The New Service I.E.: EngineeringThe New Service I.E.: Engineering Customer Psychology into Service Encounter Design*

Richard B.ChaseJustin Dart Professor of Operations Management

Marshall School of Business, University of Southern California*C ll b ti ff t ith ll S i D*Collaborative effort with my colleague Sriram Dasu

Visionary SpeechIEEE/INFORMS I t ti l C f S i O ti2007 IEEE/INFORMS International Conference on Service Operations

Logistics, and Informatics (SOLI2007) August 28, 2007, Philadelphia PA

Service I.E., Service Operations, and Services Marketing in service encounters

Services Marketing Promise makersServices Marketing – Promise makers And use the encounter to promote further sales

Service Operations – Promise keepersp pManage the service encounter to achieve service promises

Service I.E.– Structure each element of the encounter processencounter process

Define work activities in light of process requirements

Service EncounterAn interaction between a customer and an organization.organization.

Consists of one simple event or transaction, or a i f t t tiseries of events or transactions

A central feature of service businesses as definedA central feature of service businesses as defined in the SIC.

An important feature of most product business.

Three Ts of a Service EncounterTask – Job to be done

Treatment – Courtesy and friendliness of server

Tangible – Physical and sensory features of the service environment

Service Encounter Inputs and OutputsCustomer

Task Needs

Treatment Expectations

Psychological Explicit Outputs

Interaction Process

Task Events

y gMindset

Server

Task accomplishment

Treatment perceptions

Tangible perceptionsTask Events

Psych. EventsServer

Task Skills

Treatment Skills

Tangible perceptions

Implicit Outputs

Memories

Psychological Mindset

The Two Dimensions of a Service Encounter

CORECORETASK

Industrial Significance of Psychological SideCustomer satisfaction measures cannot capture the psychology of experienceBig push in managing the moments of truth to provide positive experiences p p p

McKinsey Experience 2006 survey notes the importance of positive emotional interactions on retention and profitability

Need for rationalizing emotional labor jobsAren’t enough naturally Emotionally Intelligent workers so we must design work that enables average workers to perform at high EI levelsperform at high EI levels

Industrial SignificanceThe psychological experience plays a major role in…

Financial services—trust building, managing waitsCall Centers – problem solving, promise makingHealthcare – framing diagnoses, gaining compliance Entertainment – identifying high points creating memoriesEntertainment identifying high points, creating memories Consulting – managing the flow of an engagementOn-line shopping – website design, problem solving After sales service—cars, appliances, dry goodsRestaurants, hotels, etc.

New Service I.E.I.E. has converted the art of manufacturing into a science,

and has made great improvements in services through applications of information technology and modeling of service processes. The next step is to bring to bear psychological principles to systematically engineer thepsychological principles to systematically engineer the most commonly occurring process in industry—the service encounter.

The New Service Design Goals• In addition to physical or informational outcomes, encounters evoke

various emotions or hedonic patterns.

• We want to design (and manage) encounters such that the hedonic patterns are perceived positively while the encounter is taking place and recalled positively after it is completed.

• The overriding goal is to assure that the overall experience created by each encounter enhances the brand image.

• Two dimensions of experiences• Explicit – things that the customer can describe

I li it thi th t th t ’t d ib b t h• Implicit – things that the customer can’t describe but whose presence or absence can affect the customer’s satisfaction with the experience

Excelling in the implicit dimension may call for g p ydesign features which go counter to standard I E goals of speed and efficiencyI.E. goals of speed and efficiency

Extending time for events beyond the basic performance timeChanging order of eventsInserting breaks between eventsInserting breaks between eventsScripting events for customer segments and emotions rather than just for tasksjFraming to emphasize high points and mitigate low points

Five factors that shape perceptions of F ve acto s that shape pe cept o s oservice encounters*

1.Trust 2.Control and Choice3.Emotions 4 Sequence of events4.Sequence of events 5.Duration of events*These are based upon research findings fromThese are based upon research findings from

psychologists and behavioral decision theorists, such as D. Kahneman and G. Loewenstein.

1.TrustTwo Dimensions:

Competence Trust: Do you have the ability to act p y yin my interest although I can not judge your technical competence?M ti ti l T t Will t i i t tMotivational Trust: Will you act in my interest even when I am vulnerable?

