The Future of Service Post-COVID-19 Pandemic, Volume 2: Transformation of Services Marketing (The ICT and Evolution of Work) 9813341335, 9789813341333

Table of contents :
Preface
Contents
1 Managing Organizational Culture and Shaping Human Resources Priorities During COVID 19
1.1 Introduction
1.2 Importance of Employee Engagement
1.3 Project Propel at Movenpick Resort Kuredhivaru Maldives
1.4 Response to Covid-19
1.5 Accor Launches ALL HEARTIST FUND
1.6 Accor Launches ALLSAFE
1.7 Basics to Ensure a Smooth Start—Role of Human Resources During the Return-to-Work Phase of the Pandemic
1.8 Acculturation to New Normal
1.9 Employee Feedbacks on Project Propel Employee Engagement Initiatives
1.10 Voice of Employees
1.11 Conclusion
Author’s Insight
2 Maladaptive Consumer Behaviors and Marketing Responses in a Pandemic
2.1 Introduction
2.2 Theoretical Underpinning
2.3 Pandemic-Based Consumer Behaviors
2.4 Evidence from an Exploratory Clustering Analysis
2.4.1 Data Collection and Measures
2.4.2 Results
2.5 Engagement and Promotional Strategies
2.6 Lessons Learned and Future Ideas
Authors’ Insights
References
3 The COVID-19 Pandemic and Its Impact on Grocery Retailing: A Singapore Case Study
3.1 COVID-19 in Singapore
3.2 Panic Buying
3.3 Disruptions in the Supply Chain
3.4 Adopting Technologies During the Pandemic
3.5 Unexpected Toll on Retail Employees
3.6 Pandemic and the Grocery Retail Industry
3.6.1 Changes in the Management of Supply Chain
3.6.2 Changes in Retail Work
3.6.3 Increased Opportunities for Online Retailing
3.7 Conclusion
References
4 Green Brand Equity and COVID-19 Post-Pandemic: The Case of the World’s First Coffee Face Mask in Vietnam
4.1 Introduction
4.2 Sources of Brand Equity
4.2.1 Brand Awareness
4.2.2 Brand Image
4.3 Green Brand Equity and Its Determinants
4.3.1 Green Brand Equity
4.3.2 Green Brand Image
4.3.3 Green Trust and Green Satisfaction
4.4 Building Brand Equity: A Lesson from the World’s First Biodegradable Coffee Face Mask Maker in Vietnam
4.4.1 Always Begin with Customer Empathy
4.4.2 The Beginning
4.4.3 From ShoeX—The Shoes Made from Coffee
4.4.4 To AirX—The World’s First Ever Facial Mask Made from Coffee
4.4.5 Covid-19 and the Rise of Facial Masks
4.4.6 Be Agile for the New Normal
4.4.7 Looking into the Future
Author’s Insight
Co-Author’s Insight
This case was written based on
5 Impact of COVID-19 on People-Processing vs. Information-Processing Services: Case of Food Service and Banking Industries
5.1 Introduction
5.2 What Happened?
5.3 Deposit Banking Industry: Coping Strategies Until Normalization
5.4 Deposit Banking Industry: Getting Ready for New Normal
5.5 Food Service Industry: Coping Strategies Until Normalization
5.6 Food Service Industry: Getting Ready for New Normal
5.7 Recommendations and Conclusions
Authors’ Insight
References
6 How COVID-19 Could Accelerate the Adoption of New Retail Technologies and Enhance the (E-)Servicescape
6.1 Introduction
6.2 How the COVID-19 Pandemic Drives Retail Technology Adoption
6.2.1 Coping with COVID in the Brick-and-Mortar Servicescape
6.2.2 How COVID Boosted Online Retailing
6.2.3 Drivers of Technological Advancement of the (E-)Servicescape in the COVID-Aftermath
6.3 Technology to Reinvent the Brick-and-Mortar Servicescape
6.3.1 The Social Servicescape in the New Normal
6.3.2 The Physical Servicescape in the New Normal
6.3.3 Adoption Prospects for Brick-and-Mortar Retailing Technologies
6.4 Technology to Augment the E-Servicescape
6.4.1 The Social E-Servicescape
6.4.2 The Ambient E-Servicescape
6.4.3 Adoption Prospects for Online Retail Technologies
6.5 Conclusion
Authors’ Insights
References
7 Building Agility in Service SMEs for Post-pandemic Era
7.1 Introduction
7.2 Major Frameworks of Agility
7.3 Co-creation Capabilities
7.4 Service SMEs During Covid-19: Cases from an Emerging Market
7.4.1 Overview of Cases
7.4.2 Analysis of SME Cases
7.5 Discussion and Concluding Remarks
Appendix
Authors’ Insight
References
8 COVID-19 Disruption and Service Firms’ Adaptation Strategies: Institutional Theory Perspectives
8.1 Introduction
8.2 Institutional Theory Perspectives
8.2.1 Task and Institutional Environments
8.2.2 Modern Institutional Theory (Tinkering and Theorizing)
8.2.3 Tinkering in Institutional Environments
8.2.4 Theorizing in Institutional Environments
8.2.5 Tinkering and Theorizing in the Context of Past Pandemic Research
8.3 A Taxonomy of Tinkering and Theorizing Strategies for Service Organizations
8.4 Discussion
8.4.1 Tinkering and Theorizing Strategies for Tackling COVID-19
8.4.2 Tackling the New Normal of Social Distancing
8.4.3 Tackling the New Normal of Shelter at Home
8.4.4 Tackling the New Normal of Demand Decrement
Author’s Insight
References
9 How to Think Outside of the Box in the Service Sector in the Way to Survive the “New Normal”?
9.1 Overview/Introduction
9.1.1 What About to Become More Autonomous?
9.1.2 What About to Become More Sustainable?
9.1.3 Nomad Lodges
9.1.4 A Model of Sustainable Tourism
9.1.5 Tourism as a Conservation Tool
9.1.6 Luxury Is Elsewhere
9.1.7 Rediscover Connections
9.2 Challenges/Solutions
9.2.1 How to Become More Autonomous?
9.2.2 Revenue Diversification Strategy
9.2.3 Become an Actor of Change
9.2.4 Becoming Sustainable
9.2.5 Ecotourism, Is About Commitment
9.2.6 Training and Coaching
9.2.7 A School of Life
9.2.8 Trusting the New Generation
9.2.9 Thinking Outside of the Box
9.2.10 The Nomad Lodges Lab
9.3 Outcomes
9.3.1 Benefits for Locals and the Environment
Author’s Insight
Travel Less but Travel Better
From the “Eco” to the “Sustainable” Trends
A New Normal Based on a Better Balance Between Human Being and Nature
References
10 Service Lessons During COVID-19: The Case of Food Trucks
10.1 Research on Service Contexts: A Brief Overview
10.2 The Case Study Approach
10.3 Service Lessons from Food Trucks During COVID-19
10.4 Service Encounters
10.4.1 Building Authenticity
10.4.2 Building Rapport
10.5 Servicescapes
10.5.1 Enabling Routines
10.5.2 Enabling Improvisation
10.6 Service Ecosystems
10.6.1 Fostering Solidarity Among Customers
10.6.2 Fostering Solidarity Among the Local Business Community
10.6.3 Fostering Solidarity Among the Food Truck Community
10.6.4 Fostering Solidarity Among the Local Non-business Community
10.7 Service Implications for the New Normal
10.7.1 Implications for Customer-Business Interactions
10.7.2 Implications for the Servicescape
10.7.3 Implications for the Service Ecosystem
Authors’ Insight
References

Citation preview

The ICT and Evolution of Work Series Editor: Jungwoo Lee

Jungwoo Lee  Spring H. Han   Editors

The Future of Service Post-COVID-19 Pandemic, Volume 2 Transformation of Services Marketing

The ICT and Evolution of Work Series Editor Jungwoo Lee, Center for Work Science, Yonsei University, Seoul, Korea (Republic of)

This series publishes monographs and edited volumes covering the emerging and evolving relationships between ICT and the way individuals and organizations conduct and carry out work. Exploring current themes, such as raising social capital within team environments, job craft duality, trust and dependence, artificial intelligence and governance, as well as the booming topics surrounding smart cities and new workplaces, volumes in the series keep ahead of the curve with contributions about the most groundbreaking research and introduce advance practices. Interdisciplinary in nature and combining academic as well as practitioner in industry perspectives, “ICT and the Evolution of Work Series” welcomes contributions from a diverse group of individuals and organizations.

More information about this series at http://www.springer.com/series/16400

Jungwoo Lee · Spring H. Han Editors

The Future of Service Post-COVID-19 Pandemic, Volume 2 Transformation of Services Marketing

Editors Jungwoo Lee Center for Work Science Yonsei University Seoul, Korea (Republic of)

Spring H. Han Kyoto University Kyoto, Japan

ISSN 2662-4230 ISSN 2662-4249 (electronic) The ICT and Evolution of Work ISBN 978-981-33-4133-3 ISBN 978-981-33-4134-0 (eBook) https://doi.org/10.1007/978-981-33-4134-0 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

This book delivers the experiences and insights during the COVID-19 pandemic in 2020. It carries ten chapters from various service industries to share potential changes and severe alterations in service theories and service practices post-pandemic. Chapter 1 introduces a case study of internal marketing from the Movenpick Resort Kuredhivaru Maldives. It provides how design thinking, strategy, and systematic steps can transform any ambitious goals to fit the organizational culture and appeal to people while addressing key current and uncertain challenges thereby integrating change management into engagement in the area of human resources. Chapter 2 deals with maladaptive consumer behaviors and marketing responses in a pandemic situation. The study builds on the theoretical framework of the Extended Parallel Process Model, and identifies two distinct segments of consumers—labeled as Rejectionists and Survivalists—who have responded to the pandemic in differing maladaptive ways. In this work, each segment is described in detail and validated with cluster analysis, and suggestions are given to marketers for engaging with and promoting to each segment. Chapter 3 examined how grocery retailing has changed during the pandemic using the Singapore experience as a case study. For grocery retailers in Singapore, this resulted in disruptions in the supply chain, additional workload on retail employees, and finally increased use of retail technologies particularly in online shopping. The chapter ends with a discussion on how the changes in the grocery retail industry provides new perspectives in understanding supply chain management, retail employee work, and opportunities for adoption of technology in retailing. Chapter 4 explores the concept of green brand equity, and showcase the world’s first biodegradable coffee face mask named AirX in the context of COVID-19 postpandemic. Given the large number of single-use health products filling up landfills and waterways due to COVID-19 pandemic, eco-friendly coffee masks are expected to help people to cope with corona-virus, while helping to reduce the waste crisis exacerbated by the use of disposable face masks. It further provides a major insight into our understanding of how the first coffee mask maker in Vietnam build brand equity while coping with the “New Normal” as well as looking into the future. Chapter 5 focuses on comparing and contrasting the banking services sector and the food service industry in Turkey in relation to how these industries were impacted v

vi

Preface

by and responded to the crisis caused by COVID-19 pandemic. Findings suggest that innovative products, market-linking capabilities and investment in digitalization and trust building activities are effective in dealing with the new normal. Chapter 6 discusses what challenges COVID-19 poses to conventional (e-)servicescapes, and how technologies, ranging from augmented- and virtual reality, over robots and wireless payment, to sensory-enabling technologies for online stores, can offer solutions. This chapter explores successful business applications while considering hurdles. It also demonstrates how the current pandemic crisis could catalyze the digital augmentation of retailing and services. Chapter 7 discusses how the agility framework and agility-related capabilities of service SMEs provide service-related insights into value creation for their existing and potential customers during the pandemic in an emerging market (Turkey). The findings suggest that each of the agility-related meta-capabilities (strategic sensitivity, leadership unity, resource fluidity, and resourcefulness) of service SMEs are critical but insufficient. Chapter 8 draws upon institutional theory to develop a conceptual model that explains how service firms can transition to effective crisis management, grapple with pandemic disruption, and engender resilient strategies. In particular, institutional theory advocates tinkering and theorizing approaches for recovery and future growth. It discusses how the COVID-19 situation can spur theorizing and innovation via machine learning (ML) and Artificial (AI) applications in the areas of customer service and new product development. Chapter 9 discusses how the agility framework and agility-related capabilities of service SMEs provide service-related insights into value creation for their existing and potential customers during the pandemic. This chapter suggests that service SMEs should utilize their relationship building and process enhancing co-creation capabilities to adapt their service provision processes to the new normal. Particularly, individuated and relational interaction capabilities have emerged as crucial for service SMEs to retain customers and transform their services. Chapter 10 explores how the food truck business model can help overcome the uncertainties and enable consumers to have positive, meaningful, and social dining experiences despite the pandemic situation. This chapter highlights practices that appear to help these food trucks build authenticity and rapport in service encounters with their customers, enable customers to structure some stable routines while also allowing for improvisation in terms of the servicescape, and foster a sense of solidarity among various members of the larger business and non-business communities that comprise this service ecosystem. The insights provided in this chapter inform how businesses can establish more robust interactions with their customers, structure the social elements of the environments which frame these interactions, and maximize the mutual support linked to various stakeholders that comprise the overall system in which these businesses operate. Kyoto, Japan Seoul, Korea (Republic of)

Spring H. Han Jungwoo Lee

Contents

1

2

3

4

5

Managing Organizational Culture and Shaping Human Resources Priorities During COVID 19 . . . . . . . . . . . . . . . . . . . . . . . . . . Vaibhav Garg

1

Maladaptive Consumer Behaviors and Marketing Responses in a Pandemic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seth C. Ketron, Judy A. Siguaw, and Xiaojing Sheng

27

The COVID-19 Pandemic and Its Impact on Grocery Retailing: A Singapore Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ho Keat Leng

49

Green Brand Equity and COVID-19 Post-Pandemic: The Case of the World’s First Coffee Face Mask in Vietnam . . . . . . . . . . . Tri Minh Ha and Viet Dung Trinh

65

Impact of COVID-19 on People-Processing vs. Information-Processing Services: Case of Food Service and Banking Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Misra Cagla Gul and Mehmet Kaytaz

87

6

How COVID-19 Could Accelerate the Adoption of New Retail Technologies and Enhance the (E-)Servicescape . . . . . . . . . . . . . . . . . . 103 Kim Willems, Nanouk Verhulst, and Malaika Brengman

7

Building Agility in Service SMEs for Post-pandemic Era . . . . . . . . . . 135 Özge Demir, Mehmet Okan, Nesenur Altinigne, Didem Gamze Isiksal, Elif ˙Idemen, and Elif Karaosmanoglu

8

COVID-19 Disruption and Service Firms’ Adaptation Strategies: Institutional Theory Perspectives . . . . . . . . . . . . . . . . . . . . . 175 Debi P. Mishra

vii

viii

9

Contents

How to Think Outside of the Box in the Service Sector in the Way to Survive the “New Normal”? . . . . . . . . . . . . . . . . . . . . . . . 205 Pierre-André Krüeger

10 Service Lessons During COVID-19: The Case of Food Trucks . . . . . 235 Meike Eilert, Aditya Gupta, and Chance McCullough

Chapter 1

Managing Organizational Culture and Shaping Human Resources Priorities During COVID 19 Vaibhav Garg

Abstract With the global health crisis—COVID—19, while many organizations claim to be purpose-driven however the purpose needs to be defined in view of the impact on the employees and given the urgency and complexity of the challenges being faced in the organizations, the need of the hour is to create an environment that offers transparency, trust and hope in the system and the leadership. It has become pertinent for organizations to have open and honest discussions with their employees regarding the business realities, share upcoming plans and encourage collaborative partnership. To embrace this “new normal” reality, it is also imperative for organizations and leaders to adapt and change their leadership styles to address the current crisis. This chapter focuses on how design thinking, strategy, and systematic steps can transform any ambitious goals to fit the organizational culture and appeal to people while addressing key current and uncertain challenges thereby integrating change management into engagement in the area of Human Resources. A case study on Project Propel Initiative from Movenpick Resort Kuredhivaru Maldives provides a structured and systematic approach with accountability in harmony with HR processes and people to make the HR function more robust and better organized with improved control and risk management, a tighter focus on priorities and strategic strengths, and closer alignment with what employees and senior leaders want in routine operations and also during a crisis situation of COVID-19.

1.1 Introduction The world is being adversely impacted by the unprecedented health crisis—Covid19 and organizations are exercising extreme caution with regards to the health and safety of their employees and stakeholders. Given the urgency and complexity of the challenges we are facing, the need of the hour is to create an environment that offers transparency, trust and hope in an organization. It has become pertinent for organizations to have open and honest discussions with their employees regarding V. Garg (B) Udaipur, India © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_1

1

2

V. Garg

the business realities, share upcoming plans and encourage collaborative partnership. To embrace this “new normal” reality, it is imperative for organizations and leaders to adapt and change their leadership styles to address the current crisis. This chapter will provide information about the human resource strategy of Movenpick Resort Kuredhivaru Maldivesi (a part of Accorii Hotel Group operating in the Maldives) in dealing with the pandemic with key initiatives taken by the team, their approach and considerations. While the situation is still evolving, it is believed that the ongoing employee engagement, learning and development and employee experience measures as a part of Project Propel Initiative will ensure long lasting impact as the resort proceeds towards its recovery process. These initiatives were planned not solely for the pandemic but have included pandemic situation in the middle of the process thereby embracing uncertainty due to its structure, approach and flexibility. For instance, the project was launched in February 2020, however due to impacts of pandemic experienced in mid-March 2020, the teams did not lose the focus and further initiated several other immediate measures to provide assistance to the employees and addressed critical issues onsite, thereby embracing uncertainty. At Movenpick Resort Kuredhivaru Maldives, the leadership team is making every effort and attempt to ensure calm, constant communication and compassion while engaging the teams with a focus on health, safety and regulatory & statutory compliance. The resort management strongly believes that the current crisis will eventually pass and a new normal will emerge—and there are plenty of reasons to trust that future will be bright. While for now, it may be difficult to see the light at the end of the tunnel or hold a sense of positive outlook, but tomorrow will be improved only by the struggles everyone is fronting today and they are only going to succeed with the emotional relationships they are maintaining during this time with their employees and stakeholders as they include trust and humility in the organization’s governance framework. As government authorities look to implement business reopening measures, the resort management is now planning to move its employees back into the workplace as lockdown and stay-at-home orders and other COVID-19 business restrictions expire or are modified.

1.2 Importance of Employee Engagement At Movenpick Resort Kuredhivaru Maldives, in line with Accor talent philosophy,iii the employees are the most precious resource. They are committed to placing the way in which they lead the teams at the heart of their company culture. To achieve this, all leaders demonstrates behavior that welcomes, grows and supports their employees (talents) equitably.iv As a managerial responsibility, leaders ensure compliance with the law being a non-negotiable principle and are familiar with the legal environment in which they are carrying out their duties. Accor rejects all forms of discrimination and pledges to support cultural diversity by creating an environment in which everyone has the opportunity to attain professional and personal fulfillment.

1 Managing Organizational Culture …

3

The company’s integrity is built on the diligent application of three closely related, interconnected principles: 1. Understanding the legal framework underpinning our actions (LAW) 2. Meeting or exceeding regulatory standards (ACCOR) 3. Integrating our compliance into a broader ethical agenda (ETHICS). In applying its ethical commitments, Accor ensures compliance with the following fundamental documents: 1. The principles of the 1948 Universal Declaration of Human Rights 2. The International Labour Organisation’s fundamental conventions 3. The OECD Guidelines for Multinational Enterprises issued by the Organisation for Economic Cooperation and Development 4. The ten principles of the United Nations Global Compact. In the business of hospitality, to deliver on the guest experience leaders also make sure that they have the right talent everywhere to enable excellence in serving and anticipating customer needs. The resort Talent and Culture (HR) leaders are charged with the responsibility of ensuring a positive experience of the employees throughout their Journey with the company. Each employee experiences his/her own individual journey—the nature and quality of their journey and the associated outcomes contributes to the customer experience. The talent/employee needs to feel valuedv (refer Exhibit 1.1), and know they are trusted and respected. Fully engaged talent equals higher levels of guest satisfaction and higher levels of talent retention and this is done by enabling and empowering the talent through all phases of their journey. By providing the necessary tools and opportunities; Accor offers opportunities, growth, and a culture of inclusion to let each individual shine and place people at the heart of what they do, and nurture

Exhibit 1.1 Accor employee promise—feel valued

4

V. Garg

real passion for service and achievement beyond limits. Accor believes that there is no one-size-fits-all, and they tailor opportunities to fit each person’s ambition. They boost each talent’s unique potential with continuous learning through coaching, training and mentoring and there is a transparent, consultative talent development process and career pathway which is accessible for all talent at Accor as a part of its Employee Promise “Feel Valued” thereby by fostering a culture of support, learning and development and by encouraging diversity within teams and across all levels of management. Operating in a talent shortage market means that when the talent becomes dissatisfied with their working environment it is easy for them to leave and seek other employment. This means that the process of finding the right talent and developing them to meet the standard of skills, knowledge and behavior begins all over again. This turnover cost the business in both money and time. Even worse is when employees become disengaged and stay with the company. Disengaged employees can impact on the guest experience and the business loses not only money but reputation as a result. This is avoided through constantly seeking feedback from the talent/employees and improving their experience so that they are engaged in the business and deliver exceptional service. Engagement goes further than satisfaction and motivation. It has a positive impact on company performance. It is about people’s intellectual and emotional involvement in their work, and desire to do well, to surpass themselves, to succeed and to help their company succeed. Engaged employees develop 3 main types of behavior: 1. Advocacy & Referral—They talk positively about the company when discussing with their colleagues, customers and entourage. They want others to talk positively about it too. In the Year 2019, the employee engagement survey score for the resort under Advocacy and Referral under is as follows: • Given the opportunity, I tell others great things about working here—70% Positive Perception • I have the opportunity to create memorable/delightful experiences for others (my team, customers, partners etc.) on a regular basis—73% Positive Perception 2. Loyalty—They are attached to the company; they project themselves into its future and do not plan to leave. In the Year 2019, the employee engagement survey score for the resort under Loyalty under is as follows: • I rarely think about leaving this hotel to work somewhere else—41% Positive Perception • It would take a lot to get me to leave this hotel—52% Positive Perception 3. Going an Extra Mile—They get involved in key initiatives to promote the company’s success and are prepared to do more than just what is expected of them. In the Year 2019, the employee engagement survey score for the resort under Going an Extra Mile is as follows: • This hotel inspires me to do my best work every day—70% Positive Perception

1 Managing Organizational Culture …

5

Exhibit 1.2 Project propel road map 2020–2021

• This hotel motivates me to contribute more than is normally required to complete my work—71% Positive Perception • I believe I contribute to the Desired Guest Experience—84% Positive Perception. At Movenpick Resort Kuredhivaru Maldives, it is a priority to improve areas of employee satisfaction and maintain employee’ engagement levels when they are already high. In the year 2019, the overall Employee Engagement Survey Score for the resort was at 73% against the target of 64%. This was the first ever engagement survey post resort opening, and the resort HR team worked towards the goal of further enhancing the scores for the next year while addressing each engagement indices where the resort scored low.

1.3 Project Propel at Movenpick Resort Kuredhivaru Maldives In the beginning of 2020, the Talent & Culture1 team of the resort came up with their Annual Strategic Plan—Project Propel—Vision 2020 (refer Exhibit 1.2), through a strategic workshop in February 2020, the workshop (refer Exhibit 1.3) reviewed the scope for the way forward approach, addressed gaps, reviewed current challenges and look for opportunities to leverage the strengths to set up a systematic plan of action for driving Annual Strategic Plan at Movenpick Resort Kuredhivaru Maldives, while also providing an execution plan, training and resource allocation to this initiative to drive employee engagement, experience and satisfaction. 1 Talent

& Culture—Human Resources|At Accor, the Human Resources Department is known as Talent & Culture globally.

6

V. Garg

Exhibit 1.3 Project propel strategic workshop February 2020

Project Propel is the Annual Strategic Plan of the Talent & Culture Department at Movenpick Resort Kuredhivaru Maldives. This Strategic Plan is the means to coordinate the big bold steps needed to realize the ambitious goals that fit the culture and are appealing to people and therefore Project Propel 2020 aims to ensure a structured, systematic approach, accountability in harmony with HR processes and people at work. This is an effective blueprint to ensure that HR department becomes increasingly attractive to the employees and other stakeholders. The Plan is structured into all the major blocks of strategic guidelines that shape the various initiatives of our Accor Talent Journey (refer Exhibit 1.4). The project vision is also to set new benchmarks for the team and the resort in the area of Human Resources, L&D, Sustainability and Talent & Culture Initiatives while adhering to the corporate guidelines and contributing some innovative best practices to the company and the industry thereby promoting experimentation while treating failures as a learning experience.

Exhibit 1.4 Talent journey

1 Managing Organizational Culture …

7

1.4 Response to Covid-19 Since early March 2020, the health crisis has severely deepened with over half the worldwide population either confined and/or under lock-down. This has resulted in a virtual standstill of travel, dining and entertainment, which is vastly affecting our industry. Since April 2020, more than half Accor branded hotels worldwide including Movenpick Resort Kuredhivaru Maldives were temporarily closed. One piece of good news had been the confirmation of the Chinese hotel market recovery in early April 2020, with mild improvements in occupancy and F&B activity. The abrupt deterioration in the situation had prompted the company to take drastic actions across its global operations. These actions were indispensable to limit the impact on earnings and cash, and necessary to prepare for the post-crisis recovery. In these unprecedented times, the group stands more than ever by its employees,vi partners and communities, providing time, resources and access to its local and global network. Mitigation measures were implemented as early as February. Given the situation, the resort decided to take aggressive, incremental actions. Collectively, these included:—Travel ban, hiring freeze, reduced schedules and/or furloughing teams for Q2, further streamlining all other costs (e.g. sales, marketing, IT), in line with lower revenues. Besides this, resort business had to implement some major cost saving measures to mitigate the financial impact in order to survive in the long term. Due to these developments, the resort was forced to temporarily suspend its operations effective April 2020 and ensured proper communication to its employees by explaining the exact reasons i.e. under-occupancy/order of the authorities/order for the closure with an assurance that the welfare of the employees is top priority and the resort management is doing everything they can to find an acceptable solution for everyone in the current situation. The resort leadership also communicated the opportunities that are available to employees; discuss individual solutions in oneto-one meetings and came up with leave without pay incentive system to monetize those who would proceed on unpaid leaves. During this time, no forced terminations were made by the management to protect the jobs of employees. In line with Project Propel’s focus on processes and crisis management being one of the key component embedded in the Learning & Development strategy for the year 2020 under the compliance pillar, the management also came up with Work From Home SOP and made a regular contact with the teams and assisted them with repartitions to their respective countries. An SOP of temporary resort operations closure was also made available to all employees thereby providing them with a transparent approach towards this crisis management. The leadership team is also keeping a track of ongoing regulatory and statutory changes and would specify a time horizon when employees can expect an update about whether the closure will be extended, or the resort will be prepared for reopening. Team Human Resources also developed a plan for the continuity of leadership in the event of absence of key decision makers and executives and a contingency plan.

8

V. Garg

1.5 Accor Launches ALL HEARTIST FUND As a group, Accor has taken proactive measures to protect its business and support its employees and partners including the creation of the “ALL Heartist Fund”.vii Humility, Strength, Trust: this is the message Mr. Sébastien Bazin, Chairman and the CEO—Accor sent to all employees to weather the storm together and prepare for the rebound. Since the beginning of the Covid-19 crisis, Accor has been mobilizing to protect its business and support its employees and partners, notably with the creation of the “ALL Heartist Fund”. Through this fund, Accor worldwide across all its brands (including Movenpick Resort Kuredhivaru Maldives) is assisting its employees, business partners and front-line fighters in four categories with a strong belief that they are all in this together and it important that Accor support its employees during this challenging period so that when the recovery comes, everyone will stand strong. There are two types of grants under this initiative: financial and non-financial and depending on the applicant’s needs, financial grants are being offered in the following categories: • Category One: an employee who has been infected with Covid19 and needs assistance with medical expenses • Category Two: an employee who is facing financial hardship and needs assistance for food and shelter • Category Three: An individual business partner who is facing medical or financial hardship on a personal level and needs support • Category Four: Local initiatives that support Frontline Covid19 Fighters (e.g. Medical workers). With this initiative, the company has been able to help a large number of employees heavily impacted by the crisis since its launch. While the future remains uncertain and many questions remain unanswered, however the leadership is encouraging the teams to reinvent themselves and review their priorities in order to refocus on the essentials. Authenticity and commitment is the watchwords of this new turning point and as an organization Accor believes in being transparent and empathetic, ensuring that everyone is aligned to global developments at the Group level across its network of hotels.viii

1.6 Accor Launches ALLSAFE Accor has been prioritizing the safety and wellbeing of employees and customers and on a daily basis for more than 50 years, thanks to their high standards of hygiene and cleanliness applied by all its brands around the world. Today, due to the Covid-19 pandemic and to ensure guest safety as hotels reopen, Accor has elevated those norms even further by launching the ALLSAFE Cleanliness & Prevention Labelix which

1 Managing Organizational Culture …

9

represents some of the most stringent cleaning standards & operational protocols in the world of hospitality. ALLSAFE Label—The ALLSAFE global cleanliness & prevention standards have been developed with and vetted by Bureau Veritas, a world leader in testing, inspections and certification. All the Group’s hotels will apply these standards and will be audited either by Accor operational experts or by third-party auditors such as Bureau Veritas to receive this label. Enhanced Cleaning Protocols—New stringent cleanliness standards will be implemented and monitored across all Accor hotels and will include a reinforced cleaning program with frequent disinfection of all high-touch areas like elevators and public restrooms. An enhanced in room cleaning program using hospital grade cleaning materials will now be a standard across all Accor hotels. Enhanced Staff Training—In the hotels, Accor will launch a new comprehensive safety & hygiene training program to ensure all employees worldwide have the skills and education necessary to protect themselves and the guests. Training & Education of employees around will also be included in the ALL SAFE label because of its essential role in the safety and well-being of all. Training will be widely deployed under the responsibility of on-site managers to ensure consistency and efficiency throughout the Accor network. New Guest Contact Measures—To ensure all guests remain safe and healthy during their stay, Accor is implementing new standards to ensure social distancing measures throughout the hotel and specifically in hotel public areas with the provision of individual sanitizer, wipes and masks upon check-in and signage to advise guests of the necessary restrictions. Enhanced Food Safety Standards—In the restaurants and bars, Accor is extending its healthy and sustainable food charter (link) to better respond to the current context with new food safety standards that go beyond government and local regulations: maintaining 1 m distance across tables & maximum 8 per table/group, all employees to wear masks and gloves in kitchens, sanitation gel products available in public restaurant areas, new procedures for buffet service or change from buffet to a la carte as well as enhanced employee training on awareness and cleanliness procedures.

1.7 Basics to Ensure a Smooth Start—Role of Human Resources During the Return-to-Work Phase of the Pandemic This section details several COVID-19 employment and return-to-work considerations and recommendations. Because the pandemic is a fluid situation and highly dependent on jurisdiction- and sector-specific considerations, the resort management

10

V. Garg

anticipates that additional guidance will be coming from the Health Protection Agencies, relevant ministry and regulatory bodies as plans to allow businesses to open in the coming months. As it is unlikely that all employees will be able to return to the workplace at once, the management must consider what employees and departments should return first based on business needs, compliance with ongoing restrictions regarding limitations of operations to “essential business,” and compliance with health precautions such as social distancing. To ensure transparency and to be fair, the legitimate business reasons for this selection process should be documented to provide evidence of non-discriminatory selection criteria if later challenged. Although employees will be coming back to work in a different set up with new rules & regulations to deal with the ongoing situation, leaders and the management are committed to live the core values and adjusting them to the new situation. Some quick actions, new changes and recommendations includes: • Training the staff on all new work and cleaning procedures and ensure that they are always up to date. • Schedule the team based on occupancy and appoint the rest of the staff for additional tasks, or dedicated trainings via corporate training programs. • Providing masks, disposable gloves and access to the gel hydro alcoholic for all employees. • Equip employees with personal work tools whenever possible. • Avoid working in pairs or groups if possible or limit it to tasks that absolutely require to be handled by several persons. • Planning staggered breaks and meal times in order to avoid grouping too many people at one place. • Keeping team roaster as stable as possible and avoid unnecessary rotation of the staff. • To appoint dedicated resource to manage prevention measures e.g. COVID-19 Manager or additional responsibility to be given to the Resort Doctor and the Security Manager (refer Exhibit 1.5). • Must deep clean the workplace and accommodations prior to any employees returning. • Documents for instructing employees should be made available centrally. In addition, the management should regularly (at department meetings or in small groups with intervals) remind about the necessary compliance with the protective measures. It is recommended to inform the employees about the infection transmission and about the protective measures taken in the hotel. The resort management is complying with the Health Protection Agencies and local ministry regulations while being mindful of conforming with obligations regarding confidential treatment of medical information with regards to medical testing results and being sensitive when making decisions regarding who is selected to return to work based on medical conditions. During this recovery and reopening process, the resort Human Resources team is also working closely with the leadership team, serving as an internal consultant, to

1 Managing Organizational Culture …

11

Exhibit 1.5 ALLSAFE officers at Movenpick Resort Kuredhivaru Maldives

respond based on identified priorities. As the teams put plans in place for transitioning toward a post-pandemic normal, it’s critical to understand that the employees won’t be in a place where they can prioritize esteem or self-actualization needs (such as a sense of accomplishment, creativity, achieving one’s full potential), until they are comfortable that their physiological, safety and social needs are adequately being met—in that order. Hence recovery efforts should be highly prioritized with the current need. The Human Resources role includes coaching, developing strategy communication plans, tracking and analyzing metrics and any other actions that would help ensure that employees’ needs are met throughout the return-to-work transition and beyond. Employees’ concerns regarding safety, health, and financial security must be addressed before things can return to a semblance of normalcy. Ideas about best practices for attracting and retaining top talent need to be adjusted based on where our employees are now, at this unique moment in time. This means prioritizing workplace safety and reassuring employees that the organization is taking steps to remain viable and keep its workforce employed in the unfolding economic crisis. As the public health and economic fallout of the COVID-19 pandemic remains top of mind for employers and employees alike, organizations need to ensure proactive planning that addresses these key areas: safety, business viability and work-life concerns. Safety—employees would want to know their employers are taking steps to protect them from exposure to contagious disease and otherwise keep them safe. • Operational Adjustments—cclearly communicate to employees any operational adjustments the company is making to improve workplace safety.

12

V. Garg

• Sanitization/hygiene improvements—inform employees about steps the organization is taking to sanitize the workspace and improve hygiene. • Wellness initiatives—reconsider workplace wellness offerings with COVID-19 concerns in mind and adapt as appropriate. Business Viability—in times of economic uncertainty, employees are concerned about their ability to earn a living and to pay for housing, food and other basic needs. • Transparency—Be transparent and truthful regarding business impact while proactively share information on steps the company is taking to maintain or grow market position, profitability. • Vision—Communicate the organization’s vision and strategy to unify and align employees around it. • Soliciting employee input—Make it easy for employees to share their concerns for senior leadership to address. Work Life Concerns—it’s more important than ever for organizational leaders to empathize with employees and be flexible with regards to work-life balance concerns. • Empathy training for leaders—Provide training and/or coaching to leaders on how to empathize with employees. • Flexible work arrangements—Consider expanding flexible scheduling or remote options for employees. • Mental health support—provide and promote counselling facilities for help navigating the emotional impact of the pandemic. • Employee interest groups (share pandemic-related experiences)—Consider implementing a special interest group for employees who are seeking to connect with others to share pandemic-related experiences. At Movenpick Resort Kuredhivaru Maldives, AudioCapsule initiativex has been rolled out to meet this objective.

1.8 Acculturation to New Normal As employees return to work, the focus will entirely be on ensuring the highest levels of safety, hygiene and well-being with physical distancing and other protocols as deemed necessary. The teams will have to embrace new skills that this ‘new-normal’ will demand. The shift will not be as much on restructuring and rationalization, but on equipping the teams to be multi-skilled, imbibing digital skills to better use technology. They will have to balance with an innate ability to demonstrate incredible levels of warmth and personalized care, the very core of what hospitality is about. Hence there should be an information to employees of the safety, prevention measures, new amendments and policy changes the resort has taken to ensure employee safety and the protocols employees are expected to follow. Materials should be easy to understand and available in the appropriate language and literacy level for all employees.

1 Managing Organizational Culture …

13

As organizations balance their present and future needs, the leaders need to introspect as the businesses emerge into the “new normal”, it’s about what do they want to be known for as an organization and how do their choices and communication today will get them closer to or further from that vision. Some “new normal” recommendations are as follows: Employee Communication—It is a leadership responsibility and all management leaders must be aware of the required policies & protocols since most employees are going through feelings of loneliness and gratitude, it is important for leaders to acknowledge these emotions and communicate accordingly. It cannot be just done via email communication or a conference call, there must be an ongoing dialogue with all the employees at regular intervals. The management must appoint communications coordinator to ensure constant updates from single and reliable source while keeping all employees informed of changes to practices, policies and procedures. The management must also to maintain contact with employees available and suitable for continued work, regular contact with those in self-isolation and with remote workers. This also means candidly communicating with our teams on the ground and empowering them to find solutions to help us all wade through this crisis and emerge stronger on the other side. Leadership Behaviors—In a crisis like this, people observe the leader very closely, they see how his/her energy is and the words he/she is using hence a leader need to be calm and cool while keeping the focus on the right things. The role of leadership is to spark that resilience, stoke that fighting spirit. It comes from a combination of safety and trust in the leader and the company. This is an opportunity for leadership and to be able to make a difference when the teams on the ground need all the possible empathy, support and hand holding through this crisis to emerge unscathed and stronger.xi Social Distancing—Employees must comply with social distancing rules at the worksite as set by the management in line with health protection agency guidelines. Social distancing rules should be communicated electronically and/or in hardcopy at workstations and common areas. Materials should be easy to understand and available in the appropriate language and literacy level for all employees. The training teams might provide video training to returning employees to introduce them to new workplace rules. Employees should acknowledge receipt of rules and training. Human Resources professionals must train supervisors on how best to enforce social distancing rules. Employees may also be required to wash their hands at specified frequencies, following recommended practice at resort. Working Remotely—The management should consider which employees may be able to continue to work remotely to allow those who need to be in the workplace to socially distance. When instructed not to come to work during a pandemic due to office closure, split teamwork arrangement or individual quarantine, all employees who have the tools provided by the company to do so, are required to continue to work from home. Whilst working from home, employees are to paid the same salary that they would be paid, if they were working from the office. Meetings & Class Room Training—The resort management should consider limiting meetings and conduct meetings virtually as much as possible. If in-person

14

V. Garg

meetings are necessary, they must be conducted in a manner consistent with social distancing requirements. The resort management must consider posting updated “maximum occupancy” signage on meetings/training rooms to limit attendance to the number of people who may be in the room while still maintaining the recommended person-to-person distance, removing extra chairs to avoid use of the room by more people at one time than recommended. It is suggested to implement protocols for sanitizing meeting/training spaces between uses throughout the workday. Employee Entertainment—To avoid any work-sponsored or workplace events that involve communal sharing of food, we would need to gently communicate these expectations in advance to employees. It is also recommended to postpone indefinitely in-person events such as sports events, picnics, or team BBQ, fishing trips or island outings due to the challenges of maintaining effective social distancing. Environmental & Physical Considerations—To consider what supplies might be needed to facilitate a smooth return to work, keeping in mind the health protection agency guidelines, as well as applicable return to work orders. The management should pre-order (taking shipping time into consideration) necessary or required products, which will likely include hand sanitizer, paper goods, sanitizing wipes, bottled water, face masks, gloves, etc. Special cleaners might need to be ordered, and personal protective equipment (gowns, gloves, masks) would be needed for any individuals who clean or remove trash and we must prepare signage and other instructions for employees and visitors to their facilities to avoid any confusion related to containment practices upon reopening. Policy Amendements—Paid sick leave clauses needs to be revisited based on COVID-19-related absences. In advance of any potential increase in absence, it is essential that all employees are fully familiar with policy requirements, particularly around what constitutes acceptable reasons for absence, the notification and certification requirements and the social welfare procedures. Remote work policies will also need to be reviewed and revised. The management might need to consider an interim addendum to their handbooks, SOPs and contracts to address these rapidly changing provisions. Also, Human Resources should have detailed policies on what to do when an employee becomes symptomatic, tests positive or is potentially exposed to COVID-19 in line with health protection agency guidelines. Business Travel Policies—It is recommended to defer all non-essential travel. Management should identify what is essential travel and we should follow the advice of the health protection agency regarding information needed to permit an employee’s return to the workplace after visiting any identified high-risk location, whether for business or personal reasons. Employee Recruitment—Human Resources must consider conducting virtual interviews and onboarding process, which will reduce the number of in-person interactions. If in-person interviews are conducted, it is recommended to set certain parameters in place to ensure social distancing (e.g., no handshakes, minimum distance of 6 feet, etc.). Going forward HR professionals may screen job applicants for symptoms of COVID-19 after making a conditional job offer, as long as it does so for all entering employees in the same type of job (without discrimination). New Joinees who have symptoms of acute respiratory illness are recommended to stay home if they are well

1 Managing Organizational Culture …

15

enough to do so or contact the health service if they are acutely unwell. They should not come to work and should restrict their movements for 14 days from symptom onset, the last five days of which should be fever free. The date of joining/contract activation is conditional in such cases. The resort management should also identify the communications coordinator to disseminate communications plan in line with our business needs and the business continuity plan. It must be ensured that all managers and staff are familiar with company policies, relevant legislation and employment act. Vendor & Other Site Visits—The management should consider the potential complications of not allowing vendors and visitors who do not pass screening to come onsite and ensure that such screening is applied uniformly. It is also acceptable to screen visitors before entering a facility (or to simply prohibit visitors altogether). The management must communicate by email or other means to regular visitors, suppliers, and vendors explaining our COVID-19 management policy, asking that no person to arrive the resort for non-essential purposes and explaining any containment practices that all visitors must follow while onsite. We should adhere to HPA guidance, which may require visitor screening (to be developed). Protecting the Employees—It is known that during a crisis like the one being experienced now, organizations are leading teams that are emotionally fragile. This can have a toll on the leaders as they also know that the care, protection and support being offered to the team during this time will be remembered long after the crisis is over. Organizational leaders need to ensure that they can protect the team impacted by this virus, help people avoid doing anything they will regret later, and protect our business and reputation with a fair, just and responsible approach to their team. Companies may be liable for the conduct of team members who discriminate against or harass other team members or guests, unless the employer has taken reasonable steps to avoid the conduct (policy, complaint handling procedures, training conducted, clear direction not to engage in any kind of conduct and acting quickly on complaints and taking action). Employee Counselling & Mental Health Awareness—The employees are in the midst of a mental health crisis. Never before have so many people at work struggled with anxiety, burnout and other serious mental health conditions hence it is important for the leaders and managers to create a culture of trust and compassion. By opening up a dialogue about mental health and showing they care, they’ll build a supportive culture where people feel like they can tell it like it is and bring their whole selves to work. Leaders can build trust and psychological safety when people feel seen and accepted for who they are—and that trust is essential for a high performing team. Best Practices—Virtual Engagement Initiatives at Movenpick Maldives— During this time, when most of the employees are offsite and team building and group engagement activities are restricted due to social distancing norms, the Human Resources team at Movenpick Resort Kuredhivaru Maldives came up with several innovative and learning based programs to engage the teams while providing them with a platform to express and share their stories and ensure mutual learning. These initiatives were rolled out in a phased manner (refer Exhibit 1.6):

16

V. Garg

Exhibit 1.6 Project propel initiatives launch journey

• Leadership Communique—Leadership is about setting an inspiring vision, executing diligently towards reaching that vision, and developing people. So, it’s one of the most important things for a leader. A monthly leadership communique series ensures that there is formal message from the leadership well communicated at all staff levels giving them a direction, information while ensuring transparency in the communication process (refer Exhibit 1.7). • A Day in the Life of Series—“A Day in the Life” series has been introduced for the resort teams to ensure appropriate recognition at workplace. The series focuses on appreciating and recognizing what each one working at the resort does and contribute in the area of their core-competence while performing the daily job. With these short features which will include either a cinematic video or a beautiful photo gallery of go-getters at work, Heartists can get to know each other better (refer Exhibit 1.8). • MasterClass—MasterClass initiative has been implemented to drive a culture of learning and sharing while providing our professional, executive and strategic leaders a platform to share their special skills, knowledge, new trends and best practices related to their area of core competence and expertise. Attendees can access training material, tutorials and other relevant materials from the expert

Exhibit 1.7 Monthly leadership communique

1 Managing Organizational Culture …

17

Exhibit 1.8 A day in the life series

speakers who are invited to conduct a MasterClass. Each class includes video lessons, practical demonstrations, exercises, study material/handouts, and interview sessions with the instructor. Employees, typically experienced in one discipline, may attend these classes to learn the basics of a new, related discipline. During this pandemic, virtual MasterClass via zoom platform on Mindfulnessxii and COVID 19 precautions have been conducted for employees (refer Exhibit 1.9). • AudioCapsule Initiative—AudioCapsule initiative has been designed and introduced at Movenpick Resort Kuredhivaru Maldives to create a culture of mutual learning and sharing while focusing on entrepreneurial leadership. AudioCapsule is an audio series in a podcast format that one can access from the smartphone and listen to it anytime—anywhere. AudioCapsule series is intended to entertain, educate and inspire our colleagues in the background of other boring or

Exhibit 1.9 MasterClass initiative

18

V. Garg

rote activities. It is a series of spoken words, time bound audio episodes, all focused on a particular topic or theme, like management skills, current affairs, review & features, best practices or even a review, short story, song & music etc. During this pandemic, several employees contributed their podcasts on the subject of COVID19 and solidarity messages through this platform. So far over 35+ episodes have been broadcasted (refer Exhibit 1.10). • We are ONE Solidarity Campaign—We are all ONExiii and this belief comes with more confidence during current situation. We captured some of the thoughts, feelings and messages from our employees through 3 simple questions to get inspired as we will emerge from COVID19 stronger and safer. This positive campaign is created to connect and engage with our Heartists during a difficult time and as we are contending with the emotional repercussions of the pandemic while also dealing with anxiety as to balance new realities at work and at home (refer Exhibit 1.11). • CampusConnect Initiative—CampusConnect initiative is an endeavor to ensure a productive and collaborative interface between industry and academia which in the present times of knowledge economy, is a critical requirement. Such interface between academic institutions and their research and development divisions is key to learning and innovation. At Movenpick Resort Kuredhivaru Maldives, such strategic partnerships with academic institutions are vital component embedded in their learning & innovation culture. In line with this objective, Mövenpick Resort Kuredhivaru Maldives signed an MoU with Maldives Business Schoolxiv to promote higher education for its employees being the first resort in the Maldives to have such a partnership with Maldives Business School. With this alliance the local Maldivian employees will benefit from free enrollment to any of Bachelor Degree Program such as Bachelor of Accounting and Finance, Bachelor of Hospitality Management, Bachelor of Business Administration, Bachelor of

Exhibit 1.10 AudioCapsule initiative

1 Managing Organizational Culture …

19

Exhibit 1.11 We are one campaign

Exhibit 1.12 CampusConnect initiative

Human Resource Management. The program is online and will benefit all those at home. This is an perfect opportunity to forge stronger partnerships that will last for many years (refer Exhibit 1.12).

1.9 Employee Feedbacks on Project Propel Employee Engagement Initiatives In June 2020, the Talent & Culture Team conducted an online survey to gauge and secure employee feedback on the initiatives that have been rolled out as a part of

20

V. Garg

Exhibit 1.13 Project propel H1 key indices scores

Exhibit 1.14 Project propel impact H1 2020 survey feedback

Project Propel and as indicated above. The employees and the leaders of the resort appreciated the efforts of Human Resources Team during the crisis and by introducing several interesting programs to keep them engaged. Some of the employee feedback on these initiatives is as follows which is quite encouraging and promising with some suggestions shall be worked upon in the remaining year of 2020. The key index ratings for the initiatives are illustrated below (refer Exhibit 1.13, 1.14, and 1.15) with a ripple effect on the staff turnover reduction (refer Exhibit 1.16).

1.10 Voice of Employees “It gives me an opportunity to learn from an industry specialist regarding so many things. For example, we had a session with Helene Gardiner (Menne) on CrossCultural Collaboration. “Today i will be participating another webinar regarding “Defining the Leader of Tomorrow”. I also had an opportunity to share about how I conduct my role and responsibilities through “A Day in the Life Series” and AudioCapsule Episodes. It such an accumulation of vast knowledge listening to an expert in

1 Managing Organizational Culture …

21

Exhibit 1.15 Project propel initiatives ratings H1 2020 survey feedback

Exhibit 1.16 Impact on reduction of staff turnover 2019 v/s 2020

the industry and fellow colleagues. Also getting to share my opinion and knowledge with them”. “In lockdown period T&C took full initiative to send all heartist them own country. It’s a really well appreciated to T&C”. “It was great experience to participate all above there nothing I can complain all was amazing”. “Continue it. Highlights some works and acknowledged participation more”. “…This is a unique project within the Accor umbrella in Maldives, and she be supported as much as possible”.

22

V. Garg

“Keep doing what has begun. Make more relevant topics/activities regarding the current global situation (how to handle financial crisis for heartists affected during this pandemic)”. “A day in the life of series, it gives the opportunity to shine light/spotlight one particular employee - we usually don’t know what a heartist does or what his work actually entails, it’s also a booster of a motivation for the employee”. “It helps me very well and learn new things and after project propel it helps on organizing/times management”. “A day in life series - to help us to get to know who our colleges are and the likes and dislikes of them will keep us much in a close relationship”. “I would say that there is nothing more to add for any area of improvement since our T&C team is already doing totally excellent job. Our T&C Director, VG is so far away yet so close to all of us here. Doing everything in his global connection to get us an opportunity in participating and learn lots of good things during this pandemic”. “Knowledge sharing and there is a lesson every time from someone improve our career growth and personal life”. “Giving a voice to everyone to share things that matters to them”. “The drive for continuous learning and personal/professional improvement”.

1.11 Conclusion Leadership has a role to play as organizations deal with the current situation and address the new challenges and a leader has to sense the trust and ensure that he/she personally steps up to build trust in the organization. At Movenpick Resort Kuredhivaru Maldives, the management commitment is to work with their employees as best they can individually. They also ask for the flexibility as while working through this together and will continue to review the situation and work closely with all team members. In addition, each team member’s health is of the utmost priority, as well as ensuring to help manage their own risk to the virus and the risk to their families and communities. The management continue to act quickly,xv clearly and promptly at every phase of this crisis and intend to continue this approach for as long as this crisis continues to affect the business and more importantly colleagues. It is understood and fully acknowledged that this unprecedented situation is having a significant impact on the team members in all parts of the business. The management commitment is that they are honest, transparent and open with all team members as they step through each phase. The team is also showing great resilience and commitment and the flexibility that everyone is showing at this time is appreciated. It is times like this that company’s shared values and employee centric culture are being sustained, management of day to day operations are ensured while preparing for the future. Notes i.

https://www.movenpick.com/en/asia/maldives/kuredhivaru/resort-kuredh ivaru/overview/.

1 Managing Organizational Culture …

ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. xiv. xv.

23

https://group.accor.com/en. https://group.accor.com/en/careers/our-philosophy/our-values. https://group.accor.com/en/group/our-commitments/accor-ethics-and-compli ance. https://vimeo.com/226197658. https://group.accor.com/en/Actualites/2020/04/sebastien-bazin-video-mes sage. https://group.accor.com/en/Actualites/2020/04/sebastien-bazin-video-hea rtist-all-fund. https://group.accor.com/en/Actualites/2020/05/video-message-sebastienbazin. https://group.accor.com/en/Actualites/2020/05/allsafe-cleanliness-preven tion-label. https://vimeo.com/user112260885. https://group.accor.com/en/Actualites/2020/05/reignites-the-love-of-tra vel-all. https://vimeo.com/416228018. https://vimeo.com/409366789. https://hotelinsidermv.com/2020/05/19/movenpick-resort-kuredhivaru-mal dives-signs-mou-with-maldives-business-school/. https://vimeo.com/427595882.

Author’s Insight With the rise of the COVID-19 pandemic, organizations are faced with an uncertain and frightening situation, and many businesses being shuttered for an indefinite time. Organization leaders find themselves without the same resources at their disposal to ensure business continuity with an impact on workforce financial and other basic requirements. These indefinite circumstances of the 2020 COVID-19 pandemic have shown the value now–more than ever–of Maslow’s understanding of caring for ourselves and each other. Using Maslow’s Hierarchy as a tool, it’s possible to take a step back and examine what’s most essential and critical for the employees as one of the most essential stakeholders of an organization. While globally, organizational leaders were working to boost the esteem, motivation and recognition needs of their teams in the quarter one of the year 2020, they are now struggling to meet the basic physiological needs for their workforce that includes health & safety, job security, financial stress, etc. as they are likely more motivated by the bottom three rungs: physiological (health, food, water, sleep, clothes, shelter), safety and security (personal, emotional, financial, health), and belonging (friends, relationships, family). According to Maslow’s framework, this is fine, and in fact, the most critical strategy given the current stressors and challenges organizations are facing.

24

V. Garg

Before beginning to address any other needs or attempting to manage what’s out of control during COVID-19, organizations must aim to focus on basic physiological needs first including workforce and workplace health and safety protocols, compliance to regulatory and health protection agencies, assisting the workforce with safe repartitions to their countries, ensuring the safe onsite living environment and medical assistance while working on the precautionary and recovery measures onsite. Until these basic needs are met, it’s unlikely that any attempts to achieve higher-level needs will be successful–nor should they be a priority for an organization. Similar to meeting physiological needs, organizations then need to focus their attention on meeting basic safety needs. Leaders should examine safety needs by reviewing health and safety requirements and workplace conditions so employees can stay physically safe from contracting COVID-19. They also need to ensure that employees fully understand and obey safety procedures like proper handwashing, wearing protective equipment, and practicing social distancing at work. While it is fine to set aside other goals to temporarily focus on training safety measures, hand washing, social distancing, and how to safely wear a mask. It might be the only choice to help protect employees from spreading the infection. The next area of focus is financial security, and it needs to be determined that how leaders are addressing employees and their family’s need for financial security at this time and what are the impacts of COVID-19 on their employment status. Unfortunately, issues of financial security have also added to the stressors, overnight many employees found themselves in uncharted financial waters with uncertainty about employment and housing among the issues. It is thereby crucial for organizations to ensure as soon as possible developing their contingency plans in the event employees face financial insecurity as a result of COVID-19. This can be done through some emergency grants, special loans, assistance through companywide relief funds, or leave without pay incentives. If an organization is capable enough to be meeting basic physiological and safety needs during the initial weeks of the pandemic, Maslow’s Hierarchy suggests examining the need for love and belonging. These needs become even more critical when practicing social distancing and isolation during the pandemic. Leaders should consider and review the ways they can protect employee’s emotional health and by providing structure and routine in this challenging time. Leaders need to stay connected with others while practicing social distancing through virtual engagements or digital platforms. Maslow’s Hierarchy suggests that esteem and self-actualization are higher-order needs, meaning they only become relevant after the basic human needs for safety and survival have been met. In times of high stress, like the current COVID-19 pandemic, leaders may need to shift priorities to focus on different needs. Typically esteem needs to concentrate on things like finding meaning and worth. While things will not go back to normal overnight and it may be difficult to see the light at the end of the tunnel or hold a sense of positive outlook, but tomorrow will be improved only by the struggles being fronted today. The current crisis will eventually pass, and a new normal will emerge—and there are plenty of reasons to believe that the future will be bright. To embrace the new reality, there will be a need

1 Managing Organizational Culture …

25

to create an environment that offers hope, trust, and transparency. Organizations of tomorrow will succeed with emotional relationships with their stakeholders as they include faith and humility in their corporate governance framework. Therefore, it has become even more pertinent to have open and authentic discussions with employees regarding the business realities, share upcoming plans, and encourage collaborative partnerships.

Vaibhav Garg is Area Talent & Culture Manger for Accor in the Maldives and is responsible for the smooth roll out of all Accor Talent & Culture activities and the implementation of Accor Talent & Culture tools, actively promote Accor Values, Heartist culture, Ethics Charter and Accor Group Strategy thereby acting as Accor Ambassadors in creating an environment where all members of the team are recognized as talent and feel valued for their contribution. He is also Director of Talent & Culture at Movenpick Resort Kuredhivaru Maldives and is one of the Global Expert & Mentor for United Nations Global Compact—Young SDG Innovators Program (2019–2020). Wellestablished at Cornell University, Vaibhav served as the Advisory Board Member at Cornell Institute of Healthy Futures from the year 2018–2020 and currently serves as the Industry Scholar involved in hospitality service research initiatives & programs at Cornell University, New York.

Chapter 2

Maladaptive Consumer Behaviors and Marketing Responses in a Pandemic Seth C. Ketron, Judy A. Siguaw, and Xiaojing Sheng

Abstract The COVID-19/coronavirus pandemic has upended consumers’ day-today lives and abruptly halted the operations of many businesses of all sizes. In the face of these challenges, how should marketers respond? Although pundits have suggested a uniform marketing approach in addressing and appealing to consumers during the pandemic, such a universal approach contradicts market segmentation wisdom. To better utilize sound marketing practices, marketers require a clear means of segmenting consumers during global crises. In response to this unfulfilled need, this study builds on the theoretical framework of the Extended Parallel Process Model, or EPPM (Witte 1991, 1992a, b, 1994), and identifies two distinct segments of consumers—labeled as Rejectionists and Survivalists—who have responded to the pandemic in differing maladaptive ways. In this work, each segment is described in detail and validated with cluster analysis, and suggestions are given to marketers for engaging with and promoting to each segment. These market segments are the first to be developed to assist marketers in identifying appropriate engagement and promotional strategies in a national crisis. Keywords Maladaptive consumer behaviors · Coronavirus · Services · Consumer engagement

S. C. Ketron University of North Texas, Denton, TX, USA e-mail: [email protected] J. A. Siguaw East Carolina University, Greenville, NC, USA e-mail: [email protected] X. Sheng (B) The University of Texas Rio Grande Valley, Edinburg, TX, USA e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_2

27

28

S. C. Ketron et al.

2.1 Introduction The COVID-19 pandemic, also known as the coronavirus pandemic, has upended consumers’ day-to-day lives and abruptly halted the operations of many businesses of all sizes in the United States (e.g., Arnold 2020; Cohen and Tankersley 2020). While service firms have undertaken various activities to engage with consumers during the time of the coronavirus crisis, American marketing pundits have cautioned that such efforts need to reflect an awareness of the crisis and express empathy for and an understanding of the stress and uncertainty which consumers felt (Boudet et al. 2020; Steinmetz 2020). Additionally, others have warned that if service firms focused on selling rather than supporting consumers through the pandemic, consumers were likely to deem the company as tone-deaf, and brand trust may have sustained longterm damage (Edelman 2020). Yet, this uniform approach to all consumers and the expectation that they respond in a consistent, compliant way refutes the wisdom of market segmentation and is dangerously flawed (Kubacki et al. 2015, 2017). During the pandemic, consumers have exhibited a wide range of responses. Many consumers have displayed full compliance with government guidelines. However, others have demonstrated problematic behaviors, from non-concern and no voluntary behavioral changes to stockpiling, hoarding, panic buying, and other behaviors resembling doomsday preparation. Identifying and understanding these noncompliant or otherwise problematic consumer behaviors allows marketers to develop appropriate engagement and promotional strategies in national crises for both rational and irrational consumers. While much content has been written in the popular press about engaging with consumers demonstrating desired behaviors (e.g., Boudet et al. 2020; Roesler 2020; Sorrentino 2020; Steinmetz 2020), no one has offered guidelines on how to engage with and promote to consumers who respond in irrational ways. Therefore, the aim of this chapter is to explore two types of irrational consumer segments: Survivalists, who have responded with extreme fear and behaviors such as panic buying, and Rejectionists, who believe the threat of the coronavirus is highly exaggerated and have chosen not to comply with guidelines. We begin by discussing the theory that explains these observed consumer behaviors—the Extended Parallel Process Model (EPPM) (Witte 1991, 1992a, b, 1994)— and then follow with an in-depth exploration of the two sets of maladaptive consumer behaviors that Survivalists and Rejectionists exhibit. Drawing upon results from a cluster analysis with a convenience sample of one hundred twenty four undergraduate and graduate students attending a major public university in the southwestern United States, we present initial evidence of these two consumer segments and show how they differ in their maladaptive responses to the pandemic based on several key theoretical constructs, including perceived threat, susceptibility, self-efficacy, fear, attitude toward the coronavirus narrative, and panic buying. We then suggest engagement and promotion strategies that marketers can use when targeting each consumer group and finish with lessons learned and future ideas for inquiry and application.

2 Maladaptive Consumer Behaviors …

29

2.2 Theoretical Underpinning As stated above, we draw on the Extended Parallel Process Model (EPPM; Witte 1991, 1992a, b, 1994) to understand the observed differences in responses that consumers have exhibited during the coronavirus pandemic. The EPPM builds on and expands Leventhal’s (1970; Leventhal et al. 1983) danger control/fear control framework and Rogers’ (1975, 1983) protection motivation theory to explain how individuals cognitively and emotionally deal with a given danger or threat, such as the coronavirus pandemic. Central to the EPPM is the delineation of a mechanism whereby in the face of a threatening object or event, evaluations of the perceived threat and the perceived efficacy to manage the threat are conjointly assessed to determine the individual’s response. Perceived threat encompasses two underlying dimensions: perceived severity and perceived susceptibility. Whereas perceived severity refers to beliefs about the significance or magnitude of the threat (e.g., “The coronavirus causes death” vs. “The coronavirus is nothing but a common flu”), perceived susceptibility refers to individuals’ beliefs about their risk of experiencing the threat (e.g., “I and other people can get infected with the coronavirus easily from exposure in public spaces” vs. “I’m not at all at-risk for contracting the coronavirus because I am young and invincible”). Perceived efficacy, meanwhile, consists of response efficacy and self-efficacy. While response efficacy refers to thoughts or cognitions about the usefulness and effectiveness of the advocated response in deterring the threat (e.g., “I believe social distancing can help slow down the spread of the coronavirus” vs. “I think wearing face masks does nothing to keep me safe from the coronavirus”), self-efficacy reflects one’s beliefs about one’s ability to carry out the recommended response(s) to avert the threat (e.g., “I am able to comply with the lockdown order and stay at home for as long as it takes” vs. “I think it is close to impossible for me to stay at home and not be out and about”). According to the EPPM, threat appraisals precede efficacy appraisals. When the threat is evaluated as low or non-existent, no efficacy evaluation will occur—the threat will simply be ignored as irrelevant. Indeed, as noted by Witte (1991), the least amount of attitudinal and behavioral change occurs with low perceived threat. When appraisals indicate that the threat is high, however, the efficacy judgment results in the domination of one of two types of motivations: a protection motivation and a defensive motivation. A protection motivation arises when the individual perceives that the severity of and susceptibility to the threat are high and the individual’s efficacy to manage the threat is robust. Protection motivation “arouses, sustains, and directs activity” (Rogers 1975, p. 98) to manage the perceived threat and yields cognitions to avert the threat (Witte 1992a). Defensive motivation surfaces when the severity and susceptibility to the threat is high but perceived efficacy is low (Witte 1992a). Individuals operating under a defensive motivation have increased fear but lack the perceived efficacy to avert the danger. As such, these individuals resort to maladaptive approaches (Witte 1992a).

30

S. C. Ketron et al.

Although the EPPM was developed to explain consumer reactions to advertising fear appeals, such as anti-smoking or HIV protection ads, the framework has since been utilized in a diverse set of research contexts, including communication and health promotion (e.g., Diegelmann et al. 2020; Nandakumar et al. 2017; Noar et al. 2020; Shi and Smith 2016), tourism crisis communication and management (e.g., Liu et al. 2016), social media effects (Jowett and O’Donnell 2018; Oh et al. 2020), sport psychology (Tenebaum and Eklund 2020), and users’ compliant/noncompliant behaviors related to computer security and information assurance (e.g., Johnston and Warkentin 2010; Moody et al. 2018). Many interesting insights have emerged from this line of research. For example, building upon theories of technology adoption and the EPPM, Johnston and Warkentin (2010) found that fear appeals affected end users’ intentions to comply with the recommended computer security actions, but the effect was contingent upon perceptions of self-efficacy, response efficacy, threat severity, and social influence. Additionally, Liu et al. (2016) examined the effect of communication in the face of a health crisis on tourists’ risk attitude, perceived threat, and cruise travel intentions. The authors presented a complex picture of the relationships among these constructs whereby the effect of perceived threat on cruise travel intentions was moderated by perceived efficacy and mediated by perceived safety of cruising. More recently, building on the EPPM, Diegelmann et al. (2020) conducted a qualitative investigation of British road safety campaigns directed against distracted driving resulting from mobile phone use. The authors argue that message content and message structure in terms of the sequence and order of presenting message content relating to threat, susceptibility, and efficacy are both important for fear appeals to be effective and to influence behavior change. These findings speak to the prominence and relevance of the EPPM, which provides a fitting theoretical lens to help understand why consumers have responded and behaved differently in the face of the coronavirus pandemic.

2.3 Pandemic-Based Consumer Behaviors Most consumers experiencing the pandemic have perceived the coronavirus as a serious public health threat and, although the pandemic has evoked anxiety, these individuals have felt confident in their ability to develop and utilize strategies to reduce the threat. Following the danger control process in the EPPM, the high response efficacy and self-efficacy of these individuals have activated a protection motivation, which in turn has led to following the recommended behaviors. They have stayed home and maintained social distancing practices out of concern for their family and their community members, many of whom may be strangers, in order to slow the rate of infection (Goldman 2020). In the beginning, they purchased the recommended two-week supply of food and toiletries, and they have self-isolated as much as possible (Schmidt 2020). These consumers have also been more likely to shop online and/or make less frequent, more extensive shopping visits to necessary stores. Further, to avoid interaction in high-risk medical offices, these consumers

2 Maladaptive Consumer Behaviors …

31

have used telemedicine and home delivery when possible (Rosica 2020) and prepared for working, schooling, and entertainment from home while in isolation (Schmidt 2020). Moreover, they have paid attention only to credible news sources and have not been particularly obsessed with the news, likely seeking out news only when updates have been warranted (Schmidt 2020). They have approached the pandemic from a rational mindset and believe that the behaviors suggested by health experts have been effective in slowing the spread of the coronavirus (Schmidt 2020). They believe they can have a positive impact on their families and their communities by complying with the desired behaviors. As such, the psychological path followed by these individuals was the expected or “normal” reaction to the pandemic threat. On the other hand, as indicated above, not everyone has responded to the threat of the coronavirus by utilizing preferred, adaptive courses of action. Some individuals have evaluated the severity of and susceptibility to the threat as low or nonexistent. According to Allyn and Sprunt (2020), approximately 38% of Americans fall into this category, so this market segment is of a substantial size. In concurrence with the EPPM, these individuals have practiced defensive avoidance (Witte 1992a). They either have evaluated the efficacy of the recommended response superficially or have either partially or totally disregarded recommendations for behavioral modification. Their motivation has been to resist the behavioral change message by repudiating or minimizing the threat of the pandemic, and consequently, refusing to follow the guidelines established by medical experts. Some consumers have even exhibited violent reactions in public spaces when asked to comply with policies, such as the requirement to wear masks—social media is replete with videos and written accounts of such responses (e.g., Rahman 2020; Tyko 2020). Remo (2020) found that these individuals believe that the coronavirus pandemic is “a giant conspiracy” and that “the virus doesn’t even really exist, which is why none of us know someone who has it.” Others have called the pandemic a “hype,” a “hoax,” and/or a “sham” (Gowen 2020; Remo 2020). These consumers believe that the media is creating mass hysteria and is intentionally pressuring the country to shut down most operations, perhaps for political reasons (Gowen 2020; Pew Research Center 2020; Zadrozny and Collins 2020). Ghaemi (2020) explained this behavior as resulting from these individuals deeming their perspectives as more legitimate than scientific evidence. Celeste Kidd, a UC Berkeley computational cognitive scientist, stated: The problem arises when we believe that we know everything there is to know, but we are wrong. When this happens, we are less open to changing our minds based on new information because we don’t seek out new information, and we are more inclined to ignore it when we do encounter it. (Anwar 2020)

Consequently, these individuals have refused to alter their behaviors during the pandemic (Allyn and Sprunt 2020; Gowen 2020) and are more likely to spread false or misleading information about COVID-19 (Gruzd and Mai 2020) to confirm their bias. Other irrational behaviors observed during the pandemic involve panic buying, hoarding, and stockpiling (Kirk and Rifkin 2020). To illustrate the size of this market,

32

S. C. Ketron et al.

approximately 26% of Chinese citizens were found to have engaged in panic buying during the coronavirus crisis (Thomala 2020). It is therefore likely that a sizeable percentage of consumers in the United States have also engaged in this behavior. Perry (2020) noted that maladaptive behaviors from panic buying result from motivations such as herd behavior, loss aversion, and regret. These behaviors are underlaid by fear, appropriately labeled anticipatory anxiety, and driven by a need for these individuals to keep themselves and their families safe while also acquiring some semblance of control over the situation (Gyulai 2020; Preston 2020; Schmidt 2020). However, for these individuals, anticipatory anxiety during the pandemic has become unduly severe (Schmidt 2020), leading to egocentric thinking and engagement in extreme reactions, such as panic buying, hoarding, and stockpiling (FairWarning Staff 2020; Gyulai 2020; Schmidt 2020). Because the reasoning of these consumers has been impeded by high levels of anxiety, these panic-buying and hoarding behaviors have also likely been stimulated by witnessing the panic-buying behavior of others, heightening the probability that these individuals will have purchased too much of certain products by the end of the pandemic, which can lead to waste with perishable products as well as resource depletion for other consumers seeking those products (Antonelli 2020; Dholakia 2020). Panic buying may also have created financial difficulties as these consumers are likely not making smart purchasing decisions (Dholakia 2020). As evidence, on March 12, U.S. household consumer spending at grocery stores increased by 62% over the previous week and 16% at drug stores, as consumers sought to reestablish their sense of control and feelings of security following consecutive announcements of the cancellation of the NBA season, a ban on European travelers, and Tom Hanks’ COVID-19 infection (NCSolutions 2020b). Among the items included in panic buying were toilet paper, which saw an 845% increase in sales; paper towels, which increased 536%; and bottled water, which increased 302% (NCSolutions 2020a). This hoarding behavior had other negative consequences as these mass purchases may have produced scarcity, driving up prices and leading to numerous stockouts when otherwise there would have been adequate product levels for everyone (Antonelli 2020; Perry 2020). Indeed, Pantano and colleagues (2020) report that consumers have had to cope with 300% price increases on some products, which can be at least partially attributed to consumer hoarding of certain goods. These panicbuying behaviors have also fostered violence in retail spaces (i.e., altercations and physical force to obtain products at the expense of others’ needs and safety), which highlight the agitated nature of this buying behavior (Antonelli 2020). Beyond the simple act of panic buying, these consumers have been experiencing high levels of disquiet resulting in stress and isolation that may have caused medical and psychological maladies, such as increased testiness, headaches, and sleeplessness (Schmidt 2020). They have also been more likely to practice tribalism and to have xenophobic reactions stemming from their anxiety (Gyulai 2020; Schmidt 2020). As such, responses to products from some countries or global areas have likely triggered negative visceral responses among this group, especially those areas that have been linked by some to the coronavirus. The above observations suggest that these consumers have appraised the coronavirus threat as severe and believe that

2 Maladaptive Consumer Behaviors …

33

their ability to cope with the pandemic is high, but in reality, they have reacted in a maladaptive manner. To summarize, while some consumers have responded to the pandemic with a rational mindset by utilizing the preferred, adaptive course of action, others have reacted in a maladaptive manner, from categorically denying the existence of the coronavirus on one end to hoarding, panic buying, and physical aggressions in the marketplace on the other. The multitude and divergence of these extreme, irrational reactions indicate that consumers who have engaged in maladaptive behaviors are not a homogeneous group—rather, there are identifiably distinctive segments of consumers within the overall irrational set. This recognition calls for a more finegrained understanding of how consumers differ in their maladaptive responses. Such an understanding will provide insights into developing targeted strategies for each consumer segment to mitigate the damaging impact of maladaptive behaviors on consumers and businesses in the midst of major crises. To do so, we conducted an exploratory cluster analysis to present initial evidence for the existence of distinct consumer segments as they relate to maladaptive behaviors observed during the coronavirus pandemic.

