Services Marketing Session 13

7/28/2019 Services Marketing Session 13

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Achieving Service Recovery andObtaining Customer Feedback


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Customer Complaining Behaviour

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Customer Response Categories

to Service Failures

Service Encounteris Dissatisfactory

Take some formof Public Action

Take some formof PrivateAction

Take No Action

Complain to theservice firm

Complain to athird party

Take legal actionto seek redress

Defect (switchprovider)

Negative word-of-

mouth

Any one or a combination ofthese responses is possible

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Understanding Customer

Responses to Service Failure

Why do customers complain?

What proportion of unhappy customers complain?

Why don

t unhappy customers complain? Who is most likely to complain?

Where do customers complain?

What do customers expect once they have made a complaint?

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Customers Often View Complaining as

Difficult and Unpleasant

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Three Dimensions of Perceived

Fairness in Service Recovery

Process

Procedural

Justice

Interactive

Justice

Outcome

Justice

Complaint Handling and Service

Recovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction with

Service Recovery

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Customer Responses to EffectiveService Recovery

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Importance of Service

Recovery Plays a crucial role in achieving customer satisfaction

Tests a firms commitment to satisfaction and service quality

Employee training and motivation is highly important

Impacts customer loyalty and future profitability

Complaint handling should be seen as a profit center, not a cost center

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The Service Recovery Paradox

Customers who experience a service failure that is satisfactorily resolvedmore likely to make future purchases than customers without problems

(Note: not all research supports this paradox)

If second service failure occurs, the paradox disappearscustomers

expectations have been raised and they become disillusioned

Severity and recoverability of failure (e.g., spoiled wedding photos) maylimit firms ability to delight customer with recovery efforts

Best strategy: Do it right the first time

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Principles of Effective ServiceRecovery Systems

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Components of an Effective

Service Recovery System (Fig 13.4)Do the job right the

first time

Effective Complaint

Handling

Identify ServiceComplaints

Resolve Complaints

Effectively

Learn from the

Recovery Experience

Increased

Satisfaction and

Loyalty

Conduct research

Monitor complaints

Develop Complaints as

opportunity culture

Develop effective system

and training in

complaints handling

Conduct root cause analysis

=+

Close the loop via feedback

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Strategies to Reduce Customer

Complaint Barriers

Complaint Barriers for DissatisfiedCustomers

Strategies to Reduce These Barriers

Inconvenience

Hard to find right complaint procedure

Effort involved in complaining

Put customer service hotline numbers, e-mail

and postal addresses on all customer

communications materials

Doubtful Pay Off

Uncertain if action will be taken by firm to

address problem

Have service recovery procedures in place,

communicate this to customers

Feature service improvements that resulted

from customer feedback

Unpleasantness

Fear of being treated rudely

Hassle, embarrassment

Thank customers for their feedback

Train frontline employees

Allow for anonymous feedback


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How to Enable

Effective Service Recovery

Be proactiveon the spot, before customers complain

Plan recovery procedures

Teach recovery skills to relevant personnel

Empower personnel to use judgment and skills to develop

recovery solutions

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How Generous

Should Compensation Be?

Rules of thumb for managers to consider:

What is the positioning of our firm?

How severe was the service failure?

Who is the affected customer?

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Service Guarantees

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Service Guarantees Help Promote

and Achieve Service Loyalty

Force firms to focus on what customers want

Set clear standards

Highlight cost of service failures

Require systems to get and act on customerfeedback

Reduce risks of purchase and build loyalty

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How to Design Service

Guarantees

Unconditional

Easy to understand and communicate

Meaningful to the customer

Easy to invoke Easy to collect

Credible

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Types of Service Guarantees

Single attribute-specific guarantee One key service attribute is covered

Multiattribute-specific guarantee A few important service attributes are covered

Full-satisfaction guarantee All service aspects covered with no exceptions

Combined guarantee All service aspects are covered

Explicit minimum performance standards

on important attributes

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Discouraging Abuse andOpportunistic Behaviour

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Dealing with Customer Fraud

Treating all customers with suspicion is likely to alienate them TARP found only 1 to 2 percent of customer base engages in premeditated

fraudso why treat remaining 98 percent of honest customers as potentialcrooks?

