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New management tools for the successful tourism manager
NEW
M A N A G E M E N T TOOLS FOR THE SUCCESSFUL TOURISM M A N A G E R Bernard H. B o o m s
Mary J. Bitner Hotel and Restaurant Administration Washington State University, Seattle, USA
ABSTRACT B o o m s , B e r n a r d H . a n d M a r y J. Bitner, New M a n a g e m e n t T o o l s f o r T h e S u c c e s s f u l T o u r i s m M a n a g e r . Annals o f Tourism Research 1980, VII(3): 337-352. T h e p u r p o s e o f this p a p e r is t o o u t l i n e s o m e new m a n a g e r i a l t o o l s f o r the t o u r i s m i n d u s t r y . T h e thesis p u r s u e d h e r e is t h a t the m a n a g e r s o f service o p e r a t i o n s face a n u m b e r o f c h a l l e n g e s d i s t i n c t l y d i f f e r e n t f r o m t h o s e enc o u n t e r e d b y m a n a g e r s o f g o o d s - p r o d u c i n g activities; a n d therefore that tourism managers require management t e c h n o l o g i e s d e s i g n e d f o r t h e i r special needs. Services a n d service d e l i v e r y , i.e. service p r o d u c t i o n , d i f f e r in t h e i r essential n a t u r e f r o m g o o d s a n d m a n u f a c t u r i n g p r o c e s s e s . T h e s e differences a r e o u t l i n e d a n d t h e n the m a n a g e m e n t i m p l i c a t i o n s a n d new insights f o r t o u r i s m a r e d r a w n out. T h e s e insights r e l a t e m a i n l y to t o u r i s m o p e r a t i o n s m a n a g e m e n t a n d t h e m a r k e t i n g o f t o u r i s m . K e y w o r d s : tourism managers, service managers,
tourism management tools.
Bernard Booms is a faculty member at the Washington State University. He has also taught at Harvard Business School and Penn State University. Professor Booms received his Ph.D. m Economics from the University of Pittsburgh in 1968. Mar!, Bitner is a Research Associate in the College of Business and Economics at Washington State University's Seattle campus for Hotel and Restaurant Administration. She received an M.B.A in Marketing from the University of Washington. 1980 ANNALS OF TOURISM RESEARCH VII(3)
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RESUME Booms, Bernard H. et Mary J. Bitner, "Nouveaux instruments pour la saine gestion des installations touristiques." Annals o f Tourism Research 1980, VII (3): 337-352. Le but de cet article est de presenter quelques nouveaux instruments pour g~rer une entreprise touristique r~ussie. Le point de de'part est que les directeurs des entreprises dans le secteur des services doivent faire face ~ des r~alit~s bien diffe'rentes de celles qui dominent darts le secteur de la production des biens. Les directeurs dans l'industrie touristique ont besoin de m&hodologies de gestion qui seraient invent~es pour eux seuls. La production et la fourniture des services diffdrent par leur nature m~me de la manufacture et distribution des biens de consommation. On fait le bilan de ces differences et puis on dresse une liste des implications pour la gestion et pour la comprehension du ph~nom~ne touristique. Ces idles font la lumi~re principalement sur la gestion des operations touristiques et sur le marketing du tourisme. Mots Clef: directeurs des operations touristiques, directeurs des industries de service, instruments pour la gestion touristique. INTRODUCTION The purpose of this paper is to outline some new managerial tools for the tourism industry. The thesis pursued here is that the managers of service operations face challenges distinctly different from those encountered by managers of goods-producing activities, and therefore that tourism managers, like all service managers, require management methodologies designed for their special needs. Tourism enterprises are strictly service enterprises. The tourism industry consists of three operational components. The channelers of tourists (i.e., travel agencies, travel clubs), the transporters of tourists (i.e., airlines, buslines), and the receivers of tourists (i.e., hotels, resorts, restaurants, and attractions) are all service operations. Goods used by the tourism industry are considered to facilitate these operations. Today man lives in what has been called the "service society." In the United States, services are estimated to account for 40 to 65 percent of the Gross National Product, and it is estimated that nearly two-thirds of the labor force is employed in service jobs. Yet, with few exceptions, the management literature, management research, and management training all focus on manufacturing activities and the problems of g•ods production. The standard management framework is the manufacturing model. Little has been done to tailor the traditional management tools, techniques, and models to the needs of service managers. 338
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BERNARD H. BOOMS & MARY .I. BITNER SERVICES VS. G O O D S First, it is necessary to define what is meant by a service organization and a goods manufacturing organization.
A service organization is one which satisfies customer needs through the performance of acts. The service sector is composed of all organizations, public and private, profit and non-profit, whose primary activities are the performance of tasks for their customers. Examples of tourism service organizations are restaurants, transportation companies, travel consultants, and hotels/motels. In a service organization any physical goods involved in the process exist simply to facilitate performance of the service. For example, the customer in a hotel may be provided with certain physical commodities such as soap, shampoo, instant coffee, and ice, but these are only facilitating elements of the organization's primary activity of providing accommodation services. Without the service, the physical goods would have no m~aning. A goods manufacturing organization is one which satisfies customer needs through the production and transfer of ownership of material commodities. The manufactured goods sector is composed of all organizations, public and private, profit and non-profit, whose primary focus is the production and transfer of physical commodities. Any services associated with such firms exist simply to enhance the value or quality of the physical product line. For example, a company that manufactures household appliances will have a customer service department to handle complaints and product malfunctions. The customer service department would, however, be unnecessary without the existence of the physical product. SERVICES ARE D I F F E R E N T The differences in managing a service organization as opposed to a goods manufacturing organization stem from two sets of conditions: 1. The differences in the characteristics of the end products themselves suggest the need for modified management techniques. 2. The conversion process (i.e., the transformation o f factors purchased in the marketplace into products which satisfy consumer needs) is different for services, and this has implications for the organization and management of service firms. Characteristics In terms o f the characteristics of the outcomes or end products, services are distinct from goods. First and foremost, services are intangible. The fact of intangibility leads to several important differences. For one thing, since services are not physical things, they cannot be stored or inventoried. In addition, because of intangibility, services are difficult for poten1980 ANNALS OF TOURISM RESEARCH Vll(3)
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tial customers to conceptualize and to perceive. Services cannot be touched or seen. As a result, they are also difficult to grasp mentally. A service must be experienced by the c u s t o m e r / c l i e n t before it will have real meaning for that individual. Prior to experiencing the service, the customer depends on tangible clues for evidence o f the nature and quality of the expected service. Management of tangible clues such as the appearance o f personnel, the environment, and facilitating goods is therefore essential to a service organization. This is in contrast to a goods manufacturing firm where the product itself can be seen, touched, and even tried before purchase. In short, then, because services are intangible, traditional inventory methodologies and marketing tactics either do not apply or must be modified before being useful for service managers. A second characteristic of services closely related to intangibility is Services cannot be transported or transferred. This implies that there must be a direct relationship between the customer and the firm and that once a service has been performed it cannot be resold or given to anyone else. Service accessibility from the customer's point of view is therefore a key to planning and locating outlets rather than efficiency in access to inputs or economies of scale, as is usually the case in a manufacturing firm.
non-transportability.
