The Customer's Relative Importance in the Design, Development and Implementation of New Services: an Empirical Investigation



Citation:

Frederic Jallat, Bernard Pras, and Christian Dussart (1993) ,"The Customer's Relative Importance in the Design, Development and Implementation of New Services: an Empirical Investigation", in E - European Advances in Consumer Research Volume 1, eds. W. Fred Van Raaij and Gary J. Bamossy, Provo, UT : Association for Consumer Research, Pages: 352-359.

European Advances in Consumer Research Volume 1, 1993      Pages 352-359

THE CUSTOMER'S RELATIVE IMPORTANCE IN THE DESIGN, DEVELOPMENT AND IMPLEMENTATION OF NEW SERVICES: AN EMPIRICAL INVESTIGATION

Frederic Jallat, Paris Graduate School of Management, France

Bernard Pras, University Paris-Dauphine, France

Christian Dussart, Paris Graduate School of Management, France

The purpose of this research is to study the customer's relative impact on innovation performance within the service sector. In fact, previous research has focused mainly and almost exclusively on the role and the importance of contact personnel and service organization. The customer's impact has been approached only in an incidental way. In a sample of 52 French service organizations taken from four major industries (hotel and restaurant trades, retail credit cards and life insurance), a non-parametric analysis of results shows that the customer is the main source of positive impact on the performance of new services. On the other hand, the impact of both contact personnel and managerial operations varies from one industry to another.

INTRODUCTION

Research work on the subject of innovation, specifically in the service sector, has always shown interest in the important role played by the three key roles in a dynamic functional model of service companies, i.e. the customer, contact personnel and general management (Bateson 1989).

However, we have been compelled to realize that one of these specific key roles, in this case the customer, has only been incidentally touched upon. Only one research project mentioning the extent of customer involvement in the development process of providing innovation in the services offered to individuals, concludes with the absolute necessity to incorporate customer reactions and criticisms in order to develop better functioning services (Bowers 1987).

And yet the necessity for direct and positive contact between the service company and its customer during "servuction" i.e. production of service, is one of the characteristics most commonly mentioned by researchers (Zeithaml 1981; Lovelock 1984; Eiglier and Langeard 1987). In fact, for many authors, innovation in services should be as much "social" as "technological" (Crosier et al 1982; Langeard et al 1986).

The objective of this study therefore is to partly fill this gap by presenting a comparative analysis of the customer's relative impact against that of the other two key roles, and likely to affect the performance of new services provided by different tertiary industries.

REVIEW OF PUBLICATIONS

The involvement of contact personnel in the conception, development and implementation phases of new services is particularly important for at least two reasons (Schneider 1980; Schneider and Bowen 1984).

- Employees, because they are, physically as well as psychologically, close to the customer, are in a good position to assess their requirements. They are able to guide managerial policy in relation to the kind of new service to be offered, to procedures for facilitating the delivery of these services, and to the speed at which these innovations should be introduced on their respective markets.

- The new service, in order to be developed, must be accepted by contact personnel.

From this dual viewpoint, one idea appears fundamental - that of internal marketing (Gronroos 1981, 1983, 1985; Berry 1983; Lovelock 1984a) which consists of considering employees as company customers and their trades as internal products, with the aim of giving satisfaction internally in order to succeed better externally (Lovelock 1984b).

Applied to the field of innovation, this philosophy indicates that successful tertiary companies are those which commence by selling their new services to their employees so that the latter are more motivated and efficient in selling, in their turn, to the final customers (Schneider and Bowen 1984).

For others (Donnelly et al 1985), performance peculiar to service activities is often labour intense, which means that the abilities of contact personnel actually constitute the "output" bought by the customer. This is essential, bearing in mind the principle according to which the customer will assess the service supplied as a function of the way in which it is delivered (Booms and Bitner 1981; Zeithaml et al 1988).

In addition, taking the customer into account, which is the core concept of marketing, becomes even more important when his or her satisfaction depends not only on the organization and service implementation methods used by the company, but also on his or her participation at the centre of the process (Schmalensee et 1985; Bowers 1987; Joseph and Everett 1989).