Do you have the motivationDo you have the motivationDo you have the capacity

Fundamental Approach:Fundamental Approach:Reduce the need for trust through contracts and incentives – but is this always feasible

Engineering Trust

Influence judgments about effort

• Evidence of effort

E id f d l d• Evidence of resources deployed

• Evidence of goal progress

• Evidence of external hurdles

Influence judgments about motivationInfluence judgments about motivation• Evidence of interest

• Evidence of incentive alignment

• Make clear limits of empowerment

Affective Trust• Likeability

• Friendliness

• Make evident conflict of interest

• Anticipate potential problems

• Affinity (homophily)

• Familiarity

Influence judgments about skill

• Evidence of experience

• Testimonials

• Adherence to norms

• T ibl ( h i l tti• Tangibles (physical setting, uniforms etc)

2. Control and Choice

Control shapes perceptions and attributionTwo kinds of control –• Behavioral control

• Actual control • Cognitive control (We feel like we are in control)

• Knowing what is going to happen• Predictability of environment• Ability to anticipateAbility to anticipate• Ability to navigate the system

Engineering Behavioral Controlqu

ired

Server

ise

Req High

Server

Exp

erti

Mid Client/ Server

evel

of

Low Client

Significance of Decision

Le

Minor Some Major

Significance of Decision

Engineering cognitive control in healthcare

Information about:T t t ti• Treatment options

• Benefits and risks• Delineation of responsibility• Setting expectations about process steps

BUT: Accounting for Individual differences.

Effect of control choices on attribution

People blame people for system failuresPeople blame people for system failures

E t ti th t b il h dEvents or actions that can be easily changed become causes

Choice changes perceptions

3. Emotions

Emotions influence what we rememberEmotions influence what we remember

Emotional memories are distinctEmotional memories are distinct

Emotions influence what we perceive

Engineering emotions: Two tiered approach

Developing emotional platforms

Managing process generated emotions

Emotional platforms

The emotional theme or tone you want to engenderTh tt ib t th t th fi t t i t ith thThe attributes that the firm wants to associate with the brand.Most companies view this as a culture issue, but it should pcover all of the three Ts.

ExamplesH h’ F li f l kHarrah’s: Feeling of luckSouthwest Airlines: Fun Disney: DelightDisney: DelightJoie d’viere Hotel Chain: Edgy (Phoenix Hotel – Rolling Stone magazine); serene (Hotel Vitale– Country Living)

Engineering emotional platforms

Determine the emotions that have to be mitigated.Determine the emotions that have to be generated or enhanced.

This is where marketing and strategy come into playplay.

Process generated emotions

Based on process flows for customer segments or ifi t ti i t tispecific customers you can anticipate emotions

and manage them.Examples: Ultra-sound for pregnant womenExamples: Ultra sound for pregnant women, accident for auto-insurance, jack-pot at a casino, delay in servicing your car.

Classifying process generated emotions: Appraisal Theory

Specifies conditions that result in different emotions. People become i l h h fi di h iemotional when they first discover a change in outcomes.

The type of emotion depends on whether:

(1) the change in outcome improves our situation or makes it worse

(2) The outcome is associated with a penalty or reward(3) Th t i t i j t ibilit(3) The outcome is certain or just a possibility(4) The casual event is significant or powerful and its resultant

change difficult to cope with or the event is not very significant and its changes easy to cope withand its changes easy to cope with

(5) You are responsible for the event and resultant change or an outside agency caused the event and change

Managing process generated emotions

Anticipate likely emotions at different touch pointsAnticipate likely emotions at different touch points for a encounter based on:

Product/ Prior history/ ….Identify emotional concernsEmploy targeted response

Proactive response Appropriate reaction (Scripts, escalation, . .)

Strategies for managing process emotions

Positive outcome Negative outcomeSource of outcome

Emphasize Recovery You

outcome

Co-optSympathy/ support

Not you, e.g., other company Co opt ppor customer

Colonoscopy Experiment:

Redelmeier, D.A., and D. Kahneman (1996) “ Patients’ memories of painful medical treatments…” Pain, 3 – 8.

Savviest Film Makers Put Last Things First

“If you don’t have a strong finish to a film, you are in serious trouble. It can be explosive. It can be a bang or a whimper, but it better be memorable, or else people will remember very little about the movie.else people will remember very little about the movie.If a movie has a riveting conclusion, audiences are happy to overlook its earlier flaws. By contrast, if the picture has a bummer of an ending, people forget almost everything they liked about the film.”g y g y

--Robert Towne, Screenwriter

Source: Stephen Farber, L.A. Times, Aug. 27, 2001

4.Sequence Theory

We recall encounters as peaks and valleysWe recall encounters as peaks and valleys, and as snapshots, not movies

The front end and the back end are not created equalq

We like positive trends

Losses and gains are not symmetrical

Engineering sequence flows

Create a distinct highCreate a distinct highYou don’t want to allocate resource to make all events equally good, but pick and choose and q y g , pdrive some much higher.

