Managing Customer Service Lecture Notes PDF

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Managing Customer Service Lecture Notes Lecture One – 10/01/19     

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B2C: after sales service and customer support, managing feedback on social media B2B: delivery logistics; design services; advisory services; training Internal services: HR & IT services MCS takes an operations management perspective; the OM function is the part of the organisation that produces and delivers products and services to the customer Ryanair is an example – pilots had not taken enough annual leave – Ryanair cancelled up to 50 flights a day for 6 weeks, over 2000 flights. 18m people left wondering whether their plans would be affected. Cost of £22m in compensation payouts and shares were down by 7% within days of the announcement. KFC was forced to close half of its 900 UK stores after they ran out of chicken – implications – staff encouraged to take annual leave, most had to be paid, lost revenues, customer inconvenience, negative publicity etc. Sports Direct – high pressure on staff – ‘6 strikes and you’re out’. The need to get services right! “everyone loses when service is poor”. Must keep up with the readings and make notes on the papers – case studies are really important for the exam as they may directly relate Service operations management textbook Johnston, Clark, Shulver 2012

Course structure 1. Introduction: defining service concept 2. Designing the customer experience 3. Mass customisation or services 4. Measuring and improving service quality 5. Managing service capacity 6. Learning from the service leaders 7. Service failure and recovery 8. Implementing service guarantees 9. Drivers of service performance 10. Strategic alignment; exam preparation    

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A service concept is a shared and articulated understanding of the nature of the service provided and received. Johnston, Clark and Shulver, 2012, p48. Mission statements – where we want to be vs service concept = current offering A service concept captures information about; The organising idea – the essence of the service bought or used by the customer The customer experience – the customer’s direct experience of the service The service outcome – the result for the customer in terms of benefits, emotions and value for money Singapore Zoo challenges – aimed to be a world class leisure attraction providing excellent exhibits of animals displayed in their natural environment for the purposes of recreation, education and conservation. Challenges: o Visitors mainly Singaporeans: limited scope for increasing visitor numbers o Lots of other things to do in Singapore o Climate can be uncomfortable o International visitors can visit zoo at home o Animals sleep and hide Night safari ‘night life with a difference’ – unique experience – tackle some of the challenges i.e. climate. Lamps create a twilight effect so animals and more visible, tram ride with tour guides, safe to humans, restaurants and bars, shops etc.

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See PowerPoint for full service concept on the night safari How do we keep a concept fresh? Service profiling – mark your service against that of a competitor – can also be used to review possible changes to a current service concept. Think of the key elements in terms of customer experience and the outcomes.

Night safari service concept o Marries marketing objectives and operational capabilities o Marries customer experience with objectives of animal welfare o Unique, novel o Clear basis for competitive differentiation o Commands premium prices o Attracts international visitors o Made Singapore zoo internationally famous o Very few competitors world-wide o Not a fad: an enduring service concept Key points:  Many services perceived to be under-performing  Poor services are hugely wasteful as well as uncompetitive  Service improvement is an almost universal objective: o Especially if you compete on service! o Even if you don’t!  Great service design starts with the service concept  The service concept marries market requirements and operational objectives  The service concept needs to be a shared view  The service concept defines the essence of the service: the experience and outputs.

Lecture Two – 17/01/19 

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Service concept as a strategic tool; o defines and communicates the nature of the business o creates customer expectations and employee understanding o provides a sense of purpose o checks for marketing, operations and strategic alignment o helps develop and drive strategic advantage Implications of poor service design – critical to get service design right – about getting the whole customer experience right, memorable experience for customers Actively engaged in the process Right staff are available at the right time HM Revenue & Customs – impact of a poor service design – back office service, every stage needs to be designed appropriately to avoid errors in tax payments. Some people may be paid incorrectly which can have negative consequences on the customer Who designs the service for a secondary school? – board of governors? Monitor performance etc. – government designs education programmes, content of the education through government policy – every teacher in the school also has design responsibility – how they deliver it – impact on the whole student experience All these services have to be designed in order to get them correct Really difficult to get everything right even in a hospital – Coventry and Warwickshire hospital opened in 2006 – over 1200 beds and 27 theatres. Clinicians however still complain about the nursing work stations, size of the lifts, width of corridors, ward and cubicle layouts, inaccessibility of medical records. Why did these mistakes happen? Failure to understand the demand, poor communication, clinical procedures have changed overtime. Problem – forecasting. All medical records are stored in Derbyshire and not all are in electronic form. Had to send couriers to retrieve records when the scanner was backed up for two days. “Service design is often an ad hoc or trial and error activity. Most faults and problems are effectively ‘designed in’, albeit inadvertently, and as a result customers experience poor service and the processes are inefficient.” Service design means understanding customer expectations! Customer expectations  service delivery (GAP)  perception of service  level of satisfaction Expectations – key influences for customer expectations; o Price o Alternatives available o Marketing o Word-of-mouth o Previous experience o Customer’s mood/attitude o Confidence