2.4 Evidence from an Exploratory Clustering Analysis 2.4.1 Data Collection and Measures Data were collected from a convenience sample of undergraduate and MBA students who were attending a public university in the southwestern United States in the second week of May 2020, during the coronavirus pandemic. Respondents were surveyed about their opinions and responses to the pandemic. Guided by the theory of EPPM, we included the perceived health threat of the coronavirus, the perceived susceptibility of contracting the coronavirus, self-efficacy in practicing social distancing, fear toward the coronavirus, attitude toward the coronavirus narrative, and panic buying in the survey as the main constructs of interest to this research (each measure employed a seven-point semantic-differential or Likert-type scale/item). Of the 124 respondents in total, 39.5% were males, and the average age was 27.97 years (s.d. = 8.51). More than half of the respondents (53.2%) indicated a combined household income of less than $50,000. In the United States, political ideology has exerted a strong influence on consumer perceptions of and responses toward the coronavirus. For example, van Holm et al. (2020) reported that liberals and moderates made fewer trips outside their homes than conservatives and that liberals and moderates were more likely to conform to the specific behaviors suggested by the government as a means of slowing the spread of the virus. Additionally, Rosenfeld (2020) found that states with more conservative ideologies delayed stay-at-home orders and facilitated a more rapid spread of the coronavirus, while Wong (2020) stated that some U. S. citizens believe that requiring

34

S. C. Ketron et al.

masks is a civil liberties infringement. Consequently, it was important to verify that the sample did not skew toward one dominant ideology. Therefore, political ideology was measured on a 7-point scale, where “1” represented “Extremely liberal” and “7” represented “Extremely conservative.” A histogram plot (see Fig. 2.1) of the data depicts a normal distribution, with a mean score of 3.90 (s.d. = 1.43). Perceived health threat of the coronavirus was measured with three items adapted from Witte et al. (1996) on a 7-point Likert scale (1 = Strongly disagree; 7 = Strongly agree) that asked respondents to indicate their level of agreement to a set of three statements that read “I believe that coronavirus is a severe health threat,” “I believe that coronavirus is a serious health threat,” and “I believe that coronavirus is a significant health threat,” respectively. Perceived susceptibility of contracting the coronavirus was assessed with a single item adapted from Witte et al. (1996) that read “I am at risk for getting coronavirus,” on a 7-point Likert scale (1 = Strongly disagree; 7 = Strongly agree). Self-efficacy was measured with a newly developed item that asked the respondents to indicate their level of agreement with the statement “I am able to practice social distancing to prevent getting coronavirus” on a 7-point Likert scale (1 = Strongly disagree; 7 = Strongly agree). Fear was assessed with six items adapted from Block and Keller (1995) and Laroche et al. (2001) on a 7-point scale (1 = Not at all; 7 = Very much so) that tapped respondents’ feelings toward the coronavirus with anchor words fearful, nervous, scared, worried, anxious, and threatened. Attitude toward the coronavirus narrative was measured using two newly developed items on a 7-point Likert scale (1 = Strongly disagree; 7 = Strongly agree) that read “Coronavirus is a hoax” and “The threat of coronavirus is overstated.” Panic buying was assessed with a single item newly developed for this study on a 7-point Likert scale (1 = Strongly disagree; 7 = Strongly agree) that asked respondents to indicate their level of agreement with the statement “I have engaged in panic buying.” 60

Frequency

50 40 30 20 10 0 1

2

3

4

5

6

7

Political Ideology (1 = extremely liberal to 7 = extremely conservative)

Fig. 2.1 A histogram plot of the distribution of political ideology

2 Maladaptive Consumer Behaviors …

35

2.4.2 Results All multi-item scales demonstrated high reliability (see Table 2.1). The Cronbach’s alpha value was 0.93, 0.97, and 0.76 for perceived health threat of the coronavirus, fear, and attitude toward the coronavirus narrative, respectively. These items were subsequently averaged to create a composite index for each construct. An exploratory K-Means clustering analysis was then conducted using IBM SPSS Statistics 25 to ascertain whether there were distinct segments of consumers based on perceived threat, susceptibility, self-efficacy, fear, attitude toward the coronavirus narrative, and panic buying behavior, all in line with the above discussion. Importantly, this analysis is not intended to be a comprehensive, thorough assessment of clusters; rather, we are simply seeking with this pretest to initially validate the observations and assumptions above. Table 2.1 also shows the descriptive statistics for these constructs and their measurement items. Table 2.2 displays the inter-construct correlations. Table 2.1 Constructs, measures, factor loadings, and descriptive statistics Constructs and measures

Mean Std. deviation Factor loadings Cronbach’s α

Perceived threat

5.88

1.43

• I believe that coronavirus is a severe health threat

5.81

1.58

0.85

• I believe that coronavirus is a serious health threat

5.96

1.51

0.88

• I believe that coronavirus is a significant health threat

5.87

1.50

0.88

Susceptibility

4.81

1.68

6.07

1.30

• I am at risk for getting coronavirus Self -efficacy

0.93

– –

• I am able to practice social distancing to prevent getting coronavirus

– –

Fear

4.40

1.90

• Fearful

4.35

1.97

0.92

0.97

• Nervous

4.52

2.06

0.92

• Scared

4.23

2.02

0.93

• Worried

4.69

2.05

0.91

• Anxious

4.56

2.06

0.89

• Threatened

4.08

1.98

0.85

Attitude

2.50

1.65

• Coronavirus is a hoax

0.76

2.20

1.61

0.95

• The threat of coronavirus is overstated 2.81

2.04

0.74

Panic buying

1.71

• I have engaged in panic buying

2.79

– –

36

S. C. Ketron et al.

Table 2.2 Inter-construct correlations Perceived threat

Susceptibility

Self-efficacy

Fear

Attitude

Panic buying

Perceived threat

1

0.163

0.476**

0.554**

−0.519**

−0.007

Susceptibility

0.163

1

0.197*

0.273**

−0.168

0.065

Self-efficacy

0.476**

0.197*

1

0.263**

−0.396**

−0.092

Fear

0.554**

0.273**

0.263**

1

−0.360**

0.149

−0.360**

1

0.022

0.149

0.022

1

Attitude

−0.519**

−0.168

−0.396**

Panic buying

−0.007

0.065

−0.092

**p = 0.01 (2-tailed); *p = 0.05 (2-tailed)

Table 2.3 Summary of cluster analysis results

Survivalists

Rationals

Rejectionists

Perceived threat

6.56

6.34

3.74

Susceptibility

5

5

4

Self-efficacy

7

6

5

Fear

5.83

4.64

2.11

Attitude

1.90

2.05

4.56

Panic buying

5

2 27.22

3

Age (years)

28.73

29.42

Gender

38.5% males 37.8% males 45.8% males

Number of cases in 26 each cluster

74

24

Percentage of each 20.97% cluster

59.68%

19.35%

Table 2.3 summarizes the results from the K-Means clustering analysis. As shown in Table 2.3, the results indicate a three-cluster solution of which one cluster consisted of rational consumers practicing adaptive behaviors and the other two of maladaptive consumers. These clusters confirm the consumer segment descriptions above. The majority of respondents, as expected, fell into Cluster 2—which we have labeled Rationals—consisting of those who perceived the threat as high (M = 6.34), their susceptibility as moderately high (M = 5), and their self-efficacy as very high (M = 6). Their fear is moderate (M = 4.64), their attitude toward the coronavirus narrative is low (M = 2.05), and they do not engage in panic-buying behavior (M = 2). The average age of Rationals was 27.22 years old, and 37.8% were males. Given that the focus of this chapter is on irrational segments, we turn our attention now to Clusters 1 and 3. While consumers in Cluster 1—termed Survivalists— perceived the coronavirus as a perilous threat to health (M = 6.56), those in Cluster 3 (Rejectionists) seemed to think otherwise, as reflected by their low score on perceived threat of the disease (M = 3.74). Survivalist consumers exhibited a much higher

2 Maladaptive Consumer Behaviors …

37

level of fear (M = 5.83) than the Rejectionist consumers (M = 2.11). As for attitude toward the coronavirus narrative, Rejectionist consumers seemed to think that the coronavirus was a hoax and that the danger of this disease was overstated (M = 4.56). In contrast, Survivalists (M = 1.90) did not consider the menacing impact of the virus as exaggerated. Finally, Survivalists engaged in more panic buying (M = 5) than Rejectionists (M = 3). In terms of demographics, while the Survivalist cluster consisted of 38.5% males, the Rejectionist cluster was composed of 45.8% males, suggesting that males are more common among the Rejectionist segment than either the Survivalist or the Rational segment. Finally, the mean age for Survivalist consumers was 28.73 years old and 29.42 years old for Rejectionists, suggesting that irrational responses may not necessarily differ by age. However, this insight should be taken contextually, given that the sample came from undergraduate and graduate students (who, on average, are younger than the average U.S. consumer). Moreover, while the percentage of Survivalists and Rejectionists were fairly high in this student sample (20.97 and 19.35%, respectively), the research of others indicates that the existence of Survivalists and Rejectionists in the general population is markedly higher (26 and 38%, respectively; Allyn and Sprunt 2020; Thomala 2020). In any case, these two irrational segments are sizeable and offer significant potential for market segmentation. Figure 2.2 depicts the three consumer clusters as discussed above.

More Survivalists

Panic buying Rejectionists Rationals

Less Low

High

Overall assessment of the danger of the coronavirus pandemic

Fig. 2.2 An illustration of the three consumer segments, panic buying, and the pandemic

38

S. C. Ketron et al.

2.5 Engagement and Promotional Strategies The pandemic engagement and promotional strategies proposed by marketing pundits—reflecting awareness of the crisis, focusing on supporting consumers and expressing empathy for the stress which consumers feel (Edelman 2020; Steinmetz 2020)—are appropriate for consumers who follow the expected or “rational” path of behavioral compliance. However, we argue and demonstrate with exploratory data that there are substantial segments of “irrational” consumers—those unwilling to acknowledge the full force of the threat and those who have had basal, irrational responses to the pandemic—and that these segments require different marketing strategies. We have summarized the engagement and promotional strategies in Table 2.4, which we discuss in greater depth below. The first group, the Survivalists, have experienced higher emotionality in response to the threat of the coronavirus. In response to their high levels of distress, they hoard goods in order to feel better and to feel in control (Muthalaly 2020). Nonetheless, Survivalists should not be encouraged to engage in panic buying, which can lead to extensive stockouts and dissatisfaction among other consumers. Consequently, providers need a method of mitigating panic among Survivalists. Survivalist consumers should respond better to appeals that positively address their emotions and convey empathy for them as the Survivalists try to handle their distress. They need marketing messages and efforts to reduce their levels of anxiety. Businesses and organizations targeting Survivalists need to avoid shaming consumers in this segment and instead congratulate them on their advanced planning to protect themselves and their families, recognizing that Survivalists believe they are extremely capable of managing such a crisis, even if the result is not the desired behavior. Stiff (2020) suggests creating a feeling of kinship among shoppers to foster feelings of Table 2.4 Suggested engagement and promotional strategies for survivalists and rejectionists

Strategies for “irrational” consumer segments Survivalists

Rejectionists

Emotional confirmation and empathy Avoid shaming Signal that more inventory is en route Provide specific replenishment dates Encourage variety seeking Encourage online shopping/ordering Offer appointments Offer BOGO (buy one get one) promotions Limit shopping capacities Limit number of units per product per transaction

Maintain appearance of “normalcy” Use typical kinds of messaging content and delivery Avoid overt acknowledgement of pandemic Implement safety measures behind line of visibility Rotate front line employees frequently Offer percent-off or dollar-off promotions

2 Maladaptive Consumer Behaviors …

39

cooperation and not acknowledging panic buying to avoid triggering corresponding aping behavior from Survivalists. For example, firms could focus their messaging on assuring Survivalists that more inventory is en route, perhaps providing specific information (i.e., arrival dates) about these replenishment shipments to allay fears of long-term inventory depletion (e.g., Kirk and Rifkin 2020; Pantano et al. 2020). These firms may also offer alternative solutions to everyday problems and encourage variety seeking to shift focus from single popular brands that may be stocked out. Additionally, organizations may want to encourage online ordering for Survivalists, so that they know when the products they ordered will be delivered. As such, assurance of supply and replenishment as well as the offering of alternative viable solutions could reduce anxiety and panic buying among Survivalists. Finally, Stiff (2020) suggests only allowing a small number of people into retail spaces to reduce the selfish behavior of panic buying. As service businesses plan to reopen, they can engage the Survivalists weeks before the scheduled opening by implementing reservation systems on their websites and mobile apps and offering recurring appointments or “buy one, get one” service promotions (similar sales promotions would also work for goods-focused firms, as well). Doing so will reduce Survivalist consumers’ anxiety about an inability to acquire desired service appointments when others may also be trying to obtain similar time slots. Moreover, this approach feeds Survivalist consumers’ need to panic buy as a form of control over the situation while ensuring the service business can successfully reopen with adequate supply and demand planning. On the other hand, Rejectionists have not wanted to be reminded of the pandemic as they are skeptical of the existence of the coronavirus and the seriousness of the risk of infection. Ideally, businesses and organizations who are marketing to this segment would avoid any mention of the pandemic and not change any current engagement or promotional efforts. McMurty (2020) encourages business to continue with regular emails, ads, statements, etc., and to provide distractions such as interesting stories about the company, its brands, and constituents. Undertaking the normal business activities enables service firms to act as a “beacon of hope” and a source of relief for this market segment, especially when many within the group believe that the media have overhyped the pandemic (Kloor 2020). To the degree possible, firms targeting Rejectionist consumers should acknowledge that non-compliance is a valid response (Chotiner 2020) and these firms may avoid overtly acknowledging the existence of the coronavirus (Maheshwari 2020), though doing so need not necessarily mean that the firm does not take action behind the line of visibility to keep employees and customers safe. By keeping messaging positive and focusing on business as usual, service organizations can provide reassurance to Rejectionists and ensure they remain customers (Maheshwari 2020; McMurty 2020). However, while these firms need to consider the health, well-being, and concerns of their employees and ensure they are supported, more subtle protections for employees, such as frequent rotation to minimize exposure and greater access to handwashing stations, would help with supporting employees while not providing overt signals of the pandemic to Rejectionists. Additionally, some firms with high percentages of Rejectionist customers may have increased inventory levels due to

40

S. C. Ketron et al.

anticipated higher demand. Though Rejectionists are highly unlikely to stockpile, they may respond well to sales promotions that do not encourage buying more units of a product than usual (i.e., price-off or percent-off). Message content is only one component of tailoring strategies toward these consumer segments. During the pandemic, all consumers have been consuming more broadcast, cable, and streaming television as well as video games (Balis 2020). Identifying the specific channels, shows, and video games relevant to each consumer segment will allow marketers to send relevant and timely messages to their particular target markets and identify appropriate product placement opportunities. Bored consumers may also be accessing social media more frequently, which provides additional opportunities for marketers to provide fitting messages to those consumers. Balis (2020) and Diebner et al. (2020) note that marketers will want to constantly monitor consumer attitudes, emotions, and usage trends in real time across all social media platforms, websites, and product information databases to routinely adapt promotional messaging and channels to target desired market segments. In light of the finding that Survivalists have a greater tendency to hoard and stockpile products, knowledge about consumers’ media preferences and habits will allow marketers to deliver timely updates through their preferred communication channels about product availability, store hours, and product delivery options to reduce panic buying amongst Survivalist consumers. Doing so will also help marketers minimize the occurrence of product shortages and stockouts, both of which may trigger Survivalist consumers to escalate their panic buying behaviors and result in violent retaliations from other consumers. In a similar vein, although our results also show that Rejectionist consumers have followed the defensive avoidance route to tune out messages related to the pandemic, another maladaptive behavior in the face of the pandemic, marketers could stay engaged with these consumers through their preferred communication channels with product and service offering updates to maintain the relationship. However, it should be noted that Rejectionist consumers are unlikely to respond positively to any references to the pandemic that do not align with their confirmation bias, so messages should be carefully designed.

2.6 Lessons Learned and Future Ideas Not all consumers respond to national crises, such as pandemics, in the same way, and the COVID-19/coronavirus pandemic has clearly illustrated this fact. Consequently, marketers need guidance on how to reach different consumers in more segmented ways that would be permitted by a general, blanket strategy. Namely, the recognition that consumers evaluate major threats in vastly different ways supports the contention that consumers should not receive uniform marketing treatments during pandemics or other crises. Therefore, this chapter utilizes the theory of the Extended Parallel Process Model (EPPM) to highlight segments of consumers who have maladaptive reactions to the threat of a pandemic. We have labeled these consumers Survivalists and Rejectionists, each group holding different beliefs and exhibiting different

2 Maladaptive Consumer Behaviors …

41

reactions to the pandemic. As discussed previously, service firms should undertake special strategies to appeal to these segments depending on their target markets. For example, rather than utilizing umbrella messages (“In these difficult times…;” “We will work together…;” etc.), marketers should ensure that they use targeted messages in future crises based on who their customers are and how they perceive the calamity. In doing so, marketers can avoid alienating key customers who engage in maladaptive coping strategies during crises. Beyond the recommended strategies above, the findings of the data in this chapter suggest avenues of future inquiry. For one, different motivations underlie consumer responses to the pandemic. Some of these motivations may arise from a need to maintain cognitive consistency (Festinger 1957). For example, Rejectionists may view the pandemic as a hoax because they may hold pre-conceived notions about the government or the media. Acknowledging the threat of the coronavirus as legitimate would introduce cognitive dissonance for Rejectionist consumers. Marketers may also be able to segment appeals to motivational mindsets, such as different message strategies aimed at promotion- vs. prevention-focused consumers in line with regulatory focus theory (Higgins 1998). Given that in the pandemic, for example, Survivalists appear strongly prevention-focused (i.e., motivated by avoidance of loss and duties/obligations), messages based on loss avoidance strategies would be likely to appeal to these consumers, perhaps even providing needed assurance that could reduce fear and panic buying. Additionally, marketers may be able to influence how Survivalists and Rejectionists perceive information about the pandemic, which can shift the perspectives of both segments. For example, construal-level theory argues that consumers process information at either a low (concrete) or a high (abstract) level (Trope and Liberman 2010). Consumers thinking in concrete terms tend to focus on specific attributes and short-term effects, whereas thinking in abstract terms leads to a focus on broader goals or benefits and more long-term influences. Given the Rejectionists’ stubborn denial of the threat of the coronavirus and their subsequent refusal to follow guidelines (i.e., wearing masks in public), these consumers are likely thinking in concrete terms, focusing only on the short-term discomforts of following the guidelines and how the processes that have been recommended affect them individually. However, marketers could frame messages or otherwise sway these consumers to think more about the long-term and about the bigger social picture (i.e., “We know it is uncomfortable now, but think about how much faster we can reopen if everyone complies”). Likewise, Survivalists’ hyper-focus on hoarding products in the short term could be extended to think more about long-term occurrences (i.e., that inventory will be replenished soon and that stockouts of toilet paper and cleaning products will not last forever). In closing, just like any other study, our research has limitations. One such limitation is that data were collected from a convenience sample of undergraduate and graduate students and therefore are not representative of the broader U.S. population. Consequently, study results may not be generalizable beyond the current sample. Researchers could use a representative sample to verify if the three-cluster solution found in the current solution still holds. Another limitation pertains to the sample

42

S. C. Ketron et al.

size of the current data set. Although the extant literature does not provide clear-cut guidance as to the minimum sample size for cluster analysis, a sample size larger than the current 124 observations will be needed for conducting cross-validation analysis to ascertain the stability of the cluster structure. Therefore, going forward, future research should aim to collect more data within the U.S. and from outside of the U.S. to check the robustness of the three-cluster solution, especially given the wide differences in how countries have responded to the pandemic as well as cultural approaches to dealing with pandemic conditions (i.e., do other countries have as many consumers militantly protesting pandemic-related restrictions?). Finally, the current study is theoretically grounded in the EPPM. Future studies could expand the EPPM by incorporating individual difference variables, such as uncertainty avoidance and information avoidance tendency, that are lacking in the EPPM to help identify the boundary conditions for the effects and relationships as predicted by the theory.

Authors’ Insights In the United States, service businesses, following the advice of marketing agencies and marketing “experts,” have undertaken a common approach to engage consumers during the coronavirus pandemic. As a result, slogans such as “We’re in this together” and “We live in unprecedented and uncertain times” have regularly been blasted across television screens, social media, print, and other media sources to promote the idea of solidarity between service organizations and their selected target markets. The implication is that all Americans are staying home when possible, following social distancing protocols, wearing face masks, and striving to serve as guardians of more vulnerable segments of the population. Moreover, service firms, through the “together” message, are indicating support of this compliant behavior. However, in a citizenry that values independence above all else and is more resistant to collective action than any other country (Chotiner 2020), the idea that service organizations would issue a common message promoting a theme of obedience across a wide swath of the American population appears flawed, potentially alienating previously loyal target markets. Recognition of this issue led us to identify market segments that do not adhere to the “together” behaviors. Indeed, these segments are largely non-compliant with the desired pandemic behaviors, yet they comprise significant percentages of the U.S. population. We have labeled these market segments Rejectionists and Survivalists and utilize the Extended Parallel Process Model (EPPM) to explain the maladaptive behaviors these segments display. Further, we offer empirical evidence of these consumer segments through measures that align with the discussions of these segments, initially confirming the existence of the segments. Further, we highlight the importance of utilizing different strategies in appealing to these consumers. Namely, if service businesses are targeting members of these segments, the message of solidarity and unity concerning behaviors to be utilized in the fight against the coronavirus could readily place the service organization and the target market in opposition.

2 Maladaptive Consumer Behaviors …

43

Service businesses must change their messaging for these market segments, and in the case of Rejectionists, outwardly ignore the existence of the pandemic. Failure to do so may mean these market segments may abandon engagement with and patronage of those firms, damaging business performance in both the short and long terms. Summarily, from this chapter, we hope that marketers of services as well as other products can make sound strategic decisions with different consumer segments in crisis situations. While each major crisis poses its own unique circumstances and challenges, consumers tend to respond in similarly segmented ways across contexts, and the lessons learned from the COVID-19/coronavirus pandemic can inform marketing decisions both as the current pandemic runs its course and as marketers look to be prepared for future crises.

References Allyn, B., & Sprunt, B. (2020, March 17). Poll: As coronavirus spreads, fewer Americans see pandemic as a real threat. NPR [online]. Available at: https://www.npr.org/2020/03/17/816 501871/poll-as-coronavirus-spreads-fewer-americans-see-pandemic-as-a-real-threat. Accessed 9 May 2020. Antonelli, A. F. (2020, March 13). Weekly line: The psychology behind COVID-19 panic buying. Advisory Board [online]. Available at: https://www.advisory.com/daily-briefing/2020/03/13/wee kly-line. Accessed 9 May 2020. Anwar, Y. (2020, March 26). Coronavirus skeptics, deniers: Why some of us stick to deadly beliefs. Berkley News [online]. Available at: https://news.berkeley.edu/2020/03/26/coronavirus-skepticsdeniers-why-some-of-us-stick-to-deadly-beliefs/. Accessed 9 May 2020. Arnold, C. (2020, March 16). America closed: Thousands of stores, resorts, theaters shut down. NPR [online]. Available at: https://www.npr.org/2020/03/16/816398498/america-closed-thousa nds-of-stores-resorts-theaters-shut-down. Accessed 22 June 2020. Balis, J. (2020, April 6). Brand marketing through the coronavirus crisis. Harvard Business Review [online]. Available at: https://hbr.org/2020/04/brand-marketing-through-the-coronavirus-crisis. Accessed 17 May 2020. Block, L. G., & Keller, P. A. (1995). When to accentuate the negative: The effects of perceived efficacy and message framing on intentions to perform a health-related behavior. Journal of Marketing Research, 32(2), 192–203. Boudet, J. Gordon, J., Gregg, B., Perrey, J., & Robinson, K. (2020, April 8). How marketing leaders can both manage the coronavirus crisis and plan for the future. McKinsey & Company [online]. Available at: https://www.mckinsey.com/business-functions/marketing-and-sales/ our-insights/how-marketing-leaders-can-both-manage-the-coronavirus-crisis-and-plan-for-thefuture. Accessed 19 May 2020. Chotiner, I. (2020, March 23). How to talk to coronavirus skeptics. The New Yorker [online]. Available at: https://www.newyorker.com/news/q-and-a/how-to-talk-to-coronavirusskeptics. Accessed 23 June 2020. Cohen, P., & Tankersley, J. (2020, March 16). America’s economy begins to shut down as pandemic measures take hold. The New York Times [online]. Available at: https://www.nytimes.com/2020/ 03/16/business/economy/coronavirus-us-economy-shutdown.html. Accessed 22 June 2020. Dholakia, U. (2020, March 21). Why are we panic buying during the coronavirus pandemic? To alleviate fear and anxiety, to mimic others, and to react to future scarcity. Psychology Today [online]. Available at: https://www.psychologytoday.com/us/blog/the-science-behind-behavior/ 202003/why-are-we-panic-buying-during-the-coronavirus-pandemic. Accessed 9 May 2020.

44

S. C. Ketron et al.

Diebner, R., Siliman, E., Ungerman, K., & Vancauwenberghe, M. (2020, April 2). Adapting customer experience in the time of coronavirus. McKinsey & Company [online]. Available at: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/ adapting-customer-experience-in-the-time-of-coronavirus. Accessed 17 May 2020. Diegelmann, S., Ninaus, K., & Terlutter, R. (2020). Distracted driving prevention: An analysis of recent UK campaigns. Journal of Social Marketing, 10(2), 243–264. Edelman, R. (2020, March 30). Special report: Brand trust and the coronavirus pandemic. Edelman Trust Barometer 2020 [online]. Available at: https://www.edelman.com/sites/g/files/aatuss191/ files/2020-03/2020%20Edelman%20Trust%20Barometer%20Brands%20and%20the%20Coro navirus.pdf. Accessed 9 May 2020. FairWarning Staff. (2020, March 18). I win. I got the most toilet paper. FairWarning: News of Public Health, Consumer and Environmental Issues [online]. https://www.fairwarning.org/2020/03/ishoarding-a-problem-coronavirus/. Accessed 9 May 2020. Festinger, L. (1957). A theory of cognitive dissonance. Evanston, IL: Row, Peterson, & Co. Ghaemi, N. (2020, March 24). The psychology of pandemic denial: Why do some people reject the science of public health? Psychology Today [online]. Available at: https://www.psychologytoday. com/us/blog/mood-swings/202003/the-psychology-pandemic-denial. Accessed 9 May 2020. Goldman, L. (2020, March 27). What are the rules of social distancing? Vox [online]. Available at: https://www.vox.com/2020/3/15/21179296/coronavirus-covid-19-social-distancing-bored-pan demic-quarantine-ethics. Accessed 9 May 2020. Gowen, A. (2020, March 19). Coronavirus deniers and hoaxers persist despite dire warning, claiming “it’s mass hysteria.” The Washington Post [online]. Available at: https://www.washin gtonpost.com/national/coronavirus-deniers-outbreak-hoax/2020/03/19/46bc5e46-6872-11eab313-df458622c2cc_story.html. Accessed 9 May 2020. Gruzd, A., & Mai, P. (2020, April 23). “Coronavirus deniers” spreading dangerous misinformation, conspiracies about pandemic. Medical Xpress [online]. Available at: https://medicalxpress.com/ news/2020-04-coronavirus-deniers-dangerous-misinformation-conspiracies.html. Accessed 9 May 2020. Gyulai, L. (2020, March 27). Coronavirus: The psychology of hoarding during a pandemic. Montreal Gazette [online]. Available at: https://montrealgazette.com/news/local-news/coronavirus-the-psy chology-of-hoarding-during-a-pandemic/. Accessed 9 May 2020. Higgins, E. T. (1998). Promotion and prevention: Regulatory focus as a motivational principle. In M. P. Zanna (Ed.), Advances in experimental social psychology (Vol. 30, pp. 1–46). New York: Academic Press. Johnston, A. C., & Warkentin, M. (2010). Fear appeals and information security behaviors: An empirical study. MIS Quarterly, 34(3), 549–566. Jowett, G. S., & O’Donnell, V. (2018). Propaganda & persuasion (7th ed.). Los Angeles: Sage. Kirk, C. P., & Rifkin, L. S. (2020, September). I’ll trade you diamonds for toilet paper: Consumer reacting, coping and adapting behaviors in the COVID-19 pandemic. Journal of Business Research, 117, 124–131. Kloor, K. (2020, March 22). Inside the COVID-denialist internet bubble. Politico [online]. Available at: https://www.politico.com/news/magazine/2020/03/22/inside-fringe-internet-coronavirus-bub ble-142960. Accessed 23 June 2020. Kubacki, K., Rundle-Thiele, S., Lahtinen, V., & Parkinson, J. (2015). A systematic review assessing the extent of social marketing principle use in interventions targeting children (2000–2014). Young Consumers, 16(2), 141–158. Kubacki, K., Rundle-Thiele, S., Pang, B., Carins, J., Parkinson, J., Fujihara, H., et al. (2017). An umbrella review of the use of segmentation in social marketing interventions. Segmentation in Social Marketing, 117(1), 9–23. Laroche, M., Toffoli, R., Zhang, Q., & Pons, F. (2001). A cross-cultural study of the persuasive effect of fear appeal messages in cigarette advertising: China and Canada. International Journal of Advertising, 20(3), 297–317.

2 Maladaptive Consumer Behaviors …

45

Leventhal, H. (1970). Findings and theory in the study of fear communications. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 5, pp. 119–186). New York: Academic Press. Leventhal, H., Safer, M. A., & Panagis, D. M. (1983). The impact of communications on the self-regulation of health beliefs, decisions, and behavior. Health Education Quarterly, 10, 3–29. Liu, B., Pennington-Gray, L., & Krieger, J. (2016). Tourism crisis management: Can the extended parallel process model be used to understand crisis responses in the cruise industry? Tourism Management, 55, 310–321. Maheshwari, S. (2020, April 19). Don’t mention the virus! And other marketing tips. New York Times [online]. Available at: https://www.nytimes.com/2020/04/19/business/coronavirus-influe ncers.html?auth=login-email&login=email. Accessed 23 June 2020. McMurty, J. (2020, March 19). Take a break and carry on: Adjust your mindset and messaging during coronavirus pandemic. Target Marketing [online]. Available at: https://www.targetmarket ingmag.com/post/adjust-mindset-messaging-coronavirus-pandemic/. Accessed 23 June 2020. Moody, G. D., Siponen, M., & Pahnila, S. (2018). Toward a unified model of information security policy compliance. MIS Quarterly, 42(1), 285–334. Muthalaly, S. (2020, April 16). The stock-home syndrome: How to deal with panic buying during the COVID-19 pandemic. The Hindu [online]. Available at: https://www.thehindu.com/society/ the-stock-home-syndrome-how-to-deal-with-panic-buying-during-the-covid-19-pandemic/art icle31347058.ece. Accessed 22 June 2020. Nandakumar, N., Sivakumaran, B., Kalro, A., & Sharma, P. (2017). Threat, efficacy and message framing in consumer healthcare. Marketing Intelligence & Planning, 35(4), 442–457. NCSolutions. (2020a, March 16). To the grocery store we go. NCS COVID-19 Resources [online]. Available at: https://www.ncsolutions.com/covid/to-the-grocery-store-we-go/. Accessed 23 June 2020. NCSolutions. (2020b, March 18). A bulk buying tipping point. NCS COVID-19 Resources [online]. Available at: https://www.ncsolutions.com/covid/a-bulk-buying-tipping-point/. Accessed 23 June 2020. Noar, S. M., Rohde, J. A., Barker, J. O., Hall, M. G., & Brewer, N. T. (2020). Pictorial cigarette pack warnings increase some risk appraisals but not risk beliefs: A meta-analysis. Human Communication Research, 46(2–3), 250–272. Oh, S. H., Lee, S. Y., & Han, C. (2020). The effects of social media use on preventive behaviors during infectious disease outbreaks: The mediating role of self-relevant emotions and public risk perception. Health Communication, pp. 1–10. Available at: https://doi.org/10.1080/10410236. 2020.1724639. Accessed 22 June 2020. Pantano, E., Pizzi, G., Scarpi, D., & Dennis, C. (2020). Competing during a pandemic? Retailer’s ups and downs during the COVID-19 outbreak. Journal of Business Research, 116(August), 209–213. Perry, S. (2020, March 13). The psychology behind panic buying (and what we can do to resist it). MinnPost [online]. Available at: https://www.minnpost.com/second-opinion/2020/03/the-psy chology-behind-panic-buying-and-what-we-can-do-to-resist-it/. Accessed 9 May 2020. Pew Research Center. (2020, March 18). U.S. public sees multiple threats from the coronavirus— And concerns are growing. Pew Research [online]. Available at: https://www.people-press.org/ 2020/03/18/u-s-public-sees-multiple-threats-from-the-coronavirus-and-concerns-are-growing/. Accessed 9 May 2020. Preston, S. (2020, March 27). Stop shaming people for hoarding during a global pandemic, it’s totally normal. NewsOne [online]. Available at: https://newsone.com/3917962/covid-19-hoarding-soc ial-media-shaming/. Accessed 9 May 2020. Rahman, K. (2020, May 20). Video of costco employee taking customer’s cart for refusing to wear mask goes viral. Newsweek [online]. Available at: https://www.newsweek.com/video-costco-emp loyee-taking-customer-cart-mask-viral-1505308. Accessed 4 July 2020.

46

S. C. Ketron et al.

Remo, J. (2020, March 20). What do all the coronavirus deniers have to say now? I asked them. NJ.com [online]. Available at: https://www.nj.com/coronavirus/2020/03/what-do-all-the-corona virus-deniers-have-to-say-now-i-asked-them.html. Accessed 9 May 2020. Roesler, P. (2020, April 1). Tips for responsible and smart marketing during the COVID-19 pandemic: It’s crucial that brands address this issue with a sense of tact. Inc. [online]. Available at: https://www.inc.com/sophie-downes/virtual-meeting-remote-work-from-home-zoom-produc tivity-empathy.html. Accessed 19 May 2020. Rogers, R. W. (1975). A protection motivation theory of fear appeals and attitude change. Journal of Psychology, 91, 93–114. Rogers, R. W. (1983). Cognitive and physiological processes in fear appeals and attitude change: A revised theory of protection motivation. In J. Cacioppo & R. Petty (Eds.), Social psychophysiology (pp. 155–176). New York, NY: Guilford. Rosenfeld, D. (2020, April 22). Political ideology and the outbreak of COVID-19 in the United States. PsyArXiv [online]. Available at: https://psyarxiv.com/jrpfd/. Accessed 22 June 2020. Rosica, C. (2020, March 16). Best practices for coronavirus communications & preparedness. O’Dwyer PR [online]. Available at: https://www.odwyerpr.com/story/public/13953/2020-03-16/ best-practices-for-coronavirus-communications-preparedness.html. Access 9 May 2020. Schmidt, M. (2020, March 13). Why coronavirus is turning people into hoarders: A Q&A on the psychology of pandemics. Discover [online]. Available at: https://www.discovermagazine. com/health/why-coronavirus-is-turning-people-into-hoarders-a-q-and-a-on-the-psychology. Accessed 9 May 2020. Shi, J., & Smith, S. W. (2016). The effects of fear appeal message repetition on perceived threat, perceived efficacy, and behavioral intention in the extended parallel process model. Health Communication, 31(3), 275–286. Sorrentino, D. (2020, April 21). Survey results: How marketers are changing their activities in response to the pandemic. Brafton [online]. Available at: https://www.brafton.com/blog/braftonresearch-lab/survey-results-how-marketers-are-changing-their-activities-in-response-to-the-pan demic/. Accessed 19 May 2020. Steinmetz, K. (2020, April 2). “Brands are really going to be judged.” Companies are walking a tightrope during the COVID-19 pandemic. Time [online]. Available at: https://time.com/581 4509/coronavirus-marketing/. Accessed 9 May 2020. Stiff, C. (2020, March 31). The game theory of panic-buying—And how to reduce it. The Conversation [online]. Available at: https://theconversation.com/the-game-theory-of-panic-buying-andhow-to-reduce-it-134107. Accessed 22 June 2020. Tenebaum, G., & Eklund, R. C. (Eds.). (2020). Handbook of sport psychology (4th ed.). Hoboken, NJ: Wiley. Thomala, L. L. (2020, May 19). Prevalence rate of panic buying during coronavirus in China 2020. Statista.com [online]. Available at: https://www.statista.com/statistics/1117053/china-pre valence-rate-of-panic-buying-during-coronavirus-covid-19/. Accessed 19 May 2020. Trope, Y., & Liberman, N. (2010). Construal-level theory of psychological distance. Psychological Review, 117(2), 440–463. Tyko, K. (2020, June 30). ‘I have a breathing problem,’ Yells maskless Trader Joe’s shopper who was kicked out of store in viral video. USA Today [online]. Available at: https://www.usatoday.com/story/money/2020/06/27/mask-requirement-trader-joes-viral-twi tter-video/3271625001/. Accessed 4 July 2020. van Holm, E. J., Monaghan, J., Shahar, D. C., Messina, J. P., & Surprenant, C. (2020, April 11). The impact of political ideology on concern and behavior during COVID-19. SSRN [online]. Available at: https://ssrn.com/abstract=3573224. Accessed 22 June 2020. Witte, K. (1991). Preventing AIDS through persuasive communications: Fear appeals and preventive action efficacy. Unpublished doctoral dissertation, University of California, Irvine. Witte, K. (1992a). Putting the fear back into fear appeals: The extended parallel process model. Communication Monographs, 59(4), 329–349.

2 Maladaptive Consumer Behaviors …

47

Witte, K. (1992b). The role of threat and efficacy in AIDS prevention. The International Quarterly of Community Health Education, 12(3), 225–249. Witte, K. (1994). Fear control and danger control: A test of the extended parallel process model. Communication Monographs, 61(2), 113–134. Witte, K., Cameron, K. A., McKeon, J. K., & Berkowitz, J. (1996). Predicting risk behaviors: Development and validation of a diagnostic scale. Journal of Health Communication, 1(4), 317– 341. Wong, T. (2020, May 12). Coronavirus: Why some countries wear face masks and others don’t. BBC News [online]. Available at: https://www.bbc.com/news/world-52015486. Accessed 22 June 2020. Zadrozny, B., & Collins, B. (2020, March 31). Coronavirus deniers take aim at hospitals as pandemic grows. NBC News [online]. Available at: https://www.nbcnews.com/tech/social-media/corona virus-deniers-take-aim-hospitals-pandemic-grows-n1172336. Accessed 9 May 2020.

Dr. Seth Ketron is a Clinical Assistant Professor of Marketing, New College at Frisco, University of North Texas. Dr. Ketron’s research interests are primarily in the domains of sensory marketing and information processing, and he has authored or co-authored over two dozen published papers on various topics in journals such as Journal of Retailing, European Journal of Marketing, and Journal of Business Research. Dr. Ketron currently resides in Dallas, TX with his husband and two English bulldogs.

Dr. Judy A. Siguaw is the Associate Dean of Research & Faculty Development in the College of Business at East Carolina University. She was previously the Dean of the College of Human Ecology at East Carolina University and the Dean of Cornell-Nanyang Institute in Singapore. She has published over 70 journal articles including those appearing in leading journals, such as Journal of Marketing Research, Journal of Marketing, and Journal of the Academy of Marketing Science. Her research has largely focused on the interrelationships between organizations and consumers. She is also the co-author of several books and the recipient of several research and teaching awards.

48

S. C. Ketron et al. Dr. Xiaojing Sheng is an Associate Professor of Marketing at the University of Texas Rio Grande Valley. Dr. Sheng’s research interests include services marketing, consumer behavior, tourism marketing and travel research, and eye tracking research. Her research has appeared in journals such as Journal of Service Research, Journal of Business Research, Psychology & Marketing, Journal of Services Marketing, Journal of Travel Research, and Tourism Management. Dr. Sheng enjoys running. She was a 10K Run finisher in the 2020 Scott Crane Memorial Run in McAllen, Texas.

Chapter 3

The COVID-19 Pandemic and Its Impact on Grocery Retailing: A Singapore Case Study Ho Keat Leng

Abstract The current COVID-19 pandemic has created new social behaviors that has affected daily life including the shopping of groceries. The aim of this chapter is to examine how grocery retailing has changed during the pandemic using the Singapore experience as a case study. Singapore reported its first case of COVID-19 infection in January 2020. The number of infections grew rapidly and the Singapore government implemented several policies including social distancing to control the spread of the virus. For grocery retailers in Singapore, this resulted in disruptions in the supply chain, additional workload on retail employees and finally increased use of retail technologies particularly in online shopping. The chapter ends with a discussion on how the changes in the grocery retail industry provides new perspectives in understanding supply chain management, retail employee work and opportunities for adoption of technology in retailing. Keywords Supply chain management · Supermarkets · Online retailing · Consumer behaviour · Retail employee The World Health Organisation (WHO) first reported a cluster of severe pneumonia cases in Wuhan, China in late December 2019. It was found that these were due to a new coronavirus, subsequently named COVID-19. As this was a new virus, there were many unknowns. Many initially underestimated the extent of its infectiousness and impact on the world. After it surfaced in China, the virus was reported in several neighbouring Asian countries. However, it did not stop there and spread quickly to the rest of the world. By 1 June 2020, just about 6 months later, the number of people infected with the virus worldwide crossed the 6 million mark with more than 120,000 new infections daily. In addition, more than 350,000 people have died from the virus (World Health Organisation 2020). To stem the spread of the virus, many countries have adopted social distancing and other measures. These have created new social behaviours affecting many aspects of H. K. Leng (B) Nanyang Technological University, Singapore, Singapore e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_3

49

50

H. K. Leng

daily life. In particular, it has affected the service industry to a greater extent when compared to other industries. For example, the travel and tourism industries have come to almost a standstill overnight as cities began their lockdowns and travellers disappeared. As part of the service industry, retailers are also affected. The COVID-19 pandemic has forced many retailers to adopt changes in their operations (Roggeveen and Sethuraman 2020). The aim of this chapter is to examine how the pandemic has changed the grocery retail industry using the situation in Singapore as a case study. As an Asian country, Singapore was among the first countries to report the spread of the virus. As the number of infections increased in the city-state, it employed a range of measures to control the spread of the virus, varying with the severity of the situation. It can thus offer some insights as to how the pandemic has brought about changes to the industry.

3.1 COVID-19 in Singapore After WHO reported on the emergence of severe pneumonia cases in Wuhan in late December 2019, the Singapore government announced a few days later on 3 January 2020 that it would screen all inbound travellers from Wuhan. Subsequently, with more cases reported in China and an expected influx of Chinese tourists due to the Chinese New Year holidays, Singapore announced on 20 January that it would expand temperature screening to all travellers from China. Two days later, the government formed a multi-ministry task force to focus on the emerging threat and implemented a 14 days isolation requirement for patients with pneumonia and travel history to China (Yong 2020b). There were several false alarms but on 23 January, the inevitable first confirmed case was reported in Singapore. A Chinese national from Wuhan arrived in Singapore on 20 January and tested positive for the virus 3 days later. Just a few days later, on 28 January, the government announced that the number of coronavirus patients had increased to 7 patients. All of the patients were Chinese nationals from Hubei province. As a result, travelling advisories were issued to Singaporeans against travelling to the Hubei province. In addition, travellers who had travelled to Hubei would not be allowed to enter or transit in Singapore. By the end of the month, there was a sense of anxiety in the country with long queues of customers at pharmacies and retail stores buying surgical masks to prevent infection. On 31 January, the government also expanded the restriction of entry and transit in Singapore to include all travellers who had visited China (Yong 2020b). As one of its first measures to restrict the spread of the virus, the Singapore government distributed masks to households on 1 February. This not only helped to reduce queues at retail stores but also lower the level of anxiety in the country. As expected, it was not long before the first local community cluster was reported on 4 February. By 7 February, there were in total 33 cases and it was evident that the virus had started spreading locally. Consequently, Singapore raised its Disease

3 The COVID-19 Pandemic and Its Impact …

51

Dec 2019

Jan 2020

Feb 2020

Mar 2020

Apri2020

• WHO reported the emergence of the virus in Wuhan, China

• Singapore reported first imported cases

• More than 100 cases were reported with DORSCON raised to Orange

• More than 900 cases with 3 deaths were reported

• Singapore allows only essential services to operate

Fig. 3.1 Timeline of COVID-19 events in Singapore

Outbreak Response System Condition (DORSCON) from Yellow to Orange. Large scale events were deferred or cancelled, and workplaces were encouraged to carry out temperature screening for their employees (Yong 2020b). By the end of February, there were more than 100 cases in Singapore. As the number of cases continued to climb in March, Singapore implemented more stringent measures including cancellation of large scale events and religious gatherings, expanding the number of countries with travel restrictions, closing entertainment venues and tuition centres, and implementing limits on the number of people allowed in shopping malls and other attractions. By the end of March, there were 926 cases and 3 deaths reported in the country (Yong 2020b). On 7 April, Singapore entered into a circuit breaker phase where only essential services were allowed to operate. Schools were closed and students embarked on home-based learning. Singaporeans were encouraged to stay at home as much as possible, leaving the house only for essential needs (Yong 2020b). The circuit breaker phase was initially planned to last for a month so that the number of infected cases can be brought down. This was later extended by another month and the country exited its circuit breaker phase on 2 June 2020. Figure 3.1 provides a timeline of the events.

3.2 Panic Buying When Singapore raised the DORSCON level, it created another wave of panic buying. This time round, panic buying extended to groceries and necessities like rice, canned food and instant noodles. Even non-essentials like toilet paper were swept off the shelves. One of the largest supermarket chains in Singapore, FairPrice, reported that demand for daily essentials increased by five times (Quek 2020a). Panic buying during this pandemic was not limited to Singapore as it was also reported in many countries (Chang 2020; Richards and Rickard 2020; Goddard 2020). Consumers seemed to be simply emulating the behaviours of others. When they see other shoppers buying in bulk, they followed suit. This is especially so when they see empty shelves and decide that it might be better to purchase more in the event of an emergency situation (Ng 2020b). This was further exacerbated by the rapid dissemination of information and images on panic buying via social media (Depoux et al. 2020).

52

H. K. Leng

Panic buying had created an unexpected surge in demand, resulting in a bottleneck in the distribution channel and causing a temporary shortage of products. To resolve this, some supermarkets stayed opened beyond their normal operating hours. Others increased their replenishment efforts to fill up their shelves quickly. For example, a leading supermarket chain in Singapore, FairPrice, tripled the volume of daily essential good delivered to their stores and doubled the number of delivery trips. Even then, the efforts did not seem sufficient. Customers were seen opening cartons and loading items onto their shopping trolleys before the retail employees were able to replenish them on the shelves (Quek 2020a). Panic buying had also created long queues at supermarkets throughout the country. Unfortunately, the long queues led to some customers baulking and abandoning their shopping baskets of groceries. As some of the food in abandoned baskets were perishables, they had to be discarded. This was not only a wastage of food but also deprived other shoppers of the groceries (Quek 2020a). To limit the effects of panic buying, FairPrice imposed purchase limits on essential items. For example, each customer was only allowed to buy four packs of paper products such as toilet paper, two bags of rice and S$50 worth of vegetables (Tan and Goh 2020). The hoarding behaviour of consumers have prompted political leaders and retailers to reassure the public that there was sufficient food in the country. Hence, there was no necessity to engage in irrational buying behaviour (Goh 2020; Tee and Goh 2020; Ng 2020a). Such reassurances seemed to have worked as shopping behaviour at the supermarkets subsequently returned to some sense of normalcy (Tan and Goh 2020). As consumers were staying at home for prolonged periods, the demand for grocery was still high and supermarkets were still seeing queues. Even with the implementation of stricter social distancing measures, shoppers were not deterred (Ng 2020c). To further thin out the crowds and reduce transmission risks, the government implemented a system where grocery shoppers at selected wet markets were only allowed to shop on specific dates depending on whether the last digit of their identity card end with an even or odd number (Tay 2020a). In addition, the government encouraged grocery shoppers to shop alone to minimise the spread of the disease (Tay 2020b). With the COVID-19 virus affecting the elderly disproportionately, efforts were directed to protect this group of shoppers and to keep them safe. The government had encouraged the elderly to stay away from crowds and be safe at home. However, some of the elderly were still out shopping for groceries (Ang 2020c). The larger grocery chains, for example FairPrice, set up dedicated shopping hours for those most at risk including the elderly, people with disabilities and pregnant women. In addition, some retailers implemented special checkout lanes for the more vulnerable segments of the population during normal operating hours to reduce their contact with the general population and minimise the risk of infection (2020a). The government also allowed cab drivers, who had seen a drop in income due to social distancing measures, to help make grocery and food deliveries. More importantly, this allowed more people, especially the more vulnerable segment of the population, to stay at home (Tan and Toh 2020). While larger grocery retailers were still seeing long queues of customers, smaller retailers such as convenience stores did not fare as well. In particular, retailers who

3 The COVID-19 Pandemic and Its Impact …

53

depend on office workers working near their stores were badly affected. Due to social distancing measures, many offices were closed and there were few customers. As these smaller retailers often offer less competitive prices and a narrower range of goods, they were only able to attract customers who were deterred by the long queues at supermarkets. In addition, as suppliers prioritise their replenishment to larger supermarkets, the stock-out costs were much higher for smaller retailers. This has put further strain on their profitability during the pandemic (Ng 2020d).

3.3 Disruptions in the Supply Chain As Singapore imports a large proportion of its grocery supplies, the continued supply of grocery supplies is a major concern for the country. For example, Singapore imports about 37% of its chicken supply and 16% of its fish supply from its neighbour, Malaysia. When Malaysia implemented measures to restrict movement across its borders due to the pandemic, there was concern that the food supply would be disrupted. The Singapore government took immediate action to work with their Malaysian counterparts to ensure that the supply chains remain undisrupted and that cargo will continue to move between the two countries (Yong 2020a). This resulted in supply chains remaining uninterrupted and prices of vegetables, fruits and fish remained stable (Heng and Iau 2020). The pandemic has demonstrated how global panic buying, food protectionism and lockdowns of cities can potentially disrupt the food supply chains. Consequently, there is a renewed sense of urgency in Singapore to tackle the issue of food security. To this end, it has embarked on several strategies. Firstly, it is diversifying the sources of essential goods by purchasing from regions further from Singapore including China, Australia and Spain (2020b; Koh 2020; Tee and Goh 2020). Secondly, the Singapore government is ramping up its local production capacity. It plans to produce 30% of the country’s nutritional needs locally by 2030. The country is still far from its plans. Currently, locally produced vegetables, eggs and fish make up only 14, 26 and 10% of consumption in the country (Quek 2020b; Koh 2020; Tee and Goh 2020). Finally, a line of backup suppliers will be built up in the event that the current supply chains are disrupted and a more efficient distribution system in replenishing stock when there is an unexpected demand surge will be developed (Koh 2020). The pandemic had also affected those further up the supply chain as well. Due to the movement control order in Malaysia for example, the mandated shorter operating hours and lack of manpower reduced the ability of primary agricultural producers like farmers and fishermen to sell their produce. In addition, roadblocks, which were set up to enforce travel restrictions, further delayed the delivery of their produce to their customers. As these were perishables, the producers had no choice but to throw them away (Hassan and Leong 2020). With technology, a partial solution to this problem was found. Online retailers established a link between the primary producers and customers. Using delivery

54

H. K. Leng

companies such as GRAB, producers were able to sell and deliver their agricultural produce directly to customers and limit their loss. In turn, customers were also able to get their hands on produce through an alternative source (Hassan and Leong 2020).

3.4 Adopting Technologies During the Pandemic Retailers and shoppers are turning to technologies during the pandemic as well. When brick-and-mortar retailers were experiencing long queues and a shortage of essentials, shoppers looked for an alternative online. Online grocery retailers reported a surge in demand during the pandemic. For example, RedMart, an online grocery retailer, saw demand exceed by 300%. In particular, demand for various food staples increased between 4 and 10 times (Quek 2020a; Rosli 2020). As consumers move towards online grocery shopping, the sudden surge in demand had similarly caught many online retailers unprepared. Major grocery retailers in Singapore including FairPrice, Cold Storage and Giant had all their delivery slots taken up and many customers could not get their orders delivered. While the retailers have increased their capacity, it was still insufficient to meet the demands (Heng 2020; Jamal 2020). To cope with the demand, retailers had to make changes to their online retail operations (Jamal 2020). Some retailers prioritised the delivery of daily essential such as milk powder and rice, and limiting the number of items to cope with the increased demand (Heng 2020). Others adopted technologies to manage the demand. For example, Hao, a supermarket chain store, provided replenishment updates to its customers on its Facebook and Instagram sites (Quek 2020a). With the larger and more popular online grocers facing difficulties in filling their orders, consumers turned to smaller online retailers. Other online retailers that do not sell groceries also changed their product offering to include groceries or started a new service to tap on this emerging opportunity. For example, Changi Recommends, a retailer of travel-related services, jumped on the bandwagon by launching a grocery delivery service, Get It (Yip 2020). As the pandemic worsen, stricter social distancing measures were put in place. As a result, consumers were also turning towards online shopping to minimize contact with others and prevent infection (Rosli 2020). The pandemic had thus become a catalyst for change with more consumers going cashless and shopping online. Singapore’s largest bank, DBS, reported that the volume of cashless transactions had doubled while the volume of cash withdrawals and deposits had dropped by 11% during the pandemic. The bank also reported that 100,000 of its customers had started spending online for the first time (Wong 2020). Other banks in Singapore also reported an increase in online shopping among its customers particularly for grocery shopping and food retailing (Wong 2020; Aw 2020). This phenomenon is not limited to Singapore. For example, Hong Kong had traditionally been lagging other cities in using electronic payments. However, with social distancing measures and other

3 The COVID-19 Pandemic and Its Impact …

55

restrictions, its citizens are also turning to electronic payments and online shopping (Huang 2020). The Singapore government had taken the opportunity to provide support for companies to adopt e-commerce during this period. For example, the E-Commerce Booster Package allows small and medium-sized retailers to offset up to 90% of their costs, capped at S$9000, when they work with selected e-commerce platforms including Amazon, Shopee and Lazada Singapore to set up their e-commerce operations (Iau 2020). Such initiatives further encourage shoppers and retailers to adopt technologies and go online.

3.5 Unexpected Toll on Retail Employees Retail employees working on the front lines were also affected by the pandemic. At the start of the panic buying, there were long queues of customers at many of the grocery stores. This was particularly stressful for cashiers, as they had to face a long and endless queue of impatient customers. Retail employees not only had to cope with the more than usual customers, the situation had also created additional work for them. For example, some customers baulked at the long queues and abandoned their baskets of groceries. This created additional work for retail employees as they had to return the goods from abandoned baskets to the shelves. Retail employees also took on roles in reassuring customers that there was sufficient stock and not to buy more than necessary. This task can be difficult given the emotional states of the customers. Some store managers had taken extra effort to show care and concern particularly for frontline staff during this difficult time. For example, some managers made tea for their staff to show their appreciation (Quek 2020a). As the number of infections increased, the government implemented additional measures to control the spread of the virus. Shoppers including those who visit supermarkets were required to put on masks or were denied entry. Social distancing and restrictions on the number of shoppers allowed in stores were also mandated. Retailers responded by putting up signs to inform shoppers on the new restrictions, setting up of queue markers for safe distancing between shoppers and setting up counters to limit the number of customers in their stores. In addition, retail employees, together with security officers, were deployed to ensure that shoppers comply with the stricter regulations (Aw and Ang 2020; Ang 2020b). While most shoppers at supermarkets complied with the measure, there were still members of the public who refused to comply with the restrictions. For example, on the first day after the implementation of the stricter measures, more than 200 members of the public were fined for not complying with safe distancing measures including 20 non-cooperative cases requiring police assistance (Ang 2020a). One week later, the number of members of public found flouting the rules remained around 200 persons (Ng 2020c). Social distancing efforts can be difficult to implement. Staff who are enforcing safe distancing measures were sometimes abused and threatened

56

H. K. Leng

by members of public who were more resistant in complying with the measures (Ang 2020c). While there was more work in the retail industry, other industries were facing a different set of difficulties due to social distancing measures. For example, many employees in the hospitality industry were placed on mandatory leave or laid off due to a drop in demand. Labour unions such as the Food, Drinks and Allied Workers Union worked with various government agencies and companies to secure jobs for their workers in other industries. For example, the Diary Farm Group was able to deploy workers who used to work in hotels and restaurants in their supermarkets as cashiers and sales assistants to help with the increased workload. As these workers were formerly from the hospitality industry, they were also well-qualified to handle customers including helping out with additional social distancing measures such as temperature screening, contact tracing and safe distancing (Seow 2020).

3.6 Pandemic and the Grocery Retail Industry Singapore is no stranger to epidemics and its effect on the population and the economy. It experienced SARS in 2003 and H1N1 in 2009. Yet, COVID-19 is posing many new challenges and there is much to learn from the experience. Similarly, while grocery retailers have faced many challenges in the past, the disruptions caused by this pandemic is at a level that has never been seen before. It is thus important for grocery retailers to learn from their experiences to be better prepared in future. As Roggeveen and Sethuraman (2020) had noted, retailers are likely to see changes due to the pandemic. These changes may occur in several areas including the management of supply chains, work processes of retail employees and increased opportunities in online retailing. The above sections have described how the pandemic had affected the grocery retail industry in Singapore. When the number of cases increased in the country, citizens were driven to panic buying, causing disruption in both retail operations and the supply chain. As the spread of the virus worsened, the government implemented social distancing and other measures, exacerbating the disruptions further. Retailers and consumers had to adapt to the new and constantly evolving situation, including adopting technologies and shopping online. The aim of this section is to recast the experiences of grocery retailers during the pandemic based on relevant retail management theories. This will provide the opportunity to gain insights from the pandemic experience and refine existing theories.

3.6.1 Changes in the Management of Supply Chain In a typical distribution channel (see Fig. 3.2), manufacturers generally produce a limited number of products. As factories require a large area for their operations, they are often located in relatively inaccessible locations like industrial parks to reduce

3 The COVID-19 Pandemic and Its Impact …

Manufacturer

Wholesaler

57

Retailer

Consumer

Fig. 3.2 A typical distribution channel

rental cost. Consequently, manufacturers are unlikely to sell directly to consumers and need to depend on a series of intermediaries such as wholesalers and retailers in the distribution channel. Retailers source from a large number of manufacturers and wholesalers, providing consumers with a wide variety of goods and choice of different brands. They are also usually located near to consumers and have long operating hours. As such, retailers play an important role in the distribution channel, providing consumers with convenient access to a wide variety of goods. Unlike wholesalers, retailers also allow consumers to buy in small quantities. For retailers to be successful, they need to fulfil their role in the distribution chain well. Some have sought to provide a much wider variety of goods by sourcing from more suppliers and from a wider geographic region. Others have sought to be more efficient in their sourcing by reducing their cost and passing on the savings to consumers in terms of lower prices. Retailers have also sought to be even more accessible to their customers with some operating 24 h a day, 365 days a year. Others are moving to the Internet, providing retail services whenever and wherever the consumer demands. Finally, some retailers have embarked on providing augmented services. To such retailers, consumers are also seeking an experience. It is not sufficient to be accessible and provide a wide range of goods. Retailers must also offer unique experiences in terms of exceptional customer service and retailtainment. During the pandemic, grocery retailers were put to the test. The unexpected surge in demand caught many retailers by surprise. However, retailers who have understood their role in the distribution channel had invested in a strong distribution network. Such retailers adopt lean retailing principles and adhere to just-in-time inventory management strategies to keep storage costs low (Abernathy et al. 1999). During the pandemic, they were able to change strategies quickly to deal with uneven demand by keeping their warehouses stocked and working with suppliers to keep their stores replenished with supplies (Goddard 2020). Hence, they were able to continue to fulfil their roles in providing shoppers with ready access to their goods. For retailers who were unable to replenish their goods in time, the pandemic had shown that consumers were impatient and would move quickly to other competitors including online grocers. It is important for retailers to build strong relationships with suppliers. However, the retailer-supplier relationship is built slowly over time and multiple transactions. A retailer may initiate a relationship with a supplier who is able offer an appropriate selection of merchandise. This one-off relationship may lead to repeated transactions when the supplier is able to continue to offer merchandise that is profitable for the retailer. As the retailer buys more from a supplier, the relationship between the two

58

One-off Transactions

H. K. Leng Repeated Transactions

Long-Term Relationships

Partnership

Alliances

Vertical Integration

Fig. 3.3 A continuum of retailer-supplier relationship development adapted from Varley (2006)

organisations may develop to the point where the two organisations form a partnership or even be integrated into each other’s business (Varley 2006). This is depicted in Fig. 3.3. During the pandemic, larger retailers like FairPrice leveraged on their strong relationships with their suppliers to keep the supply chain intact. In addition, they worked with manufacturers to fill their stores with private labels in various categories of goods including paper products. As such, by investing in deep relationships with their suppliers over a long period of time, FairPrice found a source of competitive advantage during this critical period. However, the pandemic has also shown the need to diversify supply sources and work with local suppliers. This may put relationships with existing suppliers at risk. In working with more suppliers, the value of transaction with existing suppliers will likely fall. Consequently, there is less incentive for any supplier to develop a close relationship with any single retailer. In particular, working specifically with local suppliers pose its own set of problems. The usual criteria for retailers in determining the supplier does not include the location of the supplier. To specifically purchase from local suppliers will mean that retailers may not be purchasing from the cheapest or the best quality source. Hence, this may affect the competitiveness of the retailer. Retailers will need to consider how to diversify its sources of supply and yet continue to develop deep relationships with their suppliers in a post-pandemic world. Besides managing the supply chain, the pandemic has also shown that it is important to understand and anticipate the needs of the customer. Prior to the pandemic, the larger retailers had already established an online presence, as they were aware of the gradual shift towards online shopping. Hence, they were able to continue to serve their customers when some of them moved online during the pandemic. In addition, the larger retailers were also able to set up dedicated shopping hours and checkout lanes to serve the needs of their customers belonging to the more vulnerable segments (Goddard 2020). Finally, some retailers sold essentials at alternative outlets to reduce the strain at their supermarkets. For example, supermarket chain FairPrice operates in more than one retail format including convenience stores. To divert consumers who were only interested in stocking essentials away from their supermarkets, they started selling essentials such as rice in their convenience stores. In addition, they set up pop-up stores near their supermarkets selling only necessities. Through these efforts, they were able to alleviate the crowding conditions in their supermarkets and provide faster service and more convenience for their customers.

3 The COVID-19 Pandemic and Its Impact …

59

3.6.2 Changes in Retail Work Most retailers employ a large number of front-line employees for its retail operations. As such, one of the major cost item for retailers is the wages paid to employees. Retailers have adopted various strategies to reduce employee wages. By simplifying retail operational tasks, retailers are able to keep the skill requirement for the job low and allow the employment of workers with minimum qualifications at a low wage level. More importantly, this arrangement allows for the employment of part-time workers which further reduces the labour cost for retailers (Leng 2013). These strategies, unfortunately, created an industry that does not pay well for entry-level positions, requires employees to work irregular hours and does not offer many opportunities for growth and career advancement. Consequently, it is unattractive to highly qualified employees. Even when retailers are able to recruit highly qualified employees, they have difficulties in retaining their workers. As a result, the retail industry has a higher employee turnover rate when compared to other industries (Leng 2013). During this pandemic, frontline retail employees, particularly during the early panic buying phase, had been put under a lot of strain. They had to work with much larger crowds and given the long queues, it was inevitable that many customers vent their frustration on retail employees. Many of them also worked longer hours as retailers extended their operational hours to cope with the increase in demand. In addition, retail employees were tasked with new duties including returning groceries from abandoned shopping baskets, advising customers to limit their purchases of essentials, taking shoppers’ temperature and restricting the entry of shoppers. Some of these duties can be unpleasant as they restrict shoppers and inevitably will irritate shoppers. There were already reports of workers being threatened and verbally abused by customers. Even before the pandemic, a job in the retail industry has never been glamourous (Leng 2013). With such experiences during the pandemic, retail employees may feel the low social status of their work even more acutely. This will not only encourage existing retail employees to leave the industry but will also discourage others from joining the industry (Wildes 2005). Some retailers have realised the difficulties faced by frontline employees. They have recruited more staff and tried to find ways and means to relieve the stress felt by frontline employees. In addition, they have put in place operational policies that protect their staff well-being including installing plastic shields at cashier counters and providing face masks for their staff (Goddard 2020). However, retailers cannot depend on ad hoc actions as a human resource strategy. The pandemic has demonstrated that frontline retail employees will remain an important factor in determining the success of the retailer. Retail employees are needed to take on a wide variety of tasks quickly and allow the retailer to operate in a changed environment. They are also needed to provide shoppers with information and attend to their needs. This was particularly evident during the panic buying period when consumers need information and assurance from retailers. When employees in the hospitality industry demonstrated how they could effectively communicate with

60

H. K. Leng

customers and provide a good level of service, it provides further evidence that retail employees can be a source of competitive advantage. The employment structures in the retail industry is dependent on the wider structural transformations operating in the retail sector (Freathy 1997). Perhaps the pandemic has provided the retail industry with the opportunity to reconsider its traditional approach in human resource management of simplifying retail operations and keeping wages low. Retailers need to review their operations and consider how they can make retail employees a source of competitive advantage. They need to make bold changes to their human resource strategies to develop long-term policies in recruiting well-qualified employees, training them for a wide variety of jobs and ensuring that they continue to stay with the company.

3.6.3 Increased Opportunities for Online Retailing More recently, retailers have been adopting technologies like self-checkout counters to lower manpower cost instead. The use of self-checkout counters can reduce the number of cashiers required by retailers. Unfortunately, its rate of adoption has been slow as many shoppers still prefer the use of manned counters (Litfin and Wolfram 2010). The situation in Singapore is similar to other countries. When selfcheckout counters first appeared in the country in 2006, there were few retailers using the technology. However, due to changes in labour legislation which reduced the ability of retailers to employ large numbers of low wage foreign workers, retailers, especially supermarkets, started exploring self-checkout counters as an option. Led by larger supermarket chain like FairPrice, self-checkout counters are now seen in many supermarkets and convenience stores (Leng and Wee 2017). It is not easy to change consumer behaviour. Consumers evaluate whether an innovation or change is better than existing products or practices. Other factors for evaluation include the compatibility of the change with existing values and experiences of the consumer, the complexity of the innovation, the degree to which the innovation allows to be experimented on a limited basis and the degree to which the results of the innovation are visible (Rogers 2003). Consequently, some innovations such as self-checkout counters take a longer time before consumers adopt them. Sometimes an external force is required for change to occur. For example, the adoption of self-checkout counters had been due to a push factor from a change in legislature. Without sufficient manned cashier counters, consumers were forced to try self-checkout counters. Retailer made the transition easier by promoting selfcheckout counter as faster alternatives and providing manned assistance for shoppers when using the machines. Similarly, the pandemic has also pushed many consumers to adopt cashless shopping and buying online for the first time. The pandemic has created a shortage of goods in grocery retail stores. As a result, consumers moved online to seek alternatives. As consumers start to shop online, they become more familiar with the technology. Coupled with social distancing measures and fear of infection through

3 The COVID-19 Pandemic and Its Impact …

61

contact with other people, online shopping can became even more attractive. Interestingly, during this period, the government also played a part in encouraging new behaviours. This time, however, government policies in incentivising retailers to sell their products online had been a pull factor. With multiple forces at play, the changes in consumer behaviour and the retail industry had been rapid. Given the expected long duration of this pandemic, the changes may also become permanent as the new behaviours become fixed (Richards and Rickard 2020). In this environment of increasing acceptance of retail technologies, it is an opportune time for grocery retailers to rethink its online retailing strategy. The environment may be ripe for the industry to invest in appropriate retail technologies and be more efficient in the long run.

3.7 Conclusion At the time of writing this chapter, the pandemic is far from over. Even then, it has clearly brought about changes in the lives of many people around the world. This chapter summarises how it has affected grocery retailing in Singapore. In addition, it describes how the pandemic has acted as a catalyst for change in the retail industry. The retail industry is likely to see changes in how it manages its supply chain. In addition, it will also need to review its human resource strategies and retail operations. Finally, given the opportunity, it should reconsider its investment in retail technologies especially in tapping on consumers’ growing acceptance towards online retailing. These changes will make the industry stronger in facing the next challenge.

References 2020a, March 25. Dedicated hour at some supermarkets for those more at risk. The New Paper. 2020b, March 17. S’pore has plan to ensure it won’t run out of essentials: Chan Chun Sing. The New Paper. Abernathy, F. H., Dunlop, J. T., Hammond, J. H., & Weil, D. (1999). A stitch in time: Lean retailing and the transformation of manufacturing–lessons from the apparel and textile industries. New York: Oxford University Press. Ang, J. (2020a, April 13). Over 200 fines of $300 issued for non-compliance of measures. The New Paper. Ang, P. (2020b, April 12). Wearing of masks a must at malls, supermarkets, convenience stores. The Sunday Times. Ang, P. (2020c, April 12). Why are seniors still going out? The Sunday Times. Aw, C. W. (2020, May 5). Surge in credit card spend on food deliveries, at supermarts. The Straits Times. Aw, C. W., & Ang, J. (2020, April 13). Shoppers don masks as new rule starts. The New Paper. Chang, M. C. (2020, February 25). Panic buying in Seoul as cases grow. The Straits Times. Depoux, A., Martin, S., Karafillakis, E., Preet, R., Wilder-Smith, A., & Larson, H. (2020). The pandemic of social media panic travels faster than the COVID-19 outbreak. Journal of Travel Medicine.

