Crafting the Service Environment. Overview of the session What Is the Purpose of Service Environments? Understanding Consumer Responses to Service.

Crafting the Service Environment

Overview of the session

What Is the Purpose of Service Environments?

Understanding Consumer Responses to Service Environments

Dimensions of the Service Environment

Putting It All Together

What Is the Purpose of Service Environments?

Purpose of Service Environments

Helps firm to create distinctive image and unique positioning

Service environment affects buyer behavior in three ways:

Message-creating medium: Symbolic cues to communicate the distinctive nature and quality of the service experience

Attention-creating medium: Make servicescape stand out from competition and attract customers from target segments

Effect-creating medium: Use colors, textures, sounds, scents and spatial design to enhance desired service experience

Comparison of Hotel Lobbies

Four Seasons Hotel, New York Orbit Hotel and Hostel, Los Angeles

Each servicescape clearly communicates and reinforces its hotel’s respective positioning and sets service expectations as guests arrive

Physical surroundings help shape appropriate feelings and reactions in customers and employees For example: Disneyland

Servicescapes form a core part of the value proposition For example: Las Vegas, Florida-based Muvico

- Las Vegas: Repositioned itself to a somewhat more wholesome fun resort, visually striking entertainment center

- Florida-based Muvico: Builds extravagant movie theatres and offers plush amenities. “What sets you apart is how you package it..” (Muvico’s CEO, Hamid Hashemi)

The power of servicescapes is being discovered

Servicescape as Part of Value Proposition

Understanding Consumer Responses to Service

Environments

The Mehrabian-Russell Stimulus-Response Model

Response/ Behavior:

Approach Avoidance and

Cognitive Processes

Environmental Stimuli and Cognitive

Processes

Dimensions of Affect:

Pleasure and Arousal

Feelings Are a Key Driver of Customer Responses to Service Environments

Insights from Mehrabian-Russell

Stimulus-Response Model

Simple yet fundamental model of how people respond to environments

The environment, its conscious and unconscious perceptions, and interpretation influence how people feel in that environment

Feelings, rather than perceptions/thoughts drive behavior

Typical outcome variable is “approach” or “avoidance” of an environment, but other possible outcomes can be added to model

The Russell Model of Affect

Arousing

Pleasant

Sleepy

Unpleasant

Exciting

RelaxingBoring

Distressing

Insights from Russell Model of Affect

Emotional responses to environments can be described along two main dimensions:

Pleasure: Direct, subjective, depending on how much individual likes or dislikes environment

Arousal: How stimulated individual feels, depends largely on information rate or load of an environment

Russell separated cognitive part of emotions from these two emotional dimensions

Advantage: simplicity, allows a direct assessment of how customers feel

Firms can set targets for affective states

Drivers of Affect

Affect can be caused by perceptions and cognitive processes of any degree of complexity

It’s the simple cognitive processes that determine how people feel in a service setting

If higher levels of cognitive processes are triggered, the interpretation of this process determines people’s feelings

The more complex a cognitive process becomes, the more powerful its potential impact on affect.

However, most service encounters are routine and simple processes can determine affect.

Behavioral Consequence of Affect

Pleasant environments result in approach, whereas unpleasant ones result in avoidance

Arousal amplifies the basic effect of pleasure on behavior

If environment is pleasant, increasing arousal can generate excitement, leading to a stronger positive consumer response

If environment is unpleasant, increasing arousal level will move customers into the “distressed” region

Feelings during service encounters are an important driver of customer loyalty

AmbientConditions

Space/Function

Signs,Symbols, and Artifacts

CognitiveEmotional

Psychological

An Integrative Framework: Bitner’s Servicescape Model

ENVIRONMENTAL DIMENSIONS

HOLISTIC ENVIRONMENT

MODERATORS

INTERNAL RESPONSES BEHAVIOR

Source: Mary J. Bitner, “Servicescapes: The Impact of Physical Surroundings on Customers and Employees,” Journal of Marketing 56 (April 1992), pp. 57-71.

