Managing customer relationships &

Managing people in service

organization

By- Prof. Snehal Chincholkar

 What is relationship marketing
Pathmarajah defines relationship marketing as “the process
whereby the seller and the buyer join in a strong personal ,
professional and mutually profitable relationship over a time.”

CRM (customer relationship management) is an information

industry term for methodologies, software, and usually Internet
capabilities that help an enterprise manage customer relationships
in an organized way.

CRM is “the development and maintenance of mutually beneficial long-

term relationships with strategically significant customers”
(Buttle, 2000)
Transactional Marketing
Orientation to single sales
Discontinuous customer contact
Focus on product features
Reducing price based on sensitivity
analysis with right promotional
measure
No measures to build the on-going
business
After sales support is poor as it is
see as cost.
Relationship Marketing
Orientation to customer retention
Continuous customer contact
Focus on customer value
Promote value and explain the
benefits
Measures like membership , club
like frequent flyer to build on the
going business
Excellent after sales support
 It costs 5 to 10 times MORE to attract a new customer
than it does to keep a current customer satisfied.

 Marketers must be concerned with the lifetime value of

the customer.
 Trust Value

Understanding of needs/Sales Support/Commitments/Long term

perspective/Honest
 High
Synergistic KAM

Partnership
Degree of
involvement Mid-KAM

Early-KAM

Low Pre-KAM

Transactional Collaborative
Nature of customer relationship
(Millman and Wilson, 1995)
 A Relationship Life Cycle Model

High cooperation
Low competition Pre- Development Maturity Decline
relationship stage stage stage
stage

Low cooperation
High competition

Time
(Wilkinson and Young, 1997)
 Functions of Customer Relationship Management

Value Creation Process

Technology delivery process
•R&D
•Technology integration
•Efficiency, effectiveness
Management
Decision learning
Process
Value-based
Customer sensitivity Strategies
Product delivery process
•Concept to launch •Pricing
•Diversity •Communication
•Information •Manufacturing process
•Differentiated
offering
Customer delivery process
•Supply chain
•Distribution
•Infomediation (distribution
of information)
(Sharma et. al., 2001)
Chapter 15: Customer Relationship Management (CRM)
Models of Customer Relationship Management

The Evans and Luskin (1994) model for effective

Relationship Marketing

Relationship marketing inputs

•Understanding customer expectations
•Building service partnerships
•Empowering employees
•Total quality management
Relationship marketing outcomes
•Customer Satisfaction
•Customer loyalty
•Quality products
•Increased profitability

Assessment state
•Customer feedback
•Integration
(Evans and Luskin, 1994)
Chapter 15: Customer Relationship Management (CRM)
Models of Customer Relationship Management

The Brock and Barcklay (1999) model of selling

partner relationship effectiveness

Independence

Mutual trust Selling partner

relationship
Cooperation effectiveness

Relative influence
 Exorbitant Costs
 Inadequate Focus on Objectives
 Insufficient Resources
 Inappropriate Metrics
 Complex Systems
 Business Needs Most Important
 No Customer Focus
 Slow Returns
 Managing People
In Service Organization
 Customer Base
Top
Mgmt Frontline Staff

Middle
Mgmt
Middle Mgmt
Frontline & Top Mgmt
Staff Support Frontline

Traditional Inverted Pyramid with a

Organizational Pyramid Customer & Frontline Focus

Legend: = Service encounters, or ‘Moments of Truth.’

 Frontline is an important source of differentiation and
competitive advantage. It is:

A. a core part of the product

B. the service firm
C. the brand

 Frontline also drives customer loyalty, with employees

playing key role in anticipating customer needs,
customizing service delivery and building personalized
relationships
 Boundary spanners link the inside of the organization to the
outside world
 Multiplicity of roles often results in service staff having to
pursue both operational and marketing goals
 Consider management expectations of restaurant servers:
 deliver a highly satisfying dining experience to their
customers
 be fast and efficient at executing operational task of serving
customers
 do selling and cross selling, e.g. “We have some nice
desserts to follow your main course”
3 main causes of role stress:
 Person vs. Role: Conflicts between what jobs require and
employee’s own personality and beliefs

 Organization vs. Customer: Dilemma whether to follow

company rules or to satisfy customer demands

 Customer vs. Customer: Conflicts between customers that
demand service staff intervention
 Customer
turnover Repeat emphasis on
attracting new customers

Failure to develop
customer loyalty
Low profit
margins Narrow design of
jobs to accommodate
low skill level
High employee turnover;
poor service quality

No continuity in Use of technology Emphasis on

relationship for to control quality rules rather
customer Employee dissatisfaction; than service
poor service attitude
Payment of
low wages

le
yc
ee
C
Employees
oy

become bored pl Minimization of

Customer Em selection effort
dissatisfaction Minimization
of training
Employees can’t
respond to customer le
yc

problems
C

er
m
usto Source: Schlesinger and Heskett
C
Staff performance is a function of both ability and motivation.
How can we get able service employees who are motivated to
productively deliver service excellence?