Among the success factors of a new service to individuals (Heany and Vinson 1984), two appear to be particularly important and refer directly to the present research subject. These are (1) interest in and consideration of wishes expressed by the customer, shown by the provider of a service and (2) management of talents inside the company.

The last statement emphasizes the need for a dynamic and for a triangular dialogue between management, contact personnel and the customer, so as to encourage continual suggestions from all, the adoption of novel ideas within the service company and improvements which could be made at a later date.

Innovation management is therefore also closely linked to the problem of service company structure (Booms and Bitner 1981; Kiechel 1985; Parry 1986a, 1986b). If structures do not facilitate an upflow of information, by the management practice commonly called "bottom-up", then this explains why the majority of large tertiary companies prefer to acquire entrepreneurial innovation externally rather than develop managerial innovation internally (Langeard et al 1986; Jallat and Lacoste 1990).

This is why the development of new services necessitates a participative process, integrating within the organizational structure the simultaneous participation of the customer and the contact personnel, both during the first creative and conceptual phases and also during implementation of the innovation (George and Marshall 1984). It is in this sense that Baudry (1986) asserts that each of the three poles constrains and valorizes the other two, thus regulating the performance.

To summarize the above, it is therefore the customer as such who is the point of departure and of arrival for the spread of innovation in the service field, while contact personnel play the role of drive belt and the company structure should become the central unit encouraging and fully developing transactions between the different parts, including itself.

RESEARCH HYPOTHESES

Reviewing the publications we have listed above, emphasizing the indivisibility of the three key roles in servuction and the preponderance of the customer's role, we now propose to test the following hypotheses:

H1 The forms of involvement of the major key roles in servuction exert direct and synergistic impact on the performance of a new service.

This first global hypothesis implies the study and verification of a series of secondary hypotheses as follows:

H1.1 Whatever the tertiary sector under consideration, the more customer involvement in the development process of an innovation, the better the performance of the new service.

H1.2 Whatever the tertiary sector under consideration, the more contact personnel involvement in many of the stages of the innovation process, the better the performance of the new service.

H1.3 Whatever the tertiary sector under consideration, the more general management involvement in the development of an innovation, the better the performance of the new service.

But also:

H2 Whatever the tertiary sector under consideration, the customer, as basic component of the servuction model, should exert the greatest relative impact on the final performance of the new service.

RESEARCH METHODOLOGY

Approach

We undertook causal research by personal interviews, taking data from a sample of 52 French tertiary companies spread over four important activity sectors, as follows:

- "one star" hotels: 15 interviews

- speciality restaurants: 12 interviews

- retail credit cards: 12 interviews

- capital life insurance: 13 interviews

The people interviewed were either marketing or general managers. A semi-directed interview guide was drawn up and pre-tested with five managers, in order to fully benefit from the advantages of personal interviews (Green and Tull 1974).

Sampling

As the very general aim of the research was to analyze causes of performance variation in new services, it was necessary to undertake an inter-sectorial analysis. We therefore selected four sectors which differed greatly in services delivered and which were, from the start, potentially representative of the idea of innovation in the tertiary sector.

Within each chosen sector, businesses were selected in a non-random manner, as a function of the following criteria:

1. The possibility of defining precisely the activity sector being studied.

Lack of precise definition in a field could have caused serious problems, not only qualitative (competitive analysis, sector development, etc.) but also quantitative (performance comparison, sectorial averages, etc.)

2. The sector's innovative character and therefore its "maturity" with respect to innovation.

We selected sectors where there was no doubt about their innovative character and which were therefore apt for dynamic analysis of performance. It was essential that the innovation be not too recent, without however having existed for more than five years.

3. The number of businesses in each sector.

The "index of sectorial concentration" is the decisive factor for effecting intra-sectorial analyses, in addition to inter-sectorial comparisons and global studies of the total sample. It was therefore necessary to select activity fields where the number of innovative competitors was sufficient at least to allow non-parametric statistical analysis.

It should be noted here that, for three of the selected sectors (hotels, life assurance, and, to a lesser degree, retail credit cards), it was possible to perform an all but exhaustive analysis of the businesses involved on a national scale. The sector valency for commercial speciality restaurants does not allow such a census.