62

H. K. Leng

Freathy, P. (1997). Employment theory and the wheel of retailing: Segmenting the circle. Service Industries Journal, 17, 413–431. Goddard, E. (2020). The impact of COVID-19 on food retail and food service in Canada: Preliminary assessment. Canadian Journal of Agricultural Economics/Revue canadienne d’agroeconomie. Goh, T. (2020, February 9). Leaders call for calm and urge against panic buying at stores here. The Sunday Times. Hassan, H., & Leong, T. (2020, April 3). KL farmers forced to dump goods as they can’t get them to customers. The Straits Times. Heng, M. (2020, April 3). Online grocers work round the clock as demand surges. The Straits Times. Heng, M., & Iau, J. (2020, March 19). Food supply and grocery prices not affected by Malaysia’s lockdown. The New Paper. Huang, C. (2020, April 3). Boom time for delivery, e-payments firms in HK as more stay home. The Straits Times. Iau, J. (2020, April 3). Retailers new to e-commerce can now have most of their costs covered. The New Paper. Jamal, N. H. (2020, April 3). RedMart suspends new orders for a day, will resume tomorrow after adjustments. The New Paper. Koh, F. (2020, March 9). S’pore reviewing its stockpile of essentials, diversifying supply chain. The Straits Times. Leng, H. K. (2013). Cinderella revisited: A historical perspective to graduate work in retailing. Acta Universitatis Danubius. Œconomica, 9, 181–194. Leng, H. K., & Wee, K. N. L. (2017). An examination of users and non-users of self-checkout counters. The International Review of Retail, Distribution and Consumer Research, 27, 94–108. Litfin, T., & Wolfram, G. (2010). New automated checkout systems. In M. Krafft & M. K. Mantrala (Eds.), Retailing in the 21st Century. Berlin: Springer. Ng, M. (2020a, February 9). Adequate supplies of essentials, no need to hoard: FairPrice CEO. The Sunday Times. Ng, M. (2020b, February 9). Heedless of crowds and bug, some rush to stock up on goods. The Sunday Times. Ng, M. (2020c, April 19). Many practising social distancing, but 200 fined for flouting rules. The Sunday Times. Ng, M. (2020d, April 25). Mid-sized supermarts and chains get a fillip; small minimarts struggle. The Straits Times. Quek, E. (2020a, February 15). After the big supermarket sweep stocks aplenty. The Straits Times. Quek, E. (2020b, March 29). Grow local. The Sunday Times. Richards, T. J., & Rickard, B. (2020). COVID-19 impact on fruit and vegetable markets. Canadian Journal of Agricultural Economics/Revue canadienne d’agroeconomie. Rogers, E. M. (2003). Diffusion of innovations. New York: Free Press. Roggeveen, A. L., & Sethuraman, R. (2020). How the COVID pandemic may change the world of retailing. Journal of Retailing, 96, 169–171. Rosli, T. M. (2020, February 10). More ordering groceries and food online to avoid crowds. The New Paper. Seow, J. (2020, May 15). Chef keeps busy with temp job as supermarket worker. The Straits Times. Tan, A., & Goh, Y. H. (2020, February 10). FairPrice imposes purchase limits to curb stockpiling. The New Paper. Tan, T. M., & Toh, T. W. (2020, April, 18). Cabbies, private-hire car drivers turn to food and grocery deliveries. The Straits Times. Tay, T. F. (2020a, April 22). Entry to 4 markets depends on last digit of your IC number. The Straits Times. Tay, T. F. (2020b, April 22). Keep grocery shopping, exercise a solo affair: Minister. The Straits Times. Tee, Z., & Goh, Y. H. (2020, February 10). Rush for supplies unnecessary: Chan. The New Paper. Varley, R. (2006). Buying and merchandising. London, UK: Routledge.

3 The COVID-19 Pandemic and Its Impact …

63

Wildes, V. J. (2005). Stigma in food service work: How it affects restaurant servers’ intention to stay in the business or recommend a job to another. Tourism and Hospitality Research, 5, 213. Wong, L. (2020, April 16). Cashless transactions spike as Covid-19 forces public to adapt. The Straits Times. World Health Organisation. (2020). WHO Coronavirus Disease (COVID-19) Dashboard [Online]. Available: https://covid19.who.int/?gclid=EAIaIQobChMI0onqxMHO6QIVSHRgCh 19TA_MEAAYASABEgLQ4fD_BwE. Accessed 22 June 2020. Yip, W. Y. (2020, April 25). Tills ringing for smaller online grocers as demand surges. The Straits Times. Yong, C. (2020a, March 19). Most imports from M’sia as usual: Chan. The New Paper. Yong, M. (2020b). Timeline: How the COVID-19 outbreak has evolved in Singapore so far [Online]. Singapore: ChannelNewsAsia. Available: https://www.channelnewsasia.com/news/sin gapore/singapore-covid-19-outbreak-evolved-coronavirus-deaths-timeline-12639444. Accessed 25 May 2020.

Dr. Ho Keat Leng is currently an Assistant Professor at Nanyang Technological University, Singapore. He holds a Bachelor’s Degree in Business Administration from the National University of Singapore, a Master’s Degree in Business Administration from the University of Leicester and a Doctor of Philosophy in Business and Management from the University of South Australia. He is also an accredited Teacher in Higher Education with the Staff and Educational Development Association in the United Kingdom. His current research interest is in sports marketing, social media marketing and consumer behaviour.

Chapter 4

Green Brand Equity and COVID-19 Post-Pandemic: The Case of the World’s First Coffee Face Mask in Vietnam Tri Minh Ha and Viet Dung Trinh

Abstract Green brand equity becomes increasingly important in green marketing, especially in the context of COVID-19 post-pandemic. Increased green brand equity may promote customer’s purchasing behavior. This is especially true for ecoconscious consumers. This chapter explores the concept of green brand equity, and showcase the world’s first biodegradable coffee face mask named AirX in the context of COVID-19 post-pandemic. Given the large number of single-use health products filling up landfills and waterways due to COVID-19 pandemic, eco-friendly coffee masks are expected to help people to cope with coronavirus, while helping to reduce the waste crisis exacerbated by the use of disposable face masks. It further provides a major insight into our understanding of how the first coffee mask maker in Vietnam build brand equity while coping with the “New Normal” as well as looking into the future.

4.1 Introduction COVID-19 has changed our society much faster than anyone could have ever imagined. Environmental pollutants, including air pollutants, sewage, polluted water, and waste, were found to play a significant role in the COVID-19 spread (Daraei et al. 2020). At the same time, our society has increasingly suffered from environmental problems due to economic activities (Chen 2008). Many firms react to these problems by adopting green marketing (Chen et al. 2006; Grant 2008). The appeals of going green encouraged numerous organizations to make ecological friendliness a business philosophy (Bigliardi et al. 2012). Various motives justify the adoption of a more environmentally friendly business, including opportunities to accomplish the firm’s T. M. Ha (B) · V. D. Trinh International University, Vietnam National University-Ho Chi Minh City, Ho Chi Minh City, Vietnam e-mail: [email protected] V. D. Trinh e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_4

65

66

T. M. Ha and V. D. Trinh

goals, competitive strength, requirements from the authority, spending improvement, and ethical responsibility (Polonsky 1994). Ultimately, green initiatives are expected to achieve financial benefits as well as social responsibility. Green marketing is an inevitable trend that no companies can afford to neglect if they wish to stay relevant in the competitive market (Chen 2010). It is worth noting that green marketing is a comprehensive notion. Although the term green marketing is often associated with the promotion of environmentally friendly product attributes such as recyclable, ecofriendly, scholars argue that green marketing should be incorporated into all activities of the firms. Marketing and brand exist interdependently as eventually, marketing efforts will be reflected in the brand, and be guided by brand (Keller et al. 2015; Keller 1993). When competition becomes intense, firms need to divert their attention to building a competent green brand that succeeds in greening all aspects of the marketing mix (Kang and Hur 2012; Polonsky 1994). Not only do companies need to formulate ecofriendly products without compensating traditional attributes, they also need to answer the pressing challenge of producing favorable impressions of green marketing efforts (Ng et al. 2014). Living in a new normal post COVID-19 pandemic and given new and more intense market competition, building a strong green brand, especially competent green brand in the mind of consumers, therefore, deserves heavy investment from organizations as well as scholars. This key objective is often reflected in green brand equity. Understanding how green brand equity is developed is essential to successful adoption of eco-friendly practices in the long run. There have been various attempts to discover the driving forces that constitute green brand equity (Ng et al. 2014; Chen 2010). While Chen (2010) has devoted attention to addressing green trust, green satisfaction, green brand image, and green brand equity in a relatively systematic way, the relationship between green trust and satisfaction has received limited attention in literature. This chapter explores the concept of green brand equity in the context of Covid-19 post-pandemic in Vietnam, and further provides a major insight into our understanding of how the world’s first coffee mask maker in Vietnam build brand equity in coping with the “New Normal.” At the same time, the eco-friendly coffee masks help people to cope with the coronavirus, while helping to reduce the caused by the use of disposable face masks. This chapter starts with an introduction concerning the underlying green brand equity in the context of COVID-19 post-pandemic. Section 4.2 explains sources of brand equity, including brand awareness and brand image. Section 4.3 devotes to review green brand equity and its determinants, including green brand equity, green brand image, green trust and green satisfaction. Section 4.4 illustrates and concludes with an authentic case study to build green brand equity, providing an interesting lesson from the world’s first coffee mask maker.

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

67

4.2 Sources of Brand Equity What builds brand equity? How are marketers creating it? Brand equity is defined as “Customer-based brand equity occurs when the consumer has a high level of awareness and familiarity with the brand and holds some strong, favorable, and unique brand associations in memory (Keller et al. 2015, p. 47).” In some cases, brand awareness alone is enough to create favorable consumer response; for example, in low-involvement decisions when consumers are willing to base their choices on mere familiarity. In most other cases, however, the strength, favorability, and uniqueness of brand associations play a critical role in determining the differential response that makes up brand equity. If customers perceive the brand as only representative of the product or service category, then they will respond as if the offering were unbranded. Thus marketers must also convince consumers that there are meaningful differences among brands. Consumers must not think all brands in the category are the same. Establishing a positive brand image in consumer memory—strong, favorable, and unique brand associations—goes hand-in-hand with creating brand awareness to build customer-based brand equity. Let’s look at both these sources of brand equity.

4.2.1 Brand Awareness Keller et al. (2015) contended that brand awareness consists of brand recognition and brand recall performance: • Brand recognition is the ability of consumers to confirm previous brand experience when presented as a cue to the brand. In other words, will they be able to identify or recognize the brand as one to which they have already been exposed when they go to the store? • Brand recall is the ability of consumers to retrieve or recover the brand from memory when given the product category, the needs satisfied by the category, or a purchase or use as a cue. In other words, consumers’ recall of a category, for example Nestle’s Corn Flakes, will rely on their ability to retrieve the brand when they think of the cereal category or of what they should eat for snack or breakfast, whether at the supermarket or store when purchasing or at home when deciding what to eat. When research shows that at the point of purchase, where the brand name, logo, packaging etc. will be physically present and recognizable, more customer decisions will be made, then brand identification will be essential. By comparison, if customer decisions are made more in settings away from the point of purchase, then brand recall would be more important (Bettman 1979). For this reason, creating brand recall is critical for service and online brands: Consumers must actively seek the brand and therefore be able to retrieve it from memory when appropriate.

68

T. M. Ha and V. D. Trinh

Note, however, that even though brand recall may be less important at the point of purchase, brand evaluations and choices made by customers will most always rely on what else they know about the brand, because they can identify it there. As is the case with most information in memory, we are generally more adept at recognizing a brand than at recalling it.

4.2.2 Brand Image Creating brand awareness by increasing the familiarity of the brand through repeated exposure (for brand recognition) and forging strong associations with the appropriate product category or other relevant purchase or consumption cues (for brand recall) is an important first step in building brand equity. Once a sufficient level of brand awareness is created, marketers can put more emphasis on crafting a brand image. Creating a positive brand image takes marketing programs that link strong, favorable, and unique associations to the brand in memory. Brand associations may be either brand attributes or benefits. Brand attributes are those descriptive features that characterize a product or service. Brand benefits are the personal value and meaning that consumers attach to the product or service attributes. Consumers form beliefs about brand attributes and benefits in different ways. The definition of customer-based brand equity, however, does not distinguish between the source of brand associations and the manner in which they are formed; all that matters is their strength, favorability, and uniqueness. This means that consumers can form brand associations in a variety of ways other than marketing activities: from direct experience; online surfing; through information from other commercial or nonpartisan sources such as Consumer Reports or other media vehicles; from word of mouth; and by assumptions or inferences consumers make about the brand itself, its name, logo, or identification with a company, country, channel of distribution, or person, place, or event. Marketers should recognize the influence of these other sources of information by both managing them as well as possible and by adequately accounting for them in designing communication strategies. Consider how The Body Shop originally built its brand equity. In short, to create the differential response that leads to customer-based brand equity, marketers need to make sure that some strongly held brand associations are not only favorable but also unique and not shared with competing brands. Unique associations help consumers choose the brand. To choose which favorable and unique associations to strongly link to the brand, marketers carefully analyze the consumer and the competition to determine the best positioning for the brand. Let’s consider some factors that, in general, affect the strength, favorability, and uniqueness of brand associations.

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

69

4.3 Green Brand Equity and Its Determinants 4.3.1 Green Brand Equity It is strategically critical for every business to construct a solid brand (Kang and Hur 2012). Brand equity brings both financial and non-financial benefits to the firm such as improving competitive advantages and opening opportunities for brand extension (Kang and Hur 2012; Yoo et al. 2000). In addition, it serves as a bridge between past and future marketing activities. For example, past marketing efforts form a baseline to guide future activities (Keller 1993). Brand equity also offers decision makers with valuable insights about consumer interests and choices (Yasin et al. 2007). Various definitions of brand equity were formulated in the research literature. For example, several researchers argued that brand equity should be understood as the additional value derived from the brand name (Chen 2010; Farquhar 1989; Kamakura and Russell 1993). Others suggested that brand equity equals the difference between total values of a brand and its tangible components (Yoo et al. 2000). Most studies can be segregated into three primary approaches: from a financial angle (Simon and Sullivan 1993), from a customer viewpoint (Aaker 1991; Keller 1993; Yoo et al. 2000), and from an integration of both (Dyson et al. 1996; Motameni and Shahrokhi 1998). Brand equity is a complicated concept with multiple dimensions, such as brand associations, brand loyalty, and perceived quality (Aaker 1991). Yet, all of them eventually contribute to the same construct termed “overall brand equity” (Yoo et al. 2000). This chapter concentrates on this inclusive concept, which is often treated as the effects that make customers favor one brand over another primarily because of brand name.

4.3.2 Green Brand Image Brand knowledge is a core constituent of brand equity (Chen 2010; Cretu and Brodie 2007; Huang et al. 2014; Keller 1993; Ng et al. 2014). It determines all memories consumers have of a brand, hence being the basis for every reaction to brand’s activities (Keller 1993). The concept of brand image, defined as “perception about a brand as reflected by the brand associations held in consumer’s memory,” is fundamental to brand knowledge (Keller 1993, p. 3). Green brands are those that distinct themselves from their rivals by noteworthy environmental benefits, thus gaining the favor of environment—conscious consumers (Grant 2008). This chapter defines green brand image as “a set of perceptions of a brand in a consumer’s mind that is linked to environmental commitment and environmental concerns” (Chen 2010, p. 309). Consumers can connect the related knowledge of the brand to the brand name which ultimately constitutes brand equity (Aaker 1991; Keller 1993). A brand is considered as “green” when it can induce consumers’ positive environmental feelings, attitudes, and practices (Ng et al. 2014). Green brand image can further deliver a sense of

70

T. M. Ha and V. D. Trinh

personal connection to the customers, and gives meaning to a consumer’s social environment and to the larger culture (O’guinn et al. 2014). The associative network model posits that knowledge about a brand is stored in memories in the form of nodes (Keller 1993). Interconnected nodes create a network of brand associations which represent a brand in a consumer’s mind. Once a node in the network is stimulated or recalled, it will send signals to other nodes and eventually arouse the node that contains the brand’s identity. Brand associations form a mental picture of a brand which is related to its products and services (Cretu and Brodie 2007), providing consumers with a reference form for comparison among competitors who offer undistinctive physical products or services attributes (Mudambi et al. 1997). Therefore, brand image is a baseline to develop consumer attitudes and formulating brand equity (Buil et al. 2013; Yoo et al. 2000). The degree of “favorability, strength, and uniqueness of brand associations” is key to determine how much a brand is regarded differently to other similar ones (Keller 1993, p. 3). Faircloth et al. (2001) postulated that equity of brand can be strengthened through improvement of brand image. In addition, several studies also confirmed the impact of green brand image on green brand equity (see Bekk et al. 2016; Butt et al. 2016; Chen 2010; Namkung and Jang 2013; Ng et al. 2014).

4.3.3 Green Trust and Green Satisfaction Brand image alone is often insufficient to fully explain the differential effects between brands (Blackston 1993). It only represents how consumers perceive surface characteristics of a brand when brand relationship goes deeper into how consumers assess the attitudes of a brand. Theories of brand relationship maintain that consumers connect to brands in a similar manner to how they connect with other human beings (Blackston 1993; Esch et al. 2006; Fournier 1998). These relationships affect consumer thinking and emotions, hence constituting a brand-consumer bond (Esch et al. 2006; Fournier 1998). Ultimately, brand relationships contribute to building brand equity because it is an asset based on relations (Esch et al. 2006). Theories of types of personal relationships contend that consumer—brand relationships have two dominant aspects (Esch et al. 2006). The first element, trust, is parallel to the communal aspect of a relationship in which a person holds certain feelings towards the other party. The second aspect, satisfaction, is a result of the exchange aspect in a relationship where a person’s attitude is based upon the comparison between what they give and what they get. Trust is a popular discussion topic in many areas, including psychology and marketing (Delgado-Ballester and MunueraAlemán 2005). Trust is the willingness to subject to vulnerability because of the belief that the other party will not take advantage of it (Delgado-Ballester and MunueraAlemán 2005; Rousseau et al. 1998). It represents the confidence that the brand will perform as expected (Delgado-Ballester and Munuera-Alemán 2005; Chaudhuri and Holbrook 2001). Trust is even more prevalent in the green movement where consumers are skeptical about brand promises to preserve the environment due to the

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

71

increase of greenwashing (Chen and Chang 2013). In the long run, the insincerity of self-proclaimed green brands will not only impact negatively on consumer attitude towards the brand but also dilute their trust in the whole green market (Chen et al. 2014). Trust is the chief ingredient of brand-consumer bond (Delgado-Ballester and Munuera-Alemán 2005; Chen 2010; Flavián et al. 2005). Because commitment equals vulnerability, people are only willing to engage if they believe the other party will not harm or exploit them (Morgan and Hunt 1994). Social exchange theory implies that people act in accordance with their expectation in the rewards they will receive (Thibaut 2017). As a rule of general reciprocity, mistrust will give birth to mistrust and results in decreased engagement in the long run (Morgan and Hunt 1994). Signaling theory posits that there exists an asymmetry of information in the marketplace because only firms are certain about product quality while consumers cannot evaluate it as precisely (Erdem and Swait 1998; Stiglitz 2002). In this case, brand serves as a signal of quality. In a market of asymmetric information, credibility is the core element that determines whether the brand signal is meaningful to consumers or not (Erdem and Swait 1998). A believable brand often equals higher brand equity. Among similar brands, the brand that exhibits trustworthiness can hold a unique position in consumer mind (Chaudhuri and Holbrook 2001). Several studies support the view that higher trust will increase brand equity in green marketing (Akturan 2018; Butt et al. 2016; Chen 2010) as well as in other areas (Ambler 1997; Delgado-Ballester and Munuera-Alemán 2005; Morgan and Hunt 1994). Satisfaction is a post-consumption concept that describes the level of contentment (Oliver 2014). The closer the actual result is to expectation, the higher the level of satisfaction there is (Oliver 1980). Green satisfaction represents the state of pleasure relating to a consumption when its results fulfil consumer environmental needs and expectations (Chang and Fong 2010; Chen 2010). Several studies have proved the influence of satisfaction on consumer attitudinal loyalty, for example, brand attachment (Esch et al. 2006; Hallowell 1996) as well as behavioral loyalty (such as repurchase intention and word of mouth) (Hallowell 1996). It is more probable for customers to recall brands that they are satisfied with (Chen 2010). Those outcomes are a manifestation of brand equity since equity is a property of the consumer’s favorability, attitude, and buying decisions toward a brand (Yasin et al. 2007). Furthermore, Pappu and Quester (2006) argued that a satisfied consumer would hold strong, favorable associations with a brand. Previous studies also confirmed that brand equity changes accordingly to levels of satisfactions (Bekk et al. 2016; Chen 2010; Kim et al. 2008; Pappu and Quester 2006). Satisfaction is a product of customer experience. Therefore, it is a primary ingredient in trust development since trust is derived from previous contacts and experience with the brand (Esch et al. 2006; Garbarino and Johnson 1999). Although consumers may come into contact with brands through various sources, both directly (such as consumption) and indirectly (such as brand communications and word of mouth), experience exerts the most powerful influence on trust since it creates the most personal and valid associations (Delgado-Ballester and Munuera-Alemán 2005). A positive disconfirmation of the brand’s performance will raise consumer

72

T. M. Ha and V. D. Trinh

confidence in that brand’s expertise and trustworthiness, thus generating high level of trust (Lankton et al. 2010). Thereby, the higher the level of satisfaction, the higher the degree of trust is induced (Delgado-Ballester and Munuera-Alemán 2005). Researches in green brand management also support this argument with empirical evidence (Kang and Hur 2012; Wang et al. 2018). Because consumers cannot develop relationships with the brand if they do not have an image of them in their memory, brand relationships should be preceded by brand image (Delgado-Ballester and Munuera-Alemán 2005). Trust is based upon consumer assessment of brand associations, either through direct or indirect exposure. Corporate image encourages consumer trust in a sense that it declines the perception of risk (Flavián et al. 2005). Firms positioning themselves as environmentally friendly should be aware of building a reliable image because it will enhance consumer certainty and lower the cost of information search (Erdem and Swait 1998). Several studies also confirmed this preposition (see Delgado-Ballester and MunueraAlemán 2005; Bekk et al. 2016; Chen 2010; Esch et al. 2006). Similarly, brand satisfaction is expected to be connected with brand image. Brand image serves as a record of past behaviors which, in turn, can be used to predict future encounters with the brand (Martenson 2007). As a result, it shapes consumer expectation and affect the level of satisfaction. Brand image was found to influence consumer satisfaction in tourism (Chi and Qu 2008), retail (Martenson 2007), food and beverage (Tu et al. 2012), telecommunication (Malik et al. 2012) as well as green marketing (Bekk et al. 2016; Chang and Fong 2010; Chen 2010). To date, however, no previous research has investigated green brand equity in the context of COVID-19 post-pandemic. Our case study should make an important contribution to better insights concerning how a typical firm cope with the new normal, while contributing to environmental protection. To illustrate the connection between green marketing and COVID-19, the following section showcases a completely innovative idea of the world’s first coffee mask maker in Vietnam in the context of COVID-19 post-pandemic using a case study approach (Gerring 2006; Yin 2014). Case study method is particularly appropriate when a study requires an extensive and in-depth description of a social phenomenon, a need for a focus on contemporary COVID-19 post-pandemic, and generalization is not a priority (Yin 2014).

4.4 Building Brand Equity: A Lesson from the World’s First Biodegradable Coffee Face Mask Maker in Vietnam 4.4.1 Always Begin with Customer Empathy COVID-19’s impact on consumer behaviours and attitudes cannot be understated. According to a recent study conducted by Reach3 Reports (2020), 76% of US

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

73

consumers have recently picked up new habits, behaviours and routines in the wake of COVID-19. Of those people, 89% said they plan on keeping some of their new habits. Consumers are also trying new products, with 36% planning to continue using new brands they have tried after COVID-19. Now is not the time to rely on assumptions. Any data you have from four weeks ago—let alone six months ago—is already out of date. As the consulting firm Gartner (Starita 2020) recently advised, CMOs must be proactive in monitoring changes to customer behaviours and purchasing needs while the crisis is unfolding. Businesses must move forward but do so with genuine empathy. Marketers can help C-suite executives take the right action by acting as a lighthouse for consumer understanding. Many companies already have existing research programs—to uncover the emotions underlying people’s shifting attitudes and behaviours. Doubling down on customer engagement and listening programs can help provide insights on how to best move forward. AirX began its interests in face mask at the end of 2019, when air quality became a pressing concern for urban residents in Vietnam. The company noticed wearing a face mask was becoming a habit of many citizens even before the pandemic hit. But what kept Thanh Le up at night was how to develop a kind of face mask that is both effective in protecting the wearer from air particulate matter and environment-friendly in that it can decompose easily after being discarded. “We already had the technology to make shoes from coffee fiber, so I thought of using this material to make coffee face masks”, Thanh Le shared (Tuoi Tre News 2020). When the COVID-19 outbreaks hit, Thanh and his co-workers knew it was a good chance they could grasp to finally put the idea into practice. Fashion was another one of the entrepreneur’s concerns. “When people wear a face mask, they not only want an anti-bacterial and environment-friendly mask but also one that is fashionable and well-designed,” Thanh added. The fashion-minded product designers at Veritas Shoes decided to use four metal rivets, similar to those found on jeans, to fix the masks’ straps. It took the company many months of hard work to produce the first coffee face masks in April 2020 under the brand name ‘AirX’. The product was immediately met by warm reception from foreign customers, with many orders for the made-in-Vietnam coffee face masks shipped overseas to Japan, Europe, and the United States in the month following its launch.

4.4.2 The Beginning In September 2019, the air quality in Hanoi and other major cities in Vietnam had deteriorated and was unlikely to get better in the coming days. IQAir AirVisual, a Switzerland-based air quality monitoring facility that generates data from public, ground-based and real-time monitoring stations, recorded Hanoi’s AQI level at 152 on Wednesday morning, making it the seventh most polluted city in the world. It used data from three monitoring stations in the city.

74

T. M. Ha and V. D. Trinh

Hanoi, which has eight million people and more than five million motorbikes and 550,000 cars, has become the world’s seventh most polluted capital city, even worse than Beijing, a new IQ AirVisual report says. The city’s worsening air quality saw its average PM2.5 level in 2019 rise to 46.9 micrograms per cubic meter of air from 40.8 in 2018. Haze contains fine particles that are 2.5 microns (PM2.5) or smaller. Haze particles can affect the heart and lungs, especially in people who already have chronic heart or lung disease, such as asthma, chronic obstructive pulmonary disease or heart failure. Because of the worsening air quality, facial masks—especially N95 masks have become one of the most sought-after products in Vietnam. Many studies have shown that N95 masks do provide good protection against particle pollutants as they are at least 95% efficient against fine particles that are about 0.1–0.3 microns. In the mist of all the haze reports and N95 masks demand on television news, Thanh Le spent most nights thinking of what he and his company could do to help the situation. Born in Vietnam but spent a great deal of time studying and working in Canada, Thanh went back to Vietnam to pursuit his dream by establishing a startup company in shoemaking industry—Veritas Bespoke.

4.4.3 From ShoeX—The Shoes Made from Coffee Five years after established, Veritas Bespoke has achieved some success stories. Thanh Le made his appearance on Shark Tank, a popular TV show where startups pitching for major investments. Thanh won 4 billion VND (approximately 172,000 USD) from Shark Tank Vietnam for his application ScanFit; however, he decided to use the money on R&D for ShoeX after realizing the app was not suitable for the Vietnamese market. Vietnam is facing serious environmental pollution, and given that the fashion industry as a whole produces 10% of all carbon emissions and pollutes the oceans with microplastics, the industry must take responsibility for the issue. After looking at a wide range of approaches to develop products, he chose “making money while promoting sustainable development”, and the closed-loop ShoeX was born. The process of making ShoeX starts with collecting old coffee from coffee chains around Ho Chi Minh City. The soles of the shoes are made using 150gr of coffee grind and 12 plastic cups. Coffee yarn are imported from Taiwan to make the bodies of the shoes. Being made from used coffee granules and plastic cups, ShoeX is truly a vegan pair of shoes. Regarding functionality, ShoeX have a waterproof membrane together with coffee fabric insoles which ensure people’s feet stay dry in any conditions. The coffee also creates micro-pockets that trap odor and help the outer layer to dry 200% faster than regular shoes. Besides that, coffee has UV-blocking properties to ensure the color of the shoes stay brighter for longer. And as a bonus, with natural antibacterial qualities, coffee also prevents the shoes from bad odor. Thanh is planning to transform the spent coffee grounds and use plastic on an industrial scale, helping to give new

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

75

life to materials previously considered as waste. Particularly, his coffee shoes are biodegradable within five to ten years. ShoeX was launched in July 2019 and has already sold more than 20,000 pairs of shoes. This means 3 tonnes of coffee and 240,000 plastic cups have been recycled. The company is planning to purchase around 4 tonnes of coffee each year to make ShoeX soles. At the moment, the company imports the materials for the shoe bodies from Taiwan, but thanks to the abundance of coffee grown in Vietnam, it is looking at sourcing domestically soon. With Thanh, the creation of ShoeX was not only to make money, it is a journey to persuade customers to make sustainable choices. In fact, ShoeX has won over many Vietnamese people, who are ready to pay over 1.9 million VND (approximately 81.62 USD) for a pair of shoes that protect the environment while making a fashion statement.

4.4.4 To AirX—The World’s First Ever Facial Mask Made from Coffee As steady demand for green products from concerned consumers has led companies to introduce new product lines that match or exceed consumer environmental concerns. However, not all the organizations were able to achieve significant returns on their investments in green products. These failures are generally attributed towards companies’ inability to overcome consumer skepticism towards the performance of functional and green attributes of their brands to generate a positive green image and green value in consumers mind. Therefore, the question arises that does the success in promoting green brand image and value depend on consumer existing perceptions about the brand quality and credibility?

76

T. M. Ha and V. D. Trinh

Q1 2020, Veritas Bespoke introduced AirX—the world’s first face mask made from Vietnamese coffee. The mask is produced using 100% vegan components and is antibacterial, reusable, and biodegradable. The creation of the mask is in response to the increasing environmental damage caused by the disposal of millions of tons of face masks and medical waste caused by the global spread of the coronavirus. The eco-friendly coffee mask is not only meant to help prevent coronavirus from spreading but also protect the earth as well. Thanh Le took interests in face mask at the end of 2019, when air quality became a pressing concern for urban residents in Vietnam. The company noticed wearing a face mask was becoming a habit of many citizens even before the pandemic hit. But what kept Thanh Le up at night was how to develop a kind of face mask that is both effective in protecting the wearer from air particulate matter and environment-friendly in that it can decompose easily after being discarded. “We already had the technology to make shoes from coffee fiber, so I thought of using this material to make coffee face masks”, Thanh Le shared.

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

77

AirX focus on the concerns of many people: Eco-friendly, Fashion and Tech. According to its social media campaign, AirX are antimicrobial face masks with 99.99% dual antibacterial technology for 2 layers of protection. The first layer is woven from coffee yarn using PowerKnit technology, provides a comfortable fit but softness for sensitive skin. The face mask has a biodegradable filter inside, which is developed by silver nanotechnology and coffee. The mask is washable and reusable while its filter does not need to be washed but can be replaced after 30 days. Each coffee mask, as well as coffee filter, has a custom-designed 3-layer packaging to ensure sterilized function of Nano silver filter. It also has excellent natural coffee aroma. AirX has obtained the AATCC 100 certification (the textile industry’s standard for antimicrobial fabric performance in the United States) from QUATEST 3. Furthermore, AirX has successfully embedded technology in producing recycled coffee mask with N95 feature.

78

T. M. Ha and V. D. Trinh

4.4.5 Covid-19 and the Rise of Facial Masks The pandemic, which has seen over 400,000 deaths worldwide and over seven and a half million infections as of writing, has changed global medical supply chains in drastic ways that even begin to affect global power structures. The humble mask has become a universal symbol of the new coronavirus pandemic and a crucial means of limiting contagion. The collateral damage in the fight against the spread of COVID-19 has been significant. But efforts to flatten the curve are creating a particularly specific problem: medical waste, specifically coming from one-time use face masks. In Wuhan, China alone, one report indicated hospitals were generating 270 tons of medical waste daily during the peak of the outbreak. With the virus now gone global and the CDC’s recommendation that everyone wear a mask, the amount of waste is only going to increase. According to statistics, during the COVID-19 pandemic in Mainland China, 116 million tons of masks were consumed every day. And during the peak of the outbreak, hospitals in Wuhan released about 240 tons of medical waste every day. While most of Hong Kong’s 7.4 million people have been utilizing single-use face masks daily. The difference in Eastern and Western perception towards face masks often leads to various stigmas in both parts of the world. Wearing a mask has been quite common in much of eastern Asia since the SARS epidemic of 2002–2003 made it a “daily, recreational, personalized” item. In Japan,

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

79

wearing surgical style masks is common in winter and spring, both as a means of protecting oneself and others from infection. During the pandemic, not wearing face masks represents the lack of social cohesion, failure of effective government prevention strategies and comprehensive solidarity. Intercity transportation in Taiwan has required mandatory use of a face mask since the start of April. In contrast, in Europe wearing one has been rare—in France, the post-revolution spirit of enlightenment means a “citizen presents himself face uncovered in public spaces”. In the eyes of many Westerners, wearing a face mask indicates a high chance of personal illness and is closely associated with Asian culture, where the first wave of the virus began, and thus potential danger. In the new normal, wearing a mask is currently mandatory nationwide in over 50 countries. The rest of the world either require wearing mask in some zones or recommend using one. Given the demand, prices soared—some 25 times over in Lebanon, according to unions involved with medical imports. Price gouging sparked a welter of counterfeit versions available online—but there were also thefts of stocks from chemists’ and hospitals. China cranked up production and exported more than 21 billion masks between early March and April 25 while firms across the globe switched production to make their own contributions. Supply has been a major problem—the bulk of production being Asian in origin with China producing around 50% of global stocks of surgical varieties. With the pandemic starting in China, the country felt bound to distribute on home soil first. “Once the need for masks in China exploded our subcontractor firms in China no longer had the right to export,” David Guiho of French specialist protective equipment group Delta Plus told AFP. When Chinese exports did resume demand was frantic, leaving major shortages from Italy and Spain to Egypt.

4.4.6 Be Agile for the New Normal If “cafe sua da”—Vietnamese iced milk coffee—is a delicious treat to seek out while visiting Vietnam, coffee mask will be the first thing that global caffeine connoisseur vividly remembers when thinking of Vietnam’s sweet-smelling effort to prevent Covid pandemic yet makes their souls sing. Some entrepreneurs and marketers are holding off action, thinking that things will be back to “normal” in a few weeks or months. However, scientists are predicting that some form of social distancing may need to happen until 2022. That is a long time to put any type of marketing on hold. And more importantly, the pandemic will have a long-term effect on the psyche and outlook of consumers. Regardless of how long the crisis actually lasts, COVID-19 will forever change the consumer landscape. After this comes to pass, companies cannot go back to their old playbooks. Personas, messaging and even your product strategy may need to significantly evolve for the realities of the post-COVID-19 world. For various reasons, some marketing teams are hesitant to engage consumers in research at this time. Many marketers who have deployed surveys specifically about

80

T. M. Ha and V. D. Trinh

COVID-19’s impact on customer experience have seen actionable responses. The bottom line is that fresh data and accurate insights have never been more important. In these uncharted territories, relying on instincts alone is dangerous. While it’s important to recognize the uncertainties and fears surrounding COVID-19, don’t let this crisis paralyze your company. It is a good time to really understand your customers and act based on timely insights. This is the key to navigating through this crisis.

4.4.7 Looking into the Future In early June 2020, a video shot by the group Operation Clean Sea last week shows scattered masks and gloves on the seabed, among beer cans, cigarette butts and other trash. Street cleaners in Paris have also complained about a rise in masks littering the sidewalks as France started relaxing confinement measures and more public places require people to wear masks. In the new normal period, more people start wearing mask on daily activities. And it creates an opportunity for green products like AirX. In fact, there are several other companies has started looking into making a more sustainable and eco-friendly masks. Melitta from Germany is making masks out of coffee filters. Gill Lab from Singapore is trying to create reusable masks. AirX biodegradable coffee face mask is the first step to giving people a healthy, cheap, and more sustainable alternative to regular medical-grade face masks. Thanh Le and his company have already figured out an excellent way to build green brand equity using eco-friendly coffee mask to cope with COVID-19 outbreak, while helping to reduce the waste crisis exacerbated by the use of disposable face masks. For the next development, “ we have successfully embedded technology in producing recycled AirX coffee mask with N95 feature, the product will be launched soon to the market,” Thanh Le revealed. All they have to do now is “embracing the circular economy and closed-loop designs as they are among the most effective ways to achieve business success while protecting the environment”, according to Thanh Le. Until a vaccine or cure is developed for COVID-19, it should be the inevitable trend for the business to adapt to the crisis by creating innovative products that are relevant to evolving eco-conscious consumer concerns.

Author’s Insight What no one knows yet is how and when the Covid-19 pandemic will come to an end. This coronavirus is unprecedented in the combination of its easy transmissibility, a variety in symptoms going from none at all to deadly, and the extent that it has disrupted the world. Covid-19 has generated great uncertainty, and dramatically impacted tourism, travel, hospitality, supply chains, consumption, production,

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

81

operations, valuations, security, financial stress and the prices of all commodities, including fossil fuel and renewable energy sources. This is completely a new situation which our world has never suffered before. While restrictions are beginning to partially ease, the path to full economic recovery remains highly unpredictable and vulnerable to a seemingly second wave of infections. There have been increasing calls for systemic change of the social and institutional arrangements that perpetuate contemporary consumerist habits, strengthening healthcare systems and empowering people and businesses to help adapt to a post-Covid world. The containment measures brought in by most governments were required to slow the spread of the virus and reduce the death toll, but they have also shut down business activity in many industries and caused widespread economic hardship. Policymakers have used a wide range of exceptional measures to improve and trigger healthcare systems and employment for people, as well as supporting businesses and stabilizing financial markets. With little prospect of a vaccine becoming widely available this year, and faced with unprecedented and immense uncertainty, a second global outbreak would seem the case. The economic impact of strict and fairly prolonged lockdowns in many parts of the world will be particularly harsh. Developed economies such as the United States of America, Japan, Germany, France, and so on are facing economic downturn with declining gross domestic product (GDP). Emerging economies, including Brazil, Russia, China, India and South Africa, are facing particular challenges of strained health systems, adding to the difficulties caused by a collapse in commodity prices, and certainly with economic downturns. In a similar vein, developing economies, such as Afghanistan, Bangladesh, Argentina, Belarus, Ukraine, Egypt, Vietnam, are threatened to undo progress towards developmental achievements over recent decades. Covid-19 adversely affects the health systems, demand, consumption, job losses and various vulnerable industries, including tourism, travel, service, hospitality and entertainment. The recovery, after an initial, rapid resumption of activity, will take a long time to bring output back to pre-pandemic levels, and the crisis will leave long-lasting scars - a decline in living standards, high unemployment and weak investment. Job losses in the most affected industries, such as service, tourism, supply chains, hospitality and entertainment, will particularly hit low-skilled, young, and informal workers. In this case the government support to help people and business in the hard-hit industries will need to evolve but to remain significantly substantial. It is important to see how governments act today, not only domestically but also internationally, to shape the post-Covid world for years to come. Given the world are living in uncertainty, it is expected that countries should cooperate to tackle global challenges together. This hopes to foster a resilient, inclusive and sustainable recovery for the entire world. Thus, it is strongly called for greater international cooperation to help put an end to the pandemic more effectively, speed up the economic recovery, and avoid damaging the catch-up process of emerging-market economies and developing countries. It also advocates for encouraging more resilient supply chains, including larger holdings of stocks and more diversification of sources locally and internationally.

82

T. M. Ha and V. D. Trinh

Co-Author’s Insight Covid-19’s impact on businesses is clear: due to new policy the consumer behavior has been changing and resulting in exploded ecommerce, mobile payment is on the rise, and automation is becoming a bigger priority for businesses. To keep consumers and employees safe so far, service providers have fast-tracked measures like offering hand sanitizer and limiting the number of shoppers in their stores. But for permanent solutions they will turn to tech to ensure a safer and better experience. Many parts of what we expected for the “service of the future” a decade from now have become a near-term necessity. This will be especially important at discretionary services, which have struggled during closures and now face hesitant consumers as they reopen. As businesses and governments work to recover lost ground after the coronavirus pandemic, perhaps they should seize the opportunity to return to a more sustainable world that is environmentally cleaner than the pre-pandemic. Waterlogged masks, gloves, hand sanitizer bottles and other coronavirus waste already are being found on seabed and washed up on beaches, joining the day-to-day detritus in the ocean ecosystems. Green marketing for essentials in the new normal: People shall wear face masks and use sanitizers more often in the post-pandemic time. This calls for promoting these new essential products or services based on their environmental benefits. Due to the massive quantity, these essential products need to be manufactured in a sustainable fashion, produced from new renewable materials, and yet it still need to be appealing to consumers. Remote service: To reduce browsing times in-store and offer advice remotely, stores will use mobile to connect with shoppers before they arrive. For example, the startup Attentive Mobile enables retailers and brands to text individual sale reminders as well as product suggestions personalized to their tastes, while Hero offers guidance and consultations from store associates via texting and video chat. Tools like those on NewStore’s platform can also help consumers and store associates access a broader assortment, which the employees can then arrange to have delivered to shoppers’ doors. Shelf monitoring: Inventory tracking will get smarter to reduce contact with items, make employees more efficient, and help retailers sell more. The use of electronic shelf labels, from companies like UK-based Displaydata, could become more widespread to help track inventory levels, promotions performance, and reviews, in addition to reducing contact with shoppers hunting for items’ prices. Startups like Edited will also help retailers optimize assortments and promotions as consumer spending remains unsteady. Clean surfaces: Even a simple table full of t-shirts will be high-tech as retailers use self-cleaning tools like coatings and adhesive covers to keep stores as germ-free as possible. Virtual try-ons: The old custom of piling seven pairs of pants and three sizes of one shirt into a dressing room will be replaced by virtual try-ons. Smart mirrors of the sort increasingly used by beauty brands and retailers will become more common.

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

83

And new tools enabling more interactive experiences in e-commerce can also easily translate to the store: for instance, Forma’s computer vision technology uses a photo to make an avatar of a user, which he or she can then use to virtually try on clothes. Contactless checkout: More types of contactless payment systems will eliminate the need for close quarters at the point of sale. A variety of retailers have already installed contactless payment options, and cashier-less checkout technology and even self-checkout will become more prevalent across retailers. While all of these changes play a role in enhancing the customer journey, businesses should also offer find ways to personalize the experience for consumers, make the business more efficient and profitable, and boost conversion through empathy and appealing to customers. All of which will be more and more crucial as consumers, retailers, and brands adjust to a dramatically different landscape in the post-pandemic.

This case was written based on AP News. (2020, May). Activists raise alarms over coronavirus litter along French coast. AP News. South China Morning Post. (2020, March). Coronavirus leaves China with mountains of medical waste. South China Morning Post. Tuoi Tre News. (2020, May). Fancy a face mask made from coffee in Vietnam? Tuoi Tre News. Bangkok Post. (2020, May). From producer to wearer—lifecycle of the humble face mask. Bangkok - giày thuij,a tho`,i 4.0 (Aspiration to create shoes in Industry Post. Khát vo.ng ta.o ra nhu˜,ng dôi 4.0)—Robb Report January 2019. Reach3 Report. (2020). Consumer Closeness in the Age of Social Distancing. Retrieved May 30, https://www.reach3insights.com/consumer-closeness. Starita, L. (2020). Adapt Your Marketing Strategy for COVID-19. Garner Website. Retrieved May 30, https://www.gartner.com/en/marketing/insights/articles/adapt-the-marketing-strategyfor-covid-19.

References Aaker, D. A. (1991). Managing brand equity: Capitalizing on the value of a brand name. Journal of Retailing, 80(4), 331–342. Akturan, U. (2018). How does greenwashing affect green branding equity and purchase intention? An empirical research. Marketing Intelligence & Planning, 36(7), 809–824. Ambler, T. (1997). How much of brand equity is explained by trust? Management Decision, 35(4), 283–292. Bekk, M., Spörrle, M., Hedjasie, R., & Kerschreiter, R. (2016). Greening the competitve advantage: Antecedents and consequences of green brand equity. Quality & Quantity, 50(4), 1727–1746. Bettman, J. R. (1979). Information processing theory of consumer choice. Reading, MA: AddisonWesley Pub. Co. Bigliardi, B., Bertolini, M., Mourad, M., & Ahmed, Y. S. E. (2012). Perception of green brand in an emerging innovative market. European Journal of Innovation Management, 15(4), 514–537. Blackston, M. (1993). Relationships, beyond brand personality: Building brand relationships. In Brand equity & advertising: Advertising’s role in building strong brands (pp 113–124). Hillsdale, NJ: Erlbaum.

84

T. M. Ha and V. D. Trinh

Buil, I., Martínez, E., & de Chernatony, L. (2013). The influence of brand equity on consumer responses. Journal of Consumer Marketing, 30(1), 62–74. Butt, M. M., Mushtaq, S., Afzal, A., Khong, K. W., Ong, F. S., & Ng, P. F. (2016). Integrating behavioral and branding perspectives to maximize green brand equity: A holistic approach. Business Strategy and the Environment, 26(4), 507–520. Chang, N.-J., & Fong, C.-M. (2010). Green product quality, green corporate image, green customer satisfaction, and green customer loyalty. African Journal of Business Management, 4(13), 2836. Chaudhuri, A., & Holbrook, M. (2001). The chain of effects from brand trust and brand affect to brand performance: The role of brand loyalty. Journal of Marketing, 65(2), 81–93. Chen, Y.-S. (2010). The drivers of green brand equity: Green brand image, green satisfaction, and green trust. Journal of Business Ethics, 93(2), 307–319. Chen, Y. (2008). The driver of green innovation and green image—Green core competence. Journal of Business Ethics, 81(3), 531–543. Chen, Y., Lai, S., & Wen, C. (2006). The influence of green innovation performance on corporate advantage in Taiwan. Journal of Business Ethics, 67(4), 331–339. Chen, Y. S., & Chang, C. H. (2013). Greenwash and green trust: The mediation effects of green consumer confusion and green perceived risk. Journal of Business Ethics, 114(3), 489–500. Chen, Y. S., Lin, C. L., & Chang, C. H. (2014). The influence of greenwash on green word-of-mouth (green WOM): The mediation effects of green perceived quality and green satisfaction. Quality & Quantity, 48(5), 2411–2425. Chi, C. G. Q., & Qu, H. (2008). Examining the structural relationships of destination image, tourist satisfaction and destination loyalty: An integrated approach. Tourism Management, 29(4), 624– 636. Cretu, A. E., & Brodie, R. J. (2007). The influence of brand image and company reputation where manufacturers market to small firms a customer value perspective. Industrial Marketing Management, 36(2), 230–240. Daraei, H., Toolabian, K., Kazempour, M., & Javanbakht, M. (2020). The role of the environment and its pollution in the prevalence of COVID-19. Journal of Infection, 81, e168–e169. Delgado-Ballester, E., & Munuera-Alemán, J. L. (2005). Does brand trust matter to brand equity? The Journal of Product and Brand Management, 14(3), 187–196. Dyson, P., Farr, A., & Hollis, N. S. (1996). Understanding, measuring, and using brand equity. Journal of Advertising Research, 36(6), 9–21. Erdem, T., & Swait, J. (1998). Brand equity as a signalling phenomenon. Journal of Consumer Psychology, 7(2), 131–157. Esch, F., Langner, T., Schmitt, B., & Geus, P. (2006). Are brands forever? How brand knowledge and relationships affect current and future purchases. Journal of Product & Brand Management, 15(2), 98–105. Faircloth, J. B., Capella, L. M., & Alford, B. L. (2001). The effect of brand attitude and brand image on brand equity. Journal of Marketing Theory and Practice, 9(3), 61–75. Farquhar, P. H. (1989). Managing brand equity. Marketing Research, 1, 24–33. Flavián, C., Guinalíu, M., & Torres, E. (2005). The influence of corporate image on consumer trust. Internet Research, 15(4), 447–470. Fournier, S. (1998). Consumers and their brands: Developing relationship theory in consumer research. Journal of Consumer Research, 24(4), 343–373. Garbarino, E., & Johnson, M. (1999). The different roles of satisfaction, trust, and commitment in customer relationships. Journal of Marketing, 63(2), 70–87. Gerring, J. (2006). Case study research: Principles and practices. Cambridge: Cambridge University Press. Grant, J. (2008). Green marketing. Strategic Direction, 24(6), 25–27. Hallowell, R. (1996). The relationships of customer satisfaction, customer loyalty, and profitability: An empirical study. International Journal of Service Industry Management, 7(4), 27–42. Huang, Y., Yang, M., & Wang, Y. (2014). Effects of green brand on green purchase intention. Marketing Intelligence, 32(3), 250–264.

4 Green Brand Equity and COVID-19 Post-Pandemic: The Case …

85

Kamakura, W. A., & Russell, G. (1993). Measuring brand value with scanner data. International Journal of Research in Marketing, 10, 9–22. Kang, S., & Hur, W. M. (2012). Investigating the antecedents of green brand equity: A sustainable development perspective. Corporate Social Responsibility and Environmental Management, 19(5), 306–316. Keller, K. (1993). Conceptualizing, measuring, and managing customer-based brand equity. Journal of Marketing, 57 (1), 1–22. Keller, K. L., Parameswaran, M., & Jacob, I. (2015). Strategic brand management: Building, measuring, and managing brand equity. Delhi: Pearson Education India. Kim, K. H., Kim, K., Kim, D., Kim, J., & Kang, S. (2008). Brand equity in hospital marketing. Journal of Business Research, 6(1), 75–82. Lankton, N. K., Wilson, E. V., & Mao, E. (2010). Antecedents and determinants of information technology habit. Information & Management, 47(5–6), 300–307. Malik, M. E., Ghafoor, M. M., & Iqbal, H. K. (2012). Impact of brand image, service quality and price on customer satisfaction in Pakistan telecommunication sector. International Journal of Business and Social Science, 23(3), 123–129. Martenson, R. (2007). Corporate brand image, satisfaction and store loyalty; A study of the store as a brand, store brands and manufacturer brands. International Journal of Retail & Distribution Management, 35(7), 544–555. Morgan, R., & Hunt, S. (1994). The Commitment-Trust Theory of relationship marketing. The Journal of Marketing, 58(3), 20–38. Motameni, R., & Shahrokhi, M. (1998). Brand equity valuation: A global perspective. Journal of Product and Brand Management, 7(4), 275–290. Mudambi, S. M., Doyle, P., & Wong, V. (1997). An exploration of branding in industrial markets. Industrial Marketing Management, 26(5), 433–446. Namkung, Y., & Jang, S. C. (2013). Effects of restaurant green practices on brand equity formation: Do green practices really matter? International Journal of Hospitality Management, 33, 85–95. Ng, P. F., Butt, M. M., Khong, K. W., & Ong, F. S. (2014). Antecedents of green brand equity: An integrated approach. Journal of Business Ethics, 121(2), 203–215. O’guinn, T., Allen, C., Semenik, R. J., & Scheinbaum, A. (2014). Advertising and integrated brand promotion. Toronto, ON: Nelson Education. Oliver, R. L. (1980). A cognitive model of the antecedents and consequences of satisfaction decisions. Journal of Marketing Research, 17(4), 460–469. Oliver, R. L. (2014) Satisfaction: A behavioral perspective on the consumer: A behavioral perspective on the consumer. Routledge. 10:9781315700892. Pappu, R., & Quester, P. (2006). Does customer satisfaction lead to improved brand equity? An empirical examination of two categories of retail brands. Journal of Product and Brand Management, 15(1), 4–14. Polonsky, M. (1994). An introduction to green marketing. Electronic Green Journal, 1(2), 1–10. Rousseau, D. M., Sitkin, S. B., Burt, R. S., & Camerer, C. (1998). Not so different after all: A cross-discipline view of trust. Academy of Management Review, 23(3), 393–404. Simon, C. J., & Sullivan, M. W. (1993). The measurement and determinants of brand equity: A financial approach. Marketing Science, 12(1), 28–52. Stiglitz, J. E. (2002). Information and the change in the paradigm in Economics. American Economic Review, 92, 460–501. Thibaut, J. W. (2017). The social psychology of groups. London: Routledge. Tu, Y. T., Wang, C. M., & Chang, H. C. (2012). Corporate brand image and customer satisfaction on loyalty: An empirical study of Starbucks coffee in Taiwan. Journal of Social and Development Sciences, 3(1), 24–32. Wang, J., Wang, S., Xue, H., Wang, Y., & Li, C. (2018). Green image and consumers’ word-ofmouth intention in the green hotel industry: The moderating effect of Millennials. Journal of Cleaner Production, 181(20), 426–436.

86

T. M. Ha and V. D. Trinh

Yasin, N. M., Noor, N., & Mohamad, O. (2007). Does image of country-of-origin matter to brand equity? Mohamad, 16(1), 38–48. Yin, R. K. (2014). Case study research: Design And methods (Vol. 5). Thousand Oaks, CA: Sage. Yoo, B., Donthu, N., & Lee, S. (2000). An examination of selected marketing mix elements and brand equity. Journal of the Academy of Marketing Science, 28(2), 195–211.

Tri Minh Ha received his Ph.D. in Development Studies in 2015. Before joining International University, Vietnam National University—Ho Chi Minh City from November 2017, he worked as a Dean at Ho Chi Minh City Open University during 2015 and 2017. Before 2015, he worked in non-governmental organization (NGO) sector. He took part in designing, implementing, monitoring and evaluating a number of projects/programs in various areas, including community development, water and sanitation, livelihoods, rural development, HIV/AIDS prevention, forest and marine protection, micro-credit and savings and agriculture (1998–2005). During 2005–2009, he worked independently as an evaluator and development practitioner. He extensively designed and conducted a number of development evaluations and research for international NGOs (including CARE International in Vietnam, Oxfam, Save the Children, ACDI/VOCA, Plan International, etc.), governmental organizations (including Ministry of Construction, Ministry of Fisheries, Ministry of Agriculture and Rural Development), bilateral programs, US Western Michigan University, GIZ, UNDP and the World Bank. Dr. Viet Dung Trinh has a strong background in consumer behavior research and brand management, with business experience in marketing research and consultant industry. He has also conducted several research and consulting projects. Recent portfolios including FE Credit, Mekong Delta Program and Giovanni Bozzetto. He received his Ph.D. Degree in Marketing at Curtin University. Currently, he is the Associate Dean and Chair of Marketing at the School of Business, International University—Vietnam National University in Ho Chi Minh. He has also been actively involved in curriculum reviews and progam development. In addition, he teaches Brand Management, B2B Marketing, Marketing Strategy, International Marketing, Service Marketing and Research Design and Analysis both at the undergraduate and postgraduate level. His research has focused on luxury branding, communication effectiveness and big data.

Chapter 5

Impact of COVID-19 on People-Processing vs. Information-Processing Services: Case of Food Service and Banking Industries Misra Cagla Gul and Mehmet Kaytaz Abstract Although COVID-19 pandemic is a health crisis, it has and will continue to have serious repercussions on business activities and the global economy, as well as a strong societal impact. This chapter focuses on comparing and contrasting the banking services sector and the food service industry in Turkey in relation to how these industries were impacted by and responded to the crisis caused by COVID-19 pandemic. Banking services are information-processing services and the food service business for the most part is people-processing. The distinction is that informationprocessing services can be provided both face-to-face in a high-contact fashion, and online/through the phone in an untact fashion. People-processing services, however, are mostly high-contact services where the person receiving the service must be present when the service is provided (Lovelock in Journal of Marketing 47: 9– 20, 1983). Naturally, this distinction creates a difference in the response of these two different types of services to the COVID-19 crisis. This chapter analyzes the economic and social developments during the COVID-19 outbreak in Turkey along with current and expected future action steps by the government and NGOs. Findings suggest that innovative products, market-linking capabilities and investment in digitalization and trust building activities are effective in dealing with the new normal. Keywords Covid-19 · Banking · Food service · Service industry · Economic crisis · Innovation · New normal

M. C. Gul (B) · M. Kaytaz Isik University, Istanbul, Turkey e-mail: [email protected] M. Kaytaz e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_5

87

88

M. C. Gul and M. Kaytaz

5.1 Introduction COVID-19 crisis seems to be evolving into one of the biggest economic crises. More than that, it will affect our daily lives and working lives very profoundly. If health issues are not solved, this crisis will not end completely and continue in varying severities. Now the vaccination and isolation seem to be the main instruments of solving this crisis. There is still time for vaccination to be available, so the only thing to prevent contagion is social distancing. This means new ways of interaction between people will be necessary both at home and at work. The term “new normal” is coined to describe the new forms of interaction between people. It basically defines how people continue with their personal and work lives under conditions of social distancing, isolation, quarantine and lockdown. The new normal presents a challenge for businesses, particularly those service industries that are people-processing rather than information-processing. Indeed, there is a range of services between these two poles. Martin-Rios and Pasamar (2018) argue that operational actions may not be enough for firm adaptation during crises due to the disruptive nature of crisis situations and state that services would need a dedicated innovation strategy for sustainable adaptation to the crisis. In addition, Martin-Rios and Parga-Dans (2016) found that service firms manage economic decline better through increasing their innovation investment and efficient resource management. Therefore, for services, it looks like the new normal adaptation will have to mean more than merely taking operational measures such as shifting operating hours and improving hygiene. The first case of COVID-19 was detected on March 11 in Turkey. Within a few days the main measures against the virus were put into action. Turkey met the COVID- 19 crisis in an already difficult economic environment. Economic growth was less than 1% in 2019. The economic performance in the first two months of 2020 seemed promising. A growth rate of at least 3% was forecasted for 2020. However, with the crisis, everything changed quickly. The monthly industrial production index fell by 7.1% in March. The retail sales declined by 8.1% in volume and value in the same month. The export and import levels dropped sharply. Unemployment increased, consumer and business confidence plummeted. The limitedness of fiscal space, declining trust in Turkish lira, credibility issues on economic policy, and need for foreign finance left very little space for the government to maneuver. During the COVID-19 outbreak, some businesses closed down, some others tried to continue and cope with the new situation. In this study, we have taken two service industries as examples of adjusting to the new normal. In choosing these industries two criteria played a role. Firstly, we wanted to have an information processingservice industry and a people-processing one so that a larger range of policies would be available for study. Secondly, there should be enough information on the outcomes so that marketing policies could be evaluated to some extent. One of the industries we have chosen is deposit banking. This industry is basically an information-processing service industry. However, it involves people-processing procedures in case of some legal requirements and more importantly in the case of trust-based marketing. The other is the food service industry. With the lockdown and isolation measures it was

5 Impact of COVID-19 …

89

one of the worst affected industries. For most of the food service industry, face-toface interaction is essential. However, there are indications that some segments of the sector will easily and quickly adapt to the new normal by finding alternative means to continue their services. Smart and Vertinsky (1984) found that in times of strategic uncertainty and severe financial distress, firms need to act in a time period shorter than a regular cycle, so it can be suggested that businesses that can respond effectively in a short period of time during this outbreak will have an advantage. The next section presents the measures taken by the government and people adapting to those measures. The following two sections deal with the coping strategies adopted by the banking and food service industries. In the conclusions section, recommendations and policy implications for businesses are discussed.

5.2 What Happened? After the detection of the first COVID-19 case in Turkey on March 11 2020, the Ministry of Internal Affairs sent a circular to the city governorships on March 19, 2020, stating that the activities in many public places, except restaurants and cafes, were temporarily suspended in order to protect citizens from the coronavirus (COVID-19) epidemic and prevent the spread of the epidemic. However, on March 21, 2020, it was announced that within the scope of evaluations made with the Ministry of Health, it was understood that additional measures were required and restaurants, cafes, patisseries and similar workplaces were also included in provisions to prevent the spread of the virus that threatens the lives of the citizens. Accordingly, as of March 22, 2020, all restaurants, cafes and bars, as well as pastry shops and similar workplaces were restricted to serve only on a home delivery and take out basis. All such businesses were required to remove all seating arrangements and stop accepting seated customers, with serious penalties if they failed to do so. One of the first precautions taken by the government was the prevention of citizens 65 years and older and citizens with chronic illnesses from leaving their residences. The circular sent by the Ministry of Internal Affairs said, “People aged 65 and over, people with immune system and chronic lung disease, asthma, cardiovascular disease, kidney, hypertension and liver disease, and citizens who use drugs that disrupt the immune system are prohibited from leaving their residences, going out on the streets and traveling by public transportation”. This restriction began on March 22, 2020 and will continue until June 15, 2020 unless there is a reason for extension. The penalty for those who do not comply with the curfew is an administrative fine of 3,150 TL (470 USD). The rationale behind this curfew is the high mortality and intensive care rate of this age group related to the COVID-19 virus. Similarly, starting on April 4, 2020, citizens under the age of 20 were restricted, as well. This prohibition was the same as the one for the elderly group. The citizens under the age of 20 are not in the high-risk group. However, they are likely to carry the virus without any symptoms and infect others without knowing. Also, children would be harder to keep at home without a curfew and their parents would have to leave

90

M. C. Gul and M. Kaytaz

the home because of the kids, as well. This unique policy prevented infection and mortality rates from going up fast, but there were concerns about the psychological and emotional wellbeing of those who were restricted. Consequently, after 51 days of total lockdown in their residences, starting with May 10, 2020, these groups were given a total free time of 6 h every weekend to leave their homes and visit walking distance places at previously determined time periods. In addition, all the citizens were restricted from leaving their residences on weekends and holidays starting on April 11, 2020, except for some occupational groups, such as healthcare workers, grocery store employees, pharmacists and the like. Even though citizens aside from the groups identified in the previous paragraph are free to leave their homes during weekdays, they are prohibited from visiting parks and coastal areas. All of these restrictions along with the anxiety brought by the disease itself have many emotional, psychological and sociological consequences as well as serious economic implications. In early May 2020, with the decrease in the spread rate of and mortality rate from COVID-19, “normalization” steps were announced. First, shopping malls and hair salons were permitted to accept customers as of May 11, 2020. Later, if the epidemic spread rate continued to decrease at the anticipated level, it was announced that restaurants and cafes could begin to accept seated customers as of June 1, 2020. However, the “new normal” for this type of service providers would obviously not be similar to what they are used to before the pandemic. All the restaurants, cafés and similar workplaces began to prepare for the “new normal”. In spite of the excitement with the prospect of opening their business for seated service, restaurant owners are seriously worried about demand, especially in the early stages of normalization.

5.3 Deposit Banking Industry: Coping Strategies Until Normalization In this study one of the sectors we have chosen for analysis is the deposit banking industry. Deposit banks provide services to households as well as businesses; their services are essential for the economic activities to continue even under a lockdown. The slowdown in banking services would exacerbate the slowdown in economic activities. With the COVID-19 crisis the banking sector faced two problems. First, a decline in economic activity means also a decline in demand for banking services. Also businesses closing and households losing income increase the probability of bankruptcies and loan defaults. This leads to a decline in their active assets and an increase in non-performing loans. The first problem would arise in any economic or financial crisis. However, the second one is unique to COVID-19. It is the difficulty of continuing with banking activities while maintaining social distancing and following the lockdown rules. The banking sector is essentially an information-processing service industry. There is no absolute need for the customer and the bank to come face to face.

5 Impact of COVID-19 …

91

However, some traditions and legal requirements bring people-processing elements into the industry. Holmlund and Sören (1996) state that legal, economic and social bonds between the bank and its customers are very strong since legal and economic bonds are formed through contracts and other financial commitments, and social bonds are created through trust, knowledge exchange and formal and informal faceto-face contacts. COVID-19 pandemic influenced social bonds the most, as well as limiting the formation of new legal and economic bonds. However, having built and maintained quality pre-crisis relationships is very important in managing the crisis (Fearn-Banks 2016). Trust is a necessary component for many business interactions (Moorman et al. 1992; Gulati 1995) since it reduces the uncertainty stemming from the interdependence of participants in an exchange (Luhmann 1979). Cognitive trust is a customer’s confidence to rely on a service provider’s competence (Moorman et al. 1992). Affective trust on the other hand is the confidence one places in an entity on the basis of feelings generated by the level of care and concern shown by that entity (Johnson-George and Swap 1982). Johnson and Grayson (2005) found that cognitive trust significantly impacts financial service relationships whereas this impact is modest for affective trust, suggesting the core aspects of service delivery, such as product performance and satisfaction with previous encounters with the service provider are more important in financial services. This is especially true for crisis situations where there is a lot of uncertainty and scarcity of resources. Coombs and Holladay (2001) found that crisis situations can damage a quality relationship and may cause serious financial and reputational problems. Monferrer-Tirado et al. (2016) found that bank customers are results driven and care about functional quality, which is a determinant of customer satisfaction and trust. Consequently, most of the banks attempted to modify their operations based on new requirements with the ultimate goal of sustaining their on-going pre-crisis relationship with their customers. They had to change their work systems to work from home where possible. Some branches had to be closed or open for limited hours. The open branches were redesigned in a way to enable social distancing and minimize contact. The bank employees worked in alternating shifts, e.g., an employee who worked from home a week worked in a branch the following week. This system of working could easily damage the relationship and trust that was built over the years. Some customers always prefer face to face banking. A large portion of older generation does not have sufficient level of digital skills for online banking. Furthermore, some transactions require that customers visit the branch. Overall effect of these developments would be a reduction in business volumes. Internet and mobile banking levels in Turkey are already relatively higher than many other countries (Deloitte 2018). With the crisis, banks promoted even more usage and developed untact activities and procedures. Untact activities are those provided without face-to-face encounters between employees and customers through the use of digital technologies (Lee and Lee 2020). Some banks provided free support for small and medium enterprises to digitalize their businesses so that billing and payments would be conducted digitally. The ATMs now can be used without any contact at all; customers can withdraw cash using QR readers or blue-tooth in their mobile phones. One can withdraw cash from any ATM, but normally banks would

92

M. C. Gul and M. Kaytaz

charge a certain fee if the person is not their customer. Under current circumstances, that fee is not charged for the next several months. In the same way, the charges for transferring money from one account to another even in another bank, as well as from one credit card to another is suspended if the transfer is done through internet banking, mobile banking or ATMs. The Banking Supervisory and Regulatory Agency also advised banks to strengthen their call centers and to employ more people in the centers. Some banks began to call their customers, mostly those who are over 65 years of age, to inquire about their present and potential banking needs. This approach seemed to be quite effective. Firstly, because citizens aged 65 and over were under full curfew, and secondly Internet usage was not widespread in this age group. Almost all the deposits banks introduced various measures to assist households and businesses in payment of debts. Housing, car and personal loans and credit cards debts are usually paid in monthly installments. Payments could be postponed for up to three months with a new payment plan. The procedures for the new plans can be done through Internet or mobile banking except for some special cases. Similar measures are taken for businesses, particularly small businesses. Sectors such as retail services, shopping malls, logistics and hospitality are thought to be the most hurt sectors and are encouraged to make use of these opportunities. These businesses are encouraged to either extend their loans or get new loans. The loan limits could be increased depending on the viability of the business. In the same way the process of increasing card limits for households and businesses is modified so that it becomes effective immediately. The common distinguishing feature of these measures is that the procedures are simpler and easier if they are done through Internet or mobile banking. Only a few certain transactions required a face to face procedure in a branch. The banks, particularly larger ones, presented the introduction of new procedures and measures as part of the fight against the COVID-19 and its economic and social effects. Banks emphasized the social and economic dimensions of the crisis. They claimed that the related products contributed to anti-recession measures, as well as to the protection of the health of working people. An important question is whether these measures and policies were successful. It is still very early to answer this question. However, there are some indications about the effectiveness of these policies. First, it is clear that all household expenditures whether for investment or consumption are expected to fall in an economic crisis. The retail trade and industrial production indices and unemployment figures all point in this direction. The industrial production index fell by 7.1% in March (TurkStat 2020a), retail sales volume in constant prices declined by 8.1% (TurkStat 2020b) in the same period. The seasonally adjusted consumer confidence index dropped by 5.8% in April (TurkStat 2020c), and services business confidence index fell by a massive 56.1% and retail sector by 26.1% (TurkStat 2020d). The decline in consumer confidence and expectations for the future encourage people to decrease their expenditures particularly on what they consider non-essential items. For businesses, it means a decrease in investment and eventually downsizing.

5 Impact of COVID-19 …

93

The credit card expenditures statistics are available on a weekly basis. The trend of expenditures is one of the indicators of performance of the banking sector. As a consequence of drop in economic activity and retail trade, the overall credit card expenditures also dropped (Fig. 5.1). There is a sharp decline at the end of March, and then it seems to stabilize. At the end of April, there is a tendency to rise again and this continues in May. The expenditures are far below their March levels yet, but rising. On the other hand, the use of credit cards on online shopping kept its level during this period and again seems to rise in May. The share of Internet shopping in total credit card usage reached 30% in May. Indeed, credit cards are the main payment system in online shopping, although there are other payment methods such as money transfer or cash payment at the door. Still, this development can be written on the positive efforts of the deposit banking sector. The other area where banks gave importance in their marketing efforts is inevitably protecting their loans and assets. A preliminary analysis using the available data suggests that banks have been relatively successful in their untact methods. It should be noted the situation might drastically change in the next coming months if the lockdown continues. However, for the time being, the banks have been successful in interaction with households and businesses. The stock of consumer loans continued to grow (Fig. 5.2). The main item in consumer loans is housing followed by car loans. All the other loans are lumped as other loans. It is clear that there is very little change in loan stock except in other loans. Another development is also clear: the stock has been stable until middle of April, but the third week onwards the stock increases. This means households got more loans or rolled their debts. The banks have been effective in marketing their services. In an economic crisis if the financial system does not

Fig. 5.1 Weekly credit card usage (million TL) (Source Central Bank of Turkey. https://evds2. tcmb.gov.tr/index.php?/evds/DataGroupLink/5/bie_kkhartut/en. Accessed 22 May 2020)

94

M. C. Gul and M. Kaytaz

Fig. 5.2 Consumer credit stock (million TL) (Source Central Bank of Turkey. https://evds2.tcmb. gov.tr/index.php?/evds/DataGroupLink/5/bie_tukkre/en. Accessed 22 May 2020)

function, the crisis deepens and may turn to a financial crisis. It is safe to say that the financial sector, at least the deposit banking industry used marketing instruments efficiently during this period. The overall positive change in confidence index support this. While the index fell by 44% in April, it increased by 20% in May (TurkStat 2020e). Consumers and producers both felt this confidence. Table 5.1 gives a summary of how the deposit banking industry coped in the initial stages of the crisis. Table 5.1 Coping strategies: deposit banks Product/Process innovation Increase in the use of digital products and processes (also assisting those who find digital methods unfamiliar and intimidating) For services that require branch interaction: adjusted hours, essential services, reduced staff, heightened safety precautions, social distancing measures; reduce branch required services New products for customers in distress: loan deferments, bridging loans, restructuring existing loans, pausing payments, refinancing Take advantage of government support programs particularly for SMEs Increase in social marketing and CSR activities Establish personal contacts with 60 + customers

5 Impact of COVID-19 …

95

5.4 Deposit Banking Industry: Getting Ready for New Normal The deposit banks are getting ready for the new normal in several areas. Prevention of spread of the virus and increased digitalization are the two main objectives in these efforts. Firstly, the branches are redesigned in a way that both employees and customers are protected by observing social distance, increased hygiene, better ventilation, and less number of customers at a given moment. Secondly, the employees are being retrained and reskilled in new digital methods as well as in interaction with customers. In the new normal the clear and precise communication with customers is essential. One part of this can be achieved by retraining employees. The other part is related to customers, which is more difficult. A certain number of customers are intimidated by increased digitalization. Hence the banks have to spend extra efforts to reach these customers. The reskilled employees will be instrumental in reaching these customers. Another advantage of reskilling is that customers will be assisted in better decision making. It is known that at times of distress people can make myopic decisions (Mullainathan and Shafir 2013). Some banks provided funding to SMEs to obtain digital tools such as e-billing and e-signature. It seems these efforts are increasing. Another important area is to increase the number of digital procedures. Banks are working with Banking Regulatory and Supervisory Agency so that procedures requiring for the customer to visit a branch are minimized as much as possible.

