1. BM404 Lecture 5

2. 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

3. 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.

4. 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

5. 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

7. Building customer relationships

9. Customer Goals of Relationship Marketing

11. Lifetime Value of an Average Business Customer at Telecheck International

12. 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

13. 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

15. 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

16. Service recovery

17. 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.

18. Customer Complaint Actions Following Service Failure

19. Satisfaction consequences McColl-Kennedy (2003)

20. Satisfaction consequences (cont.) McColl-Kennedy (2003)

23. 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

29. Service Development and Design

33. 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

35. 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

36. Service Blueprint Components

37. 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

38. 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

39. 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

44. Examples of Hard Customer-Defined Standards

45. Examples of Soft Customer-Defined Standards

46. 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).

47. 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

49. Customer-Driven Standards and Measurements Exercise Service Encounter Customer Requirements Measurements Service Quality

50. 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

51. 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

52. Figure 10.5 Importance/Performance Matrix

53. 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

56. Figure 11.1 Speedi-Lube Spells Out the Service Offering

57. Table 11.1 Elements of Physical Evidence

58. Table 11.2 Examples of Physical Evidence from the Customer’s Point of View

59. Table 11.3 Typology of Service Organizations Based on Variations in Form and Use of the Servicescape

61. 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.