23E10000 Service Business Strategy Spring Term Tomas Falk Juho-Petteri Huhtala Department of Marketing

Transcription

1 23E10000 Spring Term 2017 Tomas Falk Juho-Petteri Huhtala Department of Marketing

2 Introduction People Education Dr. Tomas Falk Associate Professor of Marketing Aalto University School of Business and Adjunct Professor of Marketing EBS Business School 2011 Habilitation, German Postdoctoral Degree, University of Mannheim 2006 Dr. rer. pol., German Doctoral Degree, similar to a PhD, University of Mannheim 2002 Diplom-Kaufmann, German Business Administration Degree, similar to a M.B.A, University of Mannheim and Helsinki School of Economics and Business Administration Professional Positions Since 08/2014 Head of Marketing Depatment, Aalto University School of Business; Adjunct Professor of Marketing, EBS Business School Since 01/2014 Associate Professor of Marketing, Aalto University School of Business Academic Director Master in Marketing and Master in Automotive Management Head of Marketing Department, EBS Business School Chaired Professor of Marketing, EBS Business School 2010 Visiting Scholar, University of Maastricht and Penn State University Smeal College of Business Assistant Professor of Marketing, University of Mannheim Slide 2

3 Introduction People etransqual: A transaction process-based approach for capturing service quality in online shopping; HH Bauer, T Falk, M Hammerschmidt; Journal of Business Research 59 (7), (590 citations)* Service Quality Service Networks Self-service Technologies Service Research Portfolio Service Employee Behaviors Customer Co-creation * Number of citations based on google scholar, Dec 16, 2016 Multichannel Management Slide 3

4 Introduction People Education Juho-Petteri Huhtala PhD Student Aalto University School of Business Professional Positions Since 08/ Researcher, Valio PhD Student, Marketing department, Aalto University School of Business Assistant, Marketing department, Aalto University School of Business 2011 M.Sc. (Econ), Marketing at Aalto BIZ Research intrests Strategic marketing, Innovation management, Business models, Business networks and ecosystems, Marketing performance Slide 4

5 Introduction Course Structure COURSE 23E10000 Credits 6 Status Master s Program of Marketing, advanced studies Assessment Methods and Criteria 1. Pre-assignment (20%) 2. Take Home Exam (50%) 3. Group Work (20%) 4. Class participation (10%) (80% attendance in lectures required) Course book Wilson et al. (2012): Services Marketing: Integrating Customer Focus Across the Firm, 2nd ed. People Tomas Falk, Juho-Petteri Huhtala Slide 5

6 Introduction Pre-task Please reflect on an innovative service that you have recently started to use on a regular base (note that you are free to determine the service you want to relate your answer to. The service might relate to your private consumption or might be business related) and answer the following questions. 1. Shortly describe the service you reflect on. What are the main features of the service? 2. Why did you start to use the service? Try to depict the main drivers of your initial decision to start using the service. (optional: in case you stopped using the service, try also to ponder on reasons for quitting). 3. What (if anything) could you learn from the service provider you are referring to in order to solve a service-related challenge in your own work? Slide 6

7 Introduction Pre-task Submission of your answer 1. Please prepare a written, max. 800 word report on the three questions indicated on the previous slide Please prepare a PechaKucha presentation based on your written report. PechaKucha refers to a presentation style in which a specific number of slides are shown for a specified time. For this lecture, 10 slides will be shown for 30 seconds each (i.e., total presentation time is 5 minutes). The lecturer will ask selected participants to present their ideas on one of the lecture days. Selection of presentations is based on the types of services introduced in the submissions and aims at covering a diverse set of different services. Given time constraints, not all students will have the chance to present their work. Slide 7

8 Introduction Group project Depiction of the group project 1. Please organize yourselves into max. ten groups of max. four members. The group allocation will be facilitated during the first two lectures on Tuesday, Jan. 3 and Thursday, Jan. 5, Select one Finnish subject company to focus on during the group work. Appropriate subject companies might include well-known brands such as Amer Sports, Finnair, Fiskars, Kone, Marimekko, Rovio, Viking Line to name a few. Please decide upon the target company by Tuesday, Jan. 10, 2017 (name of the company to be indicated during the lecture). 3. Develop an innovative service offering for your selected subject company. Consider the following five aspects when designing the offering: 1. Take a customer perspective and clearly define the customer problem your offer is solving. 2. Provide a precise depiction of your offering; what are concrete service features? 3. Communicate at least three benefits your offering provides your specific customer. That is, link the service features to customer benefits. 4. Identify important resources (e.g., sales or service people, technology) that are needed to provide the suggested service offering. 5. Provide an action plan for implementing your offering. That is, what concrete steps should your subject company undertake in order to realize your suggestion? Slide 8

