
customers wait for their food to arrive, they can use the tablets to play games to pass the time.
The ability to order food or drinks on demand and to pass the time while their order is being
prepared are both great ways to improve the customer experience. When the meal is over,
customers can quickly pay their bill using the tablet. Tablets, too, can enhance customer loy-
alty if they allow diners to access rewards from the restaurant’s loyalty program while paying
their bill.
Like other sectors, restaurants and fast-food outlets have spent the past few years
adapting to the use of new service technologies. Restaurants leverage service technolo-
gies to make their systems more functional for their workday. Employee schedules are
often now found on an internal corporate app instead of on a piece of paper posted at
the location. There are also systems in place to help monitor food inventory, deliveries,
promotional events, and so on. Another way that restaurants have incorporated the use of
new technology is using online and mobile ordering systems that allow customers either
to pick up carryout orders themselves, or use a third-party app such as DoorDash, Uber
Eats, or GrubHub to deliver it to them.
Online ordering, waitlist queuing, tabletop kiosks, the use of Quick Response (QR) code-
based menus, and self-service ordering systems have created the seamless dining experiences
customers have come to expect. Online reservations also allow customers to roam freely, so
they do not have to wait by the door with a buzzer until their table is ready, a situation that can
lead to chaos. With the technological innovations of an app, restaurants can organize guest
check-ins by letting them know exactly when their table is available. When less time is spent
waiting, customers are more satisfied, may spend more, and may even facilitate a faster table
turnaround. Service technologies in the service sector are the backbone of running a smooth
and successful business with seamless ease for guests. Specific technologies can be for both
the back and front office either for guests and employees to use or only for employees behind
the scenes. A hotel or restaurant could not run the way it does today without these service
technologies, whether it is a system or a smart device. Service technologies contribute to
business success through continuous evolution that makes operations and guest experiences
efficient with cost savings and revenue opportunities, giving more time for the business to
focus on personalization for the guests. For example, with remote check-in and checkout, the
business can save on labor costs and save guests time by speeding up the process. Mobile
room keys (Zhang et al., 2018) can also save money related to creating cards and managing
keycard inventory.
HOW DO SERVICE TECHNOLOGIES CONTRIBUTE TO SERVICE

BUSINESS SUCCESS?
In the service industry, technology contributes to business success by decreasing the

amount of money needed to be spent on wages while encouraging more satisfied guests
to return, including smart check-in (Zhang et al., 2018) and checkout as well as satisfying
requests. However, the check-in process still requires some time, and there is a matter of
privacy, as a guest must share their information, including credit card number, gender,
mailing address, phone number, and so on. However, the checkout process is quick, as
guests simply drop their keys.
From facilitating contact to making processes easier and faster, technology has been
one of the greatest supporters of the industry’s evolution. For example, hotel reservations,
something that was done face-to-face or by a phone call that could take up to several
hours can now be made via smartphone in just a couple of minutes, getting the best rates
possible. This advancement not only gives customers an advantage than traditional reser-
vation procedure, but also the business, as they are able to serve a greater audience faster
and at a cheaper price, since the labor requirement is not as high as it used to be.
Another advancement made through technology is customer awareness and person-
alization (Morosan & DeFranco, 2016). By using different software, companies can track
and identify customers’ preferences (Piccoli et al., 2017), making their experiences more
special and unique. Simple details, such as knowing the guest’s preferred rooms, amenities,
or dining experiences, can make customers feel appreciated and likeliest they will want to
return. Technology facilitates the gathering of this data and easily stores it in the cloud for
future use. Other features, such as integrating technology into the room’s amenities like
smart TVs, thermostats, lights, or dine-in room service, can boost the quality of your hotel
and potentially attract more customers.
Technology has changed the way companies work and how we advance in society over
the years. Cell phones have bigger screens and many apps that can accomplish tasks such
as managing doctor’s appointments. Technology has also made a significant impact on the
service sector. Sometimes, once a service is complete or they have been with a company
for a while, customers may get a survey asking how they liked their service and if there
was anything that they wish to bring to light. This is helpful, for example, for guests who
come to the Universal Studios Orlando theme park.
Service technologies have always been helpful to businesses, either in promoting, facil-
itating interactions, or improving operational functions. Many fast-food restaurants have
perfected their online platforms to make ordering out an easy and straightforward process.
Throughout the pandemic, many companies have also utilized technology to encourage
social distancing, such as online waiting queues or through platforms such as Instacart and
Uber Eats (da Silva Monty, 2018).Technologies have also lowered costs for businesses, includ-
ing labor, when simple tasks can be replaced with technology or saving water and energy
through electric sensors. The main purpose of these systems is to elevate and personalize the
customer experience by aiding workers in their jobs and creating a collaborative and efficient
business experience for everyone.
Service technology has been improving and becoming more advanced, which has made
our lives much easier and more efficient. Not only did it help us make running errands
and traveling easier, it also benefits people who have trouble making face-to-face contact
with strangers. This helps those who have trouble interacting with others and makes them
less nervous and stressed when traveling or running errands. Service technologies play a
vital role in the service sector. In recent years, more than ever, the development of new
hardware and software has contributed to business success in the hospitality industry.
They provide speed, convenience, and consistency to users and allow businesses to save
financially on labor and human error costs. By using information technology (IT), guests
can have full control of their day, and the technology promotes guest satisfaction and
increases brand awareness. A property management system (PMS) is a lodging application
that hotels can use to perform front-and back-house operations. Service technologies can
also include reservation systems, which make processes for guests and workers easier in
the lodging industry. Companies in the hospitality industry must keep up with these ser-
vice technologies to stay competitive in the industry. By using cloud services, smart room
keys, and entertainment on smartphones, guests’ stays are made easier. Another way ser-
vice technologies can contribute to business success is through feedback on social media.
By using social media to their advantage, business will increase and guests will have a way
to express their experiences.
Service businesses are built with providing service and an experience for a price; there-
fore, the success of the business is financially dependent on the demand of the customer.
In a fast-paced, technology-driven world with constant new upgrades to faster and better
access, the hospitality industry is faced with the challenge of rising customer expectations.
To meet and exceed customer expectations, the hospitality industry must upgrade its ser-
vice technologies to create a seamless and personalized experience for its customers. Ser-
vice technologies allow for better customer service that exceeds customer expectations,
which, in turn, results in loyal customers and increased profits.
Service technologies have revolutionized the hospitality industry. A hotel that invests
in new technologies will certainly keep an edge on the competition by enhancing the cus-
tomers’ experience, making operating a hotel more economical, organized, and efficient.
Some of these technologies, where the customer experience is enhanced for entertainment
or convenience, include smart rooms. These hotel rooms have been retrofitted with elec-
trical components that are connected to the Internet, which allow customers to order food
and control the lights, temperature, blinds, and more. There are also service technologies
that are made to improve employees’ lives and reduce operating costs with technologies
such as a PMS that serves as a hotel’s central nervous system. These systems track guests’
information as a profile for future stays, track sales, collect data useful for marketing, and
manage room inventory. These technologies allow big hotel chains to be in sync with one
another, share information with their marketing, sales, and auditing departments, and make
everyone’s job easier. Additionally, some companies adopt technologies to facilitate service
recovery processes. For example, Uber Eats offers its customers to report an issue in the app
and an automated response in the chatbot will reply immediately to answer questions or
direct customers in need to the professional support team. In this way, the service recovery
effects will be greatly enhanced with the facilitation of service technologies (Figure 10.3).
It is quite common for hotels to use service technologies to improve the flow of the
guest experience from the beginning of the experience of booking the hotel to the final
experience of checking out of the hotel. Many hotels have opted to have guests use mobile
device apps to check in and out, pick their rooms, and gain access with a virtual key card.
This allows guests to feel in control while still being properly assisted by the hotel, all
from a click on a mobile device. Incorporating service technologies definitely contributes
to business success these days, as many people like the ease technology offers them, since
mobile apps can save all the important information a guest has just by being enrolled
in a loyalty program of some sort with the company through an app. Some companies
have even gone as far as giving housekeepers, room service, and maintenance workers
smart watches or devices that notify hotel workers when a guest is in need of one of their
services. This works well because it cuts out the middleman where the dissemination of
information can fail and it gets the guest exactly what he/she needs right away.
Technology is a huge benefit to the service industry. It assists in making room services
and billing much easier and more seamless. Making use of automation technology has a
FIGURE 10.3 The Property Management System (PMS) allows hoteliers to keep track of room
inventory, revenues, housekeeping status, and many other functions.
serious advantage and improves hotel productivity. It also helps staff to keep work effi-
cient regarding their everyday repetitive tasks, thereby enhancing the staff’s overall trust-
worthiness, reliability, and quality. In the world we live in today, technology is everything.
This is the reason we can communicate with each other while being in other parts of the
country. Technology has helped reduce costs, enhance operational efficiency, and improve
services and customer experience. It has helped the industries swap expensive human
labor with technological labor. This helps reduce labor costs, but also helps avoid customer
service problems.
Service technology in the service sector is essential in ensuring a seamless experience
for each guest who interacts with staff of various positions. For example, if someone is
working as a seater at a restaurant, an amazing service technology system can help them
keep track of which tables are taken and which are open, while informing them of the
necessary details needed while working in that position. The same is true for someone
working in the front desk/concierge at a hotel/resort. A reliable system in this job position
can help guests immensely, as it gives employees the ability to take care of guests faster
and better. All the different service technology systems around the world better the hos-
pitality industry, as it provides more opportunities for an overall improved experience in
each operation (Figure 10.4).
FIGURE 10.4 Technology allows restaurant hosts and managers to keep track of reservations,
allocate sections to servers, change room layouts, and assign tables to reserva-
tions and walk-in guests.
ADVANCEMENT OF SERVICE TECHNOLOGIES DURING THE

COVID-19 PANDEMIC
Many of these service technologies contribute to business success in several ways. By

advancing over the years and still expanding to this day, technology has reached new
heights for many companies. When COVID-19 (Panzone et al., 2021; Raj et al., 2020)
struck, most people were hesitant to leave home. Companies turned to various apps, such
as Zoom, to keep in contact with their employees until it became safe to venture out
again. Also, advancement of technology has helped improve company services, including
fax machines, emails, and Zoom calls. Face recognition can be a big help in airports for
things like security check-ins.
The COVID-19 pandemic dealt (as is still dealing) with a huge blow into the service
industry, as it is very reliant on human contact and interaction. However, where contact
is not necessary, technology can step in and fill in service deficiencies for which cus-
tomers do not want to wait for resolution. One such example, which has already been
in use for several years, is self-check-in (Xu et al., 2021) whether at an airport or hotel
via a phone app. This way, travelers do not have to come to the airport two or three
hours in advance, but they can simply check in from the comfort of home and save time
waiting at the airport. This is especially handy when there is no luggage to be checked
in (Figure 10.5).
FIGURE 10.5 Kiosks have become the norm for passengers to check-in at the airport.
What many have experienced during the course of COVID-19 (Lu et al., 2021) is
the service industry moving toward (or making an effort to) shifting to a contactless
customer experience. During this fast-paced alteration, companies have turned to help
desks or front desk chat rooms, mobile checkouts, booking kiosks, and so on. In return,
businesses have reduced the time that customers spend in line and have improved
efficiency within their sphere. Implementing self-service technologies allows customers
to get assistance or products on the go or from the comfort and safety of their current
location.
Technology is something that continues to advance, and guests at hotels are going
to want the technology to be up-to-date. It is no longer a perk simply to have the
amenities that are now offered in hotels. When guests book a room, technology-based
amenities, such as Wi-Fi, charging ports, and TVs, are expected, as they are consid-
ered necessities. Smart keys allow guests to check in and open their door with their
smartphone. During COVID-19, it became important to minimize contact with others;
technology keeps guests and front desk employees safe. This draws more guests toward
these hotels because it is something simple and easy to use that continues to keep the
business successful. Delivering quality service is a challenge, which is why systems such
as those that allow guests to post comments about their experiences on their hotel’s
website help the hotel to identify problem areas and fix them for the next time the
guest books a room.
From a departmental standpoint to a marketing standpoint, technology is an extremely
important aspect of the industry and makes it what it is today. At this juncture, nearly
all sites use computer programs and extensive systems to track their bookings and avail-
ability for future guests. Online booking is used in more than just the lodging areas of
hospitality, specifically restaurants. Online ordering is used in most restaurants to give
guests the option of a safer means of receiving their food due to concerns regarding
COVID-19. This alone brings in more business by opening the door for more nervous
and safety/health-oriented guests during this climate of uncertainty. Restaurants also
use online booking for reservations so that their phone lines can be freed up for more
business opportunities, such as catering and hiring inquiries, though even those can be
arranged online now. Chick-Fil-A offers services, including curbside, drive-thru, and
online mobile orders for pickup. They use tablets to take orders halfway down the drive-
thru line just to enhance the guest experience and ensure their order is put through the
system flawlessly, and the time spent at the payment cart is shortened immensely. With-
out technology, many places would be without the means to handle their usual volume
of guests (Figure 10.6).
Property management system

One of the most important service technologies in the lodging industry is the PMS. All
hotels today have some sort of PMS that allows the staff to keep track of important infor-
mation, such as guest reservations and the status of each guest room in the property. Hav-
ing a PMS is far more cost-effective than keeping paper records because more information
can be stored faster while using less space, which reduces labor and storage expenses. A
FIGURE 10.6 As the COVID-19 pandemic spread globally, delivery services such as Uber Eats
grew in popularity.
PMS also allows for faster communication between employees and departments in the
hotel, which allows problems to be solved much faster than they were in the past. Cost-
effectiveness and quicker communication are both great for the success of the hotel, as
they reduce costs while keeping guests happy, which encourages them to return.
In-room tablets
A piece of service technology that is quickly emerging in luxury hotels is a personal tablet
that can be in each guest’s room. This tablet allows guests to do a variety of things that
they would otherwise need to call or go online for, such as changing the lights or tempera-
ture of their room, making reservations at the hotel’s restaurants, ordering room service,
requesting service from housekeeping, and checking out at the end of their stay. At the
Aria, Las Vegas, guests can use the tablets for everything mentioned above as well as set
alarms that can play music, open the curtains, and order a custom birthday or anniversary
surprise to be delivered to the room. While the services offered by guest room tablets
are great for businesses by allowing guests to personalize their stay, hotels could also use
these tablets to advertise restaurants, entertainment, or special deals to entice guests to
spend money they otherwise would not have. Guest room tablets are an important service
technology that will increase in use in the future, especially as hotel guests become more
reliant on technology to personalize and enhance their stay.
Near-field communication
Service technology helps improve employee workflow and guest experience. Technology
within the hospitality industry has been constantly changing the way we work and interact
with guests. Technology has not only made employees’ jobs easier, it also helps the guests.
For example, one piece of technology that has changed the industry is near-field commu-
nication (NFC) technology. This allows guests to be able to pay for their rooms, check in
from their phone, and use it as their room key. It also helps change their experience within
the stay. For example, when they walk past a certain sign or area within the property,
advertisements can change to something more relevant.
QR code scan for reviewing menus at restaurants

A rising trend in restaurants is the use of QR codes. They offer an alternate way to view
menus or make payments. A guest simply scans the QR code and pays via Apple Pay/
Google Pay and staff receives a notification and the transaction is complete. If you add to
this the increasing presence of robot waiters, restaurants have the opportunity to present
themselves as modern, progressive, eco-friendly, and at the same time save on labor-related
expenses. With such technological advancements, however, comes a higher degree of
responsibility for the stored data. There is an increase in information stored about guests
and visitors; therefore, we should be careful in handling this information, not just from a
legal standpoint but from an ethical one as well. Adequate IT and cybersecurity systems
should be in place to provide the maximum amount of security possible.
Robots and voice control

Emerging technologies in the hospitality industry include robots and voice control in hotel
rooms. Robots are starting to be used in some higher-end hotels for clean tasks, such as
vacuuming and germ-killing. With voice control in the room, guests are able to turn on
and off the lights and control the TV and thermostat without having to get up, making a
guest’s life easier and improving their experience. In an industry that is driven not only by
a guest’s experience but also by the world around them, factors that make a guest’s life
easier or safer are going to increase the success of the business.
SELECTIVE BUSINESS EXAMPLES
The smart PMS at Vinoy Renaissance Resort

At the Vinoy Renaissance Resort, St. Petersburg, Florida, a PMS has been used extensively
in each department of the resort for a variety of purposes. At the front desk, the PMS is
used to record room reservations, handle the check-in and checkout processes, and track
guest charges to their folio. In housekeeping, the PMS is used to record the status of each
room (checked out, dirty, clean, etc.), as well as alert staff when a guest requests an item or
housekeeping service. The engineering department uses the PMS to record which rooms
needed immediate maintenance and when regular preventative maintenance is needed.
The PMS is interfaced so each of the departments could communicate their needs to each
other, such as if housekeeping finds a problem that engineering needs to fix. Also, the PMS
enables employees to access all customer data across hotels under the same hotel group
to be able to provide seamless services to customers who might visit various hotels under
the same hotel brand. For example, Renaissance is a Marriott brand, so their PMS allows
them to see which guests are part of Marriott Bonvoy and what their tier in the program is.
Harry Potter Wand at Universal

Service technologies in the hospitality sector are major technological advances that have
helped the hospitality industry significantly by improving operations, such as check-in,
which can be done from a phone or device that is already set up at the hotel. Most oper-
ations at resorts happen on demand, which makes it easy to be anywhere in the hotel and
get service right away. Some hotels even have areas set up where you can order a drink,
get assistance, or even call security with the press of a button. The Harry Potter Wand
at Universal is another example of technology that allows guests to live in the moment.
Your phone is a wand, and you can cast and grant spells and fulfill your requests when
you need them through the technology set up there. Whether through a phone call or a
button, technology has made it easier for guests to relax and enjoy their time. This helps
business success because not only are the guests satisfied and returned, but it also helps the
employees do more and stay organized. Also, cruises and hotels can use apps to post the
schedules and events that are occurring all day, such as parties, activities, deals, and more.
This helps the guests become not only more interactive but also helps them know what is
going on and how to be involved with the employees (Figure 10.7).
Cyclebar iPad checking

Service technologies have continued to advance in the service industry, which has given
companies the opportunity to gain a competitive advantage against their competitors.
Cyclebar, a cycling studio in Orlando, Florida, implemented several new technology sys-
tems that put Cyclebar at a competitive advantage, including new databases that helped
sell packages to customers, new iPad systems for the customers to check in, and updated
computer systems for the cycling studios. The computer systems for the studios enhanced
the audio, such as the microphones for the instructors and the music for the sound sys-
tems. The new iPad systems made it easier and more efficient for the riders to self-check-in
for their cycling class. These new service technologies attracted new customers as well as
retained old customers who were intrigued by the new improvements made to the studio.
As long as companies stay up-to-date on the latest service technologies and trends in the
hospitality industry, they will be able to keep up with their competitors.
FIGURE 10.7 Visitors to Orlando Universal Resort can purchase the magic wand of Harry
Potter (or other story characters) which contains technology enabling them to
enhance their experience.
MagicMobile at Walt Disney World Resort

Because of shipping delays, the Walt Disney World Resort was facing a shortage of room
keycards. The keycards were designed for guests to access their rooms, park tickets, and
charging privileges. For some time now, Disney has been working on a technology called
MagicMobile and has made many changes over the years. It allows guests to be hands-free
and have everything readily available to them. With the My Disney Experience app, the
key shortage has become less of a problem because guests are now able to access their
room keys digitally. As most guests have their phones on them at all times, this is an added
and appreciated convenience. The recently added Disney MagicMobile allows guests to
download their tickets to their phones and use them instead of using Magic Bands or ticket
media. To improve this advancement, Disney is currently working to enable MagicMobile
on Apple watches as well. Another big technological step Disney has taken is its direct-to-
room service. With this service, guests can skip the check-in line at the resort and complete
the entire check-in process via phone. It is especially helpful to guests who keep coming
back to the same resorts and do not need a cast member to help with check-in process.
Hopper App
Any kind of business relies heavily on service technology for marketing. For example, the
app Hopper is now heavily used among Generation Z and Millennial travelers because of
the affordable deals it offers when it comes to hotel and plane ticket options. Despite the
fact that Hopper provides cheap and affordable prices, it acts as a low-expense advertise-
ment for their business partners, as it attracts customers checking out their main website
for more information. Also, if the customer’s first experience is great, they might become
a regular customer. It not only allows the customers to have more affordable options, the
business can better manage customers’ reviews and thoughts on the service provided,
which could impact a hospitality-related business.
“Handy” smartphone at Westin Chosun Hotel in Seoul, South Korea

The Westin Chosun Hotel in Seoul, South Korea, installed a technology called “Handy”,
comprised of a smartphone in all hotel rooms, which allowed guests to order amenities
and request housekeeping services. This program demonstrates that technology for guest
satisfaction is developing rapidly. As such, technological advances can lead to increased
guest visits and the possibility of business success. The use of technologies that help collect
and manage data internally, as well as technologies that provide guest services, can reduce
the cost of business operations and increase revenue. Also, companies with high levels of
technology are likelier to establish an image of respectability and attract guests than other
competitors, which can lead to business success.
My Disney Experience app at Walt Disney World

The My Disney Experience app allows guests to check wait times, make dining reserva-
tions, obtain information on every aspect of the park, enable GPS features to help them
get to an attraction or experience, look at their ride photos, and more. It is essentially a
one-stop shop for everything guests are trying to do at Walt Disney World. The application
itself is free, but using it gives guests more flexibility and often more ease in planning their
park day, in turn increasing guest satisfaction and contributing to the success of Walt Dis-
ney World. In conjunction with radio frequency identification (RFID) Magic Band technol-
ogy, which has recently expanded to allow guests to scan their tickets directly from their
phones using MagicMobile, Walt Disney World has further been able to enhance the guest
experience. While Magic Bands are optional, they allow guests to express their individual
style while still having a functional component. When a Magic Band or ticket is scanned at
a park entrance or when entering an attraction, a spinning light turns green and produces
a noise, which psychologically affects the mood of guests in a positive manner. Now, cer-
tain Magic Bands have a special light-up sequence, adding more customizability, potential
selling points, and overall profitability from the Magic Band service. Walt Disney World
(as well as Disneyland) recently launched a new service technology known as Genie and
Genie+ on the My Disney Experience mobile app this past fall. The regular Genie service
allows guests more tools to help plan their day, giving guests recommendations on their
interests and what they want to experience in the park, as well as providing ideal times to
experience attractions based on expected wait times. Replacing the now-retired FastPass+
system, Genie+ is a paid service in which guests can reserve hour-long windows to use the
Lightning Lane and experience attractions with much shorter wait times. Genie+ costs
an additional $15 per ticket per day, and guests are able to make a new reservation once
they have used the one they already have. Also, each park has two “Individual Lightning
Lane” attractions, Frozen Ever After being one of them. These attractions are not tied to
the Genie+ service and are an additional fee of $8–$15 per person if a party wishes to use
the Lightning Lane at these attractions.
Because the FastPass+ system had always been free, there was a huge uproar when Genie+
and the Lightning Lane were announced, as the service would no longer be free and many
guests were upset with the new system. However, there is a similar service technology in place
at nearly every major theme park now, and it has become the norm. In addition, Disney’s
Genie+ service is actually cheaper than most of the other parks – a trade-off for only being
able to have one reservation at a time. After working with Genie+ in existence for several
months now, it seems that the disapproval guests express outwardly has disappeared and
turned to acceptance. When looking at this from a business perspective, Walt Disney World is
making an exceptional sum of money that they were not making before as a result of debuting
Genie+ and the Lightning Lane. Since the debut of Genie+ and the lightening lane, Disney’s
revenue was up 34% to $21.82 billion in the fiscal first quarter with operating income being
$3.26 billion, up from $1.33 billion a year earlier (Biesiada, 2022). Also, when attractions are
operating smoothly, guest satisfaction is increased through the use of the Lightning Lane, as
those who do not want to wait as long do not have to and those who are willing to wait longer
can choose to utilize the standby entrance. This further benefits the business and contributes
to its success. As a whole, the service technologies Walt Disney World has developed give its
guests more flexibility in planning and ease of use while also generating a profit, contributing
to the success of the business from a financial and guest satisfaction perspective.
Tapu Tapu at Universal Volcano Bay

Volcano Bay has virtual lines that help minimize the time that guests wait in physical lines.
Instead of wasting the day in long lines, the guests use a Tapu Tapu, which is a waterproof
watch, and they wait in line virtually. While they wait, they can enjoy any ride that has no
wait time or enjoy the wave pool, any leisure pool, or two rivers. This kind of technological
advancement is huge within theme parks because it makes guests happier. At most theme
parks, sometimes during peak season wait times can be hours-long, and the guests spend
all day just waiting in line. With virtual lines they can eat, relax, and enjoy their time there
without lines.
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CHAPTER 11
Cross-cultural guest interactions

