serma finals c10 and c11

chap 10 and 11

4 main purposes of service environments

1. shape the customer’s service experience and behaviors

2. Signal quality, position, differentiate, and strengthen the brand

3. Core component of the value proposition

4. Facilitate the service encounter and enhance productivity

3 Theories from environmental psychology (SOR Model)

1. Stimulus

2. Organism

3. Response

3 Valence and Intensity Model of affect

1. Pleasure / Valence (subjective)

2. Arousal / Intensity (Information rate)

3. Interaction between pleasure & arousal

Shape the Customer's Service Experience and Behaviors

The physical and sensory environment influences how customers feel and act.

Example: A calm, well-lit spa encourages relaxation; a vibrant café encourages social interaction.

Signal Quality, Position, Differentiate, and Strengthen the Brand

The design, décor, and ambiance communicate the brand’s identity and market positioning.

Example: Luxury hotel lobby signals high quality; minimalist tech store signals innovation.

Core Component of the Value Proposition

The environment is part of what customers are paying for - not just the service itself.

Example: Fine dining includes atmosphere, not just food; theme parks include immersive settings.

Facilitate the Service Encounter and Enhance Productivity

Well-designed environments make service delivery easier and more efficient for staff.

Example: Clear signage in airports improves customer flow; ergonomic workstations improve staff speed.

The Stimulus Organism Response (SOR) Model

explains how service environments (stimuli) affect customers’ internal states (organism), which in turn drive their behavioral responses.

Stimulus (s)

The servicescape: physical surroundings, design, lighting, colors, sounds, smells, layout, temperature, signage, etc. These environmental cues act as stimuli that customers notice and interpret.

Example: A luxury hotel lobby with soft lighting, elegant décor, and calm music signals comfort and prestige.

Organism (O)

The customer’s internal state - perceptions, emotions, and cognitive interpretations. Environmental cues trigger feelings such as relaxation, excitement, stress, or trust.

Example: The same hotel lobby may make guests feel relaxed, welcome, and confident in the brand’s quality.

Response (R)

The customer’s behavioral reaction to the environment. Can be approach behaviors (lingering, buying, returning) or avoidance behaviors (leaving quickly, not engaging).

Example: A relaxed guest spends more time in the lobby café, books spa services, and recommends the hotel.

Valence and Intensity Model of Affect

this model explains customer emotions using two dimensions

Pleasure (valence)

how pleasant or unpleasant the experience feels

Emotional value: positive vs. negative feelings toward the environment. Highly subjective - depends on personal preferences, past experiences, cultural background.

Example: A cozy coffee shop may feel pleasant to one person but dull to another.

Arousal (intensity)

the level of stimulation or excitement the environment creates

Emotional energy level - how stimulating or calming the environment is.

Largely influenced by information rate: the amount and pace of sensory input (sounds, visuals, activity).

Example: A busy open-market has high arousal; a quiet library has low arousal.

high pleasure + high arousal

excitement, engagement, longer stays

high displeasure + high arousal

stress, frustration, quick exit

high + high

energetic employment (theme park)

high + low

relaxed satisfaction (spa)

low + high

agitated avoidance (crowded noisy store)

low + low

boredom, disengagement (empty waiting room)

servicescape model

explains how the physical environment of a service business influences the internal responses of customers and employees, which then drive behavioral outcomes.

4 servicescape model

1. internal responses

2. key dimension of service environments

3. response moderatiors

4. behavioral responses

3 Internal responses

1. Cognitive

2. Emotional

3. Physiological

cognitive

beliefs, perceptions, interpretations

example: This store feels high-end” or “It’s too crowded.”

emotional

moods, attitudes, feelings

example: feeling relaxed in a spa or stressed in a noisy cafe

physiological

bodily comfort or discomfort

example: feeling too hot, cold, cramped, or in pain

4 key dimensions of service environments

1. ambient conditions

2. spatial layout & functionality

3. signs, symbols, and artifacts

4. appearance of service employee and other customers

ambient conditions

background characteristics like music, scents, lighting, temperature, color schemes.

spatial layout and functionality

floor plan, furniture arrangement, space for movement, equipment placement.

signs, symbols, and artifacts

décor, signage, artwork, branding elements.

