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The Four Things a Service Business Must Get Right

The Idea in Brief

All successful firms must design a compelling offering and manage the workforce to deliver it at an attractive price. But service firms must do even more: deal with the frustrating fact that their customers can wreak havoc on service quality and costs.

For example, a customer dithering at a fast-food counter slows things down for everyone else waiting in line. An architect's client struggling to clarify how a new facility will be used drags out the design process.

To tackle this challenge, Frei advises aligning four key elements of your business:

  • What your service offering consists of

  • How you fund the excellence you want to provide

  • How you manage employees to deliver quality service

  • What you do to help customers enhance--not erode--service

Get these elements pulling together, and none of them can pull your business apart--as service stars like Wal-Mart, Commerce Bank, and Cleveland Clinic have discovered firsthand.

The Idea in Practice

To consistently deliver service excellence, ensure that each of these four elements reinforces the others:

Service Offering

Determine how customers define "excellence" when it comes to your offering: Convenience? Friendliness? Flexible choices? Price? Identify what you'll do to deliver that excellence--and what you won't do.

Commerce Bank decided to serve customers who prized pleasant, face-to-face service and convenience. It offers evening and weekend hours, buildings with high ceilings and natural light, and a fun contraption for redeeming loose change. Despite its relatively unattractive interest rates and narrow product range, its retail customer base has expanded dramatically.

Funding Mechanism

Think about how you'll pay for the increased cost of the excellence you're seeking to provide through your service offering. Possibilities include:

  • Charging the customer. For example, Starbucks customers value lingering in the company's coffee-house setting. To fund this inviting atmosphere, Starbucks charges a premium for its coffee.

  • Spending now to save later. For instance, Intuit offers customer support service free of charge. It uses callers' input to improve future versions of its software, so customers will ultimately need less support.

  • Having customers do the work. For example, airlines' self-check-in kiosks not only reduce costs; they also enhance the service offering by liberating travelers from long lines at staffed counters and by providing convenient tools such as seat maps.

Employee Management

Ensure that your workforce management activities (recruiting, selection, training, job design) empower employees to deliver the excellence embodied in your service offerings.

Commerce Bank competes on extended hours and friendly service, not on low price or product variety. It knows it doesn't need straight-A students to master its limited product set, so it hires for attitude and trains for service. For instance, it uses simple recruiting criteria, such as "Does this person smile in a resting state?" And it encourages employees to recruit people they see providing great customer service in other industries.

Customer Management

Articulate which behaviors customers must demonstrate to get the most value from your service. Then design your service specifically to foster those behaviors.

To get customers using the new self-check-in kiosks, airlines ensured that travelers could complete the transactions with far fewer keystrokes than check-in personnel used to need. By contrast, retail stores that offer self-service checkout machines haven't made using those machines easy for shoppers. Moreover, the stores expect shoppers to shoulder responsibility for fraud prevention by weighing bags during checkout. Result? Anxious customers avoid the machines.

Copyright 2008 Harvard Business School Publishing Corporation. All rights reserved.

Further Reading


Breaking the Trade-Off Between Efficiency and Service

Harvard Business Review

November 2006

by Frances X. Frei

This article offers additional strategies for managing customers in ways that prevent them from negatively affecting your service offering. First, understand how customers can disrupt your service, including requesting service at inconvenient times, asking for a bewildering array of features, ignoring or botching the tasks required to use your service, and having different opinions about what constitutes excellent service. Then apply strategies for managing these problems. For example, Zipcar, a car-sharing service, charges penalties to customers who return cars to their parking spaces late. The penalties reduce behavior that raises Zipcar's costs and that spoils other customers' experience of its service.

Exploding the Self-Service Myth

Harvard Business Review

May-June 2000

by Youngme Moon and Frances X. Frei

Getting customers to do the work (such as shopping for and buying your service online) is one way to pay for the cost of providing excellent service. But many companies' online self-service presents too many choices and asks customers to shoulder too many tasks. Result? Overwhelmed or annoyed customers avoid the self-service. To persuade customers to use your online self-service, simplify it. For instance, Dell Computer groups its products by customer segments and displays only in-stock items on its Web site. Customers can help themselves, but they're not overwhelmed with choices. Dell also has custom Web pages for its most valuable corporate customers that display only computer configurations preapproved by the client company and only prices reflecting negotiated discounts.

Silo Busting: How to Execute on the Promise of Customer Focus

Harvard Business Review

May 2007

by Ranjay Gulati

When a market becomes commoditized, many companies shift from a product to a solutions orientation--offering packages of products and services. But this strategy presents new challenges. In addition to having to manage customers in new ways, companies must reorganize internally to support their new service-focused business. That's because knowledge and expertise reside in silos, and companies find it difficult to harness their resources across those boundaries in ways that customers value and want to pay for. This article presents suggestions for internal reorganization--including replacing traditional silos with customer-focused ones, developing new customer-satisfaction metrics and incentives, and giving people who are closest to customers authority to act on their behalf.