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Service Design – Concepts and Challenges: A Case Study on Starbucks

Abstract

This report discusses about the concepts of services design (such as components of service design, importance or service design, as well as challenges of service design), and offers some suggestions on how to overcome the challenges of service design (for both business effectiveness and efficiency). Starbucks is used as the case study. From the theories related to service design, the concept of service design as applicable for Starbucks is being discussed and explained. Then, through the discussions on how the service design of a restaurant (i.e., food and beverages business) may be surveyed or examined from different aspects or components, the various components characterising the service design of Starbucks are also outlined and presented. It is argued that effective service design is critical for Starbucks competitive edge and performance. However, Starbucks is still being troubles by some difficulties of service design – which occasionally affect the performance of the company. Some suggestions are provided to cater for these difficulties or challenges.

 

Introduction

This report will focus on one of the important topics of Design Management, which is about the concept of Service Design. To explain, service design is becoming more important, even for product based company – as increasing competition demand businesses to focus on services delivered to the customers (Ojasalo, 2009; Edvardsson, Ng, Choo, Firth & Ding, 2011). For this discussion, the service design of Starbucks – on how the company delivers the coffee experience via excellent service to the customers will be used as the case study.

The Concept of Service Design

Service design is important as it affect both business effectiveness and efficiency (Hollins, 1993). Many scholars offered some definition for the term ‘service design’. Some of the definitions are provided below.

 

Chai, Zhang & Kay-Chuan (2005): Service design include the formulation of services objectives, strategies, idea generation, screening, and concept development and testing – towards servicing the customers.

 

Edvardsson, Ng, Choo, Firth & Ding (2011): Service design is about the management of both tangible and intangible elements (i.e., include human capital) in the delivery of value to the customers.

 

Ojasalo (2009): Service design is the effort to arrive at high quality service system (via the design of various elements related to the offering of services to customers), which is aimed to meet customers’ expectations.

 

From there, it can be understood that service design of Starbucks is about how to deliver the Starbuck or coffee experience to the customers, of which some of the outcomes intended include: provide customers the best quality coffee, the place for relaxation, the place for social gathering as well as the unique place for unique coffee experiences (Marques, 2008; Marahão & Alexandre, 2007; Liu, Huang & Chen, 2012; Venkatraman & Nelson, 2008; Plog, 2005).

Components of Service Design

Service design covers many elements or aspects. For example, for a food and beverages restaurants, the various components to be considered in service design can include:  the quality of the services offered, seating arrangement (Sulek & Hensley, 2004), food (and beverages quality) quality, servicescape (i.e., include ambient conditions, spatial layout and functionality, and signs, symbols, artefacts and human elements), waiting experience (Chase, 2004; Wang & Chen, 2012); service process, facilitating goods, as well as even on training or development of the human capital (Shulver, 2005). For that, the service design of Starbuck can also be analysed through the discussion on these different dimensions or components of service design. For example, the services offered by Starbuck to customers can be described as:

  1. A friendly and smiling face, caring and very helpful staffs that can cheer up the consumers visiting to the Starbuck store (Marques, 2008; Venkatraman & Nelson, 2008).
  2. Offering of free Wi-Fi and access to digital media such as The Economist as a free service in its stores (Fitzgerald, 2013)
  3. The use of low-waste packaging that is consistent with the concept of sustainability and environmentally friendly packaging (Aydinliyim & Pangburn, 2012)
  4. Excellent atmosphere and decoration design, which can be characterised as a warm and inviting atmosphere, interior spaciousness the floor plans, and quaint touches (example: its blackboard menus and countertops designs); which contribute to the art, aesthetics, and humanities of selling coffee (Liu, Huang & Chen, 2012; Venkatraman & Nelson, 2008)
  5. Strategic location that can be accessed by consumers conveniently (Zhenjia, 2012)
  6. Excellent Starbuck brand that give the consumers assurance on the product and service quality (Zhenjia, 2012)
  7. Informative and yet nicely decorated menu boards – that fit the entire concept of delivering unique coffee experiences to consumers (aside from giving essential information on nutrition and calories on the products) (Luo, 2010)
  8. A strong workplace culture or workplace spirituality that is highly consumer oriented (Marques, 2008; Marahão & Alexandre, 2007)
  9. A strong focus on welfare of employees do to drive internal marketing, i.e., the ensure of employee satisfaction as a way to engage the employees towards ensuring superior customer satisfaction (Harrison, Eun-Young, Gauthier & Joerchel, 2005; Plog, 2005)

 

Overall, it can be observed that the various component of service design of Starbuck is specially tailored and adjusted, so that these different elements are internally consistent and mutually supportive of the aim of delivering the unique coffee experiences to the customers.

Importance of Service Design

Service design is very important aspects in managing a business successfully – especially under the new economy when product alone cannot effectively differentiate a business from other competitors (Edvardsson, Ng, Choo, Firth & Ding, 2011; Sulek & Hensley, 2004; Ojasalo, 2009; Hollins, 1993). This should not be something hard to be understood, as excellent service design can contribute many benefits or advantages to a firm, such as follow: brand building, customer and employee retention, better relationships with customers, customer loyalty (i.e., more repeat customers or sales), enhance profitability, gaining competitive advantage (Larsen, Tonge & Lewis, 2007), and to differentiate a firm from the many other competitors (Ojasalo, 2009; Pullman & Moore, 1999). In a way, it can be simply stated that good service design can contribute to both financial and non-financial performance.