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Perceptions of services remain the same, but expectations begin to increase e.g. of an industry digital banking, always expecting something more, Apple products, expectations between price and quality can vary. Change in expectation may change the way in which you evaluate the service. More critical evaluation as expectations are higher. Match expectations with perceptions – role of the ops/customer service manager “Customers perceive service in their own unique, idiosyncratic, emotional, erratic, irrational, end of the day and totally human terms. Perception is all there is.” Tom Peters But what if… the customer doesn’t know what is best, the service professional disagrees with the customer views (health care, patient does not agree with doctor’s opinion) Service quality depends on customer input. The service professional’s role is to change customer behaviour and assess the customer Defining quality in health services Professional quality o Outcome: whether the service meets the professionally assessed needs of the clients o Process: whether the service correctly select and carries out the techniques and procedures which professionals believe meet the needs of clients Client quality o Whether the direct beneficiary of the service perceives the service as giving them what they want

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E.g. Sherratton hotels – different market segments in hotels (families vs business) expectations differ in terms of reception service. Families; feel welcome, warm experience Business people; speed and efficiency Consistently overtime gets expectations wrong – Sherratton

What does a service specification look like? o Target driven process

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o Process mapping o Organisational structures o Training and education of staff o Service level agreements with suppliers o Performance management systems Metropolitan police example – no formal training in bereavement management for a long time, young officers would have shifts with a senior officer and would watch them give bad news to a family and learnt the process that way rather than being trained. The MET now have training in this area, but it wasn’t always in the specification

Gap model – analysing customer dissatisfaction if customer dissatisfaction is increasing then you can expect a mismatch between expectations and perceptions and what it is that is leading to those mismatches. Gap 1 – not knowing what customers expect: losing the patient perspective Gap 2 – the wrong/inadequate service quality standards: lack of specification Gap 3 – the service performance gap: failure to monitor and control Gap 4 – mismanaging customer expectations All lead to gap 5: failure to match expectations and perceptions Stafford hospital poor quality – mortality rates, between 400 and 1,200 unnecessary deaths between 2005 and 2008 – UK’s health system slammed over negligence and cash before care. Lack of compassion on behalf of staff that stricken patients of their dignity. Never shared with the public. Higher than average death rates. Some left without medications and lying in their own faeces. Public inquiry into the hospital and negative media coverage. Which of these gaps are leading to the issues in the hospital – difficult to assess externally where the issues derive from i.e. staff or higher management levels – failures to monitor and control o Lack of compassion: nasty staff (GAP 1) o Not enough nurses available to help (GAP 2) o Poorly trained nurses (GAP 2) o Buzzer left out of patients’ reach (GAP 3) o Patient left lying on the floor (GAP 3) o Pain killers not issues (GAP 3) o Patients dehydrated (GAP 3) o Dummy taped to baby’s mouth (GAP 3) o Death rates higher than average (GAP 3)

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Public inquiry – the report argued for fundamental change in the culture of the NHS to ensure patients were put first. Who was to blame? o Hospital management ignored patient complaints o GPs and MPs failed to speak up for patients o Regional health authority too quick to trust hospital’s management o Royal college of nurses ignored nurses’ concerns o National regulators did not challenge the hospital (granted trust status in 2007) o Dept. of health criticised for being ‘too remote Recommendations included: o Make it criminal offence to hide information about poor care o Introduce laws to oblige doctors to be open with patients about mistakes o Code of conduct for senior managers o Increased focus on compassion in the recruitment, training and education of nurses Why is it difficult to drive service improvements in the public sector? o Absence of market forces due to the demand for the service – not really focused on improving customer expectations o Multiple stakeholders; conflicting demands o Not in the business of ‘competitive differentiation’ o No clear link between customer satisfaction and bottom line o Lack of incentives to attract/retain more customers o Often perform a ‘policing’ role which may seem at odds with concepts of customer service So what arguments can be deployed o Improving service reduces costs! o Happy patients easier to manage!

Benihana of Tokyo Case Study  What is the Benihana service concept? o “A Japanese steakhouse with a difference: dining entertainment, service in a sociable environment with abundant, simple, solid Japanese food.”  How does Benihana achieve its performance objectives? o Quality  Measurement of the food is very specific, agreed with the supplier, have a few numbers of reliable suppliers, relationships with suppliers highly important.  Experience staff who know what they are doing  Must easier to match expectations as it is being carried out in front of you o Speed  Turnover tables to meet the demand  Less movement between kitchen and restaurant floor as the service is being carried out in front of you  Perception of waiting time is reduced  Food takes a lot less time in comparison to another restaurant o Cost  Head chefs may earn 6 figure salaries, these chefs are paid much less in comparison as their skills are narrow in comparison to a restaurant with a variety of different foods, meats etc.