Appealing to a broad customer base
FIGURE 11.1 Many businesses conduct business with individuals from different cultures and
nationalities. Today’s managers need an awareness of cultural differences to
successfully manage customer interactions.
LEARNING OBJECTIVES
• Assess the benefits and drawbacks of the philosophies of ethical imperialism and
cultural relativism regarding the operation of multinational organizations
• Analyze and apply Hofstede’s cultural dimensions framework into various customer
service settings
• Understand the different food preferences, tipping traditions, greetings, and other
culturally meaningful aspect of customer service
• Explain the importance of using language, symbols, colors, and other nonverbal
clues in both the written and verbal communications with guests from multiple
nationalities.
• Explain how national culture and traditions can shape customer expectations in the
service environment
• Create products and services that are sensitive to the needs of a multinational guest
KEYWORDS
• Culture
• Cultural Sensitivity
DOI: 10.4324/9780429263965-11
178 Cross-cultural guest interactions
• Ethical Imperialism
• Cultural Relativism
• Stereotype
• Cultural Appropriation
• Power Distance
• Individualism
• Collectivism
• Uncertainty Avoidance
• Indulgence
• Masculinity
• Long-Term Orientation
• Implicit versus Explicit Culture
• Achievement versus Ascription Culture
• Universalism versus Particularism
• Proxemics
• Customer Education
• Ethnocentric
• Geocentric
• Polycentric
CULTURE AND ITS IMPORTANCE TO CUSTOMER SERVICE
Human beings are in many ways similar, yet in other ways different. Although we look
alike and share the same basic needs, the means of interacting with one another can be
diverse. One such difference relates to national culture. Since people live in different
countries, each with its own history, language, and customs, the way in which we provide
and perceive service might not be the same. In this chapter, we focus on the effects of cul-
ture in customer service. Culture refers to a system of shared values, believes, and actions
which guides the behavior of people within society (Schemerhorn et al., 2001). A culture
can be manifested in language, arts, artifacts, beliefs, sagas, and many other means. In the
service industries, we often provide service to people of different nationalities. Cruise
lines, theme parks, and other attractions receive people from different backgrounds. Sim-
ilarly, hotels receive guests from different nationalities. Large retailers have operations in
different parts of the globe and airlines transport people across national borders. Conse-
quently, it is important to understand the cultural factors that shape the way in which we
interact with customers. Similarly, as many service businesses have interests abroad, it is
important for managers to stand ready to spend part of their careers in a different country
(Figure 11.1).
Cultural understanding in the service environment can take two different forms:
employee education and customer education. Employee education entails training
workers on cultural awareness and language skills, as well as the specific expectations
Cross-cultural guest interactions 179
and customs of guests from a certain nationality. In addition to training employees in

cultural sensitivity, it is worth noting that the proactive selection of employees with a
greater predisposition for cultural awareness can be beneficial for companies. In fact,
studies have found that employees who received higher customer evaluations had higher
levels of cultural sensitivity. Furthermore, employees who lived abroad or spoke a for-
eign language were likely to display higher cultural sensitivity (Sizzo et al., 2005). In
addition to educating its employees, some companies engage in efforts to educate their
customers. Customer education may entail communicating with guests prior to arrival
in order to set appropriate expectations of service. Customer education has been found
to increase their expertise, perceptions of quality, and loyalty (Bell & Eisingerich, 2007).
Companies may inform guests on the most optimal ways to get service. For example,
service providers can inform customers of the times when lower crowds can be expected
at a theme park, invite guest to reward employees for great service by offering a gratuity,
explain the type of attire that is most appropriate for the activity customers are about
to engage in (e.g., comfortable shoes for outdoor tours or closed toe shoes for a cooking
class), the customary times to check in or check out of a hotel, expected cooking times
for a meal, and required maintenance (service) for an automobile (product), as well as
information needed by an accountant to prepare taxes. Furthermore, ethical companies
also make an effort to disclose all rules, fees, cancellation policies, and similar informa-
tion (Figure 11.2).
FIGURE 11.2 Companies can engage in efforts to educate their employees on cultural sensitivity.
Organizations and the individuals that work within them have a series of beliefs about
cross-cultural interactions. While some universal truths about human behavior can be
drawn, many of the values that we hold come from the environment in which we were
raised. Consequently, a behavior might be acceptable in one country and not so in another.
The notion of ethical imperialism is the belief that there are a series of universal truths;
thus, appropriate and inappropriate, ethical or unethical actions ought to be the same
in every country and across cultures. On the opposite end of this philosophy stands the
concept of cultural relativism. Those who espouse this viewpoint argue that what is good
or bad, appropriate or inappropriate behavior, ethical or unethical is completely based on
the culture and country in which a person or organization finds themselves. A good motto
for cultural relativism might be “when in Rome; do as the Romans do”. In practice, many
individuals and organizations find themselves somewhere between these two ends of the
spectrum.
Whereas cultural sensitivity can make employees aware of the customs of customers
from different nationalities, care must be taken not to stereotype. Sometimes, people can
assume that people of a certain nationality are impatient, individuals from another nation-
ality are rude, and those of a third group are lazy. Although culture influences behavior, it
does not account for the choices of everyone. For example, a certain culture might have a
more relaxed view of time, yet you encounter an individual that is very punctual. Another
challenge associated with cross-cultural interactions is cultural appropriation. Cultural
appropriation “takes place when members of a majority group adopt cultural elements of
a minority group in an exploitative, disrespectful, or stereotypical way” (Britannica, 2022).
There might also be demographic factors that impact the behavior of people. For example,
age, gender, and social class can impact the way that people behave. Consequently, even
within the same national culture, you can expect differences in behavior among men and
women, young and old, rich, middle class, and poor. Culture is in a constant state of evo-
lution: This is particularly true for countries whose economy has developed quickly over
the past few decades. As people become more connected via communications technology
and international travel, the possibility exists that cultures might adapt to one another and
adopt elements of different cultures.
Culture shapes customer expectations in some profound ways. One prominent exam-
ple for this is seen in the culinary traditions of each country. Many people enjoy trying new
foods, yet they might also have a certain zone of comfort. As an ethnic restaurant: do you
adapt your recipe to the local taste or do you try to be authentic to the original creation?
If you are a restaurant within a hotel or close to a tourist attraction: do you cater to visitors
or do you stick to what is customary within your country? Another aspect where culture
might influence customer service concerns gratuities. In some countries tipping is not only
customary but expected. In other countries, tipping is only provided for exceptional ser-
vice. Yet in a third country, tipping is not required and might be considered an insult. It is
noteworthy that levels of compensation for tipped positions (e.g., restaurant server, hotel
bellhop, tour guide) might vary significantly across countries. The amenities expected will
also hinge on cultural factors. For example, in a hotel room in one country, a coffee maker
and ironing board is expected, yet in a different country a hot kettle (for tea) and slip-
pers are more customary. Languages, signage, and nonverbal communications are equally
important as we prepare to receive customers from different nationalities (Figure 11.3).
FIGURE 11.3 Tipping traditions vary greatly from one country to the next.
CULTURAL DIMENSIONS
Throughout the course of time, anthropologists, sociologists, and social psychologists

have studied the unique features of each culture. One of the most prominent theories
of culture comes from Geert Hofstede. Hofstede (1993) argued that many business the-
ories were developed in the United States using American subjects. Therefore, these
theories faced challenges in their implementation in other countries. Having studied
many different cultures, Hofstede (1980a, b) proposed five cultural dimensions. Later,
he added a sixth dimension to his cultural framework. The cultural dimensions are as
follows:
1 Power Distance: This dimension comprises “the willingness of a culture to accept sta-
tus and power differences among its members” (Hofstede Insights, 2019). In countries
with high levels of power distance, a person’s status is quite important. Respect for
elders, business leaders, and politicians is expected. Questioning those in authority
such as your teacher or your boss is not acceptable. Examples of these countries
include China, Brazil, and Mexico. In contrast, cultures with low levels of power
distance are less willing to accept status differences among its members. Although
there are people in positions of power or greater responsibility, they’re often regarded
as equal in social status. Questioning a teacher, a government official, or your boss is
not only accepted but at times expected as part of the learning and exchange of ideas.
Countries with low levels of power distance include Canada, Germany, the United
Kingdom, and the United States. In cultures of high power distance, the perceived
status difference between service workers and customers is larger and workers are
expected to deliver higher levels of service (Mattila, 1999). Similarly, in a high power
distance culture, it might be especially critical for management to stress the impor-
tance of service. A traditional hierarchal organizational structure is more likely the
norm in a high power distance culture, whereas a flatter, more egalitarian organiza-
tional structure is more likely accepted by cultures with low power distance (Overby,
2005).
2 Individualism – Collectivism: Defined as “the tendency of a culture to emphasize indi-
vidual versus group interests” (Hofstede Insights, 2019), this is one of the most prom-
inent cultural dimensions in Hofstede’s framework. Individualist cultures emphasize
self-sufficiency, individual rights, independence, autonomy, and uniqueness. Examples
of these countries include Australia, Canada, the United Kingdom, and the United
States. Other countries stress putting the needs of the group ahead of the individual.
These cultures stress close family ties and group work is to be expected at every level.
Examples of collectivist countries include China, Greece, Mexico, and South Korea.
In the customer service setting, the quality of relationship (i.e., relational quality) has
been found to be of greater importance for collectivists cultures (Tsang & Ap, 2007).
Time saving, goal completion, and efficiency are extremely important for customers
from individualistic cultures (Tsang & Ap, 2007). Therefore, it is not only possible, but
likely that the same service is evaluated differently by members of various cultures. In
an experiment involving tour groups, researchers discovered that whenever the tour
guide took steps to improve customer-to-customer interactions, evaluations of Asian
guests rose significantly (Levy, 2010). This difference was attributed to the higher
levels of collectivism present in most Asian cultures.
3 Masculinity – Femininity: This dimension refers to “the tendency of a culture to
value stereotypical masculine or feminine traits” (Hofstede Insights, 2019). Mascu-
line cultures stress competition, achievement, and assertion. In cultures with high
levels of masculinity, this emphasis on competition and desire for achievement is
likely displayed in both males and females within that society. Examples of cultures
with high masculinity include Australia, Japan, Mexico, and the United States. Fem-
inine cultures emphasize caring and compassion among its members. In a feminine
culture, teams are likely to reach decisions by means of discussion, consensus, and
compromise. Examples of cultures with higher levels of femininity include the Neth-
erlands, Norway, South Korea, and Thailand. This dimension can also impact com-
plaining behavior among customers. In a study of American and Korean customers, it
was revealed that American guests are more likely to complain face-to-face, whereas
Korean customers are more likely to avoid the company in the future (i.e., not return
to the same business) and later express their concerns via electronic word of mouth
(Liu & McClure, 2001). In the airline context, low masculinity and high femininity
cultures had more positive evaluations of service. In contrast, high masculinity cul-
tures rated airline service lower. Low masculinity cultures expressed higher desires to
patronage as compared to high masculinity cultures (Crotts & Erdmann, 2000).
4 Uncertainty Avoidance: Defined as “the tendency towards discomfort with risk and
ambiguity” (Hofstede Insights, 2019), this cultural dimension often dictates how
much a culture is open to change, innovation, and risk-taking. Countries with high
uncertainty avoidance include Argentina, Germany, and Japan. In contrast, countries
with a low uncertainty avoidance include China, India, and the United Kingdom.
Studies have shown that in cultures with high uncertainty avoidance, online shopping
utilization is less than in countries with low uncertainty avoidance. Consequently,
those that avoid uncertainty will prefer the traditional brick and mortar retail setting
and cultures where low uncertainty avoidance will be more prone to adopt innova-
tions such as online shopping (Kumar & Panasari, 2016). Furthermore, customers of
cultures with high degrees of uncertainty avoidance are more likely to have a loyalty
card to a specific retail store.
5 Long-Term/Short-Term Orientation: A culture’s long-term orientation is defined as
“the tendency of a culture to emphasize values associated with the future such as
thrift, persistence, versus those that focus largely on the present” (Hofstede Insights,
2019). Cultures with long-term orientation such as China, Germany, and Japan are
seen as pragmatic cultures where thrift is a key value and investing in education and
long-term growth is of utmost importance. Leisure time is not considered very import-
ant in long-term oriented cultures. In contrast, cultures with short-term orientation
such as Argentina, Australia, and the United States are characterized by an emphasis
on the present. These cultures emphasize quick results, the bottom line, and are keen
to pursue leisurely activities. Research in the retail setting revealed that customers in
long-term oriented cultures tended to pay with cash or a debit card and those in short-
term oriented cultures were more likely to use credit cards (Kumar & Panasari, 2016).
6 Indulgence: The last dimension of Hofstede’s framework, Indulgence, refers to: “a soci-
ety that allows relatively free gratification of basic and natural human drives related
to enjoying life and having fun. Restraint stands for a society that suppress gratifi-
cation of needs and regulates it by means of strict social norms” (Hofstede Insights,
2019). Cultures with high levels of indulgence include Canada, Brazil, Mexico, and
the United States. In contrast, cultures with low levels of indulgence (or alternatively
higher levels of restraint) include Germany, India, and Russia. In a culture with high
levels of indulgence, it might be more socially acceptable to “pamper yourself” by
spending a day at the spa or purchasing luxury items. Similarly, cultures with high
indulgence may be more accepting to all-you-can eat restaurants and unlimited bev-
erage packages in cruise ships (Figure 11.4).
The cultural dimensions identified by Hofstede (1980a, b) are some of the most widely
cited and used frameworks to further the understanding of cultures. It is noteworthy that
several other cultural dimensions have been identified and are also useful to explain how
people from different nationalities behave. In the service sector, the relative importance of
various service attributes might be different for people of different cultures. Some of these
attributes (Winsted, 1999) include:
• Authenticity
• Caring
FIGURE 11.4 In countries with high levels of indulgence, gratification of human needs, having
fun, and enjoying life are important values.
• Perceived control
• Courtesy
• Formality
• Friendliness
• Personalization
• Promptness
Formality and courtesy were especially important for Japanese customers as compared
to their American counterparts. In contrast, friendliness and personalization were more
important to American consumers (as compared to Japanese clients). Several other dimen-
sions, including promptness and authenticity, were important for both groups (Winsted,
1999). A third list of cultural dimensions specific to the service industry was used to com-
pare French and American customers (Overby, 2005):
• Implicit/Explicit Dimension: This dimension refers to the communication styles prev-

alent in one culture. In the United States, communication is more explicit, thus state-
ments are to be taken at face value. Saying what is meant in a clear and concise way
is important in this type of culture. In contrast, the French employ a more implicit
communication style. Listeners are expected to “read between the lines” and use the
context of conversation, as well as nonverbal cues to interpret the totality of the
message.
• Achievement/Ascription: Some cultures emphasize “doing” and others emphasize

“being”. In the United States, status is often attained through one’s accomplishments:
what a person does in the course of their life. In France, status is more complex and
can be attained by one’s lineage, the school or university a person attended, and other
traits that define who the person “is” rather than what the person “does”.
• Universalism/Particularism: This dimension refers to the extent in which a culture
emphasizes a universal set of rules that is applicable to everyone in a uniform manner.
While all countries have norms of what they consider appropriate and inappropriate
behavior, some believe that the rules may be bended a bit or that a person can be
given a certain amount of leeway. Friendships and personal relationships are given a
certain weight in how people are treated. The United States is an example of a coun-
try that has a very universalistic view, whereas France’s emphasis is on particularism.
The study of cultural dimensions is particularly helpful in creating cultural sensitivity

among people, especially in the service industries. While these present a general overview
of how members of a culture generally behave, it does not guarantee that all its mem-
bers will behave in the manner prescribed. While studying Australian and Korean tour-
ists, researchers noted that their behavior was significantly different than prescribed by
social norms and suggested by culture theories (Kim & McKercher, 2011). The differences
between expected and actual behavior were attributed to the existence of a more relaxed
tourism culture which enabled customers to adapt their behavior. Importantly, adapting
behavior does not completely signal the abandonment of one’s cultural values, but rather
FIGURE 11.5 While traveling abroad, international tourists might change their behavior.
a means to adjust certain rules based on the new country context. One important conclu-
sion drawn is that “because tourism occurs outside of the person’s national time and social
space, the tourist is likely to feel less bound to abide by the same often constricting rules
that apply at home” (Kim & McKercher, 2011, p. 158). Therefore, using good judgment
and seeking understanding through good communication can fill the gaps which cultural
theories might not explain. In the next section, we explain some important aspects to
consider to effectively communicate with members of different cultures (Figure 11.5).
COMMUNICATING WITH OTHER CULTURES
The way in which people communicate is a function of their culture. The most obvious
distinction regarding cross-cultural communications is language. Companies that do busi-
ness in different parts of the world need to hire and develop language skills among their
staff. Additionally, using gestures and body language may also convey the desired meaning.
Care must be exercised, as gestures can differ across cultures. The hand signal for “hello”
in some countries is the same one for “goodbye” in others. Snapping your fingers may
be offensive in one culture, yet harmless in another. The way in which people greet one
another can vary considerably. In many Latin American cultures, a kiss on the cheek is
customary; in some European cultures two (or even three) kisses on the cheek is to be
expected while greeting others. A handshake is a standard greeting expected in the United
States and bowing might be a more typical greeting in a country like Japan. Importantly,
these traditions might also be context-driven. For example, within a certain culture, it
might be customary to greet a close friend with a kiss; yet, during a business meeting or
interview, a handshake would be the proper etiquette. Guides into business etiquette in
different parts of the world exists, including the bestseller Kiss, Bow, or Shake Hands by
Morrison and Conaway (2006) (Figure 11.6).
People communicate with both their words and their bodies. Different cultures might
have varying expectations for how they speak to one another. The concept of proxemics
refers to the amount of personal space that is required during the course of interaction
with others. One important factor impacting proxemics is the nature of the place and
interaction with others. Public space, social space, personal space, and intimate space are
some of the labels used to describe the amount of distance to keep from one another, with
FIGURE 11.6 Body language can be interpreted differently across the globe.
public space being the furthest and intimate space being the closest (Hall et al., 1968).
To further illustrate this idea, imagine yourself walking through a shopping mall. While
walking through the corridors, you tend to keep a certain distance from others. However,
you might approach (i.e., get closer) someone for directions, thus step a few feet closer to
another human. If you are shopping with a friend, the amount of personal space between
you and your friend will likely be less than with the stranger you just asked for directions.
If the relationship is one within spouses, space is even less than with a friend and certainly
less than holding a conversation with a stranger or walking in a public space such as the
shopping mall.
Equally important to the idea of space and human interaction is the concept of cul-
ture. In some cultures, people like to maintain a certain space from one another even in
crowded places such as a subway station or a concert venue. In another culture, being very
close to one another might not be unusual. In the business context (and by extension the
customer-to-service provider relationships), it is important to note that the amount of
personal distance varies across nationalities. People from Brazil, Mexico, and the United
Arab Emirates will typically communicate within close proximity to one another. While
interacting with someone from China, standing one or two feet from one another might
be acceptable. In countries such as Australia, Germany, and India, a good rule of thumb
might be to stand two feet apart while speaking to a business acquaintance or client.
Finally, in a place like Japan, three to four feet might be the optimal distance for business
communications (Goman, 2020).
In designing service spaces for guests from multiple nationalities, special attention
should be paid to signage. Some places such as airports have signs written in two or three
languages. While it is difficult to create signs with every possible language, designers must
consider the primary two or three languages spoken by the visitors to that space. Another
way to communicate with others is through the use of internationally recognized images.
The image of an airplane with an arrow might signal to a driver that he or she is approach-
ing the airport. Similarly, several images communicate the location of the men’s and wom-
en’s restroom or the closest route to a restaurant (i.e., sign with fork and knife). Maps
and literature in several languages can also help customers better enjoy the servicescape.
Theme parks often create maps and time guides in several languages. Restaurants near
major tourist attractions often have their menus printed in more than one language and
might even use images to further illustrate their dishes (note: this practice might be more
acceptable in a casual restaurant as compared to fine dining). Web-based applications can
also provide information about a museum, theme park, or other service entity in different
languages. Some places might even have interactive maps where the guests can manipu-
late images and change the language according to their preference (Figure 11.7).
In addition to the use of signs and body language, colors often communicate different
messages across culture. Therefore, when deciding what colors to use for a hotel, restau-
rant, retailer, or even airline uniforms, special attention should be paid on how color is
perceived by those likely to visit. The color red signifies love, passion in North and South
America as well as in Europe; luck and fertility in China; wealth, love, purity, and beauty
in India; yet it means death and grief in several African nations. Blue is a fairly safe culture
to use across cultures. In Western cultures, it means trust and serenity. It should be no sur-
prise that blue is a frequently used color for the uniforms of airline and bank employees.
FIGURE 11.7 Airport signage is often spelled in multiple languages in order to accommodate
visitors from different countries.
FIGURE 11.8 Blue is a color with generally positive connotations across cultures. In Western
cultures, blue is the color of trust and serenity, thus most likely used in employee
uniforms.
In several Eastern cultures, the color blue means healing and relaxation; thus blue has
positive (yet slightly different) connotations. The color green is a sign of good luck and
nature in Western cultures. In several Middle Eastern countries, green signifies wealth and
fertility. It is also the traditional color of Islam. White wedding gowns are the standard
for many weddings in the Western world. This is because the color signifies purity and
elegance. The color white also signifies peace and cleanliness. Therefore, it should be no
surprise that the most common color used in culinary uniforms is white. Not every culture
has the same meaning attached to the color white; in China and Korea, white may denote
death, mourning, and bad luck (Kroulek, 2016) (Figure 11.8).
CULTURE, PURCHASE PATTERNS, AND SERVICE EVALUATION
National culture can have a profound impact on how customers purchase, consume, and
ultimately evaluate services. While many businesses strive to provide the best service to
all their customers, research shows that service providers are more attracted to customers
who match their cultural profile (Barker & Härtel, 2004). Furthermore, within the travel
context, residents of tourism destinations have been shown to prefer interactions with
visitor’s whose culture is perceived to be similar (Thyne et al., 2006). Customers expe-
riencing service in a culture where they’re not the majority population might be subject
to biases, which, in turn, impact the enjoyment of their experiences. Among some of the
most frequent problems noted in cross-cultural interactions are using an unfriendly or sar-
castic tone, loud volume and slow speech (both of these behaviors incorrectly assume that
a person cannot understand more than one language well), checking handbags at retailers,
lack of eye contact, not acknowledging one’s presence, offering service to someone else
despite being first in line, pretending to be busy, no attempt to make eye contact, and not
willing to go the extra mile (Barker & Härtel, 2004). These attitudinal and behavioral
biases are worthwhile noting, as they can negatively impact the guest’s perception of
service.
The way in which a customer perceives service is also affected by national culture.
Asian cultures have been shown to be more critical in their written evaluations of service
quality in both the fine dining and hotel industries (Mattila, 2000). In the airline industry,
passengers from cultures with high levels of masculinity tend to rate service lower than
those in low masculinity cultures (Crotts & Erdmann, 2000). While studying customer
delight in the hotel industry, researchers discovered that guests were often delighted by
different aspects of service. American guests emphasized service that was accommodating
and flexible, the fulfillment of the need of esteem (i.e., feeling special or welcomed or
recognized as unique by the staff), and the use of complimentary items and upgrades. Ger-
man guests emphasized the importance of service recovery and were most likely to com-
ment on the quality of the hotel room. For their part, Brazilian guests had positive remarks
about the food at the hotel, the professionalism, and efficiency of staff. Finally, Canadian
guests stressed friendliness, cleanliness, professionalism, and the importance of a positive
surprise (Torres et al., 2014). In another study directed at American and Taiwanese guests
staying at an international hotel, it was noted that Taiwanese guests had higher expecta-
tions on the service quality dimensions of tangibles, reliability, and empathy (Hsieh & Tsai,
2009). Research has also found that in countries where employees exhibit higher levels
of individualism, hotels tend to have lower average scores on their TripAdvisor ratings
(Radojevic et al., 2019). Similarly, restraint (as opposed to indulgence) tended to produce
better service evaluations. Based on the cultural dimensions proposed by Hofstede and
the impact they have on service evaluations, Radojevic et al. (2019) created a ranking of
country’s likelihood to offer good hospitality, with Japan topping the list.
The way in which we buy products and services is also affected by culture. In the retail
context, cultures with higher levels of individualism tended to engage in more multi-
channel purchasing (both in-store and online). In contrast, collectivist cultures were more
likely to engage in cross-buying merchandise in different parts of a department store. It is
theorized that in collectivist cultures, people might be more prone to buy items for other
people such as friends and family (Kumar & Panasari, 2016). In a similar vein, loyalty
programs seem to be more effective in cultures with a long-term orientation (Kumar &
Panasari, 2016). Even the purchase of more intangible items such as life insurance can
also be affected by national culture. Studies have found that cultures with greater degrees
of individualism are more open to the idea of purchasing life insurance, whereas cultures
with higher power distance are less inclined to do so (Chui & Kwok, 2008).
As companies operate in multiple nations, care must be exercised to understand
how the organizational culture of the parent company and the national culture of the
various countries in which it operates converge or diverge from that of the parent
company (Mwaura et al., 1998). Some companies emphasize the values and traditions
of the place in which it originated. Others tend to emphasize the values and traditions
of the host country. Yet a third group of companies tend to employ a mix of values
as they see fit. Therefore, companies are said to take on an ethnocentric, polycentric,
or geocentric approach to internationalization (Perlmutter, 2013). Ethnocentric com-
panies tend to deploy employees from their home country to take on various roles,
especially those involved in the management of the firm. Polycentric companies tend
to hire predominantly host country nationals. Finally, geocentric firms adopt a hybrid
approach and select employees who are best suited for each position regardless of
their country of origin. This chapter’s emphasis is predominantly on the customer-to-
employee and customer-to-customer interaction in a cross-cultural setting. However,
it is worth noting that there are many important aspects of operating across national
borders that are typically the subject of human resource management. In conclusion,
the understanding of cultural dimensions, traditions, languages, signs, symbols, rituals,
proxemics, and other culturally meaningful elements can help service companies, their
managers and employees gain a better understanding of their customers, develop strat-
egies, and deploy tactics to ensure the delight and loyalty of all of its guests regardless
of their nationality.
• To what extend do you agree or disagree with the notions of ethical imperialism and
cultural relativism? How would you approach these dilemmas if you’re doing business
in a different country?
• What are some service features which might be different from one country to the next?
• Now that you’re familiar with Hofstede’s cultural dimensions, can you think of an inter-
action with someone from a different country where these differences became appar-
ent? Which cultural dimension do you find the hardest to reconcile?
• Customers arrive with a series of expectations. Some of these expectations are based on
their culture. How can you effectively manage expectations with international customers?
• How would you approach a conversation with someone that has limited knowledge of
your language? What are some do’s and don’ts?
• What are some features of the servicescape (physical setting) that should be considered
when catering to customers from different cultures?
• What are some things companies can do to foster cultural sensitivity among their
employees?
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CHAPTER 12
Recovery strategies for service

managers
FIGURE 12.1 Much like solving a puzzle, service recovery involves finding solutions that corre-
spond to each customer problem.
LEARNING OBJECTIVES
• Explain the importance of effective service recovery

