Three-Stage Model Consumption of Service

Awareness of Need Information Search

Evaluation of alternatives (Review documentation e.g. advertising, brochures, websites/Consult with other people/visit possible service provider Pre-Purchase

Request service from chosen supplier Service delivery Evaluation of service performance
Post-Purchase Service encounter

Future Intentions

Types of Service Encounters

Remote Encounter( ATM ) Indirect Personal Encounter(On Phone) Direct Personal Encounter

Service Encounters Range

High Contact Services Low contact Services

Managing Customer expectations in services is a challenge

Customers are involved in service production and delivery. Services are difficult to evaluate.

Services are difficult to evaluate

Most Goods Most Services

Easy to evaluate
Clothing Chair Motor vehicle Foods Restaurant meals Lawn fertilizer Haircut Entertainment Computer repair Education Legal services Complex surgery

Difficult to evaluate*

High in search attributes

High in experience attributes

High in credence attributes

What service Provider need to understand for successful service delivery

What type of expectation standards do customers hold about services? What factors most influence the formation of these expectations? What role do these factors play in changing expectations? How can a service provider meet or exceed customer expectation?

Factors Influencing Customer Expectations of Service

Lasting Service Intensifiers Belief about what is possible Desired Service Personal Needs Temporary service intensifiers Perceived Service alterations Self Perceived Service role Situational Factors Zone of Tolerance Adequate Service Word of mouth Past experience Explicit Service promises Implicit service promises

Predicted Service

 Customer Expectations differ from person to person. Some customers may have smaller/larger zone of tolerance than others. Same customer may have different Zone of tolerance for different service dimensions. Reliability(service dimension):customers may have small zone of tolerance or reliability because they do not tolerate unreliable service(broken promises & service errors) Tangibles(Service dimension):Same customer may have larger zone of tolerance for tangibles included in the service.

Zone of tolerance for different service Dimensions

Desired Service Level of Expectation Desired Service Zone of Tolerance Adequate Service

Zone of Tolerance Adequate Service

Reliability

Tangibles

Customer Satisfaction is related to customer expectation

Satisfaction defined as attitude-like judgment following a service purchase or series of service interactions Customers have expectations prior to consumption, observe service performance, compare it to expectations Satisfaction judgments are based on this comparison
Positive disconfirmation if better than expected Confirmation if same as expected Negative disconfirmation if worse than expected

Satisfaction reflects perceived service quality, price/quality tradeoffs, personal and situational factors Research shows links between customer satisfaction and a firms financial performance

GAP Model

Diagram on next page

GAP Model
Providers Gaps: (1) The Knowledge gap: is the difference between what service provider believe customers expect and what are actual needs and expectations of the customers. (2) The standards gap: is the difference between managements perceptions of customer expectations and how these perceptions are translated into service design and delivery. (3) The delivery gap: is the difference between the standards of service design and delivery and actual execution of service delivery. (4) The internal communication gap: is the difference what the companys advertising and sales personnel think are the products features, performance and service quality level and what the company is actually able to deliver. Customers gaps: (5) The perceptions gap: is the difference between what is infact, delivered and what customers perceive they have received (because they are unable to accurately evaluate service quality.) (6) The interpretation gap: is the difference between what a service providers communication promise and what the customer thinks was promised from these communications. (7) The service gap: is the difference between what customers expect to receive and their perceptions of the service that is delivered.

Customer Satisfaction
Satisfaction is the consumers evaluation of service or product in terms of whether the service or product has meet the customers need and expectations. Failure to meet needs and expectations is assumed to result in dissatisfaction with the product or service

What determines Customer satisfaction in Services?

(1) Product and Service Features (2) Consumer Emotions (3) Attributions for Service Success or Failure: Attributions-the perceived causes of events. When a customer is surprised by an outcome(Either much better or much worse than expected). Then he looks for the reasons and the assessment of the reasons can influence their satisfaction. (4) Perception of Equity or Fairness: Customer ask themselves: Have I been treated fairly compared with other consumers? Did I pay a fair price for the service? Notice of fairness leads to satisfaction otherwise dissatisfaction. (5) Influence of other consumers, family members and coworkers.

Sources of Satisfaction & dissatisfaction in service encounters

Recovery-Employee response to Service Delivery System Failures Adaptability- Employee Response to Customer Needs and Request Spontaneity- Unprompted and Unsolicited Employee actions Coping-Employee Response to Problem Customers If the customer is Treated/handled in a smart manner then it leads to satisfaction if not then it leads to dissatisfaction

Service Quality and satisfaction

Five Dimensions/components of quality in Services:
Reliability Responsiveness Assurance Empathy Tangibles
Delivering on Promises Being willing to help Inspiring trust and confidence Treating customer as Individuals Physical elements

Customer Perception of Quality and satisfaction

Product Quality Service Quality

Price

Situational Factors

Customer Satisfaction

Personal Factors

Customer Loyalty

SERVQUAL
Developed by Zeithaml, Parsuraman and Berry A Multidimensional scale to capture customer perception and expectations of service quality. SERVQUAL methodology involves a survey containing 21 service attributes, grouped into the five service quality dimensions(as discussed above) The survey sometimes asks customers to provide two ratings on each attribute One rating reflects what they expect. Other reflects what is their perception about the service being provided by the service provider. Sometimes we prepare two questionnaires one for the service provider and other for the Benchmarked service Provider, who is the best in the industry. Then we compare both the ratings.

