CHAPTER 2 - LITERATURE REVIEW
2.2 Service design
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2.2 Service design
To shape a business model in the service context, using a general business model as a foundation, we can determine how to design a service-oriented business model.
Service design is an important issue because it helps a service organization to move from a strategic to an operational level (Roth and Menor, 2003). Additionally, Ponsignon et al. (2007) suggest analyzing and designing service systems from a pro-cess-centric perspective. On the other hand, Shostack (1982; 1984; 1987) indicates that it is necessary for service design to integrate the customer’s viewpoint into a model. Based on the above-described context, we will consider service design from the perspectives of strategy, process and customers. Therefore, in the following sec-tion, we will review the service strategy triad that is based on strategic concepts, a service process that focuses on process-thinking, and a service encounter that includes the perspective of customer experience.
2.2.1. Service strategy triad
To address the design, the delivery, and the evaluation of services as well as transposing a company’s strategy to an operational level, Roth and Menor (2003) present a service strategy triad. The triad consists of target markets, service concepts, and a service delivery system, which shows an integrated way to consider service de-sign (see Figure 3). The service strategy triad is valuable because it helps a service organization to implement the strategy of the service design.
Figure 3 Roth and Menor (2003) the service strategy triad The three elements can be explained as follows:
Target Market: Identifying a firm’s target market and satisfying its needs and expectations is of great importance for service design (Goldstein et al., 2002; Gouillart and Sturdivant, 1994; Roth and Menor, 2003). For service
Target Market Who are the right
customers?
Service Delivery System Design Choices
How will services be delivered?
Service Encounter What happens when services and customers
meet and interact?
Service Concept What is the service or product bundle offered?
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companies, creating a service that matches or exceeds customer expecta-tions is the overarching purpose of the design activity (Slack et al., 2004).
Additionally, some researchers suggest that service providers can segment their customers into groups that are based on their characteristics so they can serve them in personal ways (Pine and Gilmore, 1999; Sampson and Froehle 2006). On one hand, a firm should promote customer satisfaction (Dabholkar and Overby, 2005), maintain customer retention (Cronin and Taylor, 1992), and obtain loyal customers (Reichheld and Sasser, 1990). On the other hand, a firm needs to acquire new customers (Brown, 2000; Hart et al., 1990). By designing its service model properly, a firm can ensure that both its service outcome and its process of service delivery are perceived as being of good quality by customers and consequently maintain a competi-tive edge in the marketplace (Mohr and Bitner, 1995; Shostack, 1984; Ver-ma et al., 2002).
Service Concept: A service can be defined as an outcome, the what, and, as a process, the how (Ponsignon et al., 2007). The service concept represents the outcome, which refers to that which is received by customers (Lovelock and Wirtz, 2004). A description of a service can contain a portfolio of core and supporting elements, its features as well as benefits and the value it provides for customers (Roth and Menor, 2003; Heskett, 1987; Scheuing and Johnson, 1989). It can be tangible or intangible (Goldstein et al., 2002).
A service concept is also known as a service offering, service package, and service or product bundle (Roth and Menor, 2003). Before developing a service outcome, a firm should first decide on its marketing orientation (Cook et al., 1999), which is a critical factor for success.
Service Delivery System: In terms of service, a service delivery system can be defined as a process that emphasizes how the service outcome is received by a customer (Ponsignon et al., 2007; Goldstein et al., 2002). A service de-livery system should be seen from a holistic perspective, as a whole busi-ness process in a service context (Ponsignon et al., 2007). The service de-livery system consists of multiple, interdependent service processes (John-ston and Clark, 2001) and constitutes a hierarchically organized process ar-chitecture (Ponsignon et al., 2007) that involves people, technology, facili-ties, layout, and processes (Heskett,1987) and thereby generates a service outcome. A service delivery system connects a service strategy with its ex-ecution and the customers’ perceived value in their service encounters (Ponsignon et al., 2007).
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2.2.2. Service process
In Gummesson’s (1994) opinion, process-thinking is at the core of service deliv-ery. Ponsignon et al. (2007) consider that a holistic view of service delivery processes can help in the design of service systems and that a systems-approach is advised for combining sub-processes to form a core business process as a service system, which is also part of a wider system in the organization. A service delivery system, as a whole business process in a service context, is therefore proposed to account for the end-to-end nature of service processes, to transcend functional boundaries and to rec-ognize the process architecture that is inherent in service systems (Ponsignon et al., 2007).
With regard to service process design, a service blueprint has gained widespread support (Kim and Kim, 2001; Lynch and Cross, 1995; Shieff and Brodie, 1995). A service blueprint is an enhanced flowchart that depicts all of the steps, flows, and roles of a service company’s employees, customers and the organizations that are in-volved as well as all of the interactions that occur in the process of service delivery (Zeithaml et al., 2006). The advantage of a service blueprint is that it emphasizes the relationships between processes instead of focusing on specific, isolated elements (Shostack, 1987).