A third important difference in the products of service firms is that their products are often non-standard. Each customer's service experience will be uniquely defined for him or her in terms of personal expectations and actual interactions with the firm. The travel agent does not specialize in writing tickets to only one destination or even one area of the world. Rather, each contact with a customer and each end result is unique. The interactive, people-oriented nature of services means that total standardization of output is seldom possible and may not even be desirable. In goods manufacturing, on the other hand, repeatability and system-controlled production are key elements of success. The above differences in the characteristics of services from goods, together with the differences in the conversion process discussed in the following section, are the basis for suggesting that successful tourism managers need new tools, i.e., new ways of thinking a b o u t the m a n a g e m e n t of their operations. Conversion Process Differences in the conversion process are even more important for managers to be aware o f because it is mainly production processes that managers manage. (Little can be done by managers to influence the inherent nature of service outcomes.) The term conversation process as used here includes both the traditional notion of a production process (inputs transformed into outputs) and the consumption process (purchase and use 340
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BERNARD H. BOOMS& MARY J. BITNER of outputs). Thus the conversion process includes both production and consumption. This expanded view of what service managers manage is used because the separateness of the roles of firms and customers depicted in the typical model of economic activity does not apply for services sector activities. Both service organizations and goods manufacturing organizations premise their activities on the assumption that their products (service or goods) satisfy identifiable customer needs. The conversion process in both cases involves the t r a n s f o r m a t i o n o f raw materials, labor, and capital into need-satisfying products. This conversion process can be conceptualized as consisting of four sub-processes: 1. Goods M a n u f a c t u r i n g / S e r v i c e Assembly: The firm converts factors acquired in the market place into the end product through production or, in the case of a service, through the service assembly process. 2. Purchase: The customer exchanges value in the form of money, time, a n d / o r energy for the firm's product. 3. Use: The customer uses, consumes, or experiences the product. 4. Evaluation: The customer mentally evaluates the product resulting in a level of satisfaction or dissatisfaction. The a b o v e c o m p o n e n t s of the conversion process are similar for both goods and services organizations. Production (assembly), purchase, use, and evaluation always occur. However, the timing o f the sub-processes and the involvement and influence o f the firm at each step are what distinguish the goods conversion process from the service conversion process. Figure 1 illustrates the conversion process for goods and services. As can be seen in Figure 1, the separation between the production process and consumption process is distinct for goods firms. Production is the purview only of firms. Householders enter into the production process only as employees and not as consumers. The consumption process is controlled by the actions of hotaseholders as consumers, and firms have little active part in the use and evaluation stages of want satisfaction. Production and consumption intersect only at the purchase point and only here do firms and customers directly interact. The points of direct contact or involvement between firm and customer are labeled in Figure 1 as " c u s t o m e r boundary systems." This view of the operation of the goods sector might be called the manufacturing model. The manufacturing model does not apply to services-a fact the successful services manager intuitively realizes. Traditional manufacturing m a n a g e m e n t viewpoints must be modified and new tools added to the tool bag of service managers. The separateness of the roles of firms and consumers is not possible for 1980 ANNALS OF TOURISM RESEARCH Vll(3)
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service operations because services are intangible and cannot flow, i.e., move around or through steps or stages o f an economic system. Nearly all steps and actors occur and interact simultaneously in time and space. The end result is that the usual models for designing, operating, and controlling goods operations are not suitable for service operations unless tailored to account for these differences. As Figure 1 clearly shows for the service firm, the customer, as a customer, becomes an input into the production process and the firm becomes a party in the use and evaluation steps. The customer provides input in the form of time, information, and energy. For example, the information the customer gives to the travel agent or transport firm determines, in large part, the quantity and quality of the service delivered. How well the customer serves as an input plays a role in the effectiveness and efficiency of the service assembly process. A customer inputs energy into a production process when, for example, he or she assembles a salad at a salad bar. Again, how well the restaurant service is produced depends upon the quality of the customer's input. The firm enters the use and evaluation steps of want satisfaction because the end product is a performance--not a physical product--and, as such, production requires the firm's presence. Because of its presence, the firm has the opportunity to monitor and to control use, and to quickly make adjustments in service performance. Thus airlines can monitor the travel experience and make up for shortcomings by enhancing later elements in the service experience, either by increasing service levels or by increasing the perceived value of the service. For example, stewards and stewardesses use special attention and complimentary drinks as a way to influence the passengers' evaluation o f a flight that is delayed or develops difficulties. Figure 2 summarizes the differences in the conversion process between the goods and services sectors. From the viewpoint of the service firm, all this means two th!ngs: 1) the customer boundary system (where the customer interacts with the firm) is much larger for service firms than goods producing firms, and 2) service managers find the scope of their jobs to be much greater than their counterparts in manufacturing firms. These points are shown in Figure 1 by the relatively larger size of the boxes marked customer boundary system and management scope.
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involves the of dollars for goods.
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The customer controls the use of the product and the firm is totally outside this process.
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Use is separated in time from production and purchase.
Use, assembly, and purchase occur simultaneously.
Evaluation involves the matching of expectations with product performance and is out of the control of the firm.
Evaluation involves the matching of expectations with actual experience and is partially within the control of the firm.
Evaluation is separated in time from production, purchase, and use.