4. Differences in business practices

As the subject of research concerned management of innovation, it was important to select sectors that were rich in innovative businesses but equally varied with regard to management methods and the strategic policies of the constituent companies.

5. Availability and accessibility of information on the sector

In order to have access to data, it was necessary to select sectors that were sufficiently "open" with regard to information made available.

Definition and operationalization of variables

Dependent variable

The performance of the new service is measured, over the first financial year, by using financial data collected from businesses and the relevant commercial court registers.

Three indicators, in the form of dependent variables, were thus selected:

V1 Growth rate of business turnover

Overall data were only available for the period 1989-1990, thus restricting dynamic analysis of the sectors selected. Nevertheless, apart from insurance, the development shown can be carried over the two preceding financial years. In fact, the classification obtained by businesses based on this criterion remains valid over previous years, bearing in mind the relative "youth" of the services studied.

V2 Company market share

This variable is, in reality, a measure of the volume achieved by each competitor in the sector, with reference to the total volume of all the businesses studied in this sector:

- For the integrated hotel trade, the volume is expressed in number of rooms per chain;

- For the speciality restaurant trade, volume is expressed in number of covers/day per company;

- For distribution, the volume is expressed in number of cards marketed per shop group;

- For the life insurance sector, volume is expressed in number of policies signed per company.

V3 Net results of the company

This indicator, whenever possible, was obtained from the relevant commercial court registers. Nevertheless, all insurance companies and the majority of financial organizations do not publish their accounting records. We were therefore obliged to use data supplied by the managers interviewed or by professional sources, which were not always totally accurate. Estimates made could consequently affect the tests carried out but the level of ordinal measure, on which these tests are based, limits analytical weaknesses.

Independent Variables

Four self-explanatory variables have been selected:

V4 The number of stages during which the customer was involved

The aim of this variable is to assess, for each of the new services under study, the possible involvement of the customer in each of the nine stages of an innovation development process (see Booz et al 1981): idea generating , filtering, testing of concept, commercial assessment, conception of the service, testing of service, testing of other elements in mix, market testing and, finally, marketing.

It should be specified here that customer involvement at any specific stage is taken into consideration, no matter what method of consultation is used (participation in a creativity meeting at the idea generating level, measuring perceptions or intentions at idea filtering level, direct market research at business analysis level, etc.)

Consequently, the variable V4 may follow a scale from 0 (no customer involvement) to 9 (customer involvement at every process stage).

V5 The number of stages during which contact personnel are involved

In parallel, the aim of the this variable is to assess, for each of the new services under study, the possible involvement of contact personnel at each of the nine process stages.

Here again, all levels of personnel involvement in the process is taken into consideration ("up-flow" of information, participation in creativity groups, implementation of quality circles, etc.)

Consequently, the V5 variable may follow a scale from 0 (no contact personnel involvement) to 9 (contact personnel involvement at each process stage).

V6 General management involvement level

It should be noted here that a wide sense of the word involvement is inferred. Many aspects have thus been defined after analysis of publications:

- Establishment of a structure responsible for innovation;

- Definition and choice of objectives affecting the innovation;

- Administration, follow-up and support systems for those responsible (absence of formal controls, policy of internal promotion of project leaders, career management, support at higher hierarchical levels, etc.)

- Allocation of specific budgets;

- Creation of team training policies;

- Implementation of internal communication tools;

- Regular meetings to assess the development process;

- Other methods of involvement

In this way, the V6 variable may follow a scale from 0 (no general management involvement within the business) to 8 (strong level of involvement).

V7 = V4 + V5 + V6: Global involvement of key parties to the process

As a consequence, the V7 variable may follow a scale of 0 (no involvement within the process) to 26 (high involvement of each of the key parties)

Table 1 resumes and presents in synthetic form the nature and characteristics of criteria selected to measure the variables.

Analysis Program

Non-parametric statistical methods were applied to data collected so as to emphasize relevant relationships within the four activity sectors described above: even if these were little used in similar problematics (Capon et al 1990), these methods have been proved to be well-adapted to the characteristics of the current research.

