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Competing with quality service in good times and bad
Business Horizons (2009) 52, 309—317
www.elsevier.com/locate/bushor
EXECUTIVE DIGEST
Competing with quality service in good times and bad Leonard L. Berry Mays Business School, College of Medicine Health Science Center, Texas A&M University, 4112 TAMU, College Station, TX 77843-4112, U.S.A.
1. Delivering superior value On December 10, 2008, I was in Nashville, Tennessee attending a conference at the Gaylord Opryland Hotel, a huge convention property with more than 2,800 sleeping rooms. At the time, the hotel was full and each of its more upscale restaurants was booked. Several close friends attending the conference and I were looking forward to having dinner together that evening, as we had not visited in some time and had much to discuss. Good conversation and good food were our priorities. We preferred to stay in the hotel to eat, if possible, because the weather outside was nasty. One less-formal hotel restaurant, Cascades, had room for us. That would be fine. We looked forward to being together, swapping stories, and having some good laughs. Except, it wasn’t fine: A band was playing and the music was too loud for us to carry on a conversation. The Cascades Assistant General Manager, Lindsay Ketchum, twice moved us to a table farther from the music. However, the music still was disruptive and we told her that we were going to find another restaurant outside the hotel. Lindsay volunteered to make the arrangements. After asking us our food preferences, she recommended a restaurant downtown, called the restaurant to get us a reservation, arranged a taxi for us, and then personally escorted us to the waiting taxi. She also insisted on comping E-mail address: [email protected]
the drinks we had been served. We all thanked Lindsay for her exceptional service and one of my friends gave her a hug. The recommended restaurant was expecting us, the food was excellent, and it was quiet. The evening turned out splendidly. Lindsay’s story teaches us plenty. It teaches us about the power of proactive service: sensing and responding to your customers’ needs, assuming responsibility for rescuing a failure in the making, and truly caring about the welfare of your customers. Gaylord Entertainment, the parent company that builds and operates mega convention hotels, competes with service quality. It is the necessary cultural centerpiece for Gaylord to implement its core strategy of multi-year contracting with organizations to hold their large meetings and conventions in Gaylord properties across the United States. A corporate meeting planner who books convention properties for a company’s annual sales meeting of 3,000 people cannot afford to use a hotel with mediocre service. Too much is at stake, too much is invested, too many service wheels are in motion. Lindsay served us the way her supervisors would want her to serve us. She did what she was supposed to do. But, her service wouldn’t have happened in many companies. In similar circumstances in most other hotels, we would have been on our own. I wrote to Colin Reed, the CEO of Gaylord, about Lindsay and here is his reply: Thanks a lot for the note and I am sorry the place was noisy but glad we rectified.
0007-6813/$ — see front matter # 2009 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2009.02.002
310 Our service model continues to work for us and I have no doubt that this is the only sustainable approach. I suspect some of our competition will be chopping muscle in these [hard economic] times and I also suspect we will be able to differentiate even more. I will pass on your comments to Lindsay and her management. Now more than ever, with global economic distress putting intense pressure on nearly every industry and organization, firms need employees like Lindsay and cultures like Gaylord. A perfect economic storm is a perfect time for companies to recommit to the service excellence journey. Service creates value for customers, and superior value–—the best way to compete at any time–—is the only way to compete during a recession or depression. One of the most common managerial mistakes is assuming that value is the equivalent to price: the lower the price, the better the value. This is not necessarily true for most consumers, even in tough economic times. Value, to the customer, is benefits received for burdens endured. The benefits are what the customer seeks to buy. At the Cascades Restaurant, my friends and I wanted good conversation and good food. We wanted to enjoy the rare opportunity to be together. We wanted our benefits. We wanted value. Customers must endure burdens to experience the benefits. Burdens have both a monetary component (economic cost) and a nonmonetary component (for example, inconvenience or incompetent service). The killer burden in our Cascades experience was nonmonetary; that is, the loud music. Other restaurant patrons, however, appeared to be enjoying the music. To them, it was a benefit; to us, it required trading burdens (experiencing the inconvenience of leaving the hotel and the cost of cab fares in exchange for a peaceful setting for our meal and conversation). Delivering a superior value entails maximizing the benefits and minimizing the burdens for customers. It entails giving customers a good return on their investment of time and effort and money. It entails creating customers in the truest sense: someone who is glad to have been a customer following the transaction. In the graduate services marketing course I teach, I ask my students to think of the most valuable commercial relationship they have and to write a few sentences about why they feel so positively about the organization they select. I use the same exercise in executive teaching. The students select a variety of businesses: veterinary clinics, beauty salons, restaurants, banks, clothing stores, auto repair shops, medical doctors, and
EXECUTIVE DIGEST many more. When they describe their selections to the class they rarely say anything about price. Rather, they discuss the confidence they have in the company’s competence or integrity. They may tell a story about when they had a big problem and the company went out of its way to solve it for them. They often talk about extra-effort service. Sometimes, they will talk about an individual service provider, someone they rely on and trust. It is only after the students have told their stories that I point out that price was rarely mentioned. Then, I am ready to teach my students the true meaning of value and the central role of service excellence in creating it. Herein, I discuss the pillars of competing with service excellence to create compelling customer value. My focus is on building the infrastructure of quality service. All companies are service companies, in whole or part, because all create value for customers through performances (i.e., services). Thus, the pillars of quality service really are pillars in any excellent company. The overarching message of this article is: great organizations compete with great service, in good times and bad. Let’s take a closer look.
2. Compete with great employees ‘‘Compete with great employees’’ seems so simple and elementary. It is, however, a lesson that most companies get wrong. Far too often, companies allow carelessly selected, poorly prepared and supervised, ‘‘just a job’’ employees to create the customer’s service experience. And far too often, firms suck the life and vitality out of jobs with dumb policies and lousy managers even when they do happen to attract high-potential employees. In his book, The Craftsman, Richard Sennett (2008) addresses the issue of ‘‘good work.’’ Great companies make sure their employees have ‘‘good work’’ to do: work that is challenging, energizing, developmental, which leads somewhere, and is good for the soul, not just the wallet. Offering ‘‘good work’’ helps a company attract and retain high-potential employees and elicit their best onthe-job efforts, paving the way to the delivery of excellent service. In services, the ‘‘product’’ is a performance and while machines provide some of these performances, people are the primary agents. For many services, customers do not distinguish between the quality of the service and the quality of the people who perform it. As the highly successful restaurateur Danny Meyer (2006) puts it in his book, Setting the Table: ‘‘In restaurants, as in any other business, you stand a much better chance of
EXECUTIVE DIGEST ending up with the most customers when first you have the best employees’’ (p. 152). The first rule of execution in a service business is to hire people who can effectively perform the service. Excellent organizations aim high and search until they find just the right person. They practice patient hiring, using multiple tools and methods, and soliciting the involvement and input of multiple staff. Seeking alignment with the organization’s core values, they strive to reveal job applicants’ personal values with open-ended ‘‘behavioral’’ questions; for example, ‘‘Have you ever disagreed with a manager’s decision in a previous job and, if so, how did you handle it?’’ ‘‘Can you tell about a time you went out of your way to help a co-worker?’’ ‘‘Would you describe a time in your life when you wish you had done something differently from what you actually did?’’ At Mayo Clinic, panels of existing staff interview job candidates, an approach analogous to the late service quality author Ron Zemke’s view that hiring service performers should be like casting a Broadway show (Berry & Seltman, 2008; Zemke, 1992). QuikTrip, a $7+ billion convenience store chain which is regularly featured in Fortune’s ‘‘100 Best Companies to Work For’’ rankings, puts applicants through a rigorous, structured process that includes a personality assessment. The company compares applicants’ personality profiles with those of its most successful employees. Recruiting and hiring are handled by professionals in the firm’s geographic divisions rather than by store managers (Bendapudi & Bendapudi, 2005). QuikTrip’s voluntary employee turnover rate in 2007 was 19%, a remarkably low number in convenience store retailing or–—frankly–—in any category of retailing. Part-time employees who stay for a year receive a bonus of $1.55 for every hour worked thereafter (Levering & Moskowitz, 2008). Costco and The Container Store pay employees well above the average for their sectors of retailing. Although Costco’s labor rates exceed those of its principal competitor, Sam’s Club, by more than 40%, its labor costs are actually lower as a percentage of sales because Costco’s employees are more productive (Cascio, 2006). The Container Store, another Fortune ‘‘100 Best Companies to Work For’’ regular–—being ranked first, 2 years in a row–—pays entry-level employees 50% to 100% more than competitors (Berry, 1999; Levering & Moskowitz, 2008).
