1. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Chapter 4 Customer Perceptions of Service Customer Perceptions Customer Satisfaction Service Quality Service Encounters: The Foundations for Satisfaction and Service Quality Strategies for Influencing Customer Perceptions

2. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Objectives for Chapter 4: Customer Perceptions of Service Provide you with definitions and understanding of customer satisfaction and service quality. Show that service encounters or the “moments of truth” are the building blocks of customer perceptions. Highlight strategies for managing customer perceptions of service.

3. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Figure 4.1 Customer Perceptions of Service Quality and Customer Satisfaction

4. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Factors Influencing Customer Satisfaction Product/service quality Product/service attributes or features Consumer Emotions Attributions for product/service success or failure Equity or fairness evaluations

5. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Outcomes of Customer Satisfaction Increased customer retention Positive word-of-mouth communications Increased revenues

6. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Figure 4.3 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, http://www.bus.umich.edu/research/nqre/Q1-01c.html.

7. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Figure 4.4 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.

8. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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 –Process quality –Physical environment quality

9. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved The Five Dimensions of Service Quality Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to convey 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

10. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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:

11. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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

12. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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

13. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Check-In Request Wake-Up Call Checkout Bellboy Takes to Room Restaurant Meal Figure 4.5 A Service Encounter Cascade for a Hotel Visit

14. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Sales Call Ordering Supplies Billing Delivery and Installation Servicing A Service Encounter Cascade for an Industrial Purchase

15. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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

16. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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)?

17. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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

18. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved 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 DO DON’T

19. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Adaptability Recognize the seriousness of the need Acknowledge Anticipate Attempt to accommodate Explain rules/policies Take responsibility Exert effort to accommodate Promise, then fail to follow through Ignore Show unwillingness to try Embarrass the customer Laugh at the customer Avoid responsibility DODON’T

20. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Spontaneity Take time Be attentive Anticipate needs Listen Provide information (even if not asked) Treat customers fairly Show empathy Acknowledge by name Exhibit impatience Ignore Yell/laugh/swear Steal from or cheat a customer Discriminate Treat impersonally DO DON’T

21. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Coping Listen Try to accommodate Explain Let go of the customer Take customer’s dissatisfaction personally Let customer’s dissatisfaction affect others DO DON’T

22. McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Figure 4.7 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