9 Introduction Group project Depiction of the group project 4. Organization: You will have time on Tuesday, Jan. 31 and Thursday, Feb. 2, 2017 to work on the group project in class. Each group will present its suggestion for an innovative service offering on Tuesday, Feb. 7 or Thursday, Feb. 9, Presentations should not exceed 10 min in length in order to leave enough room for discussion. Please submit your presentation in pdf-format latest by Monday, Feb. 6, 2017, Finnish time to sbstrategy2017@gmail.com. Clearly indicate your group members on the submitted file. Slide 9

10 Introduction Case Study Michelin Fleet Solutions Guiding questions for in-class discussions 1. Try to identify elements of customer centricity in the Michelin Fleet Solutions offering (the case of EFFITIRES). 2. Why should Michelin move towards the solution business? 3. Why would customers go ahead with Michelin Fleet Solutions? Slide 10

11 Introduction Course Structure Date Session Topic Readings Jan. 3th, p.m. (E 107) Jan. 5th, p.m. (E 107) Jan. 10th, p.m. (E 107) 1 Information on Course Organization Chapter 1: Foundations of 2 Pecha Kucha Presentations Chapter 1: Foundations of 3 Pecha Kucha Presentations Chapter 2: Self-service Technologies #1: Chase, R. B. and S. Dasu (2001), "Want to Perfect Your Company's Service? Use Behavioral Science," Harvard Business Review, 79 (6), Wilson, A., V. A. Zeithaml, M. J. Bitner, and D. D. Gremler (2012), Services Marketing: Integrating Customer Focus Across the Firm (2nd ed.). Maidenhead, Berkshire: McGraw Hill; Chapters 1 & 2. #2: Frei, F. X. (2008), The Four Things a Service Business Must Get Right, Harvard Business Review, 86 (4), Wilson, A., V. A. Zeithaml, M. J. Bitner, and D. D. Gremler (2012), Services Marketing: Integrating Customer Focus Across the Firm (2nd ed.). Maidenhead, Berkshire: McGraw Hill; Chapters 3 & 4. #3: Meuter, M.L., M. J. Bitner, A. Ostrom, and S. W. Brown (2005), Choosing Among Alternative Service Delivery Modes: An Investigation of Customer Trial of Self-Service Technologies, Journal of Marketing, 69 (2), #4: Meuter, M. L., Ostrom, A.M., Roundtree, R. I., and M. J. Bitner (2000), "Self- Service Technologies: Understanding Customer Satisfaction with Technology- Based Service Encounters," Journal of Marketing, 64 (3), Jan. 12th, p.m. (E 107) 4 Pecha Kucha Presentations Chapter 2: Self-service Technologies #5: Heidenreich, S., Wittkowski, K., Handrich, M., and T. Falk (2015), The Dark Side of Customer Co-creation: Exploring the Consequences of Failed Cocreated Services, Journal of the Academy of Marketing Science, 43 (3), #6: Mick, D.G. and S. Fournier (1998), Paradoxes of Technology: Consumer Cognizance, Emotions, and Coping Strategies, Journal of Consumer Research, 25 (2), #7:Parasuraman, A. and C. L. Colby (2015), An Updated and Streamlined Technology Readiness Index: TRI 2.0, Journal of Service Research, 18(1), Slide 11

12 Introduction Course Structure Date Session Topic Readings Jan. 17th, p.m. (E 107) Jan. 19th, p.m. (E 107) Jan. 24th, p.m. (E 107) 5 PechaKucha Presentations Chapter 3: Foundations of Service Quality Management 6 Guest Lecture (tbd) Chapter 3: Foundations of Service Quality Management 7 PechaKucha Presentations Chapter 4: Foundations of Service Recovery Management #8: Parasuraman, A., Valarie Zeithaml, and Leonard Berry (1985), A Conceptual Model of Service Quality and Its Implications for Future Research, Journal of Marketing, 49 (4), #9: Parasuraman, A., V. A. Zeithaml and L. L. Berry (1988), "SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality," Journal of Retailing, 64 (1), Wilson, A., V. A. Zeithaml, M. J. Bitner, and D. D. Gremler, Services Marketing: Integrating Customer Focus Across the Firm (2nd ed.). Maidenhead, Berkshire: McGraw Hill; Chapters 5 & 6 #10: Bauer, Hans H., Tomas Falk and Maik Hammerschmidt (2006), "etransqual: A Transaction Process-Based Approach for Capturing Service Quality in Online Shopping," Journal of Business Research, 59 (7), #11: Lemon, K. and P. C. Verhoef (2016), Understanding Customer Experience Throughout the Customer Journey, Journal of Marketing, 80 (6), #12: Parasuraman, A, V.A. Zeithaml, and A. Malhotra A. (2005), E-S-QUAL A Multiple-Item Scale for Assessing Electronic Service Quality, Journal of Service Research, 7 (3), #13: De Matos, C. A., J. L. Henrique, and C. A. Vargas Rossi (2007), "Service Recovery Paradox: A Meta-Analysis," Journal of Service Research, 10 (1), #14: Grégoire, Y.; T.M. Tripp, R. Legoux (2009), When Customer Love Turns into Lasting Hate: The Effects of Relationship Strength and Time on Customer Revenge and Avoidance, Journal of Marketing, 73 (6), Slide 12

