SERVICE MARKETING

I — THE FOUR Ps OF MARKETING (marketing mix)

PRODUCT PRICE PLACE PROMOTION

→ not explode all the panorama, that a ects how the service is perceived.

Manufacturing : becoming more service like “servitisation” of manufacturing industries.

Services tend to have di erent features from goods, including the frequently cited four characteristics of
intangibility, heterogeneity (variability of quality), inseparability of production and consumption and
perishability of output (most service-products can’t be inventoried), IHIP for short.

The traditional marketing mix (4Ps) does not cover the

customer interface. We therefore need to extend the
marketing mix by adding three Ps associated with
services delivery : process, physical environment
and people.

Technology :
✦ Is the foundation of many services o erings
✦ Provides new ways to deliver service
✦ Enables both customers ad employees to be more e ective in getting providing service
✦ Extends the global reach of services
→ internet is a service

II — UNDERSTANDING SERVICE CONSUMERS

CONSUMER DECISION MAKING : THE THREE-STAGE MODEL OF SERVICE CONSUMPTION

→ pre-purchase stage
→ service encounter stage
→ post-encounter stage

Need arousal leads to attempts to nd a solution.

Evoked set : set of products and brands that a consumer

considers during the decision-making process that is derived
from past experiences or external sources.
→ ex. When you think of buying a “lisseur” you think of steam-
pod, Dyson, GHD, etc.

Alternative then need to be evaluated before a nal decision is

made.

× Consideration = what YOU prefer depending on your criteria

and preferences

1
ff
fi
ff
ff
fi
ff
 Evaluating alternatives — service attributes

→ Search attributes help customers evaluate a service before purchase (tripadvisor)

→ Experience attribute cannot be evaluated before purchase
→ Credence attributes are those that customers nd impossible to evaluate con dently even after purchase
and consumption

Service encounter stage :

Models and framework

→ “moments of truth” : importance of managing touchpoint

→ high/low contact model : extent and nature of contact point
→ servuction model : variations of interactions
→ theater metaphor : “statging” service performances

Perceived risks of purchasing and using services

- Functional – unsatisfactory performance outcomes
- Financial – monetary loss, unexpected extra costs
- Temporal – wasted time, delays leading to problems
- Physical – personal injury, damage to possessions
- Psychological – fears and negative emotions
- Social – how others may think and react
- Sensory – unwanted impact on any of ve senses

How light customers handle the perceived risk ?

→ seek information from respected personal sources
→ compares service o erings and search for independent reviews and rating via the Internet
→ relying on a rm with good reputation
→ looking for guarantees and warranties
→ visiting service facilities or going for trials before purchase and examining tangible cues or other physical
evidence
→ asking knowledgable employees about competing services

What could be the strategic responses to managing customer perceptions of risks

1. Free trial (for services with high experience attributes)
2. Advertise (helps to visualize)
3. Display credentials
4. Use evidence management (ex. Furnishing, equipment, etc.)
5. O er guarantees
6. Encourage visit to service facilities
7. Give customers online access about order status

Understanding customers’ service expectation :

Customers evaluate service quality by comparing what they expect against what they perceive.
→ Situational and personal factor also considered

Expectations of good services vary from one business to another and di erently positioned service
providers in same industry

Expectations change over time

If the customer has the same or higher perception as its expectations, the client is satis ed and he will
come back again.
If the customer has lower perception than expectation, the client isn’t satis ed and he won’t come back.

2
✳︎
✳︎
✳︎
ff
fi
ff
fi
fi
ff
fi
fi
fi
Bundle of outputs : elements of service that are core service (transportation from point A to point B),

A service product comprises of all element of service performance, both tangible and intangible, that create
value for customers.

III — DEVELOPING SERVICE PRODUCTS : CORE & SUPPLEMENTARY ELEMENTS

Service-product consists of :
→ core product : central component that supplies the principal, problem-solving bene ts customers seek.
→ supplementary services : augments the core products, itting its use and enhancing its value and
appeal.
→ delivery processes : used to deliver both the core product product and each of the supplementary
services.

Push logic : preparing the service before being asked by the customer so it’s instantly ready.
Pull logic : preparing the service after being ask by the customer so it’s fresh and done as they wants.