A service process plays the role of ‘delivery’ to ensure that the expected service outcome is received by the customer (Goldstein et al., 2002) and leaves the customer either satisfied or dissatisfied with the service experience (Mayer et al., 2003). In the service process, the service organization produces and delivers the service to custom-ers through a sequence of activities and steps and through the flows and interactions between those activities and resources (Slack et al., 2004).
From a concept that is rooted in customer contact theory, a service process can be broken down into the front-office and the back-office (Ponsignon et al., 2007). The front-office or the front-end of the delivery process, where the customers are, involves service operations management, while the back-office or the back-end, where pro-cesses are executed without directly involving the customers, focuses on using manu-facturing techniques and concepts (Sampson and Froehle 2006; McLaughlin et al., 1991; Chase, 1978). The main purpose of establishing these two sections is to distin-guish the differences and links between customer experiences in the front-end as well as the activities and related supporting processes in the back-end.
2.2.3. Service encounter
A service encounter occurs between a service provider and a customer in a
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vice delivery system. Through service encounters, service providers contact their customers, meet their needs and expectations, and create service experiences for them.
Bateson (1985) views the service encounter as a triad that is formed by the interacting interests of a service organization, its contact personnel, and a customer. It is mutually beneficial for the three parties to work together to create an efficient service and to achieve a service experience that is perceived by customers as positive (Elnaghi et al., 2008; Cook et al., 2002) (see Figure 4).
Figure 4 Bateson (1985) the service encounter triad
The service encounter triad displays the relationships between the three parties and can suggest if there are sources of conflict (Fitzsimmons and Fitzsimmons, 2001).
As a result, services need to be approached in an integrated way: an organization’s system, employee competencies, behavior and feelings, and customers’ needs and preferences should all balanced; a service organization requires efficiency to remain economically viable; contact personnel need to be flexible and empowered to make decisions; customers need to receive satisfactory and effective service (van Looy et al., 1998; Fitzsimmons and Fitzsimmons, 2001). The three elements can be explained as follows:
Service Organization: A service organization takes control over service processes and better manages customer encounters (Elnaghi et al., 2008). A service firm establishes its culture and physical surroundings to support the service encounter and to encourage their employees to focus on delivering exceptional service (Fitzsimmons and Fitzsimmons, 2001). Based on the above-described context, we identify that a service organization involves: (a) culture, which is a system of orientations that are shared by an tion’s members and that can be distinguished from those of other organiza-tions (Hoy et al., 1991) and (b) empowerment, which enables contact per-sonnel to be motivated, competent, committed, and well-trained to make decisions; a successful service organization invests in its contact personnel by supporting them through technology, considering their recruitment and
Service Organization
Contact
Personnel Customer
Perceived Control Efficiency
versus Autonomy
Efficiency versus Satisfaction
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training and to link compensation to their performance (Fitzsimmons and Fitzsimmons, 2001).
Contact Personnel: The importance of contact personnel and other employ-ees cannot be underestimated in any successful service organizations, and managers should be concerned with the quality of the organization’s climate and culture (Elnaghi et al., 2008). Contact personnel are on the front line of the service process by meeting and interacting with customers. Hence, a service firm should focus its resources on selecting and training its contact personnel (Fitzsimmons and Fitzsimmons, 2001).
Customer: Each interaction between a service provider and its customers is crucial (Carlzon, 1987). It is a chance to influence the customer’s percep-tions of service quality (Fitzsimmons and Fitzsimmons, 2001), and it is im-perative to consider customer perceptions when designing a service en-counter (Chase and Dasu, 2001). Customers participate in the service deliv-ery process and play a part in coproduction (Solomon et al., 1985). As a partial employee, customers experience service operations through service encounters with contact personnel (Dean, 2004). They have to learn the ap-propriate behaviors for the situation, follow a script that has been defined by the organization and experience the benefits that are inherent in the particu-lar design of the service that is being offered (Fitzsimmons and Fitzsim-mons, 2001; Solomon et al., 1985).
In conclusion, a service organization offers customers services through a series of service processes that can be divided into the organization’s back-end and the front-end. The back-end of the service process is designed to support services that are offered by the front-end, and the front-end is engaged in the process of delivering ser-vices to customers. Furthermore, the delivery process contains service encounter and service delivery. Service delivery is the way in which services are received by cus-tomers, and on the basis of service delivery, a service provider is able to establish ser-vice encounters with each customer segment. An important issue in the serser-vice en-counter is how the three parties, including an organization, its contact personnel and customers, work together to create service experiences. From this issue, we also rec-ognize the importance of organization and empowerment. The organization represents a distinctive identity and guides the development of the business model, and empow-erment describes how to empower personnel to support and offer services. From this issue, we also recognize the importance of organization. The organization represents a distinctive identity and guides the development of the business model.