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The late Professor Christopher Lovelock, the pioneer of Service Marketing
at Harvard Business School, is your close friend. You have co-authored
several textbooks with him. What is the Essence of Services Marketing according to him?
To Christopher, the essence of services marketing is, how do you market something
that does not involve a transfer of ownership? When you buy a service, like a resort
holiday, getting a consultation from a doctor or studying for your MBA, you rarely
acquire ownership of tangible goods, and that makes communicating, delivering the
value proposition difficult. Also, there's co-production with customers (i.e., the customer is
in the service factory) and distributed operations (e.g., even McDonald's outlet is a
mini factory). A lot of marketing and management issues - such
as service quality assurance, managing frontline
employees, engineering service environments, designing customer
service processes, and revenue management - are a consequence
of these features of services. And Christopher dedicated
his career to researching, thinking and experimenting on how
to manage and market service organizations effectively.
Christopher was one of the thought leaders and
pioneers in the field, and besides writing many award-winning
academic articles and developing concepts, tools and models for
various aspects of services marketing and management, he also
wrote the world's first services marketing text book when he was
on the Harvard Business School faculty. The book, Services Marketing: People, Technology,
Strategy (Prentice Hall, 2007) is now in its
7th edition! I have been privileged to work
with Christopher from the 5th edition onwards, and plan
to continue developing this book - we just started
thinking about a few major changes planned for the
8th edition.
It is not one concept that impressed me most, but rather
his approach, clarity in thinking and creativity. He never
accepted conventional wisdom at face value, but dug deeper
and deeper to get to the ground of issues, and in this way,
he often uncovered exciting new insights and developed
new models. I constantly learned from him as we worked
very interactively. We jointly wrote book chapters and
conference papers, and I was always amazed at his clarity of seeing
new angles in what services marketing is all about. He
himself never stopped being curious, inquisitive and he learned
non-stop - he remained young at heart his entire life! Being
a German, my value add was often enhancing the
structure, organization and bringing a sharper focus to our work,
plus being in Asia, I added a lot of insights, examples and
cases from Asia to our global text books.
Of course, culture is a crucial element in service firms,
as services are all about people, team work,
communications, perceptions, attributions and decision making, and
culture plays an intricate role in all these processes.
There is the country culture as well as a corporate
culture - for example, what is the McDonalds or the Hilton culture
in India versus the US - there will be many similarities as
both McDonalds and Hilton are working hard to ensure
that customers around the world experience a consistent service experience that is core to
their value proposition.
Countries also differ vastly - service in the US (with its tipping culture) is vastly different
to the more matter-of-fact but efficient service in Germany and the warm service in Italy.
India of course has personable, friendly and hospitable people, and that shines through in its
service delivery. Having said this, many organizations are rather bureaucratic and have so many
rules and cumbersome processes that the frontline simply cannot deliver great service
although they'd love to - so, they make up with a smile and by being friendly. But the best
service organizations in India are fantastic. I am so impressed by the service level provided by
firms such as the Oberoi Hotels & Resorts or Tata Consultancy Services - their customer
service processes are the best in class, benchmarked against world-class service organizations.
In short, of course, the culture of a country matters, but more importantly is, how
does a service firm interweave its own culture into the country's culture to deliver its
service performance as was designed and desired by its target segments.
They manage to deliver on paradoxes! They are a quality leader on the one hand, but at
the same time highly cost-effective - their cost per seat-mile is at the level of a budget carrier!
This is what my co-author Loizos Heracleous and I termed "cost-effective
service excellence". They deliver on other paradoxes, specifically, they are able to
innovate simultaneously in a centralized and de-centralized manner, to be both a follower and
a leader, and finally to achieve both standardization as well as personalization. We don't
have the space here to discuss how SIA delivers these factors, but readers can download a
free chapter of our book, Flying High in a Competitive Industry: Secrets of the World's
Leading Airline (McGraw Hill, 2009) from my website at JochenWirtz.com.
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You live in Singapore. Singaporeans are not known to be overtly friendly by
nature. Why are they nevertheless so successful in many different service
industries, including private banking and wealth management, education?
Actually, coming from Germany and having lived in London for many years, I
find Singaporeans very friendly and welcoming. But you may be right that the warmth
towards strangers (and perhaps non-regular customers) cannot match Thailand's or Indonesia's.
My personal observation is that Singapore's public sector and many of the successful
sector service firms are incredibly well organized, well planned, with clear strategic
intents, excellent implementation and are mostly well capitalized.