THE FLOWER FRAMEWORK

Facilitating services Enhancing services

Information Order-taking Consultation Hospitality

Billing Payment Safekeeping Other services

Managing the ower service :

→ The eight categories of supplementary services that form the “ ower of service” collectively provide
many options for enhancing core products.
→ Not every core product is surrounded by supplementary elements from all eight petals.

3
fl
fl
fl
fi
 Branding service :
→ branding help marketers
- To establish a mental picture of the service in customers’ minds
-To clarify the nature of the value proposition

* nir cours 2 ou 3*
O ering a branding experience
Branding can be employed at corporate and product
levels
→ corporate brand :
- easily recognized
- Holds meaning to customers
- Sands for a particularité way of doing business

→ product brands :
- helps rm communicate distinctive experiences and bene ts associated with a speci c service concept.

Facebook, insta, uber : what’s the basis of their high adaptability

→ rely on a non physical porter that customers need ▶︎ easy for them to collect infos about users
→ Channels are importants

V — DISTRIBUTING SERVICES THROUGH PHYSICAL ELECTRONIC CHANNELS

Distribution channels : a set of interdependent organizations involved in making a food or service available
for use or consumption by the consumer or industrial user.

Channel length : the number f levels or di erent types of intermediaries determines it.

The 4 Ws model for Service Marketing placement

1. What ow through the channel ?
the three interrelated elements of distribution are :
→ infos & promotion ow (to get customers interested in buying the service)
→ negotiation ow (to sell the right to use a service)
→ product ow (to develop a network of local sites)
2. How should the service reach the customer ?
→ customer visit service site
→ service providers go to customers
→ servie transaction is conducted remotely

channel preferences vary Amon customers

→ for complex and high perceived risk services, people tend to rely on personal channels =
consulting
→ individuals with greater con dence and knowledges about a services /channel tend to use
impersonal and self services channels = self service can wash
→ convenience is a key drive of channel choice (ex; gas station)
→ intégration is pivotal : similar experience over di erent channels = mcdrive
4
fi
ff
fl
fi
fl
fl
fl
fi
ff
fi
ff
fi
 3. Where should the service be delivered ?
→ cost, productivity and access to labor are key determinants to
4. When should the service be delivered ?
→ traditionally shechdules were restricted : services availability limited to daytime, 40 to 50 hours a
week
→ today : for exible responsive service operations (24/7) service, 24h a day, 7 days a week, all
around the world, and cost-bene t analysis.

ROLE OF INTERMEDIARIES
Many services organizations nd I cost-e ective to outsource certain competitors
This delegation predominantly concerns supplementary service elements
Analysis of bene ts and costs of alternative distribution channels

Splitting responsibilities for service delivery

VI — SETTING PRICES AND IMPLEMENTING REVENUE MANAGEMENT

What makes service pricing strategy di erent and di cult ?

Harder to calculate nancial costs of creating a service process or performance than manufacturing
goods.
Variability of inputs and outputs : how can rms de ne a “unit of service” and establish basis for pricing ?
Importance of time factor (same service may have more value to customers when delivered faster, ex
amazon prime)

What are the objectives for establishing prices ?

✦ Revenues and pro t objectives → gain pro t/cover costs
✦ Patronage and user base-related objectives → build demand/develop a user base
✦ Strategy-related objectives → support positioning / support competitive strategy

▶︎ rms have to consider search costs, purchase and service encounter costs and post-purchase or after
costs, while pricing services.

THE PRICING STRATEGY

COST-BASED PRICING VALUE-BASED PRICING COMPETITION-BASED PRICING

- Set prise relative to nancial costs - Monitor competitors’ pricing

- Activity-based costing - Relate price to value
strategy
- Pricing implications of costs analysis perceived by customer - Dependent on the price leader

Cost-based pricing : traditional vs. activity-based costing

1. Traditional costing approach :
Emphasizes expense categories (arbitrary overheads allocation)
May result in reducing value generated for customers
2. ABC management systems :
Link resource expenses to variety and complexity of goods/services produced
Yields accurate cost information
▶︎but customers care about value to themselves, not what service production costs the rm.