Partial evaluation takes place simultaneously with assembly, purchase, and use.
lYXOANNALSOFTOURISM
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BERNARD H. BOOMS & MARY J. BITNER Specifically, then, the tourism manager must realize that the tourism firm is a part of the use and evaluation steps of the consumption process. Tourism managers find themselves faced with new, little-studied or -discussed aspects of the job as manager. Further, the service assembly step is influenced by the presence and involvement of the customer as an input to the process. Thus the service manager must modify his or her concepts of how to think about and manage the service assembly process. With little help from management science, some innovative practicing managers have come up with ways to make service operations effective and efficient. They have taken into account the unique management elements of their job, i.e., the management of consumer use and evaluation, and have realized that the customer must be managed as a part of the production process. Often, to facilitate the input of the customer, the managers have redesigned the service delivery system. In effect, these innovative managers have been thinking differently about the managerial functions of planning, operating, and control. I M P L I C A T I O N S FOR TOURISM M A N A G E R S Figure 1 is a graphic comparison of the elements or steps and actors in the conversion process for goods and services. As Figure 1 illustrates, the nature and complexity o f each o f the steps in the conversion process for goods and services is different; thus the nature of the management function varies between the goods sector and the services sector o f the economy. Not only is the service manager's job different, it is also more complex. These differences in the nature and complexity of a service manager's job have implications for individual tourism firms and for the individual tourism manager. Organizational Structure: Implications for the Firm A business firm can be viewed as an organizational system that consists of numerous organizational sub-components or sub-systems, all of which are interrelated and interact in pursuing the stated goals of the firm. A system can be defined as a collection o f components designed to accomplish some particular goal, and united by some form of regular interaction and interdependence. Figure 3 illustrates the differences in the degree of separateness of the sub-systems between typical goods and services firms. Firms generally operate along departmental lines, each department in charge and responsible for accomplishing certain tasks or goals. Departments are sub-systems that have specialized goals designed to insure that overall organizational goals will be reached, namely, delivering a product or service and earning a profit. The firm is organized along departmental lines, i.e., along specialized tasks, to capture the benefits to be gained from specialization and divi1980 ANNALS OF TOURISM RESEARCH VII(3)
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sion o f labor. Firms are also organized into sub-systems to facilitate management control. Each sub-system specializes in accomplishing its own goals, but all sub-systems interconnect and interact. As is shown in Figure 3, the degree of separateness of the sub-systems in a typical manufacturing firm is greater than in a service assembly firm. Notice that several sub-systems in service firms (namely, operations, marketing, and physical distribution) are coterminous, i.e., are not separable in their impact and operation. Unfortunately, service firms are often organized as if it were possible (as in the manufacturing case) to separate the functions of these three sub-systems. It is no wonder that such service firms experience management difficulties and lackluster results. For service firms, the operations, physical distribution, and marketing functions all overlap. That is, these sub-systems not only are interactive but are also carried on simultaneously in time and place. They are not and cannot be separate. Thus tourism managers at the operating level (unlike their counterparts in a goods firm) find that they are also " d o i n g " operations, marketing, and physical distribution. The job o f a service manager at the operations level is thus more complex. A failure on the part of operations managers to recognize this difference in complexity and challenges has led to corporate disasters (this is further discussed in the next section). So, too must the Chief executive officers and other top managers of service firms realize that the nature of services and service delivery is such that service firms must be run with a different model in mind and with a different touch. The CEO must realize that in a well-ru.n service firm the subsystems will look and interact differently from the picture painted in models of manufacturing organizations. Managerial Framework: Implications for Managers For the purpose o f discussion, the functions of individual managers are divided into marketing and operations implications. In fact, as is discussed below, the manager at the operating level (that level where the customer interaction takes place) is faced with managing both marketing and operations or production functions. Implications for Tourism Marketing The earlier point that services are different from goods in terms of characteristics and in terms of the timing of and involvement of the firm in the conversion process led to the proposition that marketing m a service organization will be different from marketing in a goods manufacturing firm. The operations function also needs to be modified in a service firm, but in this section the focus is marketing. The interaction of the two functions will be obvious throughout the discussion, however. 346
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Figure 3
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Three basic implications for marketing in a service organization are summarized in the following paragraphs (Booms and Bitner 1980a, 1980b). A. The marketing mix can be expanded from the four traditional elements of product, price, place, and promotion to include three new variables: participants, physical evidence, and process of service assembly. Because services are intangible and are produced and used almost simultaneously, the firm can use additional variables above and beyond the traditional " F o u r P ' s " to influence customer responses (McCarthy 1971:44). These elements correspond to what Shostack calls "!angible clues" (Shostack n.d.) and include participants (customers and firm personnel); physical evidence (the environment, facilitating goods, and other tangible representations of the service); and the processes by which the service is assembled. Whether or not the marketing manager can control these variables, h e / s h e should be aware that they do influence the customer's responses and therefore perform a marketing function. B. Because of the intangible and interactive nature of services, planning, control, and definition of the four traditional marketing mix, variables become more complex. The traditional marketing mix variables (product, price, place, promotion) take on new meanings in service organizations. Because its product is intangible and cannot exist prior to customer/firm interaction, the service firm really represents capabilities waiting to "come to life". Product decisions therefore involve planning and preparation of capabilities which the customer perceives via the firm's personnel, environment, facilitating goods, and assembly process. Promotion will also be different, since the firm must communicate its capabilities rather than the service itself to potential customers and must therefore rely on communication variables such as its personnei and physical environment to a greater extent than would a good manufacturing firm. Likewise, pricing decisions can only be made with a clear understanding of the value of the service from the customer's point of view. Place or distribution decisions will be different for services because the firm is distributing processes that require direct c u s t o m e r / firm interaction and not physical commodities that can be transported and stored. C. The marketing manager's scope of concern within the firm is broader and more complex due to the overlap of marketing and operations functions. In addition to planning the expanded marketing mix, the services marketing manager is concerned with the performance of those elements of the marketing mix that influence the customer during the assembly and use 348
