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From Dr. Scott Sampson's Understanding Services Businesses Book (click for table of contents)
SBP 6b: Competing With Customers⇐Prior —[in Unit 6: Identifying Strategic Threats]— Next⇒SBP 6d: Mass Alliances

SBP 6c: Technological Depersonalization

With services, customers will often react negatively to technologies which depersonalize (or standardize) the service. The exception is when “customer cost” savings are valued. (Generally, customers will react positively to technologies which increase the level of personalization.)

Why it occurs

This principle occurs because depersonalizing technologies fail to acknowledge the uniqueness of customer inputs, which are the core of the Unified Services Theory.


(Recall that “personalize” means treat each customer as an individual, which is different from “personable” which has to do with server friendliness.)

Why does any company want to introduce process technologies? There may be any number of reasons, but generally it is to produce more with higher quality at lower cost. These cost savings often come by allowing technology or empowered customers to substitute for expensive labor. A disadvantage of using technology to eliminate labor is that there is no production resource more adaptable to various customer inputs than labor. Despite labor's sometimes stubborn temperament, there will never be a machine created that is as versatile and adaptable as a human being. Thus, by removing labor we risk losing the ability to adapt to various customer inputs.

In the early 1980s, home banking was introduced as a revolutionary technology to advance the banking process. Bank customers could use their home computers to access account information, make transfers, and perhaps even pay bills. Ultimately, that introduction of home banking was a failure in the marketplace. The fact is, even without home banking, customers could call up the bank to access account information and make transfers. And, they could write checks to pay bills. Home banking decreased the personalization of the service with little to no cost savings to the customer.

On the other hand, the early 1980s also marked the first widespread introduction of Automatic Teller Machine (ATM) technologies. ATMs are common now, but when they were first made widely available in the early 1980s, it was not at all clear if they would be adopted. The concern in the banking industry was whether customers would put up with an impersonal machine to conduct transactions that otherwise are conducted with a teller. What was different about ATMs that would make them successful when home banking was not? Both ATMs and home banking serve to depersonalize the service. However, ATMs do something that a customer cannot do through home banking: deposit checks and get cash. In fact, ATMs have been come to be known as “cash machines.” (Money may not grow on trees, but it does come out of a machine!) upload.wikimedia.org_wikipedia_commons_b_b3_hk_wan_chai_mtr_station_mrs_fields_cookies_1.jpgAnd what is the alternative to getting cash out of an ATM? It is waiting in longer lines to get money from personalizing tellers! The great advantage of ATMs is that they are impersonal, and thus get people through the line more quickly! This time savings (coupled with the convenience of more ATM locations than branch offices) is ultimately what made ATMs a successful service-process technology.

In some cases, process technologies can in fact increase personalization of the service. A number of years ago Mrs. Field's Cookies, a fresh-baked cookie chain, introduced process technologies that directed the efforts of the store manager. This technology assisted a variety of management responsibilities, from employee hiring to production scheduling. The way this technology increased the personalization of the service is that it allowed the store manager to spend more time up-front at the counter interacting with customers. The store managers were no longer primarily administrators, but were able to focus attention on identifying specific customer needs and desires.

So, to summarize, service process technologies often depersonalize service delivery. Service providers often want to introduce process technologies for cost savings. However, if customers perceives that the depersonalization does not provide the customers with any cost savings, it is likely they will reject the technologies. Those technologies which increase the personalization generally stand on their own merits.

How it effects decisions

The service provider must decide whether to introduce new production technologies or to stay with current production methods.

What to do about it

Consider the costs production technologies bring to the customer, including loss of personalization. Weigh that against the cost savings to the customer in terms of time, money, etc.

farm4.static.flickr.com_3280_2668765545_6fd5f4c9b7.jpg One strategy for reducing the risks of technological depersonalization is to give customers service alternatives involving various degrees of technology. (This idea will be revisited in the Capricious Labor Service Business Principle.) For example, Lovelock identifies the many alternatives customers have for conducting retail banking:1)

  • visit the bank in person and transact with a live teller,
  • conduct transaction over the phone with a customer service rep,
  • use at automated teller machine (ATM),
  • use the telephone keypad to enter commands to an automated system,
  • conduct home banking with proprietary banking software,
  • execute banking transactions over the World Wide Web.

I listed Lovelock's banking alternatives with the most personal, but least automated, at the top. Some customers are going to be comfortable with one alternative but not with another. Technophobes who demand personalized attention are more likely to visit the bank and talk with a teller, which is the least efficient alternative from the bank's and the customer's perspective. Other customers will be happier with other alternatives. Of course, the cost of providing many alternatives must be weighed against the value of the various alternatives to the customers and the company.

For example

Years ago when I was in graduate school my wife worked for an office that decided to “upgrade” its telephone system. They purchased a telephone system called Star Talk, which had a computerized receptionist that allowed callers to select a department from a menu of choices or type in an extension number. They only had the system for a short time when the organization president had Star Talk disabled. Apparently, some of the most important callers were put off by having to listen to a computer, even though one menu option was to talk to a human receptionist. At the time, I was amazed at the president's decision. I am amazed no more, having come to understand Technological Depersonalization.