• Assess the various causes of service failure
• Differentiate service failures by their timing, severity, and frequency
• Apply various service recovery tools into specific service failure scenarios
• Explain the role justice theory has on service recovery efforts
DOI: 10.4324/9780429263965-12
194 Recovery strategies for service managers
• List the various steps involved in service recovery

• Assess the role of technology in service recovery efforts
• Evaluate various customer incidents and determine whether they pose safety and
security challenges
KEYWORDS
• Service Failure
• Service Recovery
• Service Recovery Paradox
• Distributive Justice
• Procedural Justice
• Interactional Justice
• Informational Justice
• Severity of Failure
• Frequency of Failure
• Timing of Failure
• Attribution
• Counterfactual Thinking
• Tangible Recovery
• Psychological Recovery
• Service Guarantee
• Firm Recovery
• Customer Recovery
• Joint Recovery
• Empowerment
• Complainants
• Non-Complainants
THE IMPORTANCE OF RECOVERY
Organizations and the people that work within them should strive to provide flawless,
error-free service which delights customers. Despite their best efforts, sometimes service
deviates from the ideal or desired standard. These situations are labeled “service failures”
by organizations who seek to understand and rectify them. More specifically, service
failure refers to the instances where service has problems or errors, and these present a
significant deviation from the standard operating procedure or fall drastically below cus-
tomer expectations. Service failures can accrue various tangible and intangible costs for
customers, including the time spent complaining or seeking a solution as well as customer
aggravation (Hart et al., 1990). Companies can minimize the instances of service failure
Recovery strategies for service managers 195
through the quality management processes, which we described earlier in this book. How-
ever, there are a variety of reasons why service may fail (McColl-Kennedy & Sparks, 2003),
including (Figure 12.1):
1. Problems from the service itself or problems with the service product: These are
instances when the core product and service of a company are defective. In a restau-
rant setting, this may take the form of an undercooked or overcooked meal. In the
airline setting, a problem with the service product may look like lost luggage, an
overbooked flight, or a malfunction of the onboard entertainment system. In a hotel,
a service product failure can take the form of a dirty room, a room that is not available
at the expected time, or hidden fees (Figure 12.2).
2. Problems emerging from the service providers or problems with the service inter-
actions: In many cases, customer service entails interactions between human beings.
Therefore, mistakes can occur during the communication process. For instance, a ser-
vice worker may fail to make eye contact, use offensive language, or a voice tone that
is deemed inappropriate by the customer.
3. Problems emerging from customers: There are times when customers stand in the
way of their own happiness. For instance, a customer might miss his or her flight
because they arrived late for departure. Similarly, customers may injure themselves
FIGURE 12.2 A dirty hotel room is an example of a problem with the service product.
by engaging in activities not sanctioned by the service provider. For instance, a person
might try to feed animals in a zoo despite multiple warnings to the contrary, conse-
quently putting himself or herself in harm’s way. In a car rental scenario, a customer
may face an accident. This is indeed a problem for the customer, but not one created
by the rental company. In a popular fondue restaurant, a customer may ignore the
server’s warning not to lick the pot and face an injury to themselves. Organizations
need to foresee as much as possible how a customer may use the service and put
measures in place to minimize customer-related service failures.
4. Problems outside of the organization’s control or problems related to the macro envi-
ronment: Sometimes things happen which neither the organization nor its customers
have any control over. Weather is an example of one such situation. Although clima-
tological changes are beyond anyone’s control, they can delay flights or temporarily
close a water park. An outage in internet or telephone services may cause disruption
for a call center and a power outage may cause a retail store to temporarily suspend
operations (Figure 12.3).
Service failures from employee-to-customer interactions, the service product, customers,

and the macro environment, can produce discomfort and at times outrage for customers.
Good service organizations engage in efforts to correct problems and restore customer
satisfaction. Therefore, service recovery refers to the series of efforts in which a service
organization responds to problems faced by customers seeking to rectify the situation,
thereby restoring the relationship between customers and service providers (Grönroos,
1988). Service recovery turns the attention of organizations from the “cost of pleasing a
FIGURE 12.3 A weather-related travel delay is an example of a problem outside the organiza-
tion’s control.
customer to the value of doing so” (Hart et al., 1990, p. 156). It is possible that a customer
faced with a service failure emerges better-off than if no failure had ever occurred. This is
the idea behind the service recovery paradox – the notion that post-recovery satisfaction
is higher than that which would have been experienced by customers not faced with ser-
vice failures (De Matos et al., 2007).
Research has shown that effective service recovery can elicit the emotion of customer
delight (Torres & Kline, 2013). However, the relationship between service recovery efforts
and customer loyalty is a bit more complicated. While some evidence exists to suggest
that customers who had a problem successfully recovered are more loyal (Miller et al.,
2000), others argue that loyalty is not always attained in this manner (De Matos et al.,
2007). Loyalty prior to recovery might well signal a customer’s willingness to work with a
company in their recovery efforts. In fact, loyal airline passengers have been shown to be
more likely loyal after service recovery efforts (Migacz et al., 2018). Companies that are
known for the quality of their services may also face high expectations for service recovery
(Kelley & Davis, 1994). It has also been documented that companies with formalized ser-
vice recovery processes tend to perform better financially (Van Vaerenbergh & Orsingher,
2016).
All service failures are not the same; they vary in terms of timing, severity, and frequency
(Kelley & Davis, 1994). Regarding timing, service failure can take place pre-consumption
(for instance, while making a reservation), during consumption (e.g., walking into a dirty
hotel room), and post-consumption (e.g., being billed incorrectly after checkout). Some
service failures are of greater severity than others. For example, giving the wrong medica-
tion to a hospital patient can be of greater severity than failing to garnish a drink at a bar.
Finally, the frequency of service failure is also important. A customer might be forgiving
of an airline that departs late once, but if that same airline departs late multiple times in
a row, the customer might feel enraged. The cost of service recovery and the effectiveness
of such efforts can vary by industry (Mattila, 2000). Throughout this chapter, we provide
universal best practices and some industry-specific examples with the aim of acknowledg-
ing both the art and science that is involved in service recovery.
Whenever service failure takes place, customers make attributions of who (or what)
is responsible for the failure (McColl-Kennedy & Sparks, 2003). Devoid of information
from the service providers, the customer’s imagination may take over and their percep-
tion might put the service provider and their negligence at the center of the problem.
At times, service failure may involve a violation of moral standards (McColl-Kennedy &
Sparks, 2003). If the customer believes that the company is trying to take advantage of
them or others, is polluting the earth, discriminating against customers or employees, or
otherwise not socially responsible, this can, in turn, produce customer outrage. In spite
of this, if a customer believes that the service provider’s motivation is benevolent (as
opposed to selfish) during the service recovery process, they will likely have feelings of
gratitude (Lastner et al., 2016). The intensity of emotions felt during the service recov-
ery efforts might be in proportion to the customer’s goals (McColl-Kennedy & Sparks,
2003). For instance, one customer might be in a hurry to board a plane and get to their
destination in order to participate in a meaningful event in their lives. A different passen-
ger might need to get to their destination eventually, but does not have any immediate
plans. An announcement of a flight cancellation will likely be felt differently by these two
FIGURE 12.4 Whereas service failure ensues whenever service deviates from the standard,
service recovery is the process of solving customer problems with the hope they’ll
be more satisfied in the end.
customers. Customers involved in service failure often engage in counterfactual thinking.

This is a process whereby people analyze what could/should/would have happened had
someone else (i.e., the service worker, management, or the organization) taken a different
course of action (McColl-Kennedy & Sparks, 2003). When customers have reasoned that
the company and its employees could have acted differently and in doing so prevented
their problem, negative emotions from the service failure will likely ensue (Figure 12.4).
THE IMPORTANCE OF JUSTICE IN SERVICE RECOVERY
As people interact with one another, they form perceptions of justice. The customer rela-
tionship is no exception; individuals will assess service failure and recovery situations as
either fair or unfair. Justice theory explains how individuals perceive fairness in their life
experiences. There are four categories of justice which play a relevant role in the process
of service recovery:
• Distributive justice: Given a situation, people will assess the fairness of the outcome. Fair
does not mean the same; if someone perceives he or she puts in more effort, spent more,
or brings more to the table, they might expect more. In service recovery, distributive
justice might be assessed by what the customer ultimately obtains: a free drink, a dis-
count, a credit in their account, flight voucher, and more (McColl-Kennedy & Sparks,
2003).
• Procedural justice: People often analyze the fairness of a process. Whether or not
someone gets what they believe is fair (i.e., distributive justice), they might still be
satisfied with the method used to reach the outcome. A theme park visitor might
examine the process used to manage the waits at a popular attraction and form per-
ceptions of procedural fairness. Similarly, a hospital patient might form perceptions
of fairness of the process used for waiting at an emergency room. Consequently, a
patient waiting in the emergency room (ER) might believe it’s fair to allow another
patient with more severe life-threatening injuries to go first.
• Interactional justice: Human beings expect to be treated with dignity and respect. In
the service recovery effort, customers expect their complaints to be taken seriously
and for the staff to take a genuine interest in their problems. Therefore, interactional
justice in the service recovery context relates to the nature of the interaction between
service providers and customers. Effective recovery efforts which center on the prin-
ciple of interactional justice include elements of empathy, treating others with dignity
and respect, and being sensitive to their needs (McColl-Kennedy & Sparks, 2003).
• Informational justice: Providing accurate and timely information is necessary for peo-
ple to perceive a sense of justice. In the service context, customers might be more
tolerant of service failures if organizations are transparent with them. Faced with a
delay in a departure, an airline can conceal the real reason for the delay, provide no
information whatsoever, or provide accurate and timely information. If customers
perceive that the reason for the delay is contrived or that they’re not being given regu-
lar updates, they might perceive the airline as being unjust toward them. Flying is one
service scenario where customers might feel vulnerable, owing to their lack of control
(Migacz, 2018). Therefore, fair treatment of passengers goes a long way to creating a
sense of fairness and beginning the process of service recovery.
THE RECOVERY SYSTEM
Service organizations can react to a problem in different ways. Every possible situation
cannot be accounted for in any one book; thus, creativity in the service recovery process
is of utmost importance. In spite of this, we use both state-of-the-art research as well as
best practices in the industry to provide several categories of service recovery and illus-
trate how they might be used in various situations. Johnston and Michel (2008) categorize
service recovery efforts in seven areas: acknowledgment, empathy, apology, owning the
problem, fixing the problem, providing assurance, and providing compensation. Each of
these types of service recovery efforts are described below:
1 Acknowledgment: This means that the service provider recognizes that there has
been a service failure. Often, the first step to solving a problem is to recognize that
you have one. Acknowledging that a service failure has taken place communicates to
customers that what happened is not the way the company ordinarily does business.
2 Empathy: This type of recovery entails identifying with the customer and their strug-
gles. An employee might communicate this by relating the current situation faced by
the customer to a similar situation faced by himself or herself in the past. Employees
might use language such as “I would also feel frustrated” or “I personally don’t like it
when…” or “I remember a time when [specific situation] happened to me” or “I can’t
believe that happened to you”.
3 Apology: In many cases, the customer simply wants to know that the organization
is sorry for the problems they experienced. Apologies can go a long way toward
restoring goodwill in the relationship between service providers and customers
(Figure 12.5).
4 Owning the problem: Customers often make attributions of what caused the failure;
however, a responsible service provider will assume appropriate blame for a situa-
tion. Owning the problem also means that an employee will try as much as possible
to solve a problem upon the first complaint rather than trying to refer customers to
different departments or transfer their phone call.
5 Fixing the problem (also known as correction): There are problems which can be eas-
ily fixed. A restaurant customer might receive an undercooked meal and one possible
response is for the restaurant to finish cooking the food. Similarly, a customer might
complain that housekeeping did not leave enough clean towels in the room, to which
the hotel might respond by bringing more towels to their door. Timely corrections can
avoid the escalation of a problem and restore the service.
FIGURE 12.5 A sincere apology is an essential part of the service recovery process.
6 Providing assurance: Some customers complain out of altruistic reason: they don’t
want the same problem to happen to other guests. Service providers can make state-
ments assuring customers that a situation like this will not happen again. Companies
can change their processes or take additional steps to ensure quality going forward.
These statements, when followed up by appropriate action, can be critical toward
effective service recovery.
7 Providing compensation: Many times, a service provider will seek to compensate cus-
tomers for their bad experiences. Since customers spend their time, effort, and finan-
cial resources in the course of purchasing and consuming services, companies often
try to make it up to the guest. Compensation can come in different forms, including
reimbursements, vouchers, a credit to an account, free meal, free merchandise, a dis-
count, awarding extra loyalty points, and many others. Compensation is said to be
delayed when it is to be used in the future, as in the case of a flight voucher or a store
credit. Immediate compensation typically entails returning money to customers or a
credit to their account (van Vaerenbergh et al., 2019).
It is noteworthy that these categories of service recovery are not mutually exclusive. A
company may both empathize with a customer and fix the problem. Similarly, an apology
might be issued along with compensation for the service failure. Companies often develop
their own processes and tools to manage the recovery process. For example, Marriott uses
the acronym “LEARN” to teach employees about effective service recovery. The acronym
stands for (L)isten, (E)mpathize, (A)apologize, (R)eact, and (N)otify. Essentially, Marriott
advocates for the first series of steps to entail good communication with customers, which
includes empathy and apologies. Listening to the guests (L for listen) is critical towards
understanding the situation at hand. Empathy (E) means that employees express a sense
of solidarity with the guest. Apologizing (A) entails a sincere statement whereby ser-
vice providers express how sorry they are at the current situation. Reaction entails taking
action whether it is fixing a problem or offering compensation. Finally, notify means docu-
menting the problem and informing other coworkers and management of what problems
took place and how they were resolved. As you can see, there are some parallels with this
approach and the list of seven types of service recovery we just described.
In providing service recovery, it is important to take into account three elements: the
service recovery system, service employees, and customer involvement. Let us turn our
attention first to the design of effective systems to address service failures. The essential ele-
ments in the design of service recovery systems are (van Vaerenbergh & Orsingher, 2016):
• Accessibility: This feature entails the various ways of capturing the voice of the
customer.
• Formality asks the question: To what extent is the system guided by strict rules or pro-
tocols? Some companies are very systematic as to how to handle problems, whereas
others are very flexible in their approach to service recovery.
• Decentralization: How much empowerment are employees given in the service
recovery process?
• Comprehensiveness: There are many things that can go wrong in the service environ-
ment. However, through documentation, managers can quantify the most frequent
problems. System comprehensiveness refers to the number of potential situations the

recovery system accounts for.
• Human intensity: Every service organization needs to make decisions about the
amount of training and human resources devoted to service recovery efforts. Luxury
hotels such as Four Seasons and the Ritz Carlton tend to have a large employee-
to-customer ratio, thus it is easy for customers to find an employee to help solve their
problems. Other organizations rely on software or a centralized call center with only
the minimal necessary staff to engage in service recovery.
• System intensity: The amount of organizational resources is the degree to which an
organization is devoted to collecting and analyzing customer data. A company like
Walt Disney World has a Consumer Insights division which gathers and analyzes data
on consumers with the aim of making informed business decisions and improving
service.
• Influence: To what extent are customers involved in the service recovery process?
Companies vary in the amount to which they engage customers in this process
(Figure 12.6).
In order to ensure quality and stimulate prompt resolution to service failures, organiza-
tions often make service guarantees. Some quick service restaurants tell customers that
if an employee does not suggest dessert or today’s special, customers will get a compli-
mentary food item. Similarly, many retailers encourage customers to return a product if
they’re not completely satisfied. A service guarantee promotes complaining behavior and
engages customers in a quasi-employee role. Research suggests that service guarantees act
FIGURE 12.6 Being accessible to customers through various channels helps a company solve
problems faster.
in a positive way, in that they promote the solution of customer problems (Miller et al.,
2000). It is noteworthy that not every customer complains; many suffer in silence. One
way to categorize customers in terms of their reactions to service failure is to label them
as complainants or non-complainants (Kau & Loh, 2006). Complainants typically voice
their dislike of the service to the organization. Following their complaints and the com-
pany’s subsequent recovery efforts, customers may become satisfied (satisfied complain-
ants) or remain dissatisfied (dissatisfied complainants). In contrast, non-complainants will
not report service failures. A non-complainant can either be satisfied (ordinarily satisfied
customer) or experience a service failure and choose not to report it (dissatisfied non-
complainants) (Kau & Loh, 2006).
Demographic characteristics can influence a person’s willingness to complain. For
instance, it has been demonstrated that people with greater incomes are more likely to
complain (Kau & Loh, 2006). Similarly, culture plays a role, with customers from Western
cultures more likely to complain as compared to their Asian counterparts. Since not every
customer complains, it is important for customers to engage in the process of facilita-
tion, that is, promoting the expression of dissatisfaction (van Vaerenbergh et al., 2019).
Facilitation can take place through a company’s satisfaction survey, social media channels,
comment cards, and follow-up phone calls or text messages. This process can also occur
while a person is still in the company’s facilities. For example, a front desk clerk might ask
a guest checking out whether there was anything the hotel could have done to make their
stay better. This type of question might generate an important conversation, which could
help the organization improve its services and engage in service recovery. It is critical that
service recovery goes beyond solving one guest problem to create system-wide improve-
ments. In fact, it has been argued that service recovery can provide data for improvement
of processes within the organization (Johnston & Michel, 2008). Organizations can use
tools such as Frequency-Relevancy Analysis of Complaints (FRAC), which is a process
of identifying the frequency of occurrence of specific issues and their potential impact or
relevancy (Johnston & Michel, 2008). More frequent and more relevant (or impactful)
problems should be prioritized in order to create the changes in quality practices which
will minimize their occurrence in the future.
Service recovery often takes place in the context of personal interaction between
customers and service workers. Nevertheless, service recovery can also take place in a
technology-mediated environment. For example, web applications (app) can use artificial
intelligence to provide a response to a problem. Uber is one such app developer that has
programmed their application with some of the most common problems which can be
experienced by their users. The system can generate automatic answers or responses for
common service recovery scenarios. However, no artificial intelligence can account for all
service failures. Therefore, there will always be the need of contacting the service provider
via phone, text, e-mail, or face-to-face. Furthermore, customers might be frustrated trying
to navigate automated responses only to find that their problem is not accounted for in
the system and that finding human help is very difficult. While service firms are becoming
more technology-savvy and technology firms are entering the service space, customers are
also using technology to relay service failures. In many cases, electronic word of mouth
(eWOM) channels, including review sites (e.g., TripAdvisor, Yelp), online travel agencies
(e.g., Booking.com, Expedia), blogs, social media sites (e.g., Twitter, Facebook, Instagram),
FIGURE 12.7 Web-based applications (apps) such as Uber Eats allow customers to report
problems and use artificial intelligence to provide a resolution (for some of the
most common inquiries).
and many other user-generated content channels, are used to convey feedback on the
service provider (for a more comprehensive discussion of eWOM, please see our chapter
on the topic). While most feedback is of a positive nature, some eWOM can be negative
and present an opportunity for service providers to engage in service recovery. In situa-
tions like these, it is important for organizations to know that personalized responses are
more likely to have a positive effect on eWOM (Ozuem et al., 2017). Therefore generic
responses tend to be of little value in service recovery while using electronic channels
(Figure 12.7).
EMPLOYEE AND CUSTOMER ROLES IN SERVICE RECOVERY
Frontline workers often find themselves at the center of service recovery efforts. There-
fore, providing employees the training and tools needed to effectively solve problems is of
utmost importance. Organizations need to ensure that employees have the skills, motiva-
tion, and authority to handle service recovery (Hart et al., 1990). Special attention to the
service recovery personnel should begin with the employee selection process. Throughout
the use of interviews and employment tests, employers can assess a candidate’s ability
to handle problems effectively. During the training process, employers can use scenar-
ios to help workers apply their skills. Furthermore, role plays (whereby employees act as
customers during the training process) can help develop service recovery skills. Employee
training programs should cover some of the most frequent problems experienced by guests
and provide some guidance on best practices to react to such service failures.
Empowering employees is especially important to attain effective service recovery.
Empowerment refers to the amount of discretion employees are given in the execution of
their jobs. Employee empowerment can be applied during service recovery efforts, though
it can also be used for other aspects of their jobs. Successful companies provide employees
the ability to solve problems directly without the approval of management. Importantly,
this does not mean that management is excluded from service recovery efforts or that their
roles are less important. As examples of tools to help employees engage in service recov-
ery, they may be allowed to provide vouchers, discounts, free products and services (e.g.,
meals, merchandise, tickets), exchange products and services, offer bonus loyalty points,
upgrade guests, and many other related actions. The Ritz Carlton is known to empower
their employees with up to $2,000 to solve a customer problem (Zhao, n.d.) (Figure 12.8).
It is noteworthy that just like any form of power, tools to aid in service recovery can
be abused. There have been cases where employees use the resources meant for service
recovery to secure benefits and perks for themselves or their friends. It is also possible
that some customers may abuse the system. For instance, let’s say that a couple reports
a problem to a hotel employee; the hotel worker utilizes his/her discretion to offer the
compensation of “free dinner”. Two days later, the guest shows up at the restaurant, invites
ten of their closest friends to this free meal, and orders the most expensive wines the hotel
had to offer. How could this situation have been handled differently? The employee could
have written a voucher for “Free dinner for two, up to $100”. This would have attained the
goal of compensation yet avoided abuse from the guest.
FIGURE 12.8 At the Ritz Carlton, employees can use up to $2,000 to resolve a customer
problem.
The service recovery process is a personalized and idiosyncratic effort by nature. How-
ever, many of today’s companies have developed very strict procedures for most of their
operational practices. While procedures help attain the goal of consistency, they can also
present a challenge to customer service. Many angry customers have heard the term
“it’s company policy”, which does little to solve their problems. Hart et al. (1990) argue
that “companies have made service delivery idiot-proof, but idiots can’t solve problems”
(p. 150). Therefore, it is important to ensure that: (a) employees capable of making deci-
sions and solving problems are hired; (b) such employees are given the latitude to make
choices that sustain the long-term relationship with customers. In addition to empowering
employees, it is necessary to pay attention to the behaviors which would yield effective
service recovery. Some of these behaviors include effort, empathy, courtesy, and follow-up
(Van Vaerenbergh & Orsingher, 2016). Similarly, the speed of recovery plays a key role on
customer satisfaction post-recovery (Miller et al., 2000).
The well-being of employees engaged in service recovery should be taken into consider-
ation by organizations. Service recovery requires employees to listen to problems and often
times manage irate guests. This can result in added stress and burnout for service work-
ers. Therefore, some have advocated for an employee recovery process which focuses on
the needs of frontline workers who are facing customers and their resources (Johnston &
Michel, 2008). Employee recovery should lead to improved employee attitudes and reten-
tion (Johnston & Michel, 2008). Redundancies in staffing may be built into the system so
that employees can receive breaks following an emotionally intense customer interaction.
Similarly, recreational facilities and stress management workshops can help workers cope
with the stress associated with their customer service jobs (Figure 12.9).
FIGURE 12.9 Jobs that involve intense human interactions may require emotional labor and
employees might be more prone to stress and burnout.
Whereas employees play a critical role in service recovery, customers also play an
important role in the process. Some organizations provide more standardized solutions to
common service failures. However, other organizations work with customers to find more
customized solutions. In fact, some have advocated for a more co-created service recovery
effort, which empowers customers to work with service providers to find mutually agree-
able solutions (Dong et al., 2008). Following this logic, service recovery can be categorized
in a continuum from no customer involvement to high levels of customer involvement.
The result is three types of customer recovery types (Dong et al., 2008):
• Firm recovery: This type of recovery effort takes place when firms offer more stan-
dardized solutions to customer problems. Some problems occur frequently and are
experienced simultaneously by a large group of customers. Consider the case of a late
departure caused by a mechanical issue on an airplane. As a result of this problem,
those passengers with connecting fights might miss such a connection. Therefore, the
airline tries to fix the problem by putting them on the next available flight. If the
next flight leaves on the following day, the airline automatically issues a voucher for
accommodation at a nearby hotel. This type of recovery can be deployed quickly and
efficiently. However, it does not take any customer input in prescribing solutions.
• Joint recovery: There are service failure scenarios where the organization can ask the
customer’s input in the recovery process. Perhaps a hotel guest complains that the
air-conditioning in their room is not working. The front desk clerk can offer to send
an engineer to their room to fix the problem or move the guest to another room.
In a restaurant, a meal may have taken more than the expected amount of time.
The restaurant server may offer to bring an appetizer while the meal is being pre-
pared, offer complimentary dessert after the entrée has been consumed, or provide
a discount on their bill. Providing options puts the customer in the driver’s seat of
the recovery efforts and can quickly switch the tone of the conversation from the
problem toward the solution. Companies can go a step further and ask customers
directly what the firm can do to make the situation better? The benefit of this more
open-ended approach is that customers are able to express exactly what would make
the problem better. The challenge is that customers might have unreasonable expec-
tations of recovery efforts. For example, the restaurant customer receiving a meal five
minutes later than expected may demand their meal as well as all the meals of their
party to be offered at no cost to them. While there are cases where a restaurant will
“comp” an entire party’s meal, this response may not be proportional to the problem
experienced by the guest (Figure 12.10).
• Customer recovery: In some cases, companies will expect customers to solve their
problems with limited guidance or no interaction from a service employee. This type
of recovery is common in the technology world, as many electronic devices and soft-
ware will have “help” buttons or provide “troubleshooting” instructions to users. The
idea here is that there are common sources of problems which the customer can
resolve by following simple instructions. The challenge with this approach is that the
instructions may not account for every possible circumstances. If the customer has
tried many times to solve their own problem and fails repeatedly, he or she may grow
increasingly frustrated.
Engaging in co-created solutions can add specialized skills to customers, thereby improv-
ing future recovery efforts (Dong et al., 2008). In addition to customer involvement,
FIGURE 12.10 Interaction between service workers and customers can yield a joint recovery
effort.
companies may also benefit from mapping the customer’s journey through the service
recovery process (van Vaerenbergh et al., 2019). This exercise allows service providers to
see service recovery as the customer sees it and prescribe process improvements for future
recovery efforts.
WHEN RECOVERY TURNS INTO SAFETY
Most customers have legitimate complaints that deserve an appropriate response from a
service provider. Nevertheless, sometimes situations can escalate and become safety and
security issues for employees and other customers. Service managers are also called to
ensure the safety and security of their operation. Therefore, special care should be taken
in identifying those situations which merit the involvement of security professionals or
even law enforcement officers. Torres et al. (2017) present a series of questions aimed at
helping service providers discern whether a situation presents a standard service recovery
problem or a scenario where safety and security might be jeopardized. Some of these
considerations are presented below:
1 What is the nature of the action or statement made? An action may be classified any-
where from mildly uncivil to overtly aggressive. Example A: An upset customer calls
back the server and says “this food is cold” with a stern expression, but remains seated
and waits for a reaction. Example B: An outraged customer yells “you call this food”?
while throwing his entrée at the wall. The first example could be addressed by an
apology, fixing the temperature of the meal, and possibly offering some minor com-
pensation. The second example presents a situation which requires a different kind of
intervention: escorting the customer out of the restaurant.
2 How was the statement delivered? An individual might raise their voice, display aggres-
sive body language, or simply display a lack of interest or regard. Example A: An
airline passenger complains to the flight attendant about the time it takes for the
airplane to take off once boarded. He says, “I will write to your company to complain
about the horrible service I’m receiving today”. Example B: A flight attendant reminds
a passenger to fasten her seat belt and straighten her chair in preparation for takeoff.
The customer says “No; I paid for this ticket and I can sit in whichever way I want
to”. The flight attendant waits a few minutes and reminds the passenger to fasten her
seatbelt and straighten the seat. The passenger says once again, “I’ve been waiting
for an hour for this plane to leave; I’m comfortable this way and I don’t need to be
reminded by a loser flight attendant what to do”. Example A is most likely a customer
service situation that can be solved by thanking the guest for the feedback, offering
information, and asking whether he has any connecting flights so they can be let off
the plane early or accommodated on the nearest possible flight. The second situation
is a security situation where the passenger may have to be deplaned.
3 What is the perceived intention of the situation? Does it appear that the customer has
a clear intent to harm someone physically or verbally? Example A: A customer slams
his keys on the front desk of a hotel and states, “these keys don’t work”. Example B: A
customer is anxiously waiting for service at a hotel bar. He steps out of his chair and
“taps on the shoulder” of the bartender. The bartender says he pushed him. The first
example is civil and borders on aggression. You might want to try to resolve the issue
and see if you can de-escalate the situation. Example B is difficult because of the two
different perspectives. However, it would be more indicative of an aggressive behavior
that might need management or security intervention.
4 Are the attacks ambiguous or personal in nature? Complaining about an aspect of ser-
vice is acceptable, but launching personal attacks against workers might present signs
of behaviors that are of greater concern. Example A: “The service in this theme park
is horrible”. Example B: “The pool employees look trashy”. Both are very unkind com-
ments, but example B is more overtly disrespectful and has a directional object.
5 Does the incident involve the consumption of alcohol or controlled substances? The use
of these can quickly escalate and affect the seriousness of an incident. Example A:
An upset bride complains that her hotel suite is not ready before check-in time: “I’m
paying a lot of money for this wedding, and the room isn’t even ready”. Example B:
A guest has several drinks at the wedding and asks the valet parking attendant for her
car. Example A would be a service recovery situation. Example B is a security situ-
ation; if the person is indeed intoxicated, the valet parking attendant is obligated to
withhold keys, so the guest doesn’t cause harm to herself and potential legal liability
to the hotel.
6 Is the cost (in terms of money and time) becoming unbearable? Not all customers are good
customers. Some customers by virtue of their acts of deviance create increased costs
for business. Example A: A customer makes a complaint about her air-conditioning
not working. The hotel sends an engineer, but the customer calls back saying they
weren’t able to fix the issue. The now irate customer demands compensation for not
having air-conditioning for an eight-hour period. Example B: A hotel guest calls the
front desk multiple times to make complaints about his stay. One day, he calls to
report he fell in the bathtub while taking a shower. The hotel security staff reports
back to you that the customer was intoxicated when they came to the room. Later
that weekend, the same guest injures himself while playing tag football at the beach
with a few friends at midnight. The same guest demonstrates signs of excessive
alcohol usage. Example A demonstrates a service recovery issue. The customer might
have called two or three times, but a legitimate issue needs to be resolved: the air-
condition. Fixing the problem might entail moving her to a different room, upgrading
her to a suite, offering her reward points, or even giving one complimentary night.
Example B presents a situation where the guest is a harm to himself. The multiple
calls to the Front Desk and Security translate into costs for the hotel. Furthermore,
time spent with this guest is time the personnel could spend with other guests. His
multiple injuries can now result in legal liability.
7 Does a customer cause problems for other customers? If other customers are negatively
affected by a guest’s behavior, then it might be worthwhile to treat the incident as
more of a security situation. Example A: A theme park guest goes to guest services
and complaints about the long lines and a ride that was not operational during his
visit. “I spent $500 for tickets for my family and I’ve only been able to go on two
rides”!, the guest states in an upset tone but using a normal volume. Example B: In a
hospital waiting room, a customer stands up and starts yelling at the receptionist. He
complains about how long it’s taking for his service and points out to other patients
that got inside before he did. He seems agitated as he flaps his arms and demands to
be seen right now. Other patients waiting seem concerned about this man’s seemingly
aggressive demeanor. The first situation is a service recovery problem, whereas the
second situation could present (if not de-escalated promptly) a security situation.
• What factors should you consider in determining what type of service recovery is most
appropriate?
• How can you apply justice theory to the service recovery process?
• In what ways can you involve the customer in the solution to a service failure?
• What does empowerment mean? How does it relate to the service recovery process?
• What are your thoughts on the service recovery paradox? Do you think that it’s possible
to leave a customer more satisfied after the service recovery process has taken place?
Why?
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edu/delivering-service-excellence
CHAPTER 13
Recruiting, training, and

