Module 3

•UNDERSTANDING
CUSTOMER
REQUIREMENTS
•BUILDING CUSTOMER
RELATIONSHIPS
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 Provider Gap 1

CUSTOMER
Expected
Service

Listening
COMPANY Gap
Company
Perceptions of
Consumer
Expectations

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 Common Research Objectives
for Services
 To discover customer requirements or expectations for service.
 To monitor and track service performance.
 To assess overall company performance compared with that of
competition.
 To assess gaps between customer expectations and
perceptions.
 To identify dissatisfied customers, so that service recovery can
be attempted.
 To gauge effectiveness of changes in service delivery.
 To appraise the service performance of individuals and teams
for evaluation, recognition, and rewards.
 To determine customer expectations for a new service.
 To monitor changing customer expectations in an industry.
 To forecast future expectations of customers.

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 Criteria for an Effective
Service Research Program
 Includes both qualitative and quantitative research
 Includes both expectations and perceptions of customers
 Balances the cost of the research and the value of the
information
 Includes statistical validity when necessary
 Measures priorities or importance of attributes
 Occurs with appropriate frequency
 Includes measures of loyalty, behavioral intentions, or
actual behavior

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 Stages in the Research Process
 Stage 1 : Define Problem

 Stage 2 : Develop Measurement Strategy

 Stage 3 : Implement Research Program

 Stage 4 : Collect and Tabulate Data

 Stage 5 : Interpret and Analyze Findings

 Stage 6 : Report Findings

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 Portfolio of Services Research
Research Objective Type of Research
Identify dissatisfied customers to attempt recovery;
identify most common categories of service failure
Customer Complaint
for remedial action Solicitation
Assess company’s service performance compared to
competitors; identify service-improvement priorities; “Relationship” Surveys
track service improvement over time

Obtain customer feedback while service experience is

fresh; act on feedback quickly if negative patterns develop
Post-Transaction Surveys

Use as input for quantitative surveys; provide a forum

for customers to suggest service-improvement ideas
Customer Focus Groups
Measure individual employee service behaviors for use
in coaching, training, performance evaluation, “Mystery Shopping” of
recognition and rewards; identify systemic strengths
and weaknesses in service
Service Providers

Measure internal service quality; identify employee-

perceived obstacles to improve service; track Employee Surveys
employee morale and attitudes

Determine the reasons why customers defect Lost Customer Research

Forecast future expectations of customers; develop
and test new service ideas Future Expectations Research
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 Figure 6.3

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.
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 Figure 6.4

Service Quality Perceptions

Relative to Zones of Tolerance

9
8
7 O
O O
O O
6
5
4
3
2
1
0 Reliability Responsiveness Assurance Empathy Tangibles

Retail Chain = Zone of Tolerance O = Service Quality Perception

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 Service Quality Perceptions
Relative to Zones of Tolerance

10

8
O O O O
O
6

0
Reliability Responsiveness Assurance Empathy Tangibles

Computer Manufacturer = Zone of Tolerance O = S.Q. Perception

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 Figure 6.5

Importance/Performance Matrix

HIGH
High  
Leverage
Attributes to Improve Attributes to Maintain

Importance

  


Low
 Low
 Leverage
Leverage


Attributes to Maintain Attributes to De-emphasize

LOW Performance HIGH

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Building Customer Relationships

 Relationship Marketing
 Customer Profitability Segments
 Relationship Development Strategies
 Relationship Marketing
 is a philosophy of doing business, a strategic orientation, that
focuses on keeping current customers and improving
relationships with them

 does not necessarily emphasize acquiring new customers

 is usually cheaper (for the firm)

 keeping a current customer costs less than attracting a new one

 thus, the focus is less on attraction, and more on retention and

enhancement of customer relationships

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 Figure 7.1

Customer Goals of Relationship Marketing

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 Benefits of Relationship Marketing
 Benefits for Customers:  Benefits for Firms:
 Receipt of greater value  Economic benefits:
 Confidence benefits:  increased revenues
 trust  reduced marketing and administrative
costs
 confidence in provider
 regular revenue stream
 reduced anxiety
 Customer behavior benefits:
 Social benefits:  strong word-of-mouth endorsements
 familiarity  customer voluntary performance
 social support  social benefits to other customers
 personal relationships  mentors to other customers
 Special treatment benefits:  Human resource management
 special deals benefits:
 price breaks  easier jobs for employees
 social benefits for employees
 employee retention

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 Figure 7.2

Profit Generated by a Customer

Over Time

Source: An exhibit from F. F. Reichheld and W. E. Sasser, Jr., “Zero Defection: Quality Comes to Services,’’ Harvard
Business Review, September–October 1990.
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 Figure 7.3

Profit Impact of 5 Percent Increase in Retention Rate

Source: F. F. Reichheld, “Loyalty and the Renaissance of Marketing,” Marketing Management, vol. 2, no. 4 (1994), p. 15.

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 Figure 7.4

The Customer Pyramid

Most profitable What segment spends more with us

customers Platinum
over time, costs less to maintain,
spreads positive word-of-mouth?

Gold

Iron

What segment costs us in time,

Lead
effort and money yet does not
provide the return we want?
Least profitable What segment is difficult to do
customers business with?

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 Figure 7.5

Relationship Development Model

Customer Benefits
Relationship Bonds Confidence benefits
Financial bonds Social benefits
Social bonds Special treatment benefits
Customization bonds
Structural bonds

Strong Customer
Relationship
(Loyalty)
Core Service Provision
Satisfaction
Perceived service quality
Perceived value

Firm Benefits
Economic benefits
Customer behavior benefits
Switching Barriers Human resource management
Customer inertia benefits
Switching costs

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 Strategies for Building Relationships
 Core Service Provision:
 service foundations built upon delivery of excellent service:
 satisfaction, perceived service quality, perceived value
 Switching Barriers:
 customer inertia
 switching costs:
 set up costs, search costs, learning costs, contractual costs
 Relationship Bonds:
 financial bonds
 social bonds
 customization bonds
 structural bonds
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 Figure 7.6

Levels of Relationship Strategies

Stable
Volume and pricing Bundling and
frequency cross selling
rewards

1.
Integrated Continuous
Financial
information relationships
systems bonds

4. Excellent 2.
Joint service Personal
Structural Social
investments relationships
bonds and value bonds

Shared Social bonds

processes 3.
among
and Customization customers
equipment Bonds

Anticipation/ Customer
innovation intimacy
Mass
customization

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