13 Introduction Course Structure Date Session Topic Readings Jan. 26th, p.m. (E 107) Jan. 31st, p.m. (E 107) Feb. 2nd, p.m. (E 107) Feb. 7th, p.m. (E 107) Feb. 9th, p.m. (E 107) 8 PechaKucha Presentations Chapter 5: Customer Centricity 9 PechaKucha Presentations Chapter 5: Customer Centricity Preparation of the Group Presentations 10 PechaKucha Presentations Michelin Solutions Case Study Preparation of the Group Presentations 11 Group Presentations (tbd; Groups 1-5) 12 Group Presentations (tbd; Groups 6-10) #15: Shah, D., R.T. Rust, A. Parasuraman, R. Staelin, and G.S. Day (2006), The Path to Customer Centricity, Journal of Service Research, 9 (2), #16: Tuli, K.R., A.K. Kohli, S.G. Bharadwaj (2007), Rethinking Customer Solutions: From Product Bundles to Relational Processes, Journal of Marketing, 71 (3), #17: Reinartz, Werner and Wolfgang Ulaga (2008), How to Sell Services MORE Profitably, Harvard Business Review, 86 (5), #18: Ulaga, W. and W.J. Reinartz (2011), Hybrid Offerings: How Manufacturing Firms Combine Goods and Services Successfully, Journal of Marketing, 75 (6), Read and prepare Case Study Michelin Fleet Solutions Slide 13

14 Introduction Learning Goals 1. Develop a Conceptual Toolbox To explain the main service concepts in your own words. 2. Learn to Understand Service Research To develop competencies in filtering out the main take-aways of (scientific) service research. 3. Bridge the Gap Between Theory and Practice To make the transfer from theoretical consideration to practical application. Slide 14

15 1. Foundations of 1. Foundations of 1.1 Why Study Services? 1.2 Defining Services 1.3 Goods versus Services 1.4 Key Concepts in the Three-Stage Model of Service Consumption 1.5 Take Aways Slide 15

16 1. Foundations of Learning Goals 1. To understand the three constitutive stages of services. 2. To understand the distinct features of services. 3. To understand how to signal superior service quality. Slide 16

17 1. Foundations of 1.1 Why Study Service? Wirtz et al. (2013), p. 7 Slide 17

18 1. Foundations of 1.1 Why Study Service? Service as the New Normal? From car manufacturers to mobility service providers German car sharing market as an example: registered car sharing customers in Germany in Jan 2014 (three million carsharers worldwide) customers of station-based offers free-floaters 150 car sharing providers in 380 cities Forecast 2020: 26 million customers worldwide 15 million customers in Europe 2 million customers in Germany Forecast car sharing customers 2014: customers in Germany 3 million customers worldwide 2013: customers in Germany 1.4 million customers worldwide 719 million EUR turnover worldwide 2020: 2 million customers in Germany 26.2 million customers worldwide 4.5 billion EUR turnover worldwide BCS (2014); Frost and Sullivan (2013) Slide 18

19 1. Foundations of 1.2 Defining Services Service is the application of specialized competences (skills and knowledge) (1), through deeds, processes, and performances (2) for the benefit of another entity or the entity itself (self-service) (3). Vargo/Lusch (2004), p Wilson et al. (2012), p. 5 Slide 19

20 1. Foundations of 1.2 Defining Services Three Stages of Service Service Dimensions Service Stage (1) Competences (2) Deeds, processes, and performances Pre-purchase stage (before) Purchase stage (during) (3) Benefit of another entity Post-purchase stage (after) Management Challenge Service Promise Service Encounter Service Outcome Customer perceived Inseparability of production Intangibility of service Basic Service Characteristics purchase risk: customers cannot fully judge the ability and capability of a firm to and consumption Heterogeneity of services: customers interact with frontline employees (or outcomes: result of service delivery is mostly intangible Perishability of services provide a proper service technology) Service Management Improvements along all three stages of service provision. Slide 20

21 1. Foundations of 1.2 Defining Services Three Stages of Service Management Challenge Service Promise Service Encounter Service Outcome Customer perceived purchase Uno-actu-principle: Intangibility of service risk: inseparability of production outcomes: Basic Service Characteristics customers cannot fully judge the ability and capability of a firm to provide a proper service and consumption Heterogeneity of services: customers interact with frontline employees (or result of service delivery is mostly intangible Perishability of services technology) Provide information Service Management Principles Manage customer expectations: do not overpromise Give customers access (e.g., trial and test periods) Offer guarantees Apply for seals of quality and point to references Offer different service categories/ price tiers Slide 21

