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BM404
Lecture 5
Portfolio of Services Research
Customer Complaint Solicitation/ CIStudies
“Relationship”/SERVQUAL Surveys
Post-Transaction Surveys
Customer Focus Groups
“Mystery Shopping” of Service Providers
Employee Surveys
Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial action
Obtain customer feedback while service experience is fresh; act on feedback quickly if negative patterns develop
Use as input for quantitative surveys; provide a forum for customers to suggest service-improvement ideas
Assess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over time
Measure individual employee service behaviors for use in coaching, training, performance evaluation, recognition and rewards; identify systemic strengths and weaknesses in service
Measure internal service quality; identify employee-perceived obstacles to improve service; track employee morale and attitudes
Determine the reasons why customers defect
Research Objective Type of Research
Lost Customer Research
Future Expectations ResearchForecast future expectations of customers; develop and test new service ideas
Tracking of Customer Expectations and Perceptions of Service Reliability
Source: E. Sivadas, “Europeans Have a Different Take on CS [Customer Satisfaction] Programs,” Marketing News, October 26, 1998, p. 39.
Retail Chain
9
8
7
6
5
4
3
2
1
0Reliability Responsiveness Assurance Empathy Tangibles
OO
= Zone of Tolerance = Service Quality Perception
O
O
OO
Service Quality Perceptions Relative to Zones of Tolerance
Importance/Performance Matrix
HIGH
HIGHLOW Performance
Imp
ort
ance
Attributes to Improve Attributes to Maintain
HighLeverage
Attributes to De-emphasizeAttributes to Maintain
LowLeverage
LowLeverage
Upward communication
Executive visits to customers Executive/management listening to
customers Research on intermediate
customers Research on internal customers Executive/management listening to
employees Employee suggestion
Building customer relationships
Relationship MarketingCustomer relationships
Strangers Acquaintances Friends Partners
Customer Goals of Relationship Marketing
Relationship marketing
Benefits for customers Benefits for firms
Lifetime Value of an Average Business Customer at Telecheck International
Most profitable customers
Least profitable customers
What segment spends more with us over time, costs less to maintain, spreads positive word-of-mouth?
What segment costs us in time, effort and money yet does not provide the return we want?
What segment is difficult to do business with?
Gold
Iron
Lead
Platinum
The Customer Pyramid – Profitability Segments
Relationship Development Model
Customer BenefitsConfidence benefitsSocial benefitsSpecial treatment benefits
Relationship BondsFinancial bondsSocial bondsCustomization bondsStructural bonds
Switching BarriersCustomer inertiaSwitching costs
Core Service ProvisionSatisfactionPerceived service qualityPerceived value
Strong CustomerRelationship
(Loyalty)
Firm BenefitsEconomic benefitsCustomer behavior benefitsHuman resource management benefits
Strategies for Building Relationships
Core Service Provision:service foundations built upon delivery of
excellent service: satisfaction, perceived service quality, perceived
valueSwitching Barriers:
customer inertiaswitching costs:
set up costs, search costs, learning costs, contractual costs
Relationship Bonds
Excellentservice
and value
1. Financial
bonds
2.Socialbonds
4. Structural
bonds
3. Customization
Bonds
Volume and frequency rewards
Bundling and cross selling
Stable pricing
Social bonds among
customers
Personal relationships
Continuous relationships
Customer intimacy
Mass customization
Anticipation/ innovation
Sharedprocesses
and equipment
Joint investments
Integrated information
systems
Levels of Relationship Strategies
Service recovery
Unhappy Customers’ Repurchase Intentions
82%
54%
19%
9%
Complaints Resolved Quickly
Complaints Resolved
Complaints Not Resolved
Unhappy Customers Who Don’t Complain
Unhappy Customers Who Do Complain
Percent of customers who will buy again after a major complaint (over $100 in losses)
Source: Adapted from data reported by the Technical Assistance Research Program.
Customer Complaint Actions Following Service Failure
Satisfaction consequences McColl-Kennedy
(2003)
Satisfaction consequences (cont.) McColl-Kennedy (2003)
Types of complainers
Passives Voicers Irates Activists
Singh ‘ A typology of customer complaint styles’
Causes Behind Service Switching
Service Switching Behavior
• High price• Price increases• Unfair pricing• Deceptive pricing
Pricing
• Location/hours• Wait for appointment• Wait for service
Inconvenience
• Service mistakes• Billing errors• Service catastrophe
Core Service Failure
• Uncaring• Impolite• Unresponsive• Unknowledgeable
Service Encounter Failures
• Negative response• No response• Reluctant response
Response to Service Failure
• Found better service
Competition
• Cheat• Hard sell• Unsafe• Conflict of interest
Ethical Problems
• Customer moved• Provider closed
Involuntary Switching
Source: Sue Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing, April, 1995, pp. 71-82.
