Service production in high captivity service firms

Abstract

Service firms need to handle customer-induced uncertainty during service production. The literature argues for several mechanisms that organizations utilize to handle customer-induced uncertainty in service production. Specifically, the literature argues that involving customers as coproducers, or quasi-employees, in the production system could decrease such uncertainty. This reduction in turn decreases the need for a complex production system and high levels of human capital. Moreover, research suggests service production complexity and human capital to be interchangeable mechanisms in handling customer-induced uncertainty. In contrast to these past findings, we argue that such relationships might not hold in service firms exhibiting high captivity; firms where the customer has difficulty exiting the system once service delivery begins. Our empirical analysis provides support to our arguments leading us to identify an important boundary condition to existing theory regarding service production mechanisms.

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Correspondence to Erim Ergene.

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Appendix—Survey items

Appendix—Survey items

For the following items, the survey asked respondents to determine how accurately the statements described their operations on a 7-point Likert scale from “Not Accurately” to “Very Accurately”.

Performance

How do you rate your hotel’s performance on the following dimensions relative to your direct competitors in the area over the past two years?

  1. 1.

    Operating efficiency

  2. 2.

    Service quality

  3. 3.

    Customer satisfaction

Human capital

Relative to our direct competitors, our hotel:

  1. 1.

    Hires employees with high levels of prior experience

  2. 2.

    Hires employees with high levels of prior training

  3. 3.

    Hires employees with high levels of education

Service production complexity

The way our hotel produces its overall service offering:

  1. 1.

    Requires a large number of different processes to be performed during production

  2. 2.

    Requires high levels of dependency among processes

  3. 3.

    Requires coordination across our entire organization

Customer coproduction

Relative to our direct competitors, our hotel:

  1. 1.

    Requires customers to perform functions similar to that of an employee

  2. 2.

    Requires customers to become heavily involved in producing the service offering

Service customization

Relative to our direct competitors, our hotel:

  1. 1.

    Changes/adapts how our service is offered for each customer

  2. 2.

    Allows our customers to dictate how the service is offered

Service focus

Relative to our direct competitors, our hotel offers:

  1. 1.

    A service that focuses on a specific niche in the industry (e.g., wild adventure resort, game resort)

  2. 2.

    A service that focuses on a specific type of customer (e.g., third age customers)

Customer interaction

Relative to our direct competitors, our hotel employees:

  1. 1.

    Try to communicate with customers about customer’s personal issues

  2. 2.

    Use body and voice language to communicate with the customers

  3. 3.

    Develop more mutual confiding with the customers

  4. 4.

    Develop more trust with customers

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Ergene, E., Skaggs, B. & Echeveste, I. Service production in high captivity service firms. Serv Bus 15, 19–43 (2021). https://doi.org/10.1007/s11628-020-00431-8

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Keywords

  • High captivity service firms
  • Customer coproduction
  • Service production complexity
  • Human capital