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Summary Cost-effective Service Excellence (Wirtz, Zeithaml)
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Cost-effective service excellenceWirtz & Zeithaml
There is a trade-of between customer satssacton and productiitt because to much socus on cost
reducton associated with productiitt can reduce customer satssactonn, and concentraton on
customer satssacton increases costs and therebt reducing productiitty This trade-of is more
pronounced in seriices than productsy Howeiern, there are examples os organizatons that both haie
a high productiitt and customer seriicey This research explores the alignment among seriice
excellence and high productiitt approaches to demonstrate wats through which seriice frms can
achieie what we call cost-efectie seriice excellence (CESE)y
Service excellence, productivitt and organizational performance
Literature in marketng shows that using a customer satssacton strategt improies fnancial
persormance through the positie efects that customer satssacton has on repeat purchasen, cross-
butingn, reserrals and through increased attudinal lotaltt and reduced price sensitiitty Literature
shows that increased efcienct can improie business persormance through cost reductony
Combining these twon, seriice organizatons can pursue three alternatie customer satssacton and
productiitt socused strategies:
Increasing customer satssacton (highest fnancial return);
Increasing productiitt;
Pursuing a dual strategt (highest long-term fnancial return)y
Root causes of the confict etteen service excellence and productivitt
The causes os the confict between seriice excellence and productiitt:
Distributed operatoos: simultaneous producton and consumpton make industrializatonn,
economies os scalen, productiitt and qualitt control difcult to achieie;
Variety: in seriicesn, customers are important sor inputn, processn, and output and this causes
iarietty Operatons cannot be organized and scheduled at optmum efcienct as arriial
tmesn, product and seature choicesn, preserencesn, capabilites and efort and inioliement in
seriice producton iart;
Iotegratoo: customer’s experience and satssacton depend on the three additonal Ps os
seriices marketng: peoplen, process and phtsical eniironmenty To deliier seriice excellencen,
operatonsn, marketng and HR must be integrated which leads to trade-ofsy
There are some approaches organizatons can use to achieie CESE:
Dual culture strategy: socus on the entre organizaton;
Operatoos maoagemeot approach: reduce process iariabilitt;
Focussed service factory strategy: achieie CESE through a highlt specialized operatony
Dual culture strategt
The dual culture strategt uses organizatonal ambidexteritt to driie productiitt strategies and tools
to the extremey Organizatonal ambidexteritt describes how organizatons are able to simultaneouslt
pursue actons along diferent dimensionsy There are three organizatonal approaches sor this:
Structural ambidexterity: units with diferent competencies address inconsistent demands;
Cootextual ambidexterity: achieiing alignment and adaptabilitt bt pushing the integraton os
confictng goals to the indiiidual emplotee;
Leadership ambidexterity: allows leaders to embrace rather than aioid contradictons and
manage confictng demandsy
, Looking at 10 organizatons that achieied CESE we see that:
Leadership pushed their organizatons to pursue a dual culture (through internal
communicatonn, training and incentie ststems);
Contextual ambidexteritt is obiious in mant os the dual culture strategt organizatons where
emplotees’ thinking and decision making about when to socus on seriice excellencen, when to
emphasize cost-efectieness and how to integrate both where goierned;
Structural ambidexteritt was also used to achieie CESEy
Proposition 1: mechanisms sor achieiing organizatonal ambidexteritt (leadershipn, contextualn, and
structural) allow organizatons to simultaneouslt achieie seriice excellence and cost efectienessy
Two departures srom the traditonal management on ambidexteritt:
In the dual culture os seriice excellence and cost-efectienessn, all departments must be
iniolied;
Dual culture organizatons distnguish between the customer sacing sront ofce and the back
ofcey The sront ofce is generallt more customer- and seriice excellence-socused than the
back ofcey
Proposition 2: because the root causes os the productiittysatssacton trade-of penetrate the entre
seriice organizatonn, leadership and contextual ambidexteritt are most critcal in achieiing CESEy
The socus on seriice excellence is more atractie to emplotees than socusing on cost-cutngn,
because thet ttpicallt seel proud to be part os an organizaton that deliiers excellencey A dual culture
strategt requires a strong ratonale sor emplotees concerning wht cost-efectieness is critcal in
additon to seriice excellencey
Proposition 3: deliiering seriice excellence is more atractie to seriice emplotees than cost-
efectienessy To gain emplotee but-in to deliier both at the same tmen, a coniincing ratonale needs
to be made apparenty
Seriice organizatons that want to improie efcienct can reduce the gap between their actual and
potental leiels os efcienct at the current leiel os iariabilittn, which we called generic productiitt
strategies and tools (cost controln, reducton os wasten, training and motiaton os emploteesn, redesign
os customer seriice processes etcy)y Dual culture organizatons are masters os generic productiitt
strategies and tools to cut costs and boost productiittn, while managing sor seriice excellencey
Proposition 4: a dual culture strategt enables organizatons to deplot generic productiitt strategies
and tools to the extreme and allows these organizatons to minimize the gap between actual and
potental efcienct at an excellent leiel os seriicey
OM approaches to reduce process varia ilitt
There are three approaches in which organizatons can increase the leiel os efcienct bt reducing
customer-induced iariabilitt:
Isolatog aod iodustrialiiiog the back ofce, aod shifiog actvites from the expeosive froot to
the mechaoiied back ofce: this allows higher (cost-efectie) productiitt in the back ofce
as it can operate without customer-induced iariabilitt and deplot technologt and ststems
while the sront ofce can proiide customer satssacton and sales;
Modulariiiog service: reduced customer choice and complexitt reduces iariabilitt and lead
to unisormitt that can enable higher productiitt;
Deployiog SST: technologies and ststems (web and app-based seriices) to co-creaton and
seriice productiitty
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