Perceived Servicescape

EmployeeResponse Moderator

Customer Response Moderator

Employee Responses

Customer

Responses

CognitiveEmotional

Psychological

Approach• Affiliation• Exploration• Stay longer• SatisfactionAvoid(opposite of approach)

Approach• Attraction• Stay/Explore• Spend More $$$• SatisfactionAvoid(opposite of approach)

Social Interaction Between

Customers and Employees

An Integrative Framework: Bitner’s Servicescape Model (2)

Identifies the main dimensions in a service environment and views them holistically

Internal customer and employee responses can be categorized into cognitive, emotional, and psychological responses, which lead to overt behavioral responses towards the environment

Key to effective design is how well each individual dimension fits together with everything else

Dimensions of the Service Environment

Main Dimensions in Servicescape Model

Ambient Conditions Characteristics of environment pertaining to our five senses

Spatial Layout and Functionality Spatial layout:

- Floorplan - Size and shape of furnishings, counters,

machinery,equipment, and how they are arranged Functionality: Ability of those items to facilitate performance

Signs, Symbols, and Artifacts Explicit or implicit signals to:

- Communicate firm’s image- Help consumers find their way- Convey rules of behavior

Impact of Ambient Conditions

Ambient environment is composed of hundreds of design elements and details that must work together to create desired service environment

Ambient conditions are perceived both separately and holistically, and include:

Lighting and color schemes Size and shape perceptions Sounds such as noise and music Temperature Scents

Clever design of these conditions can elicit desired behavioral responses among consumers

Impact of Music

In service settings, music can have a powerful effect on perceptions and behaviors, even if played at barely audible levels

Structural characteristics of music―such as tempo, volume, and harmony―are perceived holistically

Fast tempo music and high volume music increase arousal levels

People tend to adjust their pace, either voluntarily or involuntarily, to match tempo of music

Careful selection of music can deter wrong type of customers

Impact of Music on Restaurant

Diners Restaurant Patron Behavior

Fast-beat Music Environment

Slow-beat Music Environment  

Difference between Slow- and Fast-beat Environments

Absolute Difference

% Difference

Consumer time spent at table

45min 56min +11min +24%

Spending on food

$55.12 $55.81 +$0.69 +1%

Spending on beverages

$21.62 $30.47 +$8.85 +41%

Total spending

$76.74 $86.28 +$9.54 +12%

Estimated gross margin

$48.62 $55.82 +$7.20 +15%

Source: Ronald E. Milliman (1982), “Using Background Music to Affect the Behavior of Supermarket Shoppers,” Journal Of Marketing, 56 (3): pp. 86–91

Impact of Scent

An ambient smell is one that pervades an environment May or may not be consciously perceived

by customers Not related to any particular product

Scents have distinct characteristics and can be used to solicit emotional, physiological, and behavioral responses

In service settings, research has shown that scents can have significant effect on customer perceptions, attitudes, and behaviors

Effects of Scents on Perceptions of Store Environments (1)

Evaluation Unscented Environment

Mean Ratings

Scented Environment

Mean Ratings

Difference

Store Evaluation

Negative/positive

4.65 5.24 +0.59

Outdated/modern

3.76 4.72 +0.96

Store Environment Unattractive/ attractive

4.12 4.98 +0.86

Drab/colorful 3.63 4.72 +1.09Boring/Stimulating

3.75 4.40 +0.65

Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80.

Effects of Scents on Perceptions of Store Environments (2)

Evaluation Unscented Environment Mean Ratings

Scented Environment Mean Ratings

Difference

Merchandise

Outdated/up-to-date style

4.71 5.43 +0.72

Inadequate/adequate

3.80 4.65 +0.85

Low/high quality 4.81 5.48 +0.67

Low/high price 5.20 4.93 -0.27

Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80

Aromatherapy: Effects of Selected Fragrances on People (Table 10.2)

Fragrance Aroma Type

Aroma-Therapy

Class

Traditional Use

Potential Psychological

Effect on People

Eucalyptus Camphor-aceous

Toning, stimulating

Deodorant, antiseptic, soothing agent

Stimulating and energizing

Lavender Herbaceous

Calming, balancing, soothing

Muscle relaxant, soothing agent, astringent

Relaxing and calming

Lemon CitrusEnergizing, uplifting

Antiseptic, soothing agent

Soothing energy levels

Black pepper Spicy

Balancing, soothing

Muscle relaxant, aphrodisiac

Balancing people’s emotions

Impact of Color

Colors can be stimulating, calming, expressive, disturbing, impressional, cultural, exuberant, symbolic

Color pervades every aspect of our lives, embellishes the ordinary, gives beauty and drama to everyday objects

Colors have a strong impact on people’s feelings

Colors can be defined into three dimensions:

Hue is the pigment of the color Value is the degree of lightness or darkness of the color Chroma refers to hue-intensity, saturation, or brilliance

Common Associations and Human Responses to Colors (Table 10.3)