5
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
fi
fl
fi
fi
fi
fi
fi
fi
ff
ff
fi
fi
fi
ffi
fi
 COMPETITION-BASED PRICING
Price competition increase due to :
- increasing competition
- Increase in distribution of competitors
- Wider distribution of competitors
- Increasing surplus capacity in the industry
When can price competition can decrease :
- high non-price-related costs of using alternatives
- Personal relationships matter
- Switching costs are high
- Time and location speci city reduces choice
- Manager should examine all related nancial and
non-monetary costs

Value-based pricing
1. Understanding net value
Net value : perceived bene ts to customer (gross value).
→ Consumer surplus : di erence between price paid and amount customer would have been willing
to pay in absence of other options.
→ Competing services are then evaluated via comparison of net value.

2. What are the strategies to pursue for enhancing

→ encense gross value : bene ts delivered
Add bene ts to core product
Enhance supplementary service
Manage perceptions of bene ts delivered

→ reduce costs incurred by

Reducing monetary costs of acquisition and usage
Cutting amount of time required to evaluate, buy, use service
Lowering e ort associated with purchased and use.

Dynamic prices : revenue management —

maximizing revenue from available capacity at the given time
→ most e ective in the following conditions :
✦ High xed cost structure
✦ Relative xed capacity
✦ Perishable inventory
✦ Variable and uncertain demand
✦ Varying customer price sensitivity

→ revenue management (RM) is price customization :

Charge di erent value segments di erent prices for same products based on price sensitivity.

Maximizing revenue from available capacity at a given time

→ RM uses mathematical models to examine historical data and real time information to determine
What prices to charge within each price bucket
How many service units to allocate to each bucket

→ rate fences deer customers willing to pay more from trading down to lower prices (minimize consumer
surplus).

Designing rate fences

→ price customization : charging di erent customers di erent prices for the same product
→ rate fences can be either physical or nonphysical
- Physical fences : refer to tangible product di erent prices.
- Non-physical fences refer to di erences in consumption, transaction, or buyer characteristics but the
service is basically the same.

6
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
fi
fi
ff
ff
fi
ff
fi
ff
fi
fi
fi
ff
ff
ff
fi
ff
ff
 Key categories of rate fences :

Ethical concerns in pricing

→ many services have complex pricing schedules
- Hard to understand
- Di cult to calculate full costs in advance of service

→ unfairness and misrepresentation in price promotion

- Misleading advertising
- Hidden charges
-
-

VII — PROMOTING SERVICES & EDUCATING CUSTOMERS

Speci c roles of marketing communication

Position and di erentiate service by :
- Helping customers evaluate o erings and highlight di erences that matter
- Promoting the contribution of personnel and backstage operations
- Adding value through communication content
- Facilitating customer involvement in production
- Stimulating or dampening demand to match capacity

THE 5 “W”s MODEL FOR MARKETING AND COMMUNICATION PLANNING

WHO WHAT HOW WHERE WHEN

Who is our target audience ?

→ Prospects : employ traditional communication mix because prospects are not known in advance
→ Users : more cost-e ective channels
→ Employees : secondary audience for communication campaigns, sham behavior and part of internal
marketing campaign using company-speci c channels

What are our objectives ?

After understanding our target audience, our speci c

communications objectives and message strategy, we
now need to select a mix of cost-e ective
communication channels. Most service marketers have
access to numerous forms of communication, referred to
collectively as the service marketing communication mix.

7
ffi
fi
ff
ff
ff
ff
fi
fi
ff
Where should we communicate this ?

→ we can do that by :

Blogs, videos, online ads : branded ads, social media

FAQs, Live chat : targeted ads, giveaway, webinar

Demos, free trial, emails : demos, product videos

Email onboarding, phone consultation

Surveys, events : beta testers, special bundles

How should we communicate this ?

1. What can be done to overcome social media communication problems ?

→ intangibility : safe transportation do not have one-to-one correspondence with physical objects
→ generality : some services have a physical connection but are too broad to create a unique value
proposition is to communicate what makes a speci c o ering distinctly di erent from (and superior to)
competition o ers.
→ non-searchalibity : refers to the fact that many of the service attributes cannot be searched or
inspected before they are purchased.
→ mental impalpability : refers to services that are su ciently complex, multi-dimensional, or novel so
much so that it’s di cult for consumers (especially new prospects) to understand what the experience of
using them will be linked and what bene ts will result.

2. Advertising strategies for overcoming 3. Marketing communications mix for services

intangibility

Where should we communicate this ?

Word-of-mouth (WOM) :
→ marketers use a variety of
strategies to stimulate positive and
persuasive comments from existing
customers.