Learn from R
ecovery E
xperiences
Act
Qui
ckly
Treat Customers Fairly
Fail-safethe Service
Cultivate Relationships
with Customers
Encourage and Track
Complaints
Provid
e Ade
quat
e
Explan
ation
s
Lear
n fro
m L
ost
Custo
mer
s
ServiceRecoveryStrategies
Service Recovery Strategies
Service Guarantees
in a business context, a guarantee is a pledge or assurance that a product offered by a firm will perform as promised and, if not, then some form of reparation will be undertaken by the firm
for tangible products, a guarantee is often done in the form of a warranty
services are often not guaranteedcannot return the serviceservice experience is intangible
(so what do you guarantee?)
Why a Good Guarantee Works
forces company to focus on customers
sets clear standards
generates feedback
forces company to understand why it failed
builds “marketing muscle”
Characteristics of an EffectiveService Guarantee
Unconditionalthe guarantee should make its promise unconditionally – no
strings attachedMeaningful
the firm should guarantee elements of the service that are important to the customer
the payout should cover fully the customer’s dissatisfactionEasy to Understand and Communicate
customers need to understand what to expectemployees need to understand what to do
Easy to Invoke and Collectthe firm should eliminate hoops or red tape in the way of
accessing or collecting on the guarantee
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.
Service Guarantees
Does everyone need a guarantee?Reasons companies might NOT want to offer a service guarantee:existing service quality is poorguarantee does not fit the company’s imagetoo many uncontrollable external variablesfears of cheating or abuse by customerscosts of the guarantee outweigh the benefitscustomers perceive little risk in the servicecustomers perceive little variability in service
quality among competitors
Service Guarantees
service guarantees work for companies who are already customer-focused
effective guarantees can be BIG deals – they put the company at risk in the eyes of the customer
customers should be involved in the design of service guarantees
the guarantee should be so stunning that it comes as a surprise – a WOW!! factor
“it’s the icing on the cake, not the cake”
Service Development and Design
Risks of Relying on Words Alone to Describe Services
Oversimplification
Incompleteness
Subjectivity
Biased Interpretation
Types of New Services
major or radical innovationsstart-up businessesnew services for the currently served market
service line extensionsservice improvementsstyle changes
New Service Development Process
Sources: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.
Business strategy development or review
New service strategy development
Idea generation
Concept development and evaluation
Business analysis
Service development and testing
Postintroduction evaluation
Commercialization
Market testing
Screen ideas against new service strategy
Test concept with customers and employees
Test for profitability and feasibility
Conduct service prototype test
Test service and other marketing-mix elements
Front-end Planning
Implementation
New Service Strategy Matrix for Identifying Growth Opportunities
Markets
Offerings
ExistingServices
NewServices
Current Customers New Customers
Sharebuilding
Diversification
Marketdevelopment
Servicedevelopment
Service Blueprinting
A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view.