Color Degree

of Warmth

Nature Symbol Common Association and Human Responses to Color

Red Warm Earth High energy and passion; can excite and stimulate

Orange Warmest Sunset Emotions, expressions,

warmth

Yellow Warm Sun Optimism, clarity, intellect,

mood-enhancing

Green Cool Growth, grass, and trees

Nurturing, healing, unconditional love

Blue Coolest Sky and ocean Relaxation, serenity, loyalty

Indigo Cool Sunset Mediation and spirituality

Violet Cool Violet flowerSpirituality, reduces stress, can create an inner feeling of calm

Impact of Signs, Symbols, and Artifacts

Guide customers clearly through process of service delivery

Customers will automatically try to draw meaning from the signs, symbols, and artifacts

Unclear signals from a servicescape can result in anxiety and uncertainty about how to proceed and obtain the desired service

For instance, signs can be used to reinforce behavioral rules (see picture on next slide)

Signs Teach and Reinforce Behavioral Rules in Service Settings

People Are Part of the Service Environment

Distinctive Servicescapes Create Customer Expectations

Putting It All Together

Selection of Environmental Design Elements

Consumers perceive service environments holistically

Design with a holistic view

Servicescapes have to be seen holistically: No dimension of design can be optimized in isolation, because everything depends on everything else

Holistic characteristic of environments makes designing service environment an art

Must design from a customer’s perspective

Tools to Guide Servicescape Design

Keen observation of customers’ behavior and responses to the service environment by management, supervisors, branch managers, and frontline staff

Feedback and ideas from frontline staff and customers, using a broad array of research tools from suggestion boxes to focus groups and surveys.

Field experiments can be used to manipulate specific dimensions in an environment and the effects observed.

Blueprinting or service mapping—extended to include physical evidence in the environment.

Managing People for Service Advantage

Overview of Session

Service Employees Are Crucially Important

Frontline Work Is Difficult and Stressful

Cycles of Failure, Mediocrity, and Success

Human Resources Management: How to Get It Right?

Service Leadership and Culture

Service Employees Are Crucially Important

Service Personnel: Source of Customer Loyalty and Competitive Advantage

Customer’s perspective: Encounter with service staff is most important aspect of a service

Firm’s perspective: Frontline is an important source of differentiation and competitive advantage. It is:

A core part of the product the service firm The brand

Frontline is an important driver of customer loyalty

Anticipating customer needs Customizing service delivery Building personalized relationships

Frontline in Low-Contact Services

Many routine transactions are now conducted without involving frontline staff, e.g.,

ATMs (Automated Teller Machines) IVR (Interactive Voice Response) systems Websites for reservations/ordering, payment, etc.

Though technology and self-service interface is becoming a key engine for service delivery, frontline employees remain crucially important

“Moments of truth” drive customer’s perception of the service firm

Frontline Work Is Difficult and Stressful

Boundary Spanning Roles

Boundary spanners link inside of organization to outside world

Multiplicity of roles often results in service staff having to pursue both operational and marketing goals

Consider management expectations of service staff:

Delight customers Be fast and efficient in executing operational tasks Do selling, cross selling, and up-selling Enforce pricing schedules and rate integrity

Role Stress in Frontline Employees

Three main causes of role stress:

Person versus Role: Conflicts between what jobs require and employee’s own personality and beliefs

Organizations must instill “professionalism” in frontline staff

Organization versus Client: Dilemma whether to follow company rules or to satisfy customer demands

This conflict is especially acute in organizations that are not customer oriented

Client versus Client: Conflicts between customers that demand service staff intervention

Emotional Labor

“The act of expressing socially desired emotions during service transactions” (Hochschild, The Managed Heart)

Three approaches used by employees:

Surface acting—simulate emotions they don’t actually feel Deep acting—psych themselves into experiencing desired emotion,

perhaps by imagining how customer is feeling Spontaneous response

Performing emotional labor in response to society’s or management’s display rules can be stressful

Good HR practices emphasize selective recruitment, training, counseling, and strategies to alleviate stress

Cycles of Failure, Mediocrity, and Success

Cycle of Failure (1)

Source: Schlesinger and Heskett

Customer turnover

Failure to develop customer loyalty

No continuity in relationship for

customer

Customer dissatisfaction

Employees can’t respond to customer

problems

Employees become bored

Employee dissatisfaction; poor service attitude

Repeat emphasis on attracting new customers

Low profit margins Narrow design of

jobs to accommodate low skill level

Use of technology to control quality

High employee turnover; poor service quality

Payment of low wages

Minimization of selection effort

Minimization of training

Emphasis on rules rather than service

The employee cycle of failure

Narrow job design for low skill levelsEmphasis on rules rather than serviceUse of technology to control quality