8
ff
ffi
fi
fi
ffi
ff
ff
 Including :
1. Creating existing stories, promotions and competitions that get people talking about the great service
the rm provides.
2. O ering promotions that encourage customers to persuade others to join them using the service.
3. Developing referral reward program that incentivize existing customers to make referrals.
4. Referencing other purchasers and knowledgable individuals.
5. Presenting and publicizing testimonials.
6. Providing opportunities for online reviews, supporting and responding to them frequently.
7. Support and engaged brad communities.

When should the communication take place ?

Budget in three steps :

1. De ning the communication objectives along the

service marketing communication funnel.
2. Determining the tasks needed to achieve these
objectives.
3. Estimating the costs of the program.

9
ff
fi
fi
 VIII — DESIGNING & MANAGING SERVICE PROCESSES

Designing and documenting service processes

owcharting
→ a technique for displaying nature and sequence of di erent steps involved when a customer “ ows”
through the service process.
→ describes an existing process in a fairly simple form.
→ an easy way to quickly understand the total customer service experience.
→ the term “customer journey” o ers a powerful metaphor that brings teams together.
→ it helps to explore what a service process looks like form the customer’s perceptive.

blueprinting
→ service blueprints map customer, employee and and service system interaction.
→ show full customer journey from service initiation to nal delivery of desired bene t.
→ show key customer actions, such as how customers and employees interact (the line of interaction), the
front stage actions by those service employees, and how these are supported by back-stage activities and
systems.
→ show interrelationships among employee roles, operational processes, supplies, IT, and customer
interactions.
→ help bring together marketing, operations, and HRM within a rm.
→ develop better service processes, designing fail points and excessive customer waits out of processes
and setting service standards and target for service delivery teams.

Design characteristics of a service blueprint

1. Front-stage map overall customer experience.
2. Physical evidence of front-stage activities involves what customer can see and use to access service
quality.
3. Line of visibility distinguishes between what customers experience (front-stage) and activities of
employees and support processes (back-stage).
4. Backstage activities that must be performed to support a particular front-stage step.

Blueprinting the restaurant experience : a three-act performance

10
fl
ff
fi
ff
fi
fi
fl
 Consumer perceptions & emotions in service process design

Key principles about sequencing service encounters :

1. Start strong : create a good rst impression
2. Build an improvement trend : build up quality
3. Create a peak : create a sensational step
4. Get bad experiences over with early : unpleasant experiences should be dealt with early in the
experience process, not at the end
5. Segment pleasure, combine pain : divide pleasurable and unpleasant experiences and combine them
6. Finish strong : ending on a high note is an important aspect of every service encounter
7. Use emotion prints : to manage the customer experience well and implement the principles for
sequencing service processes

Improving reliability of processes through fail-proo ng

→ identifying fail points
→ analysis of reasons for failure reveals opportunities for failure-proo ng to reduce/eliminate future errors
→ need fail-safe methods for both employees and customers

1. Fail-proo ng

Setting service standards and targets

→ service providers set standards for for each step
su ciently high to satisfy and even delight customers.
include time parameters script and prescriptions
for appropriate style and demeanor.
must be expressed in ways that permit objective
measurement.

→ performance targets : speci c process and team

performance targets for which sta are responsible
for.

→ evaluated based on distinction between standards and targets.

Setting standards and targets for customer Service process redesign : improving quality
service processes and productivity

11
ffi
✳︎
✳︎
fi
fi
fi
ff
fi
fi
 Steps in service process redesign
1. Examining the service blueprint with key stakeholders
2. Eliminating non value adding steps
3. Addressing bottlenecks in the process
4. Shifting to self-service
5. Using intelligent automation (IA), including service robots and digitalization

Self-service technologies, servie robots and IAs

→ information-based services lend themselves particularly well
to the use of SSTs.
→ many companies have developed strategies designed to
encourage customers oto serve themselves online, via apps,
chatbots or service robots.

Customers also help each other in peer-to-peer problem-

solving facilitated by online brand communities and rm-hosted
platforms.

X — CRAFTING THE SERVICE ENVIRONMENT

Service environment : an important element of service marketing mix

Service environment (i.e. servicescapes) relate to style and appearance of physical surroundings and
other experimental elements encountered by customers at service delivery sites.

Designing service environment is an art, involves time and e ort and can be expensive to important.