Insights from research on guarantee cheating Amount of a guarantee payout had no effect on customer cheating

Repeat-purchase intention reduced cheating intent Customers are reluctant to cheat if service quality is high (rather than just

satisfactory)

Managerial implication Firms can benefit from offering 100 percent money-back guarantees

Guarantees should be offered to regular customers as part of membership

program Excellent service firms have less to worry about than average providers Se

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Learning from Customer Feedback

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Key Objectives of

Effective Customer Feedback Systems

Assessment and benchmarking of service quality and

performance

Customer-driven learning and improvements

Creating a customer-oriented service culture

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Customer Feedback Collection

Tools

Total market surveys Post-transaction surveys Ongoing customer surveys

Customer advisory panels Employee surveys/panels Focus groups Mystery shopping Complaint analysis Capture service operating data


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Entry Points for Unsolicited

Feedback

Frontline employees

Intermediaries acting for original supplier

Managers contacted by customers at head/regional office

Complaint cards deposited in special box or mailed

Telephone or e-mail

Complaints passed to company by third-party recipients

Disseminate the information to relevant parties to take action Immediately

Track over time

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Organizing for Change Management

and Service Leadership


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Effective Marketing Lies at the Heartof Value Creation


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The Service-Profit Chain

Target MarketServiceConcept

Operating strategy andservice delivery system

Employees

Loyalty

Satisfaction

Capability

Service

Quality

Productivityand

Output

Quality

Customers

Satisfaction Loyalty

Revenue

growth

Profitability

Workplace design Job design Selection and development Rewards and recognition Information and communication Tools for serving customers

Quality andproductivityImprovementsyield higherservice qualityand lower costs

Lifetime value Retention Repeat business Referral

ServiceValue

Attractive value Service designed

and delivered tomeet targetedcustomers needs

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4 - 7

Internal External

Li k i th S i P fit


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Links in the Service-Profit

Chain

1. Customer loyalty drives profitability and growth

2. Customer satisfaction drives customer loyalty

3. Value drives customer satisfaction

4. Employee productivity and retention drive value

5. Employee loyalty drives productivity

6. Employee satisfaction drives loyalty and productivity

7. Internal quality drives employee satisfaction

8. Top management leadership underlies chains

success


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Qualities Associated with

Service Leaders

Understands mutual dependency among marketing,

operations and human resource functions of the firm

Has a coherent vision of what it takes to succeed

Strategies are defined and driven by a strong, effectiveleadership team

Responsive to various stakeholders

Value created through customer satisfaction


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Integrating Marketing, Operations,and Human Resources


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Reducing Interfunctional

Conflict

One challenge is to avoid creating functional silos

High-value creating enterprises should be thinking in terms of activities, not

functions

Top management needs to establish clear imperatives for each function

that defines how a specific function contributes to the overall mission

The marketing imperative

The operations imperative

The human resources imperative


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Defining the Three Functional

Imperatives

Marketing Imperative Target right customers and build relationships

Offer solutions that meet their needs

Define quality package with competitive advantage

Operations Imperative Create and deliver specified service to target customers

Adhere to consistent quality standards

Achieve high productivity to ensure acceptable costs

Human Resource Imperative

Recruit and retain the best employees for each job

Train and motivate them to work well together

Achieve both productivity and customer satisfaction


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Creating a Leading ServiceOrganization


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From Losers to Leaders: Four

Levels of Service Performance

Service Losers

Bottom of the barrel from both customer and managerial perspectives

Customers patronize them because there is no viable alternative

New technology introduced only under duress; uncaring workforce

Service Nonentities

Dominated by a traditional operations mindset

Unsophisticated marketing strategies

Consumers neither seek out nor avoid them


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From Losers to Leaders: Four Levels

of Service Performance

Service Professionals

Clear market positioning strategy

Customers within target segment(s) seek them out

Research used to measure customer satisfaction

Operations and marketing work together

Proactive, investment-oriented approach to HRM

Service Leaders

The crme da la crme of their respective industries

Names synonymous with outstanding service, customer delight

Service delivery is seamless process organized around customers

Employees empowered and committed to firms values and goals

Dilb B L F d Hi A di


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Dilberts Boss Loses Focus and His Audience