22 1. Foundations of 1.2 Defining Services Three Stages of Service Management Challenge Service Promise Service Encounter Service Outcome Customer perceived purchase Uno-actu-principle: Intangibility of service risk: inseparability of production outcomes: Basic Service Characteristics customers cannot fully judge the ability and capability of a firm to provide a proper service and consumption Heterogeneity of services: customers interact with frontline employees (or result of service delivery is mostly intangible Perishability of services technology) Make customers work Service Management Principles Clarify employees and customers roles by developing service routines Establish multichannel environments by introducing self-service technologies Identify critical moments during the service encounter Consider primacy and recency effects of the interaction between frontline employees and customers Slide 22

23 1. Foundations of 1.2 Defining Services Three Stages of Service Management Challenge Service Promise Service Encounter Service Outcome Customer perceived purchase Uno-actu-principle: Intangibility of service Basic Service Characteristics risk: customers cannot fully judge the ability and capability of a firm to provide a proper service inseparability of production and consumption Heterogeneity of services: customers interact with outcomes: result of service delivery is mostly intangible Perishability of services frontline employees (or technology) Service Management Principles Tangibilize the service outcome by using evidence management Reward customers for buying your service Take a customer perspective: do not sell product/service features, sell benefits Use digitalization to produce services for stock/cope with service peaks Slide 23

24 1. Foundations of 1.3 Goods versus Services Typology of goods and services following Information Economics: Modern Microeconomics Information Economics (e.g., Darby & Karni (1973); Nelson (1970); Spence (1983); Stiglitz (1989)) New Institutional Economics (e.g., Coase (1937); North (1955); Williamson (1975): Transaction Cost Economics Property Rights Theory Principal Agent Theory Assumptions on consumer behavior: Bounded rationality Opportunism Insecurity Slide 24

25 1. Foundations of 1.3 Goods versus Services Starting points of information economics: Information has economic value because it allows individuals to make choices that yield higher expected utility than they would obtain from choices made in the absence of information. According to information economics goods (offerings) differ in terms of their information economical characteristics. Search qualities Experience qualities Credence qualities Consumers may judge the quality of goods before the acquisition. Consumers may judge the quality of goods during and after the usage. Consumers are not able to ultimately judge the quality of the offering. Slide 25

26 1. Foundations of 1.3 Goods versus Services Typology of goods based on search, experience, and credence qualities following information economics: Search qualities Experience qualities Credence qualities Search qualities help customers evaluate an offer before purchase. Examples include style, color, texture, taste, sound etc. Experience qualities cannot be evaluated before purchase customers must experience the offer to get to know it. Examples include vacations, sporting events, medical procedures, food and drinks etc. Credence qualities are characteristics that customers find impossible to evaluate confidently even after purchase and consumption of an offering. Examples include quality of repair and maintenance work, legal and medical advice. Slide 26

27 1. Foundations of 1.3 Goods versus Services Typology of goods based on search, experience, and credence qualities following information economics: Majority of (tangible) products Majority of (intangible) services Easy to evaluate before acquisition Clothes Jewelry Furniture Houses Digital cameras Cars Dinner at a restaurant Train ride Flight Car sharing Self-Check-in Long-distance journey Child care Online-Banking TV repair Medical treatment Investment counselling Root canal treatment Legal advice Difficult to evaluate before acquisition Dominance of search qualities Dominance of experience qualities Dominance of credence qualities Zeithaml (1981) Slide 27

28 1. Foundations of 1.3 Goods versus Services The case of Adverse Selection: If experience and credence qualities dominate, quality insecurity may result This insecurity is enhanced if suppliers are better informed about the quality of their offerings than consumers Problem of Adverse Selection (Akerlof 1970): Bad suppliers may pretend good quality Consumers are unable to judge quality beforehand Consumers assume average quality and are only willing to pay average prices Good suppliers will make smaller profits than bad suppliers -> market may collapse Slide 28

29 1. Foundations of 1.3 Goods versus Services How to overcome Adverse Selection? Signaling (Spence 1973) Screening (Stiglitz 1974) Activities initiated by the better informed party Signaling quality of the offered goods by transmitting indirect quality information (i.e., surrogate information) Two types of signals: Exogenously costly signals (e.g., ads, building reputation) vs. Contingent contracts (e.g., guarantees) Activities initiated by the worse informed party Screening represents the mirror image of signaling Information sources: Internal sources External sources Slide 29