2.1. Believing, investing, listening Hiring the right people is the first part. Offering them a superior work-life experience is the equally
311 critical second component. An engaging work-life experience requires continuous skills and knowledge development, embraces teamwork, fosters trust, celebrates achievement, encourages creativity and innovation, provides a sense of meaning and contribution, offers transparency and good internal communication, and combines generosity with fairness and high standards. Excellent organizations believe in their employees, invest in their success, and listen to them. By hiring well, leaders can have faith in the goodwill and good judgment of the service performers. They can focus their energies on articulating and reinforcing the vision and strategy; on making the infrastructure and systems investments that enable better performance; on teaching, coaching, and praising; and on identifying the most promising people for advancement so they can promote from within. Nothing demonstrates management’s faith in existing employees more than a promote-fromwithin culture. Investing in the success of employees who stay, rather than seeking to minimize investment in those who leave, is a hallmark of excellent organizations. Many managers consider high employee turnover a given in their industries, and thus curtail their upfront investment in new employees’ preparation (e.g., orientation, training and education, mentoring). Schlesinger and Heskett (1991) refer to this practice as the ‘‘cycle of failure’’ because poorly prepared service providers are more likely to leave or be fired and less likely to provide excellent service before they leave, hurting profits and reducing resources and incentive for new employees’ preparation. Excellent organizations invest in a ‘‘cycle of success’’ by making a substantial upfront investment in increasing the likelihood of employees’ success and desire to stay (Berry & Seltman, 2008). Employee research is as important as customer research in organizations truly intent on improving service quality. When the ‘‘product’’ is a human performance, leaders need to know a lot about the performers. Informal, day-to-day listening is essential. But, so is more formal listening through anonymous employee surveys. How do employees perceive the quality of internal service they receive? How do they perceive the organization’s commitment to excellent service? How do they perceive the quality of senior management and their immediate manager? How do they perceive their career opportunity? How committed are they to the organization’s mission and to the organization itself? David Maister (2001) identified four key Likertscale questions to consider for employee surveys:
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I am highly satisfied with my job. I get a great sense of accomplishment from my work.
Most of the work I’m given is challenging. I am committed to this organization as a career opportunity. Maister’s research shows that increasing employees’ agreement on these four statements can have a dramatic influence on company financial performance (Maister, 2001). An open-ended employee question that I have found especially revealing in my own research is: ‘‘If you were in charge for one day and could make one change to improve the quality of service, what change would you make?’’
2.2. Being an employer of choice Excellent people giving their best efforts: this is a potent combination in the business of service. Indeed, a principal difference between superb and mediocre organizations is that the former get more ‘‘volunteerism’’ from their employees. That is, they get more effort above the minimum standard required of an employee to avoid any negative consequence. High-volunteerism organizations have many employees that choose to work harder for their internal or external customers (Berry, 2007). Great employees are the key competitive advantage for organizations. They are the face of the organization to customers, they create the service experience, they increase customers’ benefits and reduce burdens. Excellent organizations are relational employers that seek to build true bonds with employees and earn their best efforts. They lead with values rather than rules, inspiration rather than demands, actions rather than empty promises, generosity rather than greed, integrity rather than malice. One can find relational employers in every sector of the economy. Gaylord Entertainment competes for ‘‘ACE’’ (attitude, character, enthusiasm) employees in hiring. The company refers to its employees as ‘‘STARS’’ (smiles, teamwork, attitude, reliability, service) and includes all staff–—from housekeepers to managers–—in guest satisfaction quarterly bonuses. Gaylord’s ‘‘Chuck Wagon’’ provides a free meal during each shift for all employees. For its part, Wawa, a Pennsylvania-based convenience store chain with 500+ stores, offers employees more than 100 in-house courses in a central educational facility and pays the tuition for employees to pursue a degree in any field of
EXECUTIVE DIGEST study at one of several colleges with which it has relationships. Wawa stores are evaluated monthly by mystery shoppers for each element of the customer experience, ranging from waiting time to cleanliness to the freshness of the food. High-scoring stores are visited by the ‘‘prize patrol,’’ which brings awards and a celebration. Associates from prize patrol stores participate in a quarterly drawing for trips to Disney (Bendapudi & Bendapudi, 2005). Organizations like Wawa, QuikTrip, Gaylord, Mayo Clinic, The Container Store, and Costco are employers of choice which build bonds with employees and inspire volunteerism. Their success is founded on a strong market share for great employees. Great employees build strong companies that, in turn, are increasingly able to attract and keep more great employees. A bad economy favors strong companies further, for they are more likely to be growing, hiring, and promoting, and less likely to be laying off existing employees.
3. Compete with reliability Excellent employees position a firm to deliver excellent service quality. Service quality is a perception based on customers’ assessments of the service provided compared to their desires (expectations) for the service. Meeting–—or better yet, exceeding–— customers’ expectations is the essence of service quality. Customers’ assessment of service quality is a cumulative assessment, as each new experience with an organization blends with past experiences. Reliability–—performing the promised service dependably and accurately–—is the core of quality service. Why? Because a dependable, accurate service–—a service customers believe they can count on–—boosts their confidence when buying a performance. Customers often can benefit from some degree of pre-purchase experience when buying tangible goods; they can ‘‘kick the tires,’’ so to speak. When buying performances, however, there are no tires to kick. As one of my students wrote in a service diary, ‘‘A customer will never know the quality of an insurance policy until he or she needs it the most.’’ With services, purchase precedes actual experience. Customers, in effect, buy a promise of performance, which is why they consistently rank reliability of service as the most important quality dimension (Berry, Parasuraman, & Zeithaml, 1994). Service reliability is an attitude and it is a design issue. The desire to be reliable is critically important in being reliable. Some managers accept mistakes as an inevitable byproduct of labor-intensive performances; others work relentlessly to reduce
EXECUTIVE DIGEST mistakes. Some managers emphasize service throughput, volume, and speed; others emphasize quality first. Some managers are satisfied with 96% reliability; others view 96% reliability as a 4% error rate–—and are sure to note the number of service episodes affected: the former example amounts to 4,000 for a firm with 100,000 weekly transactions (Berry, 1995). In organizations with the best service, keeping promises is cultural.
3.1. Designing reliability into the service Not all service mistakes stem from hastiness, carelessness, or incompetence. A needlessly complicated, failure-prone service system is often the underlying culprit. Designing reliability into the service involves rigorous consideration of at least four questions: 1. Can the service be simplified without compromising its value to customers? 2. What can be done to assist customers in using the service correctly? 3. What processes in the service system are most prone to failure, and what can be done to prevent these failures? 4. What capabilities — skills and knowledge — do service providers need to perform the service accurately and dependably? (Berry, 1995, p. 87) Consider these four design questions in the context of the services provided by a hospital intensive care unit. A fascinating study concluded that the average I.C.U. patient requires 178 discrete services in a 24hour period. Even with extremely well-trained and conscientious service providers, correctly performing 178 daily tasks in caring for very sick patients is a formidable feat. Infections related to central line insertions are common–—and exceedingly dangerous. In 2001, a critical-care physician at Johns Hopkins Hospital, Peter Pronovost, decided to adapt an airline industry safety tool–—a checklist–—to the insertion of central lines into patients. Pronovost wrote on a piece of paper five well-known, but not always followed, steps doctors should take when inserting a line: 1. Wash hands with soap; 2. Clean patient’s skin with chlorhexidine antiseptic; 3. Cover the patient in sterile drapes;
313 4. Wear a sterile mask, hat, gown, and gloves; and 5. Put a sterile dressing over the catheter site once the line is in. (Gawande, 2007) Pronovost asked nurses in his I.C.U. to observe physicians for 1 month as they inserted central lines and to record how often they completed each step. At least one step was missed more than a third of the time. Armed with these findings, Pronovost and his team persuaded the hospital leadership to authorize nurses to stop doctors if they observed them skipping a step on the checklist. The administration made it clear: nurses were expected to intervene if physicians failed to follow each step. The results were dramatic: the 10-day line-infection rate declined from 11% to zero over the next year. Pronovost’s methods have now been used in Michigan hospitals and elsewhere with impressive results. Patient infection rates are way down and lives are saved, as are millions of dollars in costs (Gawande, 2007). The I.C.U. checklist story illustrates the salience of the four service system reliability design questions presented above. In particular, the checklist simplifies complexity by spotlighting essential steps in performing a safe and reliable service. In so doing, it assists the ‘‘performer’’–—in this case, the physician–—in using the service correctly, which in turn assists the patient.
