Transcript Services Marketing

Organizing for
Change
Management
and Service
Leadership
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 1
The Service-Profit Chain
(Fig 15.1)
Internal
External
Operating strategy and
service delivery system
Loyalty
Service
Concept
Target Market
4-7
Customers
Satisfaction
Productivity
and
Employees
Output
Quality
Capability
Revenue
growth
Service
Value
3
Satisfaction
2
Loyalty
1
Profitability
Service
Quality
• Workplace design
• Job design
• Selection and development
• Rewards and recognition
• Information and communication
• Tools for serving customers
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Quality and
• Attractive value
productivity
• Service designed
Improvements
and delivered to
yield higher
meet targeted
service quality
customers’ needs
and lower costs
Services Marketing 6/E
• Lifetime value
• Retention
• Repeat business
• Referral
Chapter 15 - 2
Links in the Service-Profit Chain
Table 15.1
1. Customer loyalty drives profitability and
growth
2. Customer satisfaction drives customer loyalty
3. Value drives customer satisfaction
4. Employee productivity and retention drive
value
5. Employee loyalty drives productivity
6. Employee satisfaction drives loyalty and
productivity
7. Internal quality drives employee satisfaction
8. Top management leadership underlies chain’s
success
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 3
Qualities Associated with
Service Leaders
 Understands mutual dependency among marketing,
operations and human resource functions of the firm
 Has a coherent vision of what it takes to succeed
 Strategies are defined and driven by a strong, effective
leadership team
 Responsive to various stakeholders
 Value creates through customer satisfaction
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 4
Reducing Interfunctional Conflict
 One challenge is to avoid creating “functional silos”
 High-value creating enterprises should be thinking in terms of
activities, not functions
 Top management needs to establish clear imperatives for
each function that defines how a specific function
contributes to the overall mission
 The marketing imperative
 The operations imperative
 The human resources imperative
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 5
Defining the Three Functional Imperatives
 Marketing Imperative
 Target “right” customers and build relationships
 Offer solutions that meet their needs
 Define quality package with competitive advantage
 Operations Imperative
 Create and deliver specified service to target customers
 Adhere to consistent quality standards
 Achieve high productivity to ensure acceptable costs
 Human Resource Imperative
 Recruit and retain the best employees for each job
 Train and motivate them to work well together
 Achieve both productivity and customer satisfaction
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 6
From Losers to Leaders: Four Levels of
Service Performance (1)
 Service Losers
 Bottom of the barrel from both customer and managerial
perspectives
 Customers patronize them because there is no viable alternative
 New technology introduced only under duress; uncaring workforce
 Service Nonentities
 Dominated by a traditional operations mindset
 Unsophisticated marketing strategies
 Consumers neither seek out nor avoid them
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 7
From Losers to Leaders: Four Levels of
Service Performance (2)
 Service Professionals





Clear market positioning strategy
Customers within target segment(s) seek them out
Research used to measure customer satisfaction
Operations and marketing work together
Proactive, investment-oriented approach to HRM
 Service Leaders