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phases of the process. Performance of firm personnel, the behavior of other customers, the appearance and upkeep of the physical environment, and the control of the processes of service assembly all serve as communicators to the customer of what the firm represents. They are therefore marketing tools and must be controlled as such on a daily basis. Such day-to-day planning and control traditionally falls within the realm of responsibility of the operations manager -- appropriately so in a goods manufacturing organization where the two functions can be easily separated, in a service organization, however, the marketing manager's role overlaps that of the operations manager resulting in a broadened and more interdependent scope of concern for both. Implications for Tourism Operations The fact that services are different from goods also bears on the role of the tourism manager in designing, directing, and controlling a service delivery system. Several basic implications are summarized below. A. The role o f the customer in the service delivery system must be studied and understood (Booms and Nyquist 1980). Customers are, to varying degrees and in different ways, a part of service delivery systems due to both the nature o f services and to the way service delivery systems are designed and operated. Changes in design and operation can influence the degree of customer involvement and, in turn, lead to differences in service efficiency and service quality. Generally, the less direct contact the customer has with the service system, the greater the potential for system efficiency. Customers as inputs are difficult to control and direct. Customers introduce a high degree of uncertainty into the system. Further, they often require special individual attention on the part of employees to facilitate their role in the service delivery process. For these reasons, where direct customer contact is high, generally the less the possibilities are for efficiency (Chase 1978). The service manager should be able to understand and realize when high customer contact is required and when a low customer contact system can be substituted with no perceived loss in the level of service from the customer's viewpoint. The tourism manager should review his or her option to determine if elements o f the service delivery system can be isolated from the customer without lowering service quality. Airlines are a good example of the separation of a service delivery system into high and low contact operations to increase efficiency. Airline ticket counters are designed to be high contact, but baggage handling is designed and operated as a low contact function (Chase 1978). Further, tourism managers should question whether the operating procedures of the system match the degree of customer contact. Here, job design, employee selection and training, and methods of compensation are 1980 ~ N N A L S OF T O U R I S M R E S E A R C H VII(3)
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especially important. Paying according to the number of customers served may speed up the delivery of services, but if it is a high contact system the result may be customer dissatisfaction due to a feeling of being rushed. In employee selection and training it is important to realize that high contact jobs require a great deal of interpersonal relations skill and thus that employees for high contact work need good interpersonal skills. Jobs should be designed to allow for specialization, so that persons with good interpersonal skills spend their time in customer contact, and others less skilled in this area be assigned to low contact jobs. The mixing of skill requirements in job design reduces the opportunity for matching skills with job requirements. B. Capacity management techniques can be used to help match the supply and demand for services. Services cannot be inventoried. Inventory is used as a way to buffer production from fluctuations in demand and to match supply with demand. Without an alternative to inventories, the service firm is faced with a constant problem o f either "stock o u t s , " i.e., customers being turned away, or a lack o f customers, i.e., excess capacity. The successful service manager knows and understands how to use capacity management techniques. The successful tourism manager is aware of the various ways to manage capacity and monitors the fluctuations in demand so that capacity is used to the fullest extent possible. The manager is aware of daily, weekly, and yearly fluctuations in demand. Capacity management techniques can be thought of as working to either " s m o o t h " demand flows or to make supply flows more responsive to demand fluctuations. Demand Side Demand flows can be managed by the use of appointments. Peaks in service demand can be leveled by de-marketing peak time periods. This can be done by posting signs that state peak hours and that the customer can better be served at other times. Visible queues with waiting time posted on a current basis also help to spread peaks in demand. Valleys in demand can be filled by shifting peak business. Here special promotions, like price discounts on traditional slow days, can be effective. The impact o f bad weather on demand can even be managed to some extent by promotions. One garden shop in the Seattle area offers 10 percent off nursery stock on any Saturday that it rains. This allows the shop to better plan for staffing on its busiest day--Saturday. Prior to the rain discount, rainy Saturdays meant paying extra staff and having little or no business. Supply Side Supply side capacity management techniques enable the firm to respond to fluctuations in demand, whereas the demand side techniques men350
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tioned above are aimed at mitigating fluctuations in demand. The key to supply side efforts is to design a flexible service delivery system. The system should be able to operate with differing staffing levels corresponding to demand fluctuations. A flexible system allows for the use of part-time help. The service manager should also be sure his employees are cross-trained so that they can fill-in and cover a wide range of tasks in the service assembly process. In this way jobs can be designed differently for peak and valley periods, with workers expanding and contracting the number of tasks they perform as the demand and the corresponding staffing needs fluctuate. An ability to forecast demand fluctuations makes the possibilities for managing capacity on the supply side even more attractive. Many hotels and restaurants currently make weekly, daily, and even hourly forecasts o f demand to help determine staffing levels and purchasing decisions. One creative supply side response to increase capacity or handle the demand is to increase customer participation in the service assembly process. If the service manager can get the customer to do some of the work, capacity is increased without increasing other inputs. Examples include salad bars and self-service gas stations. The trade-off to this strategy, however, is that increased customer contact can lead to greater uncertainty in quality control and timing o f production. Only a brief discussion is given here of the possibilities for using capacity management tools in service operations (cf. Sasser 1976). Tourism managers need to consider fully how their operations can best match supply and demand for their services. CONCLUSIONS The management insights discussed in this paper are only suggestive of the many new possibilities and ideas that successful service managers are currently putting into practice. Working with a variety o f service firms and numerous service managers would lead one to believe that the most successful service managers analyze their operations and think about their jobs in a way different from the managers of goods producing firms. The services management framework briefly developed in this paper is a tool for guiding other service managers in thinking about their own activities. The hope is that this framework will enable tourism managers to see their operations in a new light and, as a result, to develop additional insights for successful tourism management.[] []
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BIBLIOGRAPHY Booms, Bernard and Mary J. Bitner 1980a A Services Marketing Framework. Seattle: Seattle Center for Hotel and Restaurant Administration, Washington State University. Mimeo. Booms, Bernard and Mary J. Bitner 1980b Marketing Strategies and Organization Structures for Service Firms, to be presented and published in the Proceedings of the American Marketing Association Conference on Marketing of Services, 1981. Booms, Bernard and Jody Nyquist 1980 Analyzing the Customers/Firm Communication Component of the Services Marketing Mix, to be presented and published in the Proceedings of the American Marketing Association Conference on Marketing of Services, 1981. Chase, Richard B. 1978 Where Does the Customer Fit in a Service Operation? Harvard Business Review 1978 (11-12): McCarthy, Jerome E. 1971 Basic Marketing: A Managerial Approach. Homewood, IL.: Richard Irwin, Inc. Sasser, Earl W. 1976 Match Supply and Demand in Service Industries. Harvard Business Review 1976 (11-121: Shostack, Lynne G. n.d. The Environment is a Marketing Message. New York: Citibank N.A. Submttted 8 February 1980 Revised version submitted 14 April 1980 Accepted 24. Aprd 1980 Refereed anonymously