30 Lovelock & Wirtz (2011), p Foundations of 1.3 Goods versus Services Implications for service management: risk reducing strategies Consumer s perspective Seeking information from respected personal sources Using Internet to compare service offerings and search for independent reviews and ratings Service firm s perspective Preview service through brochures, websites, videos Identify and approach lead users, opinion leaders and/or market mavens Give customers online access to information Apply for seals of quality Relying on a firm that has a good reputation Advertise (helps to visualize and build reputation) Transaction vs. relationship perspective Looking for guarantees and warranties Offer guarantees and warranties Visiting service facilities or trying aspects of service before purchasing Encourage visit to service facilities before purchase, e.g., by offering free trials (for services with high experience attributes) Display credentials Use evidence management (e.g., furnishing, equipment etc.) Slide 30

31 1. Foundations of 1.4 Key Concepts in the Three-Stage Model of Service Consumption Service Dimensions (1) Competences (2) Deeds, processes, and performances (3) Benefit of another entity Service Stage Pre-purchase stage (before) Purchase stage (during) Post-purchase stage (after) Key Concepts Formation of expectations Service encounters and moments of truth Self-service technologies (Chapter 2) Customer satisfaction Confirmation/ disconfirmation of expectations Lovelock & Wirtz (2011), p. 59 Slide 31

32 1.4 Key Concepts in the Three-Stage Model of Service Consumption Pre-purchase Phase Formation of Expectations Formation of expectations Explicit service promises Lasting service intensifiers Implicit service promises Personal needs Desired service Word of mouth Temporary service intensifiers Perceived service alternatives Zone of tolerance Past experience Self-perceived service role Adequate service Predicted service Situational factors Wilson et al. (2012), p. 60 Slide 32

33 Wilson et al. (2012), p Key Concepts in the Three-Stage Model of Service Consumption Pre-purchase Phase Formation of Expectations How service firms can manage customer expectations Factor Explicit service promises Implicit service promises Lasting service intensifiers Personal needs Temporary service intensifiers Perceived service alternatives Some possible influence strategies Check to make sure promises are accurate and realistic Ensure service tangibles reflect type and level of service provided Market research to determine sources of service expectations Educate customers on ways the service addresses their needs Increase service delivery during peak periods Be aware of competitive offerings and try to match them Slide 33

34 Wilson et al. (2012), p Key Concepts in the Three-Stage Model of Service Consumption Pre-purchase Phase Formation of Expectations How service firms can manage customer expectations Factor Self-perceived service role Word-of-mouth communications Past experience Situational factors Predicted service Some possible influence strategies Educate customers to understand their roles and perform them better Stimulate word-of-mouth in advertising by using testimonials and opinion leaders Use market research to profile customers previous experience with similar services Use service guarantees to assure customers about service recovery Tell customers when service provision is higher than would normally be expected Slide 34

35 1.4 Key Concepts in the Three-Stage Model of Service Consumption Purchase Phase Service Encounter and Moments of Truth A service encounter can been defined as... a period of time during which a consumer directly interacts with a service (Shostack 1985, p. 243). Typically, the service encounter represents a moment of truth because customers experience of the service encounter is the main driver of his or her service quality judgment (Lövgren 2005). Slide 35

36 1.4 Key Concepts in the Three-Stage Model of Service Consumption Purchase Phase Service Encounter and Moments of Truth Service blueprinting is a tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer s point of view. Wilson et al. (2012), p. 182 Slide 36

37 Wilson et al. (2012), p Key Concepts in the Three-Stage Model of Service Consumption Purchase Phase Service Encounter and Moments of Truth Blueprint for overnight hotel stay service Slide 37

38 1.4 Key Concepts in the Three-Stage Model of Service Consumption Purchase Phase Service Encounter and Moments of Truth Blueprint for overnight hotel stay service Wilson et al. (2012), p. 187 Slide 38

39 1.4 Key Concepts in the Three-Stage Model of Service Consumption Purchase Phase Service Encounter and Moments of Truth Evaluation of Blueprinting Pros Cons + Connects back office with front office processes + Customer touchpoints are visualized/ - Qualitative research very resource- consuming (money, people, time etc.) - Purely descriptive approach identified + Important internal interfaces are identified + Blueprint approach as a valuable basis for subsequent service quality analyses Slide 39

40 1.4 Key Concepts in the Three-Stage Model of Service Consumption Post-purchase Phase Confirmation/Disconfirmation of Expectations Confirmation/disconfirmation paradigm as an integrative framework for explaining customer satisfaction Perceived performance Comparison Satisfaction Positive disconfirmation (perception > expectation) above confirmation level Expected performance Confirmation (perception = expectation) Negative disconfirmation (perception < expectation) at confirmation level below confirmation level Slide 40

