Essentials of Health Care Marketing 2nd Ed. Eric Berkowitz Chapter 7 Developing Customer Loyalty

Learning Objectives Understand the concept of relationship marketing Recognize the distinction between satisfaction and loyalty Describe the necessary components of a value added service delivery system Appreciate the importance and role of a recovery system

Learning Objective 1 Relationship marketing An organization’s attempt to develop a long-term, cost-effective link with a customer for the benefit of both the customer and the organization. Shift from individual transactions to the establishment of longer term relationships Table 7-1, page 196 shows a change in marketing efforts Regular, ongoing contact with patients

Learning Objective 1 Relationship marketing Focus on what the customer is buying, not what the organization is providing VALUE Empowering employees to meet customer needs Quality focus – beyond the clinical side of service delivery

Learning Objective 2 Satisfaction or Loyalty? Organizations benchmark, depending on their measurement programs. Must aim for more than satisfaction Open up the floor for discussion based on personal experiences

Learning Objective 2 The Customer Loyalty Pyramid Progression of customer psychological movement toward loyalty Awareness Interest Evaluation Trial Satisfaction Repeat purchase Loyalty See fig. 7-1, p. 199

Learning Objective 2 The value of loyalty The loyal customer makes frequent and repeat purchases Is immune from the pull of competition Reduction in acquisition costs 5:1 ratio Lifetime value of customer Referrals, word-of-mouth referral More tolerant if there is a problem Discuss the 5:1 ratio

Learning Objective 3 Creating customer value The customer defines the appropriate service quality and price level. Customer defines the price/value relationship of the service. This value is relative to competitive offerings.

Learning Objective 3 Creating customer value (continued) Health care service value equation Value=Clinical quality provided=process quality-(Price + Service Acquisition Cost) Clinical Quality Provided – technology and expertise Process quality – the ease with which a customer can access the clinical quality

Learning Objective 3 Conducting a Gap Analysis See figure 7-2 on page 203 Five possible Gaps Between Expectations of service quality and management perceptions of customer expectations Between management perceptions of customer expectations and service quality specifications Between service quality specifications and service delivery For these two slides on the gap analysis, discuss in detail using real-life experiences of the students (see pp. 203-205)

Learning Objective 3 Conducting a Gap Analysis Five possible Gaps continued Between service delivery and external communications to customers Promotional in nature Between expected service and perceived service PERCEPTION IS REALITY TO OUR CUSTOMERS! Marketers set the expectations For these two slides on the gap analysis, discuss in detail using real-life experiences of the students (see pp. 203-205)

Learning Objective 3 Measuring service performance Must meet three criteria: Measurement tool must be managerially useful Tool must recognize the role of customer expectations Tool must direct action to the most relevant areas

Learning Objective 3 Measuring service performance Step 1 in developing a measurement tool is to conduct a customer audit Use of flow charts to observe process and identify potential difficulties Medical service blueprints – mapping processes Moments of truth – customer contact points See figures 7-3 and 7-4 on pp. 206-207

Learning Objective 4 Developing a Customer Recovery System An organized system that anticipates service delivery failures or problems Defined scripts for handling problems

Learning Objective 4 Developing a Customer Recovery System Critical components for implementation Focused recovery training must be conducted with all employees Recovery standards must exist The organization must be ‘easy to complain to’ Frontline employees must see themselves as part of the system Employees need to believe they are a part of a quality-conscious organization.

Summary Relationship marketing is a shift from a transactional perspective to the development of longer term loyalty. In a transactional focus, the perspective is more on what the organization is selling; in a relationship marketing focus, it is more on what the customer values. Satisfaction is not a sufficient goal for customer behavior; rather, the focus must be loyalty. The customer loyalty pyramid has multiple stages: awareness, interest, evaluation, trial, repeat, satisfaction, and ultimate loyalty.

Summary continued The lower levels of the customer pyramid are referred to as the promotional levels. Loyal customers have multiple benefits in terms of reduced acquisition costs, longer term per revenue growth, more profitable to serve, able to refer others, and more willing to pay a price premium. Loyal patients have a broader zone of tolerance or are more willing to forgive an organization’s service lapses.

Summary continued Customer value equation has four variables’ clinical quality, service process quality less out of pocket cost less effort expended. Conducting a Gap Analysis can help identify the opportunities for the delivery of customer value. A customer contact audit or medical service blueprint is a flowchart of each step in service delivery.

Summary continued A customer contact audit highlights opportunities for establishing a differential advantage. Measuring satisfaction is a function of expectations and the importance of each point of contact. A customer recovery system is defined script that anticipates how to react when a problem arises in service delivery.