ServiceBlueprint
Process
Points of contact
Evidence
Service Blueprint Components
Customer Actions
line of interaction
“Onstage” Contact Employee Actions
line of visibility
“Backstage” Contact Employee Actions
line of internal interaction
Support Processes
Service Blueprint Components
Blueprint for Express Mail Delivery Service
DriverPicks Up Package
DispatchDriver
AirportReceives& Loads
SortPackages
Load onAirplane
Fly toDestination
Unload&
Sort
LoadOn
Truck
SU
PP
OR
T P
RO
CE
SS
CO
NT
AC
T P
ER
SO
N(B
ack
Sta
ge)
(On
Sta
ge)
CU
ST
OM
ER
PH
YS
ICA
LE
VID
EN
CE
CustomerCalls
CustomerGives
Package
TruckPackagingFormsHand-held ComputerUniform
ReceivePackage
TruckPackagingFormsHand-held ComputerUniform
DeliverPackage
CustomerServiceOrder
Fly toSort
Center
Line of interaction
Line of visibility
Line of internal interaction
Blueprint for Overnight Hotel Stay Service
SU
PP
OR
T P
RO
CE
SS
CO
NT
AC
T P
ER
SO
N
(Bac
k S
tage
)(O
n S
tage
)
CU
ST
OM
ER
Hotel ExteriorParking
Cart for Bags
DeskRegistrationPapersLobbyKey
ElevatorsHallwaysRoom
Cart for Bags
RoomAmenitiesBath
Menu DeliveryTrayFoodAppearance
Food BillDeskLobbyHotel ExteriorParking
Arriveat
Hotel
Give Bagsto
BellpersonCheck in
Go toRoom
ReceiveBags
SleepShower
CallRoom
Service
ReceiveFood
EatCheck out
andLeave
Greet andTakeBags
ProcessRegistration
DeliverBags
DeliverFood
ProcessCheck Out
Take Bagsto Room
TakeFoodOrder
RegistrationSystem
PrepareFood
PH
YS
ICA
LE
VID
EN
CE
Line of Interaction
Line of Visibility
Line of Internal Interaction
RegistrationSystem
Step 1
Identify the process to be blue-printed
Step 1
Identify the process to be blue-printed
Step 2
Identify the customer or customer segment
Step 2
Identify the customer or customer segment
Step 3
Map the process from the customer’s point of view
Step 3
Map the process from the customer’s point of view
Step 4
Map contact employee actions, onstage and back-stage, and/or technology actions
Step 4
Map contact employee actions, onstage and back-stage, and/or technology actions
Step 5
Link contact activities to needed support functions
Step 5
Link contact activities to needed support functions
Step 6
Add evidence of service at each customer action step
Step 6
Add evidence of service at each customer action step
Building a Service Blueprint
Application of Service Blueprints
New Service Development concept development market testing
Supporting a “Zero Defects” Culture managing reliability identifying empowerment issues
Service Recovery Strategies identifying service problems conducting root cause analysis modifying processes
Blueprints Can Be Used By:Service Marketers
creating realistic customer expectations: service system design promotion
Operations Managementrendering the service as
promised: managing fail points training systems quality control
Human Resources Managementempowering the human
element: job descriptions selection criteria appraisal systems
System Technologyproviding necessary tools:
system specifications personal preference
databases
10ChapterChapter
Customer-Defined Service Standards
Factors Necessary for Appropriate Service Standards
Types of Customer-Defined Service Standards
Development of Customer-Defined Service Standards
Customer-Defined Service Standards
Distinguish between company-defined and customer-defined service standards.
Differentiate among one-time service fixes and “hard” and “soft” customer-defined standards.
Explain the critical role of the service encounter sequence in developing customer-defined standards.
Illustrate how to translate customer expectations into behaviors and actions that are definable, repeatable, and actionable.
Explain the process of developing customer-defined service standards.
Emphasize the importance of service performance indexes in implementing strategy for service delivery.
Examples of Hard Customer-Defined Standards
Examples of Soft Customer-Defined Standards
AT&T’s Process Map for Measurements
Source: R. E. Kordupleski, R. T. Rust, and A. J. Zaharik, “Why Improving Quality Doesn’t Improve Quality (or Whatever Happened to Marketing?),” California Management Review 35, no. 3 (Spring 1993).