41 1.4 Key Concepts in the Three-Stage Model of Service Consumption Post-purchase Phase Customer Satisfaction Two approaches to define customer satisfaction Transaction-specific approach Cumulative approach Dominated the marketing and consumer behavior literature until the early 1990s (e.g., Oliver 1997; Yi 1991). This approach defines satisfaction as a customer s evaluation of his or her experience with and reactions to a particular product transaction, episode, or service encounter. Since the early 1990s, service and satisfaction research has grown to include an emphasis on cumulative satisfaction. This approach defines customer satisfaction as a customer s overall evaluation of a product or service provider to date (Olsen and Johnson 2003). Slide 41

42 1.4 Key Concepts in the Three-Stage Model of Service Consumption Post-purchase Phase Customer Satisfaction Customer satisfaction as a focal service outcome Customer satisfaction positively affects consumers behavioral intentions as: repurchase intentions (Mittal and Kamakura 2001) word-of-mouth intentions (Brown et al. 2005) cross-buying intentions (Seiders et al. 2005) willingness to pay price premiums (Homburg et al. 2005) Apart from that, customer satisfaction contributes to higher efficiency of communication and distribution measures (Luo & Homburg 2008). Finally, customer satisfaction is a reliable indicator for the future success of firms (Fornell et al. 2006). Slide 42

43 1. Foundations of 1.5 Key Take Aways 1. A service consists of three constitutive stages; the pre-purchase (service promise), purchase (service encounter), and the post-purchase (service outcome) stage. 2. In tendency, services involve a high purchasing risk (pre-purchase stage), a comprehensive customer participation in the service delivery (purchase stage) and intangibility of the final outcome (post-purchase stage). 3. Service providers may signal superior quality of their offerings by means of advertising and providing information, by offering free trials, guarantees and warranties, and by using evidence management. Slide 43

44 2. Self-service Technologies 2. Self-service Technologies 2.1 Definition 2.2 Technology Paradox 2.3 Technology Readiness 2.4 Determinants of Self-service Technology Acceptance 2.5 Managing Self-service Technologies 2.6 Co-creation 2.7 Take-Aways Slide 44

45 2. Self-service Technologies Learning Goals 1. To explore how technology affects customers role in service provision. 2. To realize that self-service technologies might trigger contradicting reactions from customers. 3. To collect insights on how to successfully manage self-service technologies. Slide 45

46 2. Self-service Technologies 2.1 Definition Self-service is the application of specialized competences (skills and knowledge) (1), through deeds, processes, and performances (2) for the benefit of the entity itself (3) (Vargo and Lusch 2004, p. 326). Self-service technologies (SSTs) are technological interfaces that enable customers to produce a service independent of direct service employee involvement (Meuter et al. 2000). Slide 46

47 2. Self-service Technologies 2.1 Definition Purpose Interface Telephone/ Interactive Voice Response Online/ Internet Interactive Kiosks Smart Applications Customer Service Telephone banking Flight information Order status Package tracking Account information ATMs Hotel checkout Finnair Plus-app Helsingin Sanomat-app Transactions Telephone banking Prescription refills Retail purchasing Financial transactions Pay at the pump Hotel checkout Car rental OP-app Finnair Plus-app Self-Help Information telephone lines Internet information search Distance learning Blood pressure machines Tourist information Diabetes self-care software/platform Noona-app Updated based on Meuter et al. (2000), p. 52 Slide 47

48 2. Self-service Technologies 2.1 Definition Determinants of customer satisfaction with SSTs Satisfiers Dissatisfiers Solved intensified need (11%) Technology failure (43%) Better than the alternative: Process failure (17%) Saves time (30%) Poor design: Avoiding service personnel (3%) Technology design problem (17%) When I want (8%) Service design problem (19%) Where I want (5%) Customer-driven failure (4%) Saves money (6%) Meuter et al. (2000) Slide 48

49 2. Self-service Technologies 2.2 Technology Paradox The term technology can encompass both material and nonmaterial things (e.g., laws). In a narrower sense ( ) technology refers to artificial things, and more particularly modern machines: artificial things that (a) require engineering knowledge for their design and production, and (b) perform large amounts of operations by themselves (Mick & Fournier 1998, p. 124; Joerges 1988, p. 221). Anectodal evidence points to the existence of a technology paradox: The same technology that creates radiant feelings of intelligence and efficacy can also precipitate feelings of stupidity and ineptitude (Winner 1994) Appliances purchased for saving time regularly end up wasting time (Goodman 1988) Technology assimilates people as well as isolates them (Boorstin 1978) Paradox: technology is both X and not-x at the same time. Meuter et al. (2000) Slide 49