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M A N A G E M E N T TOOLS FOR THE SUCCESSFUL TOURISM M A N A G E R Bernard H. B o o m s
Mary J. Bitner Hotel and Restaurant Administration Washington State University, Seattle, USA
ABSTRACT B o o m s , B e r n a r d H . a n d M a r y J. Bitner, New M a n a g e m e n t T o o l s f o r T h e S u c c e s s f u l T o u r i s m M a n a g e r . Annals o f Tourism Research 1980, VII(3): 337-352. T h e p u r p o s e o f this p a p e r is t o o u t l i n e s o m e new m a n a g e r i a l t o o l s f o r the t o u r i s m i n d u s t r y . T h e thesis p u r s u e d h e r e is t h a t the m a n a g e r s o f service o p e r a t i o n s face a n u m b e r o f c h a l l e n g e s d i s t i n c t l y d i f f e r e n t f r o m t h o s e enc o u n t e r e d b y m a n a g e r s o f g o o d s - p r o d u c i n g activities; a n d therefore that tourism managers require management t e c h n o l o g i e s d e s i g n e d f o r t h e i r special needs. Services a n d service d e l i v e r y , i.e. service p r o d u c t i o n , d i f f e r in t h e i r essential n a t u r e f r o m g o o d s a n d m a n u f a c t u r i n g p r o c e s s e s . T h e s e differences a r e o u t l i n e d a n d t h e n the m a n a g e m e n t i m p l i c a t i o n s a n d new insights f o r t o u r i s m a r e d r a w n out. T h e s e insights r e l a t e m a i n l y to t o u r i s m o p e r a t i o n s m a n a g e m e n t a n d t h e m a r k e t i n g o f t o u r i s m . K e y w o r d s : tourism managers, service managers,
tourism management tools.
Bernard Booms is a faculty member at the Washington State University. He has also taught at Harvard Business School and Penn State University. Professor Booms received his Ph.D. m Economics from the University of Pittsburgh in 1968. Mar!, Bitner is a Research Associate in the College of Business and Economics at Washington State University's Seattle campus for Hotel and Restaurant Administration. She received an M.B.A in Marketing from the University of Washington. 1980 ANNALS OF TOURISM RESEARCH VII(3)
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RESUME Booms, Bernard H. et Mary J. Bitner, "Nouveaux instruments pour la saine gestion des installations touristiques." Annals o f Tourism Research 1980, VII (3): 337-352. Le but de cet article est de presenter quelques nouveaux instruments pour g~rer une entreprise touristique r~ussie. Le point de de'part est que les directeurs des entreprises dans le secteur des services doivent faire face ~ des r~alit~s bien diffe'rentes de celles qui dominent darts le secteur de la production des biens. Les directeurs dans l'industrie touristique ont besoin de m&hodologies de gestion qui seraient invent~es pour eux seuls. La production et la fourniture des services diffdrent par leur nature m~me de la manufacture et distribution des biens de consommation. On fait le bilan de ces differences et puis on dresse une liste des implications pour la gestion et pour la comprehension du ph~nom~ne touristique. Ces idles font la lumi~re principalement sur la gestion des operations touristiques et sur le marketing du tourisme. Mots Clef: directeurs des operations touristiques, directeurs des industries de service, instruments pour la gestion touristique. INTRODUCTION The purpose of this paper is to outline some new managerial tools for the tourism industry. The thesis pursued here is that the managers of service operations face challenges distinctly different from those encountered by managers of goods-producing activities, and therefore that tourism managers, like all service managers, require management methodologies designed for their special needs. Tourism enterprises are strictly service enterprises. The tourism industry consists of three operational components. The channelers of tourists (i.e., travel agencies, travel clubs), the transporters of tourists (i.e., airlines, buslines), and the receivers of tourists (i.e., hotels, resorts, restaurants, and attractions) are all service operations. Goods used by the tourism industry are considered to facilitate these operations. Today man lives in what has been called the "service society." In the United States, services are estimated to account for 40 to 65 percent of the Gross National Product, and it is estimated that nearly two-thirds of the labor force is employed in service jobs. Yet, with few exceptions, the management literature, management research, and management training all focus on manufacturing activities and the problems of g•ods production. The standard management framework is the manufacturing model. Little has been done to tailor the traditional management tools, techniques, and models to the needs of service managers. 338
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BERNARD H. BOOMS & MARY .I. BITNER SERVICES VS. G O O D S First, it is necessary to define what is meant by a service organization and a goods manufacturing organization.
A service organization is one which satisfies customer needs through the performance of acts. The service sector is composed of all organizations, public and private, profit and non-profit, whose primary activities are the performance of tasks for their customers. Examples of tourism service organizations are restaurants, transportation companies, travel consultants, and hotels/motels. In a service organization any physical goods involved in the process exist simply to facilitate performance of the service. For example, the customer in a hotel may be provided with certain physical commodities such as soap, shampoo, instant coffee, and ice, but these are only facilitating elements of the organization's primary activity of providing accommodation services. Without the service, the physical goods would have no m~aning. A goods manufacturing organization is one which satisfies customer needs through the production and transfer of ownership of material commodities. The manufactured goods sector is composed of all organizations, public and private, profit and non-profit, whose primary focus is the production and transfer of physical commodities. Any services associated with such firms exist simply to enhance the value or quality of the physical product line. For example, a company that manufactures household appliances will have a customer service department to handle complaints and product malfunctions. The customer service department would, however, be unnecessary without the existence of the physical product. SERVICES ARE D I F F E R E N T The differences in managing a service organization as opposed to a goods manufacturing organization stem from two sets of conditions: 1. The differences in the characteristics of the end products themselves suggest the need for modified management techniques. 2. The conversion process (i.e., the transformation o f factors purchased in the marketplace into products which satisfy consumer needs) is different for services, and this has implications for the organization and management of service firms. Characteristics In terms o f the characteristics of the outcomes or end products, services are distinct from goods. First and foremost, services are intangible. The fact of intangibility leads to several important differences. For one thing, since services are not physical things, they cannot be stored or inventoried. In addition, because of intangibility, services are difficult for poten1980 ANNALS OF TOURISM RESEARCH Vll(3)
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tial customers to conceptualize and to perceive. Services cannot be touched or seen. As a result, they are also difficult to grasp mentally. A service must be experienced by the c u s t o m e r / c l i e n t before it will have real meaning for that individual. Prior to experiencing the service, the customer depends on tangible clues for evidence o f the nature and quality of the expected service. Management of tangible clues such as the appearance o f personnel, the environment, and facilitating goods is therefore essential to a service organization. This is in contrast to a goods manufacturing firm where the product itself can be seen, touched, and even tried before purchase. In short, then, because services are intangible, traditional inventory methodologies and marketing tactics either do not apply or must be modified before being useful for service managers. A second characteristic of services closely related to intangibility is Services cannot be transported or transferred. This implies that there must be a direct relationship between the customer and the firm and that once a service has been performed it cannot be resold or given to anyone else. Service accessibility from the customer's point of view is therefore a key to planning and locating outlets rather than efficiency in access to inputs or economies of scale, as is usually the case in a manufacturing firm.