AT&T’s Process Map for Measurements
Reliability
(40%)
Easy To Use
(20%)
Features / Functions
(40%)
Knowledge
(30%)
Responsive
(25%)
Follow-Up
(10%)
Delivery Interval Meets Needs
(30%)
Does Not Break
(25%)
Installed When Promised
(10%)
No Repeat Trouble
(30%)
Fixed Fast
(25%)
Kept Informed
(10%)
Accuracy, No Surprise
(45%)
Resolve On First Call
(35%)
Easy To Understand
(10%)
Business Process Customer Need Internal Metric
30% Product
30% Sales
10% Installation
15% Repair
15% Billing
% Repair Call
% Calls for Help
Functional Performance Test
Supervisor Observations
% Proposal Made on Time
% Follow Up Made
Average Order Interval
% Repair Reports
% Installed On Due Date
% Repeat Reports
Average Speed Of Repair
% Customers Informed
% Billing Inquiries
% Resolved First Call
% Billing Inquiries
TotalQuality
Source: AT&T General Business Systems
Exercise for Creating Customer-Defined Service Standards
Form a group of four peopleUse your school’s undergraduate or graduate program, or an approved alternative
Complete the customer-driven service standards importance chart
Establish standards for the most important and lowest-performed behaviors and actions
Be prepared to present your findings to the class
Service Encounter Customer Requirements Measurements
ServiceQuality
Customer-Driven Standards and Measurements Exercise
SatisfactionRelationship
Reliability EmpathyAssurance TangiblesResponsiveness Price
Delivers on timeReturns calls quicklyKnows my industry
Delivers by WednesdayReturns calls in two hoursKnows strengths of my
competitors
Requirements:Abstract
Concrete
Dig deeper
Dig deeper
Dig deeper
Diagnosticity:Low
High
General concepts
Dimensions
Behaviors and actions
Attributes
Figure 10.3
What Customers Expect:Getting to Actionable Steps
ValueSolution
Provider
1. Identify existing or desired service encounter sequence
2. Translate customer expectations into behaviors/actions
2. Translate customer expectations into behaviors/actions
4. Set hard or soft standards
5. Develop feedback mechanisms5. Develop feedback mechanismsMeasure by
audits oroperating
data
Hard Soft
Measure bytransaction-
based surveys
3. Select behaviors/actions for standards3. Select behaviors/actions for standards
6. Establish measures and target levels6. Establish measures and target levels
Figure 10.4
Process for Setting Customer-Defined Standards
7. Track measures against standards7. Track measures against standards
8. Provide feedback about performance to employees8. Provide feedback about performance to employees
9. Update target levels and measures9. Update target levels and measures
Figure 10.5
Importance/Performance Matrix
2 4 6 8 12 16 20 24
WORKING HOURS
Large Customers
Small Customers
10
9
8
7
6
5
4
3
2
1
0
SA
TIS
FA
CT
ION
Figure 10.6
Linkage between Soft Measures and Hard Measures for Speed of Complaint Handling
11ChapterChapter
Physical Evidence and the Servicescape
Physical EvidenceTypes of ServicescapesStrategic Roles of the Servicescape
Framework for Understanding Servicescape Effects on Behavior
Guidelines for Physical Evidence Strategy
Objectives for Chapter 11:Physical Evidence and the Servicescape
Explain the profound impact of physical evidence, particularly the servicescape, on customer perceptions and experiences.
Illustrate differences in types of servicescapes, the roles played by the servicescape, and the implications for strategy.
Explain why the servicescape affects customer and employee behavior, using a framework based in marketing, organizational behavior, and environmental psychology.
Present elements of an effective physical evidence strategy.
Figure 11.1
Speedi-Lube Spells Out the Service Offering
Table 11.1
Elements of Physical Evidence
Servicescape Other tangibles Facility exterior Exterior design Signage Parking Landscape Surrounding environment
Facility interior Interior design Equipment Signage Layout Air quality/temperature
Business cards Stationery Billing statements Reports Employee dress Uniforms Brochures Web pages Virtual servicescape
Table 11.2
Examples of Physical Evidence fromthe Customer’s Point of View
Table 11.3
Typology of Service Organizations Based on Variations in Form and Use of the Servicescape
Complexity of the Servicescape Servicescape usage
Elaborate Lean
Self-service (customer only)
Golf course eBay
ATM Car wash Simple Internet services Express mail drop-off
Interpersonal services (both customer and employee)
Hotel Restaurant Health clinic Hospital Bank Airline School
Dry cleaner Retail cart Hair salon
Remote service (employee only)
Telephone company Insurance company Utility Many professional services
Telephone mail-order desk Automated voice messaging
services
Roles of the Servicescape
Packageconveys expectations influences perceptions
Facilitatorfacilitates the flow of the service delivery process
provides information (how am I to act?) facilitates the ordering process (how does this work?) facilitates service delivery
Socializerfacilitates interaction between:
customers and employees customers and fellow customers
Differentiatorsets provider apart from competition in the mind of the
consumer
Figure 11.2
A Framework for Understanding Environment-User Relationships in Service Organizations
Source: M. J. Bitner, “Servicescapes: The Impact of Physical Surroundings on Customers and Employees,” Journal of Marketing 56 (April 1992), 57–71.
Guidelines for Physical Evidence Strategy
Recognize the strategic impact of physical evidence.
Blueprint the physical evidence of service.
Clarify strategic roles of the servicescape.
Assess and identify physical evidence opportunities.
Be prepared to update and modernize the evidence.
Work cross-functionally.