5.5 Food Service Industry: Coping Strategies Until Normalization Between March 22 and May 27, 2020, most food service providers increased the number of their delivery personnel. Restaurants and cafes that did not offer home delivery services before the epidemic started home delivery services to survive. However, they had to use untact marketing strategies during this time to reassure the people that their food was prepared, packaged and delivered with utmost care with adherence to all the hygienic precautions. They frequently made use of social media platforms showing videos and pictures of how they prepare, package and send their food along with physical evidence from their work environment. Physical environment, an already important element of the service marketing mix (Lovelock 1983), especially for the food services industry, gained yet a higher significance during this health crisis. It was difficult to persuade people to purchase ready made food during this time. Naturally, everyone was concerned with the safety of consuming such products. In terms of the food industry, demand exploded for grocery stores and packaged goods. Even though the demand for non-food items dropped during this time as expected, food, beverages and tobacco consumption

96

M. C. Gul and M. Kaytaz 15.0 10.0 5.0 0.0 -5.0

2019-11

2019-12

2020-01

2020-02

2020-03

-10.0 -15.0 -20.0

Food, beverages, tobacco

Non-food

Fig. 5.3 Retail turnover index monthly rate of change (%) (Source TurkStat. http://www.turkstat. gov.tr/PreHaberBultenleri.do?id=33827)

increased significantly (Fig. 5.3). Home delivery of groceries and other super market products such as household needs and online and mobile grocery shopping were already very common and popular in Turkey, and the value chain and delivery processes were well established. Baron et al. (2005) argue that in a crisis event, such as the COVID-19 outbreak, the phase following the initial reaction and the immediate response is mainly related to defense and consolidation for affected organizations, as well as proactive actions where possible, and it is at this phase that businesses begin to benefit from learnings and lessons from the crisis. Vigilant restaurants and cafes benefited from interactive learning as well as learnings from interactions with all stakeholders during this time. The former included comments and suggestions received from consumers mostly on social media platforms directed to them or other users. The latter consisted of firsthand experiences these food service organizations had with their peers and/or stakeholders including observing and modeling how other enterprises in their industry with whom they had interactions were handling and reacting to this crisis. Huang (2008) found that the type of crisis response (timely response, consistent response, and active response) is more powerful than communicative strategies of the crisis for forming trust and proving relational commitment. This suggests that in times of crisis, actions do speak louder than words. One of the most significant actions in the food service industry in line with this finding was for recuperating the losses encountered during the Coronavirus lockdown and was produced by Yemeksepeti, the largest online food home delivery network in Turkey in partnership with the Union of Chambers and Commodity Exchanges of Turkey. They created a campaign to support the restaurants and cafes whose business is restricted only to take out and home delivery services during the pandemic. With their campaign, checks began to be sold both on Yemeksepeti website and mobile app for more than 10,000 restaurants. Yemeksepeti users will be able to spend more than what they paid for the checks for their chosen restaurant 60 days after the check is purchased. For example, by paying 40 TL today, they will be able to spend the check as 50 TL after 60 days. There are 3 check types in the program: “Pay 40 – Spend 50”, “Pay 70 – Spend 100” and “Pay 150 – Spend 225”. On the 60th day following the day of purchase, 50 TL, 100 TL

5 Impact of COVID-19 … Table 5.2 Coping strategies: food service industry

97 Product/Process innovation Quick implementation of pandemic-related learnings/suggestions through customer interactions Certification for sanitary and social distancing standards at business facilities Increase in facilitating services (e.g. home delivery) Use of social media for • tangible proof of hygiene for food preparation and packaging • interaction and trust building during quarantine Increase in social marketing and CSR activities Focusing on strengthening relationships with customers

or 225 TL balance will be loaded in the Wallet accounts of users, and this balance will be used for payments at the restaurant for which the check purchase is made. If the restaurant that a customer bought checks for is out of business in two months, Yemeksepeti will reimburse the customer. This campaign is aimed to create a serious amount of cash flow for restaurants and cafes, especially those struggling to survive, and also to benefit the customers by saving them between 20 and 33% with every check they purchase. Another important initiative came from the partnership of Domino’s Pizza and Yemeksepeti. Together, they sent 152 thousand pizzas in 35 days to healthcare workers in various hospitals in 49 different cities in Turkey and this will continue until the end of the pandemic. This project created a win-win situation for all parties involved. Literature suggests that customer preferences change often in turbulent environments and this requires businesses to be vigilant to these changes through their market-linking capabilities, i.e. their ability of creating and maintaining long-term relationships with stakeholders, and innovative service offerings and activities (Chen et al. 2016; Song et al. 2007). In this vein, the two food service brands that produced this innovative project made use of their market-linking capabilities and gained goodwill and appreciation for their brand during these extraordinary times during which they lost a great deal of business as a result of people’s food safety concerns. At the same time, healthcare employees felt supported and pampered during a period when they were dealing with much pressure, health risks and anxiety. Table 5.2 summarizes the strategies food service firms need to adopt in order to cope with the difficulties caused by the pandemic.

5.6 Food Service Industry: Getting Ready for New Normal The Ministry of Culture and Tourism started the Healthy Tourism Certification Program in order to document hygiene activities and set clear standards, and also use this certification for international tourism. This certification will also be applicable

98

M. C. Gul and M. Kaytaz

to restaurants, cafes and other food service providers. Enterprises that receive the certificate will regularly be announced on the Ministry’s website. In line with the certification, the restaurants will need to fulfill the following criteria: There will be a minimum of 1.5 meters (5 feet) between the tables and 60 cm (2 feet) between the chairs. Dining tables and furniture, table-top equipment will be cleaned with alcoholbased products after each customer. There will only be disposable saltshakers, peppershakers and napkins on the table. Adherence to predefined food safety criteria on food input acceptance, preparation, processing and service-presentation process will be required. Samples from the restaurants will be taken and examined every day. Protective clothing will be provided to staff and their fever will be measured every day. The certificate along with other measures such as removal of open-buffets and encouragement of up to only 50% of physical capacity usage would act as a token of safety for restaurant patrons who would like to start visiting their favorite places of socialization after a long period of lockdown.

5.7 Recommendations and Conclusions The reaction of the two industries to the COVID-19 related economic crisis carry some common elements as well as some differences. The common element for both sectors is that at initial stages, both sectors tried to protect and defend their positions where possible. Findings suggest, under such circumstances, service businesses need to do more than taking only operational actions such as shifting operating hours and improving hygiene to protect their positions. For the banking industry this was less of a challenge because it had already invested a lot on digitalization and innovation. As also suggested by the literature, these innovations increased the survivability of the banking sector (Dosi 1988; Banbury and Mitchell 1995). Also, due to the nature of banking services, untact activities are more viable for this industry, be it phone banking or digital channels. Going forward with the new normal, firms in the banking industry need to achieve and maintain cognitive trust of their customers, i.e. customers’ confidence to rely on their service provider’s competence (Moorman et al. 1992). This is especially important since the lack of face-to-face interactions during COVID-19 pandemic have the potential to seriously hurt the pre-crisis relationships they had with their customers. The food service industry relies even more heavily on face-to-face contact with the customers. Consequently, many firms in food service industry had to put greater effort to survive in terms of finding new ways to deliver their services and maintain some kind of cash flow. Hurley and Hult (1998) argue that greater creativity is required for performance and innovative activities in times of high turbulence and this has been exact situation observed in the food service industry during the COVID-19 pandemic. Innovative campaigns and novel social responsibility projects have been developed in this sector, which have created win-win situations going forward. Another observation in this industry during this time is that vigilant businesses benefited from interactive and interaction learning from their customers and

5 Impact of COVID-19 …

99

Table 5.3 Responses and coping strategies Deposit banking vs. Food service industries

Deposit Banking

Food Service

Product/Process Innovation

✓

✓✓

Increase in the use of digital products and processes

✓

✖

Hygiene precautions for services that require contact

✓

✓

New products for customers in financial distress

✓

✖

Take advantage of government support programs

✓

✖

Increase in social marketing and CSR activities

✓

✓

Implementation of pandemic-related learnings

✖

✓

Certification for sanitary and social distancing standards

✖

✓

Increase in facilitating services (e.g. home delivery)

✖

✓

Use of social media for trust-building/proof of hygiene

✓

✓✓

Focusing on strengthening relationships with customers

✓✓

✓

other stakeholders. Also, there is evidence that certification and going above and beyond hygiene and safety standards will create a competitive advantage for food service businesses in transition to the new normal. Overall, it can be concluded that it is important for services to develop a fast yet deliberate response to the crisis. Findings suggest that, for banking services, building and sustaining cognitive trust through untact channels and maintaining strong relationships will prove to be beneficial during the new normal. For food service businesses, the capacity to act quickly on learnings and developing innovative service products and communication activities, as well as enhanced market-linking capabilities, will be significant going forward. Table 5.3 compares the coping strategies of the two industries.

Authors’ Insight This is undoubtedly a very difficult time with all of its uncertainties and unknowns. Projections and forecasts are attempted as more and more data becomes available, but it is still very hard to predict how the pandemic will progress and how much longer the economy will have to continue to fight against it. As the “new normal” is unfolding, we are seeing that both the banking and the food service industries are increasing their marketing expenditures, mostly in the form of advertising spending. This seems to be a smart move since consumers are in need of reassurance and consumer trust on both how capable the firms are in handling the situation and what the future will bring needs to be re-established. The advertisements are more informational in nature than transformational. They mostly contain information on what precautions the sponsoring businesses are taking, how they are running their businesses when physical branches of banks or seated sections of restaurants are closed, and more

100

M. C. Gul and M. Kaytaz

general information on what to do to stay safe during the pandemic. We also see some corporate advertisement in these sectors highlighting what the company is doing to support the society during this time and assuring the audience that the brand or the company is not weakened by this health crisis. The latter is especially important for the food service sector for most restaurants and cafes were closed for almost three months and it is important to prove to their target markets that they are still strong despite what they are going through. Some unification and encouragement messages are present, as well underlining that these are extraordinary times, people should unite and help each other out, and this, too, shall pass. Going forward, it looks like firms would benefit from continuing their marketing communications activities in terms of showcasing the strength of their brand, building trust, and creating a sense of support and goodwill, as well as providing information about their response to the pandemic. The government and the financial sector as a whole are cooperating better than in the beginning of other crises. Usually, with the first signs of an economic crisis banks behave more cautiously and stop credit lines and/ or call back loans. This exacerbates the economic crisis and eventually may turn into a financial crisis. This time, government, despite having limited resources, tried to use some of these through banks. Both public and private banks tried to help those customers in distress by rescheduling payments or restructuring loans. Furthermore, government provided extra support for consumer loans for housing and automotive industry. The latter seems more successful. The car factories had stopped production in March. With the new support for loans the demand for cars surged. Naturally, it takes time to get into full production levels; now there is a backlog. The support for housing will have a delayed effect, if at all. It just led to an increase in the prices of houses which are eligible for the support. On the other hand, car factories began production and everybody along the supply chain benefitted directly. The banking sector managed this process efficiently and effectively.

References Banbury, C. M., & Mitchell, W. (1995). The effect of introducing important incremental innovations on market share and business survival. Strategic Management Journal, 16(S1), 161–182. Baron, S., Harris, K., & Elliott, D. (2005). Crisis management and services marketing. Journal of Services Marketing. Central Bank of Turkey. https://evds2.tcmb.gov.tr/index.php?/evds/DataGroupLink/5/bie_kkhart ut/en. Accessed 22 May 2020. Central Bank of Turkey. https://evds2.tcmb.gov.tr/index.php?/evds/DataGroupLink/5/bie_tuk kre/en. Accessed 22 May 2020. Chen, K. H., Wang, C. H., Huang, S. Z., & Shen, G. C. (2016). Service innovation and new product performance: The influence of market-linking capabilities and market turbulence. International Journal of Production Economics, 172, 54–64. Coombs, W. T., & Holladay, S. J. (2001). An extended examination of the crisis situations: A fusion of the relational management and symbolic approaches. Journal of public relations research, 13(4), 321–340.

5 Impact of COVID-19 …

101

Deloitte. (2018). EMEA Digital Banking Maturity 2018. https://www2.deloitte.com/content/dam/ Deloitte/global/Documents/About-Deloitte/central-europe/ce-digital-banking-maturity-studyemea.pdf?nc=1. Accessed 22 May 2020. Dosi, G. (1988). Sources, procedures, and microeconomic effects of innovation. Journal of Economic Literature, 1120–1171. Fearn-Banks, K. (2016). Crisis communications: A casebook approach. Routledge. Gulati, R. (1995). Does familiarity breed trust? The implications of repeated ties for contractual choice in alliances. Academy of Management Journal, 38(1), 85–112. Holmlund, M., & Sören, K. (1996). Relationship marketing: The importance of customer-perceived service quality in retail banking. Service Industries Journal, 16(3), 287–304. Huang, Y. H. (2008). Trust and relational commitment in corporate crises: The effects of crisis communicative strategy and form of crisis response. Journal of Public Relations Research, 20(3), 297–327. Hurley, R. F., & Hult, G. T. M. (1998). Innovation, market orientation, and organizational learning: An integration and empirical examination. Journal of Marketing, 62(3), 42–54. Johnson-George, C., & Swap, W. C. (1982). Measurement of specific interpersonal trust: Construction and validation of a scale to assess trust in a specific other. Journal of Personality and Social Psychology, 43(6), 1306. Johnson, Devon, & Grayson, Kent. (2005). Cognitive and affective trust in service relationships. Journal of Business Research, 58(4), 500–507. Lee, S. M., & Lee, D. (2020). “Untact”: A new customer service strategy in the digital age. Service Business, 14(1), 1–22. Lovelock, C. H. (1983). Classifying services to gain strategic marketing insights. Journal of Marketing, 47(3), 9–20. Luhmann, N. (1979). 1979 Trust and power. Chichester: Wiley. Martin-Rios, C., & Parga-Dans, E. (2016). Service response to economic decline: Innovation actions for achieving strategic renewal. Journal of Business Research, 69(8), 2890–2900. Martin-Rios, C., & Pasamar, S. (2018). Service innovation in times of economic crisis: The strategic adaptation activities of the top EU service firms. R&D Management, 48(2), 195–209. Monferrer-Tirado, D., Estrada-Guillén, M., Fandos-Roig, J. C., Moliner-Tena, M. Á., & García, J. S. (2016). Service quality in bank during an economic crisis. International Journal of Bank Marketing. Moorman, Christine, Zaltman, Gerald, & Deshpande, Rohit. (1992). Relationships between providers and users of market research: The dynamics of trust within and between organizations. Journal of Marketing Research, 29(3), 314–328. Mullainathan, S., & Shafir, E. (2013). Scarcity: Why having too little means so much. Macmillan. Smart, C., & Vertinsky, I. (1984). Strategy and the environment: A study of corporate responses to crises. Strategic Management Journal, 5(3), 199–213. Song, M., Di Benedetto, C. A., & Nason, R. W. (2007). Capabilities and financial performance: The moderating effect of strategic type. Journal of the Academy of Marketing Science, 35(1), 18–34. TurkStat. (2020a). http://www.turkstat.gov.tr/PreHaberBultenleri.do?id=33798. Accessed 19 May 2020. TurkStat. (2020b). http://www.turkstat.gov.tr/PreHaberBultenleri.do?id=33812. Accessed 19 May 2020. TurkStat. (2020c). http://www.turkstat.gov.tr/PreHaberBultenleri.do?id=33905. Accessed 19 May 2020. TurkStat. (2020d). http://www.turkstat.gov.tr/PreHaberBultenleri.do?id=33917. Accessed 19 May 2020. TurkStat (2020e). http://www.turkstat.gov.tr/PreHaberBultenleri.do?id=33929. Accessed 28 May 2020.

102

M. C. Gul and M. Kaytaz Misra Cagla Gul is a Professor of Marketing at Isik University, Istanbul, Turkey. She holds a Ph.D. degree in marketing from Bogazici University (2008), and an MBA degree from Georgia State University. Her research interests include marketing and consumer behavior in times of crisis and recession, corporate social responsibility, social marketing, status consumption and green consumer behavior. She has been publishing and speaking on these topics globally. Formerly, she has served as the Vice Director of Graduate School of Arts and Sciences at Isik University and as the Associate Editor for the Journal of Business and Industrial Marketing (JBIM). She is a regular reviewer for several highly regarded marketing and management journals. Before joining the academic community, she held various positions in the field of marketing in telecommunications and energy sectors for over 5 years. She has a B.Sc. degree in Industrial Engineering from Bogazici University. Mehmet Kaytaz is the Dean of Faculty of Economics and Administrative Sciences at I¸sık University, Istanbul. He received his M.A. at University of Manchester (1974) and Ph.D. at University of Nottingham (1978). He joined Bo˘gaziçi University in 1978. Mehmet Kaytaz had a leave of absence during 1992–2000; and worked first as the Deputy President and then the President of the State Institute of Statistics; later he was appointed as the Undersecretary of Treasury. He was the chairman of the board of directors of Eregli Iron and Steel Factories, one of the largest manufacturing companies in Turkey. He also took part in founding Istanbul Gold Exchange. Between 1997 and 2000 he worked as the Alternate Executive Director representing Turkey and other countries in the group in European Bank for Reconstruction and Development. Before joining I¸sık University he was the head of Economics Department at Bo˘gaziçi University. He published on economic policy, statistics, economics of SMEs, economics of education, finance and marketing.

Chapter 6

How COVID-19 Could Accelerate the Adoption of New Retail Technologies and Enhance the (E-)Servicescape Kim Willems, Nanouk Verhulst, and Malaika Brengman

Abstract The current COVID-19 pandemic and containment regulations bring unseen challenges to service organizations. The physical and social servicescape are heavily impacted by government regulations on social distancing and people’s fear of contamination. Retailing has traditionally predominantly been a ‘game of people’, yet faced with the consequences of this pandemic, our innate preference for a ‘human touch’ seems to decline. This not only boosts e-commerce but also paves the way for the accelerated adoption of technological advancements in brick-and-mortar retailing, as their perceived usefulness has increased. Retailing is steadily being infused with digital technology and these technologies could prove especially valuable in the post-pandemic ‘new normal’, preventing the erosion of the customer- and employee experience. Particular problems to be solved are, among others, managing waiting lines, disinfection, diminished interpersonal contact between customers and frontline employees, in-store crowding, less testing and touching of products, payment, and delivery. This chapter discusses what challenges COVID-19 poses to conventional (e-)servicescapes, and how technologies, ranging from augmented- and virtual reality, over robots and wireless payment, to sensory-enabling technologies for webshops, can offer solutions. Successful business applications are presented, while also considering hurdles. This chapter demonstrates how the current pandemic crisis could catalyze the digital augmentation of retailing and services.

K. Willems (B) · N. Verhulst · M. Brengman Vrije Universiteit Brussel, Brussels, Belgium e-mail: [email protected] N. Verhulst e-mail: [email protected] M. Brengman e-mail: [email protected] N. Verhulst imec-SMIT, Vrije Universiteit Brussel, Brussels, Belgium © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_6

103

104

K. Willems et al.

6.1 Introduction Retailing is not only one of the largest service industries (Lovelock et al. 2014; Ostrom et al. 2015), but also a mature and highly competitive industry with lowprofit margins (Willems et al. 2016). Yet, some retail sectors suffer more than others. To illustrate, the profits amount to only about 1% of sales in food retailing (Zentes et al. 2011). Given that the retail services industry already sits on a shoestring, the COVID-19 containment measures had a profound impact. The virus first hit Europe in January 2020 and took an explosive growth to become a worldwide pandemic. To fight this pandemic, Member States of the European Union (EU) took a wide array of containment measures. In almost all countries, hotels, restaurants, and bars were shut down, impacting the services industry to the core. Besides, most countries closed all retail shops, apart from essential stores (e.g., supermarkets, pharmacies, banks). From mid-March until early May, the majority of retailing was brutally crippled to confine a further spread of the virus in most European countries. At the same time, similar measures were taken in other countries across the globe. Consequently, the retail trade volume decreased drastically during this pandemic. The average growth rate for non-food retailing sank a staggering 31.5% (Eurostat 2020). In total, the retail trade volume growth rate in the EU was also negative, amounting to −20.1%. Department stores were confronted with a stunning decline of an average of 30.5%. For supermarkets, selling essential products, the situation was different: they saw their business grow on average with +0.8%. The same goes for internet trade, which boomed with an average growth of +13.8%. Figure 6.1 presents data that show the situation for these different distribution channels, next to the evolution of different product categories (Eurostat 2020). After the brutal lockdown of non-essential retail stores and other aspects of society (e.g., schools, work, cultural events), many countries managed to get the virus under

Fig. 6.1 Development of retail trade volume, January to April 2020, EU-27 (Source Eurostat 2020)

6 How COVID-19 Could Accelerate the Adoption …

105

control and carefully started to re-open businesses. By the end of April, Germany reopened non-essential retailers provided they were ‘COVID-safe’. France followed in early May, and steadily afterward the re-opening was a fact in many other countries. Did everything go back to normal in the stores? Not really. Making a public space like a retail store ‘COVID-safe’ demands drastic precautions. The following section details how these containment measures affected the consumer’s shopping experience and retailers beyond the financial. In Sect. 6.3, the role of technology to support brick-and-mortar retailers is explored. Section 6.4 sheds light on how webshops can further be augmented by technology in the COVIDaftermath. In sum, this research illustrates how the COVID-19 crisis brings new prospects encouraging technology infusion in retailing.

6.2 How the COVID-19 Pandemic Drives Retail Technology Adoption The current COVID-19 pandemic and lockdown regulations bring many new challenges and opportunities to service organizations, employees, and their consumers (Pantano et al. 2020). The service sector underwent a severe metamorphosis during this COVID-19 pandemic (Mottl 2020). The first major factor that led to this change pertains to the legal environment, namely government regulations safeguarding public health. A second main factor driving the necessity for retailers to rethink their way of doing business is the consumers’ mindset. Beyond legal restrictions, the pandemic has made a severe impression on many people. Consumers’ fear of contamination increased, resulting in refraining from getting too close to other people and potentially contaminated objects.

6.2.1 Coping with COVID in the Brick-and-Mortar Servicescape The containment measures, combined with consumers’ fear, implied a need for an overnight change to the physical and social servicescape (Bitner 1992; Rosenbaum and Massiah 2011; Tombs and McColl-Kennedy 2003). Indeed, the physical surroundings in which customer-employee interactions take place and the service interactions in themselves drastically changed during and in the realm of the COVID crisis. For example, staying open for essential stores and the re-opening of other businesses was conditional upon implementing social distancing measures (e.g., restricted number of customers per m2 , requiring 1.5 meters distance between people). Undeniably, this has reshaped the customer experience (CX) in brick-andmortar businesses drastically (Hogue 2020). For example, restaurants had to shift to becoming take-out businesses, shops had to install plexiglass to protect employees,

106

K. Willems et al.

and the acceptance of cash payments has become a rarity. At some point, wearing face masks in-store also became obliged for shoppers. At every store entrance, there are now hand disinfecting points. Store employees ensure that the maximum number of permitted shoppers is not exceeded, for example, by making every customer take a trolley. When the trolleys run out, no new customers can enter the shop. Consequently, the focus of brick-and-mortar retailers has—out of necessity— shifted from delivering a hedonic shopping experience (Lemon and Verhoef 2016) to providing a more utilitarian shopping experience (Arnold and Reynolds 2003; Babin et al. 1994). During this pandemic, customers became increasingly task-oriented, they quickly buy what they need and prefer not to touch products. Shopping became a functional task that has to be done efficiently, stripped from most pleasure. An emerging evolution was notable from ‘fun’- to ‘run’-shopping.

6.2.2 How COVID Boosted Online Retailing While services have predominantly been a people’s game (Bowen 2016; Giebelhausen et al. 2014); faced with this pandemic, our innate preference for a ‘human touch’ and willingness to touch and test products seems to have declined. Combined with the forced lockdown of physical (non-food) stores, this has opened the path for the adoption of e-services and several other technological advancements as their perceived usefulness and convenience has increased. As a result, during the COVID19 crisis many consumers, as well as service providers and retailers, found their way to e-services (e.g., e-commerce, e-medicine; ACI worldwide 2020; Golinelli et al. 2020). As consumers review their shopping habits, they also come to discover benefits from such services that they were not yet aware of (Pantano et al. 2020). For example, less digital-savvy consumers, as well as consumers in countries that were lagging in the adoption of e-commerce, particularly for food (e.g., UK and Italy; Nielsen 2020), switched to online shopping and discovered the benefits of home-deliveries and store-pickup. In addition, the public used to be skeptical towards sharing privacy-sensitive information for commercial purposes, yet the COVID-19 crisis altered this mindset. Many people currently endorse the usefulness of sharing personal information for contact tracing measures. Nevertheless, as Pantano and colleagues (2020, p. 8) rightly note: ‘The question is left unanswered as to whether […] the decrease in consumers’ privacy concerns will remain also after the emergency period’.

6.2.3 Drivers of Technological Advancement of the (E-)Servicescape in the COVID-Aftermath The value that customers seek while shopping is basically two-dimensional: utilitarian (i.e., shopping out of necessity, as efficient as possible) and/or hedonic (i.e., shopping for the pleasure one finds intrinsically in the activity itself; e.g., Babin

6 How COVID-19 Could Accelerate the Adoption …

107

et al. 1994). The containment measures, public health concerns, and fear impact both types of shopping value. The impact of the COVID-19 pandemic on shopping value and the (e-)servicescape can be translated into four unmet customer needs, that—in turn—can be considered as powerful drivers for the adoption of retail technologies. First, in terms of utilitarian shopping value, being unable to touch products deprives consumers of getting the needed input to make informed purchase decisions. Touch is an important modality to get insights on the diagnostic properties of a product during the information stage of a purchase decision (Van Kerrebroeck et al. 2017a). This is particularly the case for experience goods. Feeling how ripe fruit is, how thick a t-shirt’s fabric feels, or what the weight of a smartphone is, are all examples of how tactile properties play an important role in customers’ purchase decision making. Consumers typically lack such tactile input when shopping online, but now also in-store, they refrain from touching products out of contamination fear. Hence, an unmet need for touching products might surface. Second, the convenience of shopping is also affected by the COVID-19 social distancing measures. In some physical stores, consumers are obligated to use a shopping basket. When the baskets (i.e., a proxy to guard maximum capacity) run out, no new consumers can enter the shop. This measure often leads to long queues at the store entrance. Another element that was implemented to assure social distancing, is forcing shoppers to follow a pre-defined trajectory. Fitting room areas are halved to assure a safe distance. All these measures may be advantageous for public health but, indirectly, they can negatively impact the smoothness and efficiency (i.e., convenience) with which customers can work through their shopping list. Third, in terms of hedonic value, in pandemic times the shopping experience is to a large extent stripped down from social interaction and pleasure. Yet, research has shown that people enjoy mingling with others or being pampered by salespeople when shopping (Cox et al. 2005). Social distancing can be considered as a form of social exclusion (Pantano et al. 2020), which negatively affects consumers’ wellbeing (Dennis et al. 2015; Papagiannidis et al. 2017). Human beings are social creatures. Numerous studies have shown that social isolation has a negative impact on anxiety, stress, and even depression (Holmes et al. 2020). Although some consumers may consciously decide to keep their distance from other people, to function and to enjoy shopping, people need social interaction—be it purely human or mediated by technology (e.g., Van Doorn et al. 2017; Grewal et al. 2020). Fourth, the shopping experience is nowadays also largely trimmed to the basics without enjoyable frills. As both government regulations and people’s fears encourage customers to minimize the duration of their visit, there simply is less ‘opportunity’ to enjoy the experience in se. For retailers, the first goal was to get their stores compliant with the requirements to reopen. To do so, their focus has mainly been on taking functional measures. As such, efforts for providing a pleasurable and rich CX were (often unintendedly) put more to the background. Browsing for new ideas, trying-out tasters, and enjoying the shopping atmosphere are all things that are now restricted, making shoppers feel as having been put on a leash. So, out with the fun-shopping, and in with the run-shopping.

108

K. Willems et al.

Affected Type of Shopping Value UTILITARIAN

Impact

HEDONIC

DIRECT

Touching products for diagnostic tactile cues

Social interaction

INDIRECT

Convenience

Shopping pleasure

Fig. 6.2 Customer needs that drive the adoption of retail technologies in pandemic times

In sum, we propose that the COVID-pandemic and its consequences on retailers and consumers amplify mainly four consumer needs: (1) the need for social interaction, (2) the need for touching products, (3) the need for convenience, and (4) the need for pleasure. In what follows, we highlight how these needs turn into drivers to adopt new technologies. Figure 6.2 presents an overview of how both the utilitarian and hedonic shopping value have been impacted directly and indirectly by the COVID-19 governmental measures and people’s contamination fear.

6.3 Technology to Reinvent the Brick-and-Mortar Servicescape Brick-and-mortar retailers need to understand how their way of doing business is affected by this crisis. In this section we discuss the changes in the current retail servicescape, focusing on the social and physical servicescape. Additionally, we elaborate on how technology can entail unexpected opportunities for retailers to deal with the post-pandemic ‘new normal’.

6.3.1 The Social Servicescape in the New Normal This section first describes how technology can enable retailers to manage crowding and reassure consumers fearing contamination. Second, it describes how technology can play a role to enhance feelings of social presence in an era where social distancing is the norm.

6.3.1.1

Technological Solutions for Keeping Social Distance

The ‘social servicescape’ is comprised of employees and other customers, as well as the aspect of social density or crowding (Rosenbaum and Massiah 2011; Tombs and McColl-Kennedy 2003). It was heavily impacted on all levels during the COVID-19

6 How COVID-19 Could Accelerate the Adoption …

109

crisis. We see a range of changes in customers’ and employees’ behavior (Pantano et al. 2020), as well as in the CX. For example, the fear of contamination can cause barriers to visit certain places, to use certain services, and to touch products (Hazée et al. 2017). Indeed, many people are extremely worried to come too close to other people. Even when the number of shoppers allowed in a store is restricted, the concerns for social distance can paradoxically lead to perceived social crowding. This psychological state can lead to less positive emotions and decreased satisfaction (Vredenburg and Philips 2020). Shoppers may be unwilling to enter, feel on edge, and try to keep a distance from other shoppers and employees. Serving shoppers becomes a challenge when trying to make sure that their personal space does not get invaded. Thus, retailers should try to limit the fear of contamination by managing in-store crowds. Also, in non-pandemic (normal) times, it is a good idea to prevent stores from getting too crowded, as social density has been found to have an inverted U-shape effect on consumer spending (Knoeferle et al. 2017). To achieve this goal upon reopening in the current crisis, retailers swiftly adopted and embraced numerous technological solutions. Limiting the number of people inside the store can, for example, be efficiently accomplished by the implementation of real-time store occupancy management systems (e.g., Pygmalios.com). Examples of such systems include using sensors as people counters or even digital screens serving as traffic lights, that only allow a pre-determined number of shoppers in the store at the same time (Neio 2020; Progressive Grocer 2020). Some smaller stores started to work with reservations to come to the store, guaranteeing a personal service. Bigger shopping districts and malls, on the other hand, work with smartphone signals to estimate the crowdedness and offer real-time updates on their website to discourage visitors to come over when it is already crowded (Ong 2020). Furthermore, apps that consumers can use indicating how busy a store is in real-time and which products are available could also be helpful (e.g., the ShopSafe app). Due to government measures, long queues may already form at the store entrance. Standing in these queues can increase the fear of contamination and instill negative feelings. Such negative feelings caused by crowding could be alleviated, for example, by a soothing VR experience (Van Kerrebroeck et al. 2017b). Anyway, retailers should try to stimulate a good flow not only in, but also around their stores (cf. Kumar 2005). A practical solution to that end is the adoption of virtual queueing systems, such as via the QLESS app that puts customers in a virtual queue and sends them a text when it is their turn to enter the shop. And if this still is not enough, many brick-and-mortar retailers took the convenience of their customers to the next level, by for example offering the possibility of pre-ordering online to efficiently pick-up the reserved goods at the store (Extenda Retail 2020). Stores without a webshop encouraged their customers via the store window or via local platforms to visit their social media page to place an order to be delivered or picked up in-store. This way, the returns were at least not reduced to zero in the lockdown weeks. More consumers became aware of the convenience these types of solutions have to offer. Even the delivery of groceries via delivery

110

K. Willems et al.

robots bringing groceries home without human contact was rolled out successfully in certain places (Palmer 2020).

6.3.1.2

Technology-Mediated Social Presence or Interaction

But let’s face it, solely focusing on convenience, safety, decreasing fear, and limiting the number of people indoors, by stripping all the ‘fun’ out of shopping is not a maintainable long-term solution. To stay relevant, brick-and-mortar shops should go a step further by rethinking how the interactions between customers, employees, and the shop can be brought back on track. Consumers consider the interrelation with other consumers and employees as a crucial part of a pleasurable service experience (Bitner et al. 1990; Cox et al. 2005). To boost interaction, retailers can consider implementing other, more socially oriented innovative technologies (Grewal et al. 2020), such as voice assistants, social service robots, or even holograms. Fast-food chains like McDonald’s have been testing robots as cooks and servers (Cellan-Jones 2020). Voice assistants could allow shoppers to drive into a parking lot and without having to leave their car, the voice assistant could tell them their place in the waiting line and when it is their turn (Stankiewicz 2020). Another illustration of using technology to create feelings of social presence or interaction is that of the Belgian bathroom company Van Marcke. It has enhanced its in-store showroom in a virtual way by a 360 degrees immersive VR enabled ‘Virtual Showroom’ (offered by the digital communications agency Big Bad Wolf), where even more bathroom products can be viewed from all angles in 3D, and all of this in the presence of an avatar of the salesperson who can provide personal assistance and advice. Alternatively, retailers can display products via holograms, for instance on lifelike models. To illustrate, the French lingerie store Empreinte broadcasted hologrammodels wearing their lingerie in the store window. And Ralph Lauren showed sporting hologram-athletes in the shopping window. Such digital product representations on real-looking models stimulate consumers’ mental imagery, and provides input on the product. To some extent, this imagery can make up for the lack of being able to actually touch the lingerie or sports clothes (Overmars and Poels 2015a). With the Telepresence Beam robot (offered by Suitabletech/Blue Ocean Robotics), smaller shop owners can interact with customers without them having to leave their house, walk together through the store, browse through merchandise, and provide a personal and full shopping experience. Or, why not, implement a humanoid service robot to do the job, such as Cruzr in AUVA, a consumer electronics retail chain in Belgium (Lens 2020; Fig. 6.3). This robot can in the meantime also measure the body temperature of shoppers at the entrance and check whether customers are wearing their facial masks correctly. At first sight, it may seem somewhat invading the personal sphere, to scan people’s body temperature before letting them enter the store. Yet, such countermeasures that retailers adopt to comply with public regulation, can potentially also lead to higher acceptance of privacy-sensitive technologies (Pantano et al. 2020). Disclosing biometric surveillance measures (e.g., face recognition, GPS tracking) usually causes

6 How COVID-19 Could Accelerate the Adoption …

111

Fig. 6.3 Cruzr robot at AUVA stores (Source Lens 2020—VRT Nieuws Online)

consumers to be concerned about their privacy (Miltgen et al. 2016), albeit with cultural differences (Carpenter et al. 2016). However, necessity knows no law, and in the current pandemic times, the benefits may outweigh the perceived privacy invasion.

6.3.2 The Physical Servicescape in the New Normal A second component of the servicescape is the ‘physical servicescape’. This is comprised of (a) spatial and functional elements (e.g., layout, equipment, products), (b) signs, symbols, & artifacts (e.g., signage, style; Bitner 1992), and (c) ambient conditions (e.g., noise, music, scent). All three elements of the physical servicescape have been put to a test, and the consequences on the CX of these challenges should not be neglected.

6.3.2.1

Space and Function

Compared to the social servicescape, the physical servicescape is impacted less by the COVID-19 crisis. The major change in the physical servicescape is seen in the space and function of a brick-and-mortar shop. The store layout and walking routes have been transformed, and while waiting times at the check-out may be reduced, at

112

K. Willems et al.

a considerable number of stores there are now waiting lines to get inside. The biggest challenge, however, is a ban (and reluctance of customers) to touch or try-on products. Where cosmetics stores used to allow shoppers to try-out some of their make-up, this is currently no longer possible. Likewise, touching fruits and vegetables is considered not only unhygienic but also inconsiderate in (post-)pandemic times. And providing tasters in supermarkets is even completely forbidden. In several countries, retail guidelines are formulated, recommending that consumers only touch and try on merchandise they actually intend to buy. While many consumers will adhere to these new rules and recommendations by refraining from touching products, such haptic blocking may also backfire as some consumers may experience psychological reactance and may respond with anti-social behavior (i.e., touching, even more, to compensate for their lack of sensory freedom; cf. Ringler et al. 2019). Similarly, contactless payment has become the standard in many stores (Forbes 2020). While the Amazon Go technology, where you even do not have to pass the cash register anymore, is not yet widely available, other more accessible technologies, such as wireless payments (e.g., ACI worldwide 2020; DIGITALEUROPE 2020; Golinelli et al. 2020), to pay touch-free are now becoming widespread (Bycer 2020). Additionally, more space in the store is necessary to create room to keep sufficient distance between customers and staff. More space can be created by not filling the entire store with products. This fits neatly in the current ‘less is more’ trend. Retailers are abandoning the traditional perspective of displaying all sizes and colors of each product. Several digital solutions exist to overcome problems with not having everything in stock and the limitations of not being able to touch or try-on products. For example, if a customer wants to try on a shirt, a smart mirror in the fitting room could do the trick. A smart mirror can also show which variants (e.g., sizes, colors) are still available of the piece the customer is interested in. Some smart mirrors even use AI and augmented reality to show what a piece looks like on a customer (Marr 2019). In other words, mirrors like this allow shoppers to ‘virtually try on’ clothes without touching anything while still evoking the imagery of touching and testing the merchandise. Furthermore, apps with augmented reality also have great potential. For example, Gap’s ‘DressingRoom’ app or the ‘Converse Sampler App’. With ‘Nike Fit’, AR technology is used to scan the foot to find the right shoe size and to visualize what the item will look like on the customer. Sephora has an application that allows consumers to virtually try on lipstick (Carman 2017; see also Fig. 6.4), and MAC provides such an application enabled via YouTube, where you cannot only see your picture with the desired make-up, but you can see it live in a dynamic video-image in your camera. With the ‘IKEA Place’ app, it is possible to virtually preview how the furniture would fit in your own home.

6.3.2.2

Signs, Symbols and Artifacts

Regarding signs, symbols, and artifacts, we believe the biggest change is the increase of the displayed guidelines, warnings, and obligations about COVID-19 in stores. These messages can negatively impact the customer experience, since they can elicit

6 How COVID-19 Could Accelerate the Adoption …

113

Fig. 6.4 L’Oréal Paris: virtual makeup try-ons on Amazon (Kwiecien 2019)

negative emotions in customers and lower perceived control or lead to psychological reactance as their individual choice is restricted (Hui and Bateson 1991; Stewart and Martin 1994). On the other hand, such signs may also be reassuring to shoppers that their health is a main priority for the retailer and provide a safe feeling (Pantano et al. 2020). Still, the signs need to draw enough attention to be able to convey their message effectively. A solution to overcome a lack of attention as well as the possible negative backlash that warning signs may have, is to integrate digital displays around the store showing humorous safety guidelines (e.g., Piirman et al. 2019; Seneviratne and Molesworth 2015). Relevance is key in order for messages on instore digital signage to be noticed (van de Sanden et al. 2020). One way of increasing the relevance of the displayed message, is context-aware in-store advertising. Digital signage content management systems can draw from location-tracking technology, such as in-store beacons, to determine when customers are getting too close, for example (van de Sanden et al. 2019). To draw attention, a supermarket chain in the Netherlands (Jumbo), implemented holograms to convey the social distance rules to consumers (Marijnissen 2020; Fig. 6.5).

6.3.2.3

Ambient Conditions

In terms of the ambient conditions of the physical servicescape, not much has changed. Retail stores still play background music and the indoor noise did not dramatically in- or decrease either. Still, in New Zealand, restaurants and bars are

114

K. Willems et al.

Fig. 6.5 Hologram used at Jumbo supermarkets in the Netherlands to explain the safety measures taken and to call for social distancing (Source Peter van Trijen/pix4profs; Marijnissen 2020)

advised to turn down the volume as this prevents loud conversations which may cause the virus to spread more quickly. Softer music volumes in restaurant settings have actually been shown to lead to longer stays and more spending (Garlin and Owen 2006; Sullivan 2002). However, while reduced sound levels may help anxious consumers relax, an ambiance that is perceived as too quiet will come across as uncomfortable. Furthermore, due to having to wear masks and an accompanying feeling of being less at ease, shoppers will be less able to enjoy ambient conditions (e.g., smelling the odor of fresh bread). Also, attention should be paid that the smell of hand sanitizers does not overpower other ambient scents. While this could be experienced as unpleasant, a freshly cleaned scent could also be reassuring to customers in the current and post-pandemic times. Furthermore, air quality and temperature in stores can change due to not using air conditioning anymore and working with open doors and windows. Several technologies can be installed that allow for providing customers with a more compelling sensory experience in the new normal as well. Appealing to consumer senses for fun, and engaging consumers in brand stories in-store can as such still be accomplished in a COVID-safe way. At TopShop, for example, shoppers can experience attending a real fashion show via Virtual Reality and the NorthFace offers in-store VR experiences to let customers virtually experience the context the gear and clothes will be used in (e.g., climbing mountains). This way, product experiences can be provided in a virtual way and brands can be brought to life (Van Kerrebroeck et al. 2017c). As VR often requires dedicated hardware, that the store needs to provide so that shoppers can use the equipment, contamination is again lurking around the corner. Having to disinfect the VR glasses after every single use, might be a cumbersome (and costly) task for an employee.

6 How COVID-19 Could Accelerate the Adoption …

115

An alternative solution for engaging customers and appealing to their senses, can be achieved via the shopper’s personal smartphone, with Augmented Reality applications. Adidas, for example, unveiled an augmented reality experience in its London flagship store where people can use their Instagram camera on their smartphones to unlock AR installations in the store that trigger different stories behind the products, covering the design process, sustainability practices within the company and Euro 2020 football memorabilia. By scanning a poster in the shop you can also enter a digital ‘free-kick challenge’, the results of which can be shared on Instagram Stories to encourage others to compete as well (Sillitoe 2019). The ‘Living Wine Labels’ app brings the labels on wine bottles to life by scanning them in the store with your smartphone.

6.3.3 Adoption Prospects for Brick-and-Mortar Retailing Technologies Despite the restraints that COVID has put on retailers’ freedom to manage the physical and social servicescape of their stores, it also brings unprecedented opportunities. However, while some may call COVID a positive trigger for us to live, work and interact ‘radically digital’, others experience this crisis as a ‘brutal’ shift to digitalization. Whatever the opinion, the fact is that the pace of digitalization, also in brick-and-mortar retailing, is unseen. Most retailers currently forced into digitalization, do this for the sake of convenience and to serve functional purposes (e.g., cost efficiencies by implementing people counters to respect social distancing; Finne and Sivonen 2008). In addition, retailers are typically not perceived as pioneers with innovative technologies (Hopping 2000; Pederzoli 2016). However, the tables may be turning now. One of the biggest factors discouraging retailers to adopt technology-based innovations is the uncertainty of consumer acceptance (Pantano et al. 2013; Pantano and Di Pietro 2012; Zhu et al. 2013). Now let this be exactly one factor that they should not fear in the current crisis: if the consumer does not embrace technology now, (s)he cannot go shopping at all. This new reality may encourage retailers to take the jump. While most retailers may start with functional implementations of technology, at the same time they may get inspired to exploit more of its strategic potential. Table 6.1 provides an overview of key technologies and their underlying consumer drivers for adoption, as well as their life cycle stage (i.e., introduction, growth, maturity, or decline; e.g., Vernon and Wells 1966). While some of the technologies discussed in this section only find themselves in the introduction stage (e.g., holograms), others are already further advanced in paving the way to broader adoption in retailing (e.g., digital signs). This table is composed based on the evaluation of three independent experts. To assure reliability, their ratings have been compared. When at least two of the three experts agreed, this common evaluation is retained. In

116

K. Willems et al.

Table 6.1 Overview of technology life cycle and main drivers for accelerated adoption in brickand-mortar retailing Life cycle stagea

Consumer drivers of adoption

PreCOVID

Need for social interaction

Now and future

Need for (product) touching

Need for convenience

Need for shopping pleasure

Social servicescape technologies Pre-ordering and delivery technologies

G

M

+b

+

Occupancy management systems

G

M

+

+

Virtual social agents and products as in holograms

I

G

+

Social robots

I

G

+

+

+

+

Physical servicescape technologies Contactless payment

G

M

Digital fitting or AR-based product testing techs

I

G

Digital signs

G

M

Robots

I

G

+

+

+

+

+

+ +

+

+

these columns, the following life cycle stages are used: (D) = development, (I) = introduction, (G) = growth, and (M) = maturity b The (+) in this cell is to be interpreted as follows: the social distancing regulation and consumers’ fear of contamination, decreases social interaction and drives people to try online shopping, leading them to adopt pre-ordering and (in-store) delivery technologies a In

the rare case of coding disagreement between the three experts, a group discussion took place to arrive at a generally supported rating.

6.4 Technology to Augment the E-Servicescape In times of the COVID-19 pandemic, customers around the globe found themselves for weeks in lockdown at home. Being forced by law, or feeling uncomfortable to leave the house, a shift toward online shopping was notable (Columbus 2020; cf. also Sect. 6.1 of this chapter).

6 How COVID-19 Could Accelerate the Adoption …

117

For many consumers, webshops have so far typically been a shopping channel to get utilitarian shopping value (e.g., obtaining the searched for goods, finding relevant information to support the purchase decision making process; Scarpi et al. 2014). They allow for saving time and consumers also have the perception that shopping online saves them costs (Cavallo 2017). Today, however, online retailers may have an additional role to assume: since fun shopping in the physical world is restrained, there is a window of opportunity for online retailers to lure new customers into their webshops. In order to provide hedonic or experiential value online, there is however still a gap to be filled (Sjödin et al. 2020). Webshops that are considered pleasant ‘places’ to visit are so far still an exception (Bridges and Florsheim 2008). One of the main shortcomings that prevent customers from shopping online is the deprivation of sensory input (Petit et al. 2019). Indeed, touching or testing products is practically impossible. Another key limitation is the lack of a warm, human touch (i.e., social presence) during most online interactions. Following the stream of research on offline store atmospherics (Kotler 1973; Turley and Milliman 2000; Vieira 2013), and the servicescape (Bitner 1992), the ‘e-servicescape’ can also be disentangled into an ambient, social, and a design component (Dailey 2004; Eroglu et al. 2003; Hopkins et al. 2009; Koernig 2003; Lee and Jeong 2012). Unlike for the physical servicescape, the pandemic crisis is likely to mainly trigger developments in the ambient and social components of the online servicescape (and not so much the design component). In order to generate more compelling, engaging and pleasant shopping experiences online, the eservicescape can be made more ‘vivid’ by increasing the breadth and depth of sensory input (cf. the ambient factor), and by being more ‘(socially) interactive’ (enhancing the social factor). Section 6.4.1 focuses on opportunities for improving the social online servicescape, or ‘online human touch’ by technology. Section 6.4.2 elaborates on technologies related to the ambient e-servicescape, addressing particularly the forgotten sense of ‘touch’.

6.4.1 The Social E-Servicescape Traditionally, the social component of the e-servicescape is often somewhat neglected or developed in a rather basic manner (e.g., typed chat messages; McLean and Wilson 2016), yet improving the social experience holds great potential to augment the online shopping experience (Grewal et al. 2020; Lee and Jeong 2012; McLean and Wilson 2016). Adding social or interactive cues during online shopping can help to enhance (a) the overall customer experience (Song and Zinkhan 2008; Wang et al. 2007), (b) perceived social presence (e.g., Grewal et al. 2020), and (c) trust (McLean and Osei-Frimpong 2017; Papadopoulou 2007; Papadopoulou et al. 2001), which in turn advances loyalty (Harris and Goode 2010; Yen and Gwinner 2003). Online customers are demanding higher online service levels and expectations continue to rise (McLean and Wilson 2016). Especially now, the time is right for online shops to rethink how

118

K. Willems et al.

to design the social component of the e-servicescape. Consumers are presently less resistant to shop online, they miss out on their former careless social interactions, and they are more open towards technologies to get a window to the outside world. Technologies, such as online helpdesks, live chat functions, and social networking sites have been around for a while now (e.g., Karampela et al. 2020; Turel and Connelly 2013). Livestream commerce also provides a solution as it allows consumers to interact with a salesperson and with the products directly via live video streaming (Chen 2019; Ho and Rajadurai 2020). In China, this new approach to e-commerce, offered amongst others by Alibaba’s Taobao marketplace, has become immensely popular, and also Amazon recently introduced the concept with Amazon Live. The social component (i.e., interpersonal interaction) however goes further than online human-to-human interaction between consumers (e.g., virtual communities, social media) or employees and consumers (e.g., online chat, a real employee as avatar, social media). Indeed, a growing body of human-computer interaction researchers suggest that certain human-computer interactions are considered social interactions as well (McLean and Osei-Frimpong 2019; Nass and Moon 2000). More recent technologies are gaining ground, to uplift social interaction during online shopping, either by augmenting people (e.g., employee gets a virtual avatar) or even substituting people (e.g., voice assistant; De Keyser et al. 2019; Grewal et al. 2020; Larivière et al. 2017). Virtual conversational agents, for example, hold great promise to make the online environment more sociable (Chattaraman et al. 2012; De Keyser et al. 2019). Virtual conversational agents are built to autonomously engage in a conversation with a human (Holz et al. 2009). These types of conversational agents can be embodied (e.g., avatar; robot) or disembodied (e.g., voice assistant, chatbot; Araujo 2018). What is particularly interesting for e-commerce is that customers feel they develop rapport with this type of agent (Cerekovic et al. 2016) and consumers derive social benefits from using them (McLean and Osei-Frimpong 2019), even though they are not human. Nestlé, for example, built an integrated app for voice assistant Alexa to offer voice-guided recipes, tips, and tricks while cooking (Kang 2017). Facebook is also investing in optimizing its chatbots to optimally support the shop function for its recently introduced ‘Facebook shops’ offer. That way, they want to enable providing automatically generated but very human-feeling personal attention during customer interactions with the shops which can now be established on their platforms and allow direct customer contact for answering questions or providing advice via WhatsApp, Messenger or Instagram Direct. Furthermore, Virtual Reality allows that flagship stores can be visited virtually from home, while still getting the feel of the store. Levi’s, for example, now offers a truly interactive virtual shopping experience, which allows you not only to visit their latest flagship stores in London and New York from your home, but also to actually shop there as well. And ‘Gucci 9’, the newest Gucci store that has just opened in the Italian city of Firenze, can even only be visited virtually through ‘Gucci Live’, a live streaming tool that allows you to shop via video with your mobile phone or computer via which you can interact live with the store staff. In the post-corona era, the fashion house plans to open more of these purely virtual luxury boutiques in various world cities.

6 How COVID-19 Could Accelerate the Adoption …

119

Also, virtual realities or worlds including avatars are promising to enhance the social experience during online shopping (Domina et al. 2012; Sharma et al. 2010). These technologies range from virtual worlds on a desktop to fully immersive VRexperiences with a head-mounted device (Flavián et al. 2019). An Australian startup, the 360 Mall, introduced an online marketplace platform with a 3D interface that promises to bring the tangible, holistic shopping experience that is missing from online shopping. It simulates moving around and shopping in a physical space, making you feel as if you were really inside the store. It even allows you to pick-up products and interact with them, as well as to interact with other shoppers (Hassouneh and Brengman 2011, 2015; Stern 2017; The 360 Mall 2020). With the increasingly popular game Fortnite, virtual worlds might be the next big thing (Marlatt 2020). Recently, Fortnite had several concerts taking place in their virtual world while fans could tune in with their avatars (Thier 2020). Online shops could do the same and create a virtual shop in a virtual world to boost social interaction during online shopping by introducing avatars that could represent the customer him/herself, an employee, other customers, or even friends. For example, a shop could create a virtual world where an avatar employee (either human- or computer-controlled) assists customers during an online shopping trip or could invite people around the globe for introducing a new clothing line while customers come and enjoy the show with their avatar. This was already happening in Second Life, be it more for selling virtual than actual products at the time (Hassouneh and Brengman 2011, 2014, 2015).

6.4.2 The Ambient E-Servicescape Besides the social e-servicescape, the ambient counterpart is also open for substantial improvements. The marketing of products through the Internet currently does not fully capitalize on human cognition (Neisser 1976), as it targets consumers as primarily verbal/visual information processors. Addressing the ‘forgotten senses’ (e.g., Spangenberg et al. 1996 on smell; Peck and Childers 2003 on taste; Citrin et al. 2003 on touch) allows for the optimization of consumers’ information processing and could enable marketers to stand out in today’s (online) environment, which is cluttered with mainly visual information. Among the forgotten senses of touch, smell, and taste, the lack of being able to touch products has the most severe effect on the customer experience. Touch is a sense that people develop first in the womb and that we lose the latest when we get old. Touch allows for evaluating diagnostic product properties (e.g., texture, weight, temperature; Peck and Wiggins 2006), which provides utilitarian value, as it facilitates consumers to make the right purchase decision. Furthermore, touch is also found to play an important role in autotelic or hedonic shopping value (i.e., value derived intrinsically from the shopping experience in se). People are currently strongly deprived of touch (be it interpersonal or touching products) in the physical (retail) world. This void is something that they will not quickly see fulfilled by residing to a webshop.

120

K. Willems et al.

Now, a lack of touch is not equally impactful for all types of purchase decisions. Whereas some product categories are smoothly bought online, this is not the case for others. For example, ‘search’ products, like books, can be purchased without any need to evaluate the book further before purchase. However, ‘experience’ products like clothing, consumer electronics, perfumes, or fresh fruits require some more elaborate sensory inspection in advance, in order to avoid post-purchase disappointment (Hsieh et al. 2005). It is exactly there that the shoe pinches for typical e-commerce businesses as we know them today. A perceived barrier in the shopper’s online path-to-purchase is namely the lack of physical inspection (or even trial) opportunities for the products offered online. This is on the one hand quintessential for buying product categories characterized by experience attributes (Citrin et al. 2003). On the other hand, this is even more prevalent during an economic downturn, when perceived risks may induce online shoppers to abandon their shopping trip altogether, without conversion to purchase. And even when the consumer dares to buy, the lack of tactile diagnostic input in the pre-purchase stage often results in product returns, due to an expectationdisconfirmation gap. These returns demand a lot of efforts from online retailers and this stream of reverse logistics heavily impacts on retailers’ bottom line (Ertekin and Agrawal 2020). The good news is that there are solutions; both ‘quick-wins’ as well as more longterm transformational technological advancements. The first quick-win solution to enable tactile input for consumers in a webshop, is to circumvent the problem. After all, besides enabling ‘the real thing’, capitalizing on cross-modal correspondences and synaesthetic marketing (Spence 2012) can also augment the shopping experience, even without having to offer a fully-fledged multi-sensory interface (Spence et al. 2014). Visual stimuli, such as the website’s color scheme, can for example be used to activate particular subconscious and basal inferences of material softness (Balaji et al. 2011; Rohm et al. 2012); and temperature (Berry 1961). Working with this kind of neuroscientific knowledge on human perceptions, also provides a gateway for (online) retailers to optimize the consumers’ information processing fluency (speed and accuracy) and, in turn, their shopping experience. And all of this without heavy investment costs for accomplishing these measures. Furthermore, digital technologies that improve the interactivity, control, and vividness of the webshop experience, in a visual and/or auditory manner can indirectly also allow customers to be better able to assess offerings in other regards (e.g., in terms of tactile diagnostic properties). An example of such vision-oriented object interactivity and vividness-inducing technology that has gained ground in online retailing is image interactivity, which can be mouse-enabled, for instance by technological support such as that of Shoogleit (Cano et al. 2017; Overmars and Poels 2015b), as depicted in Fig. 6.6. Another example is that of 3D virtual online fitting rooms (such as offered by TriMirror), up to full-fledged life Augmented Reality enabled try-on (Baytar et al. 2020), which is used for clothing (Kim and Forsythe 2008), glasses (e.g., as used by Eyeconic and Ray-Ban; see also Pantano et al. 2017) and make-up (as used by Sephora and L’Oréal for example; cf. Poushneh 2018), up to even home furniture (e.g., Brengman et al. 2019). Given that mobile traffic in COVID-19 lockdown times (e.g., in March 2020) was up 34% (Weaver 2020) and AR app downloads

6 How COVID-19 Could Accelerate the Adoption …

121

Fig. 6.6 Shoogleit image interactivity applied in online fashion retailing (Source Petit et al. 2019)

are only a click away, it seems a promising avenue for online retailers (Kwiecien 2019). Now, in the longer run, besides the above mentioned fairly ‘quick-win’ technologies, retailers do not have to resign themselves to the assumption of an ‘inherent inability’ of webshops to provide tactile, olfactory, and gustatory information in online retailing (Grohmann et al. 2007). The field of computer sciences and HumanComputer Interaction (HCI) steadily advances in developing SETs (sensory-enabling technologies; Kim and Forsythe 2008). SETs include both devices that are already widespread (e.g., headphones, touch screens), as well as technologies that are yet to be fully commercialized in this context, such as digital touch/taste/smell interfaces (Petit et al. 2019). Many of these multi-sensory, and particularly touch-enabling, interfaces are promising (Wastiels et al. 2013), but until today they remain underexploited, as they often still find themselves at the concept/prototype stage and their development is rather driven by a search for applications in other contexts than for online shopping purposes (e.g. optimizing gaming interfaces or medical applications). Weathers and colleagues (2007, p. 399) put it as follows: Improving sensory experience in remote channels is often difficult. […] research is being directed to invent methods of sensory information transmission over computer-mediated channels such as computer mice that “feel” textures and printers that “print” tastes […]. Such research may seem far-fetched, but […] these efforts may be well justified.

Upon inspecting the IT literature on touch-enabling interfaces (Culbertson et al. 2018) with potential for implementation in online retailing, Van Kerrebroeck et al. (2017a) identify two distinct types of interfaces that can allow for providing touchinput in a webshop context: actuators (e.g., a haptic glove), and mid-air tactile sensations (e.g., AirWave; Gupta et al. 2013). First, actuator technology converts electric forces into a motion that can be applied to put a force to, for example, a person’s hand. This force stimulates the user’s nervous and muscular system so that haptic input can be transferred, allowing for information provision on tactile properties such as weight, texture, or shape. Actuator technology is a form of on-skin technology, which has the advantage that users tend to associate it with ‘human’ touch interactions, which may add expressiveness (Weigel et al. 2014). It is commercially developed to augment Virtual Reality experiences (e.g., in gaming), but can stand-alone as well (cf. for example, HaptX-Glove; Fig. 6.7).

122

K. Willems et al.

Fig. 6.7 Actuator-based HaptX-Glove for tactile enrichment of VR shopping experiences (Source HaptX-Glove Online 2020)

Second, a less prominent type of touch-enabling technologies, is that of mid-air tactile sensations, making use of air or airborne ultrasound to provide tactile cues. A major advantage of this type of technology, is that users do not need to hold a device or be in contact with a device. Very early-stage experiments are taking place in the context of, for example, automotive interface design, where it could replace traditional touchscreen interfaces (Harrington et al. 2018). The disadvantage however is, that this non-touch transfer of input poses challenges to the design in terms of how to provide the tactile input at the right location. It will take more time for the mid-air tactile enabling technologies to find their way into commercially available applications for B2C marketing purposes, than for the actuator-based ones. In terms of the specific applications described in the original human-computer interaction studies, some are positioned as mainly facilitating touch-related input to make virtual objects feel more concrete. Examples of technologies that enable feeling textures or 3D shapes are the above mentioned haptic gloves or tablets that use onskin actuators and ultrasonic waves, respectively, to transmit tactile information. Other applications reported in the HCI-field include personalization of haptic information by allowing the user to create layers of textures and superimposing them to images (e.g. Haptic Editor; Kamuro et al. 2012). Beyond using touch-enabling technologies for inspecting products, they can also be considered as facilitators of remote human interaction (e.g. Kissenger and Remote Handshaking; Nakanishi et al. 2014; Samani et al. 2012). Technology such as the Kissenger allows for the remote transferal of kisses via an interface and was designed for couples in long-distance relationships (Zhang et al. 2016). Such technologies regarding interpersonal interaction could presently be considered still rather far-fetched for application in customer relationships in retailing.

6 How COVID-19 Could Accelerate the Adoption …

123

6.4.3 Adoption Prospects for Online Retail Technologies The COVID pandemic has opened the door for new opportunities for online retailers. Consumers are more than ever ready to explore online retailing and try new technologies. As suggested by Table 6.2, several technologies that can augment online retailing are expected to be adopted at an accelerated pace. This table was compiled following the same approach that was used for Table 6.1, namely based on three independent expert ratings. Table 6.2 provides an indication of which technological enablers are already close to being adopted by online retailers on a broader basis versus those that are still in the development stage (cf. Vernon and Wells 1966). Particularly, technologies that can help to satisfy the need for social interaction and sensory input have an increased chance for success. Although, implementing these technologies can offer clear advantages for online shops, they might not be cheap. Furthermore, not for all shops, these complex technologies are necessary. For example, when customers buy low-involvement search products, they want a quick straightforward buying Table 6.2 Overview of technology life cycle and main drivers for accelerated adoption in online retailing Life cycle stagea

Consumer drivers of adoption

PreCOVID

Need for social interaction

Need for (product) touching

Need for convenience

Need for shopping pleasure

+

+

+

+

+

Now and future

Social e-servicescape technologies Livestream commerce

I

G

+

Virtual conversation agents

G

M

+

Virtual worlds and VR

I

G

+

+

+

Ambient e-servicescape technologies Image interactivity G

M

+b

Digital fitting or product testing techs

I

G

+

Sensory-enabling techs

D

I

+

+ +

+

+

a In these columns, the following life cycle stages are used: (D) = development, (I) = introduction, (G) = growth, and (M) = maturity b The (+) in this cell is to be interpreted as follows: the fact that webshops usually still lack the possibility for allow shoppers to test products or feel them, image interactivity is a technology that allows them to elicit mental imagery and stimulate multi-sensory experiences that can (partly) provide the shopper with more (non-visual) product info

124

K. Willems et al.

process and the obligation/necessity to have an online conversation might in fact lower their satisfaction with the shopping experience (McLean and Wilson 2016). Thus, for an online business it is important to consider how realistic and beneficial the implementation of these technologies is. Further research is required to examine the indirect and direct return of such investments.

6.5 Conclusion To deal with the COVID-19 crisis and with the post-pandemic new normal, both brick-and-mortar and online retailers underwent changes. Brick-and-mortar shops had to re-invent some utilitarian aspects of the shopping experience, along with finding ways to keep shopping pleasurable (i.e., hedonic). Physical stores can benefit from introducing technologies to bring the ‘social’ interaction back and by integrating virtual or digitalized sensory experiences. The COVID-19 pandemic crisis also forced people to shop online. Existing eshoppers intensified their online shopping, while the laggards finally got triggered to try shopping online. Hence, online retailing received an enormous boost. To benefit from this momentum, webshops should try and tackle the lack of physical and human touch they are traditionally associated with. For both aspects of the e-servicescape, there are technological ‘quick wins’, as well as more long run emerging technologies to remediate these shortcomings. Especially now, while consumers get ever more acquainted with haptic interfaces and used to talking to virtual agents or bots. In Tables 6.1 and 6.2, we summarize the expected accelerated adoption of technology in brick-and-mortar and online retailing due to the COVID-19 pandemic containment measures. While unintended, these measures can have beneficial ‘sideeffects’ in moving both off- and online retailers to a better (digitally augmented) version of their pre-pandemic selves. Most technologies discussed in this chapter were already implemented by innovative retailers, albeit with varying success and for different reasons (Grewal et al. 2020). Hence, innovation and integration of these technologies were already triggered before COVID-19 and—for many of these technologies—the peak of inflated expectations is already behind them (cf., Gartner’s hypercycle; Fenn and Raskino 2008). Even more so, many technologies had already moved through the stage of disillusionment, where interest fades as first trials do not live up to the sky-high expectations. Note that the technological innovations that can be implemented in brick-and-mortar retailing, generally find themselves already in a more advanced stage of development than the technologies with potential for improving online retailing. During the pandemic, the further advancement of these technologies was boosted, driving several of them to the stage of enlightenment (cf. Gartner’s Hypecycle). In other words, most of these technologies are ready to be adopted at a larger scale. The life cycle stage of these technological innovations varies however (see Tables 6.1 and 6.2; e.g., Vernon and Wells 1966). Most of these technologies are in the introduction or growth phase and will likely be boosted further by

6 How COVID-19 Could Accelerate the Adoption …

125

the COVID-19 pandemic and its measures driving society into digitalization. Hence, they will most likely reach the growth or maturity stage in retail.

Authors’ Insights The COVID-19 pandemic and lockdown measures have hit the hardest for brick-andmortar retailing. Both the impact and immediacy of this environmental factor urged the offline retailer to be creative and embrace digital solutions to avoid seeing their returns being reduced to zero. Faced with this unforeseen threat, and the measures that were taken to confine its consequences, physical retailers underwent governmental decisions that neutralized their very characteristic strengths. For example, the pleasure of browsing through and testing products were now all forbidden. In that respect, the accelerated adoption of digital solutions in traditional retailing can be considered not only a necessity, but a key success factor. It is needed for many brick-and-mortar retailers to survive this period. Some retailing academics and practitioners suggested that traditional brick-and-mortar retailing was already at a ‘tipping point’ (Paul and Rosenbaum 2019). Even before this crisis, researchers suggested that to improve the CX, the physical, the digital and the social aspects need to be linked (Bolton et al. 2018). We believe that the current crisis amplified this urge for change in the retail sector. Retailers need to dare and streamline the physical store and online experiences more to deal with the future to come. Moving parts of their business also online (e.g., e-commerce, social media advertising) and integrating novel technologies in-store can favor the longevity of the physical store. Brick-and-mortar retailers need to not only think about managing crowds and safety, but also to redesign their stores and the shopping experience to remain relevant. On the contrary, online retailers experienced COVID-19 as a welcome opportunity that has naturally boosted their business, without further investments needed. As such, given that webshops are being more embraced in the current period, they do not need to invest in technology to survive. However, to seize the momentum and continue surfing on the high they’re currently experiencing, it may be worthwhile to invest in remediating a weakness that has been inherent to the online retail channel for as long as it exists, namely their lack of sensory appeals and social presence. By investing in these two main shortcomings, they can make a difference. To sum-up, retail technology in brick-and-mortar retailing expectedly will be adopted at a higher pace than in online retail, as for the former it becomes a point-of-parity or key success factor, whereas for the latter, it is a nice-to-have basis for a point-of-difference to differentiate from other online retail competitors. Overall, we expect the phygitalization of shopping, or the convergence between online- and offline retailing to be boosted substantially with this pandemic crisis. While brick-and-mortar shopping is now somewhat restrained from offering endlessly rich and enjoyable shopping experiences to consumers (due to health safety measures), they do win in terms of convenience and their design is reinvented, focusing in the first place on optimizing the functional aspects of the shopping trip

126

K. Willems et al.

(i.e., assisting the shopper to get his/her shopping list fulfilled as quickly and conveniently as possible). On the other hand, for intrinsic pleasures that are derived from shopping, such as browsing items or talking with other shoppers, consumers now also will be able to turn more online. So, it appears that this pandemic crisis indirectly also greases the ‘Wheel of Retailing’ (McNair 1958), driving offline shopping to become more functional, and online shopping more hedonic and social, contributing to a convergence of both worlds. This evolution will eventually benefit the seamless omnichannel shopping experience, about which so much has been said in the literature, but which still seems so hard to achieve in practice. Retailers often decide to cut down on their marketing and innovation budgets during a crisis, while especially then, there is a remarkable opportunity to stand out from competitors by investing in technology and marketing. Moreover, also from the consumer perspective, the time is ripe. As consumers are forced to go online or embrace digital facilitators in the physical world, if they still want to shop (and do so in a relaxed and safe way). They are as such now more open than ever to try out digital retail innovations. Implementing new technologies can offer clear advantages for retailers, but they are not always cheap. Thus, we caution businesses to consider how realistic and beneficial the implementation of certain technology is before investing in it. Further research is required to examine the direct and indirect return on such investments. Several of the technologies put forward in this book chapter find themselves already in a more advanced stage of development. Hence, we believe that they can be more than just a fancy gimmick only to be used by big, global retail industry leaders. Also, independent retailers and small to medium-sized retailers can benefit from investing in technologies that help to meet customers’ needs. We even dare to suggest that innovative technology adoption and better integration between online and brick-and-mortar retailing can give small/local retailers the edge they need to compete with the bigger and firmly established online retailers (e.g., Alibaba). Indeed, while local and small retailers might not be able to compete on price, technological innovation can help them to enhance the social and sensory part of their CXs while reaching a bigger audience.

References ACI worldwide. (2020). Global ecommerce retail sales Up 209 percent in April. ACI Worldwide Research Reveals. Available at: https://www.aciworldwide.com/news-and-events/press-releases/ 2020/may/global-ecommerce-retail-sales-up-209-percent-in-april-aci-worldwide-research-rev eals. Accessed 19 May 2020. Araujo, T. (2018). Living up to the chatbot hype: The influence of anthropomorphic design cues and communicative agency framing on conversational agent and company perceptions. Computers in Human Behavior, 85, 183–189. Arnold, M. J., & Reynolds, K. E. (2003). Hedonic shopping motivations. Journal of Retailing, 79(2), 77–95.