engaging talent for service
organizations
FIGURE 13.1 Great service requires a dedicated and engaged workforce.

LEARNING OBJECTIVES
• Evaluate various tools used for employee selection

• Design training and development programs aimed at improving customer service
• Implement programs to improve employee retention and engagement
• Create an organizational culture that supports customer service
• Develop standard operating procedures to ensure service quality
DOI: 10.4324/9780429263965-13
214 Recruiting, training, engaging talent for service organizations
KEYWORDS
• Recruitment
• Selection
• Structured Interview
• Unstructured Interview
• Behavioral Interview
• Cognitive Abilities Test
• Conscientiousness
• Personality Test
• Work Sample
• Employment Screening
• Training
• Development
• Needs Assessment
• SMART Objectives
• Career
• Subject Matter Expert
• Motivation
• Maslow’s Hierarchy of Needs
• McClelland’s Acquired Needs Theory
• Expectancy Theory
• Equity Theory
• Job Satisfaction
• Employee Engagement
• Organizational Culture
• Hospitality Organizational Culture
• Hospitableness
COMPANY SPOTLIGHT: SERVICE CULTURE AT ROSEN HOTELS

AND RESORTS
Exceptional service is often delivered by companies which create service cultures. This
service culture is often communicated through a company’s training efforts, employee
engagement initiatives, meetings, events, and human resource practices. At Rosen Hotels
and Resorts, the company communicates service culture throughout their customer ser-
vice training programs. These programs are centered on the 10 Pillars of Strength devel-
oped by Rosen and executed by employees on a daily basis. After employee orientation,
the service pillars are reinforced through monthly meetings which focus on one of these
key service principles. In many hotels it is customary to hold pre-shift meetings with
employees in order to communicate relevant operational data including occupancy,
Recruiting, training, engaging talent for service organizations 215
arrivals, departures, events, ongoing maintenance, and similar business. Managers at Rosen
hotels use this opportunity to highlight their Pillars of Strength. The ten pillars which are
part of the service culture at Rosen include:
In addition to orientation, customer service training, and reinforcement through pre-shift

meetings, Rosen Hotels employees are recognized for their efforts throughout the course
of the year. They celebrate Housekeeping week, Security Officer day, HR professional day,
FIGURE 13.2 The Rosen Shingle Creek is one of the hotels owned and operated by Rosen
Hotels and Resorts.
Source: Rosen Hotels and Resorts.
and many others. These celebrations are used to highlights the efforts of each department
and to shed light on specific employees who excel in their roles and recognize the dedica-
tion to the company. To further identify excellence in service, Rosen Hotels, uses their cus-
tomer satisfaction surveys to draw names of employees which customers deem especially
helpful during their stay. The accomplishment of these Rosen employees are underscored
in their company newsletter under the “One Step Further” section. The training, commu-
nications, and employee recognition efforts are part of building the service culture. These
elements are supported through sound hiring practices and a competitive pay and benefits
package. Rosen employees have access to one of the most generous health insurance pro-
grams in the industry and have access to a wellness center.
TALENT ACQUISITION IN THE SERVICE INDUSTRIES
In order to achieve the goal of excellent customer service, organizations must rely on their
human talent. An organization’s human resources (HR) can contribute to the success
of any organization, but it is especially critical for service organizations. Because of the
inseparability of services from the people that offer them, workers in the service industries
often embody the service itself for the customer. Consequently, recruiting and selecting
talented individuals is an especially important task for managers. Finding the best HR
consist of two related processes: recruitment and selection. Recruitment is the process
of advertising a job opening and generating interest in the position. The recruitment pro-
cess typically concludes with candidates submitting an employment application. Selection
entails choosing among a pool of qualified applicants: it starts with the employment appli-
cation and ends when the employee is officially hired. There are a variety of recruitment
and selection tools which you want to be familiarized with in order to recruit and select
the best HR for your service organization (Figure 13.1).
In order to make a position known, managers can rely on numerous recruitment tools
to promote it. A list of some of the tools available along with their benefits and drawbacks
are presented below:
Online job postings (company website): Many organizations list their posting via their pro-
prietary website. A key advantage of this tactic is that applicants typically know the
company and have a specific interest for working there. Advertising a job in its own
website is typically more economical than paying a third party to advertise. The chal-
lenge of this tactic is that candidates who don’t know your company might not be
aware of your posting.
Job board postings: Some companies build a website which attracts candidates searching
for a variety of jobs. The owners of these sites charge a fee for various companies to
advertise within them. Examples of job boards include Indeed, career builder, and zip
recruiter. The key advantage of a job board is exposure to a broader range of candi-
dates. With greater number of candidates comes the challenge of reviewing a larger
number of applications which consumes greater time and company resources.
Advertising (radio, television, print media): Traditionally, recruiters relied on newspaper
advertising to attract job candidates. With a reduced number of readership, news-
papers are no longer the dominant source of recruitment. Radio and television
advertisement can generate large pools of candidates. This is especially helpful for
a new business operation, for example, a new hospital, hotel, or department store
opening in the area. These organizations might need hundreds of employees to staff
their business. Consequently, advertising through mass media might be advantageous.
It is noteworthy that this method can be expensive and though it might generate
numbers, it does not guarantee that all candidates will be qualified.
Social media: This can be a great means of reaching out to candidates who might not be
actively searching for jobs. Sites such as LinkedIn allow recruiters to identify and
connect with talented individuals within a certain field, industry, or occupation. It is
also possible for candidates to apply directly or be directed to your company’s website
via social media. Some challenges emerge from this form of recruitment, including
privacy concerns and the blurring of lines between personal and work life.
Colleges and universities: Companies will often reach out to local, national, and interna-
tional universities in their search for the best talent. The chief advantage of this means
of recruitment is knowing the kind of education received by university graduates.
Furthermore, college recruiting targets specific professions. Despite its many advan-
tages, this form of recruitment might not be the most effective for positions requiring
extensive amounts of work experience.
Labor unions: Workers in certain fields tend to be organized via labor unions. For example,
if a recruiter is looking for a carpenter, there might be a labor union which focuses pri-
marily on representing carpenters. Therefore, they might be good sources for several
occupations, especially in the skilled trades.
Professional organizations: You might be searching for a certain type of professional
(e.g., marketing manager or a HR manager). Many of these professions are repre-
sented by professional organizations. For example, if a company is seeking a HR man-
ager, they could reach out to the Society for Human Resource Management (SHRM).
They could inquire about opportunities to attend their events, place a booth within
their meeting or conference, or advertise a posting within their website. Professional
organizations ensure that the candidates possess some type of education and experi-
ence in the field. Members of the professional organization might not even be looking
for a position, yet present potential candidates in a tight labor market.
Career fairs: These events allow employees to get acquainted with a variety of companies.
Companies can share information about their organizations, answer questions, and
obtain resumes.
Executive search: Also known as “headhunters”, executive searchers will scour the market
to find you the right candidate. These companies are typically used for highly sought
after professionals and executives. The key challenge with an executive search is the
high cost which is often expressed as percentage of the candidate’s first year salary.
Employment agency: Companies can opt to hire an outside organization which will do the
recruitment and provide a short list of candidates. Although the employee works in
the organization, they’re not really their employee. Instead, they’re an employee of an
employment agency. The agency will run payroll and manage many of the traditional
HR functions. In exchange for their services, employment agencies charge a fee.
The recruitment process culminates with the placement of a job application. At this
point, it is the hiring manager’s responsibility to select the best candidate among a pool of
applicants. Every company has a different process for selecting the best talent. Selection
tools can be broken down into three categories: interviews, testing, and screening tools.
While this is not an exhaustive list for each category, we present some examples of these
three selection tools:
Interviews: One of the most common sources of employee selection, interviews provide
information about a candidate’s verbal communication skills and body language.
Interviewers are able to ask the same questions for all candidates or adapt their strat-
egies from one to the next. When a hiring manager asks the same questions of each
candidate, this is called a structured interview. In contrast, when no predetermined
questions are established and the hiring manager engages in a free-flowing dialogue
with the candidate, this is called an unstructured interview. Unstructured interviews
allow more flexibility, but may also deviate from the principle of job-relatedness of
any employment inquiry. Structured interviews allow for consistent evaluation of all
candidates and for questions to remain job-related. One of the most popular employ-
ment interview is called a behavioral interview. The interviewer usually asks the inter-
viewee to provide a situation or scenario where he or she has displayed the desired
behavior (e.g., a situation involving leadership, problem-solving, team-building, etc.).
Although the relationship between interviews and job performance is weak to mod-
erate, behavioral interviews have demonstrated to be the strongest of all form of
interviews (McDaniel et al., 1994), as they rely on past behaviors to predict future
behaviors. A challenge inherent in any interview is the possibility for interviewer bias.
It is particularly important for recruiters to realize the potential for a snap judgment,
that is, when the manager makes a quick decision with limited information. In fact
“many interviewers make a decision on the job suitability of applicants within the first
two to four minutes of the interview and spend the balance of the interview looking
for evidence to support it” (Mathis & Jackson, 2003, p. 258).
Employment tests: In addition to relying on interviews, mangers often seek guidance from a
variety of established and validated tests. Cognitive abilities tests have demonstrated
the highest correlation to job performance (Schmidt & Hunter, 1998). These are tests
of general intelligence and involve questions related to spatial relationships, math, and
verbal ability. Work samples are also popular, as they allow candidates to demonstrate
their skills in a simulated job task. For example, a chef candidate can be asked to
prepare a meal. Personality testing is yet another critical tool in the selection process.
The personality trait of conscientiousness has demonstrated moderate correlations to
job performance; thus it is used frequently as a tool for employee selection. Highly
conscientious individuals are known to be hardworking, organized, and responsible.
Screening tools: After a company has decided that they’d like to move forward with a
candidate, they will typically issue a conditional job offer. This may take the form of
a letter or e-mail where several details concerning the person’s job title, starting pay,
and starting date are included. This offer is conditioned upon the candidate passing
several screening tools employed by the company. Some of these may include drug
testing, criminal background check, reference check (verifying past employment his-
tory), credit check, and verification of a person’s legal ability to work in the country.
When structuring the recruitment and selection process, managers must consider when
each step will take place (e.g., interview first or testing first). The number and types of
interviews are also important. It is typical for positions of greater responsibility to face
greater scrutiny, thus more number of interviews with more stakeholders. Employers
should consider which employment tests they will use and which vendors to contract in
order to supply tests. The costs of the recruitment and selection efforts must be considered
as well. The more testing, interviews, and employment screening (e.g., drug testing, crim-
inal background check), the costlier the process becomes. Furthermore, different means
of advertising a position carry different costs. For instance, advertising in your company’s
website is less expensive than posting your job on a job board or traveling to a university
to recruit candidates. However, the online posting might not be enough to attract all the
desired candidates, thus the benefits and costs must be weighted. Besides evaluating costs
and benefits, it’s important to measure how long it takes to fill a vacancy. A vacancy that
remains open for a longer time is generally seen as a negative thing, as it could create
adverse impacts on the company’s customer service, ability to generate revenue, and the
workload of the existing employees (Figure 13.3).
Despite the existence of many tools, talent acquisition can be a challenge for many
employers in the service industries. In several countries, service work is seen as a menial
occupation, thus not as socially desirable. Yet, in other countries, service work may receive
lower levels of compensation (Sturman, 2001). Many service businesses are open during
holidays, weekends, and evenings. Therefore workers must often sacrifice sociable hours
in favor of work. Finally, hospitality workers can face a variety of occupational health
challenges (Zhang et al., 2020). For instance, hotel housekeepers are constantly exposed
to chemicals, which, in turn, might negatively impact their respiratory system and skin.
Restaurant cooks work with sharp objects which can cause a higher than average injury
rate. Delivery workers often lift heavy items, thus the possibility for musculoskeletal
problems.
FIGURE 13.3 Using a variety of employee selection tools helps employers obtain a comprehen-
sive picture of a candidate’s knowledge, skills, and abilities (KSAs).
TRAINING AND DEVELOPING TALENT IN THE SERVICE INDUSTRIES
An important aspect in attaining the goal of excellent customer service is to adequately

prepare workers for their jobs. This is attained through the training and development
process. Formally defined training is “a planned effort by a company to facilitate learning
of job-related competencies, knowledge, skills, and behaviors by employees” (Noe, 2017,
p. 8). Training tends to focus on the short-term knowledge, skills, and abilities (KSAs) that
employees will need to master in order to perform their current job. For example, teaching
a front desk agent how to operate the property management system required to check in
a guest is an example of training. Similarly learning appropriate knife skills is an example
of training for a restaurant cook (Figure 13.4).
Employee development is often used alongside the term “training”. Both employee
training and development are concerned with the learning process in the employment
context. However, development is centered on the long-term growth of an employee. For-
mally defined, employee development “represents efforts to improve employees’ ability
to handle a variety of assignments and to cultivate capabilities beyond those required by
the current job” (Mathis & Jackson, 2003, p. 315). As an example of development, many
companies identify high-potential candidates to become managers. Often, they devise
FIGURE 13.4 Hands-on or on-the-job training is one of many ways in which service workers
can gain important knowledge and skills.
management development programs to help them gain the skills needed to take on man-
agerial roles within an organization.
In some organizations, the training and development functions falls on the shoulders
of the HR department. Depending on its size, HR might have a generalist which takes
care of a variety of HR roles, including training, recruitment, compensation, and so on.
In larger companies, a separate training and development department is created. Training
Specialists and Training Managers work under the supervision of a Director of Training and
specialize on developing various programs to help employees grow and the organization
succeed. Some organizations go as far as to create a corporate university which establishes
a centralized location for learning activities and offers a variety of courses. Often times,
these corporate universities will have links and partnerships with educational institutions
(Figure 13.5).
The training process has several distinct phases. One model for training divides these
into four stages: needs assessment, design, delivery, and evaluation (Mathis et al., 2017).
In the assessment phase, training managers determine the need for training and develop
training objectives. The need for training can be ascertained by three distinct processes:
organizational, task, and person analysis (Noe, 2017). Organizational analysis entails
FIGURE 13.5 Hamburger University is the corporate university for McDonald’s. At this facility,
the company educates individuals who desire to own and operate a McDonald’s
restaurant.
examining the goals and strategies of the organization and developing training objectives
to fulfill said objectives. For example, the company might be wanting to grow revenue and
the training department develops sales training to help with this goal. The second type
of analysis, task analysis, focuses on the job description, performance criteria, and other
materials to develop training initiatives. In theory, employees must be able to perform the
tasks outlined in these documents; thus, training can aid in making employees compe-
tent in the areas they will be evaluated upon. The third type of analysis, person analysis,
centers on the current employees of the organizations and whatever gaps there might be
between the KSAs they possess and those desired by the organizations. Once gaps in KSAs
have been identified, training programs can be developed to fill these gaps. Once the need
for training has been determined, training objectives are established. Some in the training
profession advocate for SMART objectives, an acronym which denotes that objectives
should be specific, measurable, achievable, relevant, and time-bound.
The second stage in the training process is training design. During this phase, the
training professional will answer questions such as: Who will receive training? What
methods or techniques will be used to deliver training? How much will the training
cost? What facilities or resources are available for training? Should we make the train-
ing in-house or outsource it? The design phase can be the longest state, as it requires
developing training materials and resources. Sometimes, training professionals will lean
on their own knowledge and research to develop programs. However, there are other
times when training professionals will reach out to one or more subject matter experts
(SMEs). These are individuals who have a great amount of knowledge due to their expe-
rience, training, or research in the area. For example, a restaurant interested in doing
food safety training might rely on the expertise of a consultant who develops training
materials for multiple restaurants. Similarly, an Industrial Engineer might act as an expert
in occupational safety for a company. A Director of Finance can be an expert in training
other managers on how to best prepare budgets. A Professor with extensive research in
the field of service recovery can also act as a resource when creating training materials
on that subject.
After seeking the right sources of expertise, the training professional might develop a
course outline or a lesson plan. A lesson plan typically includes the title, learning objec-
tives, activities to be used, materials required, and a step-by-step development of the train-
ing. After these have been developed, more detailed training materials can be developed.
It is important to note that training can take place in different modalities, including face-
to-face, web-based asynchronous, web-based synchronous, or a hybrid of mixed mode
consisting of both face-to-face and web-based delivery. Trainers have a variety of tools and
techniques at their disposal, including hands-(on-the-job) training, lectures, discussions,
case studies, role play, simulations, adventure/outdoor training, and many others. Manag-
ers should note that the choice of technique should be predicted on the course objectives,
number and types of participants, and the resources available. Once training content has
been created, training professionals should be ready to move to the delivery phase. During
this phase, training is scheduled which includes setting aside space, promoting the train-
ing event, registering attendees, and coordinating travel (if necessary). Training is carried
out during the delivery phase and the progress toward the desired goals is continually
monitored.
The last step involved in the process is training evaluation. One of the most used
approaches to evaluate training comes from Donald Kirkpatrick. Accordingly, training
professionals can evaluate their programs at four distinct levels: reaction, learning, behav-
ior, and results (Kirkpatrick & Kirkpatrick, 2006). In some cases, a fifth level is added:
return on investment (ROI). At the reaction level, trainee’s perceptions are usually cap-
tured via surveys or interviews. Training managers usually evaluate learning via testing
(one single or a pre- and a post-training event test). Professionals can also evaluate training
activities via employee behaviors. This entails observing employees performing their jobs,
engaging in role plays and simulations, and keeping track of their performance appraisals.
Finally, evaluating training at the reaction level involves analyzing the effects of training
on various business outcomes. For example, a company can track revenues before and
after sales training. Similarly, the same company can compare customer satisfaction scores
before and after a customer service training. Kirkpatrick’s model has been tried and tested
in the training profession and presents an intuitive way to determine the success of various
training initiatives.
Whereas some employees in the service industries view their employment as a “job”
for a short or long period, others tend to focus on developing careers on the field. A
career is a “pattern of work-related experiences that span the course of a person’s life”
(DeCenzo & Robins, 1999, p. 254). Companies have a vested interest in developing the
careers of their employees. Successful development efforts ensure that the organization
has the needed talent to fill current and future vacancies and help the company grow
and succeed. Employers can use a variety of tools to help employees develop their career.
Some typical development tools include:
Formal education: Taking a course or earning a certificate or a degree from an educational