3.2. Running to the problem The importance of delivering a reliable service elevates the importance of service recovery when a failure occurs. After a service failure, the company must gain back the customer’s confidence in the service. Unless egregious, a single service failure is unlikely to completely destroy a customer’s confidence in the organization. A poor recovery, however, compounds the initial failure and demonstrates a pattern of ineffectiveness. Customers’ service expectations usually are higher once they have experienced the burden of the initial failure. Research teaches: perform the service right the first time and, when necessary, perform even better the second time. Restaurant owner Danny Meyer (2006) writes ‘‘The worst mistake is not to end up in a better place after having made a mistake. We call that ‘writing a great last chapter’. . . .To be effective, the last chapter must be written imaginatively, graciously, generously, and sincerely’’ (p. 222). The best recovery option is correcting a problem before it reaches the customer. FedEx, which delivers more than 7 million items daily to more than 220 countries, has invested heavily in keeping its
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brand-positioning promise of on-time delivery. Each evening, selected company airplanes start out empty or partially full so they can be diverted to airports where they are needed due to overloads, aircraft maintenance issues, or other problems. Additionally, on-call airplanes and crews–—called ‘‘hot spares’’–—are on standby each night. Writing a great last chapter becomes the best option when the problem does impact the customer. Making it easy for customers to contact the firm, apologizing and personalizing the recovery experience, acting quickly, offering a resolution that reasonable customers would consider to be fair, and keeping customers informed when resolution is delayed are well-accepted service recovery guidelines. Competing in the online space where many firms require customers with complaints to send an e-mail, movie rental company Netflix operates an around-the-clock call center. Call center staff are encouraged to be generous; for example, granting bonus DVDs, crediting accounts, and marking the missing DVD as lost. Great service companies ‘‘run to the problem’’ as Garrett Jamison, a banker passionate about quality service, would state it (Berry, 1995, p. 99). Effective service recovery provides the opportunity not only to regain the customer’s confidence, but also to learn more about a service system’s points of vulnerability and improve them. Effective service recovery also reduces the number and ferocity of aggrieved customer Internet attacks on the company. Finally, effective service recovery improves the quality of worklife for service providers who are often caught in the middle of an inflexible company policy and an irate customer. Table 1.
4. Compete with respect and pleasant surprises Service reliability is key to developing a reputation for superior service, but it is not enough. Companies are supposed to be reliable; they are supposed to know what they are doing and to value the customer relationship sufficiently to try to keep their promises. Although the absence of reliability undermines a customer’s confidence in the firm, its presence generally does not create a service experience that exceeds the customer’s expectations. The best opportunity to exceed customers’ expectations is typically when service providers interact with customers and have the opportunity to surprise them with uncommon civility, kindness, caring, and extra effort. Exceeding customers’ expectations requires pleasant surprise, and the human interaction in service delivery offers an ideal opportunity to create this surprise–—and, in so doing, create a memorable, confidence-strengthening experience for the customer. Many of the service provider behaviors that please customers demonstrate respectfulness. Respect is a powerful, pervasive concept in the journey to improve service. Respectful treatment of the customer is fundamental to delivering a quality service. Customers are different from one another in so many ways, but no customer wants to feel disrespected. Disrespectful service is inherently poor service, and it is all too common. Consider Table 1, which presents a list of common customer service complaints based on many years of service quality research. From the first category, ‘‘True Lies’’ (cheating customers) to the last, ‘‘Misplaced
Common customer service complaints
True Lies Red Alert Broken Promises I Just Work Here The Big Wait Automatic Pilot Suffering in Silence Don’t Ask Lights On, No One Home Misplaced Priorities Source: Berry (1999, p. 31)
Blatant dishonesty or unfairness, such as service providers selling unneeded services or purposely quoting fake, ‘‘low-ball’’ cost estimates. Providers who assume customers are stupid or dishonest, and treat them harshly or disrespectfully. Service providers who do not show up as promised. Careless, mistake-prone service. Powerless employees who lack the authority–—or desire–—to solve basic customer problems. Waiting in a line made long because some of the checkout lanes or service counters are closed. Impersonal, emotionless, no-eye-contact, going-through-the-motions non-service. Employees who don’t bother to communicate with customers who are anxious to hear how a service problem will be resolved. Employees unwilling to make any extra effort to help customers, or who seem put-out by requests for assistance. Clueless employees who do not know (i.e., will not take the time to learn) the answers to customers’ common questions. Employees who visit with each other or conduct personal business while the customer waits. Those who refuse to assist a customer because they’re off duty or on a break.
EXECUTIVE DIGEST Priorities’’ (ignoring customers), every complaint category is associated with disrespectful service (Berry, 1999, p. 31). Respectful service extends esteem and dignity not only to the customer, but also to the provider. The core values statement for which Ritz-Carlton Hotels is best known–—‘‘We are ladies and gentlemen serving ladies and gentlemen’’–—has an impact because of the dignity it invests in the act of serving. Respect elevates human interaction; it brings esteem to both parties in a service interaction. Respectful service includes honoring customers’:
Presence — by responding to it; Voice — by listening to it; Time — by not wasting it; Privacy — by not invading it needlessly; and Self-esteem — by not undermining it. Respectful service that pleasantly surprises often comes in small acts of kindness, seemingly minor gestures that wind up making a major impression. Management Lessons from Mayo Clinic (Berry & Seltman, 2008, pp. 173-174) includes a verbatim e-mail written by a Mayo Clinic employee to Dr. Wyatt Decker, who at the time was head of the Emergency Department at the Clinic’s St. Marys Hospital in Rochester, Minnesota. The story told in this e-mail, which appears below, captures the grand possibilities for creating memorable service experiences when human beings interact. Hello Dr. Decker, I’m remiss in not sending you this e-mail earlier, but I wanted to recount an experience I had in the Emergency Room about three months ago with Dr. Luis Haro. I want to share firsthand with you what an extraordinary physician he is. I live with my mother who is 91 and has fairly severe dementia. About three months ago, I came home to find her outside on the lawn. She had fallen, was unable to get up, and had a nasty bruise and scrape on her elbow. She is a tiny woman so I managed to get her up and we headed for the Emergency Room. Once there, we were seen quickly and everyone was very solicitous of her. She’s also almost deaf so sometimes this is no easy task. Dr. Haro introduced himself and was very patient and kind–—and spoke with enough volume so she could hear him. As he examined her,
315 he asked her to stand and take a few steps. As she began to do so, she bumped into him. My mother in her day was quite a wit and some of that has remained. She looked up at him after bumping against him and said, ‘‘Well, I suppose we could waltz.’’ And he replied, ‘‘Yes, we could.’’ He then proceeded to take her in his arms and waltz a few steps around the cubicle. My mother was absolutely enchanted as she loves to dance and I started to cry. The sight of this tiny fragile old woman being waltzed around the room by this most handsome young man was just too much. I don’t think I’ve ever been prouder to be a Mayo employee than that night. To witness that interaction and know this is the caliber of doctor we have here, someone whose medical expertise is a given but whose compassion and kindness–—and humanness–—are extraordinary was very moving. I know in the grand scheme of Emergency Medicine this scenario has little significance. My mother had a bad bruise and a scrape but really was just fine. Her physical symptoms healed in a day or two but the ‘‘healing’’ that occurred that evening with his interaction with her is really what sets Mayo apart and will last in my memory forever.
