When Customers Push Back: The Dangers of Service Divestment and How to Avoid Them

[We’re pleased to welcome authors Christina M. Haenel of the University of Goettingen, Hauke A. Wetzel of Massey University, and Maik Hammerschmidt of the University of Goettingen. They recently published an article in Journal of Service Research entitled “The Perils of Service Contract Divestment: When and Why Customers Seek Revenge and How It Can Be Attenuated,” which is currently free to read for a limited time. Below, they reflect on this research:]

Divesting from unprofitable customers is a widely-established practice in many service industries. Service providers often demote (i.e., they cut back services) or terminate customer service contracts (i.e, they end service provision). The idea is that investing less in unprofitable customer relationships saves costs and enhances firm profitability.

Our recent study forthcoming in Journal of Service Research shows, however, that such practices may severely harm future business. In particular, service contract demotion and termination trigger customer revenge, including aggressive behaviors towards employees, negative word-of-mouth, and third-party complaining for negative publicity.

The good news for service providers who rely on divestment practices is that customer revenge depends on the divestment practice and the targeted customers. Customer revenge is much less likely if customers implicitly agree with the service provider’s initiative. Unsatisfied customers are less likely to become angry and take revenge when their contracts are terminated than when they are demoted. For satisfied customers it is the other way around. Thus, when service providers wish to divest from specific relationships, they should terminate unsatisfied customers’ contracts but they should demote satisfied customers’ contracts.
For many service providers our findings may come as a surprise as terminating service contracts is generally viewed as a last resort. Drawing an analogy to romantic relationships (that many of us may have experienced themselves) helps to understand the findings: It can be very relieving if an unhappy relationship is ended, whereas we prefer to get a second chance if we value a relationship.

Our study offers another counterintuitive finding. Offering financial compensation or an apology turn out to be double-edged swords that can serve to remedy customer revenge after experiencing service divestment—or reinforce it. It is best to offer financial compensation or apology only to “turn around” customers who implicitly disagree with the service provider’s divestment choice and are likely to take revenge (i.e., if satisfied customers’ relationships are terminated or if unsatisfied customers’ relationships are demoted). It does not make a difference whether financial compensation or an apology are offered. This is an interesting finding in itself as offering an apology is a much cheaper option.

Overall, we contend that for service divestment initiatives to minimize customer revenge, the customer’s perspective on the relationship should be accounted for. If the firm’s chosen divestment approach aligns with the customer’s take on the relationship, service providers may well adopt service divestment practices without fueling customer rage.

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An Investigation of Nonbeneficiary Reactions to Discretionary Preferential Treatments

[We’re pleased to welcome authors Kimmy Wa Chan of Hong Kong Baptist University, Chi Kin (Bennett) Yim of the University of Hong Kong, and Taeshik Gong of Hanyang University ERICA. They recently published an article in Journal of Service Research entitled “An Investigation of Nonbeneficiary Reactions to Discretionary Preferential Treatments,” which is currently free to read. Below, they reflect on this research:]

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Some service firms, particularly those in the hospitality industry, have resorted to explore less structured preferential treatments, in addition to traditional loyalty programs. The most famous example being The Ritz-Carlton who gives its staff the discretion to spend up to US$2,000 for offering free treats or room upgrades to selected guests, without any approval from a supervisor. Offering discretionary preferential treatments (DPTs) could be an effective customer relationship management tool because they are not granted based on contractual and publicly stated policies, thus will not become firms’ ongoing obligations. Doing so also stimulates a feeling of being special because it encourages decision flexibility by frontline employees to offer unexpected, surprise benefits, above and beyond the core services. Yet, service managers need to evaluate DPTs on their ability to stimulate positive effects among beneficiaries while still preventing negative reactions of nonbeneficiaries. Particularly, they are advised to apply their understanding of nonbeneficiaries’ psychology when implementing DPTs.

