Cont’d.

Building Customer Relationships

 Service Consumption
 Consumption means the act or process of Using Something
Up but physical consumption or deterioration doesn’t
apply to most services.
Consumption Values
 The perceived value or utility an individual or business
believes special choice will provide.
 Includes:
a. Functional Value: perceived utility acquired when a
particular choice provides utilitarian or functional
benefits for the consumer.
b. Social Value: perceived utility acquired from making a
purchase decision associated with a particular
reference group.
c. Emotional Value: obtained when the choice
Stimulates Feelings and emotions within the
consumer.
D. Epistemic Value: acquainted when a purchase decision
is perceived to satisfy a desire for knowledge, provide
novelty or arouse curiosity.
E. Conditional Value: utility provided when an
alternative is chosen because of temporary situational
factors.
Understanding user cost for service
1. Purchase price and other financial expenditures
 Financial cost of service
 Price of the service itself
 Incidental expense
 Purchase of facilitative goods
 Travel cost
2. Nonfinancial Outlays and Burdens
a. Time Expenditure: inherent opportunity cost to
customers.
b. Physical Effort: fatigue, discomfort and injury.
c. Psychological Burdens: mental effort, inadequacy, fear
d. Sensory Burdens: unpleasant sensation, noise, nasty,
physical, psychological and sensory burdens
collectively as effort or hassle.
How Customers Evaluate Service Performance
Continuum Product Attribute
 The basic differences between goods and services is that
services are harder for customers to evaluate.
 All products can be placed on a continuum ranging from
easy to evaluate to difficult to evaluate depending on
three attributes:
1. Search Attributes: Evaluated before purchasing
2. Experience Attributes: Evaluated after purchasing
3. Credent Attributes: Impossible to evaluate
A. Search Attributes: Attributes that can be evaluated
before purchasing a service, based on information that is
easily accessible.
 Physical goods tend to emphasize attributes that allow
customers to and evaluate a product before purchasing.
 Tangible and Intangible features: Physical appearance of the
service provider, Location, Hours of operation, color, style,
price, fit feel, hardness, and sound allow prospective consumers
to try out, taste-test or test drive the product prior to purchase
and reduce sense of uncertainty or risk.

