Industrialization of services business model

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The industrialization of services business model is a business model used in strategic management and services marketing that treats service provision as an industrial process, subject to industrial optimization procedures. It originated in the early 1970s, at a time when various quality control techniques were being successfully implemented on production assembly lines.

Theodore Levitt (1972) argued that the reason the service sector suffered from inefficiency and wide variations in quality were that it was based on the craft model. Each service encounter was treated as an isolated event. He felt that service encounters could be systematized through planning, optimal processes, consistency, and capital intensive investments. This model was the foundation of the success of McDonalds and many other mass service providers in the 1970s, 80s, and 90s.

Unfortunately, the application of assembly line techniques to service provision had several undesirable consequences. Employees found working under these conditions disempowering, resulting in low morale, high staff turnover, and reduced service quality. One of the most difficult aspects of this model for employees to deal with was the "smile incentives". Employees were instructed to put a smile on their face during the service encounter. This manufacturing and commercialization of apparent happiness has been criticised by many commentators, particularly Mundie (1987). Also many customers prefer the "personal touch".

By the early 1990s most service providers turned their attention back to the human element and personalized their services. Employees were empowered to customize the service encounter to the individual characteristics of customers.

Subsequently, scholars developed the service-profit-chain concept to understand how employees and customers interact to create value,.[1][2][3][4]

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References[edit]

  1. ^ Evanschitzky, Heiner and Groening, Christopher and Mittal, Vikas and Wunderlich, Maren, How Employer and Employee Satisfaction Affect Customer Satisfaction: An Application to Franchise Services (December 17, 2011). Journal of Service Research, 14(2), May 2011, 136-148. Available at SSRN: http://ssrn.com/abstract=2339332
  2. ^ Eugene W. Anderson and Vikas Mittal (2000). "Strengthening the Satisfaction-Profit Chain", Journal of Service Research, 3(2), November, 107-120. Available at SSRN: http://ssrn.com/abstract=2345327
  3. ^ Loveman, Gary W. "Employee satisfaction, customer loyalty, and financial performance an empirical examination of the service profit chain in retail banking." Journal of Service Research 1.1 (1998): 18-31.
  4. ^ Blut, Markus and Chowdhry, Nivriti and Mittal, Vikas and Brock, Christian, E-Service Quality: A Meta-Analytic Review (2015). Journal of Retailing, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2630428
  • Levitt, T. (1972) "Production line approach to service", Harvard Business Review, Sept-Oct, 1972, pp. 41–52.
  • Mundie, P. (1987) "Internal marketing: cause for concern", Quarterly Review of Marketing, spring-summer, 1987, pp. 21–24.