Our study offer some important insights on how nonbeneficiaries react to witnessing DPTs in order to help service companies manage the offering of DPTs effectively. For example, to avoid nonbeneficiaries’ feelings that they are treated badly, employees could help nonbeneficiaries understand why the DPT was granted in order to enhance the perceived deservedness of beneficiaries. This research also suggests that nonbeneficiaries who have strong relationships with the firms might react more negatively to witnessing DPTs that are offered on a one-off basis. We are not asking firms to restrain from strengthening relationships with their customers. Instead, employees may be trained to identify those frequent customers and only offered DPTs when they could be offered on a continuous basis. Moreover, a DPT perceived to have high continuity creates a hopeful pathway for nonbeneficiaries to achieve similar treatments in the future. Firms should make their DPTs available for a longer period or framing them accordingly to induce more hope among nonbeneficiaries. Better yet, firms may help nonbeneficiaries to see not receiving the preferential treatment as a challenge rather than threat. Service firms could also offer multiple and smaller or more accessible goals, e.g., granting DPTs based on a multitude of reasons such as being a regular customer, being nice or polite, etc. Findings from this research emphasize that implementing DPTs requires close monitoring to avoid too much autonomy of the employees in turning DPTs into sweethearting behaviors. Firms still need to provide employees with general guidelines for whom they prefer to target with DPTs. Finally, firms can leverage database technology to provide employees with an easy access to customer information for granting customized DPTs to targeted customers.

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Integrating Experience-Based and Practice-Based Perspectives on Value Co-Creation in Collective Consumption Contexts

[We’re pleased to welcome authors Carol Kelleher of Cork University, Hugh N. Wilson of the University of Warwick, Emma K. Macdonald of the University of Warwick, and Joe Peppard of MIT. They recently published an article in Journal of Service Research entitled “The Score Is Not the Music: Integrating Experience and Practice Perspectives on Value Co-Creation in Collective Consumption Contexts,” which is currently free to read for a limited time. Below, they reflect on this research:]

What motivated you to pursue this research?

Three interrelated and enduring research questions motivated this study as well as my other studies on collective consumption: 1) what is the individual experience of the collective? 2) what is the collective experience of the individual? and 3) how do they impact each other?
In many service settings, such as when attending a live orchestral music performance, the value that a customer derives from the experience depends on their interactions not just with service employees (such as when buying tickets, being ushered to a seat, or when hearing the music played by the musicians) but also from interactions with other customers in the service environment (such as others in the audience who sit together – in silence or not – to enjoy the musicians’ playing). We label these collective consumption contexts. Other examples, which have their own ‘rules of behaviour’, include spectator sports, choral singing, slimming clubs and orienteering, and examples in the online world include multi-player gaming and peer-to-peer IT support.

A key challenge for service managers in these contexts is to understand how customers coordinate with each other, particularly when there is variation in customers’ skill levels. Despite the difficulty, it is ultimately the service provider’s responsibility to ensure that the service experience is optimised for all customers irrespective of individual variation, lest it detract from the value that customers perceive.

What has been the most challenging aspect of conducting your research? Were there any surprising findings?

To address this challenging managerial issue, I conducted a six-month immersive study with the London Symphony Orchestra (LSO), a world leading orchestra, as part of my PhD. At the time, the LSO had a strong understanding of its core customers but did not know why 70% of first-time attendees failed to return. The problem did not appear to be pricing, as discounting a second visit did not improve return rates. Rather, this study’s findings resulted in the recognition that a key problem was how to support social learning.

In what ways is your research innovative, and how do you think it will impact the field?

An overarching implication for service managers is that they need to anticipate potential barriers to value co-creation that can arise from differences in customers’ prior learning. Immersive customer insight is needed to identify whether individual customers are able to learn the accepted ways of behaving, what barriers exist to this social learning, and where more expert customers will be only too happy to help less experienced peers. Service organizations can then design ways to facilitate social learning between novices and experts so as to optimize value for all.

What advice would you give to new scholars and incoming researchers in this particular field of study?

First, study and research what you are passionate about – this will be your energy source. You will always have a smile on your face, continue to be surprised and never be bored.

Second, research and scholarship is a shared social construction within the community of practice of experts and novices to – be generous and give generously. We need to appreciate the opportunity and responsibility to sustain such communities, assist junior or novice scholars and, each in our own way, leverage our shared endeavors to contribute to the greater good.

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How Should Contested Historical Sites be Presented?

[We’re pleased to welcome author Athinodoros Chronis of California State University, Stanislaus. He recently published an article in Journal of Service Research entitled “The Staging of Contested Servicescapes,” which is currently free to read for a limited time. Below, he reflects on the motivations and influences on this research:]

What motivated you to pursue this research?