Example: clothing, furniture, cars, and electronic equipment

2. Experience Attributes: Attributes that can only be
evaluated after purchasing and using a service.
 Properties can‘t be evaluated prior to purchase.
 Customers have experience about these features to
know what they are getting.
Example: live entertainment performances, sporting
events, and restaurants
• Examples:
 Quality of service
 Comfort
 Convenience
 Friendliness of staff
C. Credent Attributes: Attributes that are difficult or
impossible to evaluate, even after purchasing and using a
service.
Trust and faith in the service provider is required.
• Examples:
 Expertise of a doctor
 Safety of a financial advisor
 Effectiveness of a therapy
 Product characteristics that customers find impossible
to evaluate confidently even after purchase and
consumption because the customer is forced to trust
that certain benefits have been delivered even though
it may be hard to document them.
Example: Dental Work, Education, Training, Car
Repairing
Customer Complaint Behavior
 Customer response to service failures course of actions:
A. Do nothing
B. Complain in some form to the service firm
C. Abandon supplier and discourage other people from
using the service: negative word of mouth
Course of action open to a dissatisfied customer
General types of Service Encounters:
A. Remote encounters: Encounters can occur without any
direct human contact such as when a customer
interacts with a bank through the ATM system, with a
retailer through its website, or with a mail-order
service through automated touchtone phone ordering.
B. Technology mediated encounters: encounter between
an end-customer and the firm occurs over the
telephone or via simultaneous texting, live chats, or
other platforms that allow technology- based
communication with a real person in real time
C. Face-to-face encounters: encounters occur between
patients and reception staff, nurses, doctors, lab
technicians, food service workers, pharmacy staff, and
others.
Complaint as Market Research Data
 Responsive service organizations look at complaints as a
stream of information that can be used to help monitor
productivity and quality and highlight improvements
needed to improve service design and execution.
 Coordinating such activities is not a simple matter
because there are many different entry points, including:
A. The firm‘s own employees at the front line
B. Intermediary organizations acting on behalf of the original
supplier
C. Managers who normally work backstage but contacted by a
customer seeking higher authority
D. Suggestion or complaint cards mailed or placed or placed in a
special box
E. Complaints to third parties: consumer advocate groups,
legislative agencies, trade organizations and other customers
 The most useful roles for centralized complaint
logs/record are:
a) To provide a basis for follow-up and to see that they
have in fact been resolved,
b) To serve as an early warning indicator of perceived
deterioration
c) To indicate topics and issues that may require more
detailed research.
Types of Complainers
1. Passives: This group of customers is least likely to
take any action. – Less Vs. Less
They are unlikely to say anything to the provider, less
likely than others to spread negative word of mouth,
and unlikely to complain to a third party.
They often doubt the effectiveness of complaining,
thinking that the consequences will not merit the time
and effort they will expend.
Sometimes their personal values or norms argue against
complaining.
Passive:
Unlikely to say anything to the provider,
Less likely than others to spread negative word of
mouth
2.Voicers: These customers actively complain to the service
provider, but they are less likely to spread negative word of
mouth, switch patronage, or go to third parties with their
complaints. --- High Vs. Less
 These customers should be viewed as the service provider’s
best friends.
 They actively complain and, by doing so, give the
company a second chance.
 They tend to believe complaining has social benefits and
therefore do not hesitate to voice their opinions.
 They believe that the consequences of complaining to the
provider can be very positive, and they believe less in
other types of complaining such as spreading negative
word of mouth or talking to third parties. Their personal
norms are consistent with complaining.
Voicers
 Actively complain to the service provider,
 but they are less likely to spread negative word of mouth,
switch patronage, or go to third parties with their
complaints
3. Irates: These customers are more likely than others to
engage in negative word-of- mouth communication with
friends and relatives and to switch providers. –Less Vs. High
They are about average in their propensity to complain to the
provider and are unlikely to complain to third parties.
 As their label suggests, they are quite angry with the
provider, although they do believe that complaining to the
provider can have social benefits.
 They are less likely to give the service provider a second
chance and instead will switch to a competitor, spreading
the word to friends and relatives along the way.
 Such customers are more likely than the other types to go
to the trouble of creating websites, blogs, or YouTube
videos to share their frustrations with others.
Irates
 Customers are more likely to engage in negative word-of-
mouth communication
 Likely to give the service provider a second chance
4. Activists: These customers are characterized by
above-average propensity to complain on all dimensions:
 they will complain to the provider, they will tell
others, and they are more likely than any other group
to complain to third parties or express their opinions
via social media (such as Twitter).
 Complaining fits with their personal norms. They have
a very optimistic sense of the potential positive
consequences of all types of complaining.

 High Vs. High

Activists
 above-average propensity to complain on all
dimensions
Managing service failure and recovery
Service Failure
 A service is either not performed or performed poorly.
 Customers leave a service angry or dissatisfied.
 Service performance below adequate expectation level
of a customer.
Service Recovery
 A general term for systematic efforts by a firm to
correct a problem following a service failure and
retain a customer goodwill.
 Service Failure is generally described as service
performance that falls below a customer’s expectations in
such a way that leads to customer dissatisfaction.
 Service Recovery refers to the actions taken by an
organization in response to a service failure to improve the
situation for the customer.
 Successful service will diminish the negative impact of the
original poor or failed service for thee reasons:
1. Through post-service communications with the firm,
customers become to believe that service provider is fair
because who admitted mistakes or restitutions.
2. A good service recovery process takes away all of the
negative consequences of a service failure.
3. A service recovery process will cause consumers to alter
their attributions as to the cause of service fail.
Guidelines for Effective Service Recovery
 Act fast
 Admit mistake but don’t be defensive
 Show that you understand the problem from each
customer’s point of view
 Don’t argue with customers
 Acknowledge the customer’s feelings, either tacitly or
explicitly
 Give customers the benefit of the doubt
 Clarify the steps needed to solve the problem
 Keep customers informed of progress
 Consider compensation
 Persevering/continue to region customer goodwill
Service Recovery Steps
1st: develop service recovery program
2nd: encourage customers to complain
3rd: data from causes of service recovery
4th: allocate sufficient resources
Reasons for Service Communication Problems
 Discrepancies between:
 What is communicated about a service and
 What a customer receives— or perceives that she
receives—can powerfully affect consumer evaluations of
service quality.
The factors that contribute to these communication challenges
include
 Service Intangibility
 Management of Service Promises
 Management of Customer Expectations
 Customer Education
 Internal Marketing Communication
 Incorporeal Existence. The service product neither is
made out of physical matter nor occupies physical space.
 Although the delivery mechanism may occupy space, the
service itself (car servicing and oil change) does not. The
implication is that showing the service is difficult, if not
impossible.
 Abstractness. Service benefits such as financial security,
fun, and health do not correspond directly with objects,
making them difficult to visualize and understand.
 When businesses need consulting, for example, they often
do not know where to begin because the concept is so
vague that they do not understand the specific goals,
processes, or deliverables they are seeking.
Generality:
 Generality refers to a Class of things, persons, events, or
properties whereas:
 Specificity refers to Particular objects, people, or events

