Business plan development for service ventures: integrating customer experience management.

Wall, Eileen ; Envick, Brooke R.

This paper introduces customer experience management to the traditional services plan model. It provides a framework entrepreneurs can use to develop plans that incorporates three types of clues that influence customers' thoughts, feelings and behaviors. These clues are: (1) functional--the technical performance of the service; (2) mechanic--tangibles associated with the service; and (3) humanic--the behavior and appearance of service providers. These clues play an important role in creating the customer's service experience, influencing both rational and emotional perceptions of service quality. By including these clues into the business plan for a services venture, entrepreneurs have a better opportunity of "getting off on the right foot", thus ensuring firm survival and prosperity.

INTRODUCTION

A business plan is a basic model and description of a new venture. It is used internally to provide parameters for the firm's owners and employees and to solidify its goals. It is also used externally to attract investors and other potential stakeholders such as customers. It should provide a clear picture of all the important aspects of the proposed venture. Because services ventures are different from goods ventures, however, the traditional business plan model is incomplete. A business plan for a service organization should provide a model--as well as a clear description of how the business intends to make an emotional connection with customers and systematically manage their experiences with the organization. However, traditional business plan outlines do not provide a section, nor do they integrate customer experience management throughout the different sections of the plan.

The basic business plan outline for a services venture has sections for: general company description, services plan, marketing plan, management plan, operations plan, and financial plan (see Figure 1).

[FIGURE 1 OMITTED]

The general company description outlines the primary products and/or services, current status of the start-up, name and location of the business, and legal formation. In the typical services section of the business plan, entrepreneurs are asked to provide a basic description of the service itself, any unique characteristics or special advantages, stage of development, applicable legal protection, potential liabilities, dangers relating to trends, style, or fashion, and comparisons to similar services offered by competitors.

The marketing section of the business plan identifies the target market. It is a demographic, psychographic, and geographic description of the target market, projects market share, outlines benefits provided to the customer, pinpoints competitors, establishes a competitive advantage, and then requires the entrepreneur to develop a marketing strategy. This strategy includes describing how you will identify and attract customers, outlining channels of distribution, discussing selling procedures, establishing pricing, credit and collection policies, and creating plans for sales promotions and advertising.

The management plan introduces the owner(s) and their qualifications. It also provides information on other key personnel, advisors, directors, investors, and other outside resource people along with their qualifications. Plans are also presented for recruiting, training, and compensating employees. The operations plan discusses methods of service delivery, quality control, and customer support at the most basic level including warranties, guarantees, and support strategies and obligations. It also includes a description of operating facilities such as location, layout, and equipment.

And the financial plan outlines start-up capital requirements. It presents projections of the company's financial statements over a period of five years. The forecasts include balance sheets, income statements, cash flow statements, and a break-even analysis. The plan also indicates how much capital is needed from prospective investors and the intended purpose for the money, and potential return on investment.

Intuitively, you might find strategies for customer experience management in the services plan, marketing plan, and/or operations plan. Entrepreneurs are really only addressing the functional or rational components of customer experience management at best. The focus is on the technical nature of the experience, such as reliability and quality. At no point in the traditional business plan model does the entrepreneur have the opportunity to make a plan to establish an emotional connection with potential customers. According to Berry and Carbone (2007), great organizations go beyond the functional aspects of the business to establish emotional connections with their customers. The business plan model we propose in this paper takes them beyond the commodity of the service offering, engaging customers at both the rational and emotional levels, thus increasing customer commitment to the business and creating a total customer experience.

LITERATURE REVIEW

Services are performances rather than objects--the customer doesn't have something to pick up and inspect prior to purchase, nor does he own a tangible asset after the exchange. Customers therefore look for clues that are available to them before and during the service performance that they can evaluate. Numerous clues of varying importance are embedded in these performances, and customers rely on them to choose services and evaluate service experiences. Customers form overall perceptions of experiences based on the technical performance of the service (functional clues), the tangibles associated with the service (mechanic clues), and the behavior and appearance of service providers (humanic clues). Functional, mechanic, and humanic clues play specific roles in creating the customer's service experience, influencing both rational and emotional perceptions of service quality. By definition, a good customer experience is good customer service; the experience is the service. As a result, consistent design and orchestration of these clues is a critical responsibility of the business owner.