For many decades, debates in the United States about the removal of the Confederate flag, monuments, and memorials were both reflective of and constantly feeding major divisions among groups with divergent political views. Noticing similar conflicting perspectives during my fieldwork at Gettysburg National Military Park about the “correct” way in which the painful civil war era should be represented and remembered, inspired and motivated my research into the role that service providers should play in staging contested servicescapes.

In what ways is your research innovative, and how do you think it will impact the field?

Marketing researchers and other scholars have identified and reflected upon a large number of service environments where oppositional interpretations become the basis for contestation and, as a result, create a problem for service organizers on the way in which the site should be presented to the public. While the above scholarship identifies the presence of contestation and the struggle among opposing parties, it does not provide a focused theorization on the way in which service providers understand and work out a solution to place contestation. To this end, the present research is innovative by highlighting the politicized nature of certain servicescapes and paying attention to the performative practices of frontline employees as they guide customers through the servicescape and as they stage the place and its representation in a particular way in order to avoid contestation. The major impact of this study is the provision of a framework that can be used by the management of contested servicescapes to analyze the contestation terrain and evade marketplace controversies that can be detrimental to a positive customer experience. It also provides three groups of strategic practices that help to accomplish this goal.

What is the most important/ influential piece of scholarship you’ve read in the last year

There is a body of literature that is very relevant and influential to my current research. This scholarship is couched in humanist perspectives that highlight the politicized character of certain places and see their construction as a struggle among interest groups. Place is considered a social construction and its emergence is seen as a process through which the material environment is invested with a variety of meanings by different groups or individuals. As a result, place identities can be multiple and the dominant character of place is subject to debate and contestation. Within this unstable terrain, a number of scholars have theorized the production of “official stages” by dominant social forces in order to inculcate particular ideological positions and craft their own version of social reality and place identity (Adams et al. 2001; Ateljevic and Doorne 2002; Bender 1993, 2002; Bosco 2004; Bruce and Creighton 2006; Forest et al. 2004; Frost 2007; Gillen 2014; Goulding and Domic 2009; Hale 2001; Jeong and Santos 2004; Kong and Law 2002; Leitner and Kang 1999; Osborne 1998, 2001; Patil 2011; Sarmento 2009; Stokowski 2002; Tilley 2006; Wight 2016; Worden 1996; Yea 2002; Zhang et al. 2015).

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Short- and Long-Term Effects of Nonconsciously Processed Ambient Scents in a Servicescape

[We’re pleased to welcome authors Anna Girard of Ludwig Maximilians University Munich, Marcel Lichters of Otto von Guericke University Magdeburg, Marko Sarstedt of
Otto von Guericke University Magdeburg, and Dipayan Biswas of the University of South Florida. They recently published an article in Journal of Service Research entitled “Short- and Long-Term Effects of Nonconsciously Processed Ambient Scents in a Servicescape: Findings From Two Field Experiments,” which is currently free to read. Below, they reflect on this research:]

Have you ever walked past, or entered, a Victoria’s Secret or an Abercrombie & Fitch store? If so, you might have noticed a distinctive ambient scent. One can speculate that possible goals for having ambient scents might be to create a pleasant atmosphere, improve their customers’ service experience, or simply mask bad smells in their retail stores. Importantly, Victoria’s Secret or Abercrombie & Fitch are not alone in its efforts to leverage ambient scents. With an annual growth rate of 10% and a volume of over USD 200 million in 2017, the market for ambient scents is growing rapidly.

It is therefore not surprising that ambient scents have also received considerable attention in academic research. Prior research in this domain has revealed that pleasant ambient scents have a positive influence on consumers’ perceptions, of for example, the physical servicescape and on their brand evaluations. We extend this research stream and examine whether the positive effects also hold when consumers are repeatedly exposed to ambient scents without being aware of it. And do the positive effects prevail in a service environment, characterized by many different olfactory influences (e.g., malodors) – as it is often the case in real-world service settings? How do consumers react to the discontinuation of a scent campaign?