The four purposes of service environment

1. Shape customers’ experience and their behaviors
2. Support image, positioning and di erentiation
3. Part of value proposition
4. Facilitates service encounter and enhance productivity

Servicescape as part of value proposition

→ physical surrounding help shape appropriate
feelings and reactions in customers and
employees (ex. Disneyland, Denmark’s Legoland)
→ servicescapes from a core part of the value
proposition
Las Vegas : repositionne itself to a
somewhat more wholesome fun resort,
visually striking entertainment center
Florida-based Music : built extravagant movie theaters and o ers plush amenities.

12
✳︎
✳︎
ff
fi
ff
ff
 Stimulus-organism-response (SOR) model

Valence & intensity model of a ect

→ environments are stimulating when they are complex, when they include motion or change or when they
have novel and surprising elements.
→ relaxing environment with a low information rate has relaxing characteristics.

The behavioral consequence of a ect

→ pleasant environment result in approach, whereas unpleasant ones result in avoidance
→ arousal ampli es the basic e ect of pleasure on behavior
if environment is pleasant, increasing arousal can generate excitement, leading to a stronger
positive consumer response
if environment is unpleasant, increasing arousal level will move customer into the “distressed”
region.
→ feeling during service encounters are an important driver for customer loyalty.

The integrative framework

13
✳︎
✳︎
fi
ff
ff
ff
 The main dimensions in servicescape model
→ ambient dimensions : characteristics of environment
pertaining to ur ve senses
→ spacial layout & functionality : spacial layout are oorpan,
size and shape of furnishing and the functional includes ability of
those items to facilitate performances.
→ signs, symbols and artifacts : explicits or implicit signals to
help consumer nd their way.

Ambiant conditions
→ ambiant conditions are perceived both separately ad
holistically, including lighting and color schemes, size and shape
perceptions, sounds such as noise and music, temperature and
scents .
→ celer design of thee conditions can elicit desired behavioral responses among consumers.

Signs, symbols & artifacts

→ signs are often used to teach behavioral rules in service settings.
→ explicit signal include signs used as labels, for giving direction, for communicating the service script and
for reminders about behavioral rules.
→ servicescape designers should use signs, symbols and artifacts to guide customers clearly through
process f service delivery, and to teach the service scripting in as intuitive a manner as possible.
→ customer become disoriented when they cannot derive clear signals from a servicescape.

The tools to guide servicescape design

- Keen observation of customers’ behavior and responses.
- Feedback and ideas from frontline sta and customers.
- Photo audit : mystery shopper to take photographs of service experience.
- Field experiments can be used to manipulate speci c dimensions in an environment and the e ects
observed.
- Blueprinting or service mapping-extended to include physical evidence in the environment.

XI — MANAGING PEOPLE FOR SERVICE ADVANTAGE

Service personnel : source of customer loyalty & competitive advantage

→ frontline is an important driver of customer loyalty :

They are a core part of the service
They are the service rm
They are the brand
They a ect the sales
They in uence customers’ loyalty
They determine productivity

→ customer’s perceptive : the encounter with service sta is the most important aspect of a service.
→ rm’s perspective : frontline is an important source of di erentiation and competitive advantage.

Frontline work is di cult and stressful

→ boundary spanners link the organization to outside world.
→ multiplicity of roles often results in service sta having to purse both operational and marketing goals.
This leads to role con ict and role stress, also due to :
1. Organization/client con ict (delight customers, be fast and e cient in executing operational tasks,
do selling, cross selling and up-selling).
2. Person/role con ict (not tting personality traits).
3. Inter-client con ict (re-establish the order).
4. The act of expressing social desired emotion during the service transaction.

14
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
fi
ff
fl
fl
fi
fi
fl
ffi
fi
fl
fl
fi
ff
ff
fi
fl
ff
ff
ffi
ff
 The cycle of failure

Cost of short-sighted policies are ignored :

Constant expenses of recruiting, hiring and training
Lower productivity of inexperience new worked
Higher costs of winning new customers to replace those lost
(more need for advertising and promotional discounts)
Loss of revenue stream form dissatis ed customers who turn
to alternatives
Los of potential customers who are tuned o by negative
word-of-mouth (WOM)
bouche-à-oreille

The cycle of mediocrity

Most commonly found in large, bureaucratic organizations that

are frustrating to deal with :

Service delivery is oriented towards :

Standardized service
Operational e ciencies
Promotion with long service
Rule-based training
Narrow and repetitive jobs
Successful performance measured by absence of mistakes

→ Little incentive for customers to cooperate with

organizations to achieve better service.