The distinction among functional, mechanic, and humanic clues can be subtle. For example, a retail salesperson who answers a customer's question about when an out-of-stock item will be available is producing both functional and humanic clues. The accuracy of the information is a functional clue. The salesperson's choice of words and body language are humanic clues. One salesperson may answer the question disinterestedly, and another may answer enthusiastically. A customer's emotional response to the differing humanic clues is likely to be quite different even if the information is accurate in both cases. Consequently, this same cusomer's overall impression of the service is likely to be different.

Conceptual Basis for Experience Clues

Clues create the service experience by influencing customers' thoughts, feelings and behavior. The important influence of affect or feelings is well documented in behavioral sciences research. This research shows that affect or mood influences how people think and act (Poon, 2001). Research shows, for example, that positive mood seems to help people recall positive material from memory. This is because when people are in a particular feeling state, they try to maintain that state. Consequently, memories that are congruent with that feeling are more accessible and more likely to come to mind (Isen, 1987). This pattern does not hold for negative moods, however. It is thought that people try to improve a negative mood by avoiding recall of negative memories (Poon, 2001).

Mood also influences people's evaluations. For example, one study found that cartoons were rated as funnier by subjects who were smiling than subjects who were frowning (Laird, 1974). Mood or affective states also influence the information processing strategy individuals are likely to adopt. People in a good mood are more likely to use quicker mental short-cuts in decision making whereas people in a sad mood are more likely to use a thorough decision-making strategy (Schwarz, 2000; Schwarz & Clore, 1996). Research shows that we use our moods as a source of information. Evaluative judgments involve people implicitly asking themselves, "How do I feel about this?" (Schwarz & Clore, 2003). Positive moods increase the likelihood of many positive behaviors. Positive moods seem to make someone more helpful and may also promote cooperative behavior in conflict resolution situations (Isen & Levin, 1972; George, 1998; Ford, 1995; Baron 1997). For example, a study of dyadic negotiations found that positive mood subjects were less likely to display hostility or break off negotiations and more likely to see the point of view of others and adopt a problem-solving approach to the negotiations (Carnevale & Isen, 1986). Customers' moods may have particular impact on how they think and act in service encounters because of the interpersonal nature of these encounters (Gardner, 1985). Thus, it seems critical that firms seek to manage experience clues in ways that positively influence customers' mood.

One opportunity to do this is with the tangible elements of the service experience--mechanic clues. Environmental psychology and marketing research confirms the influence of mechanic clues on customers. At its foundation, environmental psychology draws from the stimulus-organism-response (SOR) paradigm in psychology (Spangenberg, Crowley & Henderson, 1996). In an environmental psychology context, the physical environment or stimulus (S) (i.e., mechanic clues) causes an evaluation by a person or organism (O), which results in a response (R). Consequently, environmental psychologists have examined the physical environment's influence on people's thoughts, feelings, and behaviors, and they have found the three to be complex and interrelated. In a widely studied model, Mehrabian and Russell (1974) proposed that the three basic emotional states of pleasure, arousal and dominance or control mediate behavior in an environment. Pleasure refers to the degree to which a person feels good, happy, or satisfied in the situation; arousal refers to the degree to which a person feels excited or stimulated; and dominance refers to the extent to which the individual feels in control of the situation. These emotions are associated with behavioral responses, which are categorized as either approach or avoidance behaviors. Approach behaviors are positive behaviors directed at a particular place, such as a desire to stay, explore or affiliate. Avoidance behaviors reflect the opposite. Thus, the environment can trigger feelings that either encourage someone to stay in an environment or to leave it.

Research in marketing confirms the influence of the environment on customers. Donovan and Rossiter (1982), for example, tested the Mehrabian-Russell model in a retail setting and found that the pleasure and arousal dimensions of the model are strong predictors of in-store behavioral intentions, such as lingering in the store or purchase. In this study, pleasure was a determinant of desire to stay and explore in the store, while arousal was also found to increase customer time spent in the store as well as willingness to interact with sales associates. Researchers in marketing have also focused on the effects of specific ambient factors or clues, such as lighting, music, or scent. For example, in studies of the effects of music in retail and restaurant environments, Milliman (1986) found that slow music tempo encouraged restaurant customers to stay at their tables longer and spend more and also encouraged grocery shoppers to spend more.

