© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

5 Chapter Customer Perceptions of Service  Customer Perceptions  Customer Satisfaction  Service Quality  Service Encounters: The Building Blocks for Customer Perceptions

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Objectives for Chapter 5: Customer 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.  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.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Figure 5.1 Customer Perceptions of Quality and Customer Satisfaction

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Factors Influencing Customer Satisfaction  Product/service quality  Specific product or service features  Consumer emotions  Attributions for service success or failure  Perceptions of equity or fairness  Other consumers, family members, and coworkers  Price  Personal factors  the customer’s mood or emotional state  situational factors

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Outcomes of Customer Satisfaction  Increased customer retention  Positive word-of-mouth communications  Increased revenues

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Figure 5.3 ASCI and Annual Percentage Growth in S&P 500 Earnings Source: C. Fornell “Customer Satisfaction and Corporate Earnings,“ commentary appearing on ACSI website, May 1, 2001,

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Figure 5.4 Relationship between Customer Satisfaction and Loyalty in Competitive Industries Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Service Quality  The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.  Service quality assessments are formed on judgments of:  outcome quality  interaction quality  physical environment quality

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 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. Tangibles Reliability Responsiveness Assurance Empathy

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Exercise to Identify Service Attributes In groups of five, 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:

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin n Providing service as promised n Dependability in handling customers’ service problems n Performing services right the first time n Providing services at the promised time n Maintaining error-free records n Keeping customers informed as to when services will be performed n Prompt service to customers n Willingness to help customers n Readiness to respond to customers’ requests RELIABILITY RESPONSIVENESS n Employees who instill confidence in customers n Making customers feel safe in their transactions n Employees who are consistently courteous n Employees who have the knowledge to answer customer questions ASSURANCE n Giving customers individual attention n Employees who deal with customers in a caring fashion n Having the customer’s best interest at heart n Employees who understand the needs of their customers n Convenient business hours EMPATHY n Modern equipment n Visually appealing facilities n Employees who have a neat, professional appearance n Visually appealing materials associated with the service TANGIBLES SERVQUAL Attributes

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin The Service Encounter  is the “moment of truth”  occurs any time the customer interacts with the firm  can potentially be critical in determining customer satisfaction and loyalty  types of encounters:  remote encounters, phone encounters, face-to-face encounters  is an opportunity to:  build trust  reinforce quality  build brand identity  increase loyalty

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Check-In Request Wake-Up Call Checkout Bellboy Takes to Room Restaurant Meal Figure 5.5 A Service Encounter Cascade for a Hotel Visit

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Sales Call Ordering Supplies Billing Delivery and Installation Servicing A Service Encounter Cascade for an Industrial Purchase

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Critical Service Encounters Research  GOAL:  understanding actual events and behaviors that cause customer dis/satisfaction in service encounters  METHOD:  Critical Incident Technique  DATA:  stories from customers and employees  OUTPUT:  identification of themes underlying satisfaction and dissatisfaction with service encounters

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Sample Questions for Critical Incidents Technique Study  Think of a time when, as a customer, you had a particularly satisfying (dissatisfying) interaction with an employee of ______________.  When did the incident happen?  What specific circumstances led up to this situation?  Exactly what was said and done?  What resulted that made you feel the interaction was satisfying (dissatisfying)?

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Common Themes in Critical Service Encounters Research Recovery: Adaptability: Spontaneity:Coping: employee response to service delivery system failure employee response to customer needs and requests employee response to problem customers unprompted and unsolicited employee actions and attitudes

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Recovery  Acknowledge problem  Explain causes  Apologize  Compensate/upgrade  Lay out options  Take responsibility  Ignore customer  Blame customer  Leave customer to fend for him/herself  Downgrade  Act as if nothing is wrong  “Pass the buck” DODON’T

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Adaptability  Recognize the seriousness of the need  Acknowledge  Anticipate  Attempt to accommodate  Adjust the system  Explain rules/policies  Take responsibility  Ignore  Promise, but fail to follow through  Show unwillingness to try  Embarrass the customer  Laugh at the customer  Avoid responsibility  “Pass the buck” DODON’T

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Spontaneity  Take time  Be attentive  Anticipate needs  Listen  Provide information  Show empathy  Exhibit impatience  Ignore  Yell/laugh/swear  Steal from customers  Discriminate DODON’T

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Coping  Listen  Try to accommodate  Explain  Let go of the customer  Take customer’s dissatisfaction personally  Let customer’s dissatisfaction affect others DODON’T

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Figure 5.7 Evidence of Service from the Customer’s Point of View People Process Physical Evidence Contact employees Customer him/herself Other customers Operational flow of activities Steps in process Flexibility vs. standard Technology vs. human Tangible communication Servicescape Guarantees Technology Website Source: From “Managing the Evidence of Service” by M. J. Bitner from The Service Quality Handbook, eds. E. E. Scheuing and W. F. Christopher (1993), pp