Role Of Economic In Service

 Service and Profitability: The Direct Relationship

 Offensive Marketing Effects of Service: Attracting More
and Better Customers
 Defensive Marketing Effects of Service: Customer
Retention
 Customer Perceptions of Service Quality and Purchase
Intentions
 The Key Drivers of Service Quality, Customer Retention,
and Profits
 Company Performance Measurement: The Balanced
Performance Scorecard
 Objectives
Role Of Economic In Service
 Examine the direct effects of service on profits.

 Consider the effect of service on getting new

customers.
 Evaluate the role of service in keeping customers.

 Discuss what is known about the key service drivers of

overall service quality, customer retention, and
profitability.
 Discuss the balanced performance scorecard that
allows for strategic focus on measurements other than
financials.
The Direct Relationship between
Service and Profits

Service
? Profits

Figure 18.1
Offensive Marketing Effects of Service
on Profits

Profits
Service
Market
share

Reputation Sales

Price
premium

Figure 18.2
Defensive Marketing Effects of Service
on Profit

Lower
costs

Volume of Margins
purchases
Customer
Service
retention Price
premium

Word of
mouth
Profits

Figure 18.3
The Effects of Service on Behavioral
Intentions and Behavior

Lower
costs

Volume of Margins
purchases
Customer
Retention Price
Behavioral premium
Service Intentions
Word of Profits
mouth

Sales

Figure 18.5
 The Key Drivers of Service Quality,
Customer Retention, and Profits
Service Service
Attributes Encounters
Service
encounter

Service
encounter
Service Behavioral Customer
Quality Intentions Retention Profits
Service
encounter

Service
encounter

Figure 18.6
Sample Measurements for the
Balanced Scorecard
Financial Measures

Price Premium
Volume increases
Value of customer referrals
Value of cross sales
Long-term value of customer
Customer Operational
Perspective Perspective

Service perceptions
Right first time (% hits)
Service expectations
Right on time (% hits)
Perceived value
Responsiveness (% on time)
Behavioral intentions: Innovation and
Learning Perspective Transaction time (hours, days)
% Loyalty
Throughput time
% Intent to Switch
# Customer Referrals Reduction in waste
Number of new products
# Cross Sales Process quality
Return on innovation
# of Defections
Employee skills
Time to market
Time spent talking to
customers

Figure 18.7
Source: Adapted from: R.S. Kaplan and D.P. Norton, “The Balanced Scorecard—Measures That
Drive Performance,” Harvard Business Review 70 (January-February 1992), pp. 71-79.
Service Quality Spells Profits
Lower
costs

Defensive Volume of Margins

Marketing purchases

Price
premium

Service Customer Word of

Retention mouth Profits

Market
share
Sales
Offensive
Marketing Reputation

Price
premium
 The Measures That Matter Most:
Fast Food Example

e re
e H
a g
r I m
pe
ri s
r t C
s e
In
Figure 18.8 Source: Christopher D. Ittner and David F. Larcker, “Coming Up Short on Nonfinancial
Performance Measurement,” Harvard Business Review 81 (November 2003), pp. 88–95.