1.1 Look to consumers to increase productivity

.Authors' note; This article grew out of out involvemeni in an ongoing research project on the marketing of consumer services that is being conducted at the Marketing Science Institute. A ptelioiinary report on this project is Marketing Consumer Services: New Insights (MSI: December 1977!. 1. Richard B. Chase, "Where Does The Customer Fit in a Service Operation?" HBR November-Decemher 1978, p. 137. 2. See W. Earl Sasser, "Match Supply and Demand in Serrice Indtutiies," HBR Novembci-Dcccmbei 1976, p. 133.
Consumers & productivity
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In this article, we are going to argue that there is a fourth component to improving productivity in service industries-that is, to change the ways consumers interact with service producers. This is a task that marketing-the art of demand management—can tackle best. Service managers can use marketing tools to encourage consumers to modify their behavior so that services can be delivered in a more productive and economically efficient manner. Our primary focus will be on what Richard B. Chase has termed "high contact" service systems, where there is a high level of interaction between service producers and their customers.^ One can divide services into two broad categories: those that do something for consumers themselves— such as transporting them to distant locations, cutting their hair, and healing their bodies; and those that do something for consumers' possessions—such as transporting their mail, cutting their grass, and repairing their cars. The former, of course, involve a higher level of personal contact than the latter, but consumer behavior is important in both instances, and we will consider both here. Understanding consumer behavior is the first step in determining how to change it.
Most people agree that low productivity is a major contributor to inflation. Lagging productivity gains are particularly a problem for the service sector of the economy, which now accounts for close to twothirds of the GNP in the United States. Low productivity afflicts all three categories of service organizations—for profit, public, and nonprofit. In private companies, managers worry about their ability to maintain profits, yet fear that passing on higher costs in the form of higher prices might drive away consumers. Many public agencies find themselves with rising deficits at a time when taxpayers are angrily demanding tax cuts; yet a strategy of service cutbacks could have serious consequences for the welfare of disadvantaged citizens and the quality of life in general. Some nonprofit organizations that have relied unrealistically on increased donations or higher user charges have been hit particularly hard, some even to the point of collapse. People usually think that improving productivity is a task for the R&D department, for the finance committee, or for operations and personnel management. Economists tell us that the three ways to increase productivity are (1) to improve the quality of the labor force, (2) to invest in more efficient capital equipment, and (3) to automate tasks previously undertaken by labor.
Christopher H. Lovelock and Robert F. Young
when productivity is a problem in manufacturing, managers turn to the R&.D department or operations for help. In services, however, especially ones where there is a lot of contact with the customer, such in-house groups cannot hy themselves improve productivity. Because services involve the customer in production, are laborintensive, and are timebound, consumer behavior itself is critical. Increasing productivity, then, becomes a matter of changing consumer behavior and expectations, and that depends on enlisting consumer acceptance of the change. The authors describe five instances where managers have heen less successful than they might in improving productivity in services because they did not take the needs of consumers into account. Then, drawing lessons from these experiences, they discuss three marketing strategies managers can employ in influencing consumers to become a part of the service process itself. Mr. Lovelock is associate professor of business administration at the Harvard Business School, where he specializes in the marketing of consumer services. His most recent books (both with Charles B. Weinherg), are entitled Cases in Public and Nonpiofit Marketing and Readings in Public and Nonprofit Marketing (Palo Alto, California: The Scientific Press, 1977, 1978). Mr. Young is a research assistant at the Marketing Science Institute and a doctoral candidate at the Harvard Business School. He previously held executive positions in marketing and sales management with several different companies. In addition to services marketing, his current research interests include advertising and sales promotion.