Managing Customers in Services

Philip Moscoso & Alejandro Lago

Services = I + I + I
Services =

The client DEMANDS

AT THEIR FREE WILL and WITHOUT TIME FOR REACTION

CAPACITIES and WAITINGS

IMMEDIATE
PERSONAL INTERACTIONS

The clients ACTS

UNPREDICTABLE and FANCIFUL

INTERACTIVE
EXPECTATIONS and PERCEPTIONS

The client EVALUATES

SUBJECTIVELY
P. Moscoso & A. Lago

INTANGIBLE
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An OPERATIONAL definition of a services

In service processes, the customer provides significant input into the production process.
What shall we do? a miracle.

Without customer there is no service possible

P. Moscoso & A. Lago

Fuente: Sampson and Froehle 2006

Reviewing customer role in services

1.Customer as a buyer 2.Customer as co-producer 3.Customer as a partner

P. Moscoso & A. Lago

Traditional operations view: demand variability and utilization

Waiting
Increase Variability

=0

=1
HOW CAN CUSTOMERS INTRODUCE VARIABILITY INTO OUR SYSTEM?

Utilization

P. Moscoso & A. Lago

Customer implications (3Is) on service management

Customer as a buyer El cliente como agente Activo (Productivo) Capacidad (Habilidad, esfuerzo) El cliente como agente Emotivo (Evaluador) Preferencias Exp - Percep

Arrivals When?

Services What?

Motivacin y esfuerzo

Management challenges

How to manage customer variability without reducing customer experience? How to accommodate variability without increasing much costs?
P. Moscoso & A. Lago
Source: Adapted from Frei, 20066

Managing customer variability

Arrivals When?

Services What?

Reduce (with or w/o reducing experience)

High/low season pricing Reservations Limit opening times

Accommodate (with or w/o costs)

Excess capacity Flexible openings Back-office centralization Mask waitings Self-service

Variability in Alternative services with arrivals

complementary demand Subcontract

Variability in services Segment clients demanded

Reservations (preselection Excess capacity per type of requests) Polyvalent resources Reduce offer (transversal) Persuade clients Manage back-office (centralized) /automate Self-service
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P. Moscoso & A. Lago

Reviewing customer role in services

1.Customer as a buyer 2.Customer as co-producer 3.Customer as a partner

P. Moscoso & A. Lago

Where/when to put the customer to work an ambitious example

P. Moscoso & A. Lago

Where and how I want the customer to work?

Candidate activities to outsource to customer
Cost for the firm larger than the perceived value/cost for the customer (i.e., gas station)
- No scalable - Easy and acceptable for the customer

High demand variability difficult to control (i.e., AVR) Customer controls better the final result (i.e., sugared coffees) Delay the delivery of the main service process (e.g. fill in info sheet) NO differential activities in the overall service delivery (e.g. auto-check-in for economy class?)
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The challenging tasks of achieving collaboration Future Bank Migrate clients to cheaper electronic channels and ATMs
- Greeters: employees at entrance indicating options and explaining use

Clients hand-over cars to other clients (per hour rent)

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From a pasive buyer to an active collaborator

Customer as a buyer Customer as an active agent (productive) Capabilities El cliente como agente Emotivo (Evaluador) Preferencias Exp - Percep

Arrivals When?

Services What?

Motivation and effort

Management challenges Accommodate or reduce variability with reasonable costs Control clients impact on service operations
-Where and how should the client collaborate? -Can and is (s)he willing to collaborate? -How may I control him/her?

P. Moscoso & A. Lago

Source: Adapted from Frei, 2006

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Managing variability in collaborations

Reduce (with or w/o reducing experiencie)

Arrivals When?

Services What?