Also, Singapore in general is not afraid of trying new technologies, software and
systems, and therefore is able to execute service processes well and efficiently. See the
Singapore Airlines example from the above said book, or Changi Airport, PSA, Capital Land, and
even the Inland Revenue Authority with its e-filing, simple interface and tax-payer friendly
rules and processes, which almost make it a pleasure to file income tax. Also, I was
most impressed with how Singapore managed to design, launch and implement its electronic
road pricing system. In spite of all the technological challenges, the system is operating in a
highly integrated, efficient and largely failure-free manner - it is a powerful tool to
effectively manage road congestion during peak hours. I don't think many cities could have done
a better job than Singapore at this!
I am not sure why one would do that - Service firms tend to have high fixed and
low variable costs. Once a hotel, a cinema, a cruise ship, a server farm or a testing lab has
been built, the bulk of the costs (often 80% and more) have been incurred and are sunk. It is
very difficult to cut depreciation, interest charges, and maintenance costs that continue to
be incurred independent of whether a firm utilizes the capacity or not. All savings from
cutting service quality tend to be marginal.
In fact, when capacity utilization is low, service employees can go all the way to truly
wow their customers. A firm that wants to build customer loyalty and market share should use
the slack in operations to focus on outstanding customer service. This can include low or no
waiting times, allocation of preferred seating, providing extra attention and consultation, and the like.
The reward is a combination of higher average prices and/or higher capacity utilization.
Think about it, who has to cut prices lower in times of a crisis - the firm with the
high quality image or the one with low quality?
Having said this, a crisis is always a great opportunity to cut non-value adding
costs, processes, and activities to the bone, let go of underperforming staff, cut non-strategic
and unprofitable customers, segments, branches, products - now is the time to focus, to
truly drive the long-term strategy.
Finally, if a firm is in the great situation of having cash, use this opportunity to
get the high quality people, shop locations, software, renovation, etc., - all these can
be acquired at much lower cost than during boom times. The opportunity costs
of renovation, training, etc., are low when business is down, and the firms that invest
now will reap the rewards first at the upturn. Now is the time to retool, renovate,
retrain, etc., not when firms get busy again. Singapore Airlines has been exceptionally
successful at doing all these during the many crises that South-East Asia has had to go
through over the past 14 years.
I would prefer to select from companies that I have worked with and understand. I am
most impressed by Singapore Airlines as discussed in our book, then Banyan Tree for having
been a serial innovator in a saturated market and growing rapidly, although there has been
one crisis after another since their inception shortly before the Asian Economic Crisis in
1997/98, and all this while showing high levels of corporate responsibility even before it
has become mainstream (see www.jochenwirtz.com for a free copy of a case study on
Banyan Tree)! Finally, Raffles Hotels & Resorts, who although are a small chain, have won so
many awards and continue to deliver service "like a gentle breeze" around the world.
I believe the program has an innovative structure with a unique positioning and
value proposition - what else do you expect from a marketing professor who launches a program!
It is a global program which through its one-of-a-kind format allows senior executives
from anywhere in the world to participate in an unparalleled global learning experience
without interrupting their careers. The program is taught via six formal residential sessions, each of
two weeks duration held every three months during the
15-month period. Because of this structure, participants can fly in for the sessions
from anywhere in the world, commit full-time for two weeks and then return to their jobs
with richer perspectives and immediately can apply what they have learned. We have been able
to build a uniquely global program, with 50% of our participants flying in for segments from
other continents (not countries!).
The class is amazingly diverse not only by nationality, culture, and industry and
functional background, but importantly, participants are currently both working and living in very
different parts of the globe. You have participants in our class who currently work and live in India,
China, Japan, South-East Asia, the Middle East, Europe, and last but not least, the Americas. They
bring their rich backgrounds and distinctive business environments together with their unique set of
skills, knowledge and perspectives into the classroom. With such diversity, the program provides
an unsurpassed forum for peer-to-peer learning, sharing of experiences and profoundly
in-depth discussion of the most pressing business issues. I came back from our EMBA session in Shanghai
in November rightly after Lehman Brothers went under. I was so deeply impressed to hear
the perspectives on the current crisis from bankers, consultants, industrialists, and so forth from
four different continents! The perspectives varied so much from what we read, heard and believed
in Asia - already then, I could see that people in Asia completely underestimated the crisis that
had been hitting us. To me, that was an eye opener and showed the real value of bringing senior
people together who currently live in very different parts of the world.
You can read more about the program at www.ucla.nus.edu.
The interview was conducted by
Ivaturi Murali
krishna
Research Associate,
Effective Executive
IUP Publications