non-transportability.
A third important difference in the products of service firms is that their products are often non-standard. Each customer's service experience will be uniquely defined for him or her in terms of personal expectations and actual interactions with the firm. The travel agent does not specialize in writing tickets to only one destination or even one area of the world. Rather, each contact with a customer and each end result is unique. The interactive, people-oriented nature of services means that total standardization of output is seldom possible and may not even be desirable. In goods manufacturing, on the other hand, repeatability and system-controlled production are key elements of success. The above differences in the characteristics of services from goods, together with the differences in the conversion process discussed in the following section, are the basis for suggesting that successful tourism managers need new tools, i.e., new ways of thinking a b o u t the m a n a g e m e n t of their operations. Conversion Process Differences in the conversion process are even more important for managers to be aware o f because it is mainly production processes that managers manage. (Little can be done by managers to influence the inherent nature of service outcomes.) The term conversation process as used here includes both the traditional notion of a production process (inputs transformed into outputs) and the consumption process (purchase and use 340
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BERNARD H. BOOMS& MARY J. BITNER of outputs). Thus the conversion process includes both production and consumption. This expanded view of what service managers manage is used because the separateness of the roles of firms and customers depicted in the typical model of economic activity does not apply for services sector activities. Both service organizations and goods manufacturing organizations premise their activities on the assumption that their products (service or goods) satisfy identifiable customer needs. The conversion process in both cases involves the t r a n s f o r m a t i o n o f raw materials, labor, and capital into need-satisfying products. This conversion process can be conceptualized as consisting of four sub-processes: 1. Goods M a n u f a c t u r i n g / S e r v i c e Assembly: The firm converts factors acquired in the market place into the end product through production or, in the case of a service, through the service assembly process. 2. Purchase: The customer exchanges value in the form of money, time, a n d / o r energy for the firm's product. 3. Use: The customer uses, consumes, or experiences the product. 4. Evaluation: The customer mentally evaluates the product resulting in a level of satisfaction or dissatisfaction. The a b o v e c o m p o n e n t s of the conversion process are similar for both goods and services organizations. Production (assembly), purchase, use, and evaluation always occur. However, the timing o f the sub-processes and the involvement and influence o f the firm at each step are what distinguish the goods conversion process from the service conversion process. Figure 1 illustrates the conversion process for goods and services. As can be seen in Figure 1, the separation between the production process and consumption process is distinct for goods firms. Production is the purview only of firms. Householders enter into the production process only as employees and not as consumers. The consumption process is controlled by the actions of hotaseholders as consumers, and firms have little active part in the use and evaluation stages of want satisfaction. Production and consumption intersect only at the purchase point and only here do firms and customers directly interact. The points of direct contact or involvement between firm and customer are labeled in Figure 1 as " c u s t o m e r boundary systems." This view of the operation of the goods sector might be called the manufacturing model. The manufacturing model does not apply to services-a fact the successful services manager intuitively realizes. Traditional manufacturing m a n a g e m e n t viewpoints must be modified and new tools added to the tool bag of service managers. The separateness of the roles of firms and consumers is not possible for 1980 ANNALS OF TOURISM RESEARCH Vll(3)
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service operations because services are intangible and cannot flow, i.e., move around or through steps or stages o f an economic system. Nearly all steps and actors occur and interact simultaneously in time and space. The end result is that the usual models for designing, operating, and controlling goods operations are not suitable for service operations unless tailored to account for these differences. As Figure 1 clearly shows for the service firm, the customer, as a customer, becomes an input into the production process and the firm becomes a party in the use and evaluation steps. The customer provides input in the form of time, information, and energy. For example, the information the customer gives to the travel agent or transport firm determines, in large part, the quantity and quality of the service delivered. How well the customer serves as an input plays a role in the effectiveness and efficiency of the service assembly process. A customer inputs energy into a production process when, for example, he or she assembles a salad at a salad bar. Again, how well the restaurant service is produced depends upon the quality of the customer's input. The firm enters the use and evaluation steps of want satisfaction because the end product is a performance--not a physical product--and, as such, production requires the firm's presence. Because of its presence, the firm has the opportunity to monitor and to control use, and to quickly make adjustments in service performance. Thus airlines can monitor the travel experience and make up for shortcomings by enhancing later elements in the service experience, either by increasing service levels or by increasing the perceived value of the service. For example, stewards and stewardesses use special attention and complimentary drinks as a way to influence the passengers' evaluation o f a flight that is delayed or develops difficulties. Figure 2 summarizes the differences in the conversion process between the goods and services sectors. From the viewpoint of the service firm, all this means two th!ngs: 1) the customer boundary system (where the customer interacts with the firm) is much larger for service firms than goods producing firms, and 2) service managers find the scope of their jobs to be much greater than their counterparts in manufacturing firms. These points are shown in Figure 1 by the relatively larger size of the boxes marked customer boundary system and management scope.
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Evaluation involves the matching of expectations with product performance and is out of the control of the firm.