→ Complaints are often made to already unhappy employees

→ Customers often stay because of lack of choice

The cycle of success

→ Broadened job description with empowerment practices

enable frontline sta to control quality, facilitate service
recovery.

→ regular customers are more likely to remain loyal because

they :
Appreciate continuity in service relationships
Have higher satisfaction due to higher quality

→ long-term view of nancial performance, rm seeks to

prosper by investing in people.

→ attractive pay and bene ts attract better job applicants

→ more focused recruitment, intensive training and higher wages make it more likely that employees are
Happier in their work
Provide higher quality, customer-pleasing service.

15
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
ffi
ff
fi
fi
fi
fi
ff
 The preferred employer :
→ create a large pool “compete for talent market
share”
→ select the right people :
Di erent jobs are best lled by people with di erent
skills, styles of personalities
Hire candidates that t the rm’s core values and
culture
Focus on recruiting naturally warm personalities for
customer-contract jobs.

The tools to identify best candidates

→ employ multiple, structured interviews
Use structured interviews built around job requirements
Use more than one interviewer to reduce “similar to me” biaises.

→ observe behavior
Hire based own observed behavior, not words you hear
Best predictor of future behavior is past behavior
Consider group hiring sessions where candidates are giving group tasks.

→ conduct personality tests

Willingness to treat co-workers and customers with courtesy, consideration and tact.
Perceptiveness regarding customer needs
Ability to communicate accurately and pleasant

→ give applicants a realistic preview of the job

Chance for candidates to “try on the job”
Assess how candidates respond to job realities
Allow candidates to self select themselves out of the job
Manage new employees’ expectation of job

Train service employees — they need to learn

→ 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

→ product/service knowledge
Sta ’s product knowledge is a key aspect of service quality
Sta must explain product features and position products correctly

16
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
ff
ff
ff
fi
fi
fi
ff
 XII — MANAGING CUSOMER RELATIONSHIPS & BUILDING LOYALTY

Why is customer loyalty important to a rm’s pro tability ?

The customers become more pro table the longer they remain with a rm :
→ increased purchases and/or account balances
customers/families purchase in greater quantities as they grow
→ redue operating costs
fewer demands from suppliers and operating mistakes as
customer become experienced
→ referrals to other customers
positive WOM saves rm from investing money in sales and
advertising
→ price premiums
long-term customers willing to pay regular price
willing to pay higher price during peak periods

Assessing the value of a loyal customer

Must not assume that loyal customers are always more pro table than those making one-time transactions.
→ costs : not all types of services incur heavy promotional expenditures to attract a new customer.
→ revenue : large customers may expect price discounts in return of loyalty & revenues don’t necessarily
increase with time for all types of customers.

Why are customers loyal ? The wheel of loyalty

Building a foundation for loyalty

→ search for value, not just volume : marketing is about getting better business not just more business.
→ manage the customer base through e ective tiering of service : Zeithaml, Rust and Lemon illustrate this
principle through a four-level pyramid.
→ customer satisfaction and service quality are prerequisite for loyalty : the satisfaction-loyalty relationship
can be divided into three main zones (defection, indi erence and a ection).

Targeting the right customers

→ target the right customer
How do customer needs relate to operations elements ?
How can service Perone meet expectations of di erent customers ?
Can company match or exceed competition services that are directed at same types of customers ?

→ focus on number of customers served and value of each customer

Some customers more pro table that others in the short term
Others may have room for long-term growth

→ “right customers” are not always high spenders

Can be a large group of people that no other supplier is serving well.

17
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
fi
fi
fi
ff
fi
ff
fi
ff
fi
ff
fi
 Customer satisfaction & service quality as
The customer pyramid prerequisites for loyalty

Strategies for develop loyalty bonds with customers

→ rewards based bonds : incentives that o ers rewards based on frequency or
purchase, value of purchase or combination of both
Financial bonds : discounts on purchases, loyalty program rewards (ex.
Frequent yer miles), cash-bak program.
Non- nancial rewards : priority to loyalty program members for waitlists and
queues in call centers, higher baggage allowances, priority upgrading.
Intangible rewards : special recognition and appreciation, tiered loyalty
programs.