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Limited choice makes predicting demand much easier High rent, high footfall locations More front office space, less storage space Fewer preparation areas More spent on promotion Managing expectations through advertising

Explicit concept – tight specification – easy to control  One chef always serves 16 people, optimum “load”  Limited menu = quick ordering decisions  Repeat customers even quicker as “trained”  Very fast cooking on hibachi table  Chef cuts up meat… faster eating process  Chef throws small pieces of food, whetting appetite  Long and/or intimate conversations are impossible  Chef constantly “paces” the meal  Dessert…little selection…rapid-melt sorbet  Clear end to the meal. Chef brows and begins cleaning

Implementing lean principles – focussed concept to make it easier to improve the service and make it more consistent  Clearly focused service concept  Learned competences  U-shaped cells  Simple process; tight control  Error visibility  Use minimum of space  Fast throughput  Fast changeover times  Keep very low levels of inventory  Low levels of waste  Well-trained, productive workforce  Simple management structure

Secret of Benihana’s Success  Clear service concept  Changed line of visibility  Spotted a gap in the market  Designed a service that could process higher volumes of customers by limiting variety  Process simplicity: easier to control  Exploited high volumes and high margins  Aoki: great at marketing; understood operations!

Lecture Three 24/01/19 Customer experience design principles

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Design from the perspective of the customer journey and its associated touchpoints Conduct sensory design Require front-line employees to engage with customers Pay attention to the dramatic structure of events Manage the presence of fellow customers – customers can have an impact on other customers – has an impact on the service design Closely coupe backstage employees and frontstage experiences – front and back office to work together effectively Capability service examples (high variety, low volume) o high end luxury hotel, highly customised, less standardised o legal firms, consultancy firms etc. o a la carte restaurant Complexity examples (high variety, high volume) o Simplicity examples (low variety, low volume) o Commodity examples (low variety, high volume) o McDonalds o Other fast food restaurants

Adhering to the diagonal: operational imperative?

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In order to design a service effectively you need to adhere to the variety volume diagonal. Each segment in a market has different requirements – how do organisations like this operate – differentiate their different services;

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Bank operations – typically find this form of segmentation – meet the requirements of high volume of customers ‘Incubator services’ low volume and low variety – shift to the diagonal so you are less vulnerable by either increasing variety (customisation) or volume. Incubator can hold this position of low volume and low variety for a while but in time will have to move out of this incubation period Flexibility correlates with variety Mass customisation: o NIKEiD – price around £120 - £250 – offering a highly customised service at a relatively low cost o Porsche product configurators Mass customisation – “the use of flexible processes and organisation structures to produce varied and often individually customised products and services at the low costs of a standardised, mass-production system” (Chris Hart) o Internet technology o Modularity o Postponement Modular vehicles enable modular services i.e. ambulances Postponement: computer printers Two types of printers – stored until the next process can start – producing in one batch then only separate processes for final assembly – benefit = significant economies of scale

If forecasts aren’t right, you have huge wastage. Less reliant on forecasting if you use this method. Reduction in the level of markdowns.  Modularisation and postponement – modularisation is “the degree to which a system’s components can be separated and recombined’ (Schilling, 2000, p.315). – high perceived variety but not much waste – postponing customisation to the last minute  Chocri chocolate – view of not mass customisation as there is not high volume – low volume, handmade and crafted – low volume customised service  Graze snacks – similar idea to Chocri chocolate – is it mass customisation? 300,000 snacks delivered per day in the UK.  Mass customisation definition – “the use of flexible processes and organisation structures to produce varied and often individually customised products and services at the low cost of a standardised, massproduction system” (Chris Hart)  Key enablers of mass customisation are; internet technology, modularity and postponement MC enables firms to:

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Offer high perceived variety Provide individual customisation Exploit scale economics Lower costs of production/delivery ALSO Lower costs production design Bring new products to market quickly

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Baldwin (1997) argues that product/service modularity should be ‘mirrored’ in terms of organisational modularity Segmenting micro-operations along the diagonal

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Market pressures on payment operations  Economic recession  Low customer confidence in finance industry  Increasingly demanding corporate and retail customers  Increasing complexity of global supply chains Pressure to:  variety and differentiation  Provided added value to support customer acquisition and retention  Offer customised products and services Pressure to:  volume and cost leadership  Simplify processes  Automate processes  Achieve scale economies

Banca San Giovanni: Payment services  Large international bank serving corporate, retail and personal customers  Payments services under pressure to differentiate  Also, keen to exploit scale economies  Adopted mass customisation strategy based on: o Internet technology o Product modularity o Re-organisation of back and front office operations BSG’s approach to mass customisation: design of service package Mid 2000’s: combinatorial customisation  Front liners compiled individual service package  Result: complexity, product proliferation Late 2000s: modular design  Menu-driven customisation  Halved the number of product items in the bank’s catalogue  Simpler on-line product configuration  Simplified product pricing The front/back office dichotomy  Line of visibility (LOV): key design decision (Shostack, 1986)  Front of office used for customer contact, participation and customisation; interpersonal skills important  Back office: ‘technical core’ protected from disruption; focus on cost efficiency But the dichotomy is being challenged:  In some service front office staff also perform back office duties (Metters and Vargas, 2000)  LOV doesn’t really fit with virtual interfaces!  There is a danger back office staff lose customer perspective (Zomerdijk and Voss, 2010)  In financial serv...