6 How COVID-19 Could Accelerate the Adoption …

127

Babin, B. J., Darden, W. R., & Griffin, M. (1994). Work and/or fun: Measuring hedonic and utilitarian shopping value. Journal of Consumer Research, 20(4), 644–656. Balaji, M. S., Raghavan, S., & Jha, S. (2011). Role of tactile and visual inputs in product evaluation: A multisensory perspective. Asia Pacific Journal of Marketing and Logistics, 23(4), 513–530. Baytar, F., Chung, T., & Shin, E. (2020, April 6). Evaluating garments in augmented reality when shopping online. Journal of Fashion Marketing and Management: An International Journal. https://doi.org/10.1108/JFMM-05-2018-0077. Berry, P. C. (1961). Effect of colored illumination upon perceived temperature. Journal of Applied Psychology, 45(4), 248. Bitner, M. J. (1992). Servicescapes: The impact of physical surroundings on customers and employees. Journal of Marketing, 56(2), 57–71. Bitner, M. J., Booms, B. H., & Tetreault, M. S. (1990). The service encounter: Diagnosing favorable and unfavorable incidents. Journal of Marketing, 54(1), 71–84. Bolton, R. N., McColl-Kennedy, J. R., Cheung, L., Gallan, A., Orsingher, C., Witell, L., & Zaki, M. (2018). Customer experience challenges: Bringing together digital, physical and social realms. Journal of Service Management, 29(5), 776–808. Bowen, D. E. (2016). The changing role of employees in service theory and practice: An interdisciplinary view. Human Resource Management Review, 26(1), 4–13. Brengman, M., Willems, K., & Van Kerrebroeck, H. (2019). Can’t touch this: The impact of augmented reality versus touch and non-touch interfaces on perceived ownership. Virtual Reality, 23(3), 269–280. Bridges, E., & Florsheim, R. (2008). Hedonic and utilitarian shopping goals: The online experience. Journal of Business Research, 61(4), 309–314. Bycer, B. (2020, April 16). Paying at a distance: How to navigate touch-free in-store payment methods during coronavirus and beyond. Forbes Advisor. Available at: https://www.forbes.com/ advisor/credit-cards/touch-free-in-store-payment-methods/. Accessed 31 May 2020. Cano, M. B., Perry, P., Ashman, R., & Waite, K. (2017). The influence of image interactivity upon user engagement when using mobile touch screens. Computers in Human Behavior, 77, 406–412. Carman, A. (2017, March 16). Sephora’s latest app update lets you try virtual makeup on at home with AR. The Verge. Available at: https://www.theverge.com/2017/3/16/14946086/sephora-vir tual-assistant-ios-app-update-ar-makeup. Accessed 28 May 2020. Carpenter, D., Maasberg, M., Hicks, C., & Chen, X. (2016). A multicultural study of biometric privacy concerns in a fire ground accountability crisis response system. International Journal of Information Management, 36(5), 735–747. Cavallo, A. (2017). Are online and offline prices similar? Evidence from large multi-channel retailers. American Economic Review, 107(1), 283–303. Cellan-Jones, Z. T. (2020, April 19). Will Covid-19 accelerate the use of robots at work? BBC News. Available at: https://www.bbc.com/news/technology-52340651. Accessed 29 May 2020. Cerekovic, A., Aran, O., & Gatica-Perez, D. (2016). Rapport with virtual agents: What do human social cues and personality explain? IEEE Transactions on Affective Computing, 8(3), 382–395. Chattaraman, V., Kwon, W.-S., & Gilbert, J. E. (2012). Virtual agents in retail web sites: Benefits of simulated social interaction for older users. Computers in Human Behavior, 28(6), 2055–2066. Chen, L. Y. (2019). The effects of livestream shopping on customer satisfaction and continuous purchase intention. International Journal of Advanced Studies in Computers, Science and Engineering, 8(4), 1–9. Citrin, A. V., Stem, D. E., Jr., Spangenberg, E. R., & Clark, M. J. (2003). Consumer need for tactile input: An internet retailing challenge. Journal of Business Research, 56(11), 915–922. Columbus, L. (2020). How COVID-19 is transforming e-commerce. Forbes, 28 April 2020. Available at: https://www.forbes.com/sites/louiscolumbus/2020/04/28/how-covid-19-is-transforminge-commerce/?sh=4f0167e73544. Accessed 26 November 2020. Cox, A. D., Cox, D., & Anderson, R. D. (2005). Reassessing the pleasures of store shopping. Journal of Business Research, 58(3), 250–259.

128

K. Willems et al.

Culbertson, H., Schorr, S. B., & Okamura, A. M. (2018). Haptics: The present and future of artificial touch sensation. Annual Review of Control, Robotics, and Autonomous Systems, 1, 385–409. Dailey, L. (2004). Navigational web atmospherics: Explaining the influence of restrictive navigation cues. Journal of Business Research, 57(7), 795–803. De Keyser, A., Köcher, S., Alkire (née Nasr), L., Verbeeck, C., & Kandampully, J. (2019). Frontline service technology infusion: Conceptual archetypes and future research directions. Journal of Service Management, 30(1), 156–183. Dennis, C., Alamanos, E., Papagiannidis, S., & Bourlakis, M. (2015). Does social exclusion influence multiple channel use? The interconnections with community, happiness and wellbeing. Journal of Business Research, 69(3), 1061–1070. DIGITALEUROPE. (2020). Raising contactless thresholds in response to COVID-19. Available at: https://www.digitaleurope.org/resources/raising-contactless-thresholds-in-response-tocovid-19/. Accessed 9 May 2020. Domina, T., Lee, S.-E., & MacGillivray, M. (2012). Understanding factors affecting consumer intention to shop in a virtual world. Journal of Retailing and Consumer Services, 19(6), 613–620. Eroglu, S. A., Machleit, K. A., & Davis, L. M. (2003). Empirical testing of a model of online store atmospherics and shopper responses. Psychology & marketing, 20(2), 139–150. Ertekin, N., & Agrawal, A. (2020). How does a return period policy change affect multichannel retailer profitability? Manufacturing & Service Operations Management. https://doi.org/10.1287/ msom.2019.0830. Eurostat. (2020). Impact of Covid-19 crisis on retail trade. European Commission Online Publications. Available at: https://ec.europurostatostat/statistics-explained/index.php/Impact_of_Covid19_crisis_on_retail_trade. Accessed 25 June 2020. Extenda Retail. (2020). Retail in a time of coronavirus|COVID-19. EXTENDA RETAIL. Available at: https://www.extendaretail.com/insight/retail-in-a-time-of-covid-19. Accessed 28 May 2020. Fenn, J., & Raskino, M. (2008). Mastering the hype cycle: How to choose the right innovation at the right time. Brighton, MA: Harvard Business Press. Finne, S., & Sivonen, H. (2008). The retail value chain: How to gain competitive advantage through efficient consumer response (ECR) strategies (1st ed.). London; Philadelphia: Kogan Page. Flavián, C., Ibáñez-Sánchez, S., & Orús, C. (2019). The impact of virtual, augmented and mixed reality technologies on the customer experience. Journal of Business Research, 100(July), 547– 560. Forbes. (2020). WHO encourages use of contactless payments due to COVID-19. Available at: https://www.forbes.com/sites/rogerhuang/2020/03/09/who-encourages-use-of-digitalpayments-due-to-covid-19/. Accessed 9 May 2020. Garlin, F. V., & Owen, K. (2006). Setting the tone with the tune: A meta-analytic review of the effects of background music in retail settings. Journal of Business Research, 59(6), 755–764. Giebelhausen, M., Robinson, S. G., Sirianni, N. J., & Brady, M. K. (2014). Touch versus tech: When technology functions as a barrier or a benefit to service encounters. Journal of Marketing, 78(4), 113–124. Golinelli, D., Boetto, E., Carullo, G., Landini, M. P., & Fantini, M. P. (2020). How the COVID-19 pandemic is favoring the adoption of digital technologies in healthcare: A rapid literature review. medRxiv. https://doi.org/10.1101/2020.04.26.20080341. Grewal, D., Noble, S. M., Roggeveen, A. L., & Nordfalt, J. (2020). The future of in-store technology. Journal of the Academy of Marketing Science, 48(1), 96–113. Grohmann, B., Spangenberg, E. R., & Sprott, D. E. (2007). The influence of tactile input on the evaluation of retail product offerings. Journal of Retailing, 83(2), 237–245. Gupta, S., Morris, D., Patel, S. N., & Tan, D. (2013). AirWave: Non-contact haptic feedback using air vortex rings. In Proceedings of the 2013 ACM International Joint Conference on Pervasive and Ubiquitous Computing (pp. 419–428). Haptx Online. (2020). Haptx. Available at: www.haptx.com. Accessed 23 June 2020. Harrington, K., Large, D. R., Burnett, G., & Georgiou, O. (2018, September). Exploring the use of mid-air ultrasonic feedback to enhance automotive user interfaces. In Proceedings of the 10th

6 How COVID-19 Could Accelerate the Adoption …

129

International Conference on Automotive User Interfaces and Interactive Vehicular Applications (pp. 11–20). Harris, L. C., & Goode, M. M. H. (2010). Online servicescapes, trust, and purchase intentions. Journal of Services Marketing, 24(3), 230–243. Hassouneh, D., & Brengman, M. (2011). Shopping in virtual worlds: Perceptions, motivations, and behavior. Journal of Electronic Commerce Research, 12(4), 320–335. Hassouneh, D., & Brengman, M. (2014). A motivation-based typology of social virtual world users. Computers in Human Behavior, 33, 330–338. Hassouneh, D., & Brengman, M. (2015). Retailing in social virtual worlds: Developing a typology of virtual store atmospherics. Journal of Electronic Commerce Research, 16(3), 218. Hazée, S., Delcourt, C., & Van Vaerenbergh, Y. (2017). Burdens of access: Understanding customer barriers and barrier-attenuating practices in access-based services. Journal of Service Research, 20(4), 441–456. Ho, R. C., & Rajadurai, K. G. (2020). Live streaming meets online shopping in the connected world: Interactive social video in online marketplace. In Strategies and tools for managing connected consumers (pp. 130–142). Hersey, Pennsylvania: IGI Global. Hogue, C. (2020). Navigating the new retail experience: A world of change. Available at: https://www.retailcustomerexperience.com/blogs/navigating-the-new-retail-experiencea-world-of-change/. Accessed 26 May 2020. Holmes, E. A., O’Connor, R. C., Perry, V. H., Tracey, I., Wessely, S., Arseneault, L., et al. (2020). Multidisciplinary research priorities for the COVID-19 pandemic: A call for action for mental health science. The Lancet Psychiatry, 7(6), 547–560. Holz, T., Dragone, M., & O’Hare, G. M. P. (2009). Where robots and virtual agents meet. International Journal of Social Robotics, 1(1), 83–93. Hopkins, C. D., Grove, S. J., Raymond, M., & LaForge, M. C. (2009). Designing the e-servicescape: Implications for online retailers. Journal of Internet Commerce, 8(1/2), 23–43. Hopping, D. (2000). Technology in retail. Technology in Society, 22(1), 63–74. Hsieh, Y.-C., Chiu, H.-C., & Chiang, M.-Y. (2005). Maintaining a committed online customer: A study across search-experience-credence products. Journal of Retailing, 81(1), 75–82. Hui, M. K., & Bateson, J. E. G. (1991). Perceived control and the effects of crowding and consumer choice on the service experience. Journal of Consumer Research, 18(2), 174–184. Kamuro, S., Yuta, T., Kouta, M., & Susumu, T. (2012). Haptic editor: Creation and editing system for touchable 3D content. SIGGRAPH Asia 2012 Technical Briefs. ACM. Kang, M. (2017). Kitchen stories enhances its Alexa cooking skill for echo show. Amazon Alexa Blogs, 27 September 2017. Available at: https://developer.amazon.com/blogs/alexa/post/ fda4a8e8-4742-4e6f-8dfb-8e10b140f891/kitchen-stories-enhances-itsalexa-cooking-skill-forecho-show. Accessed 26 November 2020. Karampela, M., Lacka, E., & McLean, G. (2020). “Just be there”: Social media presence, interactivity, and responsiveness, and their impact on B2B relationships. European Journal of Marketing, 54(6), 1281–1303. Kim, J., & Forsythe, S. (2008). Adoption of virtual try-on technology for online apparel shopping. Journal of Interactive Marketing, 22(2), 45–59. Knoeferle, K. M., Paus, V. C., & Vossen, A. (2017). An upbeat crowd: Fast in-store music alleviates negative effects of high social density on customers’ spending. Journal of Retailing, 93(4), 541– 549. Koernig, S. K. (2003). E-scapes: The electronic physical environment and service tangibility. Psychology & Marketing, 20(2), 151–167. Kotler, P. (1973). Atmospherics as a marketing tool. Journal of Retailing, 49(4), 48–64. Kumar, P. (2005). The competitive impact of service process improvement: Examining customers’ waiting experiences in retail markets. Journal of Retailing, 81(3), 171–180. Kwiecien, A. (2019). Examples of AR-powered virtual try ons in the fashion industry. Divante.com Blog. Available at: https://divante.com/blog/examples-of-ar-powered-virtual-try-ons-in-the-fas hion-industry/. Accessed 31 May 2020.

130

K. Willems et al.

Larivière, B., Bowen, D., Andreassen, T. W., Kunz, W., Sirianni, N. J., Voss, C., et al. (2017). “Service encounter 2.0”: An investigation into the roles of technology, employees and customers. Journal of Business Research, 79, 238–246. Lee, S. A., & Jeong, M. (2012). Effects of e-servicescape on consumers’ flow experiences. Journal of Hospitality and Tourism Technology, 3(1), 47–59. Lemon, K. N., & Verhoef, P. C. (2016). Understanding customer experience throughout the customer journey. Journal of Marketing, 80(6), 69–96. Lens, M. (2020). Limburgse winkelketen zet robots in om temperatuur van klanten te meten. VRT Nieuws Online. Available at: https://www.vrt.be/vrtnws/nl/2020/05/07/limburgse-winkelketenzet-robots-in-om-temperatuur-van-klanten-t. Accessed 20 June 2020. Lovelock, C., Patterson, P. G., & Wirtz, J. (2014). Services marketing. Sydney: Pearson. Marijnissen, S. (2020, April 8). Opvallend: Hologram legt je de coronaregels uit in winkels van Jumbo. bndestem.nl online. Available at: https://www.bndestem.nl/etten-leur/opvallend-hol ogram-legt-je-de-coronaregels-uit-in-winkels-van-jumbo~a5e08071/. Accessed 29 May 2020. Marlatt, R. (2020). Capitalizing on the craze of Fortnite: Toward a conceptual framework for understanding how gamers construct communities of practice. Journal of Education, 200(1), 3–11. Marr, B. (2019). The magic of smart mirrors: Artificial intelligence, augmented reality and the Internet of things. Forbes. Available at: https://www.forbes.com/sites/bernardmarr/2019/10/ 04/the-magic-of-smart-mirrors-artificial-intelligence-augmented-reality-and-the-internet-of-thi ngs/. Accessed 28 May 2020. McLean, G., & Osei-Frimpong, K. (2017). Examining satisfaction with the experience during a live chat service encounter-implications for website providers. Computers in Human Behavior, 76, 494–508. McLean, G., & Osei-Frimpong, K. (2019). Hey Alexa … examine the variables influencing the use of artificial intelligent in-home voice assistants. Computers in Human Behavior, 99, 28–37. McLean, G., & Wilson, A. (2016). Evolving the online customer experience… is there a role for online customer support? Computers in Human Behavior, 60, 602–610. McNair, M. P. (1958). Significant trends and developments in the postwar period. Pittsburgh, PA: University of Pittsburgh Press. Miltgen, C. L., Henseler, J., Gelhard, C., & Popoviˇc, A. (2016). Introducing new products that affect consumer privacy: A mediation model. Journal of Business Research, 69(10), 4659–4666. Mottl, J. (2020). Big adapting ahead for retailers striving to succeed in post-COVID-19. Retail Customer Experience Online. Available at: https://www.retailcustomerexperience.com/articles/ big-adapting-ahead-for-retailers-striving-to-succeed-in-post-covid-19/. Accessed 19 May 2020. Nakanishi, H., Tanaka, K., & Wada, Y. (2014). Remote handshaking: Touch enhances videomediated social telepresence. In Proceedings of the SIGCHI Conference on Human Factors in Computing Systems (pp. 2143–2152). Nass, C., & Moon, Y. (2000). Machines and mindlessness: Social responses to computers. Journal of Social Issues, 56(1), 81–103. Neio. (2020). Real time store occupancy management. Available at: https://pygmalios.com/occupa ncy-management/. Accessed 29 May 2020. Neisser. (1976). Cognition and reality: Principles and implications of cognitive psychology. US: WH FreemanNeisser. Nielsen (2020). COVID-19: The unexpected catalyst for tech adoption. Nielsen CPG, FMCG & Retail Articles. Available at: https://www.nielsen.com/us/en/insights/article/2020/covid-19-theunexpected-catalyst-for-tech-adoption/. Accessed 26 June 2020. Ong, T. (2020). Useful map shows real-time crowd levels in S’pore malls & supermarkets for your phase 2 use. Mothership. Available at: https://mothership.sg/2020/06/spaceout-website-crowdmalls/. Accessed 27 June 2020. Ostrom, A. L., Parasuraman, A., Bowen, D. E., Patrício, L., Voss, C. A., & Lemon, K. (2015). Service research priorities in a rapidly changing context. Journal of Service Research, 18(2), 127–159.

6 How COVID-19 Could Accelerate the Adoption …

131

Overmars, S., & Poels, K. (2015a). How product representation shapes virtual experiences and re-patronage intentions: The role of mental imagery processing and experiential value. The International Review of Retail, Distribution and Consumer Research, 25(3), 236–259. Overmars, S., & Poels, K. (2015b). Online product experiences: The effect of simulating stroking gestures on product understanding and the critical role of user control. Computers in Human Behavior, 51, 272–284. Palmer, M. (2020, May 29). Robots from Estonia boost supermarket spirits during pandemic. Financial Times. Available at: https://www.ft.com/content/f2875a4c-943b-11ea-899a-f62a20d54625. Accessed 29 May 2020. Pantano, E., Rese, A., & Baier, D. (2017). Enhancing the online decision-making process by using augmented reality: A two country comparison of youth markets. Journal of Retailing and Consumer Services, 38, 81–95. Pantano, E., & Di Pietro, L. (2012). Understanding consumer’s acceptance of technology-based innovations in retailing. Journal of Technology Management & Innovation, 7(4), 1–19. Pantano, E., Iazzolino, G., & Migliano, G. (2013). Obsolescence risk in advanced technologies for retailing: A management perspective. Journal of Retailing and Consumer Services, 20(2), 225–233. Pantano, E., Pizzi, G., Scarpi, D., & Dennis, C. (2020). Competing during a pandemic? Retailers’ ups and downs during the COVID-19 outbreak. Journal of Business Research, 116, 209–213. Papagiannidis, S., Boulakis, M., Alamanos, E., & Dennis, C. (2017). Preferences of smart shopping channels and their impact on perceived wellbeing and social inclusion. Computers in Human Behavior, 77, 396–405. Papadopoulou, P. (2007). Applying virtual reality for trust-building e-commerce environments. Virtual Reality, 11(2), 107–127. Papadopoulou, P., Andreou, A., Kanellis, P., & Martakos, D. (2001). Trust and relationship building in electronic commerce. Internet Research, 11(4), 322–332. Paul, J., & Rosenbaum, M. (2019). Retailing and consumer services at a tipping point: New conceptual frameworks and theoretical models. Journal of Retailing and Consumer Services, 54, 101977. Peck, J., & Childers, T. L. (2003). To have and to hold: The influence of haptic information on product judgments. Journal of Marketing, 67(2), 35–48. Peck, J., & Wiggins, J. (2006). It just feels good: Customers’ affective response to touch and its influence on persuasion. Journal of Marketing, 70(4), 56–69. Pederzoli, D. (2016). ICT and retail: State of the art and prospects. In Information and communication technologies in organizations and society (pp. 329–336). Cham, Switzerland: Springer. Petit, O., Velasco, C., & Spence, C. (2019). Digital sensory marketing: Integrating new technologies into multisensory online experience. Journal of Interactive Marketing, 45, 42–61. Piirman, M., Pratt, S., Smith, M., & Tooman, H. (2019). Assessing humour use in accommodation establishments: The Estonian context. The European Journal of Humour Research, 7(3), 63–83. Poushneh, A. (2018). Augmented reality in retail: A trade-off between user’s control of access to personal information and augmentation quality. Journal of Retailing and Consumer Services, 41, 169–176. Progressive Grocer. (2020). People Counting Technology Beyond COVID-19. Available at: https:// progressivegrocer.com/people-counting-technology-beyond-covid-19. Accessed 28 May 2020. Ringler, C., Sirianni, N. J., Gustafsson, A., & Peck, J. (2019). Look but don’t touch! The impact of interpersonal haptic blocking on compensatory touch and purchase behavior. Journal of Retailing, 95(4), 186–203. Rohm, A. J., Gao, T. (Tony), Sultan, F., & Pagani, M. (2012). Brand in the hand: A cross-market investigation of consumer acceptance of mobile marketing. Business Horizons, 55(5), 485–493. Rosenbaum, M. S., & Massiah, C. (2011). An expanded servicescape perspective. Journal of Service Management, 22(4), 471–490.

132

K. Willems et al.

Samani, H. A., Parsani, R., Rodriguez, L. T., Saadatian, E., Dissanayake, K. H., & Cheok, A. D. (2012). Kissenger: Design of a kiss transmission device. In Proceedings of the Designing Interactive Systems Conference (pp. 48–57). Scarpi, D., Pizzi, G., & Visentin, M. (2014). Shopping for fun or shopping to buy: Is it different online and offline? Journal of Retailing and Consumer Services, 21(3), 258–267. Seneviratne, D., & Molesworth, B. R. C. (2015). Employing humour and celebrities to manipulate passengers’ attention to pre-flight safety briefing videos in commercial aviation. Safety Science, 75, 130–135. Sharma, G., Anantaram, C., & Ghosh, H. (2010). The role of semantics in next-generation online virtual world-based retail store. In F. Lehmann-Grube & J. Sablatnig (Eds.), Facets of virtual environments (pp. 91–105). Berlin, Heidelberg: Springer. Sillitoe, B. (2019). Adidas unveils augmented reality experience in London flagship. Essential Retail. Available at: https://www.essentialretail.com:443/news/adidas-augmented-reality-lon don/. Accessed 31 May 2020. Sjödin, D., Parida, V., Kohtamäki, M., & Wincent, J. (2020). An agile co-creation process for digital servitization: A micro-service innovation approach. Journal of Business Research, 112, 478–491. Song, J. H., & Zinkhan, G. M. (2008). Determinants of perceived web site interactivity. Journal of Marketing, 72(2), 99–113. Spangenberg, E. R., Crowley, A. E., & Henderson, P. W. (1996). Improving the store environment: Do olfactory cues affect evaluations and behaviors? Journal of Marketing, 60(2), 67–80. Spence, C. (2012). Managing sensory expectations concerning products and brands: Capitalizing on the potential of sound and shape symbolism. Journal of Consumer Psychology, 22(1), 37–54. Spence, C., Puccinelli, N. M., Grewal, D., & Roggeveen, A. L. (2014). Store atmospherics: A multisensory perspective. Psychology & Marketing, 31(7), 472–488. Stankiewicz, K. (2020). Stores may use voice assistants to transform shopping, retail consultant says. CNBC. https://www.cnbc.com/2020/05/12/stores-may-use-voice-assistants-to-transf orm-shopping-retail-consultant-says.html. Accessed 29 May 2020. Stern, M. (2017). Does e-commerce need 3-D shopping? RetailWire. Available at: https://retailwire. com/discussion/does-e-commerce-need-3-d-shopping/. Accessed 31 May 2020. Stewart, D. W., & Martin, I. M. (1994). Intended and unintended consequences of warning messages: A review and synthesis of empirical research. Journal of Public Policy & Marketing, 13(1), 1–19. Sullivan, M. (2002). The impact of pitch, volume and tempo on the atmospheric effects of music. International Journal of Retail & Distribution Management, 30(6), 323–330. The 360 Mall. (2020). Shop Virtually. Virtual shopping mall. https://www.the360mall.com/. Accessed 31 May 2020. Thier, D. (2020). ‘Party Royale’: When and where to watch Fortnite’s big Dillon Francis, Steve Aoki and Deadmau5 concert, time and dates. Forbes. Available at: https://www.forbes.com/sites/dav idthier/2020/05/08/party-royale-when-and-where-to-watch-fortnites-big-dillon-francis-steveaoki-and-deadmau5-concert-time-and-dates/. Accessed 30 May 2020. Tombs, A., & McColl-Kennedy, J. R. (2003). Social-servicescape conceptual model. Marketing Theory, 3(4), 447–475. Turel, O., & Connelly, C. E. (2013). Too busy to help: Antecedents and outcomes of interactional justice in web-based service encounters. International Journal of Information Management, 33(4), 674–683. Turley, L. W., & Milliman, R. E. (2000). Atmospheric effects on shopping behavior: A review of the experimental evidence. Journal of Business Research, 49(2), 193–211. van de Sanden, S., Willems, K., & Brengman, M. (2019). In-store location-based marketing with beacons: From inflated expectations to smart use in retailing. Journal of Marketing Management, 35(15–16), 1514–1541. van de Sanden, S., Willems, K., & Brengman, M. (2020). How do consumers proces digital display ads in-store? The effect of location, content, and goal relevance. Journal of Retailing & Consumer Services, 56(September), 102177. https://doi.org/10.1016/j.jretconser.2020.102177.

6 How COVID-19 Could Accelerate the Adoption …

133

Van Doorn, J., Mende, M., Noble, S. M., Hulland, J., Ostrom, A. L., Grewal, D., & Petersen, J. A. (2017). Domo arigato Mr. Roboto: Emergence of automated social presence in organizational frontlines and customers’ service experiences. Journal of Service Research, 20(1), 43–58. Van Kerrebroeck, H., Willems, K., & Brengman, M. (2017a). Touching the void: Exploring consumer perspectives on touch-enabling technologies in online retailing. International Journal of Retail & Distribution Management, 45(7/8), 892–909. Van Kerrebroeck, H., Brengman, M., & Willems, K. (2017b). Escaping the crowd: An experimental study on the impact of a Virtual Reality experience in a shopping mall. Computers in Human Behavior, 77, 437–450. Van Kerrebroeck, H., Brengman, M., & Willems, K. (2017c). When brands come to life: Experimental research on the vividness effect of Virtual Reality in transformational marketing communications. Virtual Reality, 21(4), 177–191. Vernon, R., & Wells, L. T. (1966). International trade and international investment in the product life cycle. Quarterly Journal of Economics, 81(2), 190–207. Vieira, V. A. (2013). Stimuli–organism-response framework: A meta-analytic review in the store environment. Journal of Business Research, 66(9), 1420–1426. Vredenburg, J., & Philips, M. (2020). Coronavirus has turned retail therapy into retail anxiety. AdNews. Available at: https://www.adnews.com.au/news/coronavirus-has-turned-retail-therapyinto-retail-anxiety. Accessed 31 May 2020. Wang, L. C., Baker, J., Wagner, J. A., & Wakefield, K. (2007). Can a retail web site be social? Journal of Marketing, 71(3), 143–157. Wastiels, L., Schifferstein, H. N. J., Wouters, I., & Heylighen, A. (2013). Touching materials visually: About the dominance of vision in building material assessment. International Journal of Design, 7(2), 31–41. Weaver, R. (2020). 5 quick e-commerce changes retailers should make now|Navigating COVID-19. Retail Customer Experience Online. Available at: https://www.retailcustomerexperience.com/ blogs/5-quick-e-commerce-changes-retailers-should-make-now/. Accessed 30 May 2020. Weathers, D., Sharma, S., & Wood, S. L. (2007). Effects of online communication practices on consumer perceptions of performance uncertainty for search and experience goods. Journal of Retailing, 83(4), 393–401. Weigel, M., Mehta, V., & Steimle, J. (2014). More than touch: Understanding how people use skin as an input surface for mobile computing. In Proceedings of the 32nd Annual ACM Conference on Human Factors in Computing Systems—CHI’14 (pp. 179–188). Willems, K., Leroi-Werelds, S., & Swinnen, G. (2016). The impact of customer value types on customer outcomes for different retail formats. Journal of Service Management, 27(4), 591–618. Yen, J. R. H., & Gwinner, K. P. (2003). Internet retail customer loyalty: The mediating role of relational benefits. International Journal of Service Industry Management, 14(5), 483–500. Zentes, J., Morschett, D., & Schramm-Klein, H. (2011). Strategic retail management (2nd ed.). Wiesbaden: Gabler Verlag. Zhang, E. Y., Nishiguchi, S., Cheok, A. D., & Morisawa, Y. (2016, December). Kissenger–development of a real-time internet kiss communication interface for mobile phones. In International Conference on Love and Sex with Robots (pp. 115–127). Cham: Springer. Zhu, Z., Nakata, C., Sivakumar, K., & Grewal, D. (2013). Fix It or leave it? Customer recovery from self-service technology failures. Journal of Retailing, 89(1), 15–29.

134

K. Willems et al. Kim Willems is professor marketing at the Vrije Universiteit Brussel (Belgium), in the faculty of Social Sciences & Solvay Business School, in the Business Department. She studies digitalization of retailing and services, focusing on the consumer- and company-perspective. Interdisciplinary improvements to the on- and offline shopping environment are focal. Her work has been published in (among others) Journal of Business Research, Psychology & Marketing, Journal of Services Marketing, Journal of Retailing & Consumer Services, Computers in Human Behavior, and Technological Forecasting & Social Change.

Nanouk Verhulst is senior researcher at imec-SMIT and professor in the Business Department at the Vrije Universiteit Brussel. She obtained her Ph.D. in Applied Business Economics at Ghent University. She has a master’s degree in Organizational and Occupational Psychology (Ghent University) and a master in Management (KULeuven). Her work has been published in Journal of Services Marketing, Journal of Service Management, and Journal of Retailing and Consumer Services.

Malaika Brengman is professor (digital) marketing, consumer behavior and market research at the faculty of Social Sciences & Solvay Business School at the Vrije Universiteit Brussel (Belgium). She is head of the Business department where she leads the research cluster Marketing & Consumer Behavior. Her research is mainly focused on shopper behavior and motivations, both online and offline, whereby the future of shopping is central. Particular attention in her research goes to the impact of new technologies. Her research has been published in internationally renowned scientific journals.

Chapter 7

Building Agility in Service SMEs for Post-pandemic Era Özge Demir, Mehmet Okan, Nesenur Altinigne, Didem Gamze Isiksal, ˙ Elif Idemen, and Elif Karaosmanoglu

Abstract Due to the uncertainty during the pandemic and beyond, service organizations’ skills and competencies related to adapting their service operations to the restricted customer conditions have become critically important. While many service companies are shutting down or facing demand reductions, some companies maintain their operations by transforming their service provision abilities. Accordingly, it is imperative to understand which capabilities are critical for the survival of service organizations, specifically service SMEs which are under intense pressure of the social isolation and physical distancing concerns of customers and restrictions of governments. In this paper, by focusing on the cases of service SMEs in an emerging market (Turkey), we discuss how the agility framework and agility-related capabilities of service SMEs provide service-related insights into value creation for their existing and potential customers during the pandemic. We conducted interviews with the managers of service SMEs in Turkey. Our findings suggest that each of the agility related meta-capabilities (strategic sensitivity, leadership unity, resource fluidity, and resourcefulness) of service SMEs are critical but insufficient. Ö. Demir · D. G. Isiksal · E. ˙Idemen · E. Karaosmanoglu Faculty of Management, Management Engineering Department, Istanbul Technical University, Istanbul, Turkey e-mail: [email protected] D. G. Isiksal e-mail: [email protected] E. ˙Idemen e-mail: [email protected] E. Karaosmanoglu e-mail: [email protected] M. Okan (B) Faculty of Management, Artvin Coruh University, Artvin, Turkey e-mail: [email protected] N. Altinigne Faculty of Business, Istanbul Bilgi University, Istanbul, Turkey e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_7

135

136

Ö. Demir et al.

We observe that service SMEs should also utilize their relationship building and process enhancing co-creation capabilities to adapt their service provision processes to the new normal. Particularly, in our cases, individuated and relational interaction capabilities have emerged as crucial for service SMEs to retain customers and transform their services.

7.1 Introduction The economic impacts of the coronavirus (Covid-19) pandemic on the private sector, industry, and employment are expected to be significant all over the world but especially in emerging markets and developing countries. That is particularly the case for small-medium enterprises (SMEs), which are typically characterized by having fewer resources to absorb the economic shocks (Madrid-Guijarro et al. 2013; Kjær Monsson 2017) and are more likely to be severely affected. SMEs constitute more than 95% of registered firms worldwide, 50% of the total private sector employment in emerging markets, and they contribute up to 35% of national income in these economies (The World Bank Group 2019). They represent over 99% of businesses in the EU. They employ two out of every three employees, create 85% of all new jobs, and generate about three-fifth of the EU value-added (European Commission 2020). As an emerging market, in Turkey, SMEs constitute 99.8% of total firms and supply 73.5% of total employment (TUIK 2016). As the figures demonstrate, SMEs are the backbone of the national economies, so that their survival is crucial for mitigating the economic impact of any crisis, sustaining employment, and creating conditions needed for the post-pandemic growth of emerging economies. Covid-19 outbreak becomes a sudden and dramatic challenge for SMEs. Due to the quarantine, abrupt business closures, employee lay-offs, and shifts to remote work practices may become long-term trends for labor-intensive service SMEs. Since they have thinner liquidity reserves and limited financial alternatives, these conditions may make them more vulnerable to the pandemic. SMEs are forced to adapt to the “new normal”. As the crisis continues to evolve, companies are doing their best to navigate the unknown. Coping with economic stressors caused by the pandemic requires some organizational capabilities that facilitate agile responsiveness to emerging business conditions. Since SMEs have an advantage over larger firms by having less bureaucracy, faster communications, shorter processes, and rapid decision-making abilities (SullivanTaylor and Branicki 2011), they are able to offer more dynamic and fast-paced service solutions to reinvigorate the economy. During the unexpected crisis Covid-19 outbreak, decision-making processes need to be quicker and solutions to be more agile for sustaining businesses. Thereby agility-related capabilities of SMEs are more critical than ever in value creation and adaptation of their service operations to the conditions of the new normal. We believe that we have lessons to be learned from agile SMEs to create a crisis plan for dealing with the new normal. Accordingly, this paper aims to analyze how the distinctive co-creation and dynamic capabilities end

7 Building Agility in Service SMEs for Post-pandemic Era

137

up with strategic agility by providing specific cases of SME service providers in an emerging market, Turkey. Although agility is a much-discussed concept in literature, our knowledge related to its implication in strategic decision making is mostly based on the examples from large companies (e.g. Nokia in Doz and Kosonen 2008; IBM, Lego, Unilever in Lewis et al. 2014). However, we argue that, after Covid-19, SMEs in the service sector, which are severely affected by the pandemic and expectedly will continue to be so, can overcome the difficulties peculiar to this era by being agile via the help of co-creation and dynamic capabilities that they possess. In order to understand the role of the agility-building capabilities on survival and growth of service SMEs during Covid-19, we conducted in-depth interviews with managers of seven service SMEs that have quickly transformed their existing services or developed new ones after the announcement of the pandemic-related restrictions in Turkey. By doing this, we inquire about these SMEs’ dynamic and co-creation capabilities that make their organizations agile in this process. Our research contributes to the literature by how dynamic capabilities and co-creation capabilities of service SMEs foster agility and transform their services during Covid-19. Our results also highlight the importance of individuated and relational interaction capabilities for sustaining operations and customer relations during the pandemic. We provide our findings and insights with examples in Sects. 7.4.2.1 and 7.4.2.2. In this paper, first, we review major strategic agility frameworks (Teece et al. 2016; Doz and Kosonen 2008, 2010). Then, by integrating Wilden et al.’s (2019) co-creation framework to the Arbussa et al.’s (2017) service SME-specific agility framework, we suggest a comprehensive approach in applying the agility framework for the survival of service SMEs in turbulent times. In the following sections, we provide a discussion on two different frameworks of agility, which is followed by sections on co-creation and dynamic capabilities to reveal their role in adopting agility with flourishing cases of service SMEs.

7.2 Major Frameworks of Agility Agility has been evaluated and conceptualized as a meta-level capability by two different frameworks in the literature. The first one is David Teece and colleagues’ sense, seize, transform (from now on S-S-T) perspective that defines organizational agility as “the capacity of an organization to efficiently and effectively redeploy/redirect its resources to value creating and value protecting (and capturing) higher-yield activities as internal and external circumstances warrant” (Teece et al. 2016, p. 17). This definition is congruent with the previous definitions of agility, which view agility as continuous flexibility or adaptability of organizations (Doz and Kosonen 2008; Weber and Tarba 2014; Worley et al. 2014). The S-S-T perspective views organizational agility as integral to the firm’s dynamic capabilities, which refer to the abilities “to sense and then seize new opportunities, and to reconfigure and protect knowledge assets, competencies, and complementary assets with the aim

138

Ö. Demir et al.

of achieving a sustained competitive advantage” (Augier and Teece 2009, p. 412). The second perspective from Doz and Kosonen (2008, 2010) resembles the S-S-T perspective as it too suggests that strategic agility rests on three meta-capabilities: strategic sensitivity, leadership unity, and resource fluidity. According to S-S-T, organizations can be agile first through sensing or generating opportunities in markets before these opportunities become visible for other actors in markets. In general, agile firms make planning and analysis for future drastic changes (emerging trends, economic and political crises, or natural hazards) like Covid-19. They put the effort in foreseeing potential changes and disruptions and thus reconfigure their resources to adapt their organizations to the “new normal” before any actor in the marketplace (Teece et al. 2016). Second, agile firms are able to seize these opportunities through rapid implementations; they successfully re-allocate their resources, adjust their existing competencies, or develop new ones for the new normal (Harreld et al. 2007; Teece et al. 2016). Third, after successfully sensing and seizing, agile organizations need to transform or reconfigure organizational assets (resources and competencies) aiming at sustaining organizations’ flexibility and growth (Helfat and Peteraf 2015). The second framework—the strategic agility framework—on the other hand, requires the leadership to possess three meta-capabilities. First, strategic sensitivity requires the top management to be on the look-out for emergent trends on a continuous basis and be attentive to the changes in the environment. Second, leadership unity requires the top team to be ready and willing to commit to difficult decisions in times of turbulence. And finally, resource fluidity necessitates implementing those decisions through resource re-allocations (Doz and Kosonen 2010). We argue that the S-S-T is a more generalized perspective, whereas the strategic agility framework is more practice-oriented as each dynamic-(meta-)capability addresses similar concerns with regards to achieving flexibility. The former (S-S-T) possesses a what needs to be done perspective, while the latter (strategic agility) recommends concrete leadership actions towards similar goals (Teece et al. 1997; Doz and Kosonen 2010). Strategic sensitivity or sensing capability refers to the scanning and exploration processes engaged in creating knowledge about the service firm’s customers, competitors, and other developments in the strategic landscape (Doz and Kosonen 2008, 2010; Augier and Teece 2009). Sensitivity assists firms to detect the regular service provision gaps caused by sudden changes in environments (Wilden et al. 2019). It is especially vital during times where resuming normal operations is essential and recognizing forthcoming opportunities critical. Seizing capability involves decision making processes for allocating resources and generating business models (Teece 2007). Leadership unity implies commitment to these decisions without political infighting to obtain personal gains (Doz and Kosonen 2008). Most of the strategic decisions are deployed through the lenses of seizing capability and implementation success largely depends on the commitment among the leadership team (Doz and Kosonen 2010). The resource fluidity or the reconfiguring capabilities refers to the execution of the service strategy that emerged from seizing capability and enacted through unity (Helfat et al. 2009). Reconfiguration naturally involves fluidity as it implies implementations of the strategies, such as

7 Building Agility in Service SMEs for Post-pandemic Era

139

hiring skilled employees or redesigning the service blueprint (Doz and Kosonen 2008; Wilden et al. 2019). In sum, both perspectives require insight into the developments in the strategic environment, willingness and ability to act on these insights, and deployment of resources to either realize opportunities or avoid threats. These meta-capabilities decay gradually when management gets consumed in day-to-day operations in search of ever increasing efficiencies, thus they need to be fostered continuously. Doz and Kosonen (2010) suggest a set of leadership actions (see Table 7.1) to cultivate each of these capabilities. Strategic sensitivity is honed through experimenting and broadening perspective. Thought experiments and market-testing both work towards a better understanding of the future of the market, yet these techniques generally do not account for disruptions. Broadening the perspective requires distancing from daily activities and enables an outside-in view of the firm and its potential strategic alternatives. Leadership unity requires trust and safety among the top management. Open dialogue, transparency, and building interdependencies all nurture unity among the leadership team and commitment toward decisions. Finally, enabling resource fluidity mostly depends on reducing inertia creating rigid structures (i.e., processes or hierarchies), and creating management approaches that encourage cooperation to avoid rivalries over resources (Doz and Kosonen 2010, 2011). According to the S-S-T perspective, deciding to be an agile organization and maintaining agility can be a costly decision for some organizations, and it is possible to harm their efficiency in relatively stable markets (Teece et al. 2016). Therefore, they suggest that organizations should try to be agile if they want to manage “uncertainty”, which is about “unknown unknowns”, but agility is not needed to manage “risks”, which is associated with known outcomes (Teece et al. 2016). This is one of the major differences where the strategic agility perspective departs from S-S-T. According to Doz and Kosonen (2008), strategic agility is no longer a choice. The authors acknowledge the necessity and natural tendency of organizations towards increasing efficiency, yet they also assert that highly efficient companies may become vulnerable to discontinuities because they lose their flexibility. The second divergence stems from the means of achieving agility, S-S-T maintains that agility is achievable through drawing on any one of the meta-capabilities (Teece et al. 2016), yet the strategic agility perspective sees all three meta-capabilities necessary as they complement each other in gaining agility (Doz and Kosonen 2008, 2010). Building on Doz and Kosonen’s (2008, 2010) strategic agility framework, Arbussa et al. (2017) suggest a service SME specific strategic agility framework, which we adopt in this study. As we discussed earlier, Doz and Kosonen’s (2010) agility framework has three meta-capabilities: strategic sensitivity, leadership unity, and resource fluidity. From the perspective of service SMEs, service SMEs are inherently capable of resource fluidity owing to their more flexible and less bureaucratic structures. They also have the inherent capability of leadership unity because, in service SMEs, the “leadership team” is small, either the owner of the company or at most accompanied by a partner or a professional manager. These managing partners interact on a daily basis to make strategic decisions. However, from the SMEs’ point of view, strategic sensitivity (or sensing capabilities) is not inherent but a critical capability.

140

Ö. Demir et al.

Table 7.1 The leadership action agenda (Doz and Kosonen 2010, pp. 372) Explanations Strategic sensitivity Anticipating

“Sharpening foresight: Explore future usage concepts, Do not over-rely on foresight tools”

Experimenting

“Gaining insight- Probing. Discovering ‘lead locations,’ innovation hotspots: Local experiments, in-market tests, Strategic and reflective use of corporate venturing”

Distancing

“Gaining perspective: Nurture an ‘outside-in’ perspective through a rich network of personal contacts, Hearing the voice of the periphery”

Abstracting

“Gaining generality: Restating business models in conceptual terms”

Reframing

“Seeing the need for business model renewal: Engaging in honest, open and rich dialogue around strategic issues”

Leadership unity Dialoguing

“Surfacing and sharing assumptions, understanding contexts: Explore underlying assumptions and hypotheses, not just conclusions, developing common ground”

Revealing

“Making personal motives and aspirations explicit: Transparency and clarity of motives brings mutual respect and trust, and understanding of positions”

Integrating

“Building interdependencies: Define a valuable common agenda that conditions success”

Aligning

“Sharing a common interest: Beyond incentives, give deeper common meanings”

Caring

“Providing empathy and compassion: Provide the personal safety needed to be playful”

Resource fluidity Decoupling

“Gaining flexibility: Organise by customer/segmentation-based value domains”.

Modularising

“Assembling and disassembling business systems: Develop ‘plug and play’ functionality for business systems and processes”

Dissociating

“Separating resource use from resource ownership and negotiating resource access and allocation”

Switching

“Using multiple business models: Having different business model infrastructures in parallel and aligning and switching products between them”

Grafting

“Acquiring to transform oneself: Import a business model from acquired company”

SMEs generally have weak strategic sensitivity because of their lack of resources on strategic planning, foresight, or following changes in markets. Service SMEs’ capabilities on strategic sensitivity considerably depend on the general manager’s or leader’s personal characteristics (Arbussa et al. 2017). By broadening the perspective of Doz and Kosonen (2008, 2010), Arbussa et al. (2017) suggest a fourth capability, which is called “resourcefulness”. SMEs generally

7 Building Agility in Service SMEs for Post-pandemic Era

141

lack some resources compared to large companies. According to them, resourcefulness is an SME-specific capability for service SMEs’ strategic agility to overcome their weaknesses in quantitative (economies of scale) and qualitative (specialized human resources) limitations. Thanks to resourcefulness, which enables resilience and performance (Arbussa et al. 2017) in turbulent times, agile service SMEs can successfully cope with scale-related resource inabilities. According to the SME-specific strategic agility framework of Arbussa et al. (2017), these four meta-capabilities need to be adopted at a certain level and dynamic co-occurrence of these four capabilities provides service SMEs to achieve strategic agility.

7.3 Co-creation Capabilities Service firms respond differently to changes in the market environment, and turbulence periods may require deviations from an existing path and revisions in the business model. The success/survival of a service firm, irrespective of the firm size, relies on its capabilities for leveraging relationships with customers (co-creation capabilities) and adapting to changing environments (dynamic capabilities) (Wilden et al. 2019). These two groups of capabilities are key factors that broaden or limit the moves of the service firms during crisis conditions, and an inadequate level of these crucial capabilities may even cause disruptions. Co-creation is considered as the driving force of service ecosystems (Vargo and Lusch 2011; Ngugi et al. 2010), and implies a strategic process for joint value creation with customers (Prahalad and Ramaswamy 2004). Conceptualizations of co-creation include both direct or indirect interactions between two or more parties that lead to a positive consequence for one or more organizations or individuals. Karpen et al. (2015) propose six co-creation capabilities (relational, ethical, individuated, empowered, developmental, and concerted interaction) that are required to build successful service experiences and resolve related problems. The combination of these capabilities comprises a firm’s capacity to co-create value with others (Table 7.2). These six co-creation capabilities are interconnected and based on the resources of the firm (Madhavaram and Hunt 2008); however, the length of internal processes and the complexity of the structure may have adverse effects on the deployment of these capabilities. Co-creation capabilities allow firms to employ various forms of interaction independent from routine activities about service provision and create long-lasting relationships (Karpen et al. 2012). According to Wilden et al. (2019), a service firm’s ability to build deep relationships with its customers is based on three co-creation capabilities: individuated, relational, and ethical. These three capabilities assist firms in engaging directly with their customers, getting insights into their needs, and building trust. Besides, service firms’ ability to help their customers in the process of

142

Ö. Demir et al.

Table 7.2 Definition of co-creation capabilities and underlying reasoning (Karpen et al. 2015, p. 91, Wilden et al. 2019, p. 46) Label of (sub-)construct

Definition of (sub-)construct

Individuated interaction capability

“An organization’s ability to understand the resource integration processes, contexts, and desired outcomes of individual actors within the service system”

Relational interaction capability

“An organization’s ability to enhance the connection of social and emotional links with individual actors within the service system”

Ethical interaction operant capability “An organization’s ability to act in a fair and non-opportunistic way toward individual actors within the service system” Empowered interaction capability

“An organization’s ability to enable individual actors within the service system to shape the nature and content of exchange”

Developmental interaction capability “An organization’s ability to assist individual actors’ own knowledge and competence development within the service system” Concerted interaction capability

“An organization’s ability to facilitate coordinated and integrated service processes with individual actors within the service system”

value co-creation consists of different capabilities as well: developmental, empowered, and concerted. The latter three capabilities enable service firms to use critical thinking and contribute to creating solutions as part of the knowledge creation and transfer process, as part of the regular service provision activities in service industries. Unitedly all these co-creation capabilities explain service firms’ potential for customer engagement and interaction. Orchestration of the co-creation capabilities and dynamic capabilities are crucial for the survival of the firms in turbulent times (Wilden et al. 2019), as these dynamic capabilities build agility in companies (Teece et al. 1997; Doz and Kosonen 2010). Agility in turn allows a service SME “to sense opportunities, design different sets of everyday tasks specifications, and modify its capabilities to match market requirements” (Wilden et al. 2019, p. 45; Arbussa et al. 2017; Danneels 2008; Teece et al. 1997). When the service ecosystem changes, the regular service provision activities rely on dynamic capabilities. Consequently, in the era of Covid-19 and beyond, it can be argued that service organizations’ flexibility and their abilities to adapt and respond rapidly to the turbulent environment are critical for survival and, then, growth of service organizations (Kabadayi et al. 2020), especially for service SMEs. Aiming to provide a framework on how service SMEs adopt strategic agility, we integrate co-creation capability framework (Wilden et al. 2019; Karpen et al. 2012; Karpen et al. 2015; Teece et al. 2016) to the broadened strategic agility framework of service SMEs (Arbussa et al. 2017; Doz and Kosonen 2008, 2010, 2011). For gaining insights from the field about how agile service SMEs adopt and utilize their co-creation and dynamic capabilities,

7 Building Agility in Service SMEs for Post-pandemic Era

143

we discuss cases from an emerging market (Turkey). In the following sections, we present cases and insights that have been gained through the in depth interviews with the managers of service SMEs during Covid-19 precautions.

7.4 Service SMEs During Covid-19: Cases from an Emerging Market Although strategic agility is a much-discussed concept in literature, our knowledge related to the usage of agility in strategic decision and implementation are mostly based on the examples from large companies. However, we argue that, after Covid-19, SMEs in the service sector, which are severely affected by the pandemic, need agile capabilities much more than before and we believe that Arbussa et al. (2017) provide a comprehensive framework for applying agility framework for the survival and renewal of service SMEs in these turbulent times. Service SMEs have some opportunities and challenges while acquiring strategic agility. Innovativeness and flexibility are two of the important characteristics of SMEs and these characteristics enable their sustained organizational learning and innovation (García-Morales et al. 2007). SMEs also easily maintain close customer relationships (Arbussa et al. 2017). For the purpose of gaining insights from service SMEs during Covid-19, we collected cases from Turkey. As discussed earlier, service industries and service SMEs are critically important for the survival of the Turkish economy. Since the confirmation of the first Covid-19 case in Turkey, the government has strongly promoted social isolation and imposed strong restrictions towards service industries. Relatedly, most of the service industries have been severely affected and incapacitated by these restrictions (Taymaz 2020). Therefore, Turkey is a good example for investigating the role of service SMEs’ agility in their survival during disruptive changes. We adopted in-depth interviewing as the main method to collect data for the study, since the central concern of our research is to capture a multitude of different perspectives from the participants and understand their experiences in a rich and holistic manner (Kvale 1996; Alam 2005). Before starting the interviews, we developed unstructured interview questions driven on the definitions of each co-creation and dynamic capabilities in literature (Doz and Kosonen 2008; Teece et al. 2016; Arbussa et al. 2017; Wilden et al. 2019). Since the nature of data collection shifts “from a macro-approach, studying large groups via questionnaires or structured interviews, to a micro-approach, studying small groups via observation or unstructured interviews” (Ellis and Haugan 1997, pp. 384–385) for gaining more holistic view, we aimed to gain insights about all of these capabilities with our unstructured interview questions. Since the aim of the study is to observe service organizations’ skills and competencies related to adapting their service operations during the pandemic crisis, we used purposive sampling techniques. Accordingly, we determined the service

144

Ö. Demir et al.

SMEs, which have directly responded to the Covid-19 crisis by transforming their existing services or developing new ones. 8 interviewees, the owners of the 7 service SME businesses, ranged in age from 24 to 53. All agreed to respond to our questions in online in-depth interviews that last between 30 and 75 min which were done and recorded by using Zoom video conferencing services. Subsequently, we organized and transcribed the data, then coded them to generate description categories for analysis within the frame of the dynamic and co-creation capabilities. Then we describe them in line with the related sub-capabilities to correspond with the main aim of the study (see Appendix).

7.4.1 Overview of Cases This chapter lays the practices of the service SMEs that represent the microfoundations of their dynamic and co-creational capabilities which help them to capture agility during Covid-19 crisis times. Before going into the details of specific approaches taken by the case companies illustrated below, brief presentations of cases are provided here. The real estate office was established by Harry and Sally a couple of years ago in one of the picturesque holiday destinations in Turkey. It is a franchise of one of the biggest international real estate organizations. They are mostly selling and renting summer houses and apartments. The partners used to work in Istanbul as white-collar employees in the banking sector. Although moving to a smaller town from a big city with no connections, they were able to grow their business fast. They work with two more customer representatives in their real estate office. During Covid-19, they have utilized their virtual site tours intensively since travels to other cities were restricted. The image recognition and processing business was founded by Arthur (an aeronautical engineer) and his partner (an artificial intelligence expert) in 2017. They have developed a software that helps to recognize an individual’s face in different photographs shared in various digital environments (e.g. websites, forums, social media, etc.). With this technology, they are preparing photo albums for individuals with the photos they did not have access before and they were unaware of. The individuals can even reach their photos taken unknowingly. They work with photographers and studios and ease their job with the app they developed. During Covid-19, they have decided to utilize their knowledge of image recognition and processing, and artificial intelligence to offer a new software for processing X-rays for distant medical diagnosis. They also started to give consultancy services to the government. Washable Burger is a business created by Mark who is a chef, restaurateur, and consultant based in Istanbul. He currently operates a burger shop where he and his small team only can serve his clients with take-out and delivery orders due to the Covid-19 measures. He also has created the ‘washable burger’: Burger ingredients, mostly raw and vacuum-packaged separately so that they can be washed and/sterilized after delivery. In Turkey, washing and/or sterilizing bottles, groceries, packaged goods, etc. has become the norm during the pandemic. Many people avoid

7 Building Agility in Service SMEs for Post-pandemic Era

145

ordering take-out. Therefore, the ‘washable burger’ comes as a good solution as every ingredient is vacuum-packed and can be washed prior to cooking. The ingredients come together with a preparation manual, following the steps you can prepare a restaurant-quality burger at home. Medical Software Company is an online system provider owned by two partners who work with three more engineers. Their software facilitates the management of healthcare organizations’ records and patient follow-ups. Their business was mainly targeting private clinics and hospitals. However, it had an additional aspect that is telemedicine through which they aimed to recruit individual patients who are seeking for quick consultation via online interviews with doctors. Even though they have planned to launch this feature by the end of 2020, social isolation needs and closure of private clinics after Covid-19 made them move their telemedicine integration to an earlier time. They fast developed software and met technical requirements and enable their clients to remotely inspect and consult their patients, who do not need a physical examination. Maggie is a nutrition and dietetics specialist based in Istanbul who has offered her professional services for five years. She partners with a pilates studio and acts as their nutrition consultant on a revenue-sharing basis. Maggie predominantly accepted her clients in her office in the studio prior to the pandemic. Due to Covid-19 precautions, the studio has been closed since mid-March 2020 with no clear timeline for re-opening. Since she also has several clients from out-of-town, she already had some experience in advising her clients over video-communication tools. After the mandatory closure, she has been able to migrate most of her clients who visited her office in the pilates studio into her online consultancy. Joy and Celine are two separate gym owners who offer group classes and personal trainer services. Celine has recently opened her gym, whereas Joy is a more established fitness center owner. Joy is more experienced and senior in her profession so that she offers a wide range of classes and has a larger customer base with high loyalty. On the other hand, Celine is still trying to grow her business and has a relatively smaller group of customers. They both have several trainers who work with them. After Covid-19 precautions both started offering online courses free for the public but later Joy was more capable of continuing her classes online with her private customer groups than Celine. Exemplar quotations representing managerial actions underpinning different capabilities can be found in the Appendix.

7.4.2 Analysis of SME Cases 7.4.2.1

Findings on Dynamic Capabilities of SMEs

As previously discussed, four types of meta-capabilities provide foundations for agility in service SMEs: strategic sensitivity, leadership unity, resourcefulness, and resource fluidity (Arbussa et al. 2017; Doz and Kosonen 2010). Based on our case

146

Ö. Demir et al.

studies, we have insights on how service SMEs’ meta-capabilities help them to survive during Covid-19, adapt to new normal and construct a vision that may provide competitive advantage for post-pandemic conditions. While some of the managers (e.g. Mark from Washable Burger) provide their SMEs’ complete understanding related to agility that covers most of the elements of these four capabilities, others (e.g. Allen from the Medical Software Company) inform us about their more focused visions that are directly associated with some of these capabilities. The prevalence of each capability and underlying leadership actions are depicted in Fig. 7.1. First of all, most of the managers of these service SMEs that swiftly responded to Covid-19 restrictions clearly uncover their sensing capabilities or their strategic sensitivity by mentioning their plans and projects they started before the pandemic. This is important because strategic sensitivity is a hardly acquired but critical capability for service SMEs (Arbussa et al. 2017). We observe clear service SME skills and

Fig. 7.1 Dynamic capabilities observed in service SMEs

7 Building Agility in Service SMEs for Post-pandemic Era

147

competences, which target several underlying capabilities related to strategic sensitivity, such as anticipating, experimenting, reframing, distancing, and abstracting. Related to anticipating capability, most of our interviewees expressed that, before the pandemic, they spent time to anticipate future needs of the customers and changes in marketplaces, especially changes related to digitalization. For instance, by analyzing the government data, the Medical Software Company was aware of the need for remote patient inspection and consulting so that they had already planned to develop a telemedicine system before the pandemic. For experimenting, one of the fitness centers yields a good example. After the government closed all fitness centers, Celine quickly experimented not only with online gym coaching activities but also offered face-to-face outdoor possibilities to the municipality where her business is located. Mark from Washable Burger, on the other hand, is a good example of the combination of anticipating and experimenting capabilities. He stresses that he discovered consumers’ food safety concerns before the pandemic and mentions his trials on vacuum packaging Burger ingredients to reach different segments. He also anticipates that the current place of Washable Burger Restaurant may not be well-fitted to the post-pandemic conditions and mentions about his more flexible and mobile business models (e.g. takeaway restaurants). This is also a good example of his reframing capabilities that refers to “seeing the need for business model renewal” (Doz and Kosonen 2010, p. 372). He utters about his different business model renewal projects designed for the further stages of the pandemic or post-pandemic. Second, leadership unity is an inherent capability for agile service SMEs (Arbussa et al. 2017). As expected, our interviewees, especially partners of technology businesses, express their less hierarchical and more joint decision making processes. Most of them highlight their direct interactions with their employees and customers. For instance, a service SME specializing in image recognition software is a prominent example for dialoguing, integrating, and caring capabilities. Managers and their teams jointly decide the projects. They also give chances to their employees to use company resources to personally work and experiment on their ideas in their spare time, even if their ideas were rejected by others. Besides, all partners and employees participate in the tasks and projects, which are jointly accepted. Allen, the partner of a medical software company, gives good examples of integrating and aligning capabilities of the leaders. Both of the partners and employees of this medical software company are aware of the meaning of this project for the company and also for the other actors they worked with. After they decided to focus on the integration of telemedicine applications during the Covid-19 Crisis, all owners and employees showed extra role behaviors to improve software’s technical qualifications and they successfully finished the project in a short time. Third, resource fluidity is also another meta-capability, which is inherent in service SMEs (Arbussa et al. 2017). Our case studies indicate how these service SMEs are capable of reconfiguring their business systems and redeploying their resources rapidly (Doz and Kosonen 2008) during Covid-19. For instance, Arthur’s image recognition business is a good example for modularizing (“assembling and disassembling units and processes within the business”; Doz and Kosonen 2010). After

148

Ö. Demir et al.

the pandemic started to spread all over the world, they rapidly transferred their resources they used (particularly, human resources and technical skills and competences on image processing) in the face recognition project to the project of analyzing and determining the particles in the air and x-ray photograph records. All interviewees stated that their customers’ expectations from their service providers have changed after the pandemic. For this reason, our service SME participants needed to adjust their service offerings to these transformed customer requirements. We observe that they are mostly successful at adapting themselves to these new value domains of their customers by (temporarily or permanently) leaving the existing ways of service provision and developing new systems. For instance, Mark from Washable Burger states, “If I want to grow my business after this pandemic, I will need to develop strategies according to the transforming consumption requirements of my customer base”. Similarly, Maggie, a nutritionist states that she has adapted her practice according to the pandemic imposed lifestyles of her clients. These examples clearly imply their decoupling capabilities. Finally, as an SME-specific needed meta-capability for agility, resourcefulness has helped participating service SMEs to overcome their scale-related limitations. Some of our interviewees stress that getting sufficient financial support from banks and the government is almost impossible during Covid-19. However, we also observe that they mostly seem to be coping with their financial limitations for the time being owing to their strategic agility. For instance, the Medical Software Company was planning to overcome its existing and potential financial problems thanks to their social capital. One of the owners of the Medical Software Company said that if they face hardship financially, they may get loans from their families and close kin. Some of the businesses have transformed their offerings and were able to get access to the necessary technical knowledge with the help of their networks during this process. The image processing business owner states that “… After we realized that some of our team members lacked some technical information regarding our new service idea, we called our friends from [major tech giant]. They immediately organized webinars for our team members for free”.

7.4.2.2

Findings on Co-creation Capabilities of SMEs

Service SMEs’ ability to build well-established relationships with their customers depend on their individuated, relational, and ethical co-creation capabilities. SMEs can also support their customers in their value creation processes through developmental, empowered, and concerted interaction capabilities that facilitate critical thinking and collaborative solution development that rise upon knowledge creation and interaction (c.f. Wilden et al. 2019). Through in-depth interviews with seven service SMEs, we analyzed how agile service SMEs adopt and utilize their relationship-building and process-enabling co-creation capabilities during the Covid-19 crisis. The prevalence of each co-creation capability is depicted in Fig. 7.2 First of all, the SMEs’ individuated interaction capability is based on the SME’s ability to identify their customers’ expressed and latent customer needs, processes,

7 Building Agility in Service SMEs for Post-pandemic Era

149

Fig. 7.2 Co-creation capabilities observed in service SMEs

and value sought (Terho et al. 2012). Some occupations like nutritionists and the realtors require individuated co-creation capability as a nature of the practice. Both Maggie, the nutritionist, and Harry & Sally, the real estate partners, both express that they have always attuned to their clients’ individual requirements. Nevertheless, the nature of these requirements changed drastically due to social isolation. Nutritionist Maggie gives an example of families with small children: “Parents are stationed to work from home, while the children are continuing their formal education online. Being together 24/7, the parents’ only time of rest and relaxation is after putting their kids to bed. This ‘me time’ is generally accompanied by drinks and snacks… They also want to entertain together with their kids in the kitchen and cook or bake together more often since they cannot go out”. Since the quarantine and travel restrictions made it almost impossible to sell a house, realtors Harry & Sally try to keep up with the new normal by providing personalized digital experiences (e.g., virtual walk-throughs and live-streams). They are trying to ease their customers’ stressful decision-making process: “We aim to eliminate some options at least. Then, when they come, they will visit their favorites”. By doing that, apart from giving individualized attention to their customers, they also allow their customers to shape the way they perform their job. A firm’s ability to enable individual actors within the service system to shape the nature and content of exchange signifies their empowered interaction capability. Empowered interaction also involves providing coordinated solutions to all stakeholders such as the telemedicine application developed by the medical software company which considers the perspectives of all relevant parties that are clinics, government, and patients. Another component of co-creation is relational interaction capability, which enables businesses to cultivate the social and emotional ties between the parties and to form an empathic interaction with their customer (Wieseke et al. 2012). During the pandemic, some SMEs like Mark’s Washable Burgers, find an opportunity to get to know their customers better. Mark is delivering his ‘washable burgers’ himself door-to-door all over the city “This has given me an incredible insight into who my customers are. I like being in touch with my customers during these hard times”.

150

Ö. Demir et al.

By doing that, he combines the individuated and relational interaction capabilities of his business, which makes his business more agile. Similarly, realtors Harry & Sally aim to overcome the disadvantage of being isolated from their customers by transforming their time resources into self-learning activities and strengthening their relationships with potential customers in the future: “We started to make long phone calls with our elderly customers and tried to learn all the information they need for future interactions.” In this way, Harry & Sally compensate for the lack of their physical contact with their customers through building stronger relationships which imply their individuated and relational interaction capabilities. Image recognition software company owner Arthur and his partner are also successful in adapting their relational interaction capability by talking with several doctors for three weeks to understand the nature of the process and hence reveal all their latent needs. They work with several firms and value the importance of long-term relationships built on trust. As an experienced gym owner Joy has the leverage of having a long history with her customers. She mentions her members as a family. Even though they are far away from each other, they were able to sustain their close relationship like families do: “Because none of them left me alone during the pandemic, they cared about me as much as I care about them.” Unlike Joy, Celine, the other gym owner, lays emphasis on the importance of face-to-face interaction with their members: “We will not continue online courses because we believe that my team and I can put in our performance only when we are together with our members physically.” Accordingly, she admits that she loses the advantage of relational interaction capability that may make her more vulnerable during the Covid-19 crisis. Since dynamic environments in which relationship requirements are constantly changing (Teece et al. 1997), these service SMEs are good at sensing the importance of the relational interactions, and hence connecting with their customers during the pandemic. Relationship-building co-creation capability also comprises fair and nonopportunistic processes between the actors. Namely, service SMEs need to have ethical interaction capability to engage in joint value realization (Karpen et al. 2012). Both Celine and Joy have launched open-public lessons via social media. Whereas Joy’s aim was testing her members’ online course abilities, Celine held only moral concerns like preventing her members’ efforts to go down the drain and enhancing their immune system by encouraging them to do physical exercise. After Joy was sure of her members’ online abilities, she immediately switched to private class lessons, but she decided to continue with open access classes for children as a social responsibility. Although it may not seem so instantly, finalizing the open-public lessons for adults and starting one-to-one lessons is also driven by her ethical concerns: “I felt responsible to my members, who already paid for the lessons but could not get their money’s worth because of the pandemic.” Accordingly, after she made sure that her members can follow online courses via social media, she called them and proposed to pay her debt by doing one-to-one and close-group courses. Moreover, Joy explicitly states that she does not enjoy giving online classes. Nevertheless, she is still willing to continue online lessons for her members, who do not want to come to the studio after opening. Along with new normal, Celine, a tenant of the municipality, is willing to cooperate with the city hall to continue their activities outdoors

7 Building Agility in Service SMEs for Post-pandemic Era

151

or organize free outdoor activities for the residents as a social responsibility: “If the municipality shows us an appropriate open-air area like an amphitheater, we are delighted to continue to serve the city.” Both gym owners were implicitly happy that the pandemic allows them to show their ethical stance. They are proud of their socially responsible acts, and hope that it will bring future opportunities. Thereby, Joy and Celine present their ethical interaction capabilities through their customers during the pandemic. Similarly, the realtor Harry & Sally, Allen from medical software company, and the burger chef Mark approach their competitors similarly and see them as stakeholders instead of competitors and share information to overcome this crisis together. The lifestyle changes of the consumers as a result of the pandemic necessitates service providers to help their customers improve their coping abilities during these hard times. Developmental interaction capability for that matter, represents the organization’s ability to educate all partners and assist them in becoming more skilled. More knowledgeable actors can make more informed decisions and better use of resources (Karpen et al. 2015). For example, Joy, a gym owner, explained to her customers how to use digital devices for having better access to online classes. Similarly, Maggie, a nutritionist, supported her clients for improving their cooking skills. She states that “Many people stay at home and unfortunately eat more and unhealthier than usual. …when people are stuck at home, they want to cook and eat. I don’t want them to regress. That’s why I’ve spent quite some time doing research during the pandemic. I wanted to generate a wide variety of healthy recipes that I can share with my clients because I want them to be able to prepare healthy snacks for themselves when they are craving.” Mark, the creator of the washable burger, assists his customers by providing the ingredients more safely and teaching them how to integrate all these components to create their desired burger. He underlines that the majority of the feedback is very positive. Many of his customers were eating out regularly and have missed a good burger. He says, “it is very hard for a normal person to cook a restaurant-quality burger. Even if some can prepare the patty, the burger bun is an in-house recipe. Many customers thank me, because the “washable burger” is a safe product that they can trust and prepare at home”. Serving customers remotely is a new experience for most of the SMEs in our cases. For instance, Joy says, “I encouraged other fitness trainers in our team to contemplate on how best to continue lessons for children using basic household items.”. Her main motivation in doing so is to enable parents to continue their children’s physical activities. On the other hand, SMEs need to consider the development of their internal stakeholders as well, namely their employees. Due to the pandemic, many employees in the real estate business became idle. But realtors Harry & Sally were lucky because their franchiser came up with a successful solution for those employees in their firm. Their franchiser allocated resources towards the skill and knowledge development of their employees about customer relations. Whether the service firm invests in the development of internal or external actors, this commitment to the relationship eventually helps in generating trust. Empowering individuals and assisting their development generates skillful and authorized actors in the service ecosystem. Thus, synchronization of the service

152

Ö. Demir et al.

processes between partners became crucial (Karpen et al. 2015). Concerted interaction capability allows system partners to work together smoothly to prevent value losses (e.g., time, effort, anxiety) that may negatively affect their or their partners’ experiences. Mutual interaction became more vital during the pandemic period. The psychological burden of this negative experience may be relieved by the successful execution of firms’ actions that aid concerted interaction. The declaration of the pandemic brought uncertainty, and all actors in the service ecosystem started worrying about their position. Specifically, a clarification is needed to address the concerns of both customers and employees. For example, after the pandemic, gyms were closed until further notice. Joy immediately arranged a meeting with her partner and employees. She stated, “We are in a good position financially, no one will be unemployed, and all will continue to get paid.” By doing so, Joy aimed to reduce the anxiety of her employees directly and hence herself indirectly. Another interesting example for concerted interaction with external stakeholders is Celine’s cooperation with the municipality. The municipality promotes her online lessons and gives a direct link to her online workouts in the municipality’s website and social media accounts. Through this cooperation, Celine becomes able to reach each citizen of the town, thus continues service provision seamlessly. The pandemic’s impact on our daily lives forces service firms to generate empathy and to understand the unarticulated needs of their customers to create new alternatives for them. Due to the social isolation, parents are stationed to work from home, while the children are continuing their formal education online. Families want to entertain together with their kids in the kitchen and cook or bake together more often since they cannot go out. Maggie, the nutritionist, arranges her clients’ meal plans accordingly to create cheat days where they can spend time with their kids and not feel guilty at the same time. In a similar vein, burger chef Mark makes deliveries himself since he wants to see his customers’ reactions to the ‘washable burger’ and collect feedback to improve his product and processes. Moreover, he tries to gain insight into how his customers plan to normalize when the government eases the precautions. He wants to be able to respond to their new consumption requirements when the time comes. The pandemic created even more pressure on health-related services. Relieving health-care processes through creative use of technologies became more urgent. This requires generating solutions for doctors and patients at the same time and demands more time and knowledge resources. Arthur, the partner of the image recognition firm, and his firm focused on a medical project aiming to shorten the diagnostic procedures for doctors by applying image recognition technology to X-rays. They talked with several doctors for three weeks to understand the nature of the process and reveal all their subtle needs. During Covid-19, examining patients physically became harder due to the social distancing requirements; therefore, Allen’s medical software company developed a telemedicine application that eases the process for both doctors and patients. Through this telemedicine application, patient consultations or nonphysical examinations can be applied remotely.