1. Hire the right people

2. Enable your people
3. Motivate and energize your people
 The right people are a firm’s most important asset:
take a focused, marketing-like approach to recruitment
 Clarify what must be hired versus what can be taught
 Clarify nature of the working environment, corporate
values and style, in addition to job specs
 Ensure candidates have/can obtain needed
qualifications
 Evaluate candidate’s fit with firm’s culture and values
 Fit personalities, styles, energies to the appropriate
jobs
Create a large pool: “Compete for Talent Market Share”
 What determines a firm’s applicant pool?
 Positive image in the community as place to work
 Quality of its services
 The firm’s perceived status
 There is no perfect employee
 Differentjobs are best filled by people with different skills,
styles or personalities
 Hire candidates that fit firm’s core values and culture
 Focus on recruiting naturally warm personalities
 Observe Behaviour
 Hire based on observed behavior, not words you hear
 Best predictor of future behavior is past behavior
 Consider group hiring sessions where candidates given
group tasks
 Personality Testing
 Willingness to treat co-workers and customers with
courtesy, consideration and tact
 Perceptiveness regarding customer needs
 Ability to communicate accurately and pleasantly
 Employ Multiple, Structured Interviews
 Use structured interviews built around job requirements
 Use more than one interviewer to reduce similar to me effects

 Give Applicants a Realistic Preview of the Job

 Chance to have “hands-on” with the job
 Assess how the candidates respond to job realities
 Allow candidates to self select themselves out of the job
 The Organizational Culture, Purpose and Strategy
 Promote core values, get emotional commitment to strategy
 Get managers to teach “why”, “what” and “how” of job.

 Interpersonal and Technical Skills

 Both are necessary but neither is sufficient for optimal job
performance

 Product/Service Knowledge
 Staff’s product knowledge is a key aspect of service quality
 Staff need to be able to explain product features and to
position products correctly
 Firm’s strategy is based on competitive differentiation and on
personalized, customized service
 Emphasis on long-term relationships vs. one-time transactions
 Use of complex and non-routine technologies
 Environment is unpredictable, contains surprises
 Managers are comfortable letting employees work independently for
benefit of firm and customers
 Employees seek to deepen skills, like working with others, and are
good at group processes
Control concentrates 4 key features at top of organization;
Involvement pushes them down:
 Information about operating results and measures of competitive
performance
 Rewards based on organizational performance (e.g. profit sharing,
stock ownership)
 Knowledge/skills enabling employees to understand and contribute
to organizational performance
 Power to influence work procedures and organizational direction
(e.g. quality circles, self-managing teams)

Source: Bowen and Lawler

 Suggestion involvement
 Employee recommendation
 Job involvement
 Jobs redesigned
 Employees retrained
 Supervisors facilitate
 High involvement
 Information is shared
 Employees skilled in teamwork,
problem solving etc.
 Participate in decisions
 Profit sharing and stock ownership
Use the full range of available rewards effectively,
including:

 Job content
 Feedback and recognition
 Goal accomplishment
 Low
customer
turnover Repeat emphasis on
customer loyalty and
retention

Customer
loyalty
Higher
profit
margins
Broadened
Lowered turnover, job designs
high service quality

Continuity in
relationship with Train, empower frontline
customer Employee satisfaction, personnel to control quality
positive service attitude

cle
Cy
ee
Above average
Extensive ploy wages
training Em
High customer Intensified
satisfaction selection effort

cle
Cy
r
tome
s
Cu Source: Heskett and Schlesinger
Leadership that:
1. Hire the
 Focuses the entire organization
on supporting the frontline Right
People
• Fosters a strong 3. Motivate &  Be the preferred
service culture with
passion for service
Energize Your employer & compete
for talent market
and productivity People
share
Service  Intensify the
• Drives values that
inspire, energize
 Utilize the full Excellence selection
range of & Productivity process
and guide service
rewards
providers
2. Enable Your People
 Empower Frontline
 Build high performance
service delivery
teams
 Extensive Training
At last we can say that in service industry people is
the key of success and managing them successfully
leads to a successful business.
•Service marketing by M.K. Rampal and S.L.
Gupta
•Service Marketing by Christopher Lovelock