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 Research Forecast 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.
Service Quality Perceptions Relative to Zones of Tolerance Retail Chain 9 8 7 6 5 4 3 2 1 0 Reliability Responsiveness Assurance Empathy Tangibles O O = Zone of Tolerance = Service Quality Perception O O O O
Importance/Performance Matrix HIGH HIGH LOW Performance Importance Attributes to Improve Attributes to Maintain High Leverage Attributes to De-emphasize Attributes to Maintain Low Leverage Low Leverage
Executive visits to customers
Executive/management listening to customers
Research on intermediate customers
Research on internal customers
Executive/management listening to employees
Building customer relationships
Relationship Marketing Customer relationships
Customer Goals of Relationship Marketing
Benefits for customers
Benefits for firms
Lifetime Value of an Average Business Customer at Telecheck International
The Customer Pyramid – Profitability Segments 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
Relationship Development Model Customer Benefits Confidence benefits Social benefits Special treatment benefits Relationship Bonds Financial bonds Social bonds Customization bonds Structural bonds Switching Barriers Customer inertia Switching costs Core Service Provision Satisfaction Perceived service quality Perceived value Strong Customer Relationship (Loyalty) Firm Benefits Economic benefits Customer behavior benefits Human resource management benefits
Strategies for Building Relationships
Core Service Provision:
service foundations built upon delivery of excellent service:
satisfaction, perceived service quality, perceived value
set up costs, search costs, learning costs, contractual costs
Levels of Relationship Strategies Excellent service and value 1. Financial bonds 2. Social bonds 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 Shared processes and equipment Joint investments Integrated information systems
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
Causes Behind Service Switching Service Switching Behavior
Wait for appointment
Wait for service
Core Service Failure
Service Encounter Failures
Response to Service Failure
Found better service
Conflict of interest
Involuntary Switching Source : Sue Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing , April, 1995, pp. 71-82.
Service Recovery Strategies Treat Customers Fairly Learn from Recovery Experiences Act Quickly Fail-safe the Service Cultivate Relationships with Customers Encourage and Track Complaints Provide Adequate Explanations Learn from Lost Customers Service Recovery Strategies
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 guaranteed
cannot return the service
service experience is intangible
(so what do you guarantee?)
Why a Good Guarantee Works
forces company to focus on customers
sets clear standards
forces company to understand why it failed
builds “marketing muscle”
Characteristics of an Effective Service Guarantee
the guarantee should make its promise unconditionally – no strings attached
the firm should guarantee elements of the service that are important to the customer
the payout should cover fully the customer’s dissatisfaction
Easy to Understand and Communicate
customers need to understand what to expect
employees need to understand what to do
Easy to Invoke and Collect
the 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.
Does everyone need a guarantee?
Reasons companies might NOT want to offer a service guarantee:
existing service quality is poor
guarantee does not fit the company’s image
too many uncontrollable external variables
fears of cheating or abuse by customers
costs of the guarantee outweigh the benefits
customers perceive little risk in the service
customers perceive little variability in service quality among competitors
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
Types of New Services
major or radical innovations
new services for the currently served market
service line extensions
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
Concept development and evaluation
Service development and 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 Existing Services New Services Current Customers New Customers Share building Diversification Market development Service development
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.
Service Blueprint 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 Driver Picks Up Package Dispatch Driver Airport Receives & Loads Sort Packages Load on Airplane Fly to Destination Unload & Sort Load On Truck SUPPORT PROCESS CONTACT PERSON (Back Stage) (On Stage) CUSTOMER PHYSICAL EVIDENCE Customer Gives Package Truck Packaging Forms Hand-held Computer Uniform Truck Packaging Forms Hand-held Computer Uniform Deliver Package Customer Service Order Fly to Sort Center Line of interaction Line of visibility Line of internal interaction Customer Calls Receive Package
Blueprint for Overnight Hotel Stay Service SUPPORT PROCESS CONTACT PERSON (Back Stage) (On Stage) CUSTOMER Hotel Exterior Parking Cart for Bags Desk Registration Papers Lobby Key Elevators Hallways Room Cart for Bags Room Amenities Bath Menu Delivery Tray Food Appearance Food Bill Desk Lobby Hotel Exterior Parking Arrive at Hotel Give Bags to Bellperson Check in Go to Room Receive Bags Sleep Shower Call Room Service Receive Food Eat Check out and Leave Greet and Take Bags Process Registration Deliver Bags Deliver Food Process Check Out Take Bags to Room Take Food Order Registration System Prepare Food PHYSICAL EVIDENCE Line of Interaction Line of Visibility Line of Internal Interaction Registration System
Building a Service Blueprint Step 1 Identify the process to be blue-printed Step 2 Identify the customer or customer segment 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 5 Link contact activities to needed support functions Step 6 Add evidence of service at each customer action step
Application of Service Blueprints
New Service Development
Supporting a “Zero Defects” Culture
identifying empowerment issues
Service Recovery Strategies
identifying service problems
conducting root cause analysis
Blueprints Can Be Used By:
creating realistic customer expectations:
service system design
rendering the service as promised:
managing fail points
Human Resources Management
empowering the human element:
providing necessary tools:
personal preference databases
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 Total Quality Source: AT&T General Business Systems
Exercise for Creating Customer-Defined Service Standards
Form a group of four people
Use 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
Customer-Driven Standards and Measurements Exercise Service Encounter Customer Requirements Measurements Service Quality
Figure 10.3 What Customers Expect: Getting to Actionable Steps Satisfaction Relationship Reliability Empathy Assurance Tangibles Responsiveness Price Delivers on time Returns calls quickly Knows my industry Delivers by Wednesday Returns calls in two hours Knows strengths of my competitors Requirements: Abstract Concrete Dig deeper Dig deeper Dig deeper Diagnosticity: Low High General concepts Dimensions Behaviors and actions Attributes Value Solution Provider
Figure 10.4 Process for Setting Customer-Defined Standards 2. Translate customer expectations into behaviors/actions 5. Develop feedback mechanisms Measure by audits or operating data Hard Soft Measure by transaction- based surveys 3. Select behaviors/actions for standards 6. Establish measures and target levels 7. Track measures against standards 8. Provide feedback about performance to employees 9. Update target levels and measures 1. Identify existing or desired service encounter sequence 4. Set hard or soft standards
Figure 10.5 Importance/Performance Matrix
Figure 10.6 Linkage between Soft Measures and Hard Measures for Speed of Complaint Handling 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 SATISFACTION
Physical Evidence and the Servicescape
Types of Servicescapes
Strategic 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
Table 11.2 Examples of Physical Evidence from the Customer’s Point of View
Table 11.3 Typology of Service Organizations Based on Variations in Form and Use of the Servicescape
Roles of the Servicescape
facilitates 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
facilitates interaction between:
customers and employees
customers and fellow customers
sets 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.