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BERNARD H. BOOMS & MARY J. BITNER Specifically, then, the tourism manager must realize that the tourism firm is a part of the use and evaluation steps of the consumption process. Tourism managers find themselves faced with new, little-studied or -discussed aspects of the job as manager. Further, the service assembly step is influenced by the presence and involvement of the customer as an input to the process. Thus the service manager must modify his or her concepts of how to think about and manage the service assembly process. With little help from management science, some innovative practicing managers have come up with ways to make service operations effective and efficient. They have taken into account the unique management elements of their job, i.e., the management of consumer use and evaluation, and have realized that the customer must be managed as a part of the production process. Often, to facilitate the input of the customer, the managers have redesigned the service delivery system. In effect, these innovative managers have been thinking differently about the managerial functions of planning, operating, and control. I M P L I C A T I O N S FOR TOURISM M A N A G E R S Figure 1 is a graphic comparison of the elements or steps and actors in the conversion process for goods and services. As Figure 1 illustrates, the nature and complexity o f each o f the steps in the conversion process for goods and services is different; thus the nature of the management function varies between the goods sector and the services sector o f the economy. Not only is the service manager's job different, it is also more complex. These differences in the nature and complexity of a service manager's job have implications for individual tourism firms and for the individual tourism manager. Organizational Structure: Implications for the Firm A business firm can be viewed as an organizational system that consists of numerous organizational sub-components or sub-systems, all of which are interrelated and interact in pursuing the stated goals of the firm. A system can be defined as a collection o f components designed to accomplish some particular goal, and united by some form of regular interaction and interdependence. Figure 3 illustrates the differences in the degree of separateness of the sub-systems between typical goods and services firms. Firms generally operate along departmental lines, each department in charge and responsible for accomplishing certain tasks or goals. Departments are sub-systems that have specialized goals designed to insure that overall organizational goals will be reached, namely, delivering a product or service and earning a profit. The firm is organized along departmental lines, i.e., along specialized tasks, to capture the benefits to be gained from specialization and divi1980 ANNALS OF TOURISM RESEARCH VII(3)
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sion o f labor. Firms are also organized into sub-systems to facilitate management control. Each sub-system specializes in accomplishing its own goals, but all sub-systems interconnect and interact. As is shown in Figure 3, the degree of separateness of the sub-systems in a typical manufacturing firm is greater than in a service assembly firm. Notice that several sub-systems in service firms (namely, operations, marketing, and physical distribution) are coterminous, i.e., are not separable in their impact and operation. Unfortunately, service firms are often organized as if it were possible (as in the manufacturing case) to separate the functions of these three sub-systems. It is no wonder that such service firms experience management difficulties and lackluster results. For service firms, the operations, physical distribution, and marketing functions all overlap. That is, these sub-systems not only are interactive but are also carried on simultaneously in time and place. They are not and cannot be separate. Thus tourism managers at the operating level (unlike their counterparts in a goods firm) find that they are also " d o i n g " operations, marketing, and physical distribution. The job o f a service manager at the operations level is thus more complex. A failure on the part of operations managers to recognize this difference in complexity and challenges has led to corporate disasters (this is further discussed in the next section). So, too must the Chief executive officers and other top managers of service firms realize that the nature of services and service delivery is such that service firms must be run with a different model in mind and with a different touch. The CEO must realize that in a well-ru.n service firm the subsystems will look and interact differently from the picture painted in models of manufacturing organizations. Managerial Framework: Implications for Managers For the purpose o f discussion, the functions of individual managers are divided into marketing and operations implications. In fact, as is discussed below, the manager at the operating level (that level where the customer interaction takes place) is faced with managing both marketing and operations or production functions. Implications for Tourism Marketing The earlier point that services are different from goods in terms of characteristics and in terms of the timing of and involvement of the firm in the conversion process led to the proposition that marketing m a service organization will be different from marketing in a goods manufacturing firm. The operations function also needs to be modified in a service firm, but in this section the focus is marketing. The interaction of the two functions will be obvious throughout the discussion, however. 346
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Figure 3
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Three basic implications for marketing in a service organization are summarized in the following paragraphs (Booms and Bitner 1980a, 1980b). A. The marketing mix can be expanded from the four traditional elements of product, price, place, and promotion to include three new variables: participants, physical evidence, and process of service assembly. Because services are intangible and are produced and used almost simultaneously, the firm can use additional variables above and beyond the traditional " F o u r P ' s " to influence customer responses (McCarthy 1971:44). These elements correspond to what Shostack calls "!angible clues" (Shostack n.d.) and include participants (customers and firm personnel); physical evidence (the environment, facilitating goods, and other tangible representations of the service); and the processes by which the service is assembled. Whether or not the marketing manager can control these variables, h e / s h e should be aware that they do influence the customer's responses and therefore perform a marketing function. B. Because of the intangible and interactive nature of services, planning, control, and definition of the four traditional marketing mix, variables become more complex. The traditional marketing mix variables (product, price, place, promotion) take on new meanings in service organizations. Because its product is intangible and cannot exist prior to customer/firm interaction, the service firm really represents capabilities waiting to "come to life". Product decisions therefore involve planning and preparation of capabilities which the customer perceives via the firm's personnel, environment, facilitating goods, and assembly process. Promotion will also be different, since the firm must communicate its capabilities rather than the service itself to potential customers and must therefore rely on communication variables such as its personnei and physical environment to a greater extent than would a good manufacturing firm. Likewise, pricing decisions can only be made with a clear understanding of the value of the service from the customer's point of view. Place or distribution decisions will be different for services because the firm is distributing processes that require direct c u s t o m e r / firm interaction and not physical commodities that can be transported and stored. C. The marketing manager's scope of concern within the firm is broader and more complex due to the overlap of marketing and operations functions. In addition to planning the expanded marketing mix, the services marketing manager is concerned with the performance of those elements of the marketing mix that influence the customer during the assembly and use 348
