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Two strategic factors of any business are customer interaction (how close you are to your customers) and customer participation (how involved customers are in producing the offering). In recent years, we have seen companies increase interaction through servitization and increase customer participation through self-service technologies. Yet, more is not necessarily better. Too much customer interaction can destroy operating efficiencies. Too much customer participation can compromise quality and depersonalize service relationships. This article provides a framework for analyzing customer interaction and participation, including an outline of decision factors, with the goal of identifying optimal and sustainable positioning for any given offering.

When people think about innovation in customer service, they usually think about technological or process enhancements that make service delivery faster or more efficient. Restaurants have introduced hand-held devices that buzz customers when their table is ready, and supermarkets use self-service checkout lines. While such innovations can simplify matters for customers, service organizations rarely stop to consider the overall psychology that shapes service encounters. Indeed, many key psychological variables that influence customer perceptions-the subtle enhancements that help define a positive experience-have yet to be fully defined or articulated. Organizations often measure the outcomes of service encounters in concrete terms such as on-time flight arrivals or the time to resolve a customer's call. However, the subjective outcomes-the emotions and the feelings-are more difficult to describe: Did the passenger enjoy the flight? Did the customer who called the service center with a problem walk away feeling better about the provider? Just as having a deeper understanding of systems dynamics and process analysis has pushed companies to re-engineer their operations to achieve explicit outcomes, findings from behavioral decision-making, cognitive psychology, and social psychology can point service providers to ideas for redesigning the psychological or implicit aspects of service encounters. In this article, the authors examine how three factors-emotions, trust, and control-shape customer assessments of service experiences and their overall view of service providers. Drawing on research conducted at companies including Harrah's, MGM Grand, Dell, Farmers Insurance, the Seattle Supersonics, and McKinsey & Company, they argue that organizations seeking to excel in customer service need to attack the "soft side"of customer management with the same type of intensity they have previously used to reengineer workflow and supply chains.

It may seem like the topic of service management has been exhausted. Legions of scholars and practitioners have applied queuing theory to bank lines, measured response times to the millisecond, and created cults around "delighting the customer." But practitioners haven't carefully considered the underlying psychology of service encounters--the feelings that customers experience during these encounters, feelings often so subtle they probably couldn't be put into words. Fortunately, behavioral science offers new insights into better service management. In this article, the authors translate findings from behavioral-science research into five operating principles: 1) finish strong; 2) get the bad experiences out of the way early; 3) segment the pleasure, combine the pain; 4) build commitment through choice; and 5) give people rituals and stick to them. Ultimately, only one thing really matters in a service encounter--the customer's perception of what occurred. This article will help you engineer your service encounters to enhance your customers' experiences during the process as well as their recollections of the process after it is completed.

Manufacturers that thrive into the next generation will compete by bundling services with products. The factory will be the hub of their efforts to get and hold customers. Some companies are already exploiting their factories' service potentials. Upstream activities like marketing, design, and quality, are folding into downstream activities like sales, repair, and aftersales support.

Service systems with high customer contact operate at a lower degree of efficiency than those with limited customer contact. Managers should separate high-contact and low-contact elements of a service system; separate groups of people should perform high- and low-contact activities. Implementation of these concepts will enhance the development of two contrasting classes of worker skills and orientations. It requires, however, answering questions concerning the company's operating system, procedures and potential.