Today’s Agenda Glacier Bear Lodge Understanding Customer Requirements Listening to Customers Through Research Building Customer Relationships Service Recovery

Exercise – Glacier Bear Lodge

Exercise – Glacier Bear Lodge Consider that you are the Marketing Manager for Glacier Bear Lodge and that you want to understand how your customers form expectations regarding your hotel. How are your customers' expectations being influenced by word-of-mouth communication found on popular Internet sites, including Tripadvisor, Yelp, and Google reviews? Provide examples from these sites when you answer the question.  

Exercise – Glacier Bear Lodge Go to the lodge website, see http://www.glacierbearlodge.com/ Describe explicit promises that the Lodge is making to potential guests. How do photos on the lodge's website represent implicit service promises? Explain what the photos at the lodge's website are promising guests.

Exercise – Glacier Bear Lodge Use Google to determine Glacier Bear Lodge's competition in Yakutat, AK. After doing so, how do perceived service alternatives influence a potential guest's expectations of Glacier Bear Lodge?    Given that the target customer at Glacier Bear Lodge are men who are avid fishing fans, what sort of personal needs will they have which impact their expectations?

Exercise – Glacier Bear Lodge Please do same for your own company – try to find explicit and implicit promises made to the customers.

Group Formation and Proposal

Other Possible Topic Workplace Spirituality and Service Climate and Service Performance Determinants of Service Performance of Front line Service Staffs Service Quality of E-Commerce Web Sites in Nepal The impact of CSR on customer loyalty – A study of banking sector of Nepal The value of co-creation and satisfaction in subjective well being of tourists

Provider Gap 1 CUSTOMER Expected Service Perceived Service COMPANY The Listening Gap Company Perceptions of Consumer Expectations

Key Factors Leading to Provider Gap 1

Understanding customer requirements

Listening to Customers Through Research Wachovia Excels at Marketing Research in Services

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

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

Portfolio of Services Research: Research Is NOT Just Surveys! Customer Complaint Solicitation Critical Incident Studies Requirements Research Relationship and SERVQUAL Surveys Trailer Calls or Post transaction Surveys Service Expectations Meetings and Reviews Process Checkpoint Evaluations Mystery Shopping Customer Panels Lost Customer Research Future Expectations Research 5-15

Task for Next Week Group 1 Read what these mean from Book Customer Complaint Solicitation Critical Incident Studies Future Expectations Research Group 2 Requirements Research Relationship and SERVQUAL Surveys Group 3 Trailer Calls or Post transaction Surveys Service Expectations Meetings and Reviews Lost Customer Research Group 4 Process Checkpoint Evaluations Mystery Shopping Customer Panels Read what these mean from Book Presentation and Report Explain Objective Take hotel, hospital, college etc. as an example and prepare a research instrument for them – scenario – instrument – expected result – use of result 10 Min Presentation and Report 3-5 Pages

Using Marketing Research Information Managers not finding time to read report and use Customers participating in research but seeing no changes Companies must use research to make changes

Upward communication

What is objective of upward communication?

Objectives of Upward Communication Gaining firsthand knowledge about customers, improving internal service quality, gaining firsthand knowledge about employees and obtaining idea for service improvement

Two Types of Interactive Activties Designed to improve the type and effectiveness of communications from customers to management Improvement the communications between employees and management

Research for Upward Communications Executive Visits to Customers Executive of Management Listening to Customers Research on Immediate Customers Research on Internal Customers Executive or Management Listening Approaches to Employees Employees Suggestions

Exercise – 1 page assignment I Page Assignment– If you are service manager in service instituion– you are receiving lots of complain from customers, and also you perceive that employees are not happy. You just learned about importance and usefulness of upward communication; so Devise an upward communication mechanism (based on what you study) How will you operationalize it? Make it functional What are the likely outcomes of this upward communication? You can make assumption based on your personal experiences What are you going to do with the outcome of upward communication? Give some concrete action plan.

Building Customer Relationships

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

The “Bucket Theory of Marketing”

Customer Goals of Relationship Marketing

A Typology of Exchange Relationships

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

Profit Generated by a Customer Over Time

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.

Customer Loyalty Exercise Think of a service provider to whom you are loyal. What do you do (your behaviors, actions, feelings) that indicates you are loyal? Why are you loyal to this provider? What factors have influenced the formation of your loyalty?

Relationship Value of Customers Concept or calculation that looks at customers from the point of view of their lifetime revenue and/or profitability contributions to a company Factors that influence relationship value (lifetime value and lifetime profitability) Estimating customer lifetime value Linking customer relationship value to firm value

Customer Profitability Segment - The Customer Pyramid

The Customer Pyramid Platinum Tier Gold Tier Iron Tier Lead Tier Company’s most profitable customers, typically heavy users of the product, not overly price sensitive, willing to invest in and try new offerings, and committed customers of the firm   Gold Tier Profitability levels are not as high, perhaps because customers want price discounts that limit margins or are simply not as loyal. May be heavy users who minimize risk by working with multiple vendors. Iron Tier Essential customers that provide the volume needed to utilize the firm'’ capacity but their spending levels, loyalty, and profitability are not substantial enough for special treatment Lead Tier Customers who are costing the firm money. They demand more attention than they are due given their spending and profitability and are sometimes problem customers—complaining about the firm to others and tying up firm resources.