5. Compete with convenience Excellent companies make it easier for customers to do business with them. They are innovative in saving customers time and effort, the essence of service convenience. Customers’ time and effort expenditures are nonmonetary burdens they must bear to receive the benefits of the service. Reducing these burdens without a commensurate reduction in benefits increases value. Service convenience is an important facet of service quality given the time pressures, complexity, and stress that characterize contemporary lifestyles. Time is a finite resource. Time spent driving to an inconveniently located store, navigating a poorly designed website, or waiting in a long checkout line to pay or to speak to a human being in a call center is time unavailable for other activities. Effort can involve the expenditure of physical, mental, and emotional resources. Although not finite like time, most customers clearly value service that requires less effort. Netflix reinvented the movie rental business with a delivery system that combines the Internet (for selecting and ordering movies) and regular mail (for receiving and returning the DVDs) with a customer-friendly transaction model (a flat monthly fee with no return deadline). No longer
316 do movie rental consumers have to expend the energy–—and endure the stress–—of racing back to the rental store before it closes to avoid a late charge. Industry leader Blockbuster had no choice but to eventually follow Netflix’s lead. Netflix is but one of many industry-changing innovators that build convenience into superior service. Google created an online ‘‘department store’’ of information on virtually any subject available, where and when customers need it. Funded by advertising revenue, Google has become one of the world’s largest media companies. LensCrafters differentiates its retail eyewear chain by preparing glasses for customers the same day they buy them, usually within an hour. To further strengthen its convenience offer, LensCrafters typically locates independent, licensed optometrists next to its retail stores to provide ‘‘one-stop’’ convenience. Similarly, Houston’s Gallery Furniture, one of the most successful single-store furniture retailers in the United States, delivers purchases to customers on the same day they make them–—quite a contrast in a retail sector notorious for making customers wait weeks, even months, for their purchased furniture. Gallery’s same-day promise requires that it operate a distribution facility 24 hours a day, 7 days a week. It is not uncommon for customers to arrive home after shopping to find the Gallery delivery truck waiting for them (Seiders, Berry, & Gresham, 2000). FedEx did not invent the idea of delivering documents and packages by air; it did, however, create a market for the rapid, reliable delivery of timesensitive material. FedEx became an industry leader by combining speed and reliability. This is its value offer ‘‘sweetspot’’ in which it has continually invested. When the company started in 1973, customers had to call the company to initiate service. Two years later, FedEx began to introduce drop boxes for customer convenience. In 1984, the company started providing volume customers free computers and proprietary software to monitor their shipments. A decade later fedex.com was launched, enabling customers to manage their shipping activities via the Internet (Berry et al., 2006). Progressive Casualty Insurance sends a representative in a van to the site of a car accident involving an insured customer to assess the damage, help with necessary arrangements, and–—in some cases–—cut a check for the claim. Frequently, the vans arrive even before the police or tow trucks. Progressive pays for the cost of being on the scene through lower costs for fraudulent claims; that is, accidents which are staged or which never happened. It is more difficult to rip off an insurance company that shows up at the scene of an accident. In 2002, Progressive began
EXECUTIVE DIGEST displaying its rates alongside competitors’ rates on the company website, facilitating easy price comparisons. Progressive’s posted rate quote is the lowest only about half the time. In providing this service, Progressive is relying on its competency in estimating a person’s probability of getting into an accident. A customer that chooses a competitor’s lower rate may well turn out to be a money-losing customer (Frei, 2008). Enterprise became the largest and most successful American car rental firm by saving time and effort for local people whose cars are temporarily unavailable (the ‘‘replacement’’ market). Its thousands of rental offices are within a 15-minute drive of more than 90% of the U.S. population. The business’ long-used ‘‘We’ll pick you up’’ advertising theme underscores a clear customer convenience positioning strategy. In recently acquiring airport car rental companies National and Alamo, Enterprise now controls nearly half of all U.S. rental cars (Loomis, 2007). These examples demonstrate the salient role of easing customers’ nonmonetary time and effort burdens in delivering quality service. They also clearly reveal that customer convenience is comprised of far more than location or hours of operation. In an earlier article, colleagues and I (Berry, Seiders, & Grewal, 2002) proposed five types of service convenience and stressed the importance of integrating them in a cohesive strategy: 1. Decision convenience: Making it easier for customers to make purchase or use decisions (e.g., Progressive’s price comparisons). 2. Access convenience: Making it easier for customers to initiate service delivery (e.g., Google’s anytime, anywhere availability). 3. Transaction convenience: Making it easier for customers to pay and complete a transaction (e.g., Netflix’s flat-rate fee regardless of the number of movies viewed). 4. Benefit convenience: Making it easier for customers to experience the offering’s core benefits (e.g., LensCrafters and Gallery Furniture’s sameday provision of the purchased product(s)). 5. Postbenefit convenience: Making it easier for customers to resolve a problem following purchase (e.g., FedEx’s online package tracking capability). Despite its competitive importance, many companies fail to deliver optimum convenience. Some businesses put their own needs ahead of the cus-
EXECUTIVE DIGEST tomers, which is rarely–—if ever–—a good idea. Supermarkets usually locate frequently purchased staples such as bread and milk in the back of the store to encourage customers to make impulse purchases as they walk through the aisles. This motivates some consumers who need just a few items to go to a convenience store to buy them, even at a higher cost. Supermarkets commonly open a minimum number of checkout lanes to save labor costs. These savings are tangible; less tangible is how many customer shopping visits are lost because of perceived checkout waits. Excellent companies regardless of industry make a priority of saving customers time and effort. They view being easy to do business with as a cornerstone to delivering quality service.
6. Compete with the best Like an award-winning building, great service is precisely designed and carefully constructed. Delivering superior value through quality service is the best way to compete. Great service, the competitive edge in good times and bad, is built on the pillars of great employees, reliability, respect, pleasant surprises, and convenience. Hiring the best employees comes first. As the performers of the service, employees often equal the service in customer perceptions. Employers succeed by believing in employees, investing in their success, and listening to them. Employers who offer a superior work-life experience elicit more employee volunteerism, which delivers more value to the customer. Great service is reliable service. Because services generally are buy-before-you-try, customers have to trust that the service will be consistent. Reliability is both an attitude and a design. When service fails, the best companies see an opportunity not only to restore customer confidence but also to improve reliability. Respect is basic to good customer relations. Extending esteem and dignity to each customer, as well as to every employee, creates a competitive advantage in a harried world. The human encounter offers the best opportunity to pleasantly surprise customers–—and to exceed their expectations.
317 Quality service also involves making it easier for customers to do business with the firm. Convenience lessens the burdens a customer must bear to receive the benefits of the service, and it can be offered in more forms than 24/7 and prime property. The power of excellent service is competitive power in delivering differentiating value to customers. During hard economic times, it is good to remind ourselves of the quality-value relationship.