Since the analyses are effected on four small-sized samples (less than 30 observations per sector), parametric tests necessitate, as a general rule, the observation of certain hypotheses (normal distribution, similarity of variances, etc.) and even more so where manpower is low. In these cases, hypotheses become extremely difficult and sometimes impossible to check (Schwartz 1986).

Contrary to the foregoing, non-parametric tests offer the considerable advantage of making no hypothesis on distribution while preserving, in most cases, a capacity which is comparable to that of classic tests. What is more, these can also be applied to nominal and ordinal data.

TABLE 1

NATURE AND CHARACTERISTICS OF SELECTED MEASURING CRITERIA

TABLE 2

ANALYSIS PROGRAM

Bearing in mind the respective nature of the variables in Table 1, Spearman's coefficient of rank correlation was selected in order to test out the hypotheses. We used the SPSS system and some remarks have shown themselves indispensable for utilization of the results obtained:

1. The programme carries out automatically any adjustments made necessary by tied results, on exact measures (read in the table), , whatever the method used.

2. The level of significance supplied by the programme is based on a unilateral test for the Spearman coefficient. The corresponding confidence thresh-hold is therefore 0.10.

To conclude, Table 2 shows the analysis program, hypothesis by hypothesis, resuming the variable reference system as previously shown.

RESULTS OF THE STUDY

Having identified through analysis of publications the three principal types of involvement with the development process, we have chosen to aggregate the modes of involvement by not giving priority to any one of the actors over the others: the part played by each of the three key roles seems of equal importance, from a marketing viewpoint.

We will therefore examine, through the three secondary hypotheses, the influence of modes of involvement specific to each of the selected actors on the business performance supplying services to individuals.

H1 Modes of involvement of key roles within the process have a favourable impact on performance of the new service.

Table 3 indicates, for each of the sectors studied, Spearman's coefficient of rank correlation and the significance thresh-hold of selected associations.

If this hypothesis is by and large confirmed within the integrated hotel trade and retail credit cards, this is not the case for speciality restaurants, whatever measure is selected, nor for capital life assurance, for the growth rate criterion.

The capital life insurance sector, which has reached relative maturity, showed significant development which was due to transfer rather than creation of savings.

Shares of this "enlarged" market were rapidly taken up either by new entries or by existing competitors. Consequently the reference year does not weight this criterion to the extent that market leaders, having already acquired a mostly dominant position, today have more difficulty in doubling a high turnover while successive followers, of much smaller size, can easily obtain a high growth rate.

TABLE 3

ASSOCIATION BETWEEN AGGREGATE MODALITIES OF INVOLVEMENT AND PERFORMANCE OF THE NEW SERVICE

TABLE 4

ASSOCIATION BETWEEN CUSTOMER AND PERFORMANCE OF THE NEW SERVICE

Intra-sectorial characteristics therefore lean towards overall generalization of major public service activities and the impact of modes of involvement vary, globally, in relation to the activity under study.

It is therefore useful to dissociate the respective influences of each of the key roles in the success of the innovation and to examine the thresh-holds obtained by each sector in isolation (George and Barksdale 1974).

H1.1 Whatever the tertiary sector under consideration, the more customer involvement in the development process, the better the performance of the new service.

Analogically with the above table, Table 4 indicates, for each of the sectors under study, Spearman's coefficient of rank correlation and the thresh-hold of significance of the selected associations.

The ability of a service company to satisfy the expectations and needs of customers is, as already stated above, at the very roots of the concept of marketing. It is therefore perfectly normal to think that the customer's participation in the process is both beneficial and profitable for the business (Bitner et al 1985; Schmalensee et al 1985; Benson and Booms 1989).

Existing associations between the number of times customers are involved within a process, whatever the moment or nature, and the previously selected performance criteria have been studied.

This approach, which is basically numerical, of the extent the customer is taken into consideration in the development of new service activities, can be justified by the fact that the question has been broached more qualitatively during a previous research project.

As regards the growth rate, the hypothesis is confirmed, apart from life assurance: the criterion is again revealed as of little relevance for the field of activity.

Apart from this exception, the hypothesis is valid for all the activities studied. Thus, as a general rule, customer involvement in the development process has a favourable impact on the performance of new service activities to individuals.