The crème da la crème of their respective industries
Names synonymous with outstanding service, customer delight
Service delivery is seamless process organized around customers
Employees empowered and committed to firm’s values and goals
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 8
Dilbert’s Boss Loses Focus and His Audience
Fig 15.3
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 9
Moving to a Higher Level of Performance
 Firms can move either up or down the
performance ladder
 Organizations that are devoted to
satisfying their current customers may
miss important shifts in the marketplace
 As a result, they may face difficulties
attracting demanding new consumers
with different expectations
 Companies defending their control of
their competitive edge may have
encouraged competitors to find higherperforming alternatives
 Organizations with a service-oriented
culture may turn otherwise as a result of a
merger or acquisition that brings in new
leaders who emphasize short-term profits
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 10
Leading a Service Organization
Involves Eight Stages (1)
 Creating a sense of urgency to develop the
impetus for change
 Putting together a strong enough team to
direct the process
 Creating an appropriate vision of where the
organization needs to go
 Communicating that new vision broadly
Source: John Kotter
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 11
Leading a Service Organization
Involves Eight Stages (2)
 Empowering employees to act on that vision
 Producing sufficient short-term results to create
credibility and counter cynicism
 Building momentum and using that to tackle tougher
change problems
 Anchoring new behaviors in organizational culture
Source: John Kotter
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 12
Leadership versus Management
 Leadership
 Concerned with development of vision and strategies, and
empowerment of people to overcome obstacles—make vision happen
 Emphasis on emotional and spiritual resources
 Works through people and culture
 Produces useful change, especially non-incremental change
 Management
 Involves keeping current situation operating through planning,
budgeting, organizing, staffing, controlling, and problem solving
 Emphasizes physical resources—raw materials, technology, capital
 Works through hierarchy and systems
 Keeps current system functioning
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 13
Setting Direction versus Planning
 Planning
 A management process, designed to produce orderly results—not
change
 Setting direction
 Involves creating visions and strategies that describe a business,
technology, or corporate culture in terms of what it should become
over long term and articulating feasible way of achieving goal
 Many of best visions and strategies combine basic insights and
translate them into realistic competitive strategy
 “Stretch”—a challenge to attain new levels of performance and
competitive advantage that might as first seem to be beyond the
organization’s reach
 Planning follows and complements direction setting, serving as
useful reality check and road map for strategic execution
 See Service Persp. 15.1 : Can Cirque du Soleil Stretch Further?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 14
Individual Leadership Qualities
 Possesses a special perspective
 Able to believe in their employees and
make communicating with them a priority
 Love of the business
 Being driven by a set of core value that
they infuse into the organization
 Need not be charismatic, but has to be
principled
 Must have personal humility blended with
intensive professional will, ferocious
resolve, and willingness to give credit to
others but take blame themselves
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 15
Evolution versus Turnaround (1)
 Evolution involves continual mutations designed to
ensure the survival of the fittest
 Top management must proactively evolve the focus and strategy of
the firm to take advantage of changing conditions and the advent of
new technologies
 Turnaround situations are where leaders seek to bring
distressed organizations back from the brink of failure
and set them on a healthier course
 Example: Amex (Service Perspectives 15.2)
 Can be advantageous to bring in a new CEO from outside the
organization
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 16
Evolution versus Turnaround (2)
 Hurdles that leaders face in reorienting and formulating
strategy




Cognitive hurdles
Resource hurdles
Motivational hurdles
Political hurdles
 Turning around an organization that has limited resources
requires concentrating those resources where the need and
the likely payoffs are greatest
 Example: William Bratton’s 20-year police career in Boston and New
York
 A firm’s search for growth often involves expansion—even
diversification into new lines of business
 Example: IBM
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 17
Role Modeling Desired Behavior
 “Management by walking around”
 Provides insights to both backstage and front-stage operations
 The ability to observe and meet both employees and customers, and
opportunity to see how corporate strategy is implemented on the
front line
 Best Practice In Action 15.2
 This approach may lead to a recognition that changes are
needed in that strategy
 A risk of prominent leaders becoming too externally
focused at the risk of their internal effectiveness
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 18
Leadership, Culture, and Climate (1)
 Leadership traits are needed of everyone in supervisory
or managerial positions, including those heading teams
 Effective communication is essential for a leader
 Organizational culture
 Shares perceptions or themes regarding what is important in the
organization
 Shares values about what is right or wrong
 Shares understanding about what works and what doesn’t work
 Shares beliefs, and assumptions about why these things are
important
 Shares styles of working and relating to others
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 19
Leadership, Culture, and Climate (2)
 Organizational climate
 The tangible surface layer on top of the
organization’s underlying culture
 Factors of influence:
― Flexibility, responsibility, standards that
people set, perceived aptness of rewards,
clarity people have about mission and values,
level of commitment to a common purpose
 Creating a new climate for service,
based on understanding of what is
needed for market success, may require
 Radical rethinking of HRM activities,
operational procedures, and the firm’s reward
and recognition policies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 15 - 20