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phases of the process. Performance of firm personnel, the behavior of other customers, the appearance and upkeep of the physical environment, and the control of the processes of service assembly all serve as communicators to the customer of what the firm represents. They are therefore marketing tools and must be controlled as such on a daily basis. Such day-to-day planning and control traditionally falls within the realm of responsibility of the operations manager -- appropriately so in a goods manufacturing organization where the two functions can be easily separated, in a service organization, however, the marketing manager's role overlaps that of the operations manager resulting in a broadened and more interdependent scope of concern for both. Implications for Tourism Operations The fact that services are different from goods also bears on the role of the tourism manager in designing, directing, and controlling a service delivery system. Several basic implications are summarized below. A. The role o f the customer in the service delivery system must be studied and understood (Booms and Nyquist 1980). Customers are, to varying degrees and in different ways, a part of service delivery systems due to both the nature o f services and to the way service delivery systems are designed and operated. Changes in design and operation can influence the degree of customer involvement and, in turn, lead to differences in service efficiency and service quality. Generally, the less direct contact the customer has with the service system, the greater the potential for system efficiency. Customers as inputs are difficult to control and direct. Customers introduce a high degree of uncertainty into the system. Further, they often require special individual attention on the part of employees to facilitate their role in the service delivery process. For these reasons, where direct customer contact is high, generally the less the possibilities are for efficiency (Chase 1978). The service manager should be able to understand and realize when high customer contact is required and when a low customer contact system can be substituted with no perceived loss in the level of service from the customer's viewpoint. The tourism manager should review his or her option to determine if elements o f the service delivery system can be isolated from the customer without lowering service quality. Airlines are a good example of the separation of a service delivery system into high and low contact operations to increase efficiency. Airline ticket counters are designed to be high contact, but baggage handling is designed and operated as a low contact function (Chase 1978). Further, tourism managers should question whether the operating procedures of the system match the degree of customer contact. Here, job design, employee selection and training, and methods of compensation are 1980 ~ N N A L S OF T O U R I S M R E S E A R C H VII(3)
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especially important. Paying according to the number of customers served may speed up the delivery of services, but if it is a high contact system the result may be customer dissatisfaction due to a feeling of being rushed. In employee selection and training it is important to realize that high contact jobs require a great deal of interpersonal relations skill and thus that employees for high contact work need good interpersonal skills. Jobs should be designed to allow for specialization, so that persons with good interpersonal skills spend their time in customer contact, and others less skilled in this area be assigned to low contact jobs. The mixing of skill requirements in job design reduces the opportunity for matching skills with job requirements. B. Capacity management techniques can be used to help match the supply and demand for services. Services cannot be inventoried. Inventory is used as a way to buffer production from fluctuations in demand and to match supply with demand. Without an alternative to inventories, the service firm is faced with a constant problem o f either "stock o u t s , " i.e., customers being turned away, or a lack o f customers, i.e., excess capacity. The successful service manager knows and understands how to use capacity management techniques. The successful tourism manager is aware of the various ways to manage capacity and monitors the fluctuations in demand so that capacity is used to the fullest extent possible. The manager is aware of daily, weekly, and yearly fluctuations in demand. Capacity management techniques can be thought of as working to either " s m o o t h " demand flows or to make supply flows more responsive to demand fluctuations. Demand Side Demand flows can be managed by the use of appointments. Peaks in service demand can be leveled by de-marketing peak time periods. This can be done by posting signs that state peak hours and that the customer can better be served at other times. Visible queues with waiting time posted on a current basis also help to spread peaks in demand. Valleys in demand can be filled by shifting peak business. Here special promotions, like price discounts on traditional slow days, can be effective. The impact o f bad weather on demand can even be managed to some extent by promotions. One garden shop in the Seattle area offers 10 percent off nursery stock on any Saturday that it rains. This allows the shop to better plan for staffing on its busiest day--Saturday. Prior to the rain discount, rainy Saturdays meant paying extra staff and having little or no business. Supply Side Supply side capacity management techniques enable the firm to respond to fluctuations in demand, whereas the demand side techniques men350
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tioned above are aimed at mitigating fluctuations in demand. The key to supply side efforts is to design a flexible service delivery system. The system should be able to operate with differing staffing levels corresponding to demand fluctuations. A flexible system allows for the use of part-time help. The service manager should also be sure his employees are cross-trained so that they can fill-in and cover a wide range of tasks in the service assembly process. In this way jobs can be designed differently for peak and valley periods, with workers expanding and contracting the number of tasks they perform as the demand and the corresponding staffing needs fluctuate. An ability to forecast demand fluctuations makes the possibilities for managing capacity on the supply side even more attractive. Many hotels and restaurants currently make weekly, daily, and even hourly forecasts o f demand to help determine staffing levels and purchasing decisions. One creative supply side response to increase capacity or handle the demand is to increase customer participation in the service assembly process. If the service manager can get the customer to do some of the work, capacity is increased without increasing other inputs. Examples include salad bars and self-service gas stations. The trade-off to this strategy, however, is that increased customer contact can lead to greater uncertainty in quality control and timing o f production. Only a brief discussion is given here of the possibilities for using capacity management tools in service operations (cf. Sasser 1976). Tourism managers need to consider fully how their operations can best match supply and demand for their services. CONCLUSIONS The management insights discussed in this paper are only suggestive of the many new possibilities and ideas that successful service managers are currently putting into practice. Working with a variety o f service firms and numerous service managers would lead one to believe that the most successful service managers analyze their operations and think about their jobs in a way different from the managers of goods producing firms. The services management framework briefly developed in this paper is a tool for guiding other service managers in thinking about their own activities. The hope is that this framework will enable tourism managers to see their operations in a new light and, as a result, to develop additional insights for successful tourism management.[] []
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BIBLIOGRAPHY Booms, Bernard and Mary J. Bitner 1980a A Services Marketing Framework. Seattle: Seattle Center for Hotel and Restaurant Administration, Washington State University. Mimeo. Booms, Bernard and Mary J. Bitner 1980b Marketing Strategies and Organization Structures for Service Firms, to be presented and published in the Proceedings of the American Marketing Association Conference on Marketing of Services, 1981. Booms, Bernard and Jody Nyquist 1980 Analyzing the Customers/Firm Communication Component of the Services Marketing Mix, to be presented and published in the Proceedings of the American Marketing Association Conference on Marketing of Services, 1981. Chase, Richard B. 1978 Where Does the Customer Fit in a Service Operation? Harvard Business Review 1978 (11-12): McCarthy, Jerome E. 1971 Basic Marketing: A Managerial Approach. Homewood, IL.: Richard Irwin, Inc. Sasser, Earl W. 1976 Match Supply and Demand in Service Industries. Harvard Business Review 1976 (11-121: Shostack, Lynne G. n.d. The Environment is a Marketing Message. New York: Citibank N.A. Submttted 8 February 1980 Revised version submitted 14 April 1980 Accepted 24. Aprd 1980 Refereed anonymously
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