50 Mick & Fournier (1998), p Self-service Technologies 2.2 Technology Paradox Paradox Control/ Chaos Freedom/ Enslavement New/ Obsolete Description Technology can facilitate regulation or order, and technology can lead to upheaval or disorder. Technology can facilitate independence or fewer restrictions, and technology can lead to dependence and more restrictions. New technologies provide the user with the most recently developed benefits of scientific knowledge, and new technologies are already or soon to be outmoded as they reach the marketplace. Competence/ Incompetence Efficiency/ Inefficiency Fulfills/ Creates needs Assimilation/ Isolation Engaging/ Disengaging Technology can facilitate feelings of intelligence or efficacy, and technology can lead to feelings of ignorance and ineptitude. Technology can facilitate less effort or time spent in certain activities, and technology can lead more time and effort in certain activities. Technology can facilitate the fulfilment of needs or desires, and technology can lead to the development of needs or desires previously unrealized. Technology can facilitate human togetherness, and the fulfilment of needs or desires, and technology can lead human separation. Technology can facilitate involvement, flow, or activity, and technology can lead to disconnection, disruption, or passivity. Slide 50

51 Mick & Fournier (1998), pp Self-service Technologies 2.2 Technology Paradox Coping with the Paradox Stress-management theory Coping mechanisms Pre-acquisition avoidance strategies Pre-acquisition confrontative strategies Consumption avoidance strategies (a) ignore (b) refuse (c) delay (d) pretest (e) buying heuristics; (e1) latest model, (e2) basic model, (e3) expensive model, (e4) familiar brand, (e5) reliable brand (f) extended decision making (g) extended warranty/maintenance contract (h) neglect (i) abandonment (j) distancing Consumption confrontative strategies (k) accommodation (l) partnering (m) mastering Slide 51

52 2. Self-service Technologies 2.3 Technology Readiness Technology readiness refers to people s propensity to embrace and use new technologies for accomplishing goals in home life and at work. It can be viewed as an overall state of mind resulting from a gestalt of mental enablers and inhibitors that collectively determine a person s predisposition to use new technologies (44 uraman 2000, p. 308). A combination of positive and negative feelings about technology underlies the domain of technology readiness. Although the positive feelings propel people toward new technologies, the negative feelings may hold them back. The dichotomies in the eight technology paradoxes discussed by Mick and Fournier (1998) reflect general facets of potential drivers and inhibitors of technology readiness (Parasuraman 2000, p. 309). Slide 52

53 2. Self-service Technologies 2.3 Technology Readiness (1.0) Technology Readiness Optimism (+) Innovativeness (+) Discomfort (-) Insecurity (-) Conceptualization: A positive view of technology and a belief that it offers people increased control, flexibility, and efficiency in their lives. Conceptualization: A tendency to be a technology pioneer and thought leader. Conceptualization: A perceived lack of control over technology and a feeling of being overwhelmed by it. Conceptualization: Distrust of technology and skepticism about its ability to work properly. Operationalization: 10 items Operationalization: 7 items Operationalization: 10 items Operationalization: 9 items. Parasuraman (2000), pp. 307 Slide 53

54 Parasuraman and Colby (2015), pp Self-service Technologies 2.3 Technology Readiness (2.0) Technology Readiness Optimism (+) Innovativeness (+) Discomfort (-) Insecurity (-) Conceptualization: A positive view of technology and a belief that it offers people increased control, flexibility, and efficiency in their lives. Operationalization: New technologies contribute to a better quality of life Technology gives me more freedom of mobility Technology gives people more control over their daily lives Technology makes me more productive in my personal life Conceptualization: A tendency to be a technology pioneer and thought leader. Operationalization:, Other people come to me for advice on new technologies In general, I am among the first in my circle of friends to acquire new technology when it appears I can usually figure out new high-tech products and services without help from others I keep up with the latest technological developments in my areas of interest Conceptualization: A perceived lack of control over technology and a feeling of being overwhelmed by it. Operationalization: ( ) I sometimes feel as if I am being taken advantage of by someone who knows more than I do Technical support lines are not helpful ( ) ( ) technology systems are not designed for use by ordinary people There is no such thing as an understandable manual for a high-tech product or service Conceptualization: Distrust of technology and skepticism about its ability to work properly. Operationalization: People are too dependent on technology to do things for them New item Too much technology distracts people to a point that is harmful Technology lowers the quality of relationships by reducing personal interaction I do not feel confident doing business with a place that can only be reached online Slide 54

55 2. Self-service Technologies 2.3 Technology Readiness (2.0) Parasuraman & Colby (2015), p. 11 Slide 55

56 2. Self-service Technologies 2.4 Determinants of Self-service Technology Acceptance Antecedent Predictors Acceptance Adoption Perceived usefulness Perceived ease of use Attitude towards SST Intention to use SST SST usage Adapted based on Davis (1989); Davis et al. (1989) Slide 56