The importance of service design to Starbucks is also self-evident. For example, the excellent service design successfully induces positive word of mouth on services by Starbucks, as well as effectively people to lead of Starbucks lifestyle and coffee consumption (Lin, 2012). Furthermore, it had also enhanced customer perceived value and intention to revisit Starbucks stores or outlets (Yu & Fang, 2009). Yet, there are also signs that the excellent service design had enhance and strengthen the Starbucks brand, which the brand had in turn enable faster growth of Starbucks even in foreign markets (Lipsman, Mudd, Rich & Bruich, 2012). Nevertheless, some scholars also have the views that it is the excellent service that enable business success and superior profitability for the company (Talpau & Boscor, 2011). In short, the many points presented above show that service design is indeed one of the main factors that contribute to remarkable and respectable growth as well as performance (i.e., competitive edge or competitive advantage) of Starbucks.

Challenges against Effective Service Design

It is obvious from the discussions presented above that Service Design is important aspect of Design Management. However, excellent or successful Service Design may not be easy. There are some challenges that should be acknowledged in the context of trying to deliver effective service design. Some of the more common challenges facing service design include the following: facing the trade-off between costs and quality, the difficulties of have one service design that fit all preferences by consumers, the difficulties of understanding the market, or even the possibilities of failure of once-effective service design. Through the use of Starbuck as an example, these challenges will be further articulated.

For example, there will be the trade-off between art (i.e., beauty) and practicality, costs and quality trade-off, or even between efficiencies and meeting customers’ needs or preferences. One example that is also faced by Starbucks is that the company does intent to use low-waste packaging; but that may cause inconvenience to consumers and necessitate Starbucks to offer a compensating price discount (Aydinliyim & Pangburn, 2012).

Yet, it is also challenging for Starbucks to adjust its service design to meet the tastes or preferences of consumers from the different countries around the world – as consumers in different countries will likely have different lifestyles, cultures and societal norms (Lee, Madanoglu & Ko, 2013). For example, while Starbucks is successful in Taiwan (Lin, 2012), the company was however defeated by the local competition in Australia, which indicate an important lesson on the necessity to thinking globally but acting locally (Patterson, Scott & Uncles, 2010).

Aside from that, market analysis is also challenging. Emotions such as overconfidence may get in the way of market analysis, and the data may be very complicated to be analysed or leveraged upon to enhance customer satisfaction (Johnson & Burrows, 2011). Failure to interpret or analyse the market properly or accurately will cause business failure, as what had happened to Starbucks in Israel (Kalnins & Stroock, 2011).

Then, even when certain service design is proven to be successful, that may not guarantee business profitability (such as due to issue of lack of crowd or unpredictable market situations). For Starbucks, that is true as well, because the company had actually close down many non-profitable stores just after open less than 18 months (Webb, 2011).

In short, the discussions shows that even for such as successful company, there are real service design challenges that must be overcame by Starbucks, to be truly effective or to ensure business success.

Recommendations

It is discussed in the previous section that effective service design can be challenging. This notion is indeed true for Starbucks service design as well. However, there are yet some suggestions that can be offered to enhance effectiveness or performance of service design of a business (or for Starbucks), so to better meeting the requirements or needs of customers (or other stakeholders). In this section, some of the relevant suggestions on how to overcome the challenges so to ensure effective or excellent service design will be provided.

First and foremost, it is crucial to get as many service design ideas as possible from the customers or even employees (Ojasalo, 2009; Pullman & Moore, 1999; Chai, Zhang & Kay-Chuan, 2005; Chase, 2004). This is because service design is supposed to be creative, and getting ideas from multiple angles can enhance idea generation, improvement, creativity and eventually successful innovation.  For that, it is also noted that Starbuck indeed have some strategies to get ideas from customers or even employees – through a wide range of social media tools. From the social media platform, Starbucks redefines the roles of its customers by transforming them from passive recipients of beverages to active contributors of innovation (Chua & Banerjee, 2013).

Consider both the external and internal environment that may affect service design, so to align the internal competencies to tap into the external opportunities (Susskind, Kacmar & Borchgrevink, 2007; Ojasalo, 2009). This is crucial as the external environment is never constant, but yet service design must be adjusted and tailored to suit the external environment (for both business effectiveness and efficiencies). Indeed, this is even more crucial for Starbuck that operate in the global arena, because service design of Starbucks is supposed to be adjusted and localise accordingly (due to the differences of cultures, needs, lifestyles and consumers in the different countries).

Aside from that, and for service design to be effective, it should be human centred (Saco & Goncalves, 2008). For that many scholars advice that service design must be customer oriented (Chai, Zhang & Kay-Chuan, 2005; Edvardsson, Ng, Choo, Firth & Ding, 2011; Goldkuhl & Perjons, 2013; Larsen, Tonge & Lewis, 2007; Shulver, 2005). As such, one of the solution to overcome the trade-off of service design is to be customer oriented, as to ensure all elements of service design is structured to meet customers’ needs, and that anything else that cannot add value to customers must be eliminated.

It is also crucial to have constant audit on perceptions of customers on service design offered to them (Resnick & Griffiths, 2011), so that it is possible to continuous improve the service design of the company – and that is crucial for ensuring the suitability and profitability of a particular service design (Pullman & Moore, 1999). In other words, have research on customers’ perception or to get feedback is essential to adjust or even re-design services offered to consumers, to ensure that what a business is doing is what really demanded by customers.

Conclusion

Overall, the report shows that service design is important, and that is even so for the case study considered within this report: how service design enabled business success for Starbucks. It is understood that effective service design may be challenging, but there are also some strategies or suggestions available to deal with these challenges.

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