We quickly realized that answering these research questions is very challenging in a laboratory setting, where consumers (typically students) are exposed to an ambient scent under highly controlled conditions – as commonly done in prior scent research. Evaluating the long-term effects in an olfactory-rich environment requires collaborating with an industry partner who would grant us access to its servicescape over several weeks, ideally months. Finding such a partner was very challenging, but the study’s first author, Anna Girard, managed to convince a regional subsidiary of Germany’s major railway company to support the project as well as to involve a professional fragrance manufacturer who designed two different scents that fit its servicescape. Our first task was to identify the most appropriate scent and the optimal level of intensity, which we did by running a series of pretests. We found that even in the highest intensity levels, most customers did not notice the scent – that is, they processed the scent nonconsciously.

Next, we exposed the customers to the ambient scent diffused via the train’s air conditioning system over a period of four months. Our results not only confirm ambient scent’s positive short-term effect, but show that the use of a nonconsciously processed long-term ambient scent has an enduring, positive impact on consumers’ evaluations of service quality, service experience, and service value. Furthermore, our results indicate that ambient scents’ positive effect on service evaluations persists for at least two weeks after the ambient scent has been withdrawn.

Our research produced some further striking findings, which we couldn’t report in the published paper. Most notably, we also queried consumers’ satisfaction with the service provider and brand attitude and found no notable improvements in these constructs over time. We also ran a series of qualitative interviews with several of the participants. These interviews confirmed that most participants did not notice any special scent and that they were generally in favor of introducing a pleasant ambient scent into the train compartments.

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Balancing Frontliners’ Customer- and Coworker-Directed Behaviors When Serving Business Customers

[We’re pleased to welcome authors Michel van der Borgh of Copenhagen Business School, Ad de Jong of Copenhagen Business School, and Edwin J. Nijssen of Eindhoven University of Technology. They recently published an article in Journal of Service Research entitled “Balancing Frontliners’ Customer- and Coworker-Directed Behaviors When Serving Business Customers,” which is currently free to read for a limited time. Below, they reflect on this research:]

What motivated you to pursue this research?

The motivation for our research emerged from observations that prior literature mainly considered frontline employee (FLE) behaviors in isolation. This stands in sharp contrast with day-to-day practice where FLE’s constantly have to juggle between different tasks for different stakeholders. It is analogous to scholars who constantly have to balance time between research and teaching, among other things. Before this study we did some research on ambidexterity, which focusses more on paradoxical situations where FLE’s seem to be making trade-offs. Although the idea of ambidexterity also fits our research on customer-coworker balance, we felt that the theoretical underpinning was weak. When looking for other theoretical framework we realized that our situation of salespeople trying to balance multiple duties was very similar to something that many people can relate to; work-life balance. Looking into this stream of literature we found some articles pointing to role balance theory, which is rooted in role theory. The ideas of this theoretical framework matched very much with our observations of employees in the frontline. So, our motivation was borne out of personal observations, our knowledge of extant research, and new insights from related fields.

In what ways is your research innovative, and how do you think it will impact the field?

In our study we employ a novel approach to study balance. While previous studies on ambidexterity and work-life balance often used difference scores or multiplicative measures of both roles, we employ surface response modeling to tease out the interrelationship between customer and coworker-directed behaviors on performance. We were inspired by a 2014 study by Mullins et al. in the Journal of Marketing who employed the same analytical approach to investigate salesperson perceptional accuracy of customer relationship quality. All in all, our work demonstrates that the surface response modeling approach using polynomial regression techniques is better in capturing true effects. We urge future research to apply a similar approach.

What did not make it into your published manuscript that you would like to share with us?

In our paper we decided not to explicitly link our research with the research on ambidexterity since it complicated the already complex story. This is a pity as ambidexterity research also would benefit handsomely from applying these more advanced analytical approaches to examine the true effects of, for instance exploration and exploitation on performance outcomes.

How important is it for customers to have a positive experience when dealing with a company? The evidence from all manner of research disciplines (Psychology, Management, and Marketing) and reports from the field by consultants and managers is that this encounter is absolutely critical. In the field of services marketing the place where this encounter happens is called the “organizational frontlines.” The frontlines refers to everything that occurs when the customer is in contact with the company: the people, the technology, the facilities and the processes. Research on organizational frontlines has focused in on the immediate contact of the customer with the company, especially contact with employees who serve them and the technology that serves them. This research reveals that knowledgeable and skilled service employees and technology that is accurate, speedy and easy to use play important roles in meeting customer expectations and producing customer satisfaction and loyalty.