H1.2 Whatever the tertiary sector under consideration, the more contact personnel involvement at a large number of stages in the innovation process, the better the performance of the new service.

Analogically with the preceding hypothesis and based on several working papers (Schneider 1980; Schneider and Bowen 1984), it can be assumed think that personnel involvement within the process can have a favourable impact on the performance of new services.

It can be seen that if the three sectors, hotel trade, speciality restaurants and capital life assurance, show the same profile and consequently lead to identical conclusions to those in the hypothesis concerning the customer, the case of retail credit cards is different: the hypothesis is, in fact, not always confirmed in this sector.

It will be remembered that the arrival of cash dispensers in the field of financial services, whatever the nature, represents in reality a new trade for these businesses: it is therefore relatively logical to remark that, bearing in mind a flagrant lack of experience in the field, little call is made on an organization's internal competences, whatever the hierarchical level considered, and that calling in outside competences seems to be the privilege of innovation management in this sector of activity.

TABLE 5

ASSOCIATION BETWEEN CONTACT PERSONNEL AND PERFORMANCE OF THE NEW SERVICE

TABLE 6

ASSOCIATION BETWEEN GENERAL MANAGEMENT INVOLVEMENT AND PERFORMANCE OF THE NEW SERVICE

In conclusion, characteristics pertaining to this sector show a global logic: the impact of personnel involvement on the performance of new service activities varies in relation to the field of study.

H1.3 Whatever the tertiary sector under consideration, the more general management involvement in the development of an innovation, the better the performance of the new service.

Table 6 shows the Spearman coefficients together with the thresh-holds obtained for the test of hypothesis H1.3.

Associations existing between the level of general management involvement within the process and performance criteria have been measured. The significance thresh-holds obtained, whatever the performance criterion selected, lead to non-rejection of the hypothesis "nil" in the hotel or restaurant trades. This statement can easily be explained by the fact that, in both sectors, group general management often delegates responsibility for the project to a branch or specific works committee, while, to the contrary, some smaller structures force general management into total involvement in the implementation and development of the new activity, without achieving exceptional performances.

However, in the distribution and insurance sectors, organizations were much more homogeneous, and associations could be seen between general management involvement and the success of the new service. Characteristics pertaining to this sector have, once again, a bearing on an overall logic. In this way, the impact of the degree of involvement of general management on the performance of new service activities to individuals, varies as a function of the activity sector being studied.

H2 Whatever the tertiary sector under consideration, the customer, as basic component of the servuction model, should exert the strongest relative impact on the final performance of the new service.

If the strength of the relationship between each of the key roles taken separately is compared with the performance of the new service (refer back to Tables 3, 4, 5 and 6), it will be seen that, for all significant associations, the customer's relative impact, with reference to the two other key roles, is always greater, except in the case of the impact on the results in the retail trade sector (.835 against .866). It is therefore the customer as such who should be privileged in the innovation process in the field of services to individuals.

CONCLUSION

Through this research, a certain number of important elements can be emphasized.

Only customer involvement taken separately exerts a favourable and more or less generalized effect on the performance of new service activities provided to individuals.

On the other hand, the impact of contact personnel involvement and, in parallel, the impact of degree of involvement of general management, vary greatly as a function of the nature and configuration of the sector under study.

The customer's sovereignty, measured by his relative impact, is not, in practice, totally exploited by service companies.

In an in-depth qualitative study, Jallat (1992) demonstrates the fact that taking the customer into consideration within a process is still insufficiently exploited by suppliers of services to individuals: as a general rule, the businesses studied are more motivated by technical development of the innovation and its operating conditions than by understanding of and response to customer requirements. Yet it is obvious that the majority of selected leading businesses are concerned competitively with the system's efficiency and with the customer's respect by including him within their process.

Of course, this research would merit extension to other tertiary sectors, if only to convince practicians to involve their customers in order to innovate successfully.

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Authors

Frederic Jallat, Paris Graduate School of Management, France
Bernard Pras, University Paris-Dauphine, France
Christian Dussart, Paris Graduate School of Management, France



Volume

E - European Advances in Consumer Research Volume 1 | 1993



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