institution. Companies can attain this by establishing partnerships with universities
and sending their employees for particular programs, encouraging professional cer-
tification (e.g., CPA for accountants), tuition reimbursement for courses taken, and
executive education.
Assessment: This “Involves collecting information and providing feedback to employees
about their behavior, communication style, and skills” (Noe, 2017, p. 398). Some
examples may include personality inventories, performance appraisal data, skill inven-
tories, aptitude tests, and assessment centers.
Job Experiences: In order to prepare for their careers, employees can take on a variety of
assignments, including a horizontal job move, job rotation, temporary assignment,
shadow days, fixing or turning around a current business division, special committee
assigned, internationally assigned, and many others. These experiences ensure that
employees earn the skills needed to grow their careers.
Mentoring: This is a relationship whereby a more experienced, successful, and senior pro-
fessional (i.e., mentor) help develop a less experienced employee (i.e., protégé). Some
of these are formal relationships established by the company with established time-
lines, goals, and activities. Other mentorship relationships are less formal and initiated
by the two professionals themselves. A mentor can advise a protégé on what skills
are needed to succeed, how to navigate the organization, networking, understanding
norms and expectations, and provide insight on future development efforts.
The development process can be explained as a series of steps, which ultimately lead to a
match between employee capabilities and aspirations and the needs of the organization.
Noe (2017) proposed the following steps toward employee development: self-assessment,
reality check, goal setting, and action planning. In the self-assessment phase, employees
engage in a series of activities aimed at helping them recognize their own strengths and
weaknesses. Reality check involves aligning individual interests with those of the organiza-
tion. The third step, goal setting entails challenging yet realistic goals. Finally, action plan-
ning refers to the specifics steps undertaken to reach the desired outcomes (Noe, 2017).
ENGAGING SERVICE EMPLOYEES
By now you have learned about the importance of hiring the best talent and training
them to be proficient in their jobs. In addition to these steps, it’s important for managers
to pay close attention to the factors which can motivate, engage, and alternatively disen-
gage service workers. To achieve this goal, we will briefly explore some classic motiva-
tional theories, analyze the elements contributing to job satisfaction, uncover the causes
of employee turnover, and study various ways to attain employee engagement and loyalty.
First, let us turn our attention to the topic of employee motivation. Formally defined
motivation “refers to the forces within a person that affect the direction, intensity, and
persistence of voluntary behavior” (McShane & Von Glinow, 2009, p. 91). From the 1940s
until today, several experts have contributed to the theories explaining why and how peo-
ple are motivated. Some theories emphasize that motivation emerges from human needs
(e.g., Maslow’s Hierarchy of Needs; McClelland’s Acquired Needs), others highlight the
role of extrinsic stimuli in altering human behavior (e.g., reinforcement theories/operant
conditioning theories by Skinner and others), some explain the process whereby people
are motivated (e.g., Expectancy Theory), yet others highlight the role of social forces in
shaping our own motivation (e.g., Equity Theory). We will briefly discuss each of these in
the following paragraphs.
One of the most widely cited motivational theories can be attributed to Abraham
Maslow. When faced with the question of what drives human motivation, Maslow (1943)
concluded that five core needs were the answer. His hierarchy of needs theorized that
individuals would first seek to fulfill their most basic needs before trying to accomplish
higher order needs. The most basic need in Maslow’s hierarchy is physiological, that is, the
need to have sufficient water, food, and the elements needed for human survival. Immedi-
ately above physiological needs, people will seek to fulfill their need for security. In mod-
ern times, this might entail having appropriate housing to guard against the inclemency
of weather and to live in a safe neighborhood (e.g., without crime or war) and to have
appropriate health insurance in order to feel secure about one’s health. As humans, we
also crave social interactions and to feel part of a group: in Maslow’s (1943) hierarchy, this
is called the need for belonging. The fourth level in this motivational theory is the need
for esteem, which is to feel appreciated, acknowledged, and valued for your contributions.
At the top of Maslow’s hierarchy stands the need for self-actualization. This need refers to
one’s desire to leave a legacy and become the fullest expression of oneself throughout the
lifetime. In the work context, a person might write a book, mentor new employees, start a
new business, open a new division for an existing business, or start a charity. As a manager,
it’s important to realize what employees driving motivations might be. It should be noted
that some have posed criticisms to Maslow’s hierarchy. For example, this theory doesn’t
contemplate the role of selflessness and altruism in human motivation. Furthermore, the
“hierarchy” has also been questioned, as some argue that people can seek to attain higher
order needs even though their lower order needs are not totally fulfilled. Notwithstand-
ing the criticisms, Maslow’s hierarchy is one of the popular and widely cited theories on
human motivation.
Although the needs of individuals can play a key role in motivation, not every person
might have the same drive or desire to fulfill one particular need. Consequently, person-
ality may play a role in the extent to which an individual might strive to attain certain
goals. This is the premise behind McClelland’s Acquired Needs Theory (1965). Accord-
ingly, people have three basic needs: achievement, affiliation, and power. However, some
individuals will strive more toward achievement, some more toward affiliation, and yet a
third group would be more motivated by power. The need for achievement can be seen
in those that strive to obtain high grades in school, win a sports tournament or a medal
in the Olympics, or discover a cure for a disease. People with high need for achievement
are good at setting challenging yet attainable goals, which will ensure their success in
various endeavors. The need for affiliation is similar to the need for belonging, proposed
by Maslow. Individuals with high affiliation needs will seek to surround themselves with
others and help others either through volunteer efforts or via professions which provide
services to others. Finally, the need for power refers to the need to exert control over one’s
environment. Individuals who have a high need for power often engage in leadership posi-
tions whereby they can influence the organizations in which they partake.
Over the years, motivational theorists have argued that motivation can be attained by a
series of external rewards and punishments. This is the central idea behind the theories of
reinforcement or operant conditioning (Skinner, 1963). In this framework, people could
be motivated by a reward (i.e., positive reinforcement), a negative stimulus (e.g., pun-
ishment), or the removal of a negative consequence (e.g., negative reinforcement). This
form of motivation is used more frequently than you think in today’s organizations. Many
companies have a system of rewards (both monetary and intrinsic) and punishments (e.g.,
demotions, warnings, suspension, etc.). Some argue that this means of employee motiva-
tion is objectionable as it treats adults as children or, even worse, as a pet.
So far, you’ve learned about motivational theories which stress human needs, personal-
ity, and extrinsic stimuli. The expectancy theory of motivation suggests that a yet another
component could be responsible for human motivation: a person’s desired goals or out-
comes. Indeed, expectancy theory “is based on the idea that work effort is directed toward
behaviors that people believe would lead to desired outcomes” (McShane & Von Glinow,
2009). For example, a person might be interested in getting a promotion at work. As a
result, this employee puts forth effort as expressed by working overtime, taking on extra
projects, networking, and taking seminars to improve his or her skills. The expectancy is
that this effort would lead to performance, for example, becoming more knowledgeable,
efficient, recognition of one’s efforts, and a good performance evaluation. Then, logic will
follow that this enhanced performance would lead to the desired outcome: a promotion.
The logic isn’t always perfect; the employee might put his or her efforts in areas that are
not prioritized by the company or its managers. Even if the employee’s performance is
recognized, it is possible that the company might promote someone else. Consequently,
the line of expectancy might break at some point. In spite of its limitations, the expectancy
theory provides some insight as to the motivations of individuals as they seek to accom-
plish the desired outcomes.
Whereas people may be motivated to fulfill their needs or accomplish their goals, it is
also possible that they might compare themselves to others. Equity theory suggests that
people are motivated by the perceptions of the fairness of their outcomes against those of
other people around them (Adams & Freedman, 1976). This theory does not imply that
everyone will get or expect to get the same outcomes. Instead, equity theory argues that
people will compare their inputs (e.g., quantity of work, quality of work, education, spe-
cialized skills) against their outputs (e.g., compensation, promotion, recognition, positive
evaluations). The same person will also evaluate the inputs and outputs of others around
them (e.g., coworkers). The conclusion might be that equity is perceived: someone else
might earn more, but has more education, years of experience, or other qualifications.
However, there might also be perceptions of inequity; for example, two people doing the
same job with roughly the same qualifications, but one earns significantly more. A key
takeaway from this theory is that managers should pay attention to the fairness of their
employment practices and ensure that people are recognized and rewarded in line with
their contributions.
Managers must go beyond the understanding of motivational theories and aim toward
the goal of employee satisfaction and engagement. In support of this notion, the service
profit chain (Heskett et al., 1994) suggests that employers should provide excellent inter-
nal service to their employees, which would, in turn, drive higher levels of satisfaction
and engagement. Increased employee satisfaction, in turn, improves customer satisfaction,
which will eventually reveal itself in business-related outcomes such as improved profit-
ability. Given the importance of the concepts of job satisfaction and employee engage-
ment, let us turn our attention to better understanding these two different yet related
concepts. Weiss (2002) argued that job satisfaction is an attitude that entails a positive
or negative assessment concerning one’s job. Using this definition, job satisfaction is a
cognitive evaluation (i.e., an attitude) that is formed after experiencing a particular job.
More recently, we’ve learned that role conflict (negative effect), burnout (negative effect),
socialization, and autonomy are all significantly related to job satisfaction in the service
sector (Yang, 2010). Furthermore, various terms and conditions of employment, including
training, compensation, supervisor support, and coworker support, have been proven to
directly impact job satisfaction (Gu & Chi Sen Siu, 2009) (Figure 13.6).
In addition to having positive job-related attitudes (i.e., satisfaction), it has been
argued that employers should also actively engage their employees. Employee engage-
ment has been characterized as encompassing a sense of energy, efficacy, and involvement
(Maslach et al., 2001). Engagement has been a popular term among many in the busi-
ness and academic communities as it includes elements related to the use of emotion,
cognition, and behavior (Saks, 2006). Keeping employees engaged is a problem of the
contemporary workplace. “Based on this extensive measurement and analysis, Gallup has
FIGURE 13.6 Keeping employees engaged is important for service organizations as an em-
ployer as well as for the improvement of service to its customers.
been able to determine that 29 percent of the U.S. workforce is engaged, 55 percent is
not engaged and 16 percent is actively dis-engaged” (Echols, 2005, p. 44). In light of these
statistics, managers might wonder: how can we improve employee engagement? Some
factors which contribute to improved engagement include a good fit between the person
and the job, appropriate resources to do the job, and growth opportunities (Rothmann &
Rothmann, 2010). Furthermore, the quality of work environment and relationships with
coworkers has been found to contribute to employee engagement (Anitha, 2014). In
addition to factors associated with the employee and work conditions, the style of lead-
ership also has a significant influence on employee engagement (Zhang et al., 2014). The
SHRM proposed seven key steps to promote engagement (Lytle, 2016). Accordingly,
providing the right tools for the job is critical, as their absence will likely generate dis-
engagement. Providing individualized attention as well as training opportunities are also
important to keep employees engaged. Employees need to feel that they’re more than
a number and that their opinions and suggestions are valued. Recognizing employees
for their work and effort in public is yet another effective way to improve engagement.
Finally, opportunities for social interactions among workers as well as service projects
can help develop a sense of belonging and purpose which ultimately improve employee
engagement (Lytle, 2016).
Attaining high levels of engagement is important toward reducing employee turnover.
Employee turnover takes place when an employee exits the organization (voluntarily or
involuntarily). Turnover can be a problem as it creates both tangible and intangible costs
for organizations. Some tangible costs include training, employee uniforms, cost asso-
ciated with recruitment and selection of a new employee, and any incentives provided
(e.g., sign-in bonus, relocation, etc.). Furthermore, when an employee leaves, there’s often
lost productivity, which is to say the difference in performance levels between an inexpe-
rienced and an experienced worker. It usually takes some time, training, and skill to reach
peak levels of productivity. When an employee leaves and a new employee is hired, the job
might have a learning curve, and even if an employee is hired with more work experience,
he or she will have to adapt to a new organization, processes, and information systems.
Finally, when an employee leaves, the organization might lose some of its knowledge or
intellectual capital. Although this part is harder to measure, it is typically felt among those
employees that remain within the organization.
THE SERVICE CULTURE
As humans interact, they develop culture. You might be familiar with this term, as it usu-
ally relates to national culture. A country’s language, symbols, anthem, values, holidays,
and other elements are all part of what makes it unique. Each organization has its own
culture: you might notice that in some companies, people are more formal and others
more casual, some companies stress efficiency and others thrive on innovation. Formally
defined as an organizational culture is “the system of shared actions, values, and beliefs
that develops within an organization and guides the behavior of its members” (Schemer-
horn et al., 2001). One important element of an organization is a saga or origins story. For
example, cast members (employees) at Disney learn how Walt Disney started the com-
pany and how he’d like everyone to remember that “it all started with a mouse”. Employ-
ees at Marriott learn how the company’s founder started with a small root beer stand and
eventually grew the company into a global hotel powerhouse. Culture is also reflected in
the language. You might notice that employees within a company have their own lingo,
phases, acronyms, and words that are only known to insiders (Figure 13.7).
A company’s culture is communicated through physical structures, colors, and décor.
Employees at Google headquarters enjoy an office environment that features volleyball
courts, company massages, on-site physician, restaurants featuring free food, napping pods,
and office spaces where employees can bring their pets to work. These physical elements
communicate to employees that this is a fun and vibrant culture. Similarly, these office
amenities reduce external distractions, thus allowing employees to be creative. A culture
also contains a set of values which the company holds dear and ultimately drive the behav-
ior of its members. Hilton communicates its values by using a pneumonic tool which relies
on its name to create an acronym (HILTON):
• H – Hospitality: We’re passionate about delivering exceptional guest experiences.

• I – Integrity: We do the right thing, all the time.
• L – Leadership: We’re leaders in our industry and in our communities.
• T – Teamwork; We’re team players in everything we do.
• O – Ownership: We’re the owners of our actions and decisions.
• N – Now” (Hilton, 2022).
FIGURE 13.7 A company’s founder has a special role in creating a company’s culture. This
statute of Walt Disney next to Mickey reminds employees of the company’s
origins.
It is not enough to have a great acronym or the best drafted mission statement; a compa-
ny’s management needs to put these principles into practice. At Airbnb, an open and hon-
est culture is created by holding world biweekly meetings where two-way communication
is encouraged. They also use their intranet to communicate important information to its
employees (Jeanetta, 2016). Furthermore, notes from executive meetings are communi-
cated to employees within 24 hours of each meeting taking place (Razzetti, 2020). At
outdoor retailer REI, employees are encouraged to take an interest in outdoor activities.
Accordingly, “They do this by allowing employees to win gear by submitting challenging
adventure proposals [and] holding town hall meetings where employees can submit anon-
ymous questions” (Jeanetta, 2016). Another example of a strong company culture can be
found in Southwest Airlines. The company’s tenants are appreciation, celebration, and rec-
ognition (Razzetti, 2020). Southwest’s culture is known for its fun element. This is often
noticed by passengers on one their many flight itineraries, as flight attendants often make
jokes and find creative ways to provide passengers with their safety briefing (Figure 13.8).
Companies in the service industries need to have a culture which supports employees
in their quest to provide excellent customer service. The hospitality industry within the
service sector has been known for its culture of welcoming the stranger, both customer
and employees. More recently, this culture and philosophy has been applied to service
organizations that don’t traditionally fit the definition of hospitality. Consequently, sev-
eral executives and researchers have advocated for the application of the organizational
FIGURE 13.8 The physical structures, décor, colors, and other aesthetic features communicate
a company’s culture to its employees.
culture that generates hospitality toward all service sectors in the pursuit of memorable
customer experiences. The hospitality organizational culture has been defined as “a system
of shared norms, values, beliefs, traditions, and expectations whose ultimate goal is to pro-
vide exceptional service and memorable satisfactory experiences to all the organizations’
stakeholders” (Pizam, 2020, p. 432). The hospitality organizational culture has five unique
features: client/server interactions, client/support staff interactions, workplace climate,
external stakeholders’ relations, and facility atmospherics (ambience) (Pizam, 2020).
As service providers seek to build a culture in which customers are welcomed and
valued, they might do well to pay close attention to the concept of “hospitableness”. Hos-
pitableness is based on the emotional responses guests perceived following the personal-
ity, attitude, and behavior of employees (Tasci & Semrad, 2016). A hospitable employee
possesses three characteristics: heartwarming, heart-assuring, and heart-shooting. A heart-
warming individual is welcoming, courteous, respectful, and kind. Heart-assuring employ-
ees are trustworthy, honest, and reliable. Finally, heart-shooting people are generous,
open, and sociable (Tasci & Semrad, 2016). The concept of hospitableness is one which
goes beyond the industries typically associated with hospitality (i.e., lodging, foodservice,
events). A hospitable employee will use his or her transferable skills to provide great
service in any industry (e.g., retail, finance, healthcare, transportation). It should be noted
that some of the characteristics deemed hospitable are personality traits. Traits by their
very definition are dispositional and tend to endure; thus some individuals are naturally
better predisposed to be hospitable. The practical implication is that managers need to
recruit and select employees who possess these traits. Some of the hospitableness charac-
teristics are behavioral and attitudinal in nature. Therefore, training and development is
critical toward developing such behaviors and attitudes. Furthermore, engaging workers
by being a great employer can create the environment where hospitableness can flourish.
• What unique competencies are needed for employees in the service sector?
• What are some causes of employee turnover in the service industry? What can compa-
nies do about it?
• Choose a training topic related to customer service. What is the best delivery method/
technique (i.e., hands-on, lecture, simulations, etc.) to deliver this content?
• What can we learn from motivational theory to keep employees engaged?
• What are some elements of an organizational culture? What characteristics should an
organizational culture should have in order to deliver exceptional guest service?
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CHAPTER 14
Customer loyalty, analytics,

and relationship management
FIGURE 14.1 In a recent survey conducted by Brand Keys, Chipotle was recognized as having
the greatest loyalty among fast, casual restaurants.
LEARNING OBJECTIVES
• Define customer loyalty

• Explain the differences between the various types of loyalty
• Analyze the costs of retaining existing customers as opposed to acquiring new ones
• Identify the ethical challenges associated with overconsumption of various services
• Differentiate between increasing “frequency” versus “loyalty” in loyalty programs
DOI: 10.4324/9780429263965-14
234 Customer loyalty, analytics, and relationship management
• Analyze the benefits and problems associated with loyalty programs

• Explain the relevance of switching costs and situational influences in customer
loyalty
KEYWORDS
• Customer Loyalty
• Attitudinal Loyalty
• Behavioral Loyalty
• Spurious Loyalty
• True Loyalty
• Customer Lifetime Value
• Captive Customer
• Loyalty Program
• Brand Community
• Database Management
• Share of Customer/Share of Wallet
• Heavy User
• Switching Costs
• Customer Acquisition Costs
• Customer Relationship Management/Marketing
• Marketing Analytics
• Relational Benefits
• Social Benefits
• Confidence Benefits
INTRODUCTION: WHAT IS CUSTOMER LOYALTY?
In order to sustain long-term operations, most service enterprises rely on a set of loyal
customers. While a single purchase contributes to a firm’s revenue stream, the lack of a
consistent stream of revenues in the future can be problematic for any business. Conse-
quently, managers and researchers have gained interest in the topic of customer loyalty.
Formally defined customer loyalty is “A deeply held commitment to re-buy or patron-
ize a preferred product or service consistently in the future, thereby causing repetitive
same-brand-set purchasing, despite situational influences and marketing efforts having
the potential to cause switching behavior” (Oliver, 1997). For most services, customers
have options: they can choose one restaurant, airline, hotel, retailer, or bank, instead of
their competitors. Furthermore, those competitors will make every effort to attract your
existing set of customers. However, truly loyal customers have both a belief and a repeat
purchasing behavior which favors their preferred brand (Figure 14.1).
Customer loyalty, analytics, and relationship management 235
Given the existence of customers who are more loyal and companies that are better at
retaining customers, a question emerges: what makes customers loyal? Customers tend to
be more loyal when the product or service is highly differentiated, a sense of community
is created, limited competition exist, in situations of price insensitivity, and when cus-
tomers are delighted by the services they receive. Some services are highly differentiated.
Major theme parks are an example of this: the Magic Kingdom at Walt Disney World is
different from Sea World in terms of its attractions, shows, theme, service, and services-
cape. Whenever a community of users exists to support product utilization, people will
likely be more loyal. A customer that belongs to a Harley Davidson motorcycle club is
likely more committed to the brand than someone that occasionally rides alone. Lim-
ited competition tends to restrict the possibility of switching behavior. For example, cus-
tomers typically have one choice for their electric and water utilities. Therefore, they’re
extremely likely to continue their service. Customers that have low price sensitivity are
less likely to engage in search behaviors, which might ultimately stray them away from
their competitors. A loyal customer at a luxury hotel such as Four Seasons is less likely to
make a decision based on price than a customer at an economy hotel on a tight budget.
Finally, delighted customers are more likely to be loyal as opposed to those who have
been simply satisfied (Ahrholdt et al., 2017; Arnold et al., 2005; Barnes et al., 2010;
Crotts & Magnini, 2011; Dey et al., 2017). Some demographic characteristics have also
been shown to influence loyalty. Research has demonstrated that middle-aged individu-
als, home owners, and those living in rural areas tend to be more loyal (Reichheld, 1993).
Higher degrees of customization also positively influence customer loyalty (Shoemaker &
Lewis, 1999) (Figure 14.2).
Customer retention (loyalty) might become a challenge when multiple competitors
exist, the product or service is not differentiated, sales promotion and discounting are
common practices, customers are dissatisfied or outraged, and whenever customers
are price sensitive. In situations where customers have many options, it becomes eas-
ier to find an alternate service which might suit their needs. Restaurants and retailers
are known to be in hypercompetitive industry characterized by low entry barriers and
therefore a greater number of competitors. For example, the restaurant review site Yelp
lists 24,453 restaurants in New York City. Compare this to the airline industry where
four carriers (Southwest, Delta, United, and American) comprise the majority of the
market for air travel in the United States (Rodriguez, 2019). Loyalty is a harder goal
to attain for products with little or no differentiation. This applies to most commodi-
ties such as apples and gasoline. Sales promotion and discounting are practices which
might erode customer loyalty. In the hotel industry, it is common for revenue managers
to discount the price of a hotel room during a nonpeak period. In the retail industry,
discounts and promotions are designed to entice customers to buy at one store, thus
potentially poaching them from their competitors. Similarly, dissatisfied or outraged
customers are less likely to be loyal. When a customer believes that he or she is not
receiving good service, search behavior might be triggered, which ultimately results in
the decision to switch service providers. Price sensitive consumers are likely to exhibit
less loyalty. Since price savings are prioritized, other features become less prominent in
their purchase decision process.
FIGURE 14.2 Highly differentiated services are more likely to generate loyalty. Volcano Bay
water park (part of the Universal Orlando Resort) is an example of a unique
setting which attracts visitors.
TYPES OF CUSTOMER LOYALTY
From a psychological viewpoint, customer loyalty is likely to have a series of precursors.