This commentary on a special issue of the Journal of Service Research that was about organizational frontlines asks the following question: What kind of company context produces the employees and the technology that meets customers’ expectations and satisfies them? That is, given the importance of what happens at the frontlines the commentary considers what companies can do to ensure that what happens there is maximally positive. So, what can companies do?

We propose that companies must have the following mind-sets to create a context in which customers’ experience at the frontlines is optimal:

1. They must have a socio-technical systems mind-set. Socio-technical systems understand that there is no such thing as technology that stands alone. A socio-technical mind-set ensures that those who design and implement technology have those who use it (employees) and those who are served by it (customers) as there focus.

2. They must have a service climate mind set. A service climate mind-set is created in companies when HR, Marketing and Operations all work together to ensure that the people, the products/services, and the technology of a company all focus in on producing a positive customer experience. These functions can’t be silos because they all impact customers. These functions work together well when there is an internal service mind-set as well: “We help each other produce for our customers.”

3. They must have a strong service HR systems mind-set. Employees who deal immediately with customers must be only one focus of HR; as noted earlier, a service mind-set is critical also in those who design and implement technology and, we would add, those who design products and services.

4. They must have a multi-level mind-set. Companies must see themselves as containing three important levels: A managerial level, an employee level and a customer level. Thus, companies can’t divorce the customer from the company and executives can’t divorce employees from their strategies. In service organizations these different levels are in continuous interaction—at least in the best such companies.

Our proposal is that, while it is very important to focus on what happens in the immediate encounter at the company frontlines, there must also be focus on the context that produces what happens there. Our commentary addresses critical elements of that context and the mind-sets management must have if they wish to deliver excellent service.

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What Kind of Mindset Must Companies have to Create Great Customer Service?

[We’re pleased to welcome authors Benjamin Schneider of the University of Maryland and David E. Bowen of the Thunderbird School of Global Management . They recently published an article in Journal of Service Research entitled “Perspectives on the Organizational Context of Frontlines: A Commentary,” which is currently free to read for a limited time. Below, they reflect on this research:]

How important is it for customers to have a positive experience when dealing with a company? The evidence from all manner of research disciplines (Psychology, Management, and Marketing) and reports from the field by consultants and managers is that this encounter is absolutely critical. In the field of services marketing the place where this encounter happens is called the “organizational frontlines.” The frontlines refers to everything that occurs when the customer is in contact with the company: the people, the technology, the facilities and the processes. Research on organizational frontlines has focused in on the immediate contact of the customer with the company, especially contact with employees who serve them and the technology that serves them. This research reveals that knowledgeable and skilled service employees and technology that is accurate, speedy and easy to use play important roles in meeting customer expectations and producing customer satisfaction and loyalty.

This commentary on a special issue of the Journal of Service Research that was about organizational frontlines asks the following question: What kind of company context produces the employees and the technology that meets customers’ expectations and satisfies them? That is, given the importance of what happens at the frontlines the commentary considers what companies can do to ensure that what happens there is maximally positive. So, what can companies do?

We propose that companies must have the following mind-sets to create a context in which customers’ experience at the frontlines is optimal:

1. They must have a socio-technical systems mind-set. Socio-technical systems understand that there is no such thing as technology that stands alone. A socio-technical mind-set ensures that those who design and implement technology have those who use it (employees) and those who are served by it (customers) as there focus.

2. They must have a service climate mind set. A service climate mind-set is created in companies when HR, Marketing and Operations all work together to ensure that the people, the products/services, and the technology of a company all focus in on producing a positive customer experience. These functions can’t be silos because they all impact customers. These functions work together well when there is an internal service mind-set as well: “We help each other produce for our customers.”

3. They must have a strong service HR systems mind-set. Employees who deal immediately with customers must be only one focus of HR; as noted earlier, a service mind-set is critical also in those who design and implement technology and, we would add, those who design products and services.

4. They must have a multi-level mind-set. Companies must see themselves as containing three important levels: A managerial level, an employee level and a customer level. Thus, companies can’t divorce the customer from the company and executives can’t divorce employees from their strategies. In service organizations these different levels are in continuous interaction—at least in the best such companies.

Our proposal is that, while it is very important to focus on what happens in the immediate encounter at the company frontlines, there must also be focus on the context that produces what happens there. Our commentary addresses critical elements of that context and the mind-sets management must have if they wish to deliver excellent service.

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