Clues Play Different Roles

Functional, mechanic, and humanic clues play specific roles in creating the customer's service experience. Functional clues primarily influence customers' cognitive or calculative perceptions of service quality. Mechanic and humanic clues primarily influence customers' emotional or affective perceptions. Thus technical competence in service performance is not enough if they aspire to build a reputation for superior service and build preference for their company. How the service is performed is important to customers, too, because it influences the emotional perceptions of quality. For example, a restaurant that provides a quality meal, but has slow table service and a shoddy environment is not likely to survive against competitors who deliver not only good food, but do so courteously and efficiently in a clean, quality environment

INTEGRATING CUSTOMER EXPERIENCE MANAGEMENT INTO A SERVICES BUSINESS PLAN

This section of the paper identifies how service clues fit into the business plan for a services venture. Entrepreneurs do not have to abandon the traditional business plan model. Instead, they can take a more comprehensive approach to initiate their ventures. The idea is to "get off on the right foot" and eliminate common problems before they have a chance to emerge in the business. The traditional business plan model is presented below (as previously discussed in the paper), with the addition of clue planning. The functional clue plan is integrated into the services plan, the humanic clues are addressed in the management plan, and the mechanic clues are included in the operations plan. See Figure 2 below:

[FIGURE 2 OMITTED]

The next section of the paper provides an example of a small services start-up venture and how these clues can be included in the appropriate sections of the business plan.

CASE IN POINT

A small personal training studio called Body Evolution is utilizing this very approach for venture planning. Body Evolution is a personal training studio offering multidimensional programs to meet clients' fitness needs such as strength training, circuit training, plyometrics, sport-specific training, and functional training. They also offer complete nutritional programming and counseling based on clients' unique needs and lifestyles. The facility is 1,500 square feet and fully equipped for personal and group training classes. The owner of Body Evolution understands the importance of providing exceptional customer service at every level to attract and retain clients. She has identified all the key "clues" for each of the areas: functional, humanic and mechanic. Table 1 illustrates all of the clues identified, and Body Evolution has a plan in place to address each one to ensure the highest level of customer service is being delivered the very first day of operation.

DISCUSSION & CONCLUSIONS

This paper has presented a more comprehensive way for entrepreneurs to plan their services ventures in order to "get off on the right foot". The integration of customer experience management is imperative in today's competitive environment. Three types of clues are essential to address for any services business. They include functional clues, humanic clues, and mechanic clues.

It is important to remember that services are performances rather than objects, and customers experience intangibles. This forces them to look for clues before and during the service performance that they can evaluate. Customers form overall perceptions of experiences based on the technical performance of the service (functional clues), the tangibles associated with the service (mechanic clues), and the behavior and appearance of service providers (humanic clues). The evaluation of these three clues creates the rational and emotional perceptions of service quality. By definition, a good customer experience is good customer service; the experience is the service. As a result, it is inherently crucial to design and orchestration of these clues as a part of the business plan model.

The value of integrating customer experience management into services plans for new ventures is highly significant. It allows the entrepreneur to solve common customer service issues before they even arise. This means the business can attract and subsequently retain customers from the first day of operation. Generating repeat business is crucial for the survival and prosperity of any small, young business. Developing a plan that integrates customer experience management helps ensure positive customers perceptions, resulting in repeat business and ultimately firm survival.

REFERENCES

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Eileen Wall, St. Mary's University

Brooke R. Envick, St. Mary's University

Table 1: Clue Plan Focal Points for Body Evolution

 FUNCTIONAL CLUES MECHANIC CLUES HUMANIC CLUES

The Session Itself The Presentation of The Service
Productive training the Service Provider(s)
 sessions Accessible location Friendly trainers
Availability of to target market Approachability of
 training sessions Cleanliness--smell trainers
Dependability of and look Motivating attitude
 trainers at sessions Spacious and not of trainers
Experienced progression overcrowded Personal appearance
 towards goals Music played during of trainers
Adequate and functional workouts Perceived
 equipment Extras available on availability of
Appropriate nutritional equipment (TV) trainers any time
 counseling Displays of client Response time of
Clear instructions on testimonials trainers outside
 exercise & nutrition Displays of trainer sessions
 certifications Attentiveness of
 Appearance of trainers during
 equipment sessions
 Availability of
 showers, changing
 rooms
 Attractive and
 informative
 business logo
 Visible signage
 Informative Website
 Attractive
 advertisements