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Moving to a Higher Level of

Performance

Firms can move either up or down the performance ladder

Organizations that are devoted to satisfying their current customers

may miss important shifts in the marketplace

As a result, they may face difficulties attracting demanding newconsumers with different expectations

Companies defending their control of their competitive edge may

have encouraged competitors to find higher-performing

alternatives

Organizations with a service-oriented culture may turn otherwise as

a result of a merger or acquisition that brings in new leaders who

emphasize short-term profits


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In Search of Human Leadership


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Leading a Service Organization

Involves Eight Stages

1. Creating a sense of urgency to develop the impetus for change

2. Putting together a strong enough team to direct the process

3. Creating an appropriate vision of where the organization needs

to go4. Communicating that new vision broadly

5. Empowering employees to act on that vision

6. Producing sufficient short-term results to create credibility and

counter cynicism7. Building momentum and using that to tackle tougher change

problems

8. Anchoring new behaviors in organizational culture

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Leadership versus

Management Leadership

Concerned with development of vision and strategies, and empowermentof people to overcome obstaclesmake vision happen

Emphasis on emotional and spiritual resources

Works through people and culture Produces useful change, especially non-incremental change

Management

Involves keeping current situation operating through planning, budgeting,organizing, staffing, controlling, and problem solving

Emphasizes physical resources

raw materials, technology, capital

Works through hierarchy and systems

Keeps current system functioning

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Setting Direction versus

Planning Planning

A management process, designed to produce orderly resultsnotchange

Setting direction

Involves creating visions and strategies that describe a business,technology, or corporate culture in terms of what it should becomeover long term and articulating feasible way of achieving goal

Many of best visions and strategies combine basic insights and translatethem into realistic competitive strategy

Stretcha challenge to attain new levels of performance andcompetitive advantage that might as first seem to be beyond theorganizations reach

Planning follows and complements direction setting, serving as usefulreality check and road map for strategic execution


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Individual Leadership Qualities

Possesses a special perspective

Able to believe in their employees and make

communicating with them a priority

Love of the business

Being driven by a set of core value that they infuse into the

organization

Need not be charismatic, but has to be principled

Must have personal humility blended with intensive

professional will, ferocious resolve, and willingness to give

credit to others but take blame themselves


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Change Management


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Evolution versus Turnaround

Evolution involves continual mutations designed to ensure the

survival of the fittest

Top management must proactively evolve the focus and strategy

of the firm to take advantage of changing conditions and the

advent of new technologies

Turnaround situations are where leaders seek to bring

distressed organizations back from the brink of failure and set

them on a healthier course


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Evolution versus Turnaround

Hurdles that leaders face in reorienting and formulating strategy Cognitive hurdles

Resource hurdles

Motivational hurdles

Political hurdles

Turning around an organization that has limited resources requiresconcentrating those resources where the need and the likely payoffsare greatest

Example: William Brattons 20-year police career in Boston and New York

A firms search for growth often involves expansioneven

diversification into new lines of business Example: IBM


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Role Modeling Desired Behavior

Management by walking around

Provides insights to both backstage and front-stage operations

The ability to observe and meet both employees and customers,

and opportunity to see how corporate strategy is implemented

on the front line

This approach may lead to a recognition that changes are

needed in that strategy

A risk of prominent leaders becoming too externally focused

at the risk of their internal effectiveness

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Leadership, Culture, and

Climate Leadership traits are needed of everyone in supervisory or

managerial positions, including those heading teams

Effective communication is essential for a leader

Organizational culture

Shares perceptions or themes regarding what is important in the

organization

Shares values about what is right or wrong

Shares understanding about what works and what doesnt work

Shares beliefs, and assumptions about why these things areimportant

Shares styles of working and relating to others

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Leadership, Culture, and

Climate

Organizational climate

The tangible surface layer on top of the organizations underlying

culture Factors of influence:

Flexibility, responsibility, standards that people set, perceived aptness ofrewards, clarity people have about mission and values, level ofcommitment to a common purpose

Creating a new climate for service, based on understanding of

what is needed for market success, may require Radical rethinking of HRM activities, operational procedures, and

the firms reward and recognition policies

Documents

Services Marketing Session 13