Appearance of Service Employees & Other Customers

uniforms, grooming, behavior, crowd composition.

2 response moderators

1. customers

2. employees

customers

personal preferences, tolerance for noise/crowding, cultural background, liking of the servicescape.

employees

similar moderators, plus work-related comfort and efficiency

3 behavioral responses

1. approach behaviors

2. avoidance behaviors

3. interaction effects

approach behaviors

exploring, spending time, making purchases, engaging with staff.

avoidance behaviors

leaving quickly, reducing interaction, avoiding certain areas.

interaction effects

how customers and employees engage with each other within the environment.

3 design of effective service environments

1. design with a holistic view

2. design from the customer’s perspective

3. use design tools

design with a holistic view

Consider all elements of the servicescape together, ambient conditions, layout, signage, employee appearance, and customer flow. Aim for consistency so every detail reinforces the brand identity.

Example: A luxury hotel’s lighting, scent, music, uniforms, and décor all align with its premium positioning.

design from the customer’s perspective

Step into the customer’s shoes - map the customer journey from entry to exit. Identify pain points (confusing signage, bottlenecks, poor lighting) and delight points (welcoming staff, intuitive layouts).

Example: A coffee shop designs seating and counter space based on how customers order, wait, and enjoy their drinks.

4 use design tools

1. keen observation

2. customer feedback

3. photo audits

4. field experiments

keen observation

watch how customers interact with the space

customer feedback

surveys, comment cards, interviews

photo audits

take photos to analyze visual impact and identify clutter or inconsistencies.

field experiments

test changes (lighting, music, layout) to measure effects on behavior and sales.

6 reasons why Frontline Employees Are Important

1. Core Part of the Service Product

2. The Service Firm in the Eyes of the Customer

3. Core Part of the Brand - Deliver the Brand Promise

4. Sell, Cross-Sell, and Up-Sell

5. Key Driver of Customer Loyalty

6. Determine Productivity

Core Part of the Service Product

In many services, the employee is the product - their actions directly shape service quality.

Example: A waiter’s attentiveness is part of the dining experience.

The Service Firm in the Eyes of the Customer

Customers often judge the entire company based on their interaction with one frontline employee.

Example: A friendly call center agent can make a customer feel valued by the brand.

Core Part of the Brand - Deliver the Brand Promise

Employees embody the brand values and bring the brand promise to life.

Example: Ritz-Carlton staff deliver personalized luxury service.

Sell, Cross-Sell, and Up-Sell

Frontline staff influence sales by suggesting additional products or services.

Example: Hotel staff offering spa packages during check- in.

Key Driver of Customer Loyalty

Positive relationships with employees encourage repeat business and referrals.

Example: Regular customers returning to a store because of a trusted sales associate.

Determine Productivity

How efficiently employees work impacts service speed, accuracy, and overall output.

Example: Efficient baristas reduce wait times and serve more customers.

3 HR in Service Firms is Challenging Frontline Work is Difficult and Stressful

1. boundary spanning positions

2. conflicting roles + role stress

3. emotional labor

boundary spanning positions

Roles that connect the inside of the organization (processes, policies) to the outside world (customers).

Example: Hotel receptionist - represents the brand to guests and communicates guest needs internally.

Frontline employees often face three main types of role conflict:

1. organization/client conflict

2. person/role conflict

3. inter-client conflict

organization/client conflict

Balancing company rules & efficiency with customer satisfaction.

Example: Enforcing no-refund policy vs. pleasing an unhappy customer.

person/role conflict

Job requirements clash with personal values or personality.

Example: Having to be cheerful with rude customers.

inter-client conflict

Managing conflicts between customers.

Example: Handling noise complaints in a shared space.

emotional labor

Managing emotions to meet job expectations, often hiding true feelings. Employees must display positive emotions authentically even under stress.

Example: Flight attendants staying calm and friendly during delays.

basic models of HR in service firms

refers to three common approaches that service organizations use to manage their human resources - each with very different outcomes for employees, customers, and profitability.

3 Basic Models of HR in Service Firms

1. cycle of failure

2. cycle of mediocrity

3. cycle of success

cycle of failure

Characteristics: Low pay, minimal investment in training & development. High employee turnover.

Impact: Poor service quality > customer dissatisfaction. Customers defect to competitors. Low profit margins.