Create a positive trend in the process

Get the bad news out in the beginning

5. Duration TheoryDuration of an encounter is often the major determinant of its valueLittle evidence of an internal clock -- Humming birds have one; we don’tJudgment of the duration of a current experience is affected by the following:Judgment of the duration of a current experience is affected by the following:

Attention to the clock Mental capacity utilized during the event Emotional stateEmotional stateExpectation of the length of wait

Judgment of the duration of a past experience is affected by the amount of memory associated with the time interval, which is determined by the y , yfollowing:Familiarity of the eventNumber of distinguishable segments

Valuation of time depends uponOur expectationsAge and culture of the individualg

Engineering perceptions of duration

To minimize attention of durationTo minimize attention of duration- Increase perceptions of control

Increase perception of goal progress- Increase perception of goal progress To make duration seem longer- Break encounter into distinct segments

Experienceprint applied to car repairExperienceprint applied to car repair

Positivete

Joy/ Thrill/Happiness

N t lnic

Sta

t Happiness

Build trust Create feeling of

control

Provide Positive surprise

Neutral

Negative

Hed

on

Anger/ Anxiety/

controlAnticipate emotions

Negative Stress

CarCustomer Arrives

Service rep. conversation

Customer calls

Greeting & prelim. diagnosis

Convey quote

Customer approvesCar

delivered to home

Scheduling of job

j

diagnosis

Detailed diagnosis Car repairedLine of visability

Application to an on-line computer sales company

Issue: Email informing of need to change order for a computer:

Emotions to be mitigated: Frustration, Anger, Regret, Guilt, Dislike

Bad news up front: We are sorry that your product specifications have to be changed

Restore perceived control: Explain cause of change in order – new technology?Explain next step.

Offer choices.Restore trust:Restore trust:

Explain what you are doing to make this right. Assume responsibility for making it right.

Provide a single point of contact – someone responsible who will continue b ibl f h dto be responsible for the order.

Explain how Co. X works very had to avoid these situations, but a small percentage of orders (Framing issue) has this problem

Close out on Positive:Close out on Positive: Offer price adjustment or delivery concessions

General ApproachWhat is marketing promiseD t i t t b dDetermine customer segments based upon psychological factors, e.g., personality traitsMap current usage and flows (experienceprints)Map current usage and flows (experienceprints)Identify gaps/limitations in experiencesRedesignRedesign

Service scripts, flows, touch points, websitesEmployee training in experience workInformation systems

Sample service psych principles for encounter design

Create a positive trend in each encounterEnd on a high note (“stick the dismount”)Frame the “sweet spots”C t f li f t lCreate a feeling of controlEnhance trust in capabilities and effortConvey goal progressConvey goal progress Proactively anticipate and manage emotionsOptimize the number of choicesOptimize the number of choices Create positive surprises Understand the time perspective of the customer

The Challenge for Service I.E. and Service Operations

Refinement of psychological factors for easeRefinement of psychological factors for ease of application – A best practices handbook(?)Cost accounting – how to show profit impactCost accounting how to show profit impact of psychology based changes Need to develop satisfaction questionnairesNeed to develop satisfaction questionnaires which get at underlying psychology directly, without giving away the magicwithout giving away the magic

References

1. Bandura, A., (1997) Self-efficacy: The Exercise of Control. Freeman, New York.

2. Folkman, A., (1984) “Personal control and control and coping processes: A theoretical analysis.” Journal of Personality and Social Psychology vol 46 pp 839 852Journal of Personality and Social Psychology, vol 46. pp 839 – 852.

3. Gambetta. D. (1988) Trust: Making and Breaking Cooperative Relations. Edited. Basil Blackwell, Oxford U.K.

4. Lord, K.R., and S. Putrevu (2006) “Exploring the dimensionality of the need for cognition scales” Psychology and Marketing, Vol 23, pp 11 – 34.sychology and a keting, Vo 3, pp 3 .

5. Fredrickson BL and Kahneman D. (1993) Duration neglect in retrospective evaluations of affective episodes. Journal of Personality and Social Psychology Jul; 65(1):45-55.

6. Kahneman D, Fredrickson, B.L., Schreiber, C.A., and D.A. Redelmeier (1993). “When more pain is preferred to less: Adding a better end.” Psychological Science 4, 401-05.

7. Loewenstein, G. and D. Prelec (1991). “Negative Time Preference”. The American Economic Review; May 1991; 81(2): 347-352.

8. Read, D. and M. Powell, “Reasons for Sequence Preferences”, Journal of Behavioral Decision Making, 13, 2, 2000, 433-460.

9. Roseman, I. J. (1991). “Appraisal determinants of discrete emotions”. Cognition and Emotion, 5, 161-200.

10. Rousseau, D.M., S.B. Sitkin, R.S. Burt, and C. Camerer (1998) “Not so different after all: A cross discipline view of trust.” The Academy of Management Review, vol 23, pp 3939 - 404.