57 2. Self-service Technologies 2.4 Determinants of Self-service Technology Acceptance Antecedent Predictors Mediating Variables Adoption Process Innovation Characteristics Compatability Relative advantage Complexity Observability Trialability Perceived risk Individual Differences Inertia Technology anxiety Need for interaction Previous experience Demographics Consumer Readiness Role clarity Motivation (extrinsic, intrinsic) Ability Awareness Investigation Evaluation Trial Repeated use Commitment Meuter et al. (2005), p. 63 Slide 57

58 2. Self-service Technologies 2.5 Managing Self-service Technologies Critical elements of technology-based self-service Management Challenges Traditional services Service Elements Technology-based self-services Promise Not required Customer ability to use self-service technologies Required Frontline employees, physical facilities Service quality signal (surrogate information) Technological interfaces, physical facilities Man-man Interaction level Man-machine High-touch/low-tech Service process High-tech/low-touch Encounter No, rather passive, being served Customer as part-time employee Yes, rather active, selfservice Low Perceived control High Outcome Customer and service employees Driver of Customer Satisfaction Customer and SST Slide 58

59 2. Self-service Technologies 2.6 Co-creation Conceptualizing Co-creation General idea Co-creation principally refers to joint value creation by the company and the customer (Etgar 2008; Prahalad and Ramaswamy 2004) Contextspecific Constitutive dimensions Customers co-create during product development by customizing product functionality (Simonson 2005), design (Franke et al. 2009), or both (e.g., assembly of IKEA furniture) (Dahl and Moraeu 2007). In services, co-creation activities can take place across the entire value chain (Yi and Gong 2013) that is, in new service development, the service encounter and the service recovery process (Dong et al. 2008; Roggeveen et al. 2012). (1) customization, as its key benefit (e.g., Etgar 2008), and (2) effort (e.g., Hoyer et al. 2010) and (3) information sharing (e.g., Chan et al. 2010), as its primary costs. Slide 59

60 2. Self-service Technologies 2.6 Co-creation Lego Ideas Slide 60

61 2. Self-service Technologies 2.6 Co-creation Lego Ideas Slide 61

62 2. Self-service Technologies 2.6 Co-creation Lego Ideas Slide 62

63 2. Self-service Technologies 2.6 Co-creation Recovery After Failed Co-created Service The impact of faile co-created services on customer satisfaction Co-creation is the process by which products, services, and experiences are developed jointly by companies and their stakeholders (Etgar 2008; Prahalad and Ramaswamy 2004) Providers outsource value creation to customers (= part-time employees) Customers have greater control over the service encounter (= greater satisfaction) (Roggeveen et al. 2013) More comprehensive customer integration also increases contact points between service providers and customers Customers invest considerable time and effort into service delivery Higher complexity, higher failure proneness? What are the consequences if co-creation fails? 1. How does failed co-creation affect customer satisfaction? 2. How should companies react to failed co-creation? Slide 63

64 2. Self-service Technologies 2.6 Co-creation Recovery After Failed Co-created Service The impact of faile co-created services on customer satisfaction Level of (failed) cocreation + Expectancy - disconfirmation (negative) Customer satisfaction Failed co-created service (high level of co-creation) Level of cocreation in service recovery + Customer satisfaction Failed co-created service (low level of co-creation) Level of cocreation in service recovery - Customer satisfaction Slide 64

65 2. Self-service Technologies 2.6 Co-creation Recovery After Failed Co-created Service Practical implications Empirical findings (series of experiments with n=603 participants) (1) Co-creation & customer satisfaction Volatility of customer satisfaction stronger for high levels than for low-levels of co-creation: 1. Success case: co-creation can boost customer satisfaction and allows firms to unlock new sources of competitive advantage (e.g., customization potential) 2. Failure case: customer satisfaction is extremely low after failed co-creation Service providers that have only limited experience in co-creation, could consider offering services low on co-creation until they have gained the necessary expertise to provide successful highly co-created services. (2) Co-creation & service recovery Firms should initiate measures to minimize the possibility of co-created service failure: 1. Optimize the usability aspects of the service 2. Provide comprehensive support functions, well-arranged content, low downtimes, and intuitive navigation. Set up online consumer communities to allow users to share their experiences. 3. Design an exciting co-creation experience to put customer evaluations on a broader foundation. 4. Preventing from service failures is impossible Preventive measures meaningful, yet, recovery very effective for strengthening relationships Slide 65

66 2. Self-service Technologies 2.7 Take Aways 1. The increasing diffusion of technology into service provision enhances customer s role as a productive resource. Customers develop into parttime employees of the service provider and should be trained, educated, and supported in this new role. 2. On the one hand, self-service technologies provide customers with inreased control, flexibility, and convenenience in service consumption. On the other hand, customers have to invest more time and effort for becoming an active service co-producer. 3. Proactively communicating the benefits of self-service technologies, enabling customers to experience flow in the use of technology, and assuring high usability of self-service technologies are crucial for successfully managing technology-based self-services. Slide 66