 Many services and service promises are described in

generalities:
 Wonderful experience
 Superior education
 Completely satisfied customers

This making them difficult to differentiate from those of

competitors.
 Non-searchability: Because service is a performance, it
often cannot be previewed, or inspected in advance of
purchase.
 If we are interested in finding a doctor, an air- conditioning
repair firm, a personal trainer, or virtually any service, we
cannot search with certainty the options as easily as we
can search the shelves in a grocery store.
 Considerably more effort must be expended, and what we
find may not be useful.

For example, if a customer needs a plumber, the information

contained in a source such as the Internet may not adequately
discriminate among the choices.
 Mental Impalpability: Services are often complex,
multidimensional, and difficult to grasp mentally.

 When customers have not prior exposure, familiarity, or

knowledge, services are difficult to interpret.

 You may have experienced this when buying automobile

insurance for the first time.
Service Guarantees: - Promise to compensate
 A promise firms offer to compensate customers if service
delivery fails to meet predefined service standards.
 Compensation such as refund, credit, replacement,…
 A powerful tools for both promoting and achieving service
quality for the following reasons:
A. Focus on customers want and expect in each element of
the service.
B. Set clear standards
C. Develop systems for generating meaningful customer
feedback
D. Understand why they fail and encourage them
E. Build marketing muscle: long-term loyalty
 Therefore, guarantees can be given:
A. To measure customers about the quality of the service they
are receiving.
B. To differentiate the service provided by one firm from
another.
C. To more tangible elements of the service.
Condition of effective guarantee
 Service guarantee will be highest when one or more of the
following conditions exist:
A. The price of service is high or perceived to be high by
customers.
B. The negative consequence of service failure are high.
C. The success of a company depends on frequent customers
repurchase.
D. Company’s business is affected deeply by word of mouth
E. Customers don’t really understand whether the service has
been carried out properly or not.
F. Customer’s personnel reputation could be affected if the
service goes wrong.
Qualities of the ideal guarantees
 Easy to understand and communicate
 Unconditional
 Easy to invoke
 Meaningful with penalties or payouts
 Focused on customer needs
Relationship Marketing
 Attracting, maintaining enhancing customer relationships
and as the development and enhancement of internal
and other external relationships.
 The development of database marketing, interactive
marketing and network marketing.
 Retaining customers using defensive strategies:
minimizing customers turn over and maximizing
customer retention.
Transactional Marketing
 Attracting customers using offensive strategies:
encouraging, brand switching and recruiting competitors
dissatisfied clients.
Steps to develop Relationship marketing programs
1st: locating prospects
2nd: turning customers into clients
3rd: turning clients into an advocate of a firm
Function of Relationship Marketing Program
 Provide social reinforcement
 Provide reassurance
 Solve customers problem
 Provide customization of service
 Provide service enhancement
Evolution of Customer Relationships
 Customers as Strangers
 Customers as Acquaintances
 Customers as Friends
 Customers as Partners
Goal of Relationship Marketing
Service Market Segmentation
Unfocused: it is when a service provider company
provides with many services for many types of
customers. – All In One

For example: assume a hotel that provides with

restaurants, room accommodations, spa services, gym
services, swimming pool services and theatres.