Segmenting Customers Based on Commitment and Profitability BUTTERFLIES Good fit of company offering and customer needs High profit potential Action: Aim to achieve transactional satisfaction, not attitudinal loyalty Milk the accounts as long as they are active Key challenge: cease investment once inflection point is reached TRUE FRIENDS Good fit of company offering and customer needs Highest profit potential Actions: Consistent intermittently spaced communication Achieve attitudinal and behavioural loyalty Invest to nurture/defend/retain High (Behavioral Loyalty) CLV STRANGERS Little fit of company offering and customer needs Lowest profit potential Action: No relationship investment Profitize every transaction BARNACLES Limited fit of company offering and customer needs Low profit potential Action: Measure size and share-of-wallet If share-of-wallet is low, specific up and cross-selling If size of wallet is small, strict cost control Low Relationship Commitment (Attitudinal Loyalty) Low High W. Reinhartz & V. Kumar, "The Mismanagement of Customer Loyalty," Harvard Business Review 80 (July 2002), pp. 86-94.

Relationship Development Model 6-37

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

Levels of Relationship Strategies 6-39

Levels of Relationship Strategies

“The Customer Is NOT Always Right” Not all customers are good relationship customers: wrong segment not profitable in the long term difficult customers

Service Recovery The Impact of Service Failure and Recovery How Customers Respond to Service Failures Customers’ Recovery Expectations Switching versus Staying Following Service Recovery Service Recovery Strategies Service Guarantees

Reliability is Critical in Service but… In all service contexts, service failure is inevitable. Service failure occurs when 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 a firm in response to service failure.

Complaining Customers: The Tip of the Iceberg

Unhappy Customers’ Repurchase Intentions

Dissatisfied Consumers’ Behavior The Retail Customer Dissatisfaction Study 2006 by the Verde Group found: 48% of respondents reported that they avoided a store because of someone else’s negative experience for those who encountered problems, 33% said they would “definitely not” or “probably not” return The exponential power of storytelling: as people tell the story, the negativity is embellished and grows 46

Your hotel is a bad hotel

Customer Rage Study Conducted by In collaboration with 48

How Customers Expressed Their Displeasure

What Customers Wanted to Get Non-monetary remedies

What Complainants Got: 56% of complainants felt they got NOTHING

Ping-Ponging (Number of Contacts Needed to Resolve Complaint) Mean number of contacts Complainants = 4.3 % complainants

Length of Time to Resolve Complaints % complainants

Fairness Themes in Service Recovery

Customer Complaint Actions Following Service Failure

Service Recovery Paradox “A good recovery can turn angry, frustrated customers into loyal ones. ..can, in fact, create more goodwill than if things had gone smoothly in the first place.” (Hart et al.) HOWEVER: only a small percent of customers complain service recovery must be SUPERLATIVE only with responsiveness, redress, and empathy/courtesy only with tangible rewards even though service recovery can improve satisfaction, it has not been found to increase purchase intentions or perceptions of the brand service recovery is expensive

Service Recovery Paradox The service recovery paradox is more likely to occur when: the failure is not considered by the customer to be severe the customer has not experienced prior failures with the firm the cause of the failure is viewed as unstable by the customer the customer perceives that the company had little control over the cause of the failure Conditions must be just right in order for the recovery paradox to be present!

Causes Behind Service Switching

Service Recovery Strategies

Eight Most Common Remedies Customers Seek with Serious Problems Have the product repaired or service fixed Be reimbursed for the hassle of having experienced a problem Receive a free product or service in the future Explanation by the firm as to what happened Assurance that the problem will not be repeated A thank you for the customer’s business An apology from the firm An opportunity for the customer to vent his or her frustrations to the firm

Customer Satisfaction with Timeliness of Firm Responses to Service Failures

Service Guarantees guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary) in a business context, a guarantee is a pledge or assurance that a product offered by a firm will perform as promised and, if not, then some form of reparation will be undertaken by the firm for tangible products, a guarantee is often done in the form of a warranty services are often not guaranteed cannot return the service service experience is intangible (so what do you guarantee?)

The Hampton Inn 100 Percent Satisfaction Guarantee

Characteristics of an Effective Service Guarantee Unconditional the guarantee should make its promise unconditionally – no strings attached Meaningful the firm should guarantee elements of the service that are important to the customer the payout should cover fully the customer’s dissatisfaction Easy to Understand and Communicate customers need to understand what to expect employees need to understand what to do Easy to Invoke and Collect the firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee

British Airways Guarantee

Why a Good Guarantee Works forces company to focus on customers sets clear standards generates feedback forces company to understand why it failed builds “marketing muscle”

Does everyone need a service guarantee? Reasons companies might NOT want to offer a service guarantee: existing service quality is poor guarantee does not fit the company’s image too many uncontrollable external variables fears of cheating or abuse by customers costs of the guarantee outweigh the benefits customers perceive little risk in the service customers perceive little variability in service quality among competitors

Service Guarantees service guarantees work for companies who are already customer-focused effective guarantees can be BIG deals – they put the company at risk in the eyes of the customer customers should be involved in the design of service guarantees the guarantee should be so stunning that it comes as a surprise – a WOW!! factor “it’s the icing on the cake, not the cake”

Service recovery video

Thank you