7 Building Agility in Service SMEs for Post-pandemic Era

153

7.5 Discussion and Concluding Remarks The service industry has been facing two extremes during the Covid-19 crisis. At one extreme, service businesses such as personal care and sports facilities, various entertainment venues, indoor shopping facilities and the like experienced forced closures; whereas other services such as logistics, streaming, e-commerce and the like faced levels of demand beyond their capabilities. Along with the Covid-19, SMEs experience an unstable and chaotic period during which they have to continue their businesses in the restricted operating zone, with limited means. Therefore, we aim to provide an agility framework for service SMEs to survive during the pandemic and adapt themselves to the “new normal”. In this paper, first we review the two dominant agility frameworks in literature and discuss why agility framework of Doz and Kosonen (2010) and its service SME-related extension, Arbussa et al. (2017), is a timely perspective for the conditions of service SMEs during and after the pandemic. We argue that supporting this framework with co-creation capability (Wilden et al. 2019) is needed and fruitful to comprehensively understand strategic agility for service SMEs in this era. Second, we lay our findings from in-depth interviews conducted with the owners/partners of service SMEs from an emerging market (Turkey) and, based on our findings from these interviews, we provide our insights related to dynamic capabilities and co-creation capabilities of these service SMEs, which directly responded Covid-19 Crisis in Turkey. The following dynamic and co-creational capabilities highlighted by the seven SME owners interviewed in May 2020 help them to be more agile while addressing the challenges brought by this crisis. In service SME contexts, our theoretical integration and findings contribute to the literature in several ways. First, our findings corroborate with Wilden et al.’s (2019) theoretical assertion of not only dynamic capabilities but also co-creation capabilities are critical for the survival and the sustainability of businesses in disruptive service conditions. Specifically, the interviews reveal that service SMEs’ relationship building and process-enabling capabilities get highlighted for their agility during these disruptive times. Second, related to meta-capabilities, we observe that strategic sensitivity is an essential capability, which includes these service SMEs’ anticipation and understanding of the pandemic and post-pandemic conditions, that triggers their rapid responses to the “new normal”. In earlier studies conducted prior to the pandemic, strategic sensitivity has been discussed as a critical capability which has not been found inherent in service SMEs (Arbussa et al. 2017). However, in our interviews, which are conducted during the pandemic, strategic sensitivity has emerged as the most visible meta-capability that supports these SMEs’ adaptation to the “new normal”. Supporting the findings of Arbussa et al. (2017), strategic sensitivity of agile service SMEs is highly associated with their leaders’ individual characteristics. Third, the actors in the service environment should also be flexible in reshaping their businesses to meet the requirements of the current customers and even the potential ones. Accordingly, SMEs should have the capability to empower other

154

Ö. Demir et al.

parties to shape the nature or process of the service provision when necessary. In our cases, most of the SMEs attempted to reshape their service provision activities by considering their customers’ conditions due to the pandemic precautions. They have used their technical capabilities to offer new solutions to remain attractive to their market segments that need or appreciate the added value they offered. These firms demonstrated that they have the advantage of being adaptive to the new context of economic slowdown and uncertainty. Additionally, all of the firms were able to reconfigure their resources such as professional and informal networks, technical knowledge, time and labor while transforming the services they offered. Utilizing artificial intelligence and image processing technology for medical diagnosis, instigating their professional circles for quick technical support and knowledge cultivation, having informal close relationships and provision of reaching them for overcoming the potential future financial constraints, putting time in teaching electronic device usage to their customers for online access and with all team members jointly allocating time and effort for new solutions/offerings are some good examples of such resourcefulness and resource fluidity. Fourth, relationship building co-creation capabilities is a means for getting insights into customer needs, building trust, and deep relationships with customers as an end. In our service SME cases, we observe that those small businesses use the advantage of having close relationships with their customers and understand their transforming needs. Due to having less bureaucracy and shorter decision-making processes (Sullivan-Taylor and Branicki 2011), they can respond immediately to those needs. Yet co-creation capabilities are not limited to a service SME’s customers, value co-creation is broadened to the service network to include other stakeholders such as their competitors, governing bodies etc. This approach is an ethical interaction that also supports the maintenance of the network’s sustainability. By doing that, they are going beyond serving their own interests and making a contribution to the larger business environment. Fifth, the individuated interaction capability is inherent in many service SMEs as they are better able to develop individualized relationships with their customers. This capability enables leaders of service SMEs to develop a deeper understanding of the processes and outcomes of their customers. This information in turn feeds the anticipation capability and reveals whether there is a need for business model renewal. Hence, there seems to be a circularity among individuated interaction capability and anticipating—reframing dynamic capabilities. One illustrative example is a decision to relocate a business to a new and better accommodating location, based on anticipated access requirements of customers. Finally, the findings provided above may show a promising avenue for further research as to understand whether a multiplicity of capabilities is required in attaining agility or drawing on singular meta-capability is sufficient to become agile to cope with crisis times. Such an attempt may resolve the discrepancy among the capability frameworks of Teece et al. (2016) and Doz and Kosonen (2008, 2010).

7 Building Agility in Service SMEs for Post-pandemic Era

155

Appendix

(Meta-)

Capability

Quotation

Anticipating

“There’s a greater need for a good quality product that is packaged safely and delivered through the right channels” (Mark, Washable Burger)

Dynamic capabilities Strategic sensitivity

“People have become obsessed with hygiene; many people are washing their dispenser water bottles (15 litres). This brings us to the washable burger” (Mark, Washable Burger) “According to the reports of the Ministry of Health, almost half of the outpatient doctor visits are mere consultations and do not even require a prescription. This is the main insight that we based our decision to develop a telemedicine application” (Allen, Medical Software Company) “I thought, if everyone is going online (streamed workout classes) why shouldn’t I?” (Joy, Gym Owner) “I am not really fond of remote workout classes. But I will continue them anyway for my students who do not wish to come to the studio when we re-open. I’ll do both” (Joy, Gym Owner) “We were already trying to migrate to a more digital real estate consultancy service before the pandemic hit. This gave us greater flexibility in adapting to remotely working with our clientele” (Sally, Realtor) (continued)

156

Ö. Demir et al.

(continued) (Meta-)

Capability

Quotation “We have a different monitoring practice here. Everyone in the team, partners included, select a region and an industry or sector to monitor and report. For instance, I have a thing for eastern cultures especially Japan and China and I speak Japanese, so I monitor that region. We were aware of the seriousness of the approaching health crisis before the first cases were diagnosed in Turkey… So we anticipated potential outcomes that might affect us and planned accordingly” (Arthur, Image Recognition Company)

Strategic sensitivity

Experimenting

“I have been working on vacuum-sealing the ingredients of the burger months before the pandemic hit” (Mark, Washable Burger) “I always experiment with new concepts: what happens if I cook this in the oven, what about sous vide?” (Mark, Washable Burger) “(During the pandemic) I’ve done quite some research and experimenting on snacks. People get anxious, they get bored at home and they want to snack. And they don’t want to eat the same ‘healthy’ snack so I wanted to provide them a variety of alternatives” (Maggie, Nutritionist) “When I discussed my idea of the washable burger with other chefs, they told me to try it out first. They wanted to see if it worked” (Mark, Washable Burger) “I started with publicly live-streamed workout classes at first, just to try it out. I wanted to see how my gym members would react to these online classes” (Joy, Gym Owner) (continued)

7 Building Agility in Service SMEs for Post-pandemic Era

157

(continued) (Meta-)

Capability

Quotation “I encouraged other fitness trainers in our team to contemplate on how best to continue lessons for children using basic household items” (Joy, Gym Owner) “Even if we have a disagreement about a potential new project, our team members are free and encouraged to pursue that project on condition that they do not slack off on actual running projects. We are open to these types of endeavors” (Arthur, Image Recognition Technologies)

Strategic sensitivity

Distancing

“I get a lot of new ideas. I develop some promising ones, then I share them with my long-time friend and agency partner. I pick his brain, get a different perspective from him” (Mark, Washable Burger) “At times we give consultancy on image processing to other organizations. This gives us a different perspective” (Arthur, Image Recognition Technologies) “We get support from scholars of differing backgrounds from time to time” (Arthur, Image Recognition Technologies)

Strategic sensitivity

Abstracting

“Some of my suppliers have minutely traceable production processes. I want my burgers to be traceable too” (Mark, Washable Burger)

Strategic sensitivity

Reframing

“I am making a really good burger; I have won best burger awards twice. I want my burgers to be available to more people than I can seat in my shop. That’s the reason I have been working on vacuum-sealing the ingredients of the burger months before the pandemic hit. After the pandemic, we made the washable burger concept” (Mark, Washable Burger) (continued)

158

Ö. Demir et al.

(continued) (Meta-)

Capability

Quotation “I don’t remember how I started tracking my clients remotely. When I decided to relocate to Istanbul (from Ankara), I already had an established practice. It could as well be my clients who inquired about continuing remotely, I really can’t say. Besides nutritionists were rare back then, let alone remote practice. But in Istanbul, whenever my clients asked for a nutritionist referral for their kin out of Istanbul, I suggested remotely tracking them” (Maggie, Nutritionist) “I am thinking about aqua gym lessons but in my clients’ pools. I think this is a befitting idea for social distancing” (Joy, Gym Owner) “I am already cooperating with our municipality. If they provide access to an outdoor area such as an amphitheater, I’ll gladly organize free outdoor exercise sessions for our fellow citizens” (Celine, Gym Owner)

Leadership unity

Dialoguing

“I feel lucky that I do not have a partner right now. Making decisions and taking subsequent and correct - action was much faster” (Mark, Washable Burger) “I have to admit that having a business partner was tough. She (?) is slowing me down, I am unable to respond as quickly as I want to” (Joy, Gym Owner) “We try to make decisions unanimously; we discuss matters at a great length” (Arthur, Image Recognition Technologies) “We inquired about what aspects of remote work would be troublesome for our team and any competencies that they might be lacking” (Arthur, Image Recognition Technologies) (continued)

7 Building Agility in Service SMEs for Post-pandemic Era

159

(continued) (Meta-)

Capability

Quotation

Leadership unity

Revealing

“(After mandatory business closures) I immediately arranged a meeting together with my partner and we addressed our employees. I explained to them that we are financially sound and all will continue to get paid” (Joy, Fitness Salon Owner & Trainer)

Leadership unity

Integrating

“By developing the telemedicine software, we aim to improve the patient examination process… so doctors and patients remotely can utilize each other… we have an agreement with the government … so doctors can reach all patient records through our software” (Allen, Medical Software Company) “Every morning we have a meeting for ten minutes to discuss who is doing what that day. We are all part of the same project working towards a goal.” (Arthur, Image Recognition Technologies)

Leadership unity

Aligning

“By developing the telemedicine software, we aim to improve the patient examination process… so doctors and patients remotely can utilize each other… we have an agreement with the government … so doctors can reach all patient records through our software” (Allen, Medical Software Company) “The social distancing has seriously reduced our ability as a team to interact in person on a daily basis. The physical touch used to create a great deal of synergy among us” (Celine, Gym Owner) (continued)

160

Ö. Demir et al.

(continued) (Meta-)

Capability

Quotation

Leadership unity

Caring

“Large businesses in our industry, like restaurant chains were ruthless. They laid off their workers as soon as they got a glimpse of the situation. Small businesses like us, we were much more compassionate in this process. We are trying with all our might to keep our people” (Mark, Washable Burger) “(After mandatory business closures) I immediately arranged a meeting together with my partner and we addressed our employees. I explained to them that we are financially sound and all will continue to get paid” (Joy, Gym Owner) “If someone from our team does not know, say, how to use some software, he/she can readily admit to it and we take care of it asap… We make time to get together and play games and we chat with each other” (Arthur, Image Recognition Technologies)

Resource fluidity

Decoupling

“If I want to grow my business after this pandemic, I will need to develop strategies according to the transforming consumption requirements of my customer base” (Mark, Washable Burger) “We used to have parallel workout classes for kids and their mothers. We won’t be offering those classes anymore due to headcount requirements indoors” (Joy, Gym Owner) “I am planning to arrange private group fitness lessons for families and friends. They will feel much safer regarding contagion” (Celine, Gym Owner)

Resource fluidity

Modularising

“We advanced some activities in our marketing plan and we devised a social media plan.” (Harry, Realtor) (continued)

7 Building Agility in Service SMEs for Post-pandemic Era

161

(continued) (Meta-)

Capability

Quotation “We are able to advance or retard projects depending on the situation. That’s no big deal for us” (Arthur, Image Recognition Technologies)

Resource fluidity

Dissociating

“In this process, even our salesperson started to support technical team by providing suggestions and adjustments about the telemedicine software” (Allen, Medical Software)

Resource fluidity

Switching

“I was already tracking some of my clients remotely before the pandemic hit. During this time, I’ve migrated most of my clients to remote practice” (Maggie, Nutritionist) “I have started remote classes, first on an open-access basis, then privately. I intend to continue that, but I will also keep my studio classes as well. It will be a combination” (Joy, Gym Owner) “We are experts on image processing technologies, and we generated an app that recognizes an individual’s face in different photographs from various events and groups all pictures in one place. We usually work with photographers and studios, but after the pandemic, we deploy our technology to analyze and determine the particles in the air” (Arthur, Image Recognition Technologies)

Resourcefulness

“It was financially hard. We did not receive any financial aid. We fell back on our own finances. If the cash flow did not recover we would go for asking loans from our families and friends as a last resort” (Allen, Medical Software Company) (continued)

162

Ö. Demir et al.

(continued) (Meta-)

Capability

Quotation “(After mandatory business closures) I immediately arranged a meeting together with my partner and we addressed our employees. I explained to them that we are financially sound and all will continue to get paid” (Joy, Gym Owner) “The transition went smoothly because we were already working towards digital transformation” (Sally, realtor) “I know that many companies had to resort to borrowing to keep their solvency. We not only did not need any credit, but also managed to pay all our debt” (Arthur, Image Recognition Technologies)

Co-creation Capabilities Relationship building capabilities

Individuated interaction

“I am delivering the washable burger door-to-door in Istanbul. This has taught me a lot about who my customers are. I wanted to keep in touch with my customers during these hard times” (Mark, Washable Burger) “I’m trying to be responsive to the changing requirements of my clients. For instance families with kids are having a really hard time sticking with their diets. They don’t even have a coffee break, they are either working or taking care of their children. Only after the kids are in bed, they get to relax. And that ‘me time’ is generally accompanied by a drink and snacks” (Maggie, Nutritionist) “The washable burger comes with a preparation manual. Following the steps, you can prepare a restaurant-quality burger at home” (Mark, Washable Burger) (continued)

7 Building Agility in Service SMEs for Post-pandemic Era

163

(continued) (Meta-)

Capability

Quotation “I email their weekly plans, we are talking everyday on Whatsapp and making video calls on measurement days” (Maggie, Nutritionist) “I have finalized the open-public fitness classes because I need to start remote private classes with my members to respond to my clients’ personal need” (Joy, Gym Owner) “Formerly, I was a banker at the branch. Since then, I know the importance of fulfilling customer personal needs. During Corona, we believe that we are good at responding to their needs through social channels and long phone calls” (Sally, Realtor) “We talked with several doctors for three weeks to properly understand what they need” (Arthur, Image Recognition Technologies) “During Corona days, we started to make long telephone conversations with our elderly clients, because they need it. We see that as an opportunity for bonding with them instead of waste of time” (Harry, Realtor)

Relationship building capabilities

Relational interaction

“I am delivering the washable burger door-to-door in Istanbul. This has taught me a lot about who my customers are. I wanted to keep in touch with my customers during these hard times” (Mark, Washable Burger) “I think only those who are able to maintain their relationships (with their clients) will survive the pandemic.” (Maggie, Nutritionist) “Because none of them (my members) left me alone during the pandemic, they cared about me as much as care about them” (Joy, Gym Owner) (continued)

164

Ö. Demir et al.

(continued) (Meta-)

Capability

Quotation “I will not continue remote fitness classes. Me and my team, we deliver our best performance only when we are together with our members in physically” (Celine, Gym Owner) “During Corona days, we started to make long telephone conversations with our elderly clients, because they need it. We see that as an opportunity for bonding with them instead of waste of time” (Harry, Realtor) “Due to their trust in our expertise on image processing, the companies we previously worked for called us immediately for their needs during the pandemic” (Arthur, Image Recognition Technologies)

Relationship building capabilities

Ethical interaction

“We are discussing the situation with other chefs and restaurateurs. Some are trying to find means to continue working, some are idly waiting, some count on their large spaces will enable them to re-open and operate… Although we have several professional bodies, we did not have any guidance from those bodies and I strongly believe that we need a formal organization that can aid us and guide us during hard times like these. I, for one, want to be in the front lines to establish such an organization” (Mark, Washable Burger) (continued)

7 Building Agility in Service SMEs for Post-pandemic Era

165

(continued) (Meta-)

Capability

Quotation “I started these Instagram live sessions mainly to motivate my clients. We are going through trying times. I wanted to support them with some practical tips to continue eating healthy at home. Then I thought, eating healthy is not sufficient, they need to be physically active. I invited a personal trainer friend of mine for a live session. Then I invited a psychologist friend to get some tips on keeping the morale high. I want to keep their motivations high” (Maggie, Nutritionist) “We want more entrants into the patient management industry because we don’t have either the means or the desire to satisfy such a large potential. We will only be able serve the market together with our competitors and only then be truly beneficial to our society at large” (Allen, Medical Software Company) “Even though we finalized open-public lessons for adults, we decided to continue with open access classes for children to help them and their families” (Joy, Gym Owner) “We are willing to work with the municipality in the following days. We are renter of the municipality. If they show us an available open-air area like an amphitheater, we are delighted to continue our activities outdoors or organize free outdoor activities for the residents. We see that as social responsibility and we always ready to serve the town” (Celine, Gym Owner) “We immediately prioritized the medical projects, we wanted to be part of the solution” (Arthur, Image Recognition Technologies) (continued)

166

Ö. Demir et al.

(continued) (Meta-)

Capability

Quotation “We want more entrants into the patient management industry because we don’t have either the means or the desire to satisfy such a large potential. We will only be able serve the market together with our competitors and only then be truly beneficial to our society at large” (Allen, Medical Software Company)

Process enabling co-creaction capabilities

Empowered interaction

“Our telemedicine application has to be very intuitive, any person who has an email or a social media account can easily log in and start using the app” (Allen, Medical Software) “Contrary to old competitive habits, during Corona, we started to share knowledge with our competitors through common webinars… We arranged distant training for each other” (Sally, Realtor)

Process enabling co-creaction capabilities

Developmental interaction

“It is really hard for someone to prepare a good quality burger at home. Some may get a good patty but the bun is almost impossible. Therefore, many of my customers thank me. They have missed a good burger. They are able to prepare a restaurant quality burger at home” (Mark, Washable Burger) “I occasionally gave healthy recipes to some clients who especially have a sweet tooth. When people are stuck at home, they want to cook and eat. I don’t want them to regress. That’s why I’ve spent quite some time doing research during the pandemic. I wanted to generate a wide variety of healthy recipes that I can share with my clients because I want them to be able to prepare healthy snacks for themselves when they feel like munching” (Maggie, Nutritionist) (continued)

7 Building Agility in Service SMEs for Post-pandemic Era

167

(continued) (Meta-)

Capability

Quotation “We were lucky for that matter. Our franchiser decided to invest in developing our skills. We have quite some time on our hands these days. Through these webinars, we are learning to develop our customer relationship management skills” (Harry, Realtor) “After I decided to continue one-to-one lessons with my clients, I had to explain how to use the digital devices to my elderly customers for having better access to online classes” (Joy, Gym Owner)

Process enabling co-creaction capabilities

Concerted interaction

“One other reason that I am delivering the washable burger all over Istanbul is that I want to get their reactions. I want to be able to hear what’s working and what’s not, and go back and improve the product” (Mark, Washable Burger) “I needed to change the night snacking as well, I gave them healthy alternatives so that they didn’t veer off track” (Maggie, Nutritionist) “Our telemedicine app is geared towards optimizing the interaction between the clinic, the physician and the patient. We are considering all three perspectives in our development effort” (Allen, Medical Software Company) “Since we are the renter of the municipality, we easily cooperated with them from the beginning of Corona days. They promoted our online lessons by giving a direct link to the lessons in the municipality’s website and social media accounts” (Celine, Gym Owner) (continued)

168

Ö. Demir et al.

(continued) (Meta-)

Capability

Quotation “We discussed with the doctors for three weeks and restructured our team according to the requirements of this medical project” (Arthur, Image Recognition Technologies)

Authors’ Insight The Covid-19 crisis is a multi-faceted global phenomenon with no clear resolution in sight. We have provided the initial indications of dynamic capabilities that foster agility and value co-creation as potentially contributing to service SMEs’ abilities in restructuring and reimagining their businesses and continued viability. Our cases, albeit not exhaustive, are illustrative of service SMEs who have successfully faced the onset of the global pandemic via employing various capabilities. These cases were able to adapt and continue their operations almost seamlessly and have proven their ability in both being flexible in reframing their businesses as well as continuing to co-create value with their customers. These capabilities enabled these service SMEs to carry on into the new normal while many companies large and small suffered. These capabilities will be rather useful in creating service SMEs the time and space necessary until the dust settles. Yet, we are also aware that the resurgence out of this crisis will require more than companies’ very own efforts. At this point, we believe economic interventions and health and safety measures put forth by governments will be an important step toward transitioning into the new normal. Economic measures taken as a response by governments are necessary to avoid widespread business closures and layoffs. These measures are intended to help stimulate business, improve consumer confidence, and support demand. Furthermore, normalization will require effective public health policies that will be put forward by local and international health authorities. The success and effectiveness of economic and healthcare interventions as well as wide-spread adoption of these policies by the general public will determine the success of the transition into the new normal. The new normal will present itself differently across the globe. Here in Turkey, reopening has begun as of early June, yet business will not be as-usual for the foreseeable future due to the restrictions (e.g. travel bans) as well as new regulations (e.g. wearing masks in public) and are in a flux based on our understanding of the disease. Both at the onset of the pandemic and the transition period that we are going through has not hit essential services (e.g. food retail, information, and communication, or healthcare) hard. They have been able to adapt and survive through increased digitalization and reducing contact. Other services that are not deemed essential, for instance, entertainment or tourism are the worst affected with severe loss of demand

7 Building Agility in Service SMEs for Post-pandemic Era

169

and revenues. We believe, governments need to allocate those resources that they will inject into the economy wisely, such that those businesses that are hit especially hard can also survive to see the new normal. Yet, irrespective of industry, SMEs are the last to benefit from these financial aids and are left to their own devices to survive as large corporations are generally seen as too-big-to-fail and are assisted first. At this point, a better understanding of critical capabilities to foster SME resilience and survival is not only necessary but essential to, at least, inspire SMEs in their attempts to return to operations. Governments may and should aid SMEs in developing these muscles, as skill building is an important aspect of crisis recovery. At the time being most SMEs are facing resource limitations to invest in developing those capabilities and training and development is not on governments’ economic aid agenda. We believe proper allocation of financial resources, as well as concurrent training in skill development, can be a potential solution to the plight of SMEs in general and service SMEs in particular. As last remarks, we have strong belief that we all, as people of our globe, will find solutions for our way out from these hard days to a brighter future. We would like to assert our gratitude to all who are working so hard for humanity but especially to the medical services staff including doctors, nurses, administrative and support service employees all around the world. We cannot thank them enough…

References Alam, I. (2005). Fieldwork and data collection in qualitative marketing research. Qualitative Market Research: An International Journal, 8(1), 97–112. https://doi.org/10.1108/13522750510575462. Arbussa, A., Bikfalvi, A., & Marquès, P. (2017). Strategic agility-driven business model renewal: The case of an SME. Management Decision, 55(2), 271–293. https://doi.org/10.1108/MD-052016-0355. Augier, M., & Teece, D. J. (2009). Dynamic capabilities and the role of managers in business strategy and economic performance. Organization Science, 20(2), 410–421. https://doi.org/10. 1287/orsc.1090.0424. Danneels, E. (2008). Organizational antecedents of second-order competences. Strategic Management Journal, 29, 519–543. https://doi.org/10.1002/smj.684. Doz, Y., & Kosonen, M. (2008). The dynamics of strategic agility: Nokia’s rollercoaster experience. California Management Review, 50(3), 95–118. https://doi.org/10.2307/41166447. Doz, Y. L., & Kosonen, M. (2010). Embedding strategic agility: A leadership agenda for accelerating business model renewal. Long Range Planning, 43(2–3), 370–382. https://doi.org/10.1016/j.lrp. 2009.07.006. Doz, Y., & Kosonen, M. (2011). Nokia and strategic agility: A postscript. California Management Review, 53(4), 154–156. https://doi.org/10.1525/cmr.2011.53.4.154. Ellis, D., & Haugan, M. (1997). Modelling the information seeking patterns of engineers and research scientists in an industrial environment. Journal of documentation, 53(4), 384–403. https://doi.org/10.1108/EUM0000000007204. European Commission. (2020). Internal market, industry, entrepreneurship and SMEs. https://ec. europa.eu/growth/access-to-finance_en. Accessed 31 May 2020. García-Morales, V. J., Lloréns-Montes, F. J., & Verdu-Jover, A. J. (2007). Influence of personal mastery on organizational performance through organizational learning and innovation in large

170

Ö. Demir et al.

firms and SMEs. Technovation, 27(9), 547–568. https://doi.org/10.1016/j.technovation.2007. 02.013. Harreld, J. B., O’Reilly, C. A., & Tushman, M. L. (2007). Dynamic capabilities at IBM: Driving strategy into action. California Management Review, 49(4), 21–43. https://doi.org/10.2307/411 66404. Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D., et al. (2009). Dynamic capabilities: Understanding strategic change in organizations. Oxford, UK: Blackwell Publishing. Helfat, C. E., & Peteraf, M. A. (2015). Managerial cognitive capabilities and the microfoundations of dynamic capabilities. Strategic Management Journal, 36(6), 831–850. https://doi.org/10.1002/ smj.2247. Kabadayi, S., O’Connor, G. E., & Tuzovic, S. (2020). Viewpoint: The impact of coronavirus on service ecosystems as service mega-disruptions. Journal of Services Marketing, 34(6), 809–817. Karpen, I. O., Bove, L. L., & Lukas, B. A. (2012). Linking service-dominant logic and strategic business practice: A conceptual model of a service-dominant orientation. Journal of Service Research, 15(1), 21–38. https://doi.org/10.1177/1094670511425697. Karpen, I. O., Bove, L. L., Lukas, B. A., & Zyphur, M. J. (2015). Service-dominant orientation: Measurement and impact on performance outcomes. Journal of Retailing, 91(1), 89–108. https:// doi.org/10.1016/j.jretai.2014.10.002. Kvale, S. (1996). Interviews: An introduction to qualitative research interviewing. London, UK: Sage. Lewis, M. W., Andriopoulos, C., & Smith, W. K. (2014). Paradoxical leadership to enable strategic agility. California Management Review, 56(3), 58–77. Madhavaram, S., & Hunt, S. D. (2008). The service-dominant logic and a hierarchy of operant resources: Developing masterful operant resources and implications for marketing strategy. Journal of the Academy of Marketing Science, 36(1), 67–82. https://doi.org/10.1007/s11747007-0063-z. Madrid-Guijarro, A., García-Pérez-de-Lema, D., & Van Auken, H. (2013). An investigation of Spanish SME innovation during different economic conditions. Journal of Small Business Management, 51(4), 578–601. https://doi.org/10.1111/jsbm.12004. Kjær Monsson, C. (2017). Vulnerability and adaptability: Post-crisis resilience of SMEs in Denmark. In N. Williams & T. Vorley (Eds.), Creating resilient economies (pp. 41–54). Cheltenham, UK: Edward Elgar Publishing. Ngugi, I. K., Johnsen, R. E., & Erdélyi, P. (2010). Relational capabilities for value co-creation and innovation in SMEs. Journal of Small Business and Enterprise Development, 17(2), 260–278. https://doi.org/10.1108/14626001011041256. Prahalad, C. K., & Ramaswamy, V. (2004). Co-creation experiences: The next practice in value creation. Journal of Interactive Marketing, 18(3), 5–14. https://doi.org/10.1002/dir.20015. Sullivan-Taylor, B., & Branicki, L. (2011). Creating resilient SMEs: Why one size might not fit all. International Journal of Production Research, 49(18), 5565–5579. https://doi.org/10.1080/002 07543.2011.563837. Taymaz, E. (2020). Covid-19 tedbirlerinin ekonomik etkileri ve politika önerileri. Sarkaç. https:// sarkac.org/2020/03/covid-19-tedbirlerinin-ekonomik-etkileri-ve-politika-onerileri/. Accessed 31 May 2020. Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350. https://doi. org/10.1002/smj.640. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533. Teece, D., Peteraf, M., & Leih, S. (2016). Dynamic capabilities and organizational agility: Risk, uncertainty, and strategy in the innovation economy. California Management Review, 58(4), 13–35. https://doi.org/10.1525/cmr.2016.58.4.13.

7 Building Agility in Service SMEs for Post-pandemic Era

171

Terho, H., Haas, A., Eggert, A., & Ulaga, W. (2012). ‘It’s almost like taking the sales out of selling’—Towards a conceptualization of value-based selling in business markets. Industrial Marketing Management, 41(1), 174–185. https://doi.org/10.1016/j.indmarman.2011.11.011. ˙ TUIK. (2016). Küçük ve Orta Büyüklükteki Giri¸sim Istatistikleri. http://www.tuik.gov.tr/PreHaberB ultenleri.do?id=21540. Accessed 31 May 2020. Vargo, S. L., & Lusch, R. F. (2011). It’s all B2B…and beyond: Toward a systems perspective of the market. Industrial Marketing Management, 40(2), 181–187. https://doi.org/10.1016/j.indmar man.2010.06.026. Weber, Y., & Tarba, S. Y. (2014). Strategic agility: A state of the art introduction to the special section on strategic agility. California Management Review, 56(3), 5–12. https://doi.org/10.1525/ cmr.2014.56.3.5. Wieseke, J., Geigenmüller, A., & Kraus, F. (2012). On the role of empathy in customer-employee interactions. Journal of Service Research, 15(3), 316–331. https://doi.org/10.1177/109467051 2439743. Wilden, R., Gudergan, S., Akaka, M. A., Averdung, A., & Teichert, T. (2019). The role of cocreation and dynamic capabilities in service provision and performance: A configurational study. Industrial Marketing Management, 78, 43–57. https://doi.org/10.1016/j.indmarman.2018.06.008. World Bank Group. (2019). World Bank Group support for small and medium enterprises: A synthesis of evaluative findings (English). IEG synthesis. Washington, DC: World Bank Group. http://documents.worldbank.org/curated/en/640401570040096569/World-Bank-GroupSupport-for-Small-and-Medium-Enterprises-A-Synthesis-of-Evaluative-Findings. Accessed 31 May 2020. Worley, C. G., Williams, T., & Lawler, E. E. (2014). The agility factor: Building adaptable organizations for superior performance. San Francisco, CA: Jossey-Bass.

Ozge Demir is a Ph.D. candidate in Marketing at Istanbul Technical University (Turkey). She has an engineering background and held various positions in R&D and Business Development. Her research focuses on service marketing with an emphasis on customer experience management and design. Her papers appeared in several leading international conferences such as the Academy of Marketing Conference and AMS World Marketing Congress. She can be contacted at [email protected].

172

Ö. Demir et al. Mehmet Okan is an Assistant Professor at the Faculty of Management at the Artvin Çoruh University in Turkey. His research addresses employee-customer relationships, dysfunctional behaviors of service actors, and meta-analysis, and other systematic literature reviews. His papers appeared in the Journal of Services Marketing, Journal of Service Management and Review of Managerial Science. He can be contacted at [email protected].

Nesenur Altinigne is an Assistant Professor of Marketing at the Faculty of Management at Istanbul Bilgi University (Turkey). She is a Ph.D. graduate of Istanbul Technical University. She has visited SKEMA Business School (France) as a Visiting Scholar supported by the French Embassy Research Fellowship. Her work has been published in the Journal of Business Research and Journal of Product & Brand Management, as well as in several leading international conferences. Her research streams mainly focus on the areas of consumer behavior, online retailing, consumer ethics, brand relationships, and consumers’ reactions to product-harm/firm crisis. She can be contacted at [email protected].

Didem Gamze Isiksal is a Post-doc Marketing Researcher at Istanbul Technical University (Turkey). She has visited SKEMA Business School (France) as a Visiting Scholar supported by the French Embassy Research Fellowship. An Istanbul Technical University Ph.D. graduate, Dr. Isiksal’s research and consultancy are in the areas of branding, consumer behavior, and moral emotions. Her papers appeared in the Journal of Business Research, Journal of Product & Brand Management, and Journal of Brand Management, as well as in several leading international conferences. She can be contacted at [email protected].

7 Building Agility in Service SMEs for Post-pandemic Era

173

Elif Idemen is a Ph.D. candidate in Marketing and a research assistant at Istanbul Technical University (Turkey). Her work has been published in the Journal of Services Marketing and Review of Managerial Science. Her research addresses design management, product design, and strategic marketing. She can be contacted at [email protected].

Elif Karaosmanoglu is an Associate Professor of Marketing at Istanbul Technical University (Turkey). She is a Ph.D. graduate of Warwick Business School. She has also worked for Middlesex University as a Research Fellow and has visited Robert H. Smith School of Business, University of Maryland (USA) as a Fulbright Visiting Scholar. Her research streams mainly focus on corporate marketing and branding and consumer-technology interactions. Her papers appeared in the Journal of Business Research, European Journal of Marketing, Journal of Brand Management, European Management Review, Socio-Economic Planning Sciences, and Journal of Product & Brand Management as well as in several leading international conferences. She can be contacted at [email protected].

Chapter 8

COVID-19 Disruption and Service Firms’ Adaptation Strategies: Institutional Theory Perspectives Debi P. Mishra

Abstract The unprecedented global COVID-19 crisis has jolted service businesses whose raison d’être is delivering satisfaction through human interaction. Faced with this existential threat, services must suddenly become resilient and pivot towards futuristic strategies. This paper draws upon institutional theory to develop a conceptual model that explains how service firms can transition to effective crisis management, grapple with pandemic disruption, and engender resilient strategies. In particular, institutional theory advocates tinkering and theorizing approaches for recovery and future growth. While tinkering provides a baseline layer of social acceptance and stimulates innovation via marginal changes such as adherence to norms (e.g., social distancing), theorizing creates legitimacy through new institutional logics (e.g., frames of references) and radical innovations as customers learn new meanings about service firms. Using examples from past pandemics such as the Spanish Flu of 1918 that killed more than 20 million people worldwide, and natural disasters like Hurricane Katrina, this paper articulates how firms have historically created theorizing by framing the cause of pandemics and disasters as unique attributions that engender social connectedness and resilience. For example, during past pandemics, institutional theory research shows that service firms which created social connections gained rapid legitimacy and success in the post pandemic era. In fact, social bonds forged through local charities magnified embeddedness and provided firms with long lasting loyalty and reputation outcomes. The paper concludes by providing several managerial applications of tinkering and theorizing strategies in the COVID19 era. In particular, it highlights how service firms can tackle the new normal of social distancing, sheltering at home, and demand decrement through tinkering and theorizing. Finally, the study discusses how the COVID-19 situation can spur theorizing and innovation via machine learning (ML) and artificial (AI) applications in the areas of customer service and new product development. Keywords COVID-19 · Institutional theory · Tinkering · Theorizing

· Service quality

D. P. Mishra (B) School of Management, State University of New York (SUNY), Binghamton, NY, USA e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_8

175

176

D. P. Mishra

8.1 Introduction The deleterious effects of the deadly COVID-19 pandemic have been most acutely felt in the services industry encompassing a gamut of business such as airlines, car rental services, hair salons, educational establishments, health care facilities, restaurants, retail stores, gymnasiums, and banking services among others. Given that simultaneous production and consumption is a defining characteristic of services (Grönroos 2006; Shostack 1977), measures such as social distancing and shelter at home policies have effectively decimated demand in a number of industries. In fact, decrees such as social distancing promulgated by state and local governments to control the spread of the pandemic stand in sharp contrast to the intrinsic nature of services which require close physical interaction between providers and customers. This inherent contradiction is best illustrated by the plight of airlines which were designed to bring people together by flying them in relatively dense configurations on their airplanes. However, with new social distancing measures, airlines are suddenly scampering and are at pains to develop a strategy that can reconcile the seemingly contradictory objectives of social distancing and high passenger density. Likewise, hair salons appear to be clueless in their quest to provide services while maintaining social distancing. With this backdrop, a pertinent question that arises is ‘how should service organizations adapt to the massive disruptions caused by COVID-19 and design resilient strategies for the future’? This paper takes the position that while there is no panacea for adapting seamlessly to the COVID-19 disruptions in the service industry, a thoughtful approach can mitigate some of the inherent challenges. In brief, drawing upon the prescriptions of institutional theory and the lessons of past pandemics and disasters like the Spanish Flu (Rao and Greve 2018) and Hurricane Katrina (Chamlee-Wright and Storr 2010), service firms may be in a position to design adaptive strategies to cope with the current COVID-19 milieu and lay the groundwork for future resilience. The main insight of this study is that service organizations can deploy tinkering and theorizing strategies to tackle uncertainty and achieve success through social legitimacy and acceptance. Tinkering refers to minor tweaks made to a firm’s business model, while theorizing is a more elaborate exercise that creates new meaning about a service. More specifically, from a philosophy of science perspective, if we assume that organizations are designed for success, tinkering can be formally defined as, “a satisficing mode of operation in which successes are achieved routinely through experimenting with locally existing opportunities” (Knorr 1979, p. 368). Hence, “incremental adjustment, or tinkering” is a mechanism to achieve desirable societal outcomes (Weimer 1993, p. 113). In other words, instead of adopting a maximizing principle that may require radical change, tinkering involves satisficing, or minor (routine) changes to an existing system. As a practical example of tinkering during the COVID-19 outbreak, some bar owners have stopped playing recorded music on their premises even though it is allowed by law (live music shows are banned). The decision by bar owners to eliminate recorded music (tinkering) is driven by a realization that patrons will talk loudly

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

177

to be heard above the din, which, in turn, may accelerate spreading of the virus (Sayre 2020). In contrast to tinkering, theorizing is a more involved organizational exercise that “requires new roles and practices to be adopted… by providing rationales for the practices” (Rao et al. 2003, p. 816). For example, in the aftermath of the pandemic, many hair salons went the digital route by offering e-consulting services to their clients for self hair cuts. Despite trying hard, salon owners have realized that customers are resisting learning new meanings (theorizing) since “people rely on getting their hair styled professionally as opposed to doing it themselves… and they’re really struggling to figure out what to do” (Russolillo 2020). Other services like gymnasiums seem to be more successful in achieving theorization and acceptance for virtual workout services such as on-line fitness communities (Murphy 2020). Although theorizing may be difficult to achieve in all situations, if properly implemented, it can embed the service organization in an ecosystem of social actors that generates trust and a collective mindset (Granovetter 1973). Thus, it is not surprising that faced with a natural disaster like Hurricane Katrina, neighborhoods which bounced back the fastest were not ones where massive physical assets were directed, but precincts where institutions like churches stepped in to create social bonding and trust. Likewise, lessons from the Spanish Flu pandemic are broadly consistent with the idea of social connections and their impact on communities. Note that from an economic standpoint, dealing with the current pandemic is tricky because service firms possess relatively few degrees of freedom to affect customer demand meaningfully. For example, options like lowering prices to boost demand become moot when a shelter at home policy is in effect. Hence, in contrast to economic methods, institutional approaches may provide a firmer basis for firms’ underlying responses to the COVID-19 pandemic. This manuscript is organized in the following manner. First, I appraise the institutional theory literature and describe how social acceptance and legitimacy can be conceptualized as powerful drivers of firms’ strategic response to pandemics. Here, I integrate our knowledge of institutional theory with the lessons from past pandemics to achieve a better understanding of tinkering and theorizing. In the next section, I present a taxonomy which depicts tinkering and theorizing strategies for a range of services varying along the dimension of provider-customer interaction. Finally, I provide a perspective on the new normal in tackling the COVID-19 milieu through social distancing, shelter at home, and demand decrement approaches. I also extend the discussion on the post pandemic new normal theme by noting how the situation has spurred innovation in the areas of machine learning (ML) and artificial intelligence (AI) for service firms.

178

D. P. Mishra

8.2 Institutional Theory Perspectives 8.2.1 Task and Institutional Environments Service organizations are primarily designed to address the demands of the task environment, which in turn, is embedded in the larger external institutional environment, e.g., the laws prescribing business conduct. Typically, a firm’s task environment includes its customers, competitors, suppliers, and labor supply, and directly determines its economic goals. For service firms, the dominant aim in managing the task environment is to understand customer needs and offer solutions. To achieve customer satisfaction, companies determine appropriate governance structures and practices such as formalization, centralization, employee monitoring, etc. Not surprisingly, a vast and growing body of literature exists on the link between service quality, customer satisfaction, and firm profitability (Anderson et al. 1997; Briggs et al. 2020). Thus, the task environment approach to managing service firms advocates survival and growth by pursuing rational decision making (Tolbert and Zucker 1996). While the economic logic for the existence of organizations is sound, other conceptualizations augment the rational view by considering firms as entities seeking social legitimacy in addition to profits. This thinking has evolved over time in four distinct phases. In each instance, the primary dependent variables that theorists have attempted to explain are organizational structures and practices, e.g., formalization, centralization, complexity, external signaling, and internal monitoring. First, the earliest studies under the functionalist school focused on rational efforts of managers to maximize efficiency through the coordination and control of work activities (Merton 1948). Since empirical findings about structure could not be reconciled with existing theories of rationality, in the second phase, there was a shift toward studying contingency variables such as environmental uncertainty, and determining their effect on structure (Lawrence and Lorsch 1967; Thompson 1967). While uncertainty research explained some variance in structure, it retained the framework of the functionalist school, and could not fully explain different organizational forms. This lack of empirical validity prompted scholars to adopt other viewpoints. Hence, in the third phase, researchers embraced the idea that rationality was a myth because there were cognitive limits on human decision making. Specifically, the idea advanced by bounded rationality studies (March and Simon 1957; March 1978; Simon 1947) is that managers are boundedly rational, and decision making entails a satisficing rather than an optimizing approach advocated by rationalists (Barnard 1938). Finally, in the fourth stage, power dependence theory (Pfeffer and Salancik 1978) paved the way for institutional theory to provide a supplemental and different viewpoint for conceptualizing organizations. In contrast to the economic approach, institutional theory, which has a long and rich tradition in management research, argues that a critical and often overlooked requirement for the survival and growth of firms is social legitimacy. Here, the earliest seminal work on institutions is by Meyer and Rowan (1977) who conceptualized firms as loosely coupled systems with the dominant objective of achieving

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

179

social legitimacy. Over time, Meyer and Rowan’s basic insight has been extended by modern theorists (Carson et al. 1999; DiMaggio and Powell 1983; Grewal and Dharwadkar 2002; Handelman and Arnold 1999; Humphreys and Thompson 2014). In the institutional theory formulation, organizations are not autonomous entities seeking to maximize economic opportunities, but are embedded in a larger social context that constrains conduct and prescribes socially accepted actions (Granovetter 1973). One important aspect of social acceptance is legitimacy, which is defined as “the degree to which a firm is perceived to be desirable, proper, or appropriate within a social setting” (Suchman 1995, p. 574). Legitimacy is therefore a critical factor that enables firms to acquire resources for survival and growth. Recent studies in institutional theory broadly address the mechanisms and processes through which legitimacy is conferred on organizations. An enduring contribution to institutional theory was made by DiMaggio and Powell (1983) who argued that three primary forces in a firm’s external environment determined legitimacy, i.e., (1) the set of regulations and laws for managing business conduct, (2) professional norms or the set of informal and formal rules that guide actors belonging to a certain profession, e.g., accounting services, and (3) social norms or “the degree to which an organization adheres to the norms and values in the social environment” (Humphreys 2010, p. 4). Thus, organizations can attain legitimacy by sticking to rules and regulations (accepting coercion, since there is no other alternative), following normative prescriptions (because of peer pressure at work), and copying or mimicking widely followed social norms (because people are morally obliged to do so). Thus, the concept of isomorphism or organizations becoming similar over time because of coercive, normative, and mimetic isomorphism took root. DiMaggio and Powell’s work (1983) with its specific focus on identifying drivers of legitimacy provided a major impetus to researchers for subsequent empirical testing. In fact, empirical research has now documented how entire service industries have been shaped and legitimized by strong institutional forces. For example, from a historical perspective, casino gambling services in the U.S. have evolved over a long period of time based upon the complex interplay of several events that created social acceptance of the industry and conferred it with legitimacy (Humphreys 2010). To begin with, society was rather skeptical of gambling and casino services because they were widely perceived as immoral and detrimental to natural order. Thus, the industry was heavily regulated in terms of operating hours, age of customers, admission requirements, and strict zoning requirements (locating far away from neighborhoods). The purpose of regulation was to ensure that casinos did not spread out of control but remained sufficiently constrained within the larger norms and expectations of society. However, over time as casinos touted their adherence to regulatory practices, they were perceived by society as trusted partners who would not destroy the basic moral fabric of society. Thus, the casino industry gradually gained social legitimacy through conformance to rules. This legitimacy, in turn, drew customers into casinos, and provided the industry with much needed resources to grow and prosper.

180

D. P. Mishra

While attaining social legitimacy by tackling institutional forces in the external environment is a desirable organizational goal, critics of the theory have lamented that conformity to rules and norms does not leave firms with much room for innovation. In fact, as DiMaggio and Powell (1983) note, as firms within an industry strive to attain legitimacy through adherence to rules and norms, they become isomorphous over time. As a result of isomorphism, firms adopt common practices and ways of thinking which can stifle innovation and growth. Hence, an important question in modern institutional theory revolves around the idea of how firms embedded in an institutional environment can achieve the twin objectives of social legitimacy and organizational change, e.g., find innovative ways to deal with disruptions like pandemics.

8.2.2 Modern Institutional Theory (Tinkering and Theorizing) While traditional institutional theory eschews change by stressing adherence to laws and norms, modern institutional theory articulates strategies that firms may adopt to achieve the twin objectives of social legitimacy and innovation. The literature on modern institutional theory is primarily informed by work on institutional entrepreneurs who take on the risk of introducing change while sticking to the basic dictates of tradition (Battilana et al. 2009; DiMaggio 1988; Li et al. 2006). For example, instead of blindly succumbing to institutional forces or pursuing mimetic isomorphism, firms may creatively identify opportunities and pursue strategic change within the constraints of external institutional environments (Greenwood and Suddaby 2006; Tracey et al. 2011). These deviations from the norm or tinkering with an established way of conducting business may usher in change without radically altering a firm’s social position in an institutional environment. In addition, modern institutional theory also embraces the idea of theorizing, or new roles that actors have to learn in a social system for attaining legitimacy. I summarize the main features of tinkering and theorizing in Table 8.1, followed by a detailed discussion of these concepts. As depicted in Table 8.1, tinkering is conceptualized as an exercise involving marginal and minor changes by a firm to its operating procedures. In comparison, theorizing is a more complex activity that requires firms and customers to learn new roles. Stated differently, while tinkering involves incremental adjustments, theorizing entails transformational adjustments. For example, hair salons practice tinkering when they provide free masks to their customers instead of turning them away, which they are allowed to do by law. In contrast, firms practice theorizing when they spend vast sums of money for creating new brand meaning. The goals of tinkering and theorizing are primarily to achieve social legitimacy. Hence, for the hair salon, from an economic standpoint, it would not want to tinker and spend money on masks. However, from a social acceptance standpoint, spending on masks is justified. Likewise, a firm attempting to change its brand meaning or

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

181

Table 8.1 Definition and elucidation of tinkering and theorizing concepts Tinkering

Theorizing

Definition

• “Incremental adjustment or • Theorizing is a more involved tinkering” is a mechanism to organizational exercise that achieve desirable societal “requires new roles and practices outcomes (Weimer 1993, p. 113) to be adopted… by providing • “A satisficing mode of operation rationales for the practices” (Rao in which successes are achieved et al. 2003, p. 816) routinely through experimenting with locally existing opportunities” (Knorr 1979, p. 368)

General idea

• Incremental adjustments • Firms don’t aim big. They practice satisficing, instead of maximizing behavior. The main idea is to make minor changes within the existing framework in the institutional environment, such as implementing actions beyond the minimum standard prescribed by law

Goals

• Primarily to achieve social • Primarily to achieve social legitimacy legitimacy • Secondarily to achieve economic • Secondarily to achieve economic efficiency efficiency

Underlying processes • Minor tweaks to existing procedures, laws, regulations, or practices

Example

• Transformational adjustments • Firms aim big. The main idea is to pursue maximizing behavior that will alter the meaning of the current service in the institutional environment. Ushering in change is an elaborate exercise and may require considerable resource commitment

• Major changes to existing procedures, laws, regulations, or practices • Participants have to learn new roles, and may need a new frame of reference

• Grocery stores making minor • Physical gymnasiums convincing adjustments to signage by customers that joining on-line marking optimal social distances exercise communities can be fun on the shopping floor, even if it is not required by law

theorize, faces upfront sunk costs that may not be economically justified in the short run. However, social acceptance pressures provide legitimacy for brand expenditures.

8.2.3 Tinkering in Institutional Environments In the COVID-19 situation, while regulations surrounding social distancing in many countries remain fluid and confusing, institutional entrepreneurs have taken it upon themselves to proactively conceptualize and implement social distancing guidelines.

182

D. P. Mishra

A good example of tinkering and institutional entrepreneurship is offered by Walt Disney and the great lengths to which it went in formulating and implementing social distancing while reopening its Shanghai theme park (Moss 2020). Walt Disney’s actions not only represent broad conformance to existing societal norms and expectations, but also speak to creativity and innovation in tackling the COVID-19 crisis through a successful reopening protocol. Achieving creativity through tinkering is especially challenging for even iconic brands like McDonald’s and Arby’s in today’s confusing COVID-19 regulatory environment. This adaptation problem is best illustrated by Haddon (2020a), who notes the following challenges faced by food restaurant franchisees in the aftermath of reopening: One of their biggest challenges, they [franchisees] say, is parsing the sometimes conflicting, sometimes minute guidelines set out by governments and chain owners. McDonald’s Corp. franchisees must follow a 59-page guide the chain created for reopening, while Arby’s the roast-beef sandwich chain owned by private-equity-backed Inspire Brands, issued a 96-page guide to franchisees last month…among other things, Arby’s franchisees are advised to post signs reading, ‘We have the meats, but only half the seats’ on tables diners can’t occupy. Condiment bars and service bells are ordered to be put away for now. Pizza Hut’s reopening guide includes rules for ceiling fans-they must remain turned off-and the proper design for masking tape on floors to mark social distancing… and chains say, owners returning to dinein service must follow federal, state and local rules, even if they diverge, “recognizing that these will change over time and may be conflicting”, the Arby’s guide states.

As a result of the constraining nature of regulation, firms in a number of industries are adopting creative tinkering for gaining social legitimacy. For example, some cinema theatres have proactively moved toward drive-in screening options by exploring venues such as unused airport hangars and vacant parking lots in mothballed shopping malls (Rubin 2020; Tonguette 2020). Also, in the restaurant industry, brands like Starbucks are re-evaluating their physical store strategy in big cities like “New York, Chicago, Seattle, San Francisco and other dense urban areas for its shift to pick up only locations,” (Haddon 2020b), while McDonalds’ is removing hundreds of items from its menus to simplify store operations and tailor its offerings to the pickup option (Haddon 2020c). Hence, by adopting basic tinkering, i.e., by proactively using commonsense and creativity within a regulatory framework, firms can gain social acceptance and legitimacy. Companies may also benefit from competitive advantage by tinkering with their production processes and using inside out signaling strategies to inform end customers about internal aspects (Mishra et al. 1998). For example, firms signaling internal automation of production, such as the use of robots and human decoupling (Garvin and Chase 1989; Haddon 2020d; Loten 2020; Mims 2020; Smith et al. 2018), will be in a better position to attain social legitimacy.

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

183

8.2.4 Theorizing in Institutional Environments In addition to tinkering, theorizing is another approach that firms can pursue for creating innovation within an institutional framework (Rao et al. 2003). In brief, theorizing holds that firms can deploy relatively untested ideas within an institutional framework by imbuing the idea and its concomitant implementation with new meaning. For example, in the COVID-19 environment, Uber has pursued seemingly loss making activities like delivery services for local restaurants at zero cost (Gallagher 2020). Offering zero cost services in an economically challenging environment may make little sense to most economists. However, a closer look at Uber’s actions suggests that it is perhaps pursuing theorizing or the development of a new meaning for its brand as it wants to be perceived as a trusted social actor instead of a large, indifferent, and arrogant corporate entity. The literature on theorizing therefore examines how untested ideas become legitimized as the new normal in traditional change resistant institutional environments. Notably, not all untested ideas may eventually get theorized because many take on the property of fads with a very short life cycle (Abrahamson 1991; Abrahamson and Fombrun 1994). An interesting aspect of theorizing concerns the alteration of brand name meanings in the current environment. This identity modification exercise involves theorizing because iconic brands are associated with specific meanings accumulated over time, and any change should alter past associations in favor of connotations that rhyme with current social expectations. Thus, as recent medical studies (Pan et al. 2020) have documented that black, asian, and minority ethnic (BAME) individuals are at an increased risk of contracting COVID, companies have been proactive in retiring brands that prominently feature BAME individuals, e.g., Uncle Ben’s, (owned by Mars) and Aunt Jemima (owned by Pepsi). As Gasparro and Maidenberg (2020) note, “the fact that a company is willing at this point to not just revisit it [the brand name] but remove it means they’ve had some really intense conversations and come to a conclusion … that these are vestiges of the Jim Crow era”. Although the immediate impetus for brand name theorizing for Aunt Jemima and Uncle Ben’s appears to be the unfortunate killing of James Floyd and the widespread protests against racism, firms have also been influenced by stereotypes reinforced by COVID medical studies about BAME individuals being more vulnerable because of their unhealthy lifestyles. So, medical findings about the ethnicity of COVID patients may have also been a contributing factor in influencing firms’ decisions to retire brands. The interesting challenge in theorizing is for firms to create new meanings in a deliberate manner. In case of Aunt Jemima and Uncle Ben’s, any attempt at brand reengineering should primarily avoid associations with their racist past. In this sense, new branding is perhaps a germane solution. In other instances, e.g., for movies like Ben Hur, which depicts slavery in a poor light, its producer is justified in temporarily withdrawing streaming from digital platforms. When Ben Hur streams again, it will likely feature prominent disclosures about the abhorrent nature of slavery. Thus, rebranding or sub branding strategies may be more appropriate here than a new branding exercise (Miller et al. 2014).

184

D. P. Mishra

8.2.5 Tinkering and Theorizing in the Context of Past Pandemic Research Extant studies on pandemics and natural disasters point primarily to the role of theorizing and human connectedness in creating societal trust and laying the groundwork for organizations to bounce back. In this vein, a recent study by Rao and Greve (2018) found that the Spanish Flu, which killed more than 20 million people world-wide in 1918 (Reid et al. 2001) differentially influenced the beliefs and attitudes of people based on the frame of reference they perceived as the cause for the pandemic. Thus, people theorized about pandemics differently depending upon whether they attributed the contagion’s cause to an act of Mother Nature or to individuals who did not deploy adequate safeguards. In Norway, where the disaster frame of reference was socially constructed as an act of nature, theorizing enabled people to learn new meanings about the pandemic, i.e., it was an act of Mother Nature that could be tackled by the collective action of society. This theorizing, in turn, led to the creation of social organizations and non-profits embedded in a web of trust and cooperation that aided in recovery and resiliency efforts. In contrast, in countries that experienced the Spanish Flu pandemic with disaster frames that attributed its origin to other individuals, people learned a fundamentally different meaning that prevented the formation of cooperatives and trusting arrangements. Hence, contagion frames of reference are often socially constructed and create theorizing that influences cooperative behaviors. In addition to the literature on pandemics, a related stream of work has studied how societies faced with natural disasters can bounce back from adversity (ChamleeWright and Storr 2010; Kates et al. 2006). For example, consider Hurricane Katrina, a defining and catastrophic event of 2005 that gutted New Orleans and many parts of Louisiana. For most people in Louisiana, the hurricane was socially constructed in their minds as an unambiguous act of Mother Nature. This disaster frame, in turn, engendered cooperation among people and enabled certain communities to bounce back faster than others. In fact, evidence suggests that communities which invested in social capital, e.g., by repairing and reopening churches and places of worship, had a far greater impact on engendering social cooperation than neighborhoods that received financial aid and other tangible resources. Another stream of studies relevant to pandemics involves how firms communicate with stakeholders in the aftermath of crises. Drawing primarily on theories of information asymmetry, e.g., signaling and agency theories (Mishra 1995, 1998a; Mishra et al. 1998), this literature specifies efficient external communication mechanisms for firms to handle the fallout from crises. To begin with, information asymmetry is a situation where one party is at an informational disadvantage with respect to the other (Mishra 2013). In the aftermath of a pandemic, information asymmetry is widely prevalent, but some entities might hold a valuable amount of surplus information that they can share with others to ameliorate risk. In this vein, Marcus and Goodman (1991) found that after a corporate disaster, if firms used accommodative instead of defensive signals to communicate with external entities, their stock price was enhanced. Thus,

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

185

accommodative signals like owning responsibility in the immediate aftermath of an accident and disseminating relevant information for mitigation is a strategy that pays off in the long run, even if it is expensive. For example, Union Carbide faced such a communication challenge after an accident in Bhopal, India in 1989 that released almost 30 tons of the highly toxic methyl isocyanate gas into the atmosphere which killed as many as 15,000 people. However, instead of accepting blame and ameliorating the situation, initially the company was rather defensive in its external communications, which cost it dearly through numerous lawsuits and a dilution of its brand value. While any communication may not have prevented future lawsuits, the firm could have managed the situation much better and preserved some of its brand value through the use of accommodative signals. One reason why firms might resist using accommodative signals is that they are typically costly for the signal sender. To ensure authenticity, firms sending such signals should face a penalty if they deploy bluffs to tide over the current crisis. Thus, a number of studies have found that faced with accidents, some firms will still use costly signals even if less costly options are available. For example, Chen et al. (2009) found that in the aftermath of product harm crises, firms chose costly actions like proactive recalls even though they faced a penalty, e.g., share price declines. Similar results were reported by Eilert et al. (2017) who noted that “stock markets punish recall delays” (p. 111). However, despite these findings, some firms choose not to adopt an accommodative posture because proactive signals are costly. My position, in the context of pandemics is that accommodative signals, though costly for the sender, are more efficient in the long-run than defensive postures. In summary, the concepts of tinkering and theorizing appear particularly germane to our study of service organizations in the COVID-19 environment. The COVID-19 situation has created strong inertial pressures on service organizations to conform to laws, regulations, and decrees imposed by local and state governments, often at very short notice. However, based upon my appraisal of traditional and emerging institutional theory, I advance the position that firms can respond to this environment by adopting tinkering and theorizing strategies that engender innovation and differentiation, while sticking to institutional demands. Furthermore, by appraising the literature on pandemics and accidents it is clear that deliberate communication strategies using accommodative signals should be used even if they are costly. In the next section, I elaborate on these ideas by depicting and discussing a taxonomy of tinkering and theorizing strategies for a range of services varying on the dimension of provider-customer interaction.

8.3 A Taxonomy of Tinkering and Theorizing Strategies for Service Organizations I depict a taxonomy to study tinkering and theorizing strategies for service firms in Table 8.2. As may be noted from this table, my focus is on one salient aspect of services, i.e., the extent to which close physical interaction between the provider and

186

D. P. Mishra

Table 8.2 A taxonomy of adaptive tinkering and theorizing strategies for service organizations in the COVID-19 era Degree of service provider-customer interaction

Examples

Tinkering strategies Minor changes or incremental adjustments

Theorizing strategies Major changes or transformational adjustments

High

• Hair and beauty salon • Gain legitimacy and service social acceptance by proactively • Educational service implementing • Medical/health care decrees like basic service hygiene protocols, social distancing, customer demand management, use of appropriate signage and contact tracing • Explore technological substitution through online delivery

Medium

• Restaurant service • Attain social • Gain legitimacy by • Cinemas and theatres acceptance through offering web based • Retailing service innovation in signage classes, create online (grocery) to achieve social social communities, • Gymnasium and distancing offer service fitness service • Address shelter at expertise and advice home decrees by • Maintain online providing home communication and delivery conversations • Reserve time slots for • Seek feedback and vulnerable sections engage in proactive of the population learning • Explore technological substitution possibility through online delivery

Low

• E-commerce • Online banking

• Gain legitimacy by offering web based classes, create online social communities, offer service expertise and advice • Create basis for legitimacy through signaling that touts online best practices of opinion leaders and first movers

• Provide clear • Gain legitimacy by guidelines about how creating online customers can deal communities • Explore delivering with scarcity and educational stock-out situations • Reserve time slots for opportunities special segments to shop on the website

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

187

the customer is a precondition for service to be delivered. Included in the high degree of interactivity mode are hair and beauty salons, face to face education services, and medical services. The medium category of interaction encompasses a variety of services ranging from cinema halls to grocery retailing where customers are by and large shielded from service providers other than interactions at certain discrete times, e.g., checkout. Finally, in the low interaction category, services are offered online, and the need for physical interaction between providers and customers is non-existent. When the degree of physical interaction required for service delivery is high, firms can adopt tinkering strategies and gain an innovative edge in the marketplace. For example, unless shelter at home orders are promulgated, regulatory authorities may allow high contact services like hair salons to resume operation, albeit at reduced capacity levels. Since the science surrounding the spread of COVID19 is still evolving, most firms have to navigate through a welter of laws in the institutional environment that are not properly defined and in a constant state of flux. In this confused situation, firms such as hair salons can creatively tinker with the general mandate of social distancing by carefully managing customer demand, e.g., by serving customers only though previously scheduled appointments, and by using phone apps to enable contact tracing. Notice that firms which can develop creative tinkering protocols independent of general regulatory decrees (maintain social distancing), may end up gaining first mover advantages even when others firms mimic these practices. The very fact that a firm moves first and tinkers with the institutional environment offers it a measure of social legitimacy that is difficult for later entrants to achieve. Likewise, although certain services cannot be shielded from interaction, others may use the power of technology to migrate online. Included in this situation are e-medicine services that can substitute for routine doctor visits, and educational services that can be delivered online. Note that tinkering with respect to transiting toward an online environment is not a trivial manner. In fact, in the aftermath of moving to remote learning during the pandemic, many universities realized that they were totally ill equipped to institute radical changes. Hence, tinkering proactively to minimize online disruptions may create an innovation challenge for many universities who have historically pursued face-to-face teaching in physical classrooms. In addition to tinkering, high contact services can also pursue theorizing strategies, especially when there is a total lockdown and shelter at home orders are in place. The end result of shelter at home orders is a potential death knell for services like hair salons. However, these firms can still theorize and create innovation by reaching customers online and offering them web based expertise and hair grooming solutions. The more intrepid ones can even take a leadership role and create online communities of connected customers who can share experiences and tips about self hair-styling and related matters. Such online communities can create trust over time and bond the service provider to other social participants. Note however, that developing online communities may not be easy because firms require resources to set up an online presence and develop communities. However, to the extent that an online community presence is possible, service organizations may pursue the idea to

188

D. P. Mishra

seek social legitimacy and stay relevant in challenging times. Furthermore, services like hair salons are typically small family run businesses that hire low paid casual employees. For such firms, pursuing theorizing strategies may not be easy. However, by collaborating with local communities and universities, such firms can still pursue online community building. Turning to services that are of medium contact intensity, e.g., grocery stores and restaurants, firms can gainfully adopt tinkering much in the same way as hair salons. In addition, many restaurants and grocery stores can pursue home delivery and deal with social distancing and stay at home orders. Grocery stores can also de-densify their physical surrounding by reserving certain time slots for senior citizens and other vulnerable sections of society. Moreover, some restaurant chains can leverage their supply chains and sell essential groceries to customers. For example, Panera Bread, a fast-food retailer in the U.S. recently added consumer staples like milk and bread to its menu by creatively leveraging its supply chain. Collectively, these tinkering strategies can confer firms with social acceptance and legitimacy. From a theorizing perspective, the main opportunity for firms in the medium interaction category lies in the power of technology and the creation of online communities. Thus, gymnasiums can start off by offering exercise classes online. Since achieving routine in one’s life is a major concern for many stay at home people, gymnasiums can offer additional online services such as cooking classes that instill a sense of routine in people’s lives. While creating such diverse online communities may lead to uncertainty, even a simple online presence can create surplus meaning for service brands through the power of theorizing. In other words, service providers and customers can interact to create social bonds and trust. Such social capital can be gainfully employed by firms to create positive word of mouth effects. Finally, when services possess low interactivity, by definition they appear to be relatively shielded from the pressures of COVID-19. However, even in this situation, firms may gainfully pursue both tinkering and theorizing strategies to bolster their service image. For example, consider Amazon and its e-commerce model that experienced skyrocketing sales during the current pandemic primarily because its business is shielded from direct customer interaction. However, in the early days of the pandemic, when customers made a beeline for its website, the company quickly ran out of sanitizer and other hand hygiene products. Furthermore, unscrupulous sellers started price gouging on its website which led to customer dissatisfaction. Amazon however, was quickly able to bring the situation under control by carefully tweaking its famous algorithms to identify and punish offenders in real time. While Amazon has the resources to constantly tweak its model, stock outs of popular items still happen relatively frequently, and this is an area that Amazon and other e-commerce retailers should address. How e-commerce firms like Amazon handle stock-out challenges is particularly challenging because of the highly variable nature of on-line customer demand. However, initial evidence from practice suggests that firms are using a proactive or theorizing approach to deal with disruptions. For example, Thrive, an online grocer has learned that, “the lessons from the pandemic have changed its fulfilment processes… [and] the company will hold 20% more inventory and will work

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

189

with a larger number of suppliers. Its technology team plans to roll out improved recommendation functions on the website for when items are out of stock” (Herrera 2020). With respect to theorizing, in situations where e-commerce is the dominant platform for the delivery and consumption of services, we turn to the strategies deployed by financial entities like Vanguard and Charles Schwab. Realizing that the pandemic has forced many people to stay home and consume digital content, these firms started offering educational classes in basic financial literacy to reach out to small, do-ityourself (DIY) investors who earlier lacked the motivation and time to learn about investing. Thus, during the pandemic, many financial institutions have theorized and imbued their brand with a unique meaning that will engender consumer trust in the future.

8.4 Discussion The purpose of this paper has been to understand the unique challenges and constraints imposed upon service organizations by the COVID-19 pandemic and to articulate adaptation strategies that can be gainfully deployed by firms to cope with current uncertainties and deal with the post COVID-19 milieu. To this end, I adopted concepts from institutional theory to argue that firms can ameliorate disruption by attaining social legitimacy through the processes of tinkering and theorizing. While tinkering largely involves making marginal changes to a service firms’ business model, theorizing creates a new institutional logic that casts firms in a favorable light in society and provides them with a basis for resiliency in the future. Stated differently, tinkering and theorizing provide a buffer which firms can use for current survival and future growth. In the following sections I highlight the importance of these institutional concepts for service organizations in their quest for coping with the COVID-19 pandemic. Next I describe how by using tinkering and theorizing approaches, service organizations can effectively tackle the new normal in the current and post COVID-19 scenarios given the realities of social distancing, shelter in place, and demand decrements.

