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

2. Exercise – Glacier Bear Lodge

3. 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.

4. Exercise – Glacier Bear Lodge
Go to the lodge website, see 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.

5. 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?

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

7. Group Formation and Proposal

8. 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

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

10. Key Factors Leading to Provider Gap 1

11. Understanding customer requirements

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

13. 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.

14. 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

15. 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

16. 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

17. 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

18. Upward communication

19. What is objective of upward communication?

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

21. 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

22. 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

23. 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.

24. Building Customer Relationships

25. 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

26. The “Bucket Theory of Marketing”

27. Customer Goals of Relationship Marketing

28. A Typology of Exchange Relationships

29. 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

30. Profit Generated by a Customer Over Time

31. 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.

32. 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?

33. 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

34. Customer Profitability Segment - The Customer Pyramid

35. 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.

36. 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

37. Relationship Development Model
6-37

38. 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

39. Levels of Relationship Strategies
6-39

40. Levels of Relationship Strategies

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

42. 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

43. 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.

44. Complaining Customers: The Tip of the Iceberg

45. Unhappy Customers’ Repurchase Intentions

46. 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

47. Your hotel is a bad hotel

48. Customer Rage Study Conducted by
In collaboration with 48

49. How Customers Expressed Their Displeasure

50. What Customers Wanted to Get
Non-monetary remedies

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

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

53. Length of Time to Resolve Complaints
% complainants

54. Fairness Themes in Service Recovery

55. Customer Complaint Actions Following Service Failure

56. 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

57. 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!

58. Causes Behind Service Switching

59. Service Recovery Strategies

60. 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

61. Customer Satisfaction with Timeliness of Firm Responses to Service Failures

62. 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?)

63. The Hampton Inn 100 Percent Satisfaction Guarantee

64. 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

65. British Airways Guarantee

66. 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”

67. 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

68. 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”

69. Service recovery video

70. Thank you