Capabilities

Motivation and Effort

Accommodate (with or w/o costs)

Employees perform all work

Employees with experience Require training Variability (instrumental or voluntary) Flexibility in service in delivery (eg. level of capabilities Focus on clients according automation or to capability segmentation) Other clients as trainers Incentive /penalize efforts (instrumental) Employees with experience (and sensibility) Employees perform all work Flexibility in service operation (eg. automation) Interaction client-client
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Variability in Effort

Segment clients by effort level Motivate discretionary effort (normative)

P. Moscoso & A. Lago

Managing the client: From an instrumental to a normative approach

From the stick and carrot
Targets rational part Economic incentive
- i.e, discount on low season - Late fee

to the proudness and shame

Targets emotional part Incentive by service convenience
- e.g., Rush hour traffic information

Shame feeling Service prevention protocols Focus on groups Quality control by other clients (Peer pressure)

Service recovery protocols Focus on individuals Individual supervision by the company Provides moral excuse (eg. kindergarden)
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Prevent clients from failing

Employees Clients
Complexity Ease of use Support

Process

Communication Clarity of roles Fit Capability Attitudes and effort Training

Understand client failure root causes

Functionality Access Realiability Ease of use Indications Layout Ambience

Technology
P. Moscoso & A. Lago

Context
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Fuente: Tax et al. 2006

Final step: the client exists, therefore thinks

Customer as a buyer Arrivals When? Services What? Customer as an active agent (productive) Capabilities Client as an emotional agent (Evaluator) Satisfaction Exp - Percep

Motivation and effort

Management challenges Accommodate or reduce variability with reasonable costs Control clients impact on service operations Control expectations and perceptions of the client, and those of the other clients, as well as the work quality of all of them
16 Source: Aspated from Frei, 2006

P. Moscoso & A. Lago

Managing preferences

Arrivals When?

Services What?

Capabilities

Motivation and Effort

Satisfaction

Reduce (with or w/o reducing service experience) Preferences and satisfaction

Manage expectations

Accomodate (with or w/o costs)

Very experienced employees (and with sensibility

Segment clients by Self-service (increase preferences (eg. customers influence on (Expectations- maniacs vs. I dont care) service results )

Perceptions)

Interaction client-client

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Defining the information & control system

Customer Satisfaction

Expectations
MARKET TEST Global market surveys Customer panels Focus groups interviews

Perceptions
PERCEIVED QUALITY Transactional surveys New customers /defector surveys Complaint letters Guarantee executions COMUNICATION TO CUSTOMER /RECOVERY

Customer side Company side

CUSTOMER EXPECTATIONS into VALUE PROP

SERVICE MODEL DESIGN

SERVICE DELIVERY (Control)

P. Moscoso & A. Lago

OBJETIVE QUALITY (PROCESS) Service process reviews Front-office employees reports Mystery shoppers

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Anlisis del rol del cliente en servicios

1.Customer as a buyer 2.Customer as co-producer 3.Customer as a partner

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Point of arrival: how far to go with customer involvement?

Customer Satisfaction
Customer side Server/Company side
CUSTOMER EXPECTATIONS into VALUE PROP SERVICE DELIVERY (Control) COMUNICATION TO CUSTOMER /RECOVERY

Expectations

Perceptions

SERVICE MODEL DESIGN

(Operational Client collaboration system Efficiency) (Selling, Definition, Delivery and Control)
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Client as a partner some examples

Examples Advantages Higher satisfaction
- Customization - Identification (participates actively) - Thinks it will be cheaper

Less costs Better variability management Market intelligence (R&D) Develops content Our best selling agents Life can be easier for employees Helps us to improve steadily

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Key Message We need reconsider and extend the customer participation in the process
Customer as a buyer Arrivals When? Services What? Customer as an active agent (productive) Capabilities Client as a Partner (Evaluator)

Motivation and effort

Intelligence

P. Moscoso & A. Lago

22 Source: Aspated from Frei, 2006

Message 2: Systematic evaluation

#1. Understand what the customer wants and what he contributes with
-Value equation, price but also personal cost and uncertainty level

#2. Where and how I need the customer to participate?

-Consider the customer noise: demand level, variability of servic offered but also capabilities and effort required from customer -Do not forget to consider what we want him absolutely not to do!!

#3. How do I manage to make the customer work as required

- Normative vs Instrumental!!! - Preventive design!!!
SERVICE DESIGN
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