8.4.1 Tinkering and Theorizing Strategies for Tackling COVID-19 As noted earlier, conventional theoretical approaches have trumpeted the primacy of economic variables such as profits, costs, sales, and other metrics for coping with uncertainties in the task environment for service firms. For example, faced with the COVID threat and concomitant vanishing demand due to shelter at home policies, the economic adaptation argument calls on service firms, e.g., ridesharing services,

190

D. P. Mishra

to drastically scale back operations or even exit the market albeit temporarily. In contrast, the institutional theory argument provides a strong counterpoint by outlining the use of tinkering and theorizing as more germane coping strategies. In this vein, consider the emergence and growth of Uber’s business model and how the firm is currently coping with the COVID-19 pandemic. Uber entered the market as a disruptor with a strong emphasis on providing fundamental economic advantages to customers relative to the status quo taxi service (Kooti et al. 2017). Thus the company leveraged technology such as GPS location and mobile phones to create a convenient service that fundamentally disrupted the existing taxi-cab industry (Teixara and Brown 2016). Moreover, by creating thick markets that matched high demand spikes to supply through surge pricing, the company uniquely positioned itself as a creator of matchless economic value and convenience for customers (Harding et al. 2016). The initial push by Uber into many consumer markets stalled primarily because the larger question of social acceptance was not addressed. After all, Uber stood for everything that individuals have been taught as kids not to do, i.e., to not get into a car driven by a stranger. To gain social acceptance, Uber adopted a theorizing strategy that conferred new meaning to the concept of ride sharing on strangers’ cars. For example, the company targeted cities with large younger populations that would adopt new technologies like Uber, and also facilitated social influence by creating an ecosystem of users centered on the focal young early adopter. As Min et al. (2019, p. 4, emphasis added) note, ridesharing “consumers [were] exposed to a social system of their friends, families, members, and other connections, who [could] potentially influence one’s decisions and behaviors toward the innovation”. The early adopter of Uber’s service enabled others in his ecosystem to learn how ridesharing services were indeed imbued with a new meaning whose benefits far outweighed concerns about security. Note that when Uber started off, systems for concurrent ratings of drivers and customers were in their infancy (Chan 2019). Although ratings eventually created metrics of trust that customers could use in their evaluations, it was early adoption and theorizing that paved the way for Uber’s subsequent social acceptance. Likewise, from a tinkering standpoint, Uber worked closely with several counties and municipalities to increase capacity utilization for public transportation by providing free rides to the nearest local public transport hub (Cherney and Purnell 2019). Notice that unlike theorizing, here the focus of the company was not on creating a new meaning around ride sharing but on tweaking its model slightly (tinkering) so that it would be perceived just as another cab service facilitating the transfer of consumers to transportation hubs. In addition to coping with the backlash from existing medallion taxi companies (Posen 2015), Uber adopted a policy of inclusiveness focused on sharing of information about crowds, congestion, and other relevant data with local governments and taxi operators, creating further new meaning about what its business stood for (Li et al. 2016). Thus, Uber’s business model took off mainly because the company gained social acceptance through tinkering and theorizing. Given the current pandemic, Uber has been on shaky ground, and the most deleterious blow to its business model has been shelter at home policies in addition to the

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

191

challenges imposed by social distancing (Gallagher 2020). To cope with vanishing demand, Uber has been somewhat fortunate in leveraging its UberEats brand that has seen skyrocketing demand. Interestingly however, to deal with the pandemic, Uber has not focused exclusively on the economics of maximizing the revenue stream of UberEats by competing aggressively with other delivery brands like Grubhub and Doordash. On the other hand, in many markets the company has decided to deliver food from small restaurants free of charge to end customers. Thus, the new meaning or theorizing that Uber is attempting to create is that it is not a big arrogant brand out to stifle and eclipse competition, but a helping brand that is an integral part of society. By embedding itself in the local societal milieu, UberEats has become a lifeline for many small independent restaurants that have lacked the wherewithal to offer competitive delivery services through established brands like Grubhub and Doordash. Many of these small restaurants would not have survived the pandemic but for the generosity of Uber. Through the trust that Uber has created in society by theorizing, it appears to be in a stronger position to bounce back strongly in the post COVID era. In contrast to Uber’s theorizing approach, Lyft, a major ridesharing competitor, has largely stayed on the sidelines. To be fair, Lyft never had a delivery business like UberEats, but the company appears to have missed an opportunity to tinker with its existing ridesharing product and branch out into delivery by targeting small independent retailers all over the country who have struggled in these uncertain times. With the significant disruption unleashed by the COVID-19 pandemic (Zhang et al. 2020), society at large and service organizations in particular are awaiting the creation and deployment of a vaccine that will rapidly resurrect the old normal of order, equilibrium, and predictability. However, as of now, the development of an effective vaccine is still in its infancy (Le et al. 2020). With the uncertainties in transitioning seamlessly to the old normal, it is increasingly likely that service firms which predominantly rely on human interaction will have to cope with a new normal brought about by social distancing, shelter at home, and drastic demand decrement situations. Though parts of the economy are opening up in certain parts of the world, it is highly unlikely that the old normal will return anytime soon. Hence, I analyze and discuss appropriate institutional theory based strategies for firms to cope with the new normal in the current and post COVID-19 era.

8.4.2 Tackling the New Normal of Social Distancing Ever since COVID-19 was recognized as a contagious disease that is primarily transmitted between people though respiratory droplets, social distancing and associated measures like the wearing of masks have been touted as potential tools to prevent the virus from spreading widely (Zhang et al. 2020). While “social distancing takes many forms… at its core, its aim is to keep people apart from each other… in order to reduce contact rates” (Greenstone and Nigam 2020, p. 1). In a sense, social distancing is anathema to services, which by definition need human interaction and

192

D. P. Mishra

often co-production involving the service provider and the customer in close physical proximity (Batalden et al. 2016). Hence, a challenge in the COVID-19 era for services such as grocery stores is the management of human interactions within the physical confines of the service venue. From an institutional theory standpoint, social acceptance and legitimacy are often bestowed on businesses if they conform to broad social forces outside their task environment (Sine et al. 2007). For example, as Dimaggio and Powell (1983) note in their seminal article, these institutional forces are created by regulation, professional bodies, and societal norms. Hence, from a social distancing standpoint, if services adopt tinkering practices consistent with some or all of these institutional forces, their actions are likely to be considered as legitimate and they may receive social acceptance and goodwill from customers that can be gainfully exploited in the future. In many countries, the rules and laws surrounding social distancing are in a state of flux, have not been properly defined, and are rarely enforced. In the U.S., a set of universal, clear and well defined social distancing rules currently do not exist because a multiplicity of agencies belonging to the state, local, and federal governments have created a rather confused narrative. Thus, there is a great deal of uncertainty surrounding the enforcement of social distancing other than admonishments and warnings posted inside stores for customers to stay six feet apart from others. In these situations, given the grey area of the law, service organizations can create more explicit internal rules of conduct for customers inside their stores to promote social distancing and achieve legitimacy. Stated differently, since the law is not very well defined, service organizations can create legitimacy by appealing to norms such as the safety and well-being of customers. Service firms can also substitute the legal environment in the institutional environment with its normative counterpart to achieve legitimacy. For example, many grocery stores have gone to great lengths to create signage (Hashim et al. 2014) that clearly marks the minimum distance on the shopping floor that customers should maintain from others. Others have entirely eliminated short shopping carts and hand baskets in favor of longer ones to promote social distance, while more established brands have taken social distancing seriously and enabled the return of customers to service venues by specifying and following norms. For example, recently Walt Disney reopened its theme park in Shanghai by using strict social distancing guidelines, e.g., “in the resort’s restaurants, signs on half the tables declared them off-limits to prevent crowding and at stage performances in the Enchanted Storybook Castle—featuring Snow White’s Seven Dwarfs, Elsa from “Frozen” and other fan favorites—spectators were instructed to stand in small yellow squares, safely away from other visitors [while] a small army of staff watched carefully to make sure everyone complied” (Moss 2020). From a tinkering standpoint, since precise specification of social distancing guidelines is somewhat vague, service organizations have an opportunity to create first mover advantages by investing in signage and creating new servicescapes (Bitner 1992) to gain customer trust and confidence. In a related vein, a focus on social distancing can also enable the resurrection of research into signage and servicescapes that has been somewhat understudied in recent years. With the COVID-19 situation,

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

193

it is possible for service organizations to fundamentally rethink their approach to designing the physical layout of services, and use this service design opportunity as an innovative tool for competitive advantage. Thus, redesigning servicescapes holds potential for a number of services such as movie theatres, restaurants, sports arenas, lecture theatres, and venues for performing arts. While tinkering is an acceptable solution to the social distancing challenge, it is important to recognize its limitation as a strategy that can broadly apply to all organizations. First, smaller service organizations may simply lack the capacity to de-densify their small premises. For example, a small independent grocery store may lack the physical space to create social distancing servicescapes for its business. In this situation, other than decoupling service delivery from customer participation (Chase et al. 1992) by reducing the number of customers that can shop in its stores, tinkering possibilities may be limited. Hence, some small service organizations may eventually be forced out of business. Second, more enterprising small-sized service firms may pursue strategic partnership opportunities by teaming up with delivery brands like Doordash to reach the customer at his home. Pursuing strategic partnerships will likely require sizeable financial investments for smaller firms as they have to invest in web design and other technologiessomething they may not be in a position to afford. To this extent, in a recent article, Bapuji et al. (2020) decry the inequality ushered in by social distancing and other COVID-19 era rules by observing how, “the stark inequalities in our society have been laid bare”, and call upon management research to make a social turn by recognizing that the constraints imposed by the COVID-19 situation can perhaps end up creating more inequality among service organizations. In fact, it is possible that in the post COVID-19 era, service organizations perhaps will become less diverse.

8.4.3 Tackling the New Normal of Shelter at Home Shelter at home is an extreme form of social distancing that is often deployed by governments in conjunction with a lockdown of all economic activity except for those performed by essential businesses (Friedson et al. 2020). While shelter at home decrees may not be permanent, they could last for considerable periods of time. For example, the shelter at home decree in Italy lasted for about ten weeks, while the corresponding numbers for Spain and the U.K were 9 weeks and six weeks respectively. Even when lockdowns are eventually lifted, it is possible that they may be reintroduced if the virus reemerges. Thus, service firms should consciously plan for shelter at home decrees that governments may institute from time to time. The general implication of the new normal with respect to shelter at home is for service organizations to gain legitimacy through a combination of tinkering and theorizing strategies. Consider tinkering first. As discussed earlier, education services may conform to delivery via e-commerce platforms such as Zoom, Webex, and Teams, among others. Thus, in a situation where people work from home, technological delivery of services might be possible without changing the fundamental meaning

194

D. P. Mishra

of the service. For instance, Netflix has seen huge subscriber growth numbers ever since shelter at home orders have been in place (Baker et al. 2020). However, the main issue for firms like Netflix in their tinkering approach is to ensure that the system does not get overwhelmed by demand surges. For firms like Amazon, the recent spike of orders on its website has created opportunities for tinkering by ensuring that demand does not overwhelm the entire system and that the productive capacity of its supply chain is not compromised. In addition, all e-commerce platforms ranging from Amazon to Wal-Mart can go that extra yard by accommodating vulnerable customers (people over 65 years old, people with preexisting conditions) through exclusive shopping hours to minimize disappointing out-of-stock situations. In this sense, e-commerce platforms like Amazon may be learning from many of their bricks and mortar counterparts who have implemented tinkering by appealing to the normative side of the institutional environment to gain social legitimacy. After all, a dominant norm in society is for people to care for its elderly and vulnerable segments, and firms that practice such norms are likely to be perceived as legitimate in the eyes of society. From a theorizing perspective, shelter at home has important implications for service firms that wish to create new meaning in the minds of customers about their focal offering. For example, as noted earlier, for gymnasiums, they can start off by tinkering their service so that customers can follow exercise routines at home through live classes broadcast on Zoom or Webex. A more intriguing possibility is for service firms to step outside their area of expertise and offer customers a new experience altogether. In this vein, one may consider the business model of firms like Blue Apron which started off by selling cooking at home meal solutions and sending customers precisely measured ingredients with detailed cooking instructions. In normal times, customers who liked cooking at home did not pursue their culinary interests because they lacked the motivation or time to shop for quality ingredients. The alternative for such customers was to order home delivery of cooked or frozen food which however, does not mimic the real cooking experience. Now, with shelter at home as the new normal, customers have time on hand and can be enticed to become home chefs. With respect to company size, smaller restaurants that do not have resources to offer home delivery can sell an in-home cooking experience to customers by partnering with firms like Blue Apron. Note that in its first iteration, Blue Apron did not perform well because of rampant competition. However, in this changed COVID19 shelter at home environment, it is worth resurrecting services like Blue Apron. One way in which brands like Blue Apron can benefit is by tying up with local restaurants which earlier sold meals inside their physical premises. By partnering with Blue Apron, local restaurants can now create new meaning for their brand by selling an experience and thereby achieving social legitimacy. While theorizing is an appealing strategy in principle, it may be difficult for firms to deliver this new meaning to customers because the existing training and education levels of employees may be inadequate. In general, employees working in restaurants and related establishments work part-time and are not well trained in technology. Hence, absent appropriate training, education and job design, such employees may

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

195

be ill suited to pivot toward teaching online cooking classes or providing web based services to customers. Firms wishing to practice effective theorizing should therefore pay attention to selection, hiring, training, and job design.

8.4.4 Tackling the New Normal of Demand Decrement In industries like air travel and car rental services, demand has been effectively decimated by the COVID-19 pandemic. For example, passenger flights have shrunk by about 90% in the past year (2019 May–2020 June), and the forecast for air travel in the near future looks anything but rosy (Pasztor and Sider 2020). Since an effective vaccine is at least a year away, and given uncertainty about its efficacy and the complex logistics of its deployment, the new normal in many legacy service industries like airlines appears to be persistent demand shrinkage. From an economic standpoint, no company was designed to run on a zero revenue model. So, an important question arises as to whether such distressed industries can indeed survive going forward. My contention is that some degree of governmental intervention will keep many vulnerable industries alive in the short term. Hence, when an effective vaccine is developed, things can get back to normal. In the meantime, assuming that industries operate in survival mode, they can still implement theorizing strategies to benefit from a post COVID-19 milieu. In particular, firms like United Airlines (United Airlines 2020) have been actively using their spare capacity to conduct humanitarian missions like transporting critical COVID-19 personal protective equipment (PPE) supplies, e.g., N-95 masks, respirators, and gowns. To the extent that these firms are nearly bankrupt, contributing to society is a big deal and resonates as a genuine case of practicing corporate social responsibility (CSR). Such meaning can further strengthen the brand and imbue it with additional goodwill that it can capitalize upon when things become normal. However, as mentioned earlier, there is an upper limit to how long firms facing permanent demand decrements can indeed survive. After all, no amount of social legitimacy can replace the fundamental need for revenue. It may also be noted that while distressed service organizations may not have contributed a lot of money to their corporate social responsibility efforts in the past, their current investment creates more enduring meaning for their brand than large sums spent by billionaire founders of service firms like Alibaba, Facebook, and Microsoft. For example, Mark Zuckerberg of Facebook, recently contributed $25 million, or just 0.04% of his vast fortune of nearly $60 billion toward COVID-19 causes (Bapuji et al. 2020). Zuckerberg’s contribution, though sizeable, is perhaps more of a valorization of corporate philanthropy than a genuine signal of corporate social responsibility. In contrast, United’s philanthropic contributions, though miniscule by comparison, imbues its brand with a much stronger social responsibility meaning than Zuckerberg’s contribution does to the Facebook brand. After all, United Airlines was never well known for its CSR initiatives because for the past few decades, airlines have operated on razor thin margins given shocks such

196

D. P. Mishra

as the global financial crisis (CFC), past pandemics (SARS), and the emergence of cut-throat low cost carriers. With these low margins defining their industry, firms like United could not afford to invest significant amount of money for their CSR initiatives. However, the COVID-19 situation provides an opportune moment for firms like United to develop and buttress their CSR image at relatively low cost, given the huge spare capacity they have at their disposal. In conclusion, I approached the topic of service firms’ current and post COVID19 strategies by highlighting the importance of the larger social environment in which companies are embedded. My logic for focusing on the institutional environment and social legitimacy was driven primarily by the literature on past pandemics (Chamlee-Wright and Storr 2010; Kates et al. 2006; Rao and Greve 2018) which uses institutional theory to document how firms are able to bounce back from disasters by making connections to their social environment. However, no amount of social legitimacy can effectively compensate for the lack of economic revenue in a business model, and this discussion has to be necessarily viewed in this light. In other words, social legitimacy, in and of itself, will not be able to prevent organizational mortality if the COVID-19 pandemic persists and an effective vaccine cannot be deployed in the near future. In such a doomsday scenario, it is likely that society will witness a Darwinian solution with fewer but larger service organizations surviving the pandemic. In fact, we already see some evidence of this winnowing process in the U.S. retailing industry with iconic brands like Neiman Marcus, J. Crew, Pier One, and J.C. Penney filing for bankruptcy. From a theorizing standpoint, the current COVID-19 pandemic has also provided a fillip for service businesses to pursue automation, machine learning (ML) and artificial intelligence (AI) approaches. Thus, over time, I believe society will inevitably learn new meanings about common tasks that have human components despite the selective automation through apps currently in place (e.g., food delivery). Consider automation first. As Mims (2020) notes, start-ups like Flytrex have begun experimenting with drone delivery service. In fact, Flytrex is now part of the Federal Aviation Administration’s trials of drone delivery systems. Thus, in the future, drone delivery is unlikely to remain the sole preserve of large companies like Amazon. Likewise, on terra firma, there is a plethora of robot-powered delivery vehicles being tested in different parts of the word. As Mims (2020) notes, “in Sacramento, Nuro’s [a company] robots are shuttling food, fresh linens and personal protective equipment between a nearby supply depot and the field hospital, allowing support workers to remain physically distanced from patients and hospital staff”. Hence, the current pandemic is also spurring innovation-a welcome trend during this time of crisis. Finally, service firms are also using ML and AI insights during the pandemic for developing more efficient business models (Sivasubramanian 2020). Thus, theorizing or new meaning is being created around conventional methods for providing customer service, predicting diseases, and developing new drugs. ML and AI chatbots deployed in health care are capturing contactless screening data from millions of patients to assemble huge informational databases and create knowledge through sophisticated algorithms. This humungous trove of knowledge can then be accessed remotely by chatbots to answer a variety of questions posed by customers. Note that a conventional

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

197

customer service system with a human presence may not have deep knowledge to answer complex customer queries. In contrast, chatbots can incorporate deep learning AI and offer better solutions. In the aftermath of the current pandemic, calls to service centers in the airline, hospitality, banking, and related industries for cancellation of vacations, rescheduling of flights, deferring of payments, etc., have skyrocketed. As Murchison (2020) notes, a company like Ada, a leader in automated customer service, has “seen up to four times the typical amount of customer inquiries during the pandemic”. In this age of unprecedented call volumes, companies can use chatbots to provide automated customer service and address customer needs. Though conventional wisdom suggests that customers may prefer interactions with live service representatives over automation, the superior knowledge capture and diagnostic capability of AI is gradually narrowing the gap. For example, Murchison (2020) notes that in a study about customer satisfaction, “nearly half of the respondents were using chatbots to help manage their customer experience, with 65% automating more processes to manage inquiry spikes… [and] over three-quarters of those companies reported customer satisfaction improvements”. Thus, in the future, ML and AI systems are poised to play a greater role in meeting customer service needs across a number of industries. With respect to AI, the key idea is that a vast trove of varied information is being rapidly captured in real time by AI systems from the environment. As millions of data points pour in from customers, production systems, patients, doctors, researchers, and drug makers among others, ML and AI algorithms are able to distill them into relevant knowledge for delivering better customer service. In addition to chatbots, ML and AI approaches are also helping startups like BlueDot in collaboration with service outfits like Amazon Web Services (AWS) to locate and predict disease outbreaks. For instance, the BlueDot ML system sifts through news reports and publications in 65 different languages around the world in real time to pinpoint and predict hotspots based on infection trends. Another fertile area for ML and AI is in the area of new product development services. For example, BenevolentAI, a UK services supplier could identify a set of existing drugs already approved for other conditions, e.g., arthritis, and narrow them down into a subset for experimental trials based upon their similarity with the COVID situation. To improve prediction accuracy, BenevolentAI used a multilayered AI process to capture and analyze massive amounts of data from patient records, genetic dispositions, and other sources to build robust prediction models. This approach was instrumental in identifying Remdesivir as a potential candidate for clinical trials. In May this year, the U.S. Food and Drug Administration finally approved Remdesivir for emergency use by high risk patients in the US. Hence, despite the dark side of COVID that we are currently living through, there is also a potential bright side that will likely unfold in the future-something that we can look forward to.

198

D. P. Mishra

Author’s Insight The COVID-19 pandemic has caused severe disruptions to the global economy. However, people intensive service businesses have been hurt the most. The virus has not discriminated between firms, and has decimated businesses both big and small. While millions of small businesses have been wiped away, iconic brands like JC Penney, Hertz, Cirque du Soleil, J. Crew, Latam Airlines, Neiman Marcus, Pier 1, Virgin Australia, Chesapeake Energy, and others have filed for bankruptcy. In this business graveyard, many firms are currently on life support, fervently hoping for survival through cash bailouts. As successive waves of infection roil society, everyone is waiting with bated breath for a vaccine to emerge. However, despite the doom and gloom in society, there are signs of innovation in a number of areas that academics and practitioners should take note of. In particular, some firms are using commonsense and logic to grapple with the COVID-19 challenge, while others are ushering in much desired innovation to embellish their business models and plan for the future. To cope with the pandemic, firms are using creative strategies by minimally modifying their business models, or tinkering to survive, grow, and gain legitimacy in the eyes of society. At a time when most people are suffering in one way or the other, firms are substituting the pursuit of economic gains with the desire to attain social legitimacy. For example, by pro-actively embracing social distancing even if it is not explicitly mandated by law, many businesses are putting their profit imperative on the backburner. Others are resorting to bold and ambitious strategies for socially connecting customers and building goodwill. Thus, it is refreshing to see physical gymnasiums diversifying into e-services and building online fitness communities. Likewise, financial firms are using online classes to educate laypeople about investing, and aggressively marketing robo investing services. The pandemic has also accelerated the move toward automation, machine learning, and artificial intelligence solutions for customer service. While the results will unfold in the future, the efficiency gains from these endeavors cannot be ignored. Thus, firms are using robots and automating their internal production tasks at a much rapid pace compared to the pre-pandemic era. In addition, chatboxes developed from humongous databases and finessed through ML and AI algorithms are being deployed to deal with customer service needs at a time when demand for cancellations, rebooking requests, refunds, and payment deferrals have skyrocketed in industries like travel, tourism, and banking. A lingering question for many of us is whether the world will just snap back to the old way of doing things once an effective vaccine is developed and deployed. I take the position that we may not fully revert to the old way because technological advances will displace many jobs and affect our shopping behaviors. For example, I see a fundamental altering of the service landscape with firms like Uber transforming themselves into fully automated driverless systems, and robots taking and fulfilling orders at McDonalds’ drive through outlets. This robotic transformation will happen not because the coronavirus will remain a threat, but due to huge technological advances in the areas of ML and AI that are currently underway.

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

199

References Abrahamson, E. (1991). Managerial fads and fashions: The diffusion and rejection of innovations. Academy of Management Review, 16(3), 586–612. Abrahamson, E., & Fombrun, C. J. (1994). Macrocultures: Determinants and consequences. Academy of Management Review, 19(4), 728–755. Anderson, E. W., Fornell, C., & Rust, R. T. (1997). Customer satisfaction, productivity, and profitability: Differences between goods and services. Marketing Science, 16(2), 129–145. Baker, S. R., Farrokhnia, R. A., Meyer, S., Pagel, M., & Yannelis, C. (2020). How does household spending respond to an epidemic? Consumption during the 2020 COVID-19 pandemic (No. w26949). National Bureau of Economic Research. Bapuji, H., Patel, C., Ertug, G., & Allen, D. G. (2020). Corona crisis and inequality: Why management research needs a societal turn. Journal of Management. Barnard, C. (1938). Functions of the executive. Cambridge, MA: Harvard University Press. Batalden, M., Batalden, P., Margolis, P., Seid, M., Armstrong, G., Opipari-Arrigan, L., et al. (2016). Coproduction of healthcare service. BMJ Quality & Safety, 25(7), 509–517. Battilana, J., Leca, B., & Boxenbaum, E. (2009). How actors change institutions: Towards a theory of institutional entrepreneurship. Academy of Management Annals, 3(1), 65–107. Bitner, M. J. (1992). Servicescapes: The impact of physical surroundings on customers and employees. Journal of Marketing, 56(2), 57–71. Briggs, E., Deretti, S., & Kato, H. T. (2020). Linking organizational service orientation to retailer profitability: Insights from the service-profit chain. Journal of Business Research, 107, 271–278. Carson, S. J., Devinney, T. M., Dowling, G. R., & John, G. (1999). Understanding institutional designs within marketing value systems. Journal of Marketing, 63(4_suppl1), 115–130. Chamlee-Wright, E. L., & Storr, V. H. (2010). The role of social entrepreneurship in post-Katrina community recovery. International Journal of Innovation and Regional Development, 2(1/2), 149–164. Chan, N. K. (2019). The rating game: The discipline of Uber’s user-generated ratings. Surveillance & Society, 17(1/2), 183–190. Chase, R. B., Kumar, K. R., & Youngdahl, W. E. (1992). Service-based manufacturing: The service factory. Production and Operations Management, 1(2), 175–184. Chen, Y., Ganesan, S., & Liu, Y. (2009). Does a firm’s product-recall strategy affect its financial value? An examination of strategic alternatives during product-harm crises. Journal of Marketing, 73(6), 214–226. Cherney, M., & Purnell, N. (2019). Uber wants you to catch the bus or train—If they can drive you there. Accessed at https://www.wsj.com/articles/uber-wants-you-to-catch-the-bus-or-trainifthey-can-drive-you-there-11548763669. DiMaggio, P. (1988). Interest and agency in institutional theory. In L. Zucker (Ed.), Institutional patterns and organizations (pp. 3–22). Cambridge, MA: Ballinger. DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 147–160. Eilert, M., Jayachandran, S., Kalaignanam, K., & Swartz, T. A. (2017). Does it pay to recall your product early? An empirical investigation in the automobile industry. Journal of Marketing, 81(3), 111–129. Friedson, A. I., McNichols, D., Sabia, J. J., & Dave, D. (2020). Did california’s shelter-in-place order work? Early coronavirus-related public health effects (No. w26992). National Bureau of Economic Research. Gallagher, D. (2020). Ride-sharing gets knocked down by coronavirus. Accessed at https://www. wsj.com/articles/ride-sharing-gets-locked-down-by-coronavirus-11584553257. Garvin, D. A., & Chase, R. B. (1989, July–August). The service factory. Harvard Business Review, 61–89. Gasparro, A., & Maidenberg, M. (2020, June 17). Aunt Jemima and uncle Ben’s, rooted in racist imagery, to change. The Wall Street Journal. Available at https://www.wsj.com/articles/pepsico-

200

D. P. Mishra

unit-to-retire-aunt-jemima-brand-citing-origins-in-racist-stereotype-11592398455. Accessed 5 July 2020. Granovetter, M. (1973). The strength of weak ties. American Journal of Sociology, 78(6), 1360–13. Greenstone, M., & Nigam, V. (2020). Does social distancing matter? (University of Chicago, Becker Friedman Institute for Economics Working Paper) (2020–26). Greenwood, R., & Suddaby, R. (2006). Institutional entrepreneurship in mature fields: The big five accounting firms. Academy of Management Journal, 49(1), 27–48. Grewal, R., & Dharwadkar, R. (2002). The role of the institutional environment in marketing channels. Journal of Marketing, 66(3), 82–97. Grönroos, C. (2006). Adopting a service logic for marketing. Marketing Theory, 6(3), 317–333. Haddon, H. (2020a, June 20). Restaurants parse extensive and conflicting guidance as they reopen. The Wall Street Journal. Available at https://www.wsj.com/articles/big-restaurant-owners-facereopening-headaches-11591790883. Accessed 5 July 2020. Haddon, H. (2020b, June 10). Coronavirus speeds up starbucks shift to takeout. The Wall Street Journal. Available at https://www.wsj.com/articles/coronavirus-speeds-up-starbucks-shiftto-tak eout-11591790405. Accessed 5 July 2020. Haddon, H. (2020c, June 18). McDonald’s keeps salads, bagels off menus for now. The Wall Street Journal. Available at https://www.wsj.com/articles/mcdonalds-keeps-salads-bagels-off-menusfor-now-11592494697. Accessed 5 July 2020. Haddon, H. (2020d, June 20). McDonalds tests robot fryers and voice activated drive throughs. The Wall Street Journal. Available at https://www.wsj.com/articles/mcdonalds-tests-robot-fryers-andvoice-activated-drive-throughs-11561060920. Accessed 5 July 2020. Handelman, J. M., & Arnold, S. J. (1999). The role of marketing actions with a social dimension: Appeals to the institutional environment. Journal of marketing, 63(3), 33–48. Harding, S., Kandlikar, M., & Gulati, S. (2016). Taxi apps, regulation, and the market for taxi journeys. Transportation Research Part A: Policy and Practice, 88, 15–25. Hashim, M. J., Alkaabi, M. S. K. M., & Bharwani, S. (2014). Interpretation of way-finding healthcare symbols by a multicultural population: Navigation signage design for global health. Applied Ergonomics, 45(3), 503–509. Herrera, S. (2020, June 10). Can rivals take advantage of Amazon’s pandemic woes? It isn’t easy. The Wall Street Journal. Available at https://www.wsj.com/articles/amazon-struggled-coronaviruspandemic-smaller-rivals-thrive-market-11591798220. Accessed 5 July 2020. Humphreys, A. (2010). Megamarketing: The creation of markets as a social process. Journal of Marketing, 74(2), 1–19. Humphreys, A., & Thompson, C. J. (2014). Branding disaster: Reestablishing trust through the ideological containment of systemic risk anxieties. Journal of Consumer Research, 41(4), 877– 910. Kates, R. W., Colten, C. E., Laska, S., & Leatherman, S. P. (2006). Reconstruction of New Orleans after Hurricane Katrina: A research perspective. Proceedings of the National Academy of Sciences, 103(40), 14653–14660. Knorr, K. D. (1979). Tinkering toward success. Theory and Society, 8(3), 347–376. Kooti, F., Grbovic, M., Aiello, L. M., Djuric, N., Radosavljevic, V., & Lerman, K. (2017, April). Analyzing Uber’s ride-sharing economy. In Proceedings of the 26th International Conference on World Wide Web Companion (pp. 574–582). Lawrence, P. R., & Lorsch, J. W. (1967). Organization and environment. Boston: Graduate School of Business Administration, Harvard University. Le, T. T., Andreadakis, Z., Kumar, A., Roman, R. G., Tollefsen, S., Saville, M., et al. (2020). The COVID-19 vaccine development landscape. Nature Reviews Drug Discovery, 19(5), 305–306. Li, D. D., Feng, J., & Jiang, H. (2006). Institutional entrepreneurs. American Economic Review, 96(2), 358–362. Li, Z., Hong, Y., & Zhang, Z. (2016). Do ride-sharing services affect traffic congestion? An empirical study of Uber entry. SSRN Electronic Journal, 2002, 1–29.

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

201

Loten, A. (2020, April 6). Calling all robots: Businesses automate the battle against coronavirus. The Wall Street Journal. Available at https://www.wsj.com/articles/calling-all-robots-businessesautomate-the-battle-against-coronavirus-11586170801. Accessed 5 July 2020. March, J., & Simon, H. (1957). Organizations in action. New York: John Wiley. March, J. G. (1978). Bounded rationality, ambiguity, and the engineering of choice. The Bell Journal of Economics, 587–608. Marcus, A. A., & Goodman, R. S. (1991). Victims and shareholders: The dilemmas of presenting corporate policy during a crisis. Academy of Management Journal, 34(2), 281–305. Merton, R. (1948). Manifest and latent functions. In R. Morton (Ed.), Social theory and social structure (pp. 37–59). Glencoe, IL: Free Press. Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363. Miller, D., Merrilees, B., & Yakimova, R. (2014). Corporate rebranding: An integrative review of major enablers and barriers to the rebranding process. International Journal of Management Reviews, 16(3), 265–289. Mims, C. (2020, April 4). Reporting for coronavirus duty: Robots that go where humans fear to tread. The Wall Street Journal. Available at https://www.wsj.com/articles/reporting-for-corona virus-duty-robots-that-go-where-humans-fear-to-tread-11585972801. Accessed 5 July 2020. Min, S., So, K. K. F., & Jeong, M. (2019). Consumer adoption of the Uber mobile application: Insights from diffusion of innovation theory and technology acceptance model. Journal of Travel & Tourism Marketing, 36(7), 770–783. Mishra, D. P. (1995). Signaling and monitoring strategies of service firms. Advances in Services Marketing and Management, 4, 249–288. Mishra, D. P. (1998a). The conceptualization and measurement of suppliers’ reputation display in asymmetric marketing relationships. Journal of Market-Focused Management, 3(2), 123–150. Mishra, D. P. (2013). Firms’ strategic response to service uncertainty: An empirical signaling study. Australasian Marketing Journal (AMJ), 21(3), 187–197. Mishra, D. P., Heide, J. B., & Cort, S. G. (1998). Information asymmetry and levels of agency relationships. Journal of Marketing Research, 35(3), 277–295. Moss, T. (2020). Shanghai Disneyland opens with the magic of social distancing. Accessed at https://www.wsj.com/articles/shanghai-disneyland-reopens-with-the-magic-of-soc ial-distancing-11589184460. Murchison, A. (2020). How AI will lead the COVID recovery. Available at https://marketing.too lbox.com/guest-article/how-ai-will-lead-the-covid-19-recovery. Accessed 6 July 2020. Murphy, J. (2020, June 7). An urgent-care doctor embraces virtual workouts. The Wall Street Journal. Available at https://www.wsj.com/articles/an-urgent-care-doctor-embraces-virtual-wor kouts-11591407308. Accessed 6 July 2020. Pan, D., Sze, S., Minhas, J. S., Bangash, M. N., Pareek, N., Divall, P., et al. (2020). The impact of ethnicity on clinical outcomes in COVID-19: A systematic review. EClinical Medicine, 100404. Pasztor, A., & Sider, A. (2020). U.S. domestic passenger flights could virtually shut down, voluntarily or by government order. The Wall Street Journal. Accessed at https://www.wsj.com/articles/u-s-domestic-passenger-flights-could-virtually-shut-down-vol untarily-or-by-government-order-11585013673. Pfeffer, J., & Salancik, G. R. (1978). The External Control of Organizations: A Resource Dependence Perspective. New York: Harper and Row. Posen, H. A. (2015). Ridesharing in the sharing economy: Should regulators impose Uber regulations on Uber. Iowa Law Review, 101, 405. Rao, H., & Greve, H. R. (2018). Disasters and community resilience: Spanish flu and the formation of retail cooperatives in Norway. Academy of Management Journal, 61(1), 5–25. Rao, H., Monin, P., & Durand, R. (2003). Institutional change in Toque Ville: Nouvelle cuisine as an identity movement in French gastronomy. American Journal of Sociology, 108(4), 795–843. Reid, A. H., Taubenberger, J. K., & Fanning, T. G. (2001). The 1918 Spanish influenza: Integrating history and biology. Microbes and Infection, 3(1), 81–87.

202

D. P. Mishra

Rubin, R. (2020). Online ticketing, social distancing, and sanitizer: A night in the life of a drive-in during COVID-19. Available at https://variety.com/2020/film/features/drive-in-movie-theaterscoronavirus-safety-measures-1234612749/. Accessed 5 July 2020. Russolillo, S. (2020, March 27). A hair stylist’s coronavirus survival plan: Build a digital salon. The Wall Street Journal. Available at https://www.wsj.com/articles/a-hair-stylists-coronavirussurvival-plan-build-a-digital-salon-11585322069. Accessed 6 July 2020. Sayre, K. (2020, June 20). Bars get snagged in Covid-19 reopening reversals: Owners struggle to stay open as bars become a source of coronavirus flare-ups. The Wall Street Journal. Available at https://www.wsj.com/articles/bars-get-snagged-in-covid-19-reopening-reversals-115933 59937. Accessed 5 July 2020. Shostack, G. L. (1977). Breaking free from product marketing. Journal of Marketing, 41(2), 73–80. Simon, H. (1947). Administrative behavior. New York: Free Press. Sine, W. D., David, R. J., & Mitsuhashi, H. (2007). From plan to plant: Effects of certification on operational start-up in the emergent independent power sector. Organization Science, 18(4), 578–594. Sivasubramanian, S. (2020). How AI and machine learning are helping to fight COVID-19. Available at https://www.weforum.org/agenda/2020/05/how-ai-and-machine-learning-are-helping-tofight-covid-19/. Accessed 5 July 2020. Smith, M., Paton, S., & MacBryde, J. (2018). Lean implementation in a service factory: Views from the front-line. Production Planning & Control, 29(4), 280–288. Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610. Teixeira, T. S., & Brown, M. (2016, May). Airbnb, Etsy, Uber: Acquiring the first thousand customers (Harvard Business School Case 516-094) (Revised January 2018). Thompson, J. (1967). Organizations in action. New York: McGraw Hill. Tolbert, P. S., & Zucker, L. G. (1996). The institutionalization of institutional theory. In Handbook of organization studies (pp. 175–190). Tonguette, P. (2020, June 20). Heading back to the drive in. The Wall Street Journal. Available at https://www.wsj.com/articles/heading-back-to-the-drive-in-11590012473. Accessed 5 July 2020. Tracey, P., Phillips, N., & Jarvis, O. (2011). Bridging institutional entrepreneurship and the creation of new organizational forms: A multilevel model. Organization Science, 22(1), 60–80. United Airlines. (2020, May 4). United Airlines launches #GivingTuesdayNow Campaigns to support charities that rely on travel. Accessed at https://hub.united.com/united-aunches-giving tuesdaynow-campaigns-support-travel-charities-2645917989.html. Weimer, D. L. (1993). The current state of design craft: Borrowing, tinkering, and problem solving. Public Administration Review, 110–120. Zhang, S. X., Wang, Y., Rauch, A., & Wei, F. (2020). Unprecedented disruption of lives and work: Health, distress and life satisfaction of working adults in China one month into the COVID-19 outbreak. Psychiatry Research, 112958.

8 COVID-19 Disruption and Service Firms’ Adaptation Strategies …

203

Debi P. Mishra is associate professor in the School of Management at the State University of New York (SUNY) at Binghamton, principal fellow at the Melbourne Business School, University of Melbourne, and visiting professor at the S.P. Jain School of Global Management, Singapore-Dubai-SydneyMumbai. He received his Ph.D. from Case Western Reserve University, Cleveland; his MBA from the Indian Institute of Management, and a Bachelor’s degree in mechanical engineering from the National Institute of Technology, India. Professor Mishra’s academic interests are in the areas of interfirm relationships and marketing strategy. His research has been published in the Journal of Marketing Research, the Journal of Business Research, Journal of Retailing and Consumer Services, Journal of Product and Brand Management, Innovative Marketing, Journal of Market Focused Management, Journal of Global Business Issues, Journal of Ambulatory Care Marketing, Journal of Consumer Marketing, Advances in Consumer Research, Australasian Marketing Journal, Problems and Perspectives in Management, among others.

Chapter 9

How to Think Outside of the Box in the Service Sector in the Way to Survive the “New Normal”? Pierre-André Krüeger

9.1 Overview/Introduction Countries lockdown and social distancing across the globe is an evident threat for the service sector which is very dependent on providers, retailers and market.

9.1.1 What About to Become More Autonomous? We were able to see during this pandemic how much the global world production plant has seized up as a result of containment measures imposed everywhere. And how dependent we are on other countries to be able to function. This experience should lead us to reflect on the autonomy of our operation. With the crisis, we became aware of our collective vulnerability. When we talked about global warming, for example, it still remained a somewhat theoretical concept. We see the glaciers melt, we tell ourselves that it will be a disaster, but in fifty years … Everyone said to themselves: “we have time.” The crisis was not an absolute emergency. This time we re-read how vulnerable we are to our environment.

9.1.2 What About to Become More Sustainable? Hopefully this will serve as a lesson, that we will realize that we cannot brutalize nature indefinitely. Social promiscuity, as well as pollution, are themes that will have P.-A. Krüeger (B) Geneva, Switzerland e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_9

205

206

P.-A. Krüeger

Exhibit 9.1 Nomad lodges Amazonas has an exclusive location in the earth of the Amazon forest

to be tackled head on. We also need to find new sources of sustainable income for the local populations who are today excluded from our economic system. By keeping an open mind and using a participatory approach and two-way communication, Nomad lodges have designed a different business model that fully integrates with the customs of the local indigenous communities.

9.1.3 Nomad Lodges In June 2012, our founder, P.-A. Krueger, discovered a place where human beings live in perfect harmony with nature, at that time he understood that to manage the problems linked to our civilization, we had to go back and start from a blank page to rewrite the future based on what we can learn from the Amazon Indians. This is how Nomad lodges was born (Exhibit 9.1). Adapting to situations and the environment is the basis of the ancient civilizations of the Amazon forest. Nearly four hundred tribes have shared this immense territory for generations, each with their own language and traditions. After the Covid-19 crisis, it is time to rethink the New Normal in order to offer a better tomorrow for the future generations.

9.1.4 A Model of Sustainable Tourism When Krueger first arrived at Puerto Nariño, he didn’t know that this “heaven” has been the first destination in Colombia to receive a green label for the efforts made in developing sustainable initiatives. Despite this recognition, the Colombian

9 How to Think Outside of the Box …

207

Exhibit 9.2 Speaking with some locals about the Waste Management Program

government did not measure the importance of developing sustainable tourism in the region. As our expectations are to create a model of sustainable tourism, we have to think global and not only about our project and quite quickly Krueger understand that from a single hospitality project, Nomad lodges will become a regional impact movement involving local authorities, local communities, various Colombian and international institutions. Being in a remote area and willing to make the project integrated, we had to think everything from scratch. That is how we organize our own structure of trainings for local population and a waste management program including sensibilization and recollection to be able to re-use a maximum of the waste collected to create construction materials (Exhibit 9.2). Nomad lodges is acting as an experience lab, where local people do teach us how to use local material and where people from all over the world passioned about the reconnection between Nature and People brings their knowledges and experiences in the way to make the project grow. That is how we will have our own carpentry workshop on site with professionals from Switzerland and Canada interacting with local wood experts to optimize the use of trees for the construction of the infrastructure and furniture.

9.1.5 Tourism as a Conservation Tool “Our concept includes a plan designed to fulfill the three pillars of sustainability in terms of: the product we want to offer, the clients we want to attract, our spirit and

208

P.-A. Krüeger

commitment”. The first step is to improve environmental conditions in the region where the projects will be implemented. The next step is to ensure healthy living conditions for the local population. As a final step, the projects will provide the local communities with additional revenues, which will contribute to the preservation of their environment and culture.

9.1.6 Luxury Is Elsewhere Nomad lodges can be identified as a provider of luxury experience, nonetheless, the service scape is not the main characteristic of luxury anymore, and the experience is far more important.

9.1.7 Rediscover Connections In the Amazon rainforest there is wifi for your body and mind to communicate with nature. When you arrive at Nomad lodges it is not your iPhone that you will hear ringing as it does when it arrives in a wifi zone but these your body and your mind which will receive messages from nature! When you get there you have lights on in your brain and all of a sudden your body also connects and you start to feel the energy of nature communicating with it. Your body feels more comfortable and more balanced as if it were floating. In this currently “over-connected” life, people need to reconnect on an authentic way. For Nomad lodges, this vision is for our guests to rediscover connections: the link between luxury and sustainability. The bond between human & nature. The heritage across generations. The cord between body & soul. At the same time, conservation concern is growing on global population and today’s travelers are increasingly savvy about the environmental impact on destinations. By providing an authentic experience, we want our guest to feel: connected, immersed, inspiring, natural, balanced and caring in the way to create meaningful changes in their lives and the world in which they live. The Nomad lodges concept is based on the spirit of the nomadic people of South America and invites travelers to discover places “picked by the heart” through a network of lodges that are built in total harmony with their natural environment, offering a standard of quality and services made to meet the guests’ expectations (Exhibit 9.3).

9 How to Think Outside of the Box …

209

Exhibit 9.3 Nomad lodges development project in South America

9.2 Challenges/Solutions THINKING OUTSIDE OF THE BOX FOR COMMUNITY AND BUSINESS SUSTAINABILITY. The New Normal has to be different from the past if we want to find real solutions for the future; this way we have to start from a blank page: let’s forget all we have learned in the past to try to find another way of constructing a new future.

9.2.1 How to Become More Autonomous? Becoming autonomous is probably one the most challenging goal our civilization has to achieve. Indigenous people from the Amazon live in an autonomous way from generations and they probably have the key for us to find the solution. The service industry needs to become more independent in order to limit its dependence on the provision of its services. This analysis must be carried out at different levels in all the sectors involved in the delivery of our finished product. Use of buildings, necessary energy resources, labor, tools, maintenance service, communication and raw materials or goods. The goal is to get as close to the production center as possible and eliminate the middleman. This approach allows better control over the needs of the company and more flexibility in risk management. The other essential aspect is to be able to diversify its activities in the event of problems in the main activity sector. We have seen in particular manufacturers of lingerie produced masks and producers of liquors marketed hydroalcoholic gel during the Covid-19 period. MANAGING THE COVID-19 CRISIS BY INDIGENOUS COMMUNITIES.

210

P.-A. Krüeger

We are in regular contact with local communities, and more since the arrival of the COVID-19 virus in the Amazon region. Given the global scope of the problem and the lack of local infrastructure, we were very concerned about the Tikuna, Yagua and Cocama Indians who populate the region in which our project is located. As soon as the first case has been announced on the border between Brazil and Colombia, each village formed a Crisis Unit in order to protect its population from the comings and goings in the region. Security services have been strengthened and all residents have been asked to protect themselves from the virus through traditional medicine. These measures have been very effective and to date there have been very few deaths from the virus in local communities. It is therefore interesting to note that a local micro-organization based on a united community system makes it possible to get through crisis situations much more effectively than most of our globalized societies (Exhibit 9.4). At Nomad lodges we are ninety percent autonomous in terms of energy thanks to a vast network of solar panels and solar water heaters but also thanks to the recovery of rainwater and three sources of drinking water located on the ninety-six hectares of private reserve of our property. During the construction ninety percent of the materials will be local we will bring from the capital the sanitary as well as the bedding, all the furniture will be made on site by the local community. A permanent workshop was created allowing the

Exhibit 9.4 Guardia Indigena ATICOYA (ATICOYA is the Association of 22 indigenous communities in the Puerto Nariño region of the Colombian Amazon. ATICOYA means Association of Tikuna, Cocama and Yagua, three of the 400 tribes who live in the Amazon forest), Indigenous Guard

9 How to Think Outside of the Box …

211

manufacture of furniture and handicraft objects as well as the maintenance of the hotel. Seventy-five percent of our staff are from local communities and ninety percent of the food and drink will be produced locally. We are therefore almost completely autonomous for the hotel operation.

9.2.2 Revenue Diversification Strategy In our “Autonomous” vision of the project, we also notice that we absolutely need to be less dependent not only from our providers but also from our revenues. In this case the Covid-19 experience show us how a business plan focused on only hotel nights can be dangerous for the survival of a hotel. That’s why is it absolutely necessary to have a diversify our incomes developing derivative products or related activities. Our concern to become autonomous led us to develop many additional activities during the stages of construction and installation as during the periods of operation. These activities were developed jointly with the local communities like plantation of regional fruit trees, vegetable garden, construction of furniture and decorative items, packaging of medicinal plants, preparation of cosmetics and handicrafts. Those goods can generate additional revenues in case of reduction in the number of overnight stays. This is also an excellent way to stay in touch with our clients in a period where they don’t have the possibility to visit us. We also develop a program focused on traditional medicines with the local Chaman in the way to promote local traditions and generate additional revenues for the communities. The Waste Management Program developed with local communities and authorities will also generate revenues in the future as we are working on a system to produce construction materials from plastic waste. The fact that the project is located in a very isolated place, made us turn to an all-inclusive solution for our customers. Despite this, it is important to separate the profit centers in order to properly control the costs and gains of each of the sectors. This is how we realized that being autonomous gives us a potential of diversification in terms of revenues and that F&B, SPA Treatments, Transports, excursions and even energy represents a significant part of our turnover (Exhibit 9.5).

9.2.3 Become an Actor of Change In the New normal everyone should be concerned about the future, that’s why at Nomad lodges we focus on a community-based vision and mission where our staff, our partners and our guests are committed (Exhibit 9.6). Community thinking is the basis of any solution; individual thinking does not solve problems. In this vision, Nomad lodges has been inspired by the model of the indigenous communities of the Amazon rainforest which for generations have always

212

P.-A. Krüeger

Exhibit 9.5 Revenue Diversification Strategy

relied on the community spirit to solve their problem. Our modern society is based on the individual and not on the community which shows us a great inequality especially in such a crisis as at this time. Nomad lodges is inspired by the indigenous where the community takes precedence over the individual. The Indian system of Amazonia is organized in regrouping of several families who elect once a year a chief as well as advisers in charge of various aspects related to the functioning of the community such as security, education, health, etc. When a family carries out renovation work on their house, they inform the other families and the whole community mobilizes to help them, which is locally called a “Minga”, after the work done, the family offers to people who helped a meal (Exhibit 9.7). This model is interesting in times of crisis and makes it possible to provide for everyone’s needs and to maintain solidarity within a community. It avoids the development of inequalities with all the problems that can be linked to them. Our staff are assessed on their potential. When hiring an employee, we are more interested in his personality and his development potential within our company than on his CV. Our judgment will be based more on the motivation and the passions of the candidate than on his level of studies or professional experience. It is important that our employees share our values in terms of sustainable development and that they adhere to our value charter. Our partners must be active in conservation and share our values in terms of sustainable development and respect for their employees in their commercial activities. Our customers must share our values in terms of respect for the environment and local populations and favor the exclusive experience aspect

9 How to Think Outside of the Box …

213

Exhibit 9.6 Community based Vision

over the comfort aspect. They are aware that the sustainable aspect is more important than comfort and that 90% of the products consumed at Nomad lodges are local and that there is not as much choice as in a hotel located in town (Exhibit 9.8).

9.2.4 Becoming Sustainable “Sustainability is about commitment, not about marketing strategy.” Pierre-A. Krueger

Even though sustainable development now seems to be obvious, we still see far too many examples where the economy takes precedence over the environment (Exhibit

214

P.-A. Krüeger

Exhibit 9.7 Minga in the Santa Teresita Community to collect all non-organic waste from the village

Exhibit 9.8 Communication campaign with our staff, partners and guests

9.9). During this Covid-19 crisis, we saw in all countries the proponents of a rapid economic recovery clash with people putting priority on man and nature. This is proof that our current system has become completely unnatural since it does not hold tale of the human respect. For a long time now, we have been talking about problems linked to the climate, notably with global warming, with an emphasis on saving the planet without even thinking of saving the human species. While we know perfectly that the planet earth

9 How to Think Outside of the Box …

215

Exhibit 9.9 The base of the Nomad lodges concept is made on commitment in socio-cultural, environmental and economic aspects

has since its creation go through all these states while the presence of human beech on the earth represents only an insignificant duration in comparison. What our civilization has completely forgotten is that it is the human being who belongs to nature and not the opposite. A notion that the Indians of the Amazon respect, which is why they live in total harmony with nature because they know that they are totally dependent on it. We should therefore forget our daily routine to return to a rhythm of life more in tune with Nature. This is what we try to demonstrate to our customers during their stay at Nomad lodges. From the very beginning, Nomad lodges puts his priority on human and environmental aspect of its project in order to become an example of sustainable development. The Nomad lodges concept is based on the spirit of the nomadic people of South America and invites travelers to discover places “picked by the heart” through

216

P.-A. Krüeger

Exhibit 9.10 Base of Nomad lodges Brand, Student Business Project EHL (EHL is the Ecole Hôtelière de Lausanne based in Lausanne Switzerland knowed as one of the best Hotel Management School in the world. www.ehl.edu) 2016, Team 33 Liu, Neuenschwander, Staub, Chen, Li, Downey

a network of lodges that are built in total harmony with their natural environment, offering a standard of quality and services made to meet the guests’ expectations (Exhibit 9.10). By providing an authentic experience, we want our guest to feel: connected, immersed, inspiring, natural, balanced and caring in the way to create meaningful changes in their lives and the world in which they live. The Concept is at the forefront of a new socially responsible way to discover the world that sees an increasing number of tourists seeking more “authentic” experiences. At Nomad lodges, we recognize the importance of creating synergies that benefit both the guest and those who inhabit the areas that appeal to these new curious luxury travelers. This is demonstrated by the strong interaction with locals to enhance the overall guest experience. Conservation and respect of local cultures are clear priorities, and we believe there are ways of improving the current best practices of ecotourism. We are also convinced the tourism industry can play a central role in conservation efforts: Tourism can be an actor and a driver behind this big change. You have to show people what is important and make them experience things in order to make them conscious of the problems and trigger positive action.

9 How to Think Outside of the Box …

217

9.2.5 Ecotourism, Is About Commitment “You have to show people that you are really doing something, not just words. You really have to be active and show the evolution of your work.” Pierre-A. Krueger

With this process we add a new vision in indigenous communities living, it is the opportunity for them to share their culture, knowledges, traditions and environment with people coming from another part of the world. And this vision plays an indispensable role in the conservation process, where you can convince the local communities that their culture and environment are important and that people from all over the world are interested to discover them. This is the best way to evaluate their land and culture, something that for them is just natural, became a real mission: Conservation! Following this strategy when we began the training program, we always made a debriefing of each formation to see what we could improve for the next one. And we took the opportunity to identify some areas for improvement in the life of the community. One of our concern was the waste management. Originally, indigenous from the Amazon have no problem to face with waste because they only use organic good for their needs. As the majority of them are no more nomads, they are confronted with modern civilization and are bringing more non-organic waste to their village. That’s why we decided with the local population to introduce a “Waste Management Program” in order to eliminate all non-organic waste from the local communities (Exhibit 9.11). The closest city of the project was doing a great job in terms of recycling, so that we made an arrangement with them to take care of the waste we were recollecting. In this mission we needed to incentive the locals to recollect their waste for us and

Exhibit 9.11 Beginning of the Waste Management Campaign in the Community of Villa Andrea

218

P.-A. Krüeger

that’s why we are giving each family big bags where they can recollect their waste and they receive 1 kg of basic food like rice, flour or oil for each bag of waste. One other of our concern was the wild animals in captivity. This is actually very cultural and can be a more complicated way to solve as those communities are basically hunters and when they kill an animal it is sometimes a mother who as babies. So usually hunters bring back the baby home and some animals become children’s mascot. This practice become a tourist attraction in most of the Amazon destinations and indigenous began to develop wildlife trade as an opportunity of revenues selling them to hotels or restaurants. Those practices have been totally forbidden in Colombia and Brazil we still see some places where they us it as a tourist attraction in Peru. We explain to the locals that it is not nice for people coming from outside to see the virgin landscape of the Amazon to see wild animals tied up against their will and we could make them understand that if they have to bring back babies after having killed the mother they have to give them to us and we will give the baby to a local foundation which reintroduce wild animals in their natural environment. We begin working with the Maikuchiga Foundation1 who is working with local communities to convince them that conservation is better than hunting. That’s how former hunters become wildlife keepers of environmental guides. At Nomad lodges our best guides are all former hunters and that is how we could reduce wildlife hunting and focus more on species conservation (Exhibit 9.12).

Exhibit 9.12 Our best guides were hunters, they are now explaining to our guest the importance of biodiversity to conserve their lands

9 How to Think Outside of the Box …

219

9.2.6 Training and Coaching Obviously by having high expectations on the quality of service in our lodge, we need to setup an adapted training system. That’s why we began a collaboration with the Colombian National Learning Service (SENA)2 to make a complete program in the way to give the local communities the basic knowledges in hospitality sectors. In this process, Nomad lodges is organizing the planning of trainings with the local communities and coordinates with the SENA in the way for them to provide the appropriate teachers (Exhibit 9.13). We have been working on one week to four weeks sessions giving the possibilities to all adults of the indigenous communities to receive the best training alternating theory and role-playing. After having received basic knowledges of hospitality, we began to practice those learnings inviting people involved in the project to visit the place. This was the opportunity for the indigenous community to receive guests and to show them their landscape and culture. The strategy was to setup the program with the local community leaders and then informing all the visited villages about the venue so that every indigenous could be participating in this event providing his best skills and practicing the training he had received. This process is also an opportunity for locals to share and exchange ideas with foreign people. The first experiences where a real success and we could observe a real evolution between the first visitors and the last one in the way the local communities organize themselves to receive the hosts (Exhibit 9.14). The success of this process was confirmed in the guests experience who really enjoy the way to share a living experience with local population.

Exhibit 9.13 Our first training program with a professor from the SENA

220

P.-A. Krüeger

Exhibit 9.14 Our guest visiting a neighboring community

For Nomad lodges it was a very good way to define what will be our target clients and it was a surprise to see that our main target will not only be the classical high-end market 40 to 60 years frequent traveler couples, but also the family segment. We were amazed to see the interaction of the children from 5 to 18 years old with the local population which was really a major success factor of the family experience. In those first operations experiences we had the chance to follow the process from the sales (convincing the guest to visit us) to the return to their homeland. We really could see that at the beginning, the parents where very skeptical about their children to exchange with local children of their age because of their timidity or their focus on video games… (Exhibit 9.15).

Exhibit 9.15 Canoe race including guest’s and local children

9 How to Think Outside of the Box …

221

Parents where absolutely surprised to see that this kind of experience can really become a way to share the same enthusiasm of travel with their young children or adolescents. That’s how thanks to this process we could realize that families will be one of our core business. HUMAN RESOURCES CHALLENGE FOR THE NEW NORMAL. The New Normal has to be much more flexible in HR organization. In our concern to become more Autonomous, HR is one of the most important and complex internal aspect of this evolution. We have seen that during the Covid-19 crisis, HR problematics was depending of work regulations in each countries and internal politics of the companies. But usually we can see that HR problematic is the hidden side of the iceberg that will occur after the health crisis. Lots of people will lose their jobs and for most of them it will be very difficult to find a new one as their professional experience is too little diversified, having faced every day the same routine for years. Generation Z (Gen Z), the youngest members of the workforce are more likely focused on experiences than in career. At Nomad lodges we have developed a system where passionate professionals or interns have the possibilities to live and amazing professional experience learning more about the possibilities to develop their skills. No more long terms contracts; we are more focus on intense, passionate and benefic professional experiences.

9.2.7 A School of Life More than a professional experience, Nomad lodges is a school of life. That’s why we think that it is the kind of professional experience that will be convenient for Gen Z. Thinking outside of the box, can be a potential professional opportunity for this new generation of workers. The experience of the Covid-19 has shown us that it is important to reinvent ourselves and that the structures in place were not necessarily the best suited to a crisis situation. An opportunity for Nomad lodges to develop a new organizational system in terms of human resources in which Gen Z can express themselves without apprehension under the guise of a coaching system (Exhibit 9.16). “The long-term toll of the coronavirus is unknown, but its effects on our health care system and the economy have already been catastrophic. And while the immediate concerns of skyrocketing unemployment and a stalled economy must be addressed today, employers also need to begin considering how to rebuild for the employees returning to the workforce — or entering it for the first time.” Lauren Stiller Rikleen, Harward Business Review, June 2020

9.2.8 Trusting the New Generation When we had to decide the base of the project and which direction we had to go, we felt that the students understood. They had done great work, digesting and

222

P.-A. Krüeger

Exhibit 9.16 Nomad lodges’ organizational chart by levels of skills, Student Business Project EHL 2016, Shibeko, Austern, Tsareva, Krause, Valdez, Liu

compiling all the information. When they got back with the initial report, we were very impressed. They truly grasped the project and were exactly in focus (Exhibit 9.17). Traditional consultants have standards, but the students offered something different. We had to have people who could absorb the information and get something new and fresh from their inspiration and work. We are quite sure that nobody could have done what they have done (Exhibit 9.18).

Exhibit 9.17 Skype briefing with EHL SBP team 33

9 How to Think Outside of the Box …

223

Exhibit 9.18 EHL SBP Team 39 at Ecole Hôtelière de Lausanne

9.2.9 Thinking Outside of the Box Conventional, and often standardized, “western” operating norms which are implemented to deliver high quality service, do not fit in with the indigenous concept of life, work and time. For the Tikuna, Yagua and Cocama communities, life is about reaching a balance with the environment, and therefore, daily activities are adapted to the rhythm of nature, rather than a daily “nine to five” schedule. Fishing, growing crops and working can be influenced by the rain or the moon cycle. Similarly, social activities have a determinant role in the community life. Mingas, for example, are a collective activity where all the families reunite to discuss or work on a specific issue and can be summoned with only one- or two-day notice. Since participating in Mingas is a priority for community members, work may be postponed, to attend or organize these gatherings. As a result, the major challenge for Nomad lodges was to find a way to manage the high level of uncertainty and unreliability as well as the availability of mainly unskilled work within the communities, in order to offer a consistent and high quality service without changing the dynamics of the communities’ way of live and rhythm. The Nomad lodges Project is located on a 237-acre private reserve in the heart of the Colombian Amazon. Close to the Amacayacu National Park, bordering Brazil and Peru, the area is rich in biodiversity—home to 150 species of mammals, 500 species of birds and over 1000 species of plants. The 10 bungalows that will allow visitors to experience this special part of the world will be complete in late 2021 and have been designed in total harmony with the local environment (Exhibit 9.19). Nomad Lodges Amazonas revolves around the guiding principle that the conservation of the Amazon Rainforest depends on buy-in from local populations. The Association of Ticunas, Cocamas and Yaguas (ATICOYA) (local indigenous communities) has had an active role in the project’s development. So far, the Nomad lodges Project has helped local communities embrace sustainable fishing practices, species identification, and reforestation skills. Nomad lodges also hopes to help this population through healthcare and economic campaigns, to ultimately improve their quality of life (Exhibit 9.20).

224

P.-A. Krüeger

Exhibit 9.19 Identification of major attractions of the region with the local population

Exhibit 9.20 Study of the vegetation with experts from the National University of Colombia (UNAL) (UNAL, Universidad Nacional de Colombia is having various campus within Colombia and one in Leticia, Amazon, at 80 km from the Nomad lodges projects. This offer the us to have access to numerous experts in indigenous, environmental or animal fields. www.unal.edu.co) and local indigenous

9 How to Think Outside of the Box …

225

The guest experience begins on the Amazon River and drifts into the forest, via boats and floating platforms. The bungalows are traditionally designed and kitted out with native interiors. Built on stilts and connected by raised footpaths and bridges, views of the river and forest are far-reaching. Locally produced renewable energy, harvested rainwater and food and drink procured from the local region all help to minimize the impact of the lodge.

9.2.10 The Nomad Lodges Lab As an exchange platform of knowledges and skills, Nomad lodges first role is to focus on the potential of the indigenous communities in terms of sustainable living in total balance with the nature. All their culture and ancestral expertise are founded on the equilibrium between Nature and Human being. In this vision, local communities become the spearhead of land conservation, giving us the keys to realize the most sustainable hotel project ever. Most of the time, working with local communities has always been in the way of helping them and give them education in the way to integrate them in our civilization. The Nomad lodges concept is all the contrary, of course the project aims to be beneficial for the natives, but our concept is more based on exchanging experiences and knowledges (Exhibit 9.21). In the development of the operation, we really want to have a management of Alumni assisted by Graduates who will supervise the local staff assisted by Trainees. In this spirit, Nomad lodges Amazonas would be a platform for work and study. Collaborating with outsiders to create a new operating model Nomad lodges worked in collaboration with the young and motivated students from the Ecole Hôtelière de Lausanne (Switzerland) for 8 weeks in order to find an innovative business model that allowed Nomad lodges Amazonas to achieve international quality and service standards, while respecting the harmony of the indigenous activities and traditions with nature. Nomad lodges decided to work with students because, unlike CEO’s or General Managers, students’ ideas are not influenced by previous experiences. Not without acknowledging that feedbacks from experts are valuable and can be used as a point of reference, for Nomad lodges it was important to have a fresh and relatively unbiased point of view since they wanted to develop a completely new concept. The “outside of the box” model that was developed, is based on a flexible organization with a high level of rotation among staff and management. Since the indigenous people are not used to having long-term jobs, but rather work on a “mission”, Nomad lodges will assign a person to a specific job for one or two days, after which they will rotate to another person who has the same capacities and acquired the same skills through the training scheme. Similarly, if one community summons a Minga with short notice, Nomad lodge can quickly replace staff with people from any of the other two communities. To ensure the success of the model, extensive training and motivation were identified as key elements to ensure that sufficient qualified staff would be available

226

P.-A. Krüeger

Exhibit 9.21 The Nomad Lab, an exchange platform to develop new solutions

for rotation without jeopardizing the quality of the service Nomad lodges wants to provide (Exhibit 9.22). The model also envisions a “puzzle-like” structure for managerial positions. Nomad lodges aims to retain a General Manager for one year but is preparing for shorter periods of time as well. After the first 3–4 months, a person will be assigned to assist the General Manager in every managerial aspect. In case the General Manager was to leave, the Assistant should have acquired sufficient knowledge of the operation in order to replace the former Manager or to train a new one. In addition, for Managerial positions, Nomad lodges will seek out outstanding young hospitality professionals from abroad, who are motivated, open minded, capable of understanding and adapting to a continuously changing environment, and

9 How to Think Outside of the Box …

227

Exhibit 9.22 Working together with expert, professionals, students and locals is the key to success

who are happy to live in remote areas. Motivation and a desire for a unique experience are the key elements that Nomad lodges will seek in its future Managers. These same values and motivations will be essential for the General Manager and Chef, although they will need to have more years of experience. Local people will have the opportunity to land managerial positions if they wish to do so in the long-term. Nomad lodges will continue its collaboration with the Ecole Hôtelière de Lausanne (Switzerland) by incorporating students aged between 22 and 24 years, as trainees into the Lodge for a period of 3–6 months, and graduates, who are on average over 24 years, will be considered for managerial positions. By this process, Nomad lodges Amazonas will be an Ambassador of the region in terms of Cultures and Environment helping local communities to conserve their culture, traditions and landscape.

9.3 Outcomes About four hundred eighty indigenous people have followed our training program within the last five years. The Nomad lodges project involved three local communities impacting six hundred people directly or indirectly. More than four tons of Waste have been collected in the local community during the last 3 years. More than one hundred European guests have been visiting the local communities within the las three years.

228

P.-A. Krüeger

Exhibit 9.23 Developing local handicraft to create future furniture for the hotel

The ninety-six hectares of Nomad lodges private reserve is a wildlife corridor between the Amacayacu National Park and the Ramsar protected area of Tarapoto Lakes, creating a link in the earth of a five hundred thousand hectares area. Tourist activity prevents the development of illegal activities in protected areas (Exhibit 9.23).

9.3.1 Benefits for Locals and the Environment As a model of sustainable tourism, this proposal will have benefits at various levels for the Municipality of Puerto Nariño: First in terms of conservation, that to develop a nature tourism is absolutely relevant. The risk at the level of nature is the spread of illegal activities and these are spread due to lack of income in the territory and lack of control. Developing sustainable tourism activities based on the cultural component of the region brings a new source of income to local populations and improves security in the territory creating regular movement in the area. The second benefit is the appreciation of local culture and traditions. Through tourism, communities will be able to export their traditions and cultures through their crafts, their gastronomy and their ancestral knowledge of the management and use of the forest and animals. This point has a very important value in the development of the project because these same communities are going to be in charge of receiving tourists and providing them with the different services (Exhibit 9.24). The last benefit is economic and has a more important value than just an additional income, this will allow communities to be more and more independent economically, without affecting natural ecosystems since the activities to be developed will be

9 How to Think Outside of the Box …

229

Exhibit 9.24 Sustainable activities with the young generation

based on their ancestral knowledge and this It seems very important to us within this proposal. In terms of numbers, this proposal is addressed to twenty-two indigenous communities, eight hundred families and a little less than six thousand inhabitants. If we consider minors (two thousand) and the elderly (one thousand), we have three Thousand active people who can be directly or indirectly integrated into the project. Beyond the Municipality of Puerto Nariño, this proposal will allow Leticia Travel Agencies, Bogotá Operators or Foreign Tour Operators to add new tourism products within their offer (Exhibit 9.25). Nevertheless, it is essential not to develop tourism by any means in these remote regions. In fact, tourism that is poorly controlled and that does not respect the carrying capacity of sensitive areas in terms of environment and local population, could prove to be very negative for the region. The national tourism in Colombia being rather focused on the entertainment and the mass tourism, certain communities showed themselves opposed to the tourism development in their region due to bad experiences with Tour Operators having no respect about the local traditions and landscape. It is therefore important to communicate actively with the local communities and to work alongside them for the development of sustainable tourism in their region (Exhibit 9.26). Nomad lodges will be a new source of revenues for the local communities as ninety percent of the goods needed for the project construction and operation will become from local sources.

230

P.-A. Krüeger

Exhibit 9.25 Helping local schools with supplies for students

Exhibit 9.26 Speaking with Community leaders to maintain the cultural heritage of the indigenous

Nomad lodges Amazonas was created to protect the values of Indians of the Amazon by providing them with financial and logistical support while strengthening their culture and ancestral knowledge. This above all a sharing project of skills and experiences, an exchange platform which scene of actors of modern society as well as members of communities to find a path to a better future.

9 How to Think Outside of the Box …

231

Exhibit 9.27 Identifying local plants and fruits with with children and women from local community

As Tikuna indigenous are becoming more and more sedentary from the last two generations, they tend to lose their traditional values; Nomad lodges wants to promote transmission knowledge from old to new generations by developing activities like harvesting local fruits, using plant medicine, practicing, controlled fishing and hunting, the development of traditional crafts, of local culture and languages (Exhibit 9.27 and 9.28). Notes 1. Maikuchiga Foundation, http://fundacionmaikuchiga.org. Maikuchiga means “the monkeys’ story” in Tikuna, the dominant indigenous language in our area. Our mission is to contribute to the development of systems in which the care and rehabilitation of Amazonian animals confiscated from the illegal trade in wildlife is linked to coherent and effective programs of ecosystem conservation, environmental education in its broadest sense, and participative research. We are a Colombian nonprofit organization registered with the Leticia Chamber of Commerce (Amazonas). 2. SENA is the Servicio Nacional de Aprentizaje (National Service for Training), helping young and older people in their professional orientation. https://www. sena.edu.co/.

232

P.-A. Krüeger

Exhibit 9.28 Final Report EHL SBP Team 39 at Ecole Hôtelière de Lausanne

Author’s Insight After analyzing traveler’s expectations and needs during more than 25 years of operation, I came to the conclusion that something had to change in the way of operating tourism and develop hospitality industry. Nomad lodges is born from a simple observation: “my clients want to live an authentic experience when travelling!” This change in customer expectations is in line with the COVID-19 crisis and confirms that changes must be made in the service sector. This crisis has forced the entire tourism industry to reinvent itself and I sincerely hope that it will be able to make the shift to focus on Quality rather than Quantity.

Travel Less but Travel Better This is what the tourism industry must remember for a new future. Providing customers with a unique experience is much more rewarding than simply focusing on customer volume without worrying about the quality of their stay. Hoteliers should no longer just think about meeting their occupancy rate targets but how to deliver a unique experience to their customers. It is indeed a question of offering customers a range of products during their stay and no longer just overnight stays. Meals, drinks, excursions, themed visits, cooking lessons, SPA treatments, etc. are sources of income which will add to the turnover of hoteliers after COVID-19.

9 How to Think Outside of the Box …

233

From the “Eco” to the “Sustainable” Trends Twenty years ago, the ecotourism movement was born. This new trend quickly became a fashion and a marketing instrument for destinations and tourism operators. Today “Ecotourism” is viewed with a certain distrust and suspected of “Greenwashing” for the benefit of marketing. Nowadays the trend is more accessible on the long term and one speaks rather of “Sustainable tourism” which includes not only the aspect of concern for the environment but the socio-cultural aspect. Today consumers are interested in knowing under what conditions the products or services they buy were produced. Companies must be able to demonstrate to their customers that their products have been supplied in compliance with environmental but also socio-cultural rules. Customers are no longer content to consume blindly, but will choose their products and their service providers according to their social and environmental commitments. Today companies that do not respect sustainable values are denounced and singled out and their economic future is threatened.

A New Normal Based on a Better Balance Between Human Being and Nature When I discovered this corner of paradise in the Amazon, I then realized that it was possible to live more in harmony with Nature in order to leave a richer heritage for generations to come. Today more than ever, it is important to ask the question of knowing what future we want to reserve for future generations. Hit hard by a global pandemic, it’s time to tackle a turn and question yourself. There is no ready-made answer, it is just a matter of stopping and watching. The time is right for contemplating nature and reflecting on the balance between man and the environment. Autonomous, ephemeral, integrated and able to adapt to the situations that surround them, the Tikuna People, one of the 400 ethnic groups who live in the Amazon rainforest has become for me a model of balance in these time or inequality and destruction of the planet.