 In this case the hotel provides a wider range of

services in which each service could be separately sold
for customers. In this case the hotel is not focused in
one or two service with this its customers varies too.
Service Focused: in this category a company
specializes at one or few service provisions.
-- Specialize Service

For example, assume an auto repair service provider. It

only sales a service in repairing automobiles and sale
nothing else. In this case the company is specialized and
focused only on provides one type of service which
cannot be separately provided for customers.
Market Focused: a company designs a wider range of
services but for specific types of customers.
 Wider Service with -- Specific Types of Customers
For example, assume a company that provides auto
repair, car décor, training, and car wash but these services
are provided targeting only high-income customers.

Fully Focused: in this category a company provides

narrower range of services for targeted few customers.
Narrow Service for Targeted Few Customers
For example, assume a company that provides only car
wash services for only high-income customers.
Retention Strategies
 Financial Bonds: Offering Financial Inceptives
 Social Bonds: Relationship
 Customization Bonds: Personalized recommendations
 Material (Structural) Bonds: Creating Contractual
1. Financial Bonds: Offering financial incentives to
customers to encourage them to continue doing business
with the company.
Examples: Loyalty programs, discounts, coupons, rebates
2. Social Bond: Building relationships with customers
based on shared values, interests, and experiences.
Examples: Community involvement, social media
engagement, customer appreciation events
3. Customization Bond: Tailoring products and services to
meet the individual needs and preferences of customers.
Examples: Personalized recommendations, customized
products, subscription boxes
4. Structured (Material) Bond: Creating physical or
contractual barriers to prevent customers from switching
to competitors.
Examples: Contracts, warranties, high switching costs
 Service Blueprint is an operational planning tool
that provides guidance on how a service will be
provided, specifying the physical evidence, staff
actions, and support systems / infrastructure needed to
deliver the service across its different channels.

For example, to plan how you will loan devices to users,

a service blueprint would help determine how this would
happen at a service desk, what kinds of maintenance and
support activities were needed behind the scenes, how
users would learn about what’s available, how it would
be checked in and out, and by what means users would
be trained on how to use the device.
Service Design and Deployment
According to Professor G. L. Shostack (1984), services
are intangible so New Service Development System
should have the following four characteristics:

 It must be objective, not subjective

 It must be precise, not vague
 It must be fact driven, not opinion driven
 It must be methodological, not philosophical
Types of New Services
1. Major Service Innovations A new service that is significantly
different from existing services and creates a new market. EG: NEW
2. Major Process Innovations: A new way of delivering an existing
service that significantly improves efficiency or effectiveness.
Examples:
 Self-checkout kiosks at grocery stores
 Online banking
 Automated customer service chat-bots
3. Product Line Extensions A new service that is added to an
existing product line and targets the same customer base.
Examples:
 A restaurant adding a New Menu Item
 A hotel chain adding a New Type of Room
 A software company adding a New Feature to its Existing
Software
4. Process Line Extensions: A new way of delivering an existing
service that targets a new customer base.
• Examples:
 A hospital offering a new type of surgery
 A university offering a new degree program
 A consulting firm offering a new type of consulting service
5. Supplementary Service Innovations: A new service that
complements an existing service and enhances the customer
experience.
• Examples:
 A restaurant offering a loyalty program
 A hotel offering a free shuttle service to the airport
 A software company offering a free training course for its
customers
6. Style Changes: A change in the appearance or design of an existing
service.
• Examples:
 A restaurant remodeling its dining room
 A hotel renovating its guest rooms
 A software company updating the user interface of its software
7. Service Improvements: An improvement to an existing service that
enhances its quality or value.
• Examples:
 A restaurant improving the quality of its food
 A hotel adding more amenities to its guest rooms
 A software company adding new features to its software
Thank You!!!