Rewards based loyalty programs are relatively easy to copy and really provide a sustained competitive
advantage.

Strategies for reducing customer defections

Analyze customer defections and monitor declining accounts.

Including :
- core service failures
- Dissatisfactory service encounters
- High, deceptive or unfair pricing
- Inconvenance in terms of time, location or delays
- Poor response to service failure

Analyze customer defections and monitor declining accounts

→ understand reasons for customer switching
→ churn diagnostics :
Analysis of data warehouse information on churched and declining customers.
Exit interviews : ask a short set of questions when customer cancel account, in depth interviews of
former customers by third party agency.
Churn alert systems : monitor activity in individual customer account to predict impending customer
switching and proactive detention e orts (send voucher, customer service representative calls customer)

18
✳︎
✳︎
✳︎
✳︎
✳︎
✳︎
fi
fl
ff
ff
 XIII — COMPLAINT HANDLING & SERVICE RECOVERY

Customer response categories to service failure

Studies of customer complaining behavior have identi ed four

main purposes for complaining :
1.Obtain restitution or compensation
2. Vent their anger
3. Help to improve the service
4. For altruistic reasons

→ Complaining behavior can be in uenced by role perceptions and social norms.

→ Research nding consistently show people in higher socioeconomic levels are more likely to complain
than those in lower levels.
→ Studies show that majority if complaints are made at place where service was received.

Customer responses to e ective service recovery

→ service recovery is a term for systematic e orts by a rm

to correct a problem following a service failure and to retain
a customer’s goodwill.

→ service recovery e ort play important role in achieving (or

restoring) customer satisfaction and loyalty.

→ e ective service recovery requires thoughtful procedures

for resolving problems and handling disgruntled customers.

Service recovery

Play a crucial role in achieving customer satisfaction by testing a rm’s commitment to satisfaction and
service quality.
Impact customer loyalty and future pro tability.
Severity and “recoverability” of failure (ex. Spoiled weeding photos) may limit rm’s ability to delight
customer with recovery e orts.

Service recovery paradox : customers who experience a service failure that is satisfactorily resolved may
be more likely to make future purchases than customers without problems.
▶︎ if second service failure occurs, the parade disappears.

Describes the phenomenon where customers who experience an excellent service recovery after a failure
feel even more sti ed than customers who had o problem in the rst place.
May lead to the thought that it may be good for customers to experience service failure so they can be
delighted as a result of excellent service recovery.
Whether a customer comes out delighted form a service recovery or not also depends on severity and
“recoverability” or failure.

19
✳︎
✳︎
✳︎
ff
fi
ff
ff
ff
ff
fl
fi
ff
fi
fi
fi
fi
fi
 The impact of e ective service recovery on customer loyalty
→ if complaint is resolved to the satisfaction of the customer, retention rate jumped to 54%.
→ the highest retention rate of 82% was achieved when problems were xed quickly, typically on the spot.
→ complaint handling should be seen as a pro t center, nota cost center.

Principles of e ective service recovery systems

1. Recognize that current customers are a valuable asset base, and managers need o develop e ective
procedures for service recovery.
2. Some typical service recovery misdates made by may organizations include :
✦ Managers disregard evidence that show that service recovery provides a signi cant nancial return.
✦ Companies do to invest enough in actions that would prevent service issues.
✦ Customer service employees fail to display good attitudes.
✦ Organisations fail to make it easy for customers to complain or give feedback.

Components of an e ective SRS Three guiding principles of en e ective SRS

Dealing with complaining customers

1. Act fast
2. Acknowledge the customer’s feelings
3. Do not argue with customers
4. Show that you understand the problem form each customer’s point of view
5. Clarify the facts and sort out the cause
6. Give customers the bene t of the doubt
7. Propose the steps needed to solve the problem
8. Keep customers informed of progress
9. Consider compensation
10. Persevere to regain customer goodwill
11. Self-check the service delivery system and improve it

Types of service guarantees

Discouraging abuse and opportunistic customer

behavior
→ with generous SR of policy guarantees, some
customers can take advantage.
→ not ll complaining customers are right or
reasonable, referred to as jay customers.
→ rms that fail to deal e ectively with customer
misbehaviors risk damaging relationships with
customers they want to keep.

20
fi
ff
ff
ff
ff
fi
ff
fi
fi
fi
fi
ff