References Bendapudi, N., & Bendapudi, V. (2005). Creating the living brand. Harvard Business Review, 83(5), 124—132. Berry, L. L. (1995). On great service: A framework for action. New York: Free Press. Berry, L. L. (1999). Discovering the soul of service: The nine drivers of sustainable business success. New York: Free Press. Berry, L. L. (2007). The best companies are generous companies. Business Horizons, 50(4), 263—269. Berry, L. L., Parasuraman, A., & Zeithaml, V. (1994). Improving service quality in America. Academy of Management Executive, 8(2), 32—45. Berry, L. L., Seiders, K., & Grewal, D. (2002). Understanding service convenience. Journal of Marketing, 66(3), 1—17. Berry, L. L., & Seltman, K. D. (2008). Management lessons from Mayo Clinic: Inside one of the world’s most admired service organizations. New York: McGraw-Hill. Berry, L. L., Shankar, V., Parish, J. T., Cadwallader, S., & Dotzel, T. (2006). Creating new markets through service innovation. MIT Sloan Management Review, 47(2), 56—63. Cascio, W. F. (2006). Decency means more than ‘always low prices’: A comparison of Costco to Wal-Mart’s Sam’s Club. Academy of Management Perspectives, 20(3), 26—37. Frei, F. X. (2008). The four things a service business must get right. Harvard Business Review, 86(4), 70—80. Gawande, A. (2007). The checklist. The New Yorker, 83(39), 86—95. Levering, R., & Moskowitz, M. (2008). 100 best companies to work for — The rankings. Fortune, 157(2), 75—94. Loomis, C. J. (2007). Enterprise pulls up at the airport. Fortune, 156(2), 50. Maister, D. H. (2001). Practice what you preach: What managers must do to create a high achievement culture. New York: Free Press. Meyer, D. (2006). Setting the table. New York: Harper Collins. Schlesinger, L. A., & Heskett, J. L. (1991). Breaking the cycle of failure in services. MIT Sloan Management Review, 32(3), 17—28. Seiders, K., Berry, L. L., & Gresham, L. G. (2000). Attention retailers! How convenient is your convenience strategy? MIT Sloan Management Review, 41(3), 79—89. Sennett, R. (2008). The craftsman. New Haven, CT: Yale University Press. Zemke, R. (1992, December 15). World-class customer service. Boardroom Reports, p. 1.
www.elsevier.com/locate/bushor
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Competing with quality service in good times and bad Leonard L. Berry Mays Business School, College of Medicine Health Science Center, Texas A&M University, 4112 TAMU, College Station, TX 77843-4112, U.S.A.
1. Delivering superior value On December 10, 2008, I was in Nashville, Tennessee attending a conference at the Gaylord Opryland Hotel, a huge convention property with more than 2,800 sleeping rooms. At the time, the hotel was full and each of its more upscale restaurants was booked. Several close friends attending the conference and I were looking forward to having dinner together that evening, as we had not visited in some time and had much to discuss. Good conversation and good food were our priorities. We preferred to stay in the hotel to eat, if possible, because the weather outside was nasty. One less-formal hotel restaurant, Cascades, had room for us. That would be fine. We looked forward to being together, swapping stories, and having some good laughs. Except, it wasn’t fine: A band was playing and the music was too loud for us to carry on a conversation. The Cascades Assistant General Manager, Lindsay Ketchum, twice moved us to a table farther from the music. However, the music still was disruptive and we told her that we were going to find another restaurant outside the hotel. Lindsay volunteered to make the arrangements. After asking us our food preferences, she recommended a restaurant downtown, called the restaurant to get us a reservation, arranged a taxi for us, and then personally escorted us to the waiting taxi. She also insisted on comping E-mail address: [email protected]
the drinks we had been served. We all thanked Lindsay for her exceptional service and one of my friends gave her a hug. The recommended restaurant was expecting us, the food was excellent, and it was quiet. The evening turned out splendidly. Lindsay’s story teaches us plenty. It teaches us about the power of proactive service: sensing and responding to your customers’ needs, assuming responsibility for rescuing a failure in the making, and truly caring about the welfare of your customers. Gaylord Entertainment, the parent company that builds and operates mega convention hotels, competes with service quality. It is the necessary cultural centerpiece for Gaylord to implement its core strategy of multi-year contracting with organizations to hold their large meetings and conventions in Gaylord properties across the United States. A corporate meeting planner who books convention properties for a company’s annual sales meeting of 3,000 people cannot afford to use a hotel with mediocre service. Too much is at stake, too much is invested, too many service wheels are in motion. Lindsay served us the way her supervisors would want her to serve us. She did what she was supposed to do. But, her service wouldn’t have happened in many companies. In similar circumstances in most other hotels, we would have been on our own. I wrote to Colin Reed, the CEO of Gaylord, about Lindsay and here is his reply: Thanks a lot for the note and I am sorry the place was noisy but glad we rectified.
0007-6813/$ — see front matter # 2009 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2009.02.002
310 Our service model continues to work for us and I have no doubt that this is the only sustainable approach. I suspect some of our competition will be chopping muscle in these [hard economic] times and I also suspect we will be able to differentiate even more. I will pass on your comments to Lindsay and her management. Now more than ever, with global economic distress putting intense pressure on nearly every industry and organization, firms need employees like Lindsay and cultures like Gaylord. A perfect economic storm is a perfect time for companies to recommit to the service excellence journey. Service creates value for customers, and superior value–—the best way to compete at any time–—is the only way to compete during a recession or depression. One of the most common managerial mistakes is assuming that value is the equivalent to price: the lower the price, the better the value. This is not necessarily true for most consumers, even in tough economic times. Value, to the customer, is benefits received for burdens endured. The benefits are what the customer seeks to buy. At the Cascades Restaurant, my friends and I wanted good conversation and good food. We wanted to enjoy the rare opportunity to be together. We wanted our benefits. We wanted value. Customers must endure burdens to experience the benefits. Burdens have both a monetary component (economic cost) and a nonmonetary component (for example, inconvenience or incompetent service). The killer burden in our Cascades experience was nonmonetary; that is, the loud music. Other restaurant patrons, however, appeared to be enjoying the music. To them, it was a benefit; to us, it required trading burdens (experiencing the inconvenience of leaving the hotel and the cost of cab fares in exchange for a peaceful setting for our meal and conversation). Delivering a superior value entails maximizing the benefits and minimizing the burdens for customers. It entails giving customers a good return on their investment of time and effort and money. It entails creating customers in the truest sense: someone who is glad to have been a customer following the transaction. In the graduate services marketing course I teach, I ask my students to think of the most valuable commercial relationship they have and to write a few sentences about why they feel so positively about the organization they select. I use the same exercise in executive teaching. The students select a variety of businesses: veterinary clinics, beauty salons, restaurants, banks, clothing stores, auto repair shops, medical doctors, and
EXECUTIVE DIGEST many more. When they describe their selections to the class they rarely say anything about price. Rather, they discuss the confidence they have in the company’s competence or integrity. They may tell a story about when they had a big problem and the company went out of its way to solve it for them. They often talk about extra-effort service. Sometimes, they will talk about an individual service provider, someone they rely on and trust. It is only after the students have told their stories that I point out that price was rarely mentioned. Then, I am ready to teach my students the true meaning of value and the central role of service excellence in creating it. Herein, I discuss the pillars of competing with service excellence to create compelling customer value. My focus is on building the infrastructure of quality service. All companies are service companies, in whole or part, because all create value for customers through performances (i.e., services). Thus, the pillars of quality service really are pillars in any excellent company. The overarching message of this article is: great organizations compete with great service, in good times and bad. Let’s take a closer look.