Dick and Basu (1994) classify these as cognitive, affective, and conative. The cognitive
aspects to customer loyalty involve customer thoughts about the brand being better,
superior, or significantly different than that of its competitors. In other words, these are
deeply held beliefs that customers have about a product, service, or brand. The affec-
tive antecedents to loyalty involve the emotional attachments which customers might
have to a specific brand. Finally, conative aspects of loyalty relate to factors which might
influence behaviors such as switching costs. Switching costs comprise both tangible and
psychological costs which the customer might lose when switching to another brand. For
example, a customer might have to spend time researching the new service. The same
customer might lose points or benefits received for being a frequent customer of their
preferred brand.
Customer loyalty can be classified by the intensity of both the affective and behavioral
components. Whenever a customer continues to select their preferred service provider
on a consistent basis, they’re said to be high on repurchase behavior. However, having a
strong repurchase behavior does not necessarily mean that the same customer will have
strong feelings of attachment toward a brand. It is possible that the customer repeats the
behavior out of habit, lack of alternative, or to benefit from the incentives given as part of a
loyalty program. Similarly, a customer might have a strong feeling or belief about a brand,
but this might not always be reflected in a repeated pattern of purchases. For example,
a customer might really like to stay at the Ritz Carlton, but they might neither have the
budget to stay there often nor the time to travel on a frequent basis. Whenever a customer
has a strong belief about a product or service, but not a significant amount of repurchasing
behavior, this is called attitudinal loyalty. In contrast, when customers have a strong set of
repurchase behaviors, but is not particularly strong in their beliefs about a brand, this is
called behavioral loyalty. When a customer has both strong beliefs about a brand coupled
with a strong set of repeat purchases, this is called true loyalty (Baloglu, 2002). This holy
grail of loyalty is what managers and marketers strive for. It is believed that loyal custom-
ers cost less to serve on a regular basis, are less price sensitive, spend more time with the
company, and spread positive word of mouth (Reichheld, 1996) (Figure 14.3).
Marketers and managers can also think about loyalty using two dimensions: the prof-
itability and frequency of purchase (Reinartz & Kumar, 2002). Using this framework,
four groups of customers are created. “Butterflies” are those customers that are highly
profitable, yet not very frequent. They present a high fit between a company’s offerings
and their needs and have a high profit potential. “Strangers” are infrequent customers
with low profitability. Little fit exist between their needs and the company’s offerings.
Using the same characteristics, customers with a long history of purchases and low profit
potential are called “Barnacles”. Finally, “true friends” are those customers with high levels
of profitability and high frequency of purchases (Reinartz & Kumar, 2002). Understanding
FIGURE 14.3 Casinos, such as the ones on the Vegas strip, rely on a set of loyal customers.
These businesses incentivize players to visit their hotels and casinos through their
loyalty programs.
the multiple customer groups with different patterns of behaviors helps marketers and
managers alike devise targeted strategies to attract and retain each of them.
In yet another way to classify customers, Rowley (2005) devised the “four C’s” of
customer loyalty. Accordingly, customers may be categorized as captive, convenience-
seekers, contented, and committed. A captive customer remains in relationship with the
firm because they either have no choice or perceive they have no other alternative. These
attitudinally neutral customers may require a major change in personal circumstance or
environmental factors in order to make a change. From a practical standpoint, someone
might be captive, in that they’re bound by a long-term contract with the firm or in situ-
ations were no competition exists (i.e., monopoly). Certain services often benefit from a
captive customer. For example, passengers inside a cruise ship are captive to the company’s
offerings. Restricted to the options aboard, ships often capitalize on this circumstance to
boost beverage sales and offer premium experiences (e.g., specialty dining at an extra cost).
Movie theaters also have a captive audience once inside their facilities. This facilitates the
purchase of highly priced popcorn, candies, and beverages which are much more profitable
than the sale of tickets. Some customers are convenience-seekers. These low-involvement
consumers repeat purchases out of routine (Rowley, 2005). A customer might stop at a gas
station because it is closer to home. Yet, another customer might eat lunch at a restaurant
because it is walking distance from work. Some services such as quick service restaurants
(i.e., fast food) appeal to a customer’s desire for convenience by having multiple loca-
tions throughout a city, offering a drive-thru, deliveries, and many other features aimed at
making a customer’s life easier. A third group of customers can be classified as contented.
Contented consumers have a generally positive attitude about the brand, though they’re
not strongly committed (Rowley, 2005). From a practical standpoint, it might be diffi-
cult to get contented customers to buy additional products or services. For instance, the
customer might have an Apple iPhone and a Windows-based computer. Ideally, the orga-
nization would like to improve the amount of business they do with them. Finally, some
customers are committed to a company and its services. These are the individuals who
are prone to co-create with a brand, spread positive word of mouth, and buy additional
products and services from the same brand (Rowley, 2005). Although it is possible for a
committed customer to consider other products and services, their level of devotion to the
brand is such that there is a low probability of switching behavior (Figure 14.4).
The relationship between companies and their customers need to go beyond a single
transaction. Indeed, the concept of Customer Lifetime Value (CLV) proposes that cus-
tomers are more valuable than a single transaction. Therefore, losing a customer means
losing the stream of revenues they would generate over the course of their lifetime. In
order to calculate lifetime value, a company must determine the size of each customer
transaction, the frequency in which customer make said purchases, and the number of
years that the customer can be reasonably expected to come back. Similarly, companies
need to be cognizant of their customer acquisition costs. These can be calculated by the
total marketing expenses divided by the number of customers. The goal is for the CLV to
far exceed the cost of customer acquisition.
In practice, customers might have split loyalty portfolios of habitually bought brands
(Uncles et al., 2003). This means that a customer might do business with two or three of
their favorite retailers, thus alternating between them as time goes by. Whereas a traditional
FIGURE 14.4 Once aboard the cruise ship, passengers represent a captive market. Cruise lines
will try to sell beverages, premium dining, merchandise, and other services.
marketing strategy might advocate for acquiring more new customers, sometimes the
market is saturated and unlikely to grow. Therefore, some marketers have attempted to
increase the frequency of purchases in one business (as compared to others) which is fre-
quently referred to as the share of customer or the share of wallet. For example, let’s take
our retail customers who buy from three distinct stores. Let’s assume that their purchases
are split evenly between the three. One of these retailers might attempt to get the cus-
tomer to spend 50% of their budget (instead of 33%) in their store. This strategy will result
in the same number of customers contributing a greater amount of revenue.
Many business sectors are characterized by a relatively small number of consumers
which accounts for a large amount of the revenues generated by the organization. These
customers often termed “heavy users” by marketers have been studied in various contexts,
including wine consumption (Goldsmith & d’Hauteville, 1998) and travel (Litvin, 2000).
Heavy users can be more involved and interested in a product category (Goldsmith &
d’Hauteville, 1998). A study on vacation marketing categorized 22% of customers as
“heavy users” of vacations. Despite their relatively small size, they accounted for 41% of
all vacations taken (Litvin, 2000). Heavy users of vacations travel twice as often as light
travelers, are more likely to be married, and have a higher level of education and income.
Furthermore, they’re more likely to be opinion leaders and early adopters in the travel
space (Litvin, 2000) (Figure 14.5).
FIGURE 14.5 Frequent vacationers account for a large share of hotel nights and airplane
flights. A recent study found that 22% of customers accounted for 41% of all
vacations taken.
Increasing customer loyalty can have ethical implications for managers and marketers
alike. A person who goes to the casino too often can develop a gambling addiction. Simi-
larly, a bar patron who visits frequently can develop alcoholism. In recent years, many have
grown concerned about the potential addictive effects of various technologies. Research
has demonstrated that addiction to video games results in loyalty (Lu & Wang, 2008).
However, this desired marketing outcome can have detrimental effects on the social lives
of consumers. Similarly, addiction to smartphones has been demonstrated to improve cus-
tomer loyalty (Kim & Shin, 2016). Consequently, developers of technologies have added
incentives to study the consumers and develop features which might increase their screen
time. Socially responsible firms pay attention to customer behavior which might result
in negative effects on the customers and the community. Making customers aware of
their own behavior, intervening when necessary, and creating programs to help those who
develop addiction are all actions which companies can do to help customers.
LOYALTY PROGRAMS
In the service industries, loyalty programs abound. These programs are a tool for marketers
to sustain and reward a steady base of customers. Loyalty programs have many benefits
to the organization, including the acquisition of customer data, the likelihood to return,
remaining competitive with other firms who offer similar programs, and the ability to
customize rewards. Loyalty programs can also present challenges to businesses. Critics
argue that customers might become loyal to the rewards and not the company or brand
(Dowling & Uncles, 1997). Therefore, many programs reward frequency as opposed to
loyalty. Another criticism to loyalty schemes is that they tend to over-rely on behavioral
measures, such as frequency of purchases, which might not always indicate the probability
of purchasing in the future. Furthermore, rewarding frequency without understanding the
profitability of each customer can present risks in the long term for businesses (Kumar &
Shah, 2004). The hazard for a company offering a loyalty program emerges whenever
another firm was to offer greater benefits, thus motivating customers to engage in switch-
ing behaviors. Cost is another concern for loyalty programs. For example, in the casino
industry complimentary amenities (such as free hotel room nights and free food and bev-
erage) can account for as much as 25% of their costs. Yet another challenge with loyalty
programs is the difficulty to use them. While some programs are simple, other programs
make it exceedingly complicated to redeem rewards by adding blackout dates and similar
obstacles (Figure 14.6).
Loyalty programs can vary in terms of the type, quantity, and frequency of their
rewards. Bonvoy, the loyalty program from Marriott, allows customers to accumulate
points which can be changed for stays at their hotels and resorts. Airline reward programs
FIGURE 14.6 Critics to loyalty programs argue that customers can become loyal to the rewards
and not the company itself.
such as Delta Sky Miles allow customers to accumulate miles and later exchange them for
free or discounted airfare. Furthermore, as members gain more status, they qualify for ben-
efits such as access to their lounge and complimentary upgrades (when available). Movie
theater rewards system such as the Regal Crown Club allow members to accumulate
points which can lead to rewards such as free popcorn, beverages, and movie tickets. Star
Rewards, the loyalty scheme from the department store Macy’s, provides a discount to its
cardholders as well as free shipping. The higher the status in the program, the deeper the
discount offered to customers. Banana Republic’s BR Rewards provides customers with a
$5 “cash” reward for every $100 spent, which can then be redeemed at any of their stores.
These types of rewards entice the customer to return and will likely generate revenue that
goes beyond the reward provided (e.g., a customer might come with a $5 reward at the
store and end up spending $100 in total). Credit card clients from Bank of America can
accumulate points with their purchases, which can later be extracted in a cash payment or
a product or service from their catalog.
The manner in which rewards are structured is also key to foster customer retention.
Studies have found that immediate rewards are preferred by customers as compared to
delayed rewards (Dowling & Uncles, 1997). A popular rewards program in the online
retailing world is Amazon Prime. Unlike other schemes, members of prime must pay a fee
to Amazon in exchange for their membership. This grants them free deliveries throughout
the year, regardless of the order amount. Indeed, one of the greatest barriers to trade for
an online retailer was shipping costs. With the advent of Prime, customers can shop easily,
knowing that they will not be charged any additional amounts for their shipping. In addi-
tion to the shipping benefits, members also get streaming benefits and shopping discounts,
among others (Amazon, 2019).
A well-designed loyalty program ought to build an emotional attachment to the brand.
Furthermore, using customized recognition “trophy” rewards and tailored offers and mes-
sages can create a stronger loyalty program (Shoemaker & Lewis, 1999). Members of
loyalty programs might also be offered greater access to the brand or more variety (Uncles
et al., 2003). For instance, a theme park might be offered extra hours to its top visitors.
Similarly, a movie theater might offer a special screening of a movie to some of its most
loyal customers. Hotel customers might be given access to the concierge lounge and other
additional services. Loyal airline customers might be given the opportunity to have prior-
ity when boarding the plane (Figure 14.7).
In addition to the tangible benefits offered by loyalty schemes, these programs offer one
additional psychological benefit: they appeal to the customer’s need for esteem. Programs
often reward people with a title or a status such as “gold” or “platinum”. In fact, to some
customers, this status is probably more valuable than the tangible rewards themselves.
People desire to be recognized by their service providers as well as their peers. Research
on guests traveling suggests that “bragging rights” or the acquisition of status via travel
stories, artifacts, and photographs is one reason why frequent travelers continue to travel
(Torres, 2016).
Good reward programs have common features and benefits. Although loyalty programs
have their drawbacks, some of the best plans are those that enhance the service value
proposition, broaden the availability of services, and neutralize a competitor’s program
(Dowling & Uncles, 1997). Focusing on customer loyalty requires a paradigm shift for
FIGURE 14.7 Airlines such as Emirates offer loyalty benefits such as a special lounge at the
airport.
service providers. This might entail redefining target customers, revisiting employment
policies, and redesigning incentives (Reichheld, 1993).
CUSTOMER ANALYTICS AND LOYALTY
In recent years, many in the business field have highlighted the concept of “big data” or
“big data analytics” as one of the top business trends. With the advancement of technol-
ogy, managers are better able to understand both the financial and behavioral aspects to
their business. For the purpose of this chapter, we will focus on consumer analytics or
marketing analytics, which can be defined as the collection of various types of data from
(and about) consumers that can be analyzed and interpreted for the purposes of guiding
managers and marketers in making smart business decisions. Some companies have entire
divisions of their business devoted to understanding and predicting consumer behavior.
For example, Walt Disney World has a Consumer Insights division which uses data to
guide various decisions at the theme park resort. For instance, using prior park attendance,
school schedules, economic data, and other sources, analysts can predict future visitation
to their theme parks. These can help develop plans for staffing, procurement, and make
revenue predictions.
One way in which companies can use consumer data to improve sales and generate loy-
alty is through targeted product recommendations. You may have experienced this when
online shopping. Technology allows retailers to make suggestions of related products. For
example, you might have purchased a suit and the retailer’s software suggests a tie to go
along with the purchase. Another person might be buying a laptop computer and the soft-
ware makes a suggestion for a computer bag to transport their new purchase. Using both
human intuition and statistical analysis, companies can make predictions of customers who
buy X product would be likely to buy Y product. Sometimes, the data will be presented
to the consumers with a heading like “similar customers purchased xyz products”. Com-
panies can brainstorm these connections or use mathematical logarithms to predict what
consumers might desire. The more purchases a customer makes, the more accurate these
logarithms may become at predicting consumer behavior. Streaming services have become
quite adept at understanding the preferences of consumers. Whenever you watch a show
or movie, the system notes that in the database and is able to recommend similar shows
and movies. Perhaps you like comedies, then the system will demonstrate other comedies.
Maybe the system will note that you watch movies by a certain actor or actress, then the
system will make a suggestion of movies starring the same leading man or woman.
Data can also help marketers make timely promotions. For example, a ski resort might
use prior booking transactions to understand how far in advance bookings are made.
Knowing this information can be advantageous, as the ski resort can then schedule their
promotions around the time in which they expect bookings to occur. Companies might
also recognize when a customer has been absent for a long time. For example, if a restau-
rant realizes that a customer has not visited within six months (whereas they used to visit
every month), they might send a reminder to visit along with a gift card to entice guests to
return. Customizing an offering might be yet another advantage of analytics. For example,
the same ski resort might use data from prior visits to know your pillow preference (e.g.,
foam versus feather), room type preference, favorite magazines, favorite things to eat or
drink, activity preference, and other facts. This information can be utilized to customize
the experience in such a way that a guest’s preferences are honored even before the guest
makes a request (Figure 14.8).
Service organizations can also partner with other companies offering complimentary
products and services. For example, whenever someone purchases an airline ticket, he or
she might be offered a car rental, hotels to stay at in the destination, and tickets to local
attractions. Big data can help companies make customer profiles. This can help organiza-
tions know which customers are most likely to purchase, which are the most profitable,
and which are most likely to switch. Using this information can result in more targeted
marketing strategies which generate the kinds of customers which are most loyal and
profitable.
Loyalty programs can be a useful way to gather customer data. A company might know
some consumer demographics such as age, gender, and marital status. Loyalty cards can
gather information on the types of products and services purchased, frequency of pur-
chases, size of each transaction, and common product pairings. This information can be
analyzed using statistics in order to better predict consumer behavior and target marketing
campaigns based on information. Companies can also capture data based on your online
search behavior, social media browsing habits and check-ins, and through web-based
FIGURE 14.8 Data can help marketers gain a better understanding of consumer behavior.
applications. It is noteworthy that in recent years, many consumers have grown concerned
about how much data is collected about them and how it is being utilized. Social media
giants and technology companies have come under intense scrutiny over their data shar-
ing, selling, and marketing practices. Therefore, companies face an ethical challenge about
what kinds of data to collect, how to utilize them, and how to disclose these practices to
consumers.
As with any kind of data analysis, big data presents certain limitations. The first and
possibly most important one has to do with using the past to predict the future. While
data from prior months or years can be useful to forecast, it does not always account for
what might happen in the future. For example, let’s say that a theme park receives a lot
of visitors from a certain country. What happens if on a given year that country hosts the
Olympics? Or perhaps if the country goes into recession? In both of these scenarios, the
theme park can expect a lot less international visitors from that country. Data might not
always account for major changes in life status such as marriage, birth of a child, or a move
to a different city. Any of these changes are likely to affect consumer behavior in profound
ways. The development of new technologies as well as the entrance of new competitors
in the marketplace can also throw a “curve ball” in the most sophisticated mathematical
model.
CUSTOMER RELATIONSHIP MANAGEMENT
Successful companies think of customers as more than one transaction. Instead, great orga-
nizations focus on the quality of the relationship between them and their customers. This
new emphasis has resulted in the practice of customer relationship management (CRM)
or customer relationship marketing. Kotler and Armstrong (2001) define relationship mar-
keting as “creating, maintaining, and enhancing strong relationships with customers and
other stakeholders” and posit that marketing is “the science and art of finding, retaining,
and growing profitable customers” (p. 667). Just like in personal relationships, marketing
relationships take effort to build. However, they can yield great benefits for marketers
and consumers alike. Companies can benefit from a core group of loyal customers who
purchase more frequently, are more profitable, and have greater emotional attachments
to the brand. Customers can also accrue benefits from a long-term relationship with their
service providers and relational benefits can be the key to creating relationship quality
(Hennig-Thurau et al., 2002). Relational benefits include confidence benefits, social bene-
fits, and special treatment benefits. Confidence benefits can be defined as the “perceptions
of reduced anxiety and comfort in knowing what to expect in the service encounter”
(Hennig-Thurau et al., 2002, p. 234). When companies offer quality services, they provide
customers with a sense of consistency and reliability which assures them of what to expect
in the future. This can be advantageous from a firm’s perspective, as the customer might
perceive higher risks and switching costs, thus rendering them less likely to defect. Social
benefits relate to “the emotional part of the relationship and are characterized by personal
recognition of customers by employees, the customer’s own familiarity with employees,
and the creation of friendships between customers and employees” (Hennig-Thurau et al.,
2002, p. 234). Perhaps you get your haircut with the same person every time and have
come to know him or her better as the years pass. Similarly, a restaurant server might come
to know you well and get to know your tastes and preferences. Not only are employee-to-
customer relationships valuable, customer-to-customer (C2C) interactions can also foster
improved loyalty. Members of a country club might form friendships with other members,
which might over time become one of their primary reasons for membership. Similarly,
customers might be part of the experience of others, as in the example of a karaoke bar.
Finally, special treatment benefits can take on many different forms, including “consumers
receiving price breaks, faster service, or individualized additional services” (p. 234). Com-
panies may offer their most loyal guests a special line for check-in (thus reduced waits),
a special lounge, complimentary upgrades, special events, and many others. These forms
of special treatment might increase feelings of exclusivity or appeal to a guest’s need for
esteem, thus improving loyalty (Figure 14.9).
In order to attain the benefits of CRM, it is important to pay attention to the ways in
which it is implemented. Prior studies suggest that some of the key inputs toward rela-
tionship management include gaining a better understanding of customer expectations,
building service partnerships, employee empowerment, and successful implementation of
quality management principles (Evans & Laskin, 1994). It is also important to acknowl-
edge that businesses form different types of bonds with their customers. Financial bonds
are those that provide various types of incentives to customers (Chiu et al., 2005). Loyalty
programs often provide complimentary services, discounts, and special promotions to their
members. These bonds strengthen the relationship between the firm and its customers,
but can be easy to replicate by competitors. Social bonds are formed by the interpersonal
relationships between employees and customers or even amongst customers themselves.
FIGURE 14.9 Members of a country club gain social benefits by virtue of the relationships they
develop with other members.
Chiu et al. (2005) highlight the benefits of these bonds as follows: “social bonds dis-
pose customers to self-disclosure, listening, and caring, which in turn improve the mutual
understanding between the customer and the service provider, their openness, and their
degree of closeness” (p. 1683). Social bonds are harder to replicate, as each person is a dis-
tinct human being, thus making each relationship unique. Structural bonds entail aspects
of the relationship which create unique value and are difficult to replicate (Chiu et al.,
2005). There are benefits that a customer might gain with one firm such as partnerships
with other entities and packaging of various services together at a special price, and ease
of use which may keep the customer committed to the relationship.
Customer loyalty is essential for the financial sustainability of service businesses. In
many industries, a variety of choices along with marketing efforts make loyalty an elusive
goal. Marketers and managers should know the different types of loyal customers and the
behaviors they exhibit. Furthermore, best practices on the design and implementation of
loyalty programs should be followed. Care should be taken not to encourage overcon-
sumption to the point where it has detrimental health or financial effects on consumers.
Finally, gathering and analyzing data on consumers is the purpose of marketing analytics.
Such data can help marketers and managers understand the customer, target specific rec-
ommendations and campaigns, and design more personalized services.
• What is customer loyalty? How does loyalty differ from frequency?

• What industries could benefit from increasing the share of wallet or share of customers?
Why?
• What are some best practices concerning loyalty program management? Can you think
of some best in class companies?
• In what ways can a company strike a balance between gathering data to better know
consumers while respecting their privacy?
• List the different types of loyal customers. How do they differ from one another? Which
one would be the most desirable?
• What are the internal and external factors that foster or deter from customer loyalty?
• Customers accrue a set of benefits as a result of long-term relationship with businesses.
What are they? How can companies strengthen these bonds?
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CHAPTER 15
Service innovation
The key to business growth and
sustainability
FIGURE 15.1 The Giraffe Manor in Kenya presents an example of service innovation. Guests
can closely interact with Giraffes, as they roam around the property and even
poke their heads inside the restaurant and other hotel facilities.
LEARNING OBJECTIVES
• Understand the concept of service innovation

• Analyze the strategies of service innovation
DOI: 10.4324/9780429263965-15
Service innovation: The key to business growth and sustainability 251
• Recognize the critical role of service innovation in driving business growth and
sustainability
• Articulate the methods of leveraging information technologies for service innovation
KEYWORDS
• Service Innovation
• Assimilation Perspective
• Demarcation Perspective
• Sectorial Dimension
• Activity Dimension
• Agent Dimension
• Exploitation Innovation
• Exploration Innovation
• Output Innovation
• Process Innovation
• Experiential Innovation
• Systemic Innovation
• Business Growth
• Business Sustainability
• Service-Dominant Logic
• Employee Innovation Behavior
• Smart Service
WHAT IS “SERVICE INNOVATION”?
Service innovation is a critical piece for organizations to focus as they seek to differen-
tiate themselves from their competitors. Service innovation is the juxtaposition of both
internal and external knowledge to create new service models or processes or technolo-
gies to advance service offerings (Hameed et al., 2021). Without using service innovation
to continue to add onto an organization’s value proposition, the business may become
stagnant and unattractive to consumers while other businesses are continuing to develop
themselves. Due to the intangible nature of services, its impact may sometimes be harder
to identify and witness how innovation takes place. Furthermore, since service interactions
are short-lived and unique to the interactions themselves, any service innovations may
appear to be a short-term effect. Additionally, due to its high intangibility, replication by
competitors tends to be an easy accomplishment (McDermott & Prajogo, 2012). However,
one thing that cannot be duplicated is the talent and experience that individuals can bring
with them to assist in innovating.
The term “service innovation” has been assigned multiple definitions in the past decade.
One of the most prominent definitions comes from Van Kleef and Roome (2007) who
252 Service innovation: The key to business growth and sustainability
define innovation as “the process of discovery and development that generates new prod-
ucts, production processes, organizations, technology, and institutional and systemic
arrangements” (p. 13728). The process of innovation may include but not be limited to
technology advances and knowledge enhancement as well as the creation of new ideas.
Service innovation can emerge from an entrepreneurial company or an existing company
committed to being innovative. Sometimes innovation is more challenging to emerge
from an established business, as they don’t have strong incentives to transform or disrupt
their current business model. For example, peer-to-peer accommodation platforms such
as Airbnb were not created by hotel chains; instead, they were developed by technology
entrepreneurs. Innovation may involve technology, though not every innovative idea relies
on it. For instance, a company can launch a new service, create a unique design, or launch
a new brand. Figure 15.1 illustrates this type of innovation with the development of the
Giraffe Manor, a hotel which distinguishes itself from others by the close interaction with
animals. Service innovation may also emerge from collaboration or co-creation efforts with
customers, a subject which we explain earlier in this textbook. For example, IKEA has
co-created with design students and customers to produce new and innovative designs and
solutions to furniture and home décor needs. Some innovations are simply creative mar-
keting; for example, some yoga studios have created “goat yoga”, which allows customers
to interact with goats as they practice yoga, or even “hot yoga” which, as the name suggests,
is practiced at very high temperatures. Both are variations of the services traditionally
offered by a yoga studio or instructor, yet these add a touch of novelty (Figure 15.2).
FIGURE 15.2 Goat yoga is an example of a service innovation which has become popular in
recent years.
Innovation may lead to an increase in a business’s overall achievements as well as have

a significant impact on business sustainability. This can also be achieved through the devel-
opment and deployment of certain capabilities. In fact, business sustainability depends
on the creation of innovation as a responsive mechanism to the ever-changing needs and
wants of consumers for new products and services. Service innovation is extremely import-
ant for business success. It allows an organization to improve their services, and if properly
managed, it can contribute directly to sustainability. In a competitive marketplace, it is
important to create ways to differentiate a business from its competitors. Customers visit-
ing “Better than Sex”, an innovative bar/lounge concept, will enjoy decadent desserts and
specialty drinks with glasses coated in chocolate and other sweets, all served in a romantic
atmosphere. Dim lights and small intimate spaces serve as the backdrop to provocatively
labeled food and beverage options. Couples can spend their time sharing a set of intimate
questions (which can be accessed in a table tablet) to kick off a stimulating conversation.
While bars and lounges abound, Better than Sex presents an innovative concept which
caters to a niche market and provides a unique experience.
There are several perspectives on what constitutes service innovation. The assimilation
perspective defines service innovation in terms of the impacts of new technologies (Rand-
hawa & Scerri, 2015). This perspective is based on the premise that the service sector has
become more technology- or capital-intensive over time (Berry et al., 2006). We believe
this to be an existing trend in the service industries, given the current development of
equipping the service sector with smart sensors and wireless communications technol-
ogies. The demarcation perspective, by contrast, suggests that service innovation funda-
mentally differs in nature and character from product innovation (Witell et al., 2016).
Consequently, the question remains: how much transformation in the service needs to
occur before it’s labeled “innovative”? Witell et al.’s (2016) synthesis is a critique of both
the assimilation and the demarcation perspectives of service innovation. Their proposition
is that theories on service innovation should be broad enough to encompass innovation
in both the service and manufacturing sectors while also providing an integrative per-
spective that is not limited to technological innovations. These theories can clarify what
is innovation, yet fall short of prescribing ways to achieve it. We believe that services
often carry product-like features and likewise products often necessitate support services.
Consequently, service innovation can integrate various tangible and intangible tools at
the disposal of managers to create a unique offering. For example, Ulta Beauty created its
“GLAMlab” to help customers virtually try on makeup and beauty products. During the
COVID-19 pandemic, when customers were hesitant (or at times unable due to closures)
to visit retail stores much less to try makeup, the retailer improved its application and
integrated artificial intelligence and other technologies to produce personalized recom-
mendations (Figure 15.3).
Distinctiveness of service innovation

