Chapter 15

Organizing for Service Leadership

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

15 - 1

Customer-Led versus Market-Oriented Philosophies of Management

Firms may lose market leader position if listen too closely to

current customers

Service leadership requires curiosity, risk taking Customer-led businesses focus on understanding expressed
desires of customers in currently served markets

Market-oriented businesses commit to understand current/

latent customer desires plus competitors plans, capabilities

Scan market more broadly, have longer-term focus Work closely with lead users (windows to future vs. anchors to

past) Combine traditional research with experimentation, observation

Conclusion: Pursue customer satisfaction, but set limits on

being led by customers, especially during rapid change
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

15 - 2

The Service Profit Chain (Fig. 15.1)

Internal
Operating strategy and service delivery system
Loyalty EMPLOYEES

External
Service concept Target Market

CUSTOMERS
Productivity & Output Quality

Satisfaction

Service Value

Revenue Growth
Satisfaction Loyalty

Capability Service Quality

Profitability

Workplace design Job design Selection and development Rewards and recognition Information and communication Tools for serving customers

Quality and productivity improvements yield higher service quality and lower costs

Lifetime value Retention Repeat business Referral

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

15 - 3

Causal Links in the Service Profit Chain (Table 15.1)

Customer loyalty drives profitability and growth Customer satisfaction drives customer loyalty Value drives customer satisfaction Employee productivity and retention drive value Employee loyalty drives productivity Employee satisfaction drives loyalty and productivity Internal quality drives employee satisfaction Top management leadership underlies chains success
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

15 - 4

Integrating Three Functional Imperatives

(recap from Chapter 1)

Marketing Imperative

Human Resources Imperative

Customers

Operations Imperative

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

15 - 5

Defining 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, 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 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

15 - 6

Reducing Intra-Organizational Tension

Transfers and cross training

Cross functional taskforces

New tasks and new people

Process management teams Gain-sharing programs

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

15 - 7

The Search for Synergy: A Top Management Perspective

What do we want?

What do our employees, intermediaries, and other partners want?

What do our customers want?

What can we do?

Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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From Losers to Leaders: Moving Up the Service Performance Ladder

Service Leaders
Crme de la crme of their respective industries

Service Professionals
Clear positioning strategy

Names synonymous with outstanding service, customer delight

Sustained reputation for meeting customer expectations

Service Non-entities
Traditional operations mindset Rudimentary marketing, often emphasizing price discounts

Service Losers
Only survive because of lack of viable alternatives in marketplace
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Achieving Service Leadership by Focusing on Role of Each Functional Area

Marketing: move from tactical to innovative and

strategic

Operations: move from reactive/cost oriented to

focused, innovative, well coordinated with marketing and HR

Human Resources: move from tight control of lowcost workers to quality of employees as strategic advantage

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

15 - 10

Leadership for Change Management Involves Eight Stages

Create sense of urgency to develop impetus for change Put together strong team to direct process Create appropriate vision of where organization must go Communicate new vision broadly Empower employees to act on vision Produce sufficient short term results to create credibility Build momentum to tackle tougher problems Anchor new behaviors in the organizational culture
Source: John Kotter
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

15 - 11

Leadership Qualities Needed in Service Organizations

Vision, charisma, persistence, high expectations,

expertise, empathy, persuasiveness, integrity

Ability to visualize quality of service as foundation for

competing

Believe in people who work for the firm, make good

communications a priority

Possess a natural enthusiasm for the business, teach it to

others, pass on nuances, secrets, crafts of operating

Cultivate leadership qualities of others in organization Use values to navigate firms through difficult times
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Transformational Leadership May Require Changing Corporate Culture

Corporate Culture:
Shared Shared Shared Shared Shared

perceptions regarding what is important values about what is right and wrong understanding about what works and what doesnt beliefs about why these things are important styles of working and relating to others

Climate for Service--Tangible working environment atop

underlying culture. Influential factors include:
Shared perceptions concerning practices, procedures and types of

behaviors that get rewarded Clarity about mission and values, level of commitment to common purpose Flexibility: freedom to innovate, sense of responsibility, standards

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

15 - 13