Example: Fast-food outlet with constant staff changes and inconsistent service.

cycle of mediocrity

Characteristics: Common in large bureaucracies or monopolies. Job security, but little variety or scope for initiative. Rigid rules and procedures.

Impact: No strong incentives to serve customers well. Customers tolerate average service because alternatives are limited.

Example: Utility company with slow, rule-bound customer service.

cycle of success

Characteristics: Heavy investment in recruitment, training, and motivation. Empowered, engaged, and productive employees.

Impact: High service quality > satisfied, loyal customers. Improved profit margins and competitive advantage.

Example: Premium hotel chain with long-tenured, well-trained staff.

the service talent cycle

is about hiring, enabling, empowering, and organizing the frontline so they can deliver service excellence, productivity, and customer loyalty.

3 how to get HR right

1. hire the right people

2. enable the frontline

3. empower the frontline

hire the right people

Be the Preferred Employer - build a strong employer brand to compete for top talent. Rigorous Selection Process: Filter out unsuitable candidates. Multiple structured interviews. Personality tests for service fit. Observe behavior in real or simulated situations. Give realistic job previews so candidates know what to expect.

Example: Southwest Airlines hires for attitude and cultural fit before skills.

enable the frontline

Training & Development:

1. Teach organizational culture, purpose, and strategy.

2. Build interpersonal skills (communication, empathy) and technical skills (processes, tools).

3. Deep product/service knowledge.

4. Reinforce training to shape consistent behaviors.

5. Use internal communications to keep service values alive.

6. Professionalize the frontline so they see their role as skilled and important. Example: Ritz-Carlton9s Gold Standards embedded in daily briefings.

empower the frontline

Give employees discretion to solve problems and customize service. Match level of empowerment to business model and customer needs.

Empowerment requires: Information about performance. Knowledge to contribute effectively. Decision-making power at the right level. Performance-based rewards.

Example: Nordstrom’s one rule - “Use good judgment in all situations.”

3 motivate the frontline

1. energize and motivate with a full set of rewards

2. types of rewards

3. why it matters

energize and motivate with a full set of rewards

Use a mix of tangible and intangible rewards to keep employees engaged and performing at their best. Go beyond just salary - focus on holistic motivation.

types of rewards

1. pay

2. performance bonuses

3. satisfying job content

4. feedback and recognition

5. goal accomplishment

pay

Fair and competitive base salary. Signals value and respect for employees’ contribution.

performance bonuses

Incentives tied to measurable achievements. Encourages ongoing high performance.

satisfying job content

Variety, autonomy, and meaningful tasks. Roles that make employees feel their work matters.

feedback and recognition

Regular, positive acknowledgment from managers, peers, and customers. Public recognition programs (e.g., Employee of the Month).

goal accomplishment

Clear, challenging, and achievable goals. Meeting goals provides a sense of pride and achievement.

why it matters

Motivated employees deliver better service quality, higher productivity, and stronger customer loyalty. Positive emotions are contagious - engaged staff create engaged customers.

service excellence, climate, leadership

"______ _______ starts with culture - the shared values that drive behavior. _______ makes those values tangible through policies and rewards. ______ ensures both stay focused on the frontline, where customer relationships are built."

service culture

Definition: Shared perceptions of what is important in the organization, and shared values/beliefs about why those things matter.

Purpose: Creates a consistent mindset across all employees about delivering service excellence.

Example: Zappos’ 10 Core Values e.g., “Deliver WOW Through Service” and “Build a Positive Team and Family Spirit”

climate for service

Organizational culture made tangible - it’s how the company’s values and priorities are translated into actual policies, practices, and procedures that employees can see, feel, and experience every day.

Key Point: It’s the shared perception of which behaviors get supported and rewarded.

Example: A company that publicly recognizes employees who go above and beyond for customers reinforces a climate of service.

leadership

Qualities of Effective Leaders: Clear focus on the frontline - understanding challenges and opportunities where service happens. Role modeling desired behaviors (“walk the talk”).

Strong communication skills - making service goals clear and inspiring. Empowering employees to make decisions in the customer’s best interest.

Example: Herb Kelleher (Southwest Airlines) - known for working alongside frontline staff to understand their needs.