2. Compete with great employees ‘‘Compete with great employees’’ seems so simple and elementary. It is, however, a lesson that most companies get wrong. Far too often, companies allow carelessly selected, poorly prepared and supervised, ‘‘just a job’’ employees to create the customer’s service experience. And far too often, firms suck the life and vitality out of jobs with dumb policies and lousy managers even when they do happen to attract high-potential employees. In his book, The Craftsman, Richard Sennett (2008) addresses the issue of ‘‘good work.’’ Great companies make sure their employees have ‘‘good work’’ to do: work that is challenging, energizing, developmental, which leads somewhere, and is good for the soul, not just the wallet. Offering ‘‘good work’’ helps a company attract and retain high-potential employees and elicit their best onthe-job efforts, paving the way to the delivery of excellent service. In services, the ‘‘product’’ is a performance and while machines provide some of these performances, people are the primary agents. For many services, customers do not distinguish between the quality of the service and the quality of the people who perform it. As the highly successful restaurateur Danny Meyer (2006) puts it in his book, Setting the Table: ‘‘In restaurants, as in any other business, you stand a much better chance of
EXECUTIVE DIGEST ending up with the most customers when first you have the best employees’’ (p. 152). The first rule of execution in a service business is to hire people who can effectively perform the service. Excellent organizations aim high and search until they find just the right person. They practice patient hiring, using multiple tools and methods, and soliciting the involvement and input of multiple staff. Seeking alignment with the organization’s core values, they strive to reveal job applicants’ personal values with open-ended ‘‘behavioral’’ questions; for example, ‘‘Have you ever disagreed with a manager’s decision in a previous job and, if so, how did you handle it?’’ ‘‘Can you tell about a time you went out of your way to help a co-worker?’’ ‘‘Would you describe a time in your life when you wish you had done something differently from what you actually did?’’ At Mayo Clinic, panels of existing staff interview job candidates, an approach analogous to the late service quality author Ron Zemke’s view that hiring service performers should be like casting a Broadway show (Berry & Seltman, 2008; Zemke, 1992). QuikTrip, a $7+ billion convenience store chain which is regularly featured in Fortune’s ‘‘100 Best Companies to Work For’’ rankings, puts applicants through a rigorous, structured process that includes a personality assessment. The company compares applicants’ personality profiles with those of its most successful employees. Recruiting and hiring are handled by professionals in the firm’s geographic divisions rather than by store managers (Bendapudi & Bendapudi, 2005). QuikTrip’s voluntary employee turnover rate in 2007 was 19%, a remarkably low number in convenience store retailing or–—frankly–—in any category of retailing. Part-time employees who stay for a year receive a bonus of $1.55 for every hour worked thereafter (Levering & Moskowitz, 2008). Costco and The Container Store pay employees well above the average for their sectors of retailing. Although Costco’s labor rates exceed those of its principal competitor, Sam’s Club, by more than 40%, its labor costs are actually lower as a percentage of sales because Costco’s employees are more productive (Cascio, 2006). The Container Store, another Fortune ‘‘100 Best Companies to Work For’’ regular–—being ranked first, 2 years in a row–—pays entry-level employees 50% to 100% more than competitors (Berry, 1999; Levering & Moskowitz, 2008).
2.1. Believing, investing, listening Hiring the right people is the first part. Offering them a superior work-life experience is the equally
311 critical second component. An engaging work-life experience requires continuous skills and knowledge development, embraces teamwork, fosters trust, celebrates achievement, encourages creativity and innovation, provides a sense of meaning and contribution, offers transparency and good internal communication, and combines generosity with fairness and high standards. Excellent organizations believe in their employees, invest in their success, and listen to them. By hiring well, leaders can have faith in the goodwill and good judgment of the service performers. They can focus their energies on articulating and reinforcing the vision and strategy; on making the infrastructure and systems investments that enable better performance; on teaching, coaching, and praising; and on identifying the most promising people for advancement so they can promote from within. Nothing demonstrates management’s faith in existing employees more than a promote-fromwithin culture. Investing in the success of employees who stay, rather than seeking to minimize investment in those who leave, is a hallmark of excellent organizations. Many managers consider high employee turnover a given in their industries, and thus curtail their upfront investment in new employees’ preparation (e.g., orientation, training and education, mentoring). Schlesinger and Heskett (1991) refer to this practice as the ‘‘cycle of failure’’ because poorly prepared service providers are more likely to leave or be fired and less likely to provide excellent service before they leave, hurting profits and reducing resources and incentive for new employees’ preparation. Excellent organizations invest in a ‘‘cycle of success’’ by making a substantial upfront investment in increasing the likelihood of employees’ success and desire to stay (Berry & Seltman, 2008). Employee research is as important as customer research in organizations truly intent on improving service quality. When the ‘‘product’’ is a human performance, leaders need to know a lot about the performers. Informal, day-to-day listening is essential. But, so is more formal listening through anonymous employee surveys. How do employees perceive the quality of internal service they receive? How do they perceive the organization’s commitment to excellent service? How do they perceive the quality of senior management and their immediate manager? How do they perceive their career opportunity? How committed are they to the organization’s mission and to the organization itself? David Maister (2001) identified four key Likertscale questions to consider for employee surveys:
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I am highly satisfied with my job. I get a great sense of accomplishment from my work.
Most of the work I’m given is challenging. I am committed to this organization as a career opportunity. Maister’s research shows that increasing employees’ agreement on these four statements can have a dramatic influence on company financial performance (Maister, 2001). An open-ended employee question that I have found especially revealing in my own research is: ‘‘If you were in charge for one day and could make one change to improve the quality of service, what change would you make?’’
2.2. Being an employer of choice Excellent people giving their best efforts: this is a potent combination in the business of service. Indeed, a principal difference between superb and mediocre organizations is that the former get more ‘‘volunteerism’’ from their employees. That is, they get more effort above the minimum standard required of an employee to avoid any negative consequence. High-volunteerism organizations have many employees that choose to work harder for their internal or external customers (Berry, 2007). Great employees are the key competitive advantage for organizations. They are the face of the organization to customers, they create the service experience, they increase customers’ benefits and reduce burdens. Excellent organizations are relational employers that seek to build true bonds with employees and earn their best efforts. They lead with values rather than rules, inspiration rather than demands, actions rather than empty promises, generosity rather than greed, integrity rather than malice. One can find relational employers in every sector of the economy. Gaylord Entertainment competes for ‘‘ACE’’ (attitude, character, enthusiasm) employees in hiring. The company refers to its employees as ‘‘STARS’’ (smiles, teamwork, attitude, reliability, service) and includes all staff–—from housekeepers to managers–—in guest satisfaction quarterly bonuses. Gaylord’s ‘‘Chuck Wagon’’ provides a free meal during each shift for all employees. For its part, Wawa, a Pennsylvania-based convenience store chain with 500+ stores, offers employees more than 100 in-house courses in a central educational facility and pays the tuition for employees to pursue a degree in any field of
EXECUTIVE DIGEST study at one of several colleges with which it has relationships. Wawa stores are evaluated monthly by mystery shoppers for each element of the customer experience, ranging from waiting time to cleanliness to the freshness of the food. High-scoring stores are visited by the ‘‘prize patrol,’’ which brings awards and a celebration. Associates from prize patrol stores participate in a quarterly drawing for trips to Disney (Bendapudi & Bendapudi, 2005). Organizations like Wawa, QuikTrip, Gaylord, Mayo Clinic, The Container Store, and Costco are employers of choice which build bonds with employees and inspire volunteerism. Their success is founded on a strong market share for great employees. Great employees build strong companies that, in turn, are increasingly able to attract and keep more great employees. A bad economy favors strong companies further, for they are more likely to be growing, hiring, and promoting, and less likely to be laying off existing employees.
3. Compete with reliability Excellent employees position a firm to deliver excellent service quality. Service quality is a perception based on customers’ assessments of the service provided compared to their desires (expectations) for the service. Meeting–—or better yet, exceeding–— customers’ expectations is the essence of service quality. Customers’ assessment of service quality is a cumulative assessment, as each new experience with an organization blends with past experiences. Reliability–—performing the promised service dependably and accurately–—is the core of quality service. Why? Because a dependable, accurate service–—a service customers believe they can count on–—boosts their confidence when buying a performance. Customers often can benefit from some degree of pre-purchase experience when buying tangible goods; they can ‘‘kick the tires,’’ so to speak. When buying performances, however, there are no tires to kick. As one of my students wrote in a service diary, ‘‘A customer will never know the quality of an insurance policy until he or she needs it the most.’’ With services, purchase precedes actual experience. Customers, in effect, buy a promise of performance, which is why they consistently rank reliability of service as the most important quality dimension (Berry, Parasuraman, & Zeithaml, 1994). Service reliability is an attitude and it is a design issue. The desire to be reliable is critically important in being reliable. Some managers accept mistakes as an inevitable byproduct of labor-intensive performances; others work relentlessly to reduce
EXECUTIVE DIGEST mistakes. Some managers emphasize service throughput, volume, and speed; others emphasize quality first. Some managers are satisfied with 96% reliability; others view 96% reliability as a 4% error rate–—and are sure to note the number of service episodes affected: the former example amounts to 4,000 for a firm with 100,000 weekly transactions (Berry, 1995). In organizations with the best service, keeping promises is cultural.