The customer cycle of failure

Managers’ short-sighted assumptions about financial implications of low pay, high turnover human resource strategies

Cycle of Failure (2)

Costs of short-sighted policies are ignored

Loss of expertise among departing employees Disruption to service from unfilled jobs Constant expense of recruiting, hiring, training Lower productivity of inexperienced new workers Loss of revenue stream from dissatisfied customers who

go elsewhere Loss of potential customers who are turned off by

negative word-of-mouth Higher costs of winning new customers to replace those

lost—more need for advertising and promotional discounts

Cycle of Failure (3)

Service Sabotage (Fig 11a)

“Openness” of Service Sabotage Behaviors

“Normality” of

Service Sabotage Behaviors

Intermittent

Customary-Private Service Sabotage

Sporadic-Private Service

Sabotage

Customer-Public Service Sabotage

Sporadic-Public Service Sabotage

e.g. Waiters serving smaller servings, bad beer or sour wine

e.g. Talking to guests like young kids and putting them down

e.g. Chef occasionally purposefully slowing down orders

e.g. Waiters spilling soup onto laps, gravy onto sleeves, or hot plates into someone’s hands

Routinized

Covert

Overt

Cycle Of Mediocrity (1)(Fig 11.5)

Good wages/benefits high job security

Other suppliers (if any) seen as equally poor

Customers trade horror stories

Service not focused

on customers’ needs

Employees spend working life

in environment of mediocrity

Narrow design of jobs

Success =

not making

mistakes

Complaints met by indifference or

hostility

Employee dissatisfaction

(but can’t easily quit) Emphasison rules

vs. pleasingcustomers

Promotion and pay

increases based on longevity,

lack of mistakes

Initiative is discouraged

Jobs are boring and repetitive; employees

unresponsive

Resentment at inflexibility and

lack of employee initiative;

complaints to employees

No incentive for

cooperative relationship

to obtain better service

Training emphasizes

learning rules

Customer dissatisfactionSource: Heskett and Schlesinger

Most commonly found in large, bureaucratic organizations

Service delivery is oriented toward

Standardized service Operational efficiencies Prevention of employee fraud and favoritism toward specific

customers

Cycle Of Mediocrity (2)

Job responsibilities narrowly and unimaginatively defined

Successful performance measured by absence of mistakes

Training focuses on learning rules and technical aspects of job—not on improving interactions with customers and co-workers

Cycle of Mediocrity (3)

Cycle of Success (1)

Low customer turnover

Customer loyalty

Continuity in relationship with

customer

High customer satisfaction

Extensive training

Employee satisfaction, positive service attitude

Repeat emphasis on customer loyalty and

retention

Higher profit

marginsBroadened job designsLowered turnover,

high service quality

Above average wages

Intensified selection effort

Train, empower frontline

personnel to control quality

Source: Heskett and Schlesinger

Longer-term view of financial performance; firm seeks to prosper by investing in people

Attractive compensation packages attract better job applicants

More focused recruitment, intensive training, and higher wages make it more likely that employees are:

Happier in their work Provide higher quality, customer-pleasing service

Cycle of Success (2)

Broadened job descriptions with empowerment practices enable frontline staff to control quality and facilitate service recovery

Regular customers more likely to remain loyal because:

Appreciate continuity in service relationships Have higher satisfaction due to higher quality

Cycle of Success (3)

Human Resources Management— How to Get It

Right?

How to Manage People for Service Advantage?

Hire the right people Enable these people Motivate and energize your

people

Staff performance involves both ability and motivation

How can we get able service employees who are motivated to productively deliver service excellence?

The Wheel of Successful HR in Service Firms (Fig 11.7)

Leadership that: Focuses the

entire organization on supporting the frontline

Fosters a strong service culture with passion for service and productivity

Drives values that inspires, energizes and guides service providers

1. Hire the Right People

3. Motivate and Energize Your

People

2. Enable Your People

Be the preferred employer & compete for talent market share

Intensify the selection process

Empower frontlineBuild high performance

service delivery teams Extensive training

Utilize the full range of rewards Service Excellence

& Productivity

Hire the Right People

“The old saying ‘People are your

most important asset’ is wrong.

The RIGHT people are your

most important asset.”

Jim Collins

Recruitment

The right people are a firm’s most important asset: Take a focused, marketing-like approach to recruitment

Clarify what must be hired versus what can be taught

Clarify nature of the working environment, corporate values and style, in addition to job specs

Ensure candidates have/can obtain needed qualifications

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

Match personalities, styles, energies to appropriate jobs

Select and Hire the Right People: (1) Be the Preferred Employer

Create a large pool: “Compete for Talent Market Share”

What determines a firm’s applicant pool?