The complex nature of service innovation necessitates a multidimensional and interdis-
ciplinary approach for its study. The service-dominant logic offers a new perspective that
focuses on user innovations rather than services per se. The concept of service-dominant
logic considers service as the main denominator of exchange and focuses on a service pro-
cess orientation rather than output orientation. The service-dominant logic also highlights
the role of customers in value creation process, stating that value is always co-created
FIGURE 15.3 Ulta Beauty created its own “GLAMlab”, a technology tool which allows cus-
tomers to virtually try on various makeup products. This innovation was key to
the business’ resilience during the COVID-19 pandemic and continues to yield
dividends, as it promotes e-commerce transactions for beauty products.
with customers instead of solely created by the firms themselves. This stands in contrast
to the goods-dominant logic, which argues that value is created in the production pro-
cess. Based on service-dominant logic, the value of a pleasant dining experience should
be co-created through the interactions between customers and restaurant staff (i.e., chef,
waitress, greeting staff, etc.). In the retail setting, the value of a memorable shopping expe-
rience is co-created between consumers and retail service staff. Therefore, service innova-
tion becomes not just a new service offering, but rather a process of co-creating value with
customers. To understand the complex nature of service innovation, a comprehensive per-
spective is needed. Given this, we present the three distinct dimensions to explore service
innovation which have been the subject of study throughout the years.
First, sectorial dimension refers to innovations applied to different industries of services,
including both public and private service entities. Such innovations span both macroeco-
nomic and mesa-economic levels, which largely affect the bulk of societies. Innovation
plays a significant role in promoting public and social services. At an aggregated level,
service innovation explains innovative practices in the prevalent business sector of both
advanced and emerging economies.
Second, activity dimension refers to activities related to service innovation, regardless
of sectors. Considering service-oriented business innovations, the distinctive features of
innovation may change. At the activity level, the differences between service innovation
and goods innovation become hard to distinguish, in that there tends to be a mixture of
services and goods at the micro level. For example, LEGO remains one of the most inno-
vative companies that fully embrace technologies and innovative business models that
engage their consumers and leverage the advantages of crowdsourcing. The company has
fully used the power of the crowd, which means that both crowdsourcing new designs
for LEGO products and engaging consumers to share their co-created designs through
social networks, such as YouTube and Facebook. In this sense, LEGO becomes a catalyst
for creativity, which empowers users to co-create, share, and consume the designs via
various innovative models and platforms. Services are related to economic activities in
almost all the sectors, such as construction or manufacturing. Thus, service innovation
becomes an important component of innovation strategies for firms to stay competitive
and advance their businesses. From the activity dimension, service innovation becomes
simply a unique approach to business innovation in every sector. This perspective origi-
nated from Schumpeter’s (1934, 1942) works that defines innovation as an essential piece
for evolving capitalism with entrepreneurial spirit being central. Innovation creates new
services, new products, new organizational forms, new markets, and new sources where
production takes place. Service innovation includes both marketing and organizational
innovation (Figure 15.4).
FIGURE 15.4 LEGO presents an example of the activity dimension of service innovation. The
company leverages crowdsourcing to create innovative designs and models.
Third, agent dimension refers to the process of innovation that involves different
agents to coproduce the results of innovation. From the agent dimension, a service inno-
vation is the result of innovation networks where diverse agents collaborate to coproduce
a service-based innovation outcome. Popular multi-agent frameworks (e.g., Gallouj, 1994,
2002) are adapted to apply into the considerations of service innovation networks. In prac-
tice, the EU ServPPIN project, by analyzing public-private service innovation networks,
found that the agent dimension reveals the nature of open and social innovation. However,
open innovation remains a concept rather than an in-practice approach. This is because
traditional innovation models still prevail. In the service sector, the social innovation prac-
tice might be more appropriate so as to highlight the critical role of customers’ co-creation
perspectives. For example, TripAdvisor, which is an interactive platform offering access
to tourism and travel resources, works with the potential travelers or customers to better
plan trips through a process of navigating, viewing, and selecting travel accommodations
(lodging) and vendors (car rentals, package trips, etc.) during the phases of pre-trip, mid-
trip, and post-trip. In this vein, TripAdvisor users as customers co-create and experience
value with TripAdvisor.
Service innovation can be studied and practiced under the lens of outputs or processes
(Helkkula et al., 2018). An output focus on innovation emphasizes the outcome, that is,
the new services offered, their quality, and transformational or additive nature. A process
focus on innovation examines how innovation is crated and the steps needed to generate
value in service organizations. For example, a process-based focus would look at a phe-
nomena such as watching movies and explore its evolution over the decades from theaters
to physical DVD rentals, to streaming platforms. In a similar manner, service innovation
can be studied and practiced with an experiential or systemic focus. An experiential lens
would examine an innovation from the perspective of how customers enjoy the service,
their attitudes, and emotions toward it. Service innovation can bring about new ways to use
or experience the same service. For example, getting groceries delivered home via Instacart
presents a different experience than visiting the supermarket. The systemic approach to
service innovation examines the ecosystem generated by innovation. This includes other
actors and stakeholders such as customers, employees, competing and complementary
businesses, and the community at large. The creation of peer-to-peer platforms such as
Airbnb has created a new ecosystem which includes hosts. As these hosts have become
“superhosts” and held multiple properties for the express purpose of vacation rental, man-
agement companies have emerged to assist with the day-to-day operations (Figure 15.5).
Strategies of service innovation

There are different types of service innovation. According to McDermott and Prajogo
(2012), two types of service innovation exist: exploration innovation and exploitation
innovation. Exploration innovation is the innovation of products and services that are truly
unique and not available in other businesses within the industry. This type of innovation
disrupts the industry, changes the expectations, and causes other organizations to eval-
uate themselves against the new product, system, or process. This is unlike exploitation
innovation. Exploitation innovation extends the current offerings and improves upon it.
FIGURE 15.5 Service innovation can change the way customers experience an existing
service. For example, the experience of having groceries delivered via Instacart
is different than purchasing groceries yourself at the supermarket.
It primarily focuses on internal knowledge information to create better versions or com-

plements of the existing products and services (McDermott & Prajogo, 2012). For exam-
ple, Spotify, since its debut in the market in 2008, has been identified as a music industry
market disrupter. The platform offered the first of its kind to transform how consumers
experience music via data-driven personalization subscription services. Spotify’s disrup-
tive business model can be deemed as explorative innovation. However, its subsequent
updates such as premium membership, yearly review, and short-term memberships (e.g.,
daily, weekly) can be defined as exploitative innovation. Researchers found that a combi-
nation or the individuality of both types of innovation is not necessary to grow business
performance. However, the research does show that how a business attempts to interact
with each of these innovation types do contribute toward business success. Because of
this, the researchers recommend for companies to focus on both exploration and exploita-
tion innovation, not one over the other, and to reap the benefits that can be created by
synergy (McDermott & Prajogo, 2012). These innovations can also fall into two differ-
ent categories: interactive innovation and supportive innovation. Interactive innovation is
dependent on the guest enjoyment of new offerings. The latter focuses primarily on the
processes that provide the offerings to the guests. Typically, for interactive innovation to
occur, supportive innovation or an update of processes also occurs. This support will assist
in smooth operation and communication between partners in the front and back of house
areas (Tajeddini et al., 2020).
A different framework for service innovation classifies them in four categories (Berry
et al., 2006):
• Flexible solutions: These are service innovations that produce a new core benefit and
provide some temporal and space flexibilities. For example, Hello Fresh! sells meal
kits with recipes to customers. This presents a different paradigm than buying food
at the supermarket or at a restaurant. Instead, customers are given the expertise (via
recipe card), the ingredients, and flexibility to create the meal at their convenience.
• Controllable convenience: Using this type of innovation, consumers gain greater con-
trol over how they access and use the service. For example, Netflix offered custom-
ers more control over how they access shows and movies through their streaming
platform.
• Comfortable gains: These innovations make services more memorable, unique, and
distinctive. They transform the core benefit of service and take place within the
bounds at the same time and space. For example, Hotel Icon in Hong Kong sought
to solve many of the problems faced by customers in traditional hotels. When guests
arrive at a typical hotel before their room is ready (i.e., before check-in time), they
typically have nowhere to go. The Hotel Icon created a waiting lounge with com-
fortable reclining chairs and free beverages so guests can wait comfortably until their
room is ready.
• Respectful access: These innovations create greater convenience or time savings for
consumers. These services can also make service more affordable to a larger group of
consumers. Respectful access takes place within the bounds of time and space. For
example, the trading platform Robin Hood allows customers to place stock trades free
of commission. The company’s motto “to democratize finance for all” encompasses
their desire to expand access to trading beyond the institutional investors. Since then,
many other platforms have followed suit by creating a commission-free trading expe-
rience (Berry et al., 2006) (Figure 15.6).
It is suggested that business performance is directly correlated with the capabilities that
employees can perform. Since knowledge and capabilities of employees are an internal
manner, it is implied that the ability to innovate is also a measure of successful business
performance. The enjoyment that guests have will contribute toward businesses’ success,
and innovation creates these new enjoyments. Innovation is the creation and expansion
of brand value. Value proposition of a brand is extremely important since being able to
be different and unique will add a layer as to why a consumer should choose a particular
brand over another. Although this is not something that can be directly measured on a
financial statement, it has an effect on guest behavior, which can influence spending and
determine the results on various financial statements. Since open innovation can benefit
the entire industry, the more communication of both internal and external information
amongst different companies, the stronger the entire segment can become holistically
(Hameed et al., 2021).
FIGURE 15.6 Robin Hood’s trading platform sought to increase access to the stock market
to retail investors and newcomers to the investing world. This is an example of
respectful access form of innovation.
THE ROLE OF SERVICE WORKERS IN THE INNOVATION PROCESS
There is a large human element involved with service innovation that contributes to pos-
itive business results. Since innovation can lead to improved competitiveness, businesses
will want to minimize resources that can be copied by others. The talent produced by
the individual employees within a business is something that is difficult to imitate. The
need for the human ability to innovate goes beyond the frontline employees who tend to
work directly with the guests. Consequently, we argue that hiring employees with creative
traits, encouraging innovation behaviors, and creating a culture of innovation are all critical
toward the goal of service innovation.
While innovation can be radical in nature, small service innovations take place all the
time in organizations. For example, a chef might create a new food in the process of pro-
duction; this is called an “on-the-job innovation” (Li & Hsu, 2016). Through a variety of
employee innovation behaviors (EIB), employees turn ideas into reality. The process of
employee selection can be particularly critical as it relates to service innovation. Research
suggests that employees with a proactive personality, positive mindset, creative cognitive
style, and deep knowledge are more likely to be innovative. Similarly, creating positive
rewards and incentives can foster innovation among service workers (Li & Hsu, 2016).
Certain job characteristics such as complexity, autonomy, and task variety are also theo-
rized to contribute to innovation in the workplace (Li & Hsu, 2016). Appropriate knowl-
edge management systems are also a contributing factor to service innovation (Tajeddini
et al., 2020).
A supportive leadership team also greatly contributes to service innovation. Tajed-
dini et al. (2020) discovered that support of frontline managers and supervisors was key
toward fostering innovation. Leaders can inspire employees to innovate, provide feedback
as thought partners, and act as a valuable resource. More specifically, an authentic lead-
ership has been demonstrated to positively contribute to service innovation (Schuckert
et al., 2018). Since leaders set the tone of the company culture, leaders can incorporate
innovation and risk-taking. The combination of employees, leaders, knowledge, and cre-
ativity serves as a catalyst for innovation. For these items to go through, commitment must
be demonstrated by all the involved parties. By having engaged employees, businesses will
become more successful as they become more aligned with the organizations’ mission and
purpose. The “winning” strategy for firms to learn is to invest and to develop a culture of
service and innovation. For example, United Airlines developed mentorship programs to
advance innovation within the workplace, which created more opportunities for career
development and talent recruitment. Researchers have found that investing in human
development such as training, continuing education of staff and managers, and creativity
promotion has a significant effect on accelerating innovativeness within the service busi-
nesses. The key premise here is to establish a promoting environment and culture within
FIGURE 15.7 Employee capabilities, company culture, and leadership are critical to foster
service innovation.
the organization for recognizing individuals’ effects and rewarding social practices to sup-
port new service development (Figure 15.7).
Innovation in the services space can be seen as a process involving employees, custom-
ers, and organizational resources. Accordingly, researchers have proposed a series of steps
to explain how innovation ensues in service businesses (den Hertog et al., 2010):
1. Signaling user needs: Innovation in the service space is seldom produced in a lab.
Consequently, those employees and entrepreneurs seeking to innovate must be in
close touch with the needs and desires of consumers.
2. Conceptualizing: Having an idea is a good start, but to make a dream come true,
it’s necessary to take a series of first steps. Those wishing to innovate might find
themselves studying similar businesses or concepts, conducting focus groups with
consumers, obtaining the support of managers (or seeking investors in the case of
entrepreneurs).
3. (Un)bundling capabilities: This takes place when innovators examine the processes
employed by competing firms and try to satisfy an unmet need or target a niche in a
more effective way. For example, an online travel agency such as Booking facilitates
the exchange of hotel rooms, airfare, car rentals, and more. In contrast, Tour Radar
focuses on selling tours for different operators.
4. Coproducing and orchestrating: Services often require the orchestrating of various
important elements. Before opening a new restaurant concept, the restaurateur needs
to know where the food will be coming from (supplier) and hire an interior designer
to make the physical space match the vision, among many other tasks. Creating a new
ride at a theme park requires more than an individual vision; it requires the combined
efforts of concept artists, engineers, technology professionals, interior designers, and
many others.
5. Scaling and stretching: If a company desires to expand its service beyond its first
location or beyond a test market, it needs to have the right tools to scale. This means
having brand guidelines, standard operating procedures, training systems, and so on.
Expanding market share and growing the brand are great, but only if the business can
sustain high levels of quality akin to its original vision.
6. Learning and adapting: As innovations are implemented in the marketplace, compa-
nies learn from mistakes, gather customer feedback, and continuously improve the
original concept.
THE IMPORTANCE OF SERVICE INNOVATION IN DRIVING BUSI-

NESS SUSTAINABILITY
With the ever-increasing concern for sustainability, more businesses are considering sus-
tainability practices when it comes to the products and services that they offer. This need
has led to an increase in interest for innovation and the development of sustainable busi-
ness goals that both positively affect an organization’s consumers and the environment in
which it occurs. Within the service industry, it is important that business’s focus on various
strategies that contribute to service innovation which can assist in the development of a
sustainable business. These may include enhancing and incorporating advances in technol-
ogies and creating partnerships both internally and externally, as well as establishing trust
and core capabilities that contribute to and promote service innovation. Technology plays
a significant role in service innovation, as it is constantly upgraded and a result can assist
in keeping up with consumer needs and wants.
Service innovation allows businesses to enhance the way in which they provide ser-
vices to consumers, improves the levels at which they operate, increases consumer satis-
faction, and improves profitability, as well as enables them to participate in being socially
and environmentally sustainable. When businesses set sustainable objectives and goals, it
encourages and supports them to incorporate service innovation models that assist them in
implementing sustainable business practices. Sustainability is achieved when these service
innovations assist in achieving certain environmental, economic, and social concerns and
issues. Because many consumers are supportive of being sustainable, sustainability practices
can assist a business in achieving and maintaining a competitive advantage through the
alleviation of many environmental, social, and economic concerns. As a result, the relation-
ship between service innovation and sustainability does not only positively affect the con-
sumer experience, but also provides many advantages to the overall business performance.
By incorporating strategies that focus on service innovation, it provides a competitive
advantage to hospitality businesses, as it affects the way in which they function and par-
ticipate within the industry. As a result, attempts to mitigate negative impacts of business
practices influence the way in which a business competes within a market as well as the
way in which consumers perceive it. The link between service innovation and business
sustainability is therefore detrimental to the overall performance and success of a business.
Horng et al. (2016) explains that there is a strong relationship between service innova-
tion and sustainability concerns. Not only can businesses contribute to the economy and
increase market share, but they can also encourage and foster practicing and implementing
sustainable business practices. They can utilize service innovation to develop more envi-
ronmentally friendly measures and create a more unique position for them in the market.
This allows businesses to play a bigger role in corporate social responsibility and offer a
healthier platform for future contributions to sustainability.
Selected business cases

Walt Disney’s service innovation practices
The Walt Disney Company thrives on innovation to continuously develop and become a
leader in hospitality and entertainment. Their ability to innovate allows them to differ-
entiate themselves amongst competitors within their industry. Disney acknowledges that
humans are the ones responsible for the creation of the ideas that makes the company so
successful. One way to showcase this and to motivate employees to innovate is through
the Disney Inventor Award. This award recognizes employees who innovate and create
patents for the company. It also simplifies the patenting process by having a team to guide
employees (The Disney Inventor Awards). Although this is a global company recognition
program for innovation, every employee is encouraged at the local segment level.
A piece of service innovation currently in development to be rolled out as part of the

50th anniversary of Walt Disney World Resort is a new in-room amenity named “Hey, Dis-
ney!”. By utilizing an Amazon Echo Show 5 and the Amazon Alexa artificial intelligence
technology, “Hey, Disney!” allows guests to use voice commands for resort and theme park
information, room amenity requests, and for entertainment such as music and bedtime
stories. This form of artificial intelligence is something not seen in any other hotel room,
and it will be available in every guest room. This is something that is disrupting the indus-
try and would be considered an instance of exploration innovation. Because of the experi-
ence it is providing guests and the need for guests to coproduce the experience alongside
the device, this is also considered interactive innovation. However, with such a major
change in how the guest experience will occur, service innovation will also need to occur
behind-the-scenes to both maintain and sustain the operation of “Hey, Disney!”. This will
impact resort partners in housekeeping, engineering, front office, and information tech-
nology (IT). By innovating in this fashion, guests will most likely have a more enjoyable
vacation experience and will rate their experience higher than without this novelty. By
producing high guest satisfaction, the business should receive good performance results
from both new and repeat visitation. This is a great way the Walt Disney Company utilizes
their partnership by gaining external knowledge of artificial intelligence from Amazon
while merging it with internal information of guest desires and behaviors. By having highly
motivated employees on both teams and the backing of leadership support, such as Josh
D’Amaro, Chairman of Disney Parks, Experiences, and Products who made this announce-
ment, it will be a successful way to disrupt the industry.
Walt Disney World Resort also participates in exploitation innovation. One service that
is constantly being updated and expanded upon is Disney PhotoPass. Being that many
people have smartphones with camera in their pockets, Disney had to continuously evolve
this service to build the value proposition of Memory Maker, the product to purchase
the Disney PhotoPass photos. Beyond taking pictures while on an attraction, in front of a
theme park icon, or with characters, Disney PhotoPass photographers also take posed pho-
tos that are digitally edited backstage with characters and other special surprises. These are
branded as Disney Magic Shots (Disney PhotoPass). Guests do not know what is occurring
when the Disney PhotoPass photographers ask them to pose in a peculiar way. This is a
surprise and delightful moment when the guests see the finished product and may encour-
age them to purchase the photo. For this, supportive innovation from the Disney Photo
Imaging team needs to be done to create the process and method to edit the photos so that
the guest can see the interactive innovation piece as soon as possible. The expansion of the
Disney Magic Shot service expanded with new technology and new equipment. Guests
are now able to take a 360-degree photo that looks like they are standing on a globe of the
scenery called “Tiny World Magic Shots” and take a photo of a large landscape that is then
zoomed in super close to the guest (Disney PhotoPass). The expansion of these services
should make Disney PhotoPass appear more attractive for guests to enhance their vacation
and for the business to generate additional revenue for successful business performance.
Cast Members had to take the external information of how guests utilize their photos
(having multiple edits and adjustments to post on social media) and combine it with the
internal information character intellectual property and talent in digital editing to create
this idea and to be supported by the organization.
OLIVE GARDEN’S TABLE TABLETS
Olive Garden uses tabletop tablets in its restaurants. These are multifunctional, allowing
guests to order appetizers, alcoholic beverages, desserts, and children’s meals from their
table. They also feature pictures of each item. Further, guests can check the items on their
own. They can see their bill, insert or tap a card, or even verify their bill’s total and leave
the corresponding amount of cash. The tablets can even print receipts. The guest-server
interactions are limited, which gives servers more time for other things. Many guests enjoy
the ease of using the tablets; their experience pleases them and prompts them to return
for more reasons than the food.
FUJI SUSHI’S DIGITAL MENU
Fuji Sushi offered digital menus during the pandemic to avoid using menus constantly
handled by many people. The digital menu featured animations to catch people’s attention
and showcased the menu options in a way that traditional menus cannot. This was deemed
a success, not only because it kept customers interested, but also because it showed the
restaurant’s commitment to health, safety, and the environment, since it has continued to
use the digital menu. Fewer printed menus mean less waste any time something on the
menu changes.
ZELLE®: “LET’S GET MONEY MOVE”
Zelle® is a mobile payment method that provides fast, safe, and easy way for people
to send money to others within minutes, with very limited personal information (e.g.,
phone numbers or email addresses). The unique means Zelle® does is to combine their
experiences in authentication and fraud prevention to be able to create the large-scale
financial institution-delivered digital payment system in the United States. The process on
how Zelle® works is as follows: first step, customers use their mobile banking app (e.g.,
Chase Mobile, Huntington Mobile, Wells Fargo Mobile, etc.) to send payment to a person
(through his/her phone number or email address) they know and trust. Then, Zelle Net-
work® facilitates the messaging between the sender’s and the recipient’s financial institu-
tions. Last, sender will receive a notification that the money has been sent to the recipient
from Zelle® through email or phone number. Enrolled users of Zelle® will receive funds
within minutes.
NORWEGIAN CRUISE LINE’S SOLO CRUISING SERVICES
Norwegian Cruise Line (NCL) provides special options for solo travelers. NCL was the
first cruise line to build staterooms and common areas specifically for the single cruiser.
Their studios’ size is perfect for solo cruising passengers and the Studio Lounge offers
opportunities and events for single cruisers to meet up and interact. Some of the onboard
FIGURE 15.8 Whereas the cruising experience was primarily targeted at couples, NCL has
created solo cabins and a lounge which cater to single travelers.
cruise staff host bar crawls around the ship. NCL was recognized as Best for Solo Travelers
and won the Cruise Critic’s 2019 Editors’ Picks Awards. Porthole Magazine rated NCL as
the Best Cruise Line for Solo Travelers for six years in a row (Figure 15.8).
MCDONALD’S DIGITAL MENU AT DRIVE-THRU
Many fast-food drive-thru lanes have undergone recent technological conversions that
not only help customers, but also their staff. McDonald’s, for example, has added a second
drive-thru lane at many locations and installed digital menu boards. Digital boards make
it easier for the restaurant to switch from breakfast to the lunch/dinner menu. No one
has to go out to the order boards to flip them; at the appropriate time, they now change
automatically.
STARBUCKS’ DIGITAL LOYALTY REWARD PROGRAMS
Restaurant apps are making loyalty reward programs more attractive and easier than
ever for customers to join. Starbucks is a leading example of a foodservice business
which has successfully implemented a loyalty program that is popular with customers.
FIGURE 15.9 Starbuck’s loyalty program and related app present examples of service innovation.
Starbucks’ mobile app not only allows online ordering, it also sends notifications about
promotions and reward opportunities for loyalty program members. This increases cus-
tomer loyalty, because they have a motivation to spend more money and earn more
rewards (Figure 15.9).
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Index
Note: Italic page numbers refer to figures.
accommodation, and P2P services 132 cross-training 85; discussion questions 94;
Airbnb 130; customization 103, 138; service efficiency 84–5; goal 82; keywords 81;
culture 229 learning objectives 80–1; level strategy 85;
airport check in, kiosks 167 mixed strategy 85; subcontractors 85; see
Amazon Prime 152 also demand management; waiting time
ambience: Dream Hotel Group 36–7; captive customers: cruise ships 239; customer
servicescape 27, 33; Starbucks 36, 36 loyalty 238
amenity creep: customer delight 74; and customer Carlzon, Jan, Moments of Truth 18
expectations 74 case studies, sharing economy 138–41
American Automobile Association (AAA), hotel Chick-Fil-A, customization 111
ratings 48–9 Chipotle restaurants, customer loyalty 233
CitizenM hotels, customization 105, 106
benchmarking: airline luggage loss 47; best Coca-Cola freestyle machine, mass
practices 48; competitive 47; and electronic customization 98
Word-of-Mouth (eWOM) 122, 124; co-creation: access 101–2; benefits of 102;
functional 47, 48; internal 46–7; process and co-destruction 103; Converse shoes
47–8 111; Crumbl cookies 107; customization,
best practices, benchmarking 48 comparison 100–1; definition 97, 101;
Blaze Pizza, customization 99, 99 dialogue 101; disadvantages 102; examples
blogs, electronic Word-of-Mouth (eWOM) 117 97, 99; Hershey Park 109–10, 109; IKEA
blue, significance of color 187, 188, 189 96; key elements 101; keywords 97;
body language, cultural communication 186 learning objectives 96; LEGO company
branding: in gig economy 136; in sharing 100, 100, 107; mobile technology 108;
economy 136–8; Uber 139 online customer accounts 108; and product
brand promotion: consumer satisfaction 33–4; innovation 100; risk-reduction 102; of
Disney Vero Beach Resort 37; servicescape rooms, Marriot Hotels 99; social media
33–5 networks 107; and technology 104, 106;
burnout, and job satisfaction 226 transparency 102; vacation packages
buying decisions, and culture 190 104–5; of value with customers 103–6; Walt
Disney World Genie service 110; see also
capacity management: capacity flexibility 83–4, customization; sharing economy
84; capacity size 83; carrying capacity 83; co-destruction, and co-creation 103
270 Index
colors: cultural communication 187, 188, 189; culture: and buying decisions 190; and culinary
see also blue; green; white traditions 180; and customer expectations
commodity: definition 14; popcorn pebbles 16; 180; and customer experiences 189–90;
product, comparison 14 and customer service/s 178–80; definition
communications industries 22; see also cultural 178; and organizations 190; and tipping
communication 180, 181
complaints analysis, service recovery 203 customer acquisition costs, customer loyalty 238
consumer: choice, and electronic Word-of-Mouth customer analytics 243–5; customer profiling
(eWOM) 117–18, 118; definition 20; 244; customization 244; limitations 245;
involvement, electronic Word-of-Mouth targeted recommendations 244; Walt Disney
(eWOM) 115–16; satisfaction, brand World 243
promotion 33–4 customer anger: containment 76, 77;
consumer analytics see customer analytics manifestations 76; moral emotion 76;
consumer behavior: and COVID-19 pandemic prevention 76; problem-focused 76;
132; and electronic Word-of-Mouth (eWOM) rancorous rage 76; retaliatory rage 76;
118–19 vengeful anger 76
Converse shoes, co-creation 111 customer attitudes 72–7; discussion questions
Costco, customer satisfaction 68 77; emotions 72; see also customer anger;
COVID-19 pandemic: and consumer behavior customer delight
132; and service technologies 167–8; and customer delight 72, 73, 74; amenity creep 74;
Uber Eats 169; and Zoom app 167 charismatic delight 73; and customer loyalty
creativity, customer experiences 18 74; definition 73; and employee emotional
cross-cultural guest interactions: discussion labor 75; and employee empowerment 75;
questions 190–1; keywords 177–8; learning and employee turnover 75; fulfillment delight
objectives 177 74; problem resolution 73; professional
cruise ships: captive customers 239; delight 73; and service recovery 197; and
customization 101 standard operating procedures (SOPs) 75
Crumbl cookies, co-creation 107 customer education 179
culinary traditions, and culture 180 customer engagement, service recovery 202,
cultural: appropriation 180; relativism 180; 207–8, 208
sensitivity, and employee education 179, customer expectations 3; and amenity creep 74;
179; understanding, and employee and culture 180; waiting time 90
education 178–9 customer experiences 1, 3, 7; concept 14;
cultural communication 186–9; body language contactless 168; creativity 18; and culture
186; color green 189; color white 189; 189–90; customer participation 18; and
colors 187, 188, 189; examples 186; customers’ emotions 15; definition 15;
images 187; personal space 186–7; signage discussion questions 22–3; educational 18;
187, 188 entertaining 18; environmental connection
cultural dimensions: achievement/ascription 18; esthetic 18; examples 15–16; and
185; Hofstede on 181–3; implicit/explicit happiness 15; informative 18; keywords
dimension 184; individualism/collectivism 2; learning objectives 1–2; memorability
182; indulgence 183, 184; long term/ 14–15, 16, 18; online 18; originality 33;
short-term orientation 183; masculinity/ popcorn at movie theater 17; psychological
femininity 182; power distance 181–2; construct 18; sensory 17, 18; social nature of
service attributes 183–4; tourism culture 15; and technology 107; types 18; see also
185–6, 185; uncertainty, avoidance 183; Transcendent Customer Experience (TCE)
universalism/particularism 185 customer journey map 19–20, 20
Index 271
Customer Lifetime Value, customer loyalty 238 46; discussion questions 22–3; distribution
customer loyalty: affective aspects 236; channels 10; electronic Word-of-Mouth
attitudinal loyalty 237; “barnacles” (eWOM) 117–20; empathy 5, 6; expertise
customers 237; behavioral loyalty 237; 5, 7; friendliness 4, 8; heterogeneity 9,
“butterflies” customers 237; captive 11; ideal 46; inseparability 9–10, 11;
customers 238; casinos, Las Vegas 237; intangibility 9, 11; interactions 7, 10;
Chipotle restaurants 233; cognitive aspects keywords 2; learning objectives 1–2; luxury
236; committed customers 238; conative 5, 6; “moments of truth” 18–20; need
aspects 236; contented customers 238; identification 20; as performances 9, 10;
convenience-seekers customers 238; perishability 9, 10–11; problem solutions
customer acquisition costs 238; and customer 7; products, intersection 11–13, 12–13;
delight 74; Customer Lifetime Value 238; relaxation 7, 8; service manner 20; social
and customization 235; definition 234; status 5; and technology 107; traits 9
discussion questions 248; ethical issues 240; customization: Airbnb 103, 138; Blaze Pizza 99,
heavy users 239, 240; influences on 235; 99; Chick-Fil-A 111; CitizenM hotels 105,
keywords 234; learning objectives 233–4; 106; co-creation, comparison 100–1; cruise
programs 240–3, 241; repurchase behavior ships 101; customer analytics 244; and
236–7; “strangers” customers 237; switching customer loyalty 235; definition 97, 101;
costs 236; “true friends” customers 237; true Dell Computers 97, 98; and differentiated
loyalty 237 services 235, 236; Disney Epcot theme park
customer profiling, customer analytics 244 101; examples 98, 99; hotel rooms 105,
customer relationship management 245–7; 105; keywords 97; learning objectives 96;
confidence benefits 246; discussion questions mass 97; My Disney Experience 107; Netflix
248; financial bonds 246; relational benefits 104, 104; Panera Bread 111; restaurant
246; social benefits 246, 247; social bonds kiosks 108–9; service technologies 163;
246–7; special treatment benefits 246; and technology 106; Uber 139; see also
structural bonds 247 co-creation
customer satisfaction: Costco 68; definitions 64; Cyclebar iPad check in, service
Delta Air Lines 62; disconfirmation theory technologies 171
64, 65; keywords 63; learning objectives
62–3; zone of tolerance 64–5, 65; see Dell Computers, customization 97, 98
also customer loyalty; customer satisfaction Delta Air Lines, customer satisfaction 62
surveys demand management: aim 82–3; examples
customer satisfaction surveys 65–72; central 85–6, 86
tendency bias 66; customer interviews 69; disconfirmation theory, customer satisfaction
e-mail 68–9; focus groups 69–70, 71; key 64, 65
questions 65–6; kiosk system 67; length of discussion questions: capacity management 94;
survey 66; leniency bias 66; Likert scale cross-cultural guest interactions 190–1;
66; Net Promoter Score (NPS) 69; non- customer attitudes 77; customer experiences
completion 66; phone calls 67–8; purpose 22–3; customer loyalty 248; customer
70; response rates 66–7; self-selection bias service/s 22–3; electronic Word-of-Mouth
67; and standard operating procedures (eWOM) 124; service quality 60; service
(SOPs) 71; standardized 69; strictness bias recovery 210–11; subscription business
66; text messaging 68; timing issues 66; use model 156
70–1 Disney Epcot theme park, customization 101
customer service/s: affiliation 7; convenience 5, Disney MagicMobile, self-service technologies
6; and culture 178–80; definition 3; desired (SSTs) 172
272 Index
Disney Vero Beach Resort: brand promotion 37; events industry 22