3.1. Designing reliability into the service Not all service mistakes stem from hastiness, carelessness, or incompetence. A needlessly complicated, failure-prone service system is often the underlying culprit. Designing reliability into the service involves rigorous consideration of at least four questions: 1. Can the service be simplified without compromising its value to customers? 2. What can be done to assist customers in using the service correctly? 3. What processes in the service system are most prone to failure, and what can be done to prevent these failures? 4. What capabilities — skills and knowledge — do service providers need to perform the service accurately and dependably? (Berry, 1995, p. 87) Consider these four design questions in the context of the services provided by a hospital intensive care unit. A fascinating study concluded that the average I.C.U. patient requires 178 discrete services in a 24hour period. Even with extremely well-trained and conscientious service providers, correctly performing 178 daily tasks in caring for very sick patients is a formidable feat. Infections related to central line insertions are common–—and exceedingly dangerous. In 2001, a critical-care physician at Johns Hopkins Hospital, Peter Pronovost, decided to adapt an airline industry safety tool–—a checklist–—to the insertion of central lines into patients. Pronovost wrote on a piece of paper five well-known, but not always followed, steps doctors should take when inserting a line: 1. Wash hands with soap; 2. Clean patient’s skin with chlorhexidine antiseptic; 3. Cover the patient in sterile drapes;
313 4. Wear a sterile mask, hat, gown, and gloves; and 5. Put a sterile dressing over the catheter site once the line is in. (Gawande, 2007) Pronovost asked nurses in his I.C.U. to observe physicians for 1 month as they inserted central lines and to record how often they completed each step. At least one step was missed more than a third of the time. Armed with these findings, Pronovost and his team persuaded the hospital leadership to authorize nurses to stop doctors if they observed them skipping a step on the checklist. The administration made it clear: nurses were expected to intervene if physicians failed to follow each step. The results were dramatic: the 10-day line-infection rate declined from 11% to zero over the next year. Pronovost’s methods have now been used in Michigan hospitals and elsewhere with impressive results. Patient infection rates are way down and lives are saved, as are millions of dollars in costs (Gawande, 2007). The I.C.U. checklist story illustrates the salience of the four service system reliability design questions presented above. In particular, the checklist simplifies complexity by spotlighting essential steps in performing a safe and reliable service. In so doing, it assists the ‘‘performer’’–—in this case, the physician–—in using the service correctly, which in turn assists the patient.
3.2. Running to the problem The importance of delivering a reliable service elevates the importance of service recovery when a failure occurs. After a service failure, the company must gain back the customer’s confidence in the service. Unless egregious, a single service failure is unlikely to completely destroy a customer’s confidence in the organization. A poor recovery, however, compounds the initial failure and demonstrates a pattern of ineffectiveness. Customers’ service expectations usually are higher once they have experienced the burden of the initial failure. Research teaches: perform the service right the first time and, when necessary, perform even better the second time. Restaurant owner Danny Meyer (2006) writes ‘‘The worst mistake is not to end up in a better place after having made a mistake. We call that ‘writing a great last chapter’. . . .To be effective, the last chapter must be written imaginatively, graciously, generously, and sincerely’’ (p. 222). The best recovery option is correcting a problem before it reaches the customer. FedEx, which delivers more than 7 million items daily to more than 220 countries, has invested heavily in keeping its
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brand-positioning promise of on-time delivery. Each evening, selected company airplanes start out empty or partially full so they can be diverted to airports where they are needed due to overloads, aircraft maintenance issues, or other problems. Additionally, on-call airplanes and crews–—called ‘‘hot spares’’–—are on standby each night. Writing a great last chapter becomes the best option when the problem does impact the customer. Making it easy for customers to contact the firm, apologizing and personalizing the recovery experience, acting quickly, offering a resolution that reasonable customers would consider to be fair, and keeping customers informed when resolution is delayed are well-accepted service recovery guidelines. Competing in the online space where many firms require customers with complaints to send an e-mail, movie rental company Netflix operates an around-the-clock call center. Call center staff are encouraged to be generous; for example, granting bonus DVDs, crediting accounts, and marking the missing DVD as lost. Great service companies ‘‘run to the problem’’ as Garrett Jamison, a banker passionate about quality service, would state it (Berry, 1995, p. 99). Effective service recovery provides the opportunity not only to regain the customer’s confidence, but also to learn more about a service system’s points of vulnerability and improve them. Effective service recovery also reduces the number and ferocity of aggrieved customer Internet attacks on the company. Finally, effective service recovery improves the quality of worklife for service providers who are often caught in the middle of an inflexible company policy and an irate customer. Table 1.
4. Compete with respect and pleasant surprises Service reliability is key to developing a reputation for superior service, but it is not enough. Companies are supposed to be reliable; they are supposed to know what they are doing and to value the customer relationship sufficiently to try to keep their promises. Although the absence of reliability undermines a customer’s confidence in the firm, its presence generally does not create a service experience that exceeds the customer’s expectations. The best opportunity to exceed customers’ expectations is typically when service providers interact with customers and have the opportunity to surprise them with uncommon civility, kindness, caring, and extra effort. Exceeding customers’ expectations requires pleasant surprise, and the human interaction in service delivery offers an ideal opportunity to create this surprise–—and, in so doing, create a memorable, confidence-strengthening experience for the customer. Many of the service provider behaviors that please customers demonstrate respectfulness. Respect is a powerful, pervasive concept in the journey to improve service. Respectful treatment of the customer is fundamental to delivering a quality service. Customers are different from one another in so many ways, but no customer wants to feel disrespected. Disrespectful service is inherently poor service, and it is all too common. Consider Table 1, which presents a list of common customer service complaints based on many years of service quality research. From the first category, ‘‘True Lies’’ (cheating customers) to the last, ‘‘Misplaced
Common customer service complaints
True Lies Red Alert Broken Promises I Just Work Here The Big Wait Automatic Pilot Suffering in Silence Don’t Ask Lights On, No One Home Misplaced Priorities Source: Berry (1999, p. 31)
Blatant dishonesty or unfairness, such as service providers selling unneeded services or purposely quoting fake, ‘‘low-ball’’ cost estimates. Providers who assume customers are stupid or dishonest, and treat them harshly or disrespectfully. Service providers who do not show up as promised. Careless, mistake-prone service. Powerless employees who lack the authority–—or desire–—to solve basic customer problems. Waiting in a line made long because some of the checkout lanes or service counters are closed. Impersonal, emotionless, no-eye-contact, going-through-the-motions non-service. Employees who don’t bother to communicate with customers who are anxious to hear how a service problem will be resolved. Employees unwilling to make any extra effort to help customers, or who seem put-out by requests for assistance. Clueless employees who do not know (i.e., will not take the time to learn) the answers to customers’ common questions. Employees who visit with each other or conduct personal business while the customer waits. Those who refuse to assist a customer because they’re off duty or on a break.
EXECUTIVE DIGEST Priorities’’ (ignoring customers), every complaint category is associated with disrespectful service (Berry, 1999, p. 31). Respectful service extends esteem and dignity not only to the customer, but also to the provider. The core values statement for which Ritz-Carlton Hotels is best known–—‘‘We are ladies and gentlemen serving ladies and gentlemen’’–—has an impact because of the dignity it invests in the act of serving. Respect elevates human interaction; it brings esteem to both parties in a service interaction. Respectful service includes honoring customers’:
Presence — by responding to it; Voice — by listening to it; Time — by not wasting it; Privacy — by not invading it needlessly; and Self-esteem — by not undermining it. Respectful service that pleasantly surprises often comes in small acts of kindness, seemingly minor gestures that wind up making a major impression. Management Lessons from Mayo Clinic (Berry & Seltman, 2008, pp. 173-174) includes a verbatim e-mail written by a Mayo Clinic employee to Dr. Wyatt Decker, who at the time was head of the Emergency Department at the Clinic’s St. Marys Hospital in Rochester, Minnesota. The story told in this e-mail, which appears below, captures the grand possibilities for creating memorable service experiences when human beings interact. Hello Dr. Decker, I’m remiss in not sending you this e-mail earlier, but I wanted to recount an experience I had in the Emergency Room about three months ago with Dr. Luis Haro. I want to share firsthand with you what an extraordinary physician he is. I live with my mother who is 91 and has fairly severe dementia. About three months ago, I came home to find her outside on the lawn. She had fallen, was unable to get up, and had a nasty bruise and scrape on her elbow. She is a tiny woman so I managed to get her up and we headed for the Emergency Room. Once there, we were seen quickly and everyone was very solicitous of her. She’s also almost deaf so sometimes this is no easy task. Dr. Haro introduced himself and was very patient and kind–—and spoke with enough volume so she could hear him. As he examined her,
315 he asked her to stand and take a few steps. As she began to do so, she bumped into him. My mother in her day was quite a wit and some of that has remained. She looked up at him after bumping against him and said, ‘‘Well, I suppose we could waltz.’’ And he replied, ‘‘Yes, we could.’’ He then proceeded to take her in his arms and waltz a few steps around the cubicle. My mother was absolutely enchanted as she loves to dance and I started to cry. The sight of this tiny fragile old woman being waltzed around the room by this most handsome young man was just too much. I don’t think I’ve ever been prouder to be a Mayo employee than that night. To witness that interaction and know this is the caliber of doctor we have here, someone whose medical expertise is a given but whose compassion and kindness–—and humanness–—are extraordinary was very moving. I know in the grand scheme of Emergency Medicine this scenario has little significance. My mother had a bad bruise and a scrape but really was just fine. Her physical symptoms healed in a day or two but the ‘‘healing’’ that occurred that evening with his interaction with her is really what sets Mayo apart and will last in my memory forever.