Recently I attempted to modify my health insurance coverage, which I was told I could do over the phone. I called the company's number, and found I was connected with an automated response system. The first request was for me to type in my social security number, which I could handle. Next, I was asked for an “access number” of some type, which I had no idea about. So, I just tried hitting “0” to talk with a real person, but was given an “Invalid code” type of message. I finally was able to talk with a human operator, and I explained my difficulty with the computer system. She did not know what the access number was, claiming to be unfamiliar with the automated response system. So she put me on hold while she checked it out. When she returned, she said (she believed) the access number was in some document I was supposed to have gotten in the mail. Since I did not have that document, she offered to send me a form to make the coverage change by mail. (And, if I did not have the whole thing completed by the end of the impending open-enrollment deadline, I could not make the change for another year.) I am sure the health insurance benefits company is thrilled with how efficient their automated telephone response system is, and how much money it saves them in reduced labor costs. But I doubt they have any idea how much it is costing them in good-will by the way it depersonalizes interactions with customers.

Many have wondered if Internet and video technologies will replace the classroom as the primary means education is delivered. Those technologies tend to depersonalize the education delivery process–it is difficult to ask an arbitrary question to the computer or video machine. As a result, those education technologies will likely gain widespread acceptance only if they result in sufficient cost savings to the student.

An example where the customer cost savings of technologies is dramatic is in stock broker services. It is much more impersonal to conduct stock trades on-line, but the transaction commissions are minute when compared with calling a human stock broker. As a result, the adoption of on-line trading has been phenomenal.

One reason that on-line services will ultimately be more successful than traditional cable television in providing entertainment is that the Internet technologies will allow dramatically increased personalization of the information received. For example, a news customer will be able to select exactly the types of stories and reports he wants to view on his screen, as compared with just watching the standard news feeds on a cable news channel.

A process technology that I despise is the “fax back” technical support service provided by computer software and hardware companies. The customer chooses her question from a list of pre-recorded options. I generally consider it more worthwhile to spend a half-hour on hold waiting to talk with a technical support employee.


The following are a couple of examples of technologies that increase the level of personalization for customers. A few years ago Federal Express introduced their package tracking system, which kept track of every package as it passed from one part of the delivery process to another. A customer with a package tracking number could call Federal Express or query a Federal Express computer (over the Internet) and identify when and where the package was last recorded and, if delivered, who signed for it. This is much more personalized service than telling customers that the daily shipment from point A to point B has occurred without identifying if the customers' specific packages made it with the shipment. Personalized means individualized, and the Federal Express package trackage system views every package as an individual shipment.

Previously, I criticized automated telephone receptionists for being impersonal. Pizza Hut Delivery has installed a computer system at some locations which increases the level of personalization. Most pizza delivery stores have telephone order-taking procedures which do not vary much from customer to customer. The Pizza Hut computer system uses Caller ID to help identify customers who give repeat business. If the computer detects a call coming from a repeat customer, it tells the employee what the customer at that number ordered last time. The employee can ask if the customer would like the same order, which is a highly personalized request.

A few years ago, a sister-company to Pizza Hut considered introducing order-taking technology. That company was Taco Bell. Taco Bell considered installing computer terminals that would allow customers to place orders in the restaurant without talking to a person.2) Perhaps the thinking was that order-taking employees are largely programmed in their interactions with customers, so why not let a computer do the job? Do you think computer order-taking would have been a good thing to implement? What might be the potential cost savings which could be passed on to the customer? What might be potential costs in terms of depersonalization?

My airline example

A technology that is probably not going to be successful is the airline ticket kiosks located at some airports. The advantage of those kiosks is that there will rarely be any line–who would want to use a computer that can only ask a very structured set of flight information requests. So, unless the airlines provide a ticket cost savings to customers, the kiosks are unlikely to win out over just talking to a ticket agent.

However, on-line airline ticketing seems more likely to gain widespread acceptance by passengers, since it avoids the costs of being on hold with the airline, it saves money by facilitating shopping for low fares, and it is easy to abandon and simply call the airline if necessary.

How manufacturing differs

With manufacturing, production is more standardized, lending itself to efficient technologies. In addition, inanimate manufactured products typically do not care if they are produced by high-tech or low-tech production processes.

Analysis questions

  1. What technologies have or might be employed in the production of the service?
  2. Which of these increases or decreases personalization?
  3. Which of these results in customer cost savings, such as increased convenience, reduced transaction costs, etc.?

Application exercise

Conduct a cost/benefit analysis of introducing a particular process technology from the perspective of the customer. Describe costs, including impact on personalization of the service and how peculiar customer concerns would be handled. Describe benefits, including cost and convenience savings. Comment on the likelihood of general acceptance of the process technology by customers.

1) Lovelock, Christopher, Services Marketing, Third Edition, Prentice Hall: Upper Saddle River, New Jersey, 1996, p. 54.
2) see Harvard Business School case: Taco Bell 1994

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