MKT 315 Final Ch11.12.13.14 Summary PDF

NAME: JUHANA SUBAYTA Chapter 11: Defining and Measuring Customer Satisfaction Chapter Objectives Define customer satisfaction and understand the benefits associated with satisfied custom...

NAME: JUHANA SUBAYTA Chapter 11: Defining and Measuring Customer Satisfaction Chapter Objectives Define customer satisfaction and understand the benefits associated with satisfied customers. Appreciate various methods for measuring customer satisfaction and discuss the limitations of customer satisfaction measurements. Discuss factors to consider when investing in customer satisfaction improvements. Understand the many factors that influence customer expectations. Recipe for Customer Service Disasters Technical Assistance Research Program (TARP) Skyrocketing inflation The average business does not hear from 96% of its unhappy customers (don't complain) For every complaint received, 26 customers actually have the same problem Price competition ensued (price wars) The average person with a problem tells 9 or 10 people. 13% will tell more than 20 Labor shortages Customers who have their complaints resolved tell an average of 5 people Automation Complainers are more likely to do business with you again Customers are tougher to please 1. 54-70% if the complaint is resolved at all 2. 95% if the complaint is resolved quickly Customer Satisfaction / Dissatisfaction Benefits of Customer Satisfaction Expectancy Disconfirmation Model 1. Positive word-of-mouth Confirmation: Perception = Expectations 2. Purchase more frequently Negative Disconfirmation: Perception < Expectations 3. Less likely to be lost to competitors 4. Protected from price competition Positive Disconfirmation: Perception > Expectations 5. Positive work environments FINAL EXAM Q: DISCUSS 5 METHODS TO TEST CUSTOMER SATISFACTION? Discuss the benefits of customer satisfaction surveys. Measuring Customer Satisfaction (1) provides a formal means of customer feedback; Indirect Measures: sales records, profits, customer complaints (2) conveys the message to customers that the firm values customer input; Direct Measures least effective (3) identifies existing and potential problems; (1) The Scale of 100 Approach: Federal Express’ original approach (score = 83) (4) provides a means of evaluating employee performance; (2) The “Very Dissatisfied/Very Satisfied” Approach (5) results may be used in the firm's advertising; and (3) The Combined Approach: Benchmark MOST EFFECTIVE (6) the surveys provide a means for comparison among competing firms. When forming customer expectations, price, & firms physical facility acts as a(n): implicit service promise One of the major factors driving desired service expectations is: the customer's personal service philosophies Personal factors that are stable over time and that increase a customer's sensitivity to how a service should be best provided are referred to as: enduring service intensifiers.. Situational factors ( bad weather, catastrophe), and competing alternative service providers has an influence on: adequate service expectations. Understanding Customer Satisfaction Ratings Factors Influencing Customer Satisfaction Ratings (1) Virtually all self-reports of customer satisfaction possess a Customers are genuinely satisfied distribution in which a majority of the responses indicate that Response bias customers are satisfied and the distribution itself is negatively Data collection method: personal vs. non-personal Yields high satisfaction score skewed. Question form: satisfied vs. dissatisfied (2) Customer satisfaction ratings are fairly high. Context of the Question: general question prior to specific question Should a firm invest $100,000 to attempt to improve ratings from 95% Timing of Question: recent vs. past purchase to 98%? Social Desirability Bias Depends Upon: Mood (1) satisfaction ratings of other firms Criticisms of Customer Satisfaction Research (IMPORTANT) (2) dollar investment needed relative to the impact on the bottom 1. focuses only on current needs line by increasing market share 2. Focus on registered complaints (3) no. of time periods needed to recoup the investment 3. Focus on global attributes 4. often excludes employees (4) opportunity costs associated with other uses of the firm’s funds 5. Customers just don't know what they want Types of Customer Expectations Factors Influencing Expected Service: (1) Predicted service: level of service quality a customer believes is likely to occur (2) Probability expectation (3) Desired service: level of service quality a customer actually wants from a service encounter (4) Ideal expectation (5) Adequate service: level of service quality a customer is willing to accept. Customer satisfaction is calculated by comparing predicted service and perceived service (6) Perceived service adequacy: compares adequate service and perceived service (7) Perceived service superiority: compares desired service and perceived service Perceived service adequacy AND Perceived service superiority are measures of service quality. (8) Minimum tolerable expectation zone of tolerance is related to heterogeneity The primary contribution of Babich's customer satisfaction models is that it stresses the importance of knowing competitor satisfaction ratings. 65% to 85% of customers who defect to competitors say they were "satisfied" or "very satisfied" with their former providers.  NAME: JUHANA SUBAYTA Chapter 12: Defining and Measuring Service Quality Chapter Objectives Discuss the differences and the similarities between service quality and customer satisfaction. Identify the gaps that influence consumer perceptions of service quality and discuss factors that influence the size of each servi ce quality gap. Understand the basic concepts of SERQUAL. Describe the components of a service quality information system. What is Service Quality? Service Quality: long-run overall evaluation of the firm’s performance looks at how firms should perform measures a higher standard of service delivery expectations drive service quality perceptions Customer Satisfaction: short-run, transaction specific measure Gaps Influence Consumer Perceptions of Service Quality (1) The knowledge gap: the difference between what consumer expect of a service and what management perceives that consumer expect (2) The standard gap: the difference between what management perceives that consumer expect and the quality specifications set for service delivery (3) The delivery gap: the difference between the quality standards set for service delivery and the actual quality of service delivery (4) The communications gap: the difference between the actual quality of service delivered and the quality of service described in the firm’s external communications (5) The Service gap: the difference between the customer expectations and customer perception of service. Diagnosing Failure Gaps in Service Quality *As the firm's research orientation increases, the size of the knowledge gap should decrease. Gap 1: The Knowledge Gap * As the firm begins to listen to its front-line employees and the amount of upward communication in the company 1. research orientation increases, the size of the knowledge gap should decrease. 2. upward communication * As more levels of management are added and the firm's hierarchy increases, the size of the knowledge gap should 3. levels of management increase due to the increased distance of the firm's management from the customer. Gap 2: The Standards Gap Gap 4: The Communication Gap Gap 3: The Delivery Gap 1. perceptions of feasibility 1. willingness to perform ✓ Propensity of over promising 2. commitment to service quality vs. cost reduction and short-term profits 2. employee-job fit ✓ Amount of horizontal communication 3. No culture or goal setting for services: timeliness, accuracy, responsiveness 3. role conflict 4. Inability to translate intro a written business plan 4. role ambiguity 5. dispersion of control: Learned helplessness 6. inadequate support Measuring Service Quality: SERVQUAL 7. standard diff btw service performance and