5. Compete with convenience Excellent companies make it easier for customers to do business with them. They are innovative in saving customers time and effort, the essence of service convenience. Customers’ time and effort expenditures are nonmonetary burdens they must bear to receive the benefits of the service. Reducing these burdens without a commensurate reduction in benefits increases value. Service convenience is an important facet of service quality given the time pressures, complexity, and stress that characterize contemporary lifestyles. Time is a finite resource. Time spent driving to an inconveniently located store, navigating a poorly designed website, or waiting in a long checkout line to pay or to speak to a human being in a call center is time unavailable for other activities. Effort can involve the expenditure of physical, mental, and emotional resources. Although not finite like time, most customers clearly value service that requires less effort. Netflix reinvented the movie rental business with a delivery system that combines the Internet (for selecting and ordering movies) and regular mail (for receiving and returning the DVDs) with a customer-friendly transaction model (a flat monthly fee with no return deadline). No longer
316 do movie rental consumers have to expend the energy–—and endure the stress–—of racing back to the rental store before it closes to avoid a late charge. Industry leader Blockbuster had no choice but to eventually follow Netflix’s lead. Netflix is but one of many industry-changing innovators that build convenience into superior service. Google created an online ‘‘department store’’ of information on virtually any subject available, where and when customers need it. Funded by advertising revenue, Google has become one of the world’s largest media companies. LensCrafters differentiates its retail eyewear chain by preparing glasses for customers the same day they buy them, usually within an hour. To further strengthen its convenience offer, LensCrafters typically locates independent, licensed optometrists next to its retail stores to provide ‘‘one-stop’’ convenience. Similarly, Houston’s Gallery Furniture, one of the most successful single-store furniture retailers in the United States, delivers purchases to customers on the same day they make them–—quite a contrast in a retail sector notorious for making customers wait weeks, even months, for their purchased furniture. Gallery’s same-day promise requires that it operate a distribution facility 24 hours a day, 7 days a week. It is not uncommon for customers to arrive home after shopping to find the Gallery delivery truck waiting for them (Seiders, Berry, & Gresham, 2000). FedEx did not invent the idea of delivering documents and packages by air; it did, however, create a market for the rapid, reliable delivery of timesensitive material. FedEx became an industry leader by combining speed and reliability. This is its value offer ‘‘sweetspot’’ in which it has continually invested. When the company started in 1973, customers had to call the company to initiate service. Two years later, FedEx began to introduce drop boxes for customer convenience. In 1984, the company started providing volume customers free computers and proprietary software to monitor their shipments. A decade later fedex.com was launched, enabling customers to manage their shipping activities via the Internet (Berry et al., 2006). Progressive Casualty Insurance sends a representative in a van to the site of a car accident involving an insured customer to assess the damage, help with necessary arrangements, and–—in some cases–—cut a check for the claim. Frequently, the vans arrive even before the police or tow trucks. Progressive pays for the cost of being on the scene through lower costs for fraudulent claims; that is, accidents which are staged or which never happened. It is more difficult to rip off an insurance company that shows up at the scene of an accident. In 2002, Progressive began
EXECUTIVE DIGEST displaying its rates alongside competitors’ rates on the company website, facilitating easy price comparisons. Progressive’s posted rate quote is the lowest only about half the time. In providing this service, Progressive is relying on its competency in estimating a person’s probability of getting into an accident. A customer that chooses a competitor’s lower rate may well turn out to be a money-losing customer (Frei, 2008). Enterprise became the largest and most successful American car rental firm by saving time and effort for local people whose cars are temporarily unavailable (the ‘‘replacement’’ market). Its thousands of rental offices are within a 15-minute drive of more than 90% of the U.S. population. The business’ long-used ‘‘We’ll pick you up’’ advertising theme underscores a clear customer convenience positioning strategy. In recently acquiring airport car rental companies National and Alamo, Enterprise now controls nearly half of all U.S. rental cars (Loomis, 2007). These examples demonstrate the salient role of easing customers’ nonmonetary time and effort burdens in delivering quality service. They also clearly reveal that customer convenience is comprised of far more than location or hours of operation. In an earlier article, colleagues and I (Berry, Seiders, & Grewal, 2002) proposed five types of service convenience and stressed the importance of integrating them in a cohesive strategy: 1. Decision convenience: Making it easier for customers to make purchase or use decisions (e.g., Progressive’s price comparisons). 2. Access convenience: Making it easier for customers to initiate service delivery (e.g., Google’s anytime, anywhere availability). 3. Transaction convenience: Making it easier for customers to pay and complete a transaction (e.g., Netflix’s flat-rate fee regardless of the number of movies viewed). 4. Benefit convenience: Making it easier for customers to experience the offering’s core benefits (e.g., LensCrafters and Gallery Furniture’s sameday provision of the purchased product(s)). 5. Postbenefit convenience: Making it easier for customers to resolve a problem following purchase (e.g., FedEx’s online package tracking capability). Despite its competitive importance, many companies fail to deliver optimum convenience. Some businesses put their own needs ahead of the cus-
EXECUTIVE DIGEST tomers, which is rarely–—if ever–—a good idea. Supermarkets usually locate frequently purchased staples such as bread and milk in the back of the store to encourage customers to make impulse purchases as they walk through the aisles. This motivates some consumers who need just a few items to go to a convenience store to buy them, even at a higher cost. Supermarkets commonly open a minimum number of checkout lanes to save labor costs. These savings are tangible; less tangible is how many customer shopping visits are lost because of perceived checkout waits. Excellent companies regardless of industry make a priority of saving customers time and effort. They view being easy to do business with as a cornerstone to delivering quality service.
6. Compete with the best Like an award-winning building, great service is precisely designed and carefully constructed. Delivering superior value through quality service is the best way to compete. Great service, the competitive edge in good times and bad, is built on the pillars of great employees, reliability, respect, pleasant surprises, and convenience. Hiring the best employees comes first. As the performers of the service, employees often equal the service in customer perceptions. Employers succeed by believing in employees, investing in their success, and listening to them. Employers who offer a superior work-life experience elicit more employee volunteerism, which delivers more value to the customer. Great service is reliable service. Because services generally are buy-before-you-try, customers have to trust that the service will be consistent. Reliability is both an attitude and a design. When service fails, the best companies see an opportunity not only to restore customer confidence but also to improve reliability. Respect is basic to good customer relations. Extending esteem and dignity to each customer, as well as to every employee, creates a competitive advantage in a harried world. The human encounter offers the best opportunity to pleasantly surprise customers–—and to exceed their expectations.
317 Quality service also involves making it easier for customers to do business with the firm. Convenience lessens the burdens a customer must bear to receive the benefits of the service, and it can be offered in more forms than 24/7 and prime property. The power of excellent service is competitive power in delivering differentiating value to customers. During hard economic times, it is good to remind ourselves of the quality-value relationship.
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