Data gathered from SERVQUAL survey can be used for:

To determine the average gap score (between customers perceptions and expectations) for each service attribute. To assess a companys service quality along each of the five SERVQUAL dimensions To track customers expectations and perceptions over time. To compare companys SERVQUAL score against those of competitors. To identify and examine customer segment that differ significantly in their assessment of a companys service performance. To assess internal service quality ( that is, the quality of service rendered by one department or division of a company to others within the same company.)

Customer Relationship mgt. in Services

Enhancing
Retaining Satisfying

Acquiring

Evolution of CRM

Mass Marketing
Product Focused Anonymous Few Campaigns Wide reach Little or no research Short term

Target Marketing
Group focused General segmentation More campaigns Smaller reach Based on analysis of segments Short term

Relationship Marketing
Customer focused Individuals Many campaigns Discrete reach Based on detailed customer behavior and profile Long-term

Selecting a Customer Portfolio

Platinum
More Profitable
Which segment spends more , costs less to maintain and spread positive word of mouth

Gold

Iron
Less profitable

Lead

Which segment spends less, costs more to maintain and difficult to do business with

Relationship Development Model

Relationship Drivers Outcomes
Financial bonds Relationship Social bonds Bonds Customization bonds Structural bonds

Customer benefits

Confidence benefits Special treatment benefits Social benefits

Core service provision

Satisfaction Perceived service quality Perceived value

Strong Customer Relationship

Loyalty

Switching barriers

Customer Inertia Switching costs

Firm Benefits

Economic benefits Customer Behaviour benefits HRM benefits

How Customer Loyalty is important to Firms Profitability

Profits derived from increased purchase Profits from reduced operating costs Profits from referrals to other customers Profits from price premium

Customer Satisfaction & Loyalty Relationship

Apostle Loyalty Zone of Affection Near Apostle

Zone of Indifference Zone of defection

Terrorist Satisfaction

The Wheel of Loyalty

3. Reduce Churn Drivers

1. Build a foundation for Loyalty

2. Create Loyalty Bonds

Explanation Of the Wheel of Loyalty

Build a foundation for Loyalty: Segment the market to match customer needs and firm capabilities Manage the customer base via effective tiering of service. Deliver quality service. Create Loyalty Bonds: Social Financial Customization Structural Reduce Churn Drivers: Conduct churn diagnostic and monitor churning customers Take proactive retention measures Put effective complaint handling and service recovery process

Market Segmentation in services

Segmentation is the process of classifying customers into groups which share some common characteristic. Segmenting means dividing a heterogeneous demanding markets into homogenous groups based on similar characteristics or traits

Process of market segmentation

Identifying Customer Segments Developing Measures for Structural Attractiveness Selecting Customer Portfolio

Basis for segmentation

Geographic
Nations, states, regions or cities

Demographic
Age, gender, family size and life cycle or income

Psychographic
Social class, lifestyle, or personality

Behavioral
Occasions, benefits, uses, or responses

Requirements for effective segmentation

Measurable Accessible Substantial Differential
Size, purchasing power, profiles of segments can be measured. Segments must be effectively reached and served.

Segments must be large or profitable enough to serve.

Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

Actionable

Target Marketing Strategies

Service Failure & Recovery

Reasons of Failure: Service may be unavailable when promised It may be delivered late or too slowly The outcome may be incorrect or poorly executed Employees may be rude or uncaring Recovery: The actions taken by an organization in response to a service failure

Customer response to service failure

Consumer complaint actions following Service failure

Service Failure

Dissatisfaction/ negative emotions

Complaint actions

No complaint action

Complain to provider

Negative word of mouth

Third party action

Exit/switch

Stay

Exit/switch

Stay

Customer complaint actions following service failure

Types of complainers: Passives Voicers Irates Activists

Customer Recovery expectations:

Agsf
Complaint Handling and service recovery process

Understanding & Accountability

Procedural Fairness

Interactional Fairness

Outcome Fairness

Causes behind service switching

PRICING
High Price Price increases Unfair Pricing Response to service failure

Negative response No response Reluctant Response

Inconvenie nce

Location/Hours Wait for appointment Wait for service

Competition
Service switching behaviour

Found better service

Core service failure Service encounter Failures

Service mistakes Billing Errors

Ethical Problem

Cheat Unsafe Conflict of interest

Uncaring Impolite Unresponsive Unknowledgeable

Involuntary switching

Customer moved Provider closed

Service Recovery Strategies

Act Quickly Encourage and track complaints Provide adequate explanatio n

Make the service fail safe

Service Recovery Strategies

Treat customers fairly

Learn from lost customers

Learn from recovery experience s

Cultivate relationshi p with customers

Handling customer complaints

Act Quickly Admit mistakes, but dont be defensive Show that you understand the problem from each customers point of view Dont argue with customers Acknowledge the customers feelings Give customers the benefit of doubt Clarify the steps needed to solve the problem Keep customers informed of progress Consider compensation Keep trying to regain customer goodwill

Components of Effective service recovery system

Do the right job the first time Effective complaint handling Increased satisfaction and loyalty

Close the loop via feedback

Identify service complaints

Conduct research Monitor complaints Develop complaints as Opportunity culture

Resolve complaints effectively

Develop effective system and training in complaint handling

Learn from recovery experience

Conduct RootCause analysis