References Rikleen, L. S. (2020, June 3). What your youngest employees need most right now. Harvard Business Review. https://blog.ehl.edu/towards-a-sustainable-hospitality-industry. https://www.hotel-yearbook.com/article/4092244/sustainable-tourism-is-a-commitment-not-amarketing-strategy-developing-nomad-lodges.html. https://www.youtube.com/watch?v=oszyegIf-DA&t=33s. www.nomadlodges.com.

234

P.-A. Krüeger Pierre-André Krueger Pierre-Andre is what one can calls an “Explorer & Entrepreneur”. After a bachelor in business administration in Geneva, Switzerland and studies focused on marketing and hospitality development strategy at Cornell University, he founded the first tour operator in French-speaking Switzerland dedicated to exclusive journeys in South America. After more than 30 years as a travel organizer and more than 150 inspection trips within South America, he decided to create Nomad Lodges, the first luxury sustainable hotel network in South America, focused on nature conservation and development of local cultures. Krueger defines “sustainable tourism” as a commitment and not a marketing strategy. Focused on nature conservation and cultural aspects, Krueger can be considered as one of the best specialists in tourism development for South America, involved on integration and commitment working with local communities. Nomad lodges represents for him the culmination of a career with the ambitious objective of creating a model of sustainable tourism on a global level. Krueger defines the project as a permanent challenge which will be replicated in other destinations.

Chapter 10

Service Lessons During COVID-19: The Case of Food Trucks Meike Eilert, Aditya Gupta, and Chance McCullough

Chapter for COVID-19 and the Future of the Service Industry Post-Pandemic: Insights and Resources.

Abstract COVID-19 has fundamentally altered our dining experiences as consumers, given the increased uncertainty and risks associated with dining out and, in the process, exposing ourselves to others and potentially to COVID-19. These changes have sharply limited the extent to which consumers are able and willing to continue to have social dining experiences. In this chapter, we explore how the food truck business model can help overcome these uncertainties and enable consumers to have positive, meaningful, and social dining experiences despite these changes. Drawing on a case study approach, we look at the activities of three food trucks and the associated consumer responses over the initial course of the pandemic, thereby illuminating different practices that these businesses enacted in response to the rapidly changing circumstances. Specifically, we highlight practices that appear to help these food trucks build authenticity and rapport in service encounters with their customers, enable customers to structure some stable routines while also allowing for improvisation in terms of the servicescape, and foster a sense of solidarity among various members of the larger business and non-business communities that comprise this service ecosystem. The insights provided in this chapter, thus, can inform how businesses, when trying to weather crises, can establish more robust interactions with their customers, structure the social elements of the environments which frame these interactions, and maximize the mutual support linked to various stakeholders that comprise the overall system in which these businesses operate. M. Eilert (B) · C. McCullough University of Kentucky, Lexington, KY, USA e-mail: [email protected] C. McCullough e-mail: [email protected] A. Gupta Illinois State University, Normal, IL, USA e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 J. Lee and S. H. Han (eds.), The Future of Service Post-COVID-19 Pandemic, Volume 2, The ICT and Evolution of Work, https://doi.org/10.1007/978-981-33-4134-0_10

235

236

M. Eilert et al.

In 2019, the outlook for dining out and restaurant spending in the United States was on track to grow at a 4% rate, outpacing grocery spending’s growth rate of around 3% (Rogers 2019). In fact, consumer confidence was on the rise due to a strong job market, impressive stock market gains, and helpful tax cuts (Rogers 2019). Restaurant operators as well as financial analysts were predicting continued growth in this segment throughout 2020, with some even claiming that only a second Great Recession could derail the growth (Rogers 2019). In the weeks following the COVID-19 outbreak in the US, however, the restaurant and food services industry experienced around a 50% decline in sales and laid off nearly 20% of the total workforce (National Restaurant Association 2020). Consequently, restaurant operators were forced to rapidly adapt to the new reality by modifying their business models, prompting speculation of an industry-wide reconfiguration similar in scale to the one seen by the airline industry following the events of 9/1l (Taylor 2020). For example, restaurant operators reconfigured their operating hours, menu choices, and service practices, adopting practices such as curbside pickup and delivery (COVID-19 Report 8 2020). To understand how businesses can better deal with these rapid changes, we look at the food truck business model. In the context of COVID-19, food trucks provide an interesting example of agile service marketing due to their flexibility in choice of location, food delivery capabilities, and menu options. This flexibility presents unique opportunities to respond to environmental changes brought forth by the pandemic, often faster than can be done by brick-and-mortar restaurants. Furthermore, food trucks often have experience operating within different legal environments as regulations not only differ between states but sometimes even between cities. Such prior experience can help them adapt relatively quickly to the changing regulatory environment during the pandemic. Ultimately, given current and potential future guidelines regarding social distancing, examining food trucks can provide valuable insights on establishing low contact food delivery while maintaining a positive consumption experience, providing essential services to consumers, and fostering a greater sense of community with consumers, local businesses, and other stakeholders. Food trucks have rapidly increased in popularity in the United States within the past decade, growing by 6.8% between 2014 and 2019 (Food Trucks in the US 2019). It is an important service concept in the food industry that has been instrumental in providing multiple options by exposing consumers to a variety of cuisines (Anenberg and Kung 2015). While these trucks often focus on a single type of cuisine (e.g., barbeque, tacos, sliders, etc.), their menus tend to be very innovative (e.g., fusion, gourmet, ethnic cuisines, etc.). Despite their importance, research on food trucks, and mobile vendors in general, has been limited (Lucan et al. 2013). We believe that food trucks provide a unique and insightful context to examine business practices during a pandemic and can provide broader lessons for other businesses on how to weather uncertain environments. In line with this objective, we conducted a case study of three food trucks in a mid-sized university town located in the Midwest that: (i) collectively represent a variety of cuisines; (ii) are well established in the local community as they have been part of the local business landscape for several years; and (iii) have been very active in

10 Service Lessons During COVID-19: The Case of Food Trucks

237

adapting their businesses to the unforeseen changes brought about by the COVID-19 pandemic. Consequently, they provided a rich research context that not only allowed us to identify commonalities and differences between their service offerings, but also helped us better understand the changes they had to implement due to the pandemic. To do so, we drew upon data from multiple sources, including social media updates by the respective business owners across a variety of platforms, websites managed by these businesses, and social media responses by consumers and members of local business and non-business communities. Our findings from the data helped us see how these service marketers created and communicated value during the onset and eventual unfolding of the COVID-19 pandemic (henceforth referred to as pandemic). This chapter is structured as follows: We begin by providing a brief overview of research on service contexts. We then briefly describe our research context, which is then followed by a more detailed account of our findings from the business practices of the three food trucks that were the focus of our study. These findings, presented in terms of the three levels of service contexts, are aimed at providing a practitioner-focused framework for value creation amidst uncertainty. We propose that the practices that emerge from our data—building authenticity and rapport, enabling routines and improvisation, and fostering solidarity with multiple stakeholders—can be used by businesses to create resilience in times of environmental uncertainty. As we go on to show, these practices allow businesses to adapt more quickly to changes in their business environments by giving them the ability to improvise and experiment within existing structures, in large part due to their strong relationships with customers and the broader business and non-business communities. These practices, therefore, constitute a holistic perspective that simultaneously recognizes the multiple levels involved in service provision—namely service encounters, servicescapes, and service ecosystems—and highlights the focal role of customers, local businesses, and members of the local non-business communities, in addition to the service providers themselves, in the co-creation of value. The chapter concludes by summarizing concrete practitioner take-aways that businesses can implement to establish resilience regarding their business operations during the tumultuous conditions created by the pandemic.

10.1 Research on Service Contexts: A Brief Overview Despite having a venerable academic history, the domain of services marketing continues to provide fertile ground for scholarly work due to the ever-changing nature of service provision and the accompanying need to expand theoretical boundaries to accommodate such changes (Akaka and Vargo 2015; Akaka et al. 2015; Lusch and Vargo 2014). To this end, while services marketing has often been studied with a focus on the distinguishing features of services such as intangibility, inseparability, heterogeneity, and perishability (Zeithaml et al. 1985), more recent work aims to extend the service-dominant (S-D) logic concept (Vargo and Lusch 2004) by studying the contexts in which service provision takes place. Specifically, a growing body of work

238

M. Eilert et al.

advocates for a broader view by taking a closer look at three key elements that are part of almost all service contexts: service encounters, servicescapes, and service ecosystems (Akaka and Vargo 2015; Akaka et al. 2013, 2015; Bitner 1990, 1992; Johnstone 2012; Rosenbaum and Massiah 2011; Vargo and Lusch 2016). At the heart of service provision is the interaction between the business and the consumer. It is this dyadic interaction between a customer and a service provider that is referred to as a service encounter and it is the focal element within which short-term outcomes—such as customer satisfaction or dissatisfaction—and longterm outcomes—such as firm-customer relationships—are often determined within service contexts (Bitner 1990; Czepiel 1990; Czepiel et al. 1985; Surprenant and Solomon 1987). Servicescapes, in contrast, involve looking at the physical, social, symbolic, and natural environments in which such service encounters occur. Indeed, if service encounters represent the interactions between the customer and the service provider, then servicescapes are best understood as the spaces and/or environments that frame these encounters (Bitner 1992). Servicescapes comprise an integral element in service contexts as service encounters do not occur in a vacuum but in certain environments. These environments, moreover, can be described not only in terms of their physical aspects but also in terms of their social aspects, i.e. the degree to which consumers can satisfy social and psychological needs—such as a need for social connection— due to the presence of employees and customers (Akaka and Vargo 2015; Arnould et al. 1998; Bitner 1992; Johnstone 2012; Rosenbaum and Massiah 2011). Finally, the last element to be considered in relation to service contexts is the service ecosystem as it provides an integral additive component to service encounters and servicescapes. Service ecosystems are defined as “relatively self-contained, self adjusting system[s] of resource-integrating actors connected by shared institutional arrangements and mutual value creation through service exchange” (Lusch and Vargo 2014, p. 161; Vargo and Lusch 2016). As can be seen from the definition, these ecosystems serve as the final piece to provide a complete picture of service contexts as they explicitly acknowledge the importance of multiple actors and institutions that, along with customers and service providers, are also involved in the overall cocreation of value by virtue of their services (Akaka and Vargo 2015; Akaka et al. 2013; Vargo et al. 2015). These actors and institutions, comprising members of the local business community (e.g., local restaurateurs, confectioners, or bar owners) as well as members of the local non-business community (e.g., firemen, non-profit workers, or school teachers), are often important sources of support for business owners. On one hand, business owners can seek advice and suggestions on how to best navigate the local business landscape from other local businesspersons. On the other hand, engaging with local non-business members and institutions, through volunteering efforts or providing services at low or zero cost, for instance, often helps business owners become more deeply embedded within informal networks while also helping them gain a greater sense of legitimacy with other community members. Collectively, therefore, these three elements cover a broad spectrum regarding service contexts as they are able to incorporate a micro-, meso-, and macro-level view of service provision through the consideration of customer interactions (service

10 Service Lessons During COVID-19: The Case of Food Trucks

239

encounters), social environments (servicescapes), and multi-actor networks (service ecosystems), respectively. Consequently, they provide a handy lens through which we can explore how our focal category of service providers (i.e. food trucks) responded to the many challenges brought in the wake of the pandemic.

10.2 The Case Study Approach Given the compressed timeline of the pandemic as it unfolded, we decided that a case study approach (Creswell 2013) was best suited to our research aims as it allowed for a deeper analysis of a select number of cases to extract the maximum learnings within a limited span of time. The three trucks were purposively selected to encompass a variety of service offerings, demographic diversity among the business owners, and sufficient experience in running the business itself. To preserve the privacy and confidentiality of our respondents, we refer to them by the following pseudonyms: Amigos, Mama’s Kitchen, and Seoul Food. Amigos is a Mexican fusion food truck that was started by a Hispanic family in 2017. While relatively new to the local food scene, the truck has established itself strongly over the past three years and frequently attends events conducted by local breweries, music and Pride festivals, and other such community events. Mama’s Kitchen also set up shop in 2017 and is well-known and liked within the local community. The focus of this food truck, started by an African-American couple, is on traditional southern barbeque, including pulled pork, turkey wings, collard greens, mac’n cheese and so forth. This food truck also frequents local events but also has several locations that it visits on a more routine basis. In 2019, this food truck served the local university while some dining options were closed due to construction. Finally, Seoul Food, the oldest truck that we studied, was established in 2011 by a Vietnamese couple and one of their friends. It serves Korean fusion cuisine and is present at many local events. In contrast to the other two trucks, this one also has a fixed location within a local gas station. In line with Creswell’s (2013) recommendations, we focused on acquiring an in-depth understanding of how these food trucks adapted their market offerings by looking at multiple sources to gather both textual—Facebook and Instagram posts, tweets, comments by consumers and community members—and visual—pictures, videos, and business websites—data. As business owners for the three trucks relied extensively on social media platforms to communicate with their respective customer base, social media data formed a rich central corpus for the case studies. Given the pandemic’s timeline, we looked at all social media posts made over a period of 75 days between mid-March and the end of May by the food truck owners across Facebook, Twitter, and Instagram. Of the three businesses, Amigos was the most active, logging a total of 84 Facebook posts, 312 tweets, and 31 Instagram posts. This was followed by Mama’s Kitchen which logged a total of 173 Facebook posts and 10 Instagram posts (they do not have a Twitter handle). Seoul Food, finally, is only present on Facebook where it logged a total of 38 posts.

240

M. Eilert et al.

Data analysis was conducted in line with Creswell’s (2013) recommendations wherein we successively engaged in developing “clusters of meaning” (Creswell 2013, p. 82) around the “textural description”—focusing on what the nature of service provision during the pandemic was like—and the “structural description”—focusing on how such service provision was adapted in response to the conditions created by the pandemic. These findings were then used to develop a proposed framework of service ecosystemic value co-creation that looks at certain key practices that service providers can engage in at the service encounter, servicescape, and service ecosystem level. Overall, this required an iterative process of interpretation and theory building in the tradition of the constant comparative method (Glaser and Strauss 1967; Spiggle 1994), which allowed us to ground our findings in existing theory on value co-creation among brand communities in service ecosystems (Akaka and Vargo 2015; Schau et al. 2009) while also breaking new ground in terms of understanding what service marketers can do to protect their business during the pandemic.

10.3 Service Lessons from Food Trucks During COVID-19 As we looked at the various strategies that food trucks adopted, some often done “on the fly” due to the rapid changes brought about by the pandemic, we observed a rich set of lessons on service marketing that can be extracted from the collective experiences of those trucks. We further argue that these lessons constitute a three-pronged strategic response as the businesses adapted their service offerings in terms of the aforementioned three components of service encounters, servicescapes, and service ecosystems. Collectively, these strategies provide several examples of changes that service marketers can incorporate within their market offerings and communication strategies in the face of the pandemic depending on their respective business needs and situational constraints. With this background, let us begin by looking at these changes at each level. As we go through each of the three components, it should be noted that the verbal examples we use (e.g., tweets and Facebook posts) are reported ‘as is’ in their original form. Thus, there are several cases where selected examples have typographical and grammatical errors but they have been intentionally left uncorrected to preserve the original ‘voices’ of the various individuals from whom we have drawn data.

10.4 Service Encounters Service encounters for food trucks generally involve business owners directly as these owners are simultaneously involved at the back end (e.g., when sourcing ingredients, planning menus, or cooking) and at the front end (e.g., when driving to different locations, serving customers, or delivering food to customers’ homes). In this regard, business owners also frequently receive a significant degree of support

10 Service Lessons During COVID-19: The Case of Food Trucks

241

from family members, friends, and/or employees who help out during some or all of these activities. The first disruption that occurred with COVID-19 was in the context of service encounters as businesses had to either completely pause, or severely curtail the scope of, their service provision as states across the nation successively announced lockdowns and curfews. Within the dining industry, even among businesses that were allowed to remain open, several had to reduce their hours of operation and restrict their services to offering takeout or curbside pick-up. This disruption hit the three food trucks too, as they had to pause operations to take stock of the situation. After this initial disturbance, however, the trucks worked hard to restructure their business operations and reassure their customers that they would resume service as soon as they could incorporate the necessary changes to comply with a rapidly changing reality. Our cases revealed that interactions between the food truck and customer on social media were frequent, close, and personal. All food trucks were— and continue to be—highly active on at least one social media platform, such as Facebook, Instagram, or Twitter, which provided them with a low-cost opportunity to connect with consumers and share information about their business, such as the day’s menu or their current location. Given that food trucks in general do not operate at a fixed location, using such a platform that consumers consult frequently helps the business keep them updated about events in a timely manner. In that regard, two key practices emerged in terms of service encounters: building authenticity and building rapport.

10.4.1 Building Authenticity Authenticity is generally understood as the perception that an individual or a business behaves according to its true self in a way that reflects their passion, commitment, credibility, and genuineness (Beverland and Farrelly 2010; Moulard et al. 2014, 2015). Building authenticity is important in service contexts because these behaviors can serve as cues for consumers that signal the quality of the service that they receive and the extent to which they can trust the service (Matthews et al. 2020). As the pandemic carried on, we saw that food trucks worked at building such authenticity around their service encounters in multiple ways. First, service providers who worked ‘behind the scenes’ tried to ensure a high degree of visibility vis-a-vis their customers through posts containing information, candid photographs, or videos. In the case of Amigos, for instance, the owner’s wife posted a video of him doing his favorite dance move when they crossed a high threshold of Facebook likes: HELLOOOOO EVERYONE!! [Name of owner’s wife] here! I hope you are all enjoying the sunshine Even though [owner] said I can’t post this…. I’m doing it anyway! Enjoy the Head Amigo celebrating 4,000 Facebook likes for your favorite taco truck. You are welcome in advance !! Can’t wait to see you in the window again! (Amigos, April 19)

242

M. Eilert et al.

In another example, the owner of Amigos would sometimes use his personal account along with the official business account to connect with customers and share information on social media. Often, this also included information about employees who were delivering meals to customers: Family meals with free delivery comin atcha again tonight! All deliveries occur between 5-7! Your drivers tonight are [family members and employees]! We can’t wait to serve you tonight #[city 1]! [City 2], you’re up tomorrow! (Amigos, April 1)

Not only do such glimpses into the private and professional lives of service providers help signal authenticity to their customers, but such information also provides self-referential cues to consumers who can then use it to evaluate the degree to which their personal values align with those of the business, a factor that can ultimately impact their subsequent demand for the services provided by the business. (Grayson and Martinec 2004; Morhart et al. 2015). The second way in which food truck owners tried to build authenticity was by sharing information about the heritage of the business with their customers, often a key element in such an attempt (Beverland et al. 2008). On Mother’s Day, for instance, the owner of Mama’s Kitchen shared a social media post that included a picture of his mother and grandmother, illustrating the strong influence of his roots on the food he prepares and serves: When I lost my Mother to cancer 7 years ago, I started cooking things she taught me as a way to keep her close. (Mama’s Kitchen, May 10)

The owner of Amigos, similarly, took to social media to honor his grandfather whom, along with his grandmother, he credits with many fond memories involving the kind of food that eventually inspired him to start the food truck: 8 years ago I lost my hero. I miss you everyday. But you’re with me. Love you, Amigo! (Amigos, May 5)

Signalling heritage can often be a key factor in communicating a sense of identity by virtue of signalling one’s ethnic or subcultural membership. More importantly, this can often engender a sense of identification among customers who belong to such ethnic groups or subcultures by evoking strong feelings of belongingness (Akaka and Vargo 2015). The third and final way that we observed regarding the service providers’ attempts to build authenticity was linked to the transparent and honest nature of their communication regarding business matters. In addition to the persistent uncertainty surrounding the spread and impact of COVID-19 disease, people had to frequently contend with rapidly changing—and often confusing—safety recommendations. As a result, consumers tended to be wary of leaving their homes to eat out. Being transparent proved to be a possible avenue that food truck owners could use to address the uncertainty, thereby improving the likelihood of consumers making the trip to the trucks despite the pandemic.

10 Service Lessons During COVID-19: The Case of Food Trucks

243

A series of three successive posts from Amigos highlights this commitment to transparency. The first one shows how the owner kept consumers informed about changing regulations and their collective impact on business: Dear Friends: What a week. I know there is a lot of unknown out there, a lot of stress and a LOT of cancellations. As a full time small business owner, I know that I have a lot of questions about what the next few weeks and/or months look like. I am meeting with members of city council/urban development next week to discuss what the food truck pilot program looks like in the midst of covid-19. Once I know, I will definitely let you know! (Amigos, March 12)

This was followed by a second announcement a few days later to reassure customers by informing them about the changes they were going to put in place: Friends. With cancelled events left and right, we at Amigos are having to get creative in continuing to serve people while practicing social distancing and doing our part in ensuring this virus doesn’t spread to us or because of us. So starting Wednesday, we are offering family meal plans with free delivery! (Amigos, March 15)

The third and final post, while announcing the success of the family delivery experiment, also referenced the process of developing a new ordering system that the food truck was trying out due to the pandemic. As the post shows, the owner made sure to keep consumers informed about the changes: Our first night of family meal deliveries is in the books!! A couple of hiccups and learned a lot. We are improving our processes and look for things to roll smoother. Thanks to everyone for your patience as we take on this new method!! Can’t wait to feed y’all soon! (Amigos, March 18)

In conjunction with these, food trucks also fostered transparency through sharing pictures and videos of their food preparation processes, such as smoking meats or putting orders together. These activities not only provided vivid demonstrations to consumers, potentially improving their attitudes (Coyle and Thorson 2001; Keller and Block 1997), but also allowed them to get a glimpse into how their food is made. Given the heightened concerns regarding safety and hygiene in a pandemic environment, such measures went a long way in helping customers overcome initial hesitations about ordering food from food trucks during the pandemic. In summary, therefore, we see that food trucks used multiple avenues to build a greater sense of authenticity around their respective brands of service encounters. Business owners focused on ensuring high levels of visibility regarding themselves and their operations, acknowledging their heritage along with the associated ethnic or subcultural ties, and being open and transparent regarding the struggles in adapting their business processes to changing regulations and circumstances. Collectively, such efforts helped provide additional information to consumers to aid them in their decision-making, engendered a sense of familiarity and identification, and instilled a sense of trust regarding factors like safety, hygiene, and new mechanisms for placing orders. With this in mind, we now turn to the other key practice that these service providers followed as part of their service encounters: building rapport with their customers.

244

M. Eilert et al.

10.4.2 Building Rapport If the importance of building authenticity was to communicate an honest and transparent view of their work, equally important were the interactions that food truck owners had with their consumers that focused on rapport-building (Gremler and Gwinner 2008). While building rapport is important for creating and maintaining strong relationships with customers in general, its importance was heightened in the wake of the uncertainty that businesses experienced during the pandemic. As establishments across the country grappled with changes in operational regulations and consumer behavior, business owners often needed to adapt quickly in order to stay in business, a process that had its own share of risks due to the potential for unexpected inefficiencies and service failures. A sense of rapport, however, could often smoothe out the adjustment process by aiding service recovery in case of such failures (DeWitt and Brady 2003). An example that came from our data was linked to a supply chain disruption when meat processing plants around the country closed, thereby resulting in challenges when it came to delivering items that had been consistently on the menu. Amigos, in response to this, had to switch to a different cut of meat for their tacos. More significantly, due to the combined impact of the supply chain disruption and the extent of spread of the pandemic, Amigos decided to temporarily halt business to take a break: Ok friends. A little update for next week. My crew and myself have been hustling non stop since this started. We are tired, stressed, worn out but happy and humbled. Mix that with a broken supply chain and a peak in cases and it seems like a good time to take a week off. (Amigos, May 6)

Customers, however, responded with empathy and understanding, which has been shown to result in forgiveness in the context of service failures (Wieseke et al. 2012): Enjoy the much deserved time off bud. Can’t wait for tacos!! (Levi, May 6) You & your crew have more than earned it. I legit watch your hustle in awe & admiration (Derek, May 6)

A similar display of customer understanding was also evident when Mama’s Kitchen experienced issues during their transition to new technologies and logistics intended to help with food delivery during COVID-19. While the food truck experienced long lines of cars waiting for their food on several occasions, customers generally responded positively due to the prior rapport they shared with the business: Definitely a long line on [street] last night. We were 15 cars back and took approximately 45 minutes, but we had ate there the night before and we had the catfish, potato salad and it was the best cashfish we had ever had so we knew it was worth the wait. (Rex, May 2)

10 Service Lessons During COVID-19: The Case of Food Trucks

245

Furthermore, we saw that there were three specific aspects that food trucks relied on for their rapport-building strategies during service encounters: humor, humility, and reciprocity. Humor. One of the most noticeable aspects of the interactions between service providers and customers in the food truck context was the consistent use of humor and fun, often through the medium of jokes, visual gags, and memes. Such a strategy can help build rapport as humorous communication has been linked to greater experiences of pleasure among consumers and an increased likelihood of social media sharing (Warren and Berger 2011; Warren et al. 2018). In some cases, such humor originated from the service provider’s end. Seoul Kitchen, for instance, posted videos using a pig-themed image filter stating “Piggy Hungry” while the owner of Amigos, when responding to a customer compliment, joked, “It’s [because of] the jorts, isn’t it?” In other cases, customers also joined in the fun. A customer of Mama’s Kitchen, for example, used a popular meme to demonstrate the popularity of the food truck’s cuisine wherein two pictures were shown side-by-side, the one on the left showing a man trying to keep a huge mob of people outside a pair of gates and the one on the right showing a solitary man in an empty park. The pictures were captioned, respectively, “Mama’s Kitchen’s Customers” and “Everybody Else’s Customer.” A final illustrative example also came from Stan, a dedicated Amigos customer, who created a thread of tweets starting with the words “I mean” to express how much he liked Amigo’s breakfast tacos: I mean, [city] police I’d like to report a murder… these Amigos Breakfast tacos were just killed. (Stan, April 29) I mean, Cubs you were my 1st love… but these Amigos Breakfast Nachos just stole my affection. (Stan, May 5)

Overall, we see that the use of humor by both business owners and customers helped bring a much-needed sense of levity and light-heartedness to people’s lives, a welcome respite from the sombre tone that characterised a lot of other forms of communication (e.g., news, media coverage, and press briefings) during the pandemic. Humility. A second key aspect of service encounters that emerged over the course of the pandemic was the consistent expression of humility on the part of service providers, as seen through multiple examples wherein the food truck owners warmly thanked their customers for keeping their business afloat during a trying time: This weeks family meals are hitting the streets!! I can’t thank you enough for your overwhelming and continuing support!! #hatchmac #bbq #smokedmeat. (Amigos, April 28) Most days I’m doing what I can to stay sane and keep my head above water. And then one of our amazing customers sends this email [the post also contains a photograph of the email] and it inspires me to provide more than a meal, but a heart warming experience. Thank you

246

M. Eilert et al.

for fueling my light when we need it the most! #[City]foodtrucks #[City] #foodtrucks #tacos #covid_19. (Amigos, March 25) During this difficult time, we would like to thank all of our loyal customers who have shown up these past few weeks. These are definitely trying times and as a small business owner the uncertainty has cause many sleepless nights. (Seoul Food, March 17)

Such displays of gratitude and humility, however, were not only limited to customers as there were several instances wherein the food truck owners thanked local business and non-business institutions because they helped provide opportunities for additional service encounters for the food truck owners: Mama’s Kitchen would like to give a special thanks to all 341 [customers] who let us fix them a plate for the first time this month. Our heart goes out to the 151 [customers] who let us fix them another plate. #theheartland #supportinglocal #[City]strong. (Mama’s Kitchen, April 24) Today, thanks to generous donations from multiple donors, we were blessed to serve the dispatchers or #[city] fire & rescue! These hard working peeps are keeping our streets safe and it’s the least we can do to thank them for their hard work! Hope you enjoy your meals! (Amigos, April 15)

Thus, by clearly acknowledging these various sources of support, food truck owners were able to not only express their gratitude to various groups but also strike a communicative tone marked by humility as they worked to build rapport in their service encounters. Reciprocity. The final distinctive feature of service encounters during the pandemic was the consistent focus on reciprocity in terms of actions and communications between food truck owners and their customers. All food trucks enthusiastically shared consumer-created content via retweets and reposts that contained positive feedback or pictures of the food that customers had bought from those trucks. Such actions can have several benefits as attentive behavior can validate certain types of customers (Hodis et al. 2015), and recognizing consumer-created content can extend customer satisfaction with a particular service experience for a longer time (Hall 2020). Most often, such reciprocity would take the form of sharing positive reviews by satisfied customers. The owner of Amigos, for instance, shared a post made by Urie, a customer, with the following words: Man, this makes me so happy to see this! So glad you enjoyed your meal!! We think our slaw is A++ too! (Amigos, May 1)

Mama’s Kitchen, similarly, shared numerous customer posts on social media with a consistent caption that represented their business tagline: “Thank you for letting us fix you a plate.” On other occasions, they would include a few words in addition to refer to a specific customer:

10 Service Lessons During COVID-19: The Case of Food Trucks

247

Always good to see you my brother! Thank you for letting us fix the family a plate. (April 25)

At times, though, the consumer-created content that the business owners shared also highlighted the intimate and informal nature of relationships that these owners had built with their customers. This is best seen through two posts made by Seoul Food in reference to an interaction wherein a young customer gifted a tiger lily to the owners. While the first post warmly acknowledged the gift and the giver, the second one highlighted a note of appreciation that was handwritten by the same customer: To the fine young lady (11 year old, I may have the age wrong) that thought of us, while shopping with her parents. Thank you !!! Charlie loves the tiger lily. (Now the pressure to keep it alive) PS we have a lot of crab Rangoons waiting!!!!! (Seoul Food, April 28) Our little tiger lily (crab Rangoon) loving cust came back and passed us this note !!!! Makes long hours worth it ! Thank you. (Seoul Food, May 20)

Thus, by engaging in such regular expressions of reciprocity, food trucks tried to do their best to occasionally showcase the patronage of loyal customers, the supportive efforts of local businesses, and the opportunities provided by members of the local non-business community. In summary, therefore, we see that food trucks used multiple methods to build a greater sense of rapport with the customers with whom they engaged across multiple service encounters. Briefly, business owners infused their communications with healthy doses of humor, heartfelt expressions of humility that aimed to convey their gratitude to people for supporting their businesses, and regular displays of reciprocity toward customers and other community members by highlighting the content created by them or the support they provided in helping secure additional service provision opportunities for the food trucks. Collectively, such practices helped provide moments of light-hearted levity in an otherwise sombre time, created stronger relationships based on gratitude and thankfulness between food truck owners and their customers, and provided a boost to customer and community engagement when customers saw their content shared and community members saw their names and brands being mentioned positively on social media. Service providers, therefore, can potentially focus on building authenticity and rapport in terms of their service encounters to address numerous implicit and explicit customer concerns in the face of the pandemic. In addition to the interactions between service providers and customers, however, the settings for such interactions also becomes a key element when planning for service provision adaptations. With this in mind, we now turn to the findings that emerged when looking at the servicescapes of these businesses.

248

M. Eilert et al.

10.5 Servicescapes Along with service encounters, the advent of COVID-19 also had a significant impact on the social aspect of servicescapes in the restaurant and food services industry, even for “lean” servicescapes that have limited physical inventory, such as food trucks. As customers could no longer continue dining in at several venues and could only pick up their orders via drive-through mechanisms or curbside, often while remaining socially distanced from other customers and frontline employees, the collective impact of physical and social aspects was severely weakened for many customers, often resulting in a mechanical and transactional experience in terms of eating out. Food trucks, however, were able to leverage certain structural advantages of mobility and flexibility that allowed the food truck and customers to co-create the social aspect of the servicescape by enabling routines and enabling improvisation. These two themes appear to stand out in this regard as they describe how the respective business owners responded to the deleterious effect of the pandemic on their servicescapes by setting up new structures and processes. As we go on to illustrate, these servicescape changes simultaneously provided customers with a sense of structure and normalcy while allowing for substantial leeway for the service providers to quickly adapt to many unforeseen changes that came with the gradual unfolding of the pandemic.

10.5.1 Enabling Routines Routines are important as they provide predictability and feelings of security. Research shows that individuals are able to find ways to adapt to disruptions of routines by creating new ones (Phipps and Ozanne 2017), and we found evidence that both food truck owners and consumers established new routines or adapted old ones when it came to conducting business or dining out during the pandemic. Importantly, Phipps and Ozanne (2017) also find that individuals are able to generate routines that can confer independence on them from the source of the original disruption. In our context, this was often seen when people established routines that they could safely follow despite the circumstantial or regulatory restrictions imposed on the servicescapes of the food trucks. If we first consider the routines of the business owners themselves, then we see many instances wherein the food trucks fell into some sort of structured and predictable weekly schedule. As we also illustrate in the next section, this structuration of the servicescape further enabled customers in creating their own new routines around dining. In terms of the food trucks, however, we observed how Amigos, for example, created consistency through a repetitive order and delivery routine. Every Sunday, the food truck would open up online ordering for family meals at 5 p.m. and then proceed to fulfill those orders on a specific day the following week. While

10 Service Lessons During COVID-19: The Case of Food Trucks

249

this was later changed to Fridays at 6 p.m., the essential concept of having a fixed window of time to place orders resulted in customers starting to plan ahead. As the following post shows, the presence of this routine was important for the business owner to cater to the customer demand: Yo!!! Family meal delivery starts today!! Expect myself or someone on our team to delivery your meal straight to your doorstep!! The timeframe we are giving is 5-7 but i’d expect them to be completed sooner as we have about 18 in [city] today. If there is no answer, we will leave it on your doorstep and shoot you a note via social media letting you know of delivery!! Hope you all enjoy and for those asking, we ARE DONE taking orders for this week but we will work on the same schedule next week!! Can’t wait to serve you!! (Amigos, March 18) Yo!!! Happy Sunday! It’s becoming my favorite day of the week because I get to see orders from old friends, new friends, and it gives me a chance to serve your family!! (Amigos, April 19)

The sense of structure implicit in such practices was often warmly embraced by customers who were otherwise facing several uncertainties in the context of their day-to-day lives. More importantly, these routines resonated with customers who started posting about “Amigos Day” as they eagerly awaited their home deliveries: Can 5-7 get here already? Lol it’s Amigos day today! Tacos and Mac and chz! #therearethreeofus #justsaying. (Lisa, April 28)

Since food trucks have limited capacity, they can carry only a limited amount of food, something that often results in scarcity of popular food items. Amigo’s family meals, for instance, would often sell out within the first hour of the online ordering window during the first few weeks they were offered. In some cases, such regularized schedules even led to some customers creating reminders and alarms so that they would not miss the ordering window for one of those meals: Out for my daily walk. Me: I hear music in the distance. Husband: I think it’s coming from your pocket. Me: it’s time to order Amigos! It’s my Sunday alarm! #supportlocalbusiness. (Maggie, April 26)

A related outcome of such delivery schedules was reflected in the social media accounts of customers who would often celebrate these family meal nights by posting pictures or videos of their families at the table enjoying the food truck’s tacos or ‘smoked meat mac n cheese.’ The online ordering option, moreover, also resulted in some instances of prosocial behavior as some customers used the facility to make gifts of family meals to their friends and family members. In addition to schedules and online processes, another way in which food trucks enabled new routines for customers was by making certain changes in the physical aspects of their servicescapes. Seoul Food and Mama’s Kitchen, for instance, focused on being present at a given physical location during certain days and times so that customers could seek them out without having to constantly check for location updates. By doing so, this practice helped the food trucks in providing a stable, predictable service experience.

250

M. Eilert et al.

Seoul Food, for instance, had already started the practice of setting up shop at a local gas station on certain days before the pandemic hit. Once the pandemic was widespread, however, it chose to limit its service to that particular location instead of taking the food truck around town. To create an additional sense of structure, the owner also started to advertise “fry-day” every Friday wherein he would share videos and posts about the business’ Korean fries, thereby enabling a new routine for customers who came to expect those fries every week. Mama’s Kitchen, on the other hand, started to strengthen their partnership during the pandemic with a local cigar store where they had served food in the past. The cigar store also offered drinks and beverages as part of their products. The food truck started serving food in the store’s parking lot several days a week and started collaborating more actively by promoting the cigar store’s drinks and the food truck’s food together. They also announced this collaboration across multiple posts on social media in April using hashtags such as #friendsmatter, #relationshipsmatter and #partnershipsmatter. In summary, therefore, these examples illustrate how food truck owners attempted to structure physical and social elements of their respective servicescapes, either by putting in place certain processes and schedules or by choosing to locate their operations at fixed geographical locations. Doing so helped the food trucks provide customers with a sense of normalcy and stability during otherwise precarious times by presenting them with temporal and spatial frames that they could use to bring a sense of order to their day-to-day lives. With this in mind, we now look at the second key practice that these businesses adopted in terms of adapting their respective servicescapes. Specifically, we look at how food trucks often enabled improvisation among their customers to help them mitigate the loss of pre-pandemic servicescape elements and find continued satisfaction in the dining experience.

10.5.2 Enabling Improvisation Given limited dine-in options and restrictive social distancing rules, opportunities for customers to consume food in familiar spaces, such as restaurants, outdoor venues, breweries, and local events, became almost completely unavailable during the pandemic. Our research showed, however, that customers were still able to devise ways to recreate the consumption experience outside their homes, even sometimes involving other customers in the process. This finding highlights the importance of customers in co-creating service value and using improvisation to create a social component to the servicescape outside the traditional service context (Jaakkola et al. 2015; Sandström et al. 2008). Such improvisation, moreover, proved to be a fitting response as it has been found to be a useful innovation strategy in uncertain contexts when service delivery becomes less predictable (John et al. 2006). Seoul Food, for example, posted a picture immediately after their dining room was closed that depicted two men enjoying their food while sitting on folding chairs outside the gas station:

10 Service Lessons During COVID-19: The Case of Food Trucks

251

Love our customers ! When the dining room is closed…. You improvise. (Seoul Food, March 17)

Other food trucks, similarly, shared pictures and posts highlighting their customers eating food outside or in their cars. Larissa, an avid patron of Mama’s Kitchen, posted a picture that showed herself in the company of two other people laden with take-out boxes of food from the truck: Parking lot picnic was a blast especially with the best BBQ in town!! Thank you!! (Larissa, April 30)

On one occasion, Mama’s Kitchen and the cigar store even managed to have a DJ playing music while the respective businesses were serving food and drinks to customers, thereby providing an additional layer of enjoyment to the dining experience and boosting the festival-like feel of the altered servicescape. In summary, therefore, we find several instances of service providers enabling improvisation among their customers in terms of the servicescape by allowing them to devise their own adaptive practices in line with their preferences. This not only added a sense of novelty to the service provision, thereby increasing the enjoyment of consumers (Hirschman 1980; Manning et al. 1995), but it also allowed them to experience greater autonomy as part of the consumption experience, thereby boosting the perceived meaningfulness from the purchase (Gupta 2019). We believe, therefore, that service providers can focus part of their efforts on enabling routines and improvisation among their customers to help them better adapt to the modified nature of the servicescape. Given how often such a modification occurs as a natural fallout of structural and regulatory changes brought about by the pandemic, such efforts can result in enjoyable consumption experiences despite the heightened levels of uncertainty. Finally, these practices, in conjunction with the previous ones discussed regarding service encounters, should be complemented with one additional practice anchored in the service ecosystems of these service providers. With this in mind, we now turn to the last set of findings that concerns the macro framework in which the service encounters and servicescapes of these service providers are often deeply embedded, namely the service ecosystems.

10.6 Service Ecosystems The final element of service contexts that was impacted by the spread of the pandemic was the service ecosystem. While businesses saw precipitous declines in customer traffic and revenues, in large part due to lockdowns and curfews, many non-business institutions saw major changes in the nature of their work. While schools, colleges, and educational institutions started closing down across the country, charities, food banks, and non-profit organizations saw a spike in demand for their services as people got laid off and needed help. The blurry distinction between essential and

252

M. Eilert et al.

non-essential services, murky at the best of times, further fuelled the confusion as some people had to continue going into work despite the pandemic while others could opt to work from home. In that regard, both consumers and food trucks frequently rose to the occasion by rallying round each other, other businesses, and the broader community by partnering with them, calling for support for them on social media, providing meals for each other, or having a supportive voice for each other during a time when everyone had to cope with the challenges brought by the pandemic. We term this practice fostering solidarity and, as we discuss in the subsequent subsections, it was interesting to observe how this sense of solidarity was visible across multiple actors and institutions that collectively comprised the service ecosystems for these food trucks.

10.6.1 Fostering Solidarity Among Customers The first group that we consider when looking at solidarity consists of the customers who would frequently engage in prosocial behaviors that involved the food trucks and their business. The particular examples we highlight here are linked to Amigos as they had a stronger delivery system in place compared to the other two trucks. Lane, a loyal Amigos customer, suggested on his social media account: Want to surprise someone special in your life right now? Order them some Amigos & have it delivered! Just got off the phone w/my father-in-law & they loved it! Thanks [name of owner] #SupportLocal #BrowniePoints via #Amigos. (Lane, April 15)

Another such example came from an anonymous donor who provided the food truck with the opportunity to serve some other members of the community, namely those working for the local fire rescue department. The grateful diners were also quick to thank both the food truck and the donor for the meal. In some cases, such anonymous prosocial behavior elicited subsequent customer reactions as they took to social media to share their gratitude for the act of kindness and their excitement at receiving such a lovely surprise, as can be seen from this post by Blake who received such a gift: Thank you to the mystery person who gifted my family Amigos tacos tonight! A taco guardian angel is pretty much the coolest thing iver! #TacoTuesday. (Blake, April 7)

Finally, in a related vein, Mark, another Amigos customer, decided to surprise his mother by arranging for a home delivered meal, and he shared a picture of the handwritten note that he eventually received from his mother. As she wrote, she not only thoroughly enjoyed the surprise food delivery, but she was also delighted that she got to meet the chef in person as he was the one who brought the food to her. By allowing customers to perform such thoughtful acts of kindness for each other, therefore, the food trucks were able to foster a sense of solidarity among customers

10 Service Lessons During COVID-19: The Case of Food Trucks

253

who were more than happy to engage in examples of prosocial behavior that often resulted in making several other customers happy. Along with customers, however, food trucks also took steps to build greater connections with other members and/or institutions within the local business community, as is detailed next.

10.6.2 Fostering Solidarity Among the Local Business Community Local businesses often serve as valuable sources of know-how and support for other businesses in that area. The food trucks were no different in that regard as they were well-connected with other local businesses whom they often counted on for support and whom, in turn, they supported whenever they could. Our data showed several examples reflecting the solidarity between local businesses that became an even more critical resource during the pandemic. One example of such solidarity lay in the almost informal collaborations between these businesses across several domains. In the city we looked at, for instance, local regulations did not permit food trucks to be parked on public streets. Therefore, all trucks often made arrangements with other businesses and organizations that would allow them to sell food on their premises. As referenced earlier in the improvisation section, for instance, Mama’s Kitchen actively partnered with a cigar store during the pandemic as the store’s owners allowed the truck to be parked in the store parking lot. This practice ended up benefiting both businesses as customers were able to order food from the truck while ordering cocktails from the cigar store, which was licensed to sell alcohol, using the same ordering system. Furthermore, while Mama’s Kitchen continued serving food at two other locations within the city, it increasingly started operating out of the cigar store parking lot given the successful partnership that resulted in consistent customer demand for the services of both businesses. In this regard, we also feel that one possible factor behind this high demand was the customers’ wish to reduce the number of touchpoints when they stepped out of their homes given the contagious nature of the coronavirus. Such service collaborations, therefore, had a high likelihood of becoming win-win situations. These collaborations, moreover, did not have to be necessarily anchored in geographic proximity as there were also examples of partnerships that emerged because a particular business’ products were being used either in the preparation of the food itself or as a complement with other items on the menu. A few such illustrative examples came from the owner of Amigos who acknowledged three separate businesses on social media as they were collaborating with his business during the pandemic: You guys. My first time smoking wagyu beef from [local farm]! This is gonna be perfect in tacos and creamy hatch mac tomorrow! Look at that marbling! #bbq #bbqlife #smokedmeat #brisket #wagyu #briskettacos #brisketmafia. (Amigos, May 21; this post also elicited a supportive response from a local ice cream store that wrote “This is a great collaboration!”)

254

M. Eilert et al.

You guys!! This weeks family meal is next level. Partnering with [alocal confectionery] we are adding 4 whole m&m Rice Krispie treats for $8! This is a meal you don’t want to miss! Ordering opens for next week tonight at 6 pm!! Hope to serve you soon! #[city 1] #[city 2] @ Amigos. (Amigos, May 15) Happy Friday!! I’m so happy to introduce to you something new we are offering as the opening of the Amigos store front is just a few short weeks away! The Amigos Blend from [local cafe] is something we are really proud of. It’s a great hot drip, cold brew, or espresso pull! A hint of sweet, super smooth, this blend will be our featured drip coffee and is used in our smoked meat bbq rubs! You can buy yours starting today at [website URL]. (Amigos, May 22)

This last post, also highlighted on Amigos’ Instagram account in addition to the Facebook post mentioned above, referred to Amigos’ planned business expansion as they were planning to move to a brick-and-mortar space that would be shared with an up-and-coming local cafe-and-coffee roaster. Through such posts, therefore, Amigos aimed at increasing awareness about other businesses within the community, often through persuasive communication highlighting the perceived superiority of the products offered by such businesses. Additionally, food trucks would also often express support for other businesses regardless of whether they were collaborating with them or not. Mama’s Kitchen, for instance, shared a video highlighting local business collaborations during the pandemic with the post: It is beautiful to see local businesses working together to get through these tough times. (Mama’s Kitchen, April 6)

In another post, Mama’s Kitchen also thanked employees from another local restaurant for helping them serve customers when the food truck started to implement a drive-thru system and forgot to put out traffic cones to guide customers. Other times, such support would take the form of social media ‘shout outs’ and free publicity, as seen from the following examples: You guys!! I was surprised by the amazing crew of [business]! They hand delivered delicious cherry and apple hand pies and swag! If you ever find yourself in [city], do yourself a favor and stop at [business]! (Amigos, May 9) Thank you sams club for supporting local. Without you we would not be able to stay open. Keeping us supplied To top off ordering from us means the world. Thank you again ! (Seoul Food, April 17)

In return, other businesses would sometimes use their official social media accounts to share posts about the food truck to encourage customers to give them a trial, as can be seen from this post made by a local printing business: My homeboy Amigo is slinging mad meat at Main & 50th. (Typeset Prints, May 3)

10 Service Lessons During COVID-19: The Case of Food Trucks

255

Collectively, such examples highlight the added importance of fostering a sense of solidarity and community with other local businesses during the pandemic by either partnering with them from a product standpoint, helping them when needed, acknowledging the help they provide, or simply mentioning something positive about their work on social media. In that regard, it is also worth looking at how the food trucks supported each other, given the relatively modest size of the city and its market, even before the pandemic started.

10.6.3 Fostering Solidarity Among the Food Truck Community Despite competing for the same set of customers as other food trucks, it was heartening to see the level of solidarity and cooperation that existed between the food trucks themselves. In a local newspaper article, for instance, the owner of Seoul Food was quoted as follows: You have to build those connections. With the food truck scene, we want more food trucks. People say they’re going to be competition. No, they’re not competition. It’s a draw. (Seoul Food, July 2019)

This supportive nature was also demonstrated by Mama’s Kitchen which was voted runner up for Best Food Truck/Pop-Up Kitchen and whose owner said the following in an interview: With so many great food truck & pop up kitchens in [City] like […], and countless others. Mama’s Kitchen’s is humbled and honored to be voted second by the great city of [City]in the 2020 [City] Choice Awards. From the bottom of our hearts, thank you [City] for supporting local. (Mama’s Kitchen, February 2020)

Finally, in some cases, food trucks even served food to each other, as seen from this example: Whipped up a smoked meat tostada plate for my friends at Seoul Food. They’ve been more than mentors to me, but like family. Excited to serve them our original menu item today! (Amigos, April 11)

The collaborative spirit between the food trucks was further highlighted when, in response to the above post, a social media user made a disparaging comment, saying “Sorry, Food Truck #1 [Amigos] is nasty,” prompting an immediate response from Mama’s Kitchen who replied that the customer should give this Amigos another chance. Thus, despite seemingly being competitors, food trucks frequently expressed support for each other through their words and their actions to create a collective sense of friendship and camaraderie that helped them maintain a respectful stance toward each other while communicating a unified picture to their common customer

256

M. Eilert et al.

bases. With that in mind, we now turn to the last and final aspect of fostering solidarity that goes beyond just the commercial aspect and focuses, instead, on members and institutions of the local non-business community.

10.6.4 Fostering Solidarity Among the Local Non-business Community An important implication of a service ecosystem perspective on service provision is that it makes it possible to consider the local non-business community that is often ignored in more transactional perspectives given that it usually does not have a direct bearing on a business’ scope of operations. We argue, however, that non-business actors and institutions are still quite important for business owners given that they are part of the larger community of which these owners frequently want to become a deeper part. Before the pandemic’, for instance, all food trucks were staples during local community events such as Pride celebrations, music festivals, and football games. While such events were naturally suspended in the wake of social distancing regulations, we saw that food trucks still found ways to bring the community together. The particular example we focus on is that of Amigos as it opted to leverage the mobility of its business, by virtue of serving food out of a truck, to venture into different communities and neighborhoods. “Everyone was happy to get out and see the truck and we were happy to do it,” said an Amigos manager in an interview for a news article in mid-May when asked about the experience of visiting a particular neighborhood with the food truck. Similarly, the following posts from the owner of Amigos further highlight the food truck’s commitment to go to different areas within the city whose residents might not otherwise have been able to make the trip to the food truck: Yo!!! Friends!!! Thank you so much for your orders again this week!! Sunday after Sunday, your support humbles me and blows me away each time! In other great news, we just crossed 4,000 likes on Facebook!! To celebrate this amazing event, we are planning something fun and random and frankly, kinda kick ass. Next weekend, depending on weather but it’s looking like Sunday, we will drive around neighborhoods like the ice cream truck! We will post the route and schedule when we get closer! This is a fun way to serve our community! Can’t wait to serve y’all from the truck this weekend! (Amigos, April 19) Was truly a pleasure to serve you all today! What a special treat for Brandi Griffis and I today!! Thanks to the [name] neighborhood for the amazing welcome! (Amigos, May 9) [Name] LAKE!!! Y’all showed up! Loved getting outside and serving you all today!! #[city] #foodtruck. (Amigos, May 23)

By the end of our data collection, Amigos had visited six different neighborhoods, often sharing pictures in the process that showed long lines of people waiting for their

10 Service Lessons During COVID-19: The Case of Food Trucks

257

food. The strong sense of solidarity was easily visible from these pictures and was clearly integral for several community members who were experiencing isolation as a result of the lockdown and social distancing norms. Finally, the importance of the broader community was also highlighted by making local references in posts through hashtags, for example, #[city], #theheartland and #[city]strong. Using these types of hashtags allowed the trucks to be part of a larger conversation about the community. Overall, thus, we find consistent evidence showing how service providers worked to foster a sense of solidarity between various groups of people and institutions comprising the service ecosystems for the food trucks. As we saw, this included customers, local businesses, the trucks themselves, and members of the larger community. In doing so, service providers were not only able to bolster the image of their respective businesses among these various publics, but they were also able to transcend a sole focus on revenues and profits by lending a hand to different groups within the community, thereby solidifying their sense of belongingness within the overarching fabric of local society.

10.7 Service Implications for the New Normal The objective of this case study was to examine business practices of food trucks during COVID-19 to understand broader lessons for businesses. Food trucks have a flexible business model and are also strongly connected to their customers as well as other businesses. As a result, we argue, there are important insights that can be drawn for businesses that are currently facing major challenges, such as ‘sterilization’ of service environments and heightened consumer concerns regarding safety, due to the changes brought on by the pandemic. We acknowledge that these practices may not be unique to food trucks and that other businesses may also have incorporated some or all of these practices. However, the food truck business model crystallizes these insights to the best extent as it is a business model that can be highly responsive to events like the COVID-19 pandemic. Our analysis highlights several practices related to service encounters, servicescapes, and service ecosystems that yield implications for other businesses which seek to increase resilience to events like the pandemic that frequently result in environmental uncertainty, often requiring drastic action and fast adaptation. Given how such uncertainty brings with it added risks and the possibility of failure, we see that the practices of food trucks help create a ‘minimal structures’ business model (Kamoche and Cunha 2001) that allows them to improvise when needed and rapidly adapt to change. Additionally we also find the important role that trust, communication, partnerships, and a supportive ecosystem play in this adjustment process.

258

M. Eilert et al.

10.7.1 Implications for Customer-Business Interactions The first set of take-aways pertains to customer-business interactions as we found that the food trucks strongly engaged with customers, and consumers in general, via social media. Such engagement, moreover, was anchored in building perceived authenticity of the business and building rapport with customers. Specifically, we found that the businesses were highly authentic in their interactions with consumers and consistently kept them informed throughout the pandemic. Furthermore, the information shared was credible, honest, and transparent as all food trucks addressed the overall uncertainty and talked not only about their successes but also about their mishaps in figuring out their response to pandemic-related changes. As the tone of such communication was usually casual and informal, it helped customers relate to the businesses more easily. Additionally, all food trucks shared information about their food, such as the preparation process, and about the people behind the business. In a time when consumers were uncertain about venturing outside of their homes, establishing trust in the business, the people, and the food—especially regarding food safety practices—was instrumental for continued patronage. Allowing consumers to vicariously participate in everyday business, therefore, increases the degree of perceived transparency and approachability that can often help consumers overcome mental barriers linked to dining out during a pandemic. Lastly, our findings foreground the importance of engaging with customers through, for example, the content they create. While the food trucks differed in the degree to which they shared customer-created content, all of them took the opportunity to not only feature their food prominently but also highlight the importance of each customer to their business. Across several posts we saw how food truck owners reciprocated customers’ posts by thanking them for their patronage and by emphasizing gratitude for their continued support during the pandemic.

10.7.2 Implications for the Servicescape The second set of take-aways focuses on how businesses can bring back the social aspect of their servicescape by enabling customers to interact with each other while still respecting social distancing guidelines. We found that all food trucks provided some sense of consistency which enabled customers to develop routines and rituals around the food which were also able to be social in nature. Interestingly, all food trucks settled into a routine during the pandemic, such as operating out of predictable locations or maintaining consistent ordering/delivery times. This predictability enabled and supported certain food-related rituals among customers, such as weekly family meals or outdoor expeditions to get food with family and friends. In addition, customers shared their experiences on social media while also often commenting on each others’ posts. Thus, food trucks were able to

10 Service Lessons During COVID-19: The Case of Food Trucks

259

facilitate not only offline interactions among customers who were family members but also online ones among customers who were geographically distant. Despite the limitations imposed on businesses by COVID-19, we also saw how certain customers were highly creative in terms of improvising their dining experiences, especially in terms of co-creating a social dimension to augment such experiences. Several posts suggested that even though the food trucks were not serving food in places conducive to gatherings, customers found ways to socialize around food while maintaining social distancing guidelines. While these improvisation efforts appeared to be spontaneous and customer-initiated, business can also seek to establish ways in which customers can safely co-create social food experiences during the pandemic.

10.7.3 Implications for the Service Ecosystem Lastly, we found that food trucks operate in a larger ecosystem, which proved to be even more crucial during the pandemic. The key takeaway here was the critical importance of supporting other businesses in the community, even if they are competitors. Our findings underscore that in order to withstand the hardship brought about by the pandemic, the practice of collaborating—rather than competing—with other businesses becomes more important. Indeed, the strong support of other local businesses in general appeared to set a positive and hopeful tone in how the local business community members were going to help each other weather the pandemic. Another relevant insight was linked to collaborations among different businesses to offer complementary product and/or service bundles that provided increased value to consumers while reducing the number of touch-points of the consumption experience. By providing such bundles, therefore, food trucks were able to offer an enhanced experience to customers that would otherwise have been difficult to acquire. Moreover, these collaborations also offered an avenue for customers to try out new products and/or services. In summary, therefore, we believe that the food truck business model provides several valuable lessons and insights that can be applied across different types of businesses in the dining industry—though some insights may also apply to other industries such as hospitality—to help them improve their ability to respond to, and weather, unexpected external events. As the case study highlights, these lessons can help tackle business challenges at the level of service encounters, servicescapes, and service ecosystems that comprise the core components of service contexts in modern marketplaces. ∗ ∗ ∗

260

M. Eilert et al.

Authors’ Insight Our inquiry into the usefulness of the food truck business model and practices to understand lessons for the service industry post-pandemic revealed some interesting insights and helped provide a practitioner-focused framework for value creation amidst uncertainty. Overall, our study highlighted the importance of authenticity. While authenticity can be established in many different ways, it was interesting to see the informal nature of these interactions. Posts were extremely candid when it came to the struggles that each business faced throughout the pandemic and were very informal in tone. The honesty and transparency communicated in these posts appear to be extremely important during a crisis such as the one brought on by COVID-19. It makes a business more human and relatable for customers and signals that both the business and the customer are going through this crisis together. While food establishments often post pictures of their dishes to promote the business, this type of information appeared to be more relevant during the pandemic as insights into food preparation and delivery gave important information about food safety practices which will help in gaining consumers’ trust. Furthermore, businesses appeared to be very authentic in their interactions with the community as a whole and were very supportive of other businesses, including competitors. As the pandemic has impacted the entire marketplace, the demonstration of solidarity among businesses is likely to increase their resilience as it may result in more favorable attitudes towards these businesses or increased trial and purchase likelihood. Bundling one’s products with those of another business was a novel observation in the context of food trucks that typically limit and focus their menu. Through collaborating with others, the businesses were able to maintain their focus while being able to offer a broader variety to their customers and allow another local business to expand their target market. Finally, as a result of the pandemic, the efficiency of operations has been put at the forefront. While food trucks generally operate a lean business with low overhead, our observations showed at least one practice that decreased the waste of resources even further. Using a pre-ordering system, one of the food trucks was able to offer the amount of food that it was able to produce and understand the actual demand before food preparation. Such a practice reduces unnecessary labor and food waste by producing enough to keep up with demand. Interestingly, the same practice also resulted in a predictable pattern which allowed customers to create a new routine during the pandemic. In doing so, the food truck not only provided customers with meals but also a much needed sense of normalcy and stability to their day-to-day lives during otherwise uncertain times. Overall, this chapter revealed several lessons that businesses in the service industry can learn from the food truck business model to create resilience that go beyond the mere flexibility of this business. These lessons primarily pertain to the informal yet authentic nature of interactions with customers and other businesses that create strong, supportive ties within the community.

10 Service Lessons During COVID-19: The Case of Food Trucks

261

References Akaka, M. A., & Vargo, S. L. (2015). Extending the context of service: From encounters to ecosystems. Journal of Services Marketing, 29(6–7), 453–462. Akaka, M. A., Vargo, S. L., & Lusch, R. F. (2013). The complexity of context: A service ecosystems approach for international marketing. Journal of International Marketing, 21(4), 1–20. Akaka, M. A., Vargo, S. L., & Schau, H. J. (2015). The context of experience. Journal of Service Management, 26(2), 206–223. Aleem, Z. (2020). Poll: Many Americans won’t venture into public despite businesses reopening. Vox. https://www.vox.com/covid-19-coronavirus-economy-recession-stock-market/ 2020/5/23/21268500/coronavirus-lockdown-poll-business-economy. Accessed 30 May 2020. Andersson, T. D., & Mossberg, L. (2004). The dining experience: Do restaurants satisfy customer needs? Food Service Technology, 4(4), 171–177. Anenberg, E., & Kung, E. (2015). Information technology and product variety in the city: The case of food trucks. Journal of Urban Economics, 90, 60–78. Arnould, E. J., Price, L. L., & Tierney, P. (1998). The wilderness servicescape: An ironic commercial landscape. In J. F. Sherry (Ed.), Servicescapes: The concept of place in contemporary markets (pp. 403–436). Chicago: American Marketing Association. Beverland, M. B., & Farrelly, F. J. (2010). The quest for authenticity in consumption: Consumers’ purposive choice of authentic cues to shape experienced outcomes. Journal of Consumer Research, 36(5), 838–856. Beverland, M. B., Lindgreen, A., & Vink, M. W. (2008). Projecting authenticity through advertising: Consumer judgments of advertisers’ claims. Journal of Advertising, 37(1), 5–15. Bitner, M. J. (1990). Evaluating service encounters: The effects of physical surroundings and employee responses. Journal of Marketing, 54(2), 69–82. Bitner, M. J. (1992). Servicescapes: The impact of physical surroundings on customers and employees. Journal of Marketing, 56(2), 57–71. COVID-19 Report 8: The Operator Story. (2020). Datassential. https://datassential.com/wp-con tent/uploads/2020/04/Datassential-Coronavirus8-04-03-20.pdf. Accessed 30 May 2020. Coyle, J. R., & Thorson, E. (2001). The effects of progressive levels of interactivity and vividness in web marketing sites. Journal of Advertising, 30(3), 65–77. Creswell, W. (2013). Qualitative inquiry and research design: Choosing among five approaches (3rd ed.). Thousand Oaks, CA: Sage. Czepiel, J. A. (1990). Service encounters and service relationships: Implications for research. Journal of Business Research, 20(1), 13–21. Czepiel, J. A., Solomon, M. R., Surprenant, C. F., & Gutman, E. G. (1985). Service encounters: An overview. In J. A. Czepiel, M. R. Solomon, & C. F. Surprenant (Eds.), The service encounter: Managing employee/customer interaction in service businesses (pp. 3–15). Lanham, Maryland: Lexington Books. DeWitt, T., & Brady, M. K. (2003). Rethinking service recovery strategies: The effect of rapport on consumer responses to service failure. Journal of Service Research, 6(2), 193–207. Food Trucks Industry in the US—Market Research Report. (2019). Ibis World. https://www.ibiswo rld.com/united-states/market-research-reports/food-trucks-industry/. Accessed 30 May 2020. Glaser, B., & Strauss, A. (1967). The discovery of grounded theory (pp. 1–19). London: Weidenfield & Nicolson. Grayson, K., & Martinec, R. (2004). Consumer perceptions of iconicity and indexicality and their influence on assessments of authentic market offerings. Journal of Consumer Research, 31(2), 296–312. Gremler, D. D., & Gwinner, K. P. (2008). Rapport-building behaviors used by retail employees. Journal of Retailing, 84(3), 308–324. Gupta, A. (2019). Meaningful consumption: A eudaimonic perspective on the consumer pursuit of happiness and well-being. Lincoln: University of Nebraska-Lincoln.

262

M. Eilert et al.

Hall, M. (2020). Sharing experiences in the attention economy: How receiving attention influences post-sharing satisfaction. Lincoln: University of Nebraska-Lincoln. Hirschman, E. C. (1980). Innovativeness, novelty seeking, and consumer creativity. Journal of Consumer Research, 7(3), 283–295. Hirschman, E. C., & Holbrook, M. B. (1982). Hedonic consumption: Emerging concepts, methods and propositions. Journal of Marketing, 46(3), 92–101. Hodis, M. A., Sriramachandramurthy, R., & Sashittal, H. C. (2015). Interact with me on my terms: A four segment Facebook engagement framework for marketers. Journal of Marketing Management, 31(11–12), 1255–1284. Holbrook, M. B., & Hirschman, E. C. (1982). The experiential aspects of consumption: Consumer fantasies, feelings, and fun. Journal of Consumer Research, 9(2), 132–140. How Prepared Are US Businesses to Deal with Economic Fallout from COVID-19? (2020). USA Facts. https://usafacts.org/articles/understanding-potential-impact-covid-19-eco nomy/. Accessed 30 May 2020. Huddlestone, T. (2020). How small business owners are coping with COVID-19 pandemic: ‘It was my civic duty to be a part of the solution’. CNBC. https://www.cnbc.com/2020/03/23/how-smallbusinesses-across-us-are-coping-with-covid-19-pandemic.html. Accessed 30 May 2020. Jaakkola, E., Helkkula, A., & Aarikka-Stenroos, L. (2015). Service experience co-creation: Conceptualization, implications, and future research directions. Journal of Service Management, 26(2), 182–205. John, J., Grove, S. J., & Fisk, R. P. (2006). Improvisation in service performances: Lessons from jazz. Managing Service Quality, 16(3), 247–268. Johnstone, M. L. (2012). The servicescape: The social dimensions of place. Journal of Marketing Management, 28(11–12), 1399–1418. Kamoche, K., & Cunha, M. P. E. (2001). Minimal structures: From jazz improvisation to product innovation. Organization Studies, 22(5), 733–764. Keller, P. A., & Block, L. G. (1997). Vividness effects: A resource-matching perspective. Journal of Consumer Research, 24(3), 295–304. Lucan, S. C., Varona, M., Maroko, A. R., Bumol, J., Torrens, L., & Wylie-Rosett, J. (2013). Assessing mobile food vendors (aka street food vendors)—methods, challenges, and lessons learned for future food-environment research. Public Health, 127(8), 766–776. Lusch, R. F., & Vargo, S. L. (2014). Service-dominant logic: Premises, perspectives, possibilities. Cambridge, UK: Cambridge University Press. Manning, K. C., Bearden, W. O., & Madden, T. J. (1995). Consumer innovativeness and the adoption process. Journal of Consumer Psychology, 4(4), 329–345. Matthews, L., Eilert, M., Carlson, L., & Gentry, J. (2020). When and how frontline service employee authenticity influences purchase intentions. Journal of Business Research, 114, 111–123. Morhart, F., Malär, L., Guèvremont, A., Girardin, F., & Grohmann, B. (2015). Brand authenticity: An integrative framework and measurement scale. Journal of Consumer Psychology, 25(2), 200–218. Moulard, J. G., Garrity, C. P., & Rice, D. H. (2015). What makes a human brand authentic? Identifying the antecedents of celebrity authenticity. Psychology & Marketing, 32(2), 173–186. Moulard, J. G., Rice, D. H., Garrity, C. P., & Mangus, S. M. (2014). Artist authenticity: How artists’ passion and commitment shape consumers’ perceptions and behavioral intentions across genders. Psychology & Marketing, 31(8), 576–590. National Restaurant Association. (2020). By the numbers: New National Restaurant Association research explores COVID-19’s effect on business. Restaurant Business. https://www.restaurantbu sinessonline.com/operations/numbers-new-national-restaurant-association-research-explorescovid-19s-effect. Accessed 30 May 2020. Phipps, M., & Ozanne, J. L. (2017). Routines disrupted: Reestablishing security through practice alignment. Journal of Consumer Research, 44(2), 361–380. Pongsakornrungsilp, S., & Schroeder, J. E. (2011). Understanding value co-creation in a coconsuming brand community. Marketing Theory, 11(3), 303–324.

10 Service Lessons During COVID-19: The Case of Food Trucks

263

Rogers, K. (2019). Restaurant spending set to hit high in 2019 as consumers spend more of their budget on dining out. CNBC Markets. https://www.cnbc.com/2019/08/19/americans-put ting-more-of-their-budget-toward-eating-out.html. Accessed 30 May 2020. Rosenbaum, M. S., & Massiah, C. (2011). An expanded servicescape perspective. Journal of Service Management, 22(4), 471–490. Sandström, S., Edvardsson, B., Kristensson, P., & Magnusson, P. (2008). Value in use through service experience. Managing Service Quality: An International Journal, 18(2), 112–126. https://doi.org/ 10.1108/09604520810859184 Schau, H. J., Muñiz, A. M., Jr., & Arnould, E. J. (2009). How brand community practices create value. Journal of Marketing, 73(5), 30–51. Scitovsky, T. (1986). Human desire and economic satisfaction: Essays on the frontiers of economics. Brighton: Wheatsheaf Books. Scott, D. (2020). Lockdowns worked: Now what? Vox. https://www.vox.com/2020/5/18/21262528/ coronavirus-us-state-lockdown-stay-at-home-orders-study. Accessed 30 May 2020. Spiggle, S. (1994). Analysis and interpretation of qualitative data in consumer research. Journal of Consumer Research, 21(3), 491–503. Sun, L. H. (2020). CDC director warns second wave of coronavirus is likely to be even more devastating. Washington Post. https://www.washingtonpost.com/health/2020/04/21/coronavirussecondwave-cdcdirector/. Accessed 30 May 2020. Surprenant, C. F., & Solomon, M. R. (1987). Predictability and personalization in the service encounter. Journal of Marketing, 51(2), 86–96. Taylor, K. (2020). Coronavirus could irreversibly change restaurants, with experts predicting customer temperature checks and new fears of crowds. Business Insider. https://www.businessinsi der.in/retail/news/coronavirus-could-irreversibly-change-restaurants-with-experts-predictingcustomer-temperature-checks-and-new-fears-of-crowds/articleshow/75012634.cms. Accessed 30 May 2020. Valle, G. D. (2020). Is the customer always right if they refuse to wear a mask? Vox. https://www.vox.com/the-goods/2020/5/19/21263698/store-safety-coronavirus-starbuckstarget-taco-bell. Accessed 30 May 2020. Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68(1), 1–17. Vargo, S. L., & Lusch, R. F. (2016). Institutions and axioms: An extension and update of servicedominant logic. Journal of the Academy of Marketing Science, 44(1), 5–23. Vargo, S. L., Wieland, H., & Akaka, M. A. (2015). Innovation through institutionalization: A service ecosystems perspective. Industrial Marketing Management, 44, 63–72. Warren, C., Barsky, A., & Mcgraw, A. P. (2018). Humor, comedy, and consumer behavior. Journal of Consumer Research, 45(3), 529–552. Warren, C., & Berger, J. (2011). The influence of humor on sharing. ACR North American Advances. Wieseke, J., Geigenmüller, A., & Kraus, F. (2012). On the role of empathy in customer-employee interactions. Journal of Service Research, 15(3), 316–331. Zeithaml, V. A., Parasuraman, A., & Berry, L. L. (1985). Problems and strategies in services marketing. Journal of Marketing, 49(2), 33–46.

264

M. Eilert et al. Dr. Meike Eilert earned her Ph.D. in Marketing from the University of South Carolina. She is currently an assistant professor of Marketing at the University of Kentucky. Her research interests are in marketing strategy, corporate social responsibility and activism. Her work has appeared, or is forthcoming, in journals including the Journal of Marketing, Journal of Marketing Research, Journal of Public Policy & Marketing, and Strategic Management Journal.

Dr. Aditya Gupta earned his Ph.D. in Marketing from the University of Nebraska-Lincoln. He is currently an assistant professor of Marketing at Illinois State University. His research interests broadly lie in the domain of experiential consumption with a focus on meaningful happiness, well-being, and surprise gifts. His work, which has a strong qualitative focus, has appeared in the Journal of Retailing and Consumer Services, Journal of Personal Selling and Sales Management, and Gifts, Romance, and Consumer Culture.

Chance McCullough is a consumer behavior Ph.D. student in the department of Marketing and Supply Chain at the University of Kentucky. Prior to the doctoral program, he worked as an analytics manager for the Walmart corporate headquarters in the private brands, snacks & beverages, and Hispanic foods business divisions. Based on his experience, his primary research interests are in private brands, packaging, and retail.