Customer Perceptions of Service Chapter 4 09/07/2012

Customer Perceptions of Service Chapter 4 Customer Perceptions of Service Customer Perceptions Customer Satisfaction Service Quality Service Encounters: The Building Blocks for Customer Perceptions 4-2

Objectives for Chapter 4: Consumer Perceptions of Service Provide a solid basis for understanding what influences customer perceptions of service and the relationships among customer satisfaction, service quality, and individual service encounters. Demonstrate the importance of customer satisfaction—what it is, the factors that influence it, and the significant outcomes resulting from it. 4-3

Objectives for Chapter 4: Consumer Perceptions of Service Develop critical knowledge of service quality and its five key dimensions: reliability, responsiveness, empathy, assurance, and tangibles. Show that service encounters, or the “moments of truth” are the essential building blocks from which customers form their perceptions.

The customer is . . . Anyone who receives the company’s services, including: external customers (outside the organization, business customers, suppliers, partners, end consumers) internal customers (inside the organization, e.g., other departments, fellow employees) 4-5

Customer perceptions How customer assess whether they have experienced quality service and whether they are satisfied Perceptions are always considered relative to expectations. A discussion of quality and satisfaction is based on customer’s perceptions of the service- not some predetermined objective criteria of what service is or should be.

Transaction versus Cumulative Perceptions The customers will have perception on single, transaction-specific encounters as well as overall perceptions of a company based on all their experiences. Isolated encounters are the building blocks for overall, cumulative experience evaluations. Understanding perceptions at the transaction-specific level is critical for diagnosing service issues and making immediate changes.

Customer Satisfaction is the customer’s evaluation of a product or service in terms of whether that product or service has met the customer’s needs and expectations. Satisfaction and quality are different. Satisfaction is viewed as a broader concept, while service quality is a component of customer satisfaction. Customer Satisfaction can mean Contentment, pleasure, delight, ambivalence

Customer Perceptions of Quality and Customer Satisfaction 4-9

Factors Influencing Customer Satisfaction Product quality Service quality Personal factors Situational factors Price 4-10

Factors Influencing Customer Satisfaction (continued) Specific product or service features eg. Resort hotel-pool, restaurants, room comfort Consumer emotions If you are happy, your mood will influence how you feel about the services you experience.

Attributions for service success or failure e.g. A customer of a weight-loss organization will search for the causes of the success/ failure before determining her satisfaction with the service. Perceptions of equity or fairness Am I treated fairly compared with other customers? Other consumers, family members, and coworkers

Outcomes of Customer Satisfaction Increased customer loyalty Positive word-of-mouth communications Increased revenues Increased return to shareholders 4-13

ASQI and Market Value Added A relationship between market value added and satisfaction. 4-14

Relationship between Customer Satisfaction and Loyalty in Competitive Industries 4-15

Top Box Scores – A Higher Standard Overall Satisfaction with XYZ (% of customers) Definitely Will Repurchase from XYZ Definitely Would Recommend XYZ TOP BOX Very Satisfied (64%) = 96% = 91% 44-point drop 55-point drop SECOND BOX Somewhat Satisfied (29%) All Customers = 52% = 36% BOTTOM 3 BOXES Neutral to Very Dissatisfied (7%) = 7% = 4% 4-16 Source: Technical Assistance Research Bureau (TARP), 2007.

What is Service Quality? The Customer Gap Expected Service Customer gap Perceived Service Service quality is the customer’s judgment of overall excellence of the service provided in relation to the quality that was expected. 4-17

Service Quality Service quality assessments are formed on judgments of: outcome quality interaction quality physical environment quality 4-18

E.g. a legal service Outcome quality- how the court case was resolved Interaction quality- the lawyer's timeliness in returning phone calls, his empathy for the client Physical environment quality- the décor and surroundings E.g. restaurant Outcome quality - food Interaction quality - how the food is served Physical environment quality - the décor and surroundings

The Five Dimensions of Service Quality Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to inspire trust and confidence. Physical facilities, equipment, and appearance of personnel. Caring, individualized attention the firm provides its customers. Willingness to help customers and provide prompt service. Reliability Assurance Tangibles Empathy Responsiveness 4-20

SERVQUAL Attributes RELIABILITY EMPATHY RESPONSIVENESS TANGIBLES Providing service as promised Dependability in handling customers’ service problems Performing services right the first time Providing services at the promised time Maintaining error-free records Giving customers individual attention Employees who deal with customers in a caring fashion Having the customer’s best interest at heart Employees who understand the needs of their customers Convenient business hours RESPONSIVENESS TANGIBLES Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service ASSURANCE Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions 4-21

Reliability Absolutely, positively has to get there.

Geek Squad’s Focus on Responsiveness http://www.youtube.com/watch?feature=endscreen&NR=1&v=WAqnrluv3jw http://www.youtube.com/watch?v=oCRPI-1dHQw&feature=related 4-23

How Customers Judge the Five Dimensions of Service Quality 4-24

Empathy Southwest airline commercials http://www.youtube.com/watch?v=S3zMI6fOg8o

Exercise to Identify Service Attributes In groups of two, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view. Reliability: Assurance: Tangibles: Empathy: Responsiveness: 4-26

Service Encounter: The building blocks for customer perceptions is the “moment of truth” occurs any time the customer interacts with the firm can potentially be critical in determining customer satisfaction and loyalty 4-27

The Service Encounter types of encounters: remote encounters, phone encounters, face-to-face encounters is an opportunity to: build trust reinforce quality build brand identity increase loyalty

A Service Encounter Cascade for a Hotel Visit 4-29

A Service Encounter Cascade for an Industrial Purchase Sales Call Delivery and Installation Servicing Ordering Supplies Billing 4-30

Service Encounters: An Opportunity to Build Satisfaction and Quality http://www.youtube.com/watch?v=UG39pqO6giI 4-31

Common Themes in Critical Service Encounters Research Recovery: Adaptability: employee response to service delivery system failure employee response to customer needs and requests Coping: Spontaneity: unprompted and unsolicited employee actions and attitudes employee response to problem customers 4-32

Recovery Employee is required to respond in some way to consumer complaints and disappointments. 4-33

Adaptability Customers judge service encounters quality in terms of the flexibility of the employees and the system. Customer perceives that something special is being done for her individual needs. 4-34

Spontaneity 4-35

Coping The behavior required of employee to handles problem customers encounters. 4-36

Technology-Based Service Encounters Themes for satisfying self-service technologies (SSTs) The technology solved an intensified need The technology was better than the alternative The technology did its job Themes for dissatisfying SSTs The technology itself failed The process failed The technology was poorly designed The customer did not use the technology properly 4-37

Homework: due next week Read Technology Spotlight on page 100. Visit Amazon.com’s website. Visit a traditional bookstore. How would you compare the two experience? Compare and contrast the factors that most influenced you satisfaction and perceptions of service quality in the two different situations. When would you choose to use one versus another?