Positive image in the community as place to work Quality of its services The firm’s perceived status

There is no perfect employee

Different jobs are best filled by people with different skills, styles, or personalities

Hire candidates that fit firm’s core values and cultureFocus on recruiting naturally warm personalities for customer-

contact jobs

Observe behavior

Hire based on observed behavior, not words you hear Best predictor of future behavior is past behavior Consider group hiring sessions where candidates are given

group tasks

Conduct personality tests

Willingness to treat co-workers and customers with courtesy, consideration, and tact

Perceptiveness regarding customer needs Ability to communicate accurately and pleasantly

Select and Hire the Right People:(2) How to Identify Best Candidates

Select and Hire the Right People:(3) Identifying Best Candidates

Employ multiple, structured interviews

Use structured interviews built around job requirements Use more than one interviewer to reduce “similar to me”

biases

Give applicants a realistic preview of the job

Chance for candidates to “try on the job” Assess how candidates respond to job realities Allow candidates to self select themselves out of the job Manage new employees’ expectation of job

Service employees need to learn:

Organizational culture, purpose, and strategy Promote core values, get emotional commitment to strategy Get managers to teach “why,” “what,” and “how” of job

Interpersonal and technical skills Both are necessary but neither alone is sufficient for optimal

job performance

Product/service knowledge Staff’s product knowledge is a key aspect of service quality Staff must explain product features and position products

correctly

Train Service Employees

Is Empowerment Always Appropriate?

Empowerment is most appropriate when:

Firm’s business strategy is based on competitive differentiation and on personalized, customized service

Emphasis on extended relationships versus short-term transactions

Use of complex and nonroutine technologies

Business environment is unpredictable, consisting of surprises

Managers are comfortable letting employees work independently for benefit of firm and customers

Employees seek to deepen skills, like working with others, and are good at group processes

Control concentrates four key features at top organization,

involvement pushes them down

1. Power to influence work procedures and organizational direction (e.g., quality circles, self-managing teams)

2. Information about operating results and measures of competitive performance

3. Rewards based on organizational performance (e.g., bonuses, profit sharing, stock ownership)

4. Knowledge/skills that enable employees to understand and contribute to organizational performance

Control versus Involvement Model of Management

Suggestion involvement Employee make recommendation

through formalized programs

Job involvement Jobs redesigned Employees retrained, supervisors

reoriented to facilitate performance

High involvement Information is shared Employees skilled in teamwork,

problem solving etc. Participate in management decisions Profit sharing and stock ownership

Levels of Employee Involvement

Build High-Performance Service Delivery Teams

The Power of Teamwork in Services

Facilitate communication among team members and knowledge sharing

Higher performance targets Pressure to perform is high

Creating Successful Service Delivery Teams

Emphasis on cooperation, listening, coaching and encouraging one another

Understand how to air differences, tell hard truths, ask tough questions

Management needs to set up a structure to steer teams toward success

Motivate and Energize the Frontline

Use full range of available rewards effectively, including:

Job content

People are motivated and satisfied knowing they are doing a good job

Feedback and recognition

People derive a sense of identity and belonging to an organization from feedback and recognition

Goal accomplishment Specific, difficult but attainable and accepted goals are

strong motivators

Role of Labor Unions

Challenge is to work jointly with unions, reduce conflicts, and create a service climate

Labor unions and service excellence are sometimes seen as incompatible

Yet many of the world’s most successful service businesses are highly unionized (e.g., Southwest Airlines)

Management consultation and negotiation with union representatives are essential if employees are to accept new ideas

Service Leadership and Culture

Service Leadership and Culture

Service culture can be defined as:

Shared perceptions of what is important Shared values and beliefs of why they are important

Charismatic/transformational leadership:

Change frontline’s values, goals to be consistent with firm Motivate staff to perform their best

Internal Marketing:

Play a vital role in maintaining and nurturing a corporate culture

Help ensure service delivery, working relationships, employee trust, respect, and loyalty

Customer Base

Middle Mgmt

And Top Mgmt

Support Frontline

The Inverted Organizational Pyramid

Frontline Staff

Top

Mgmt

Middle Mgmt

Legend: = Service encounters, or “Moments of Truth”

Traditional Organizational

Pyramid

Inverted Pyramid with a Customer and Frontline Focus

Frontline Staff