servicescape 37–8; topiaries 37 expectancy theory, motivation 225–6
Disney World theme parks, servicescape 37
Dream Hotel Group: ambience 36–7; feedback, electronic Word-of-Mouth (eWOM) 121
servicescape 37 financial industries 22
focus groups, customer satisfaction surveys
e-commerce 146 69–70, 71
electronic Word-of-Mouth (eWOM): and Forbes Travel Guide, hotel ratings 49
benchmarking 122, 124; blogs 117; and Fuji Sushi digital menus, service innovation 264
consumer behavior 118–19; and consumer functional congruence, servicescape 32
choice 117–18, 118; consumer involvement functionality, servicescape 28, 31–2
115–16; content 120–1; criticisms of 120;
customer service/s 117–20; discussion GDP: main types 21–2; and service industries 21
questions 124; feedback 121; and human gig economy: for and against 134–6;
resources actions 121–2; influencers 117; branding in 136
key issues 123–4; keywords 114; learning Giraffe Manor hotel, service innovation 250, 252
objectives 113–14; monitoring responsibility goat yoga, service innovation 252, 252
122–3, 123; response strategy 121, 123; Google, service culture 228, 230
review credibility 116, 116, 122; review green, cultural communication 189
sites 117; and service recovery 203–4;
social media managers 120; software Hamburger University, McDonald’s 221
management 120; sources 117 happiness, and customer experiences 15
emotions, customer attitudes 72 Harry Potter Wand, self-service technologies (SSTs)
empathy: customer service/s 5, 6; service 171, 172
quality 45 Harry’s Shave Club 145, 145, 149
employee development 220–1; assessment 223; HBO Max 155
career development 223–4; formal education healthcare industry 22
223; job experiences 223; mentoring 223; Hello Fresh 143
see also training Hershey Park, co-creation 109–10, 109
employee education: and cultural sensitivity 179, Hilton Hotels, service culture 228
179; and cultural understanding 178–9 hiring see recruitment
employee emotional labor, and customer Hofstede, Geert, on cultural dimensions 181–3
delight 75 Hogwart’s Castle, Universal Orlando Resort 25
employee empowerment: and customer delight Hopper app, service technologies 172–3
75; Ritz Carlton Hotel 205, 205; and service hospitableness, characteristics 230–1
recovery 201, 205–6 hospitality industry: service technologies 164;
employee engagement 226–7, 227; key steps to servicescape 34–9; see also hotels;
improving 227 restaurants
employee recovery process, and service recovery hotel rooms: customization 105, 105; near-field
206, 206 communication technology 170; robots 170;
employee turnover: costs 228; and customer self-service technologies (SSTs) 164, 168;
delight 75 service failures 195, 195; voice control 170
employment tests: cognitive abilities tests 218; hotels: in-room tablets 169–70; rating systems
personality testing 218; work samples 218 48–9, 49; self-check-in kiosks 160; service
entrepreneurship, sharing economy 134 technologies 165; see also hotel rooms
equity theory, motivation 226 human resources actions, and electronic Word-of-
ethical imperialism 180 Mouth (eWOM) 121–2
Index 273
IKEA store: co-creation 96; layout 29 Marriott Hotels: co-creation of rooms 99;
images, cultural communication 187 origins story 228; service recovery 201;
influencers: electronic Word-of-Mouth (eWOM) servicescape 38–9
117; review sites 117 Maslow, Abraham, Hierarchy of Needs 224–5
International Organization for Standardization memorability, customer experiences 15
(ISO) 54; certification 55 mentoring, employee development 223
interviews see recruitment interviews mobile technology, co-creation 108
job satisfaction, and burnout 226 “moments of truth”: customer service/s 18–20,
19; multiple 19
keywords: capacity management 81; co-creation motivation: definition 224; equity theory 226;
and customization 96; cross-cultural guest expectancy theory 225–6; theories 224–6
interactions 177–8; customer experiences 2; My Disney Experience app, Walt Disney
customer satisfaction 63; electronic Word-of- World 173–4
Mouth (eWOM) 114; peer-to-peer services mystery shopping 51; checklist 50–1
128; recruitment 214; service innovation
251; service quality 42; service recovery National Institute of Standards and Technology
194; service technologies 159; servicescape (NIST), and Ritz Carlton hotel 55
26; subscription business model 144; near-field communication technology, hotel
training 214 rooms 170
knowledge industries 22 Net Promoter Score (NPS): core groups 69;
customer satisfaction surveys 69, 70
learning objectives: capacity management 80–1; Netflix 145–6
co-creation and customization 96; cross- Norwegian Cruise Line: self-service technologies
cultural guest interactions 177; customer (SSTs) 161; service innovation 264–5, 265
experiences 1–2; customer satisfaction
62–3; customer service/s 1–2; electronic Olive Garden restaurants, service innovation 264
Word-of-Mouth (eWOM) 113–14; peer-to- Online Travel Agency (OTA) 10
peer services 127; recruitment 213; service organizational culture: definition 228; hospitality
innovation 250–1; service quality 41–2; 230; origins story 228; see also service
service recovery 193–4; service technologies culture
158; servicescape 25–6; subscription organizations, and culture 190
business model 143–4;
training 213 Panera Bread, customization 111
LEGO company: co-creation 100, 100, 107; peer-to-peer services: and accommodation 132,
service innovation 255, 255 135; authenticity 131; examples 130;
lighting, servicescape 32 features 130; keywords 128; learning
Likert scale, customer satisfaction surveys 66 objectives 127; lodging providers 130–1;
lodging providers 21; P2P services 130–1; service normative sharers 133; online shopping/
technologies 161; see also hotels delivery 132, 133; pioneers 128; sharing
Lyft company 130 idealists 132; sharing opponents 133;
sharing pragmatists 133; sustainability 132;
McClelland, D.C., Acquired Needs Theory 225 Uber Eats 139; unique
McDonald’s 59–60; digital menu 265; experiences 132
Hamburger University 221; service Peloton 146, 147
innovation 265 personal space, cultural communication 186–7
Malcolm Baldrige National Quality Award: key Pine, B.J. & Gilmore, J.H., The Experience
criteria 54; Ritz Carlton hotel 55, 56 Economy 14
274 Index
popcorn: part of customer experience 15; review sites: electronic Word-of-Mouth (eWOM)
product 16 117; influencers 117; YouTube 117
pricing, dynamic 11 Ritz Carlton Hotel 34; employee empowerment
product: commodity, comparison 14; 205, 205; Malcolm Baldrige National
popcorn 17 Quality Award 55, 56; and National Institute
product innovation, and co-creation 100 of Standards and Technology (NIST) 55
products, customer service/s, intersection 11–13, robots, hotel rooms 170
12–13 root cause analysis: definition 53; the five Why’s
property management system (PMS): service 54; process 53; use 53
technologies 164, 168–9; Vinoy Renaissance Rosen Hotels and Resorts: Pillars of Strength 215;
Resort 170–1 service celebrations 215; service culture
214–15
QR code scan, restaurants 170 Rover organization, pet care 130, 131
quality: intrinsic 46; and mass production 45; see Royal Hawaiian and Antica Farmavista Hotel,
also service quality; six sigma process scent marketing 35, 35
quality awards, organizations 53–4
quality circles 43–4, 44 S&P 500 index 21
queues: examples 87; multichannel, multiphase safety concerns: sharing economy 136; Uber 139
lines 88, 88; multichannel, single phase safety and security issues, service recovery
line 88, 88; multiple 87; single 87; single 208–10
channel, multiphase 87, 88; single channel, scent marketing, Royal Hawaiian and Antica
single phase 87, 87; types 86; virtual 89 Farmavista H
quick service restaurants (QSRs) 4, 11 self-service technologies (SSTs) 10; Disney
MagicMobile 172; Harry Potter Wand 171,
rating systems: hotels 48–9, 49; service quality 172; hotel rooms 164, 168; hotel self-
41, 48–52; Uber Eats 141; see also mystery check-in kiosks 160; Norwegian Cruise Line
shopping 161; restaurants 162–3
recruitment: keywords 214; learning service attributes, cultural dimensions 183–4
objectives 213 service business 20–2
recruitment interviews: behavioral interviews service business success, and service technologies
217–18; structured interviews 217; 163–6
unstructured interviews 217 service components 8–13
recruitment methods: advertising 216; career service culture 228–31; Airbnb 229; discussion
fairs 217; colleges and universities 216; questions 231; Google 228, 230; Hilton
employment agencies 217; executive Hotels 228; Rosen Hotels and Resorts
searches 217; job board postings 216; 214–15; Southwest Airlines 229; see also
labor unions 216; online job postings 216; organizational culture
professional organizations 217; screening of service failures: blame attribution 197; causes
candidates 218; social media 216; see also 195–7; complainants 203; costs 194;
employment tests customer facilitation 203; and customer’s
response strategy, electronic Word-of-Mouth counterfactual thinking 198, 198; customer’s
(eWOM) 121, 123 fault 195–6; and customer’s goals 197;
restaurant kiosks, customization 108–9 external problems 196, 196; features 197;
restaurants 21; QR code scan 170; self-service hotel rooms 195, 195; moral violations 197;
technologies 162–3; service technologies non-complainants 203; service interactions
166, 166 195; service product 195; timing 197; see
retail industry, worldwide sales 21 also service recovery
Index 275
service guarantees, and service recovery 202–3 analysis 203; comprehensiveness 201–2;
service industries: and GDP 21; size 21; talent customer accessibility 201, 202; customer
acquisition 216–19 data collection 202; and customer delight
service innovation: activity dimension 254–5; 197; customer engagement 202, 207–8,
agent dimension 256; assimilation 208; customer influence 202; customer
perspective 253; comfortable gains involvement 202; discussion questions
258; conceptualizing 261; controllable 210–11; distributive justice 198–9; empathy
convenience 258; coproducing and 200; and employee empowerment 201,
orchestrating 261; definition 251–2; 205, 205–6; and employee recovery process
demarcation perspective 253; employee 206, 206; employee-to-customer ratio 202;
innovation behaviors 259–60; examples and eWOM channels 203–4; features
252, 262–6; experiential lens 256; 196–7; formality 201; informational justice
exploitation innovation 256–7; exploration 199; interactional justice 199; justice issues
innovation 256; flexible solutions 258; Fuji 198–9; keywords 194; learning objectives
Sushi digital menus 264; Giraffe Manor 193–4; Marriott Hotels 201; paradox 197;
hotel 250, 252; goat yoga 252, 252; problem fixing 200–1; problem ownership
importance of 253; interactive 257–8; 200; procedural justice 199; safety issues
keywords 251; learning and adapting 261; 208–10; safety and security issues 208–10;
learning objectives 250–1; LEGO company and service guarantees 202–3; see also
255, 255; Norwegian Cruise Line 264–5, service failures
265; Olive Garden restaurants 264; output service technologies: and COVID-19 pandemic
focus 256; process focus 256; respectful 167–8; customization 163; Cyclebar
access 258, 259; scaling and stretching iPad check in 171; examples 158, 159,
261; sectorial dimension 254; service 170–4; Hopper app 172–3; hotels 165–6,
workers, role 259–61; service-dominant logic 165; keywords 159; learning objectives
253–4; signalling user needs 261; Spotify 158; lodging providers 161; property
257; supportive 257–8; and supportive management system 164, 165, 168–9;
leadership 260; and sustainability 261–2; restaurants 166, 166; and service business
systemic approach 256; TripAdvisor 256; success 163–6; uses 159–60; see also self-
(un)bundling capabilities 261; Walt Disney service technologies (SSTs)
World 262–3; Zelle payment method 264 service workers, role in service innovation 259–61
service organisations, role in servicescape 31–3 service/s: examples 14; see also customer
service principles ix service/s
service quality: absence 42; assurance 45; audits, servicescape: ambience 27, 33; brand promotion
process 52; dimensions 44–6; discussion 33–5; cognitive response 32; concept 26–7;
questions 60; empathy 45; examples 43; as differentiator 31, 32, 34; dimensions
functional quality 45; image factor 45; 27–8, 30; Disney Vero Beach Resort 37–8;
keywords 42; learning objectives 41–2; Disney World theme parks 37; Dream Hotel
measurement 56–7; rating systems 41, Group 37; elaborate 30; emotional response
48–52; reliability 45; responsiveness 45; 32; establishment of 30; as facilitator 31;
restaurants 56–7, 57; SERVQUAL paradigm functional congruence 32; functionality
45–6; statistical tools 55; tangibles 45; 28, 31–2; hospitality industry 34–9, 164;
technical quality 45; tools 46–8; see also keywords 26; lean 30; learning objectives
root cause analysis 25–6; lighting 32; Marriott Hotels 38–9;
service recovery 3, 42; acknowledgment 199; model 27; as package 31; physical aspects
apology 200, 200; assurance provision 27; psychological response 32; service
201; compensation 201; complaints organisations, role in 31–3; signage 28;
276 Index
social environment 27; spatial layout 28, 31, subscriptions 147; keywords 144; learning
33; Starbucks 36 objectives 143–4; limitations 150–1;
SERVQUAL paradigm: limitation 46; service predefined subscriptions 146, 147; pricing
quality 45–6 considerations 154; productivity subscriptions
sharing economy: advantages and disadvantages 146; and recurring revenue 148; replenish
134–6; branding in 136–8; case studies subscriptions 146; strategies 155; surprise
138–41; definition 129; entrepreneurship subscriptions 146; upselling opportunities
134; examples 129, 130; key concepts 149; utilization rate 150
128–9; origins 128; safety concerns 136; as sustainability: peer-to-peer services 132; and
socioeconomic ecosystem 133; sustainability service innovation 261–2; sharing
130; see also gig economy; peer-to-peer economy 130
services
signage: cultural communication 187, 188; talent acquisition, service industries 216–19
servicescape 28 Tapu watch, Volcano Bay 174
six sigma process 55–6; organizations using 56 Task Rabbit company 130
Skinner, B.F., operant conditioning 225 technology: and co-creation 104, 106; and
smartphone, “Handy, “ Westin Chosun Hotel customer experiences 107; customer service
(Seoul) 173 107; and customization 106; see also
social environment, servicescape 27 service technologies
social media managers, electronic Word-of-Mouth theme park industry 22
(eWOM) 120 tipping, and culture 180, 181
social media networks, co-creation 107 Total Quality Management (TQM): tenets 43; see
Southwest Airlines: service culture 229; turnaround also quality circles
time 84–5 tourism culture, cultural dimensions 185–6, 185
spatial layout, servicescape 28, 31, 33 training: definition 220; evaluation 223; keywords
Spotify 149, 149; service innovation 257 214; learning objectives 213; lesson
standard deviation 55 plans 222; need ascertainment 221–2;
standard operating procedures (SOPs) 57–80; organizational analysis 221–2; person
and customer delight 75; and customer analysis 222; phases 221; SMART objectives
satisfaction surveys 71; examples 58; 222; subject matter experts 222; task
franchises 59–60; limitations 59; restaurants analysis 222; training design 222; see also
59; room cleaning 58, 58 employee development
Starbucks: ambience 36, 36; convenience 6; Transcendent Customer Experience (TCE) 18
digital loyalty reward programs 265–6; transportation industry 21
servicescape 36 travel attractions 22
statistical tools, service quality 55 TripAdvisor: ratings 190; service
stereotyping, avoidance of 180 innovation 256
subscription business model: access subscriptions TripAdvisor Popularity Index 119, 119
147; actions to take 154; adoption Turo, car-sharing 139, 140
issues 153–4; benefits 147–9; churn rate
150–1; competition considerations 154; Uber 129, 129; branding 139; customization
cost of customer acquisition 151; cross- 139; fare splitting 139; safety
selling opportunities 149; curated surprise concerns 139
subscriptions 147; customer motivations Uber Eats: branding 140; and COVID-19
152–3; digital delivery 144; discovery pandemic 169; partnerships 140; peer-to-
subscriptions 146; discussion questions 156; peer service 139; problem reporting 204;
examples 144–5, 146; general surprise rating 141
Index 277
Ulta Beauty, “GLAMlab” 253, 254 Disney Experience app 173–4; origins story
user-generated content see electronic Word-of- 228, 229; service innovation 262–3; virtual
Mouth (eWOM) queues 89, 89
Walt Disney World Genie service,
vacation packages, co-creation 104–5 co-creation 110
voice control, hotel rooms 170 Westin Chosun Hotel (Seoul), “Handy”
Volcano Bay, Tapu watch 174 smartphone 173
white, cultural communication 189
waiting time: abandonment 81; causes 82; winery, Marques de Riscal, Spain 29
and color use 92; customer expectations word of mouth: definition 115; features 115; see
90; enhancement provision 90, 91, 93; also electronic Word-of-Mouth (eWOM)
entertainment provision 90–1, 91; examples Wynn Hotel, Las Vegas, 5 star rating 49
80, 81, 83; fairness perception 91;
information provision 91, 93; perceived 91, YouTube, review sites 117
92; positive effects 93–4; reduction 91–2,
174; and resource improvement 91–2; see Zelle payment method, service innovation 264
also queues zone of tolerance, customer satisfaction
Walt Disney World: customer analytics 243; 64–5, 65
entertainment 5; Italy Pavilion 28, 30; My Zoom app, and COVID-19 pandemic 167

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“This new book on customer service marketing offers a refreshing and insightful look at

This timely book is a comprehensive overview of customer service principles, theories,

Edwin N. Torres and Tingting Zhang

1 What is service? The origin and evolution of customer experiences 1

2 Servicescape: Visualizing service quality and value 25

3 Service quality: Tools and strategies 41

4 Customer attitudes and emotions: From delight to outrage 62

5 Waiting for service: Strategies to reduce waits and the perception

6 Co-creation and customization: Engaging the customer in value

7 Electronic word of mouth: Understanding the customer’s voice 113

8 The sharing economy/peer-to-peer services: Revolutionizing the

9 Subscription services and new business models 143

10 Service technologies: Delivering a seamless experience 158

11 Cross-cultural guest interactions: Appealing to a broad customer base 177

12 Recovery strategies for service managers 193

13 Recruiting, training, and engaging talent for service organizations 213

14 Customer loyalty, analytics, and relationship management 233

15 Service innovation: The key to business growth and sustainability 250

Edwin N. Torres and Tingting Zhang

What is service? The origin

• Differentiate between commodities, products, services, and experiences

• List different types of customer experiences

SERVICE DEFINITION AND ITS BENEFITS

Car Wash Roadside

FIGURE 1.10 Products and services are connected.

Dance attire Styling and

FIGURE 1.11 Products and services are connected.

FIGURE 1.12 Hotel product and service.

FIGURE 1.13 Restaurant product and service.

WHAT ARE CUSTOMER EXPERIENCES? DIFFERENCES

FIGURE 1.14 Popcorn pebbles are considered a commodity.

FIGURE 1.15 Microwave popcorn is considered a product.

FIGURE 1.16 Popcorn at the movie theater is part of a broader experience.

be perceived. Architects, interior designers, choreographers, fashion experts, composers,

THE SERVICE BUSINESS

• Understand the concept of “servicescape”

• Analyze the critical factors in establishing a successful servicescape

Dimensions of the servicescape

THE ROLE OF THE SERVICESCAPE IN SERVICE

Servicescapes are important within service organizations, particularly within hotels.

PROMOTING BRANDS THROUGH SERVICESCAPES

Selective business cases

Disney World theme parks

Disney’s Vero Beach Resort

Marriott Hotel groups

• Define service quality

• Apply quality tools to improve quality in service enterprises

QUALITY AND ITS DIMENSIONS

SERVQUAL relies primarily on self-reports of experiences by former customers. Conse-

1. Identify problem area(s)

3. Identify leaders in the process

There are multiple sources of information in order to conduct a benchmarking study.

RATING SYSTEMS AND MYSTERY SHOPPING

• Did the host/hostess made eye contact when approached?

QUALITY AUDITS AND ROOT CAUSE ANALYSIS

QUALITY AWARDS AND STATISTICAL CONTROL TOOLS

STANDARD OPERATING PROCEDURES

As demonstrated throughout this chapter, companies have a variety of means to ensure

AAA – American Automobile Association (2019). Diamond rating definitions. Retrieved

Customer attitudes and

• Define customer satisfaction

• List the various means of collecting customer satisfaction data

WHAT IS CUSTOMER SATISFACTION?