rater scale

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(Answer the “Your Call” question).

With services now employing more than 75% of American workers, universities are bringing more research attention to what is being called “services science.” This is a field that uses management, technology, mathematics, and engineering expertise to improve the performance of service businesses, such as retailing and health care.47

Harvard Business School scholar Frances X. Frei has determined that a successful service business must make the right decisions about four core elements and balance them effectively:48

The Offering: Which Features Are Given Top-Quality Treatment? Which service attributes, as informed by the needs of customers, does the company target for excellence and which does it target for inferior performance? Does a bank, for example, offer more convenient hours and friendlier tellers (excellence) but pay less attractive interest rates (inferior performance)?

The Funding Mechanism: Who Pays for the Service? How should the company fund its services? Should it have the customer pay for them? This can be done in a palatable way, as when Starbucks funds its stuffed-chair ambience by charging more for coffee. Or it can be done by making savings in service features, as when Progressive Casualty Insurance cuts down on frauds and lawsuits by deploying its own (rather than independent) representatives to the scene of an auto accident.

Or should the company cover the cost of excellence with operational savings, as by spending now to save later or having the customer do the work? Call centers usually charge for customer support, but Intuit offers free support and has product-development people, as well as customer-service people, field calls so that subsequent developments in Intuit software are informed by direct knowledge of customer problems. Other companies, such as most gas stations, save money by having customers pump their own gas.

The Employee Management System: How Are Workers Trained & Motivated? Service companies need to think about what makes their employees able to achieve excellence and what makes them reasonably motivated to achieve excellence. For instance, bank customers may expect employees to meet a lot of complex needs, but the employees aren’t able to meet these needs because they haven’t been trained. Or they aren’t motivated to achieve excellence because the bank hasn’t figured out how to screen in its hiring, as in hiring people for attitude first and training them later versus paying more to attract highly motivated people.

The Customer Management System: How Are Customers “Trained”? Like employees, customers in a service business must also be “trained” as well, as the airlines have done with check-in. At Zipcar, the popular car-sharing service, the company keeps its costs low by depending on customers to clean, refuel, and return cars in time for the next user. In training customers, service companies need to determine which customers they’re focusing on, what behaviors they want, and which techniques will most effectively influence customer behavior.


Pick a services company you’re familiar with, such as Domino’s Pizza, Starbucks, Amazon, REI, or the college bookstore. In integrating the four core features just discussed, a service company needs to determine the following: Are the decisions it makes in one area supported by those it makes in the other areas? Does the service model create long-term value for customers, employees, and shareholders? Is the company trying to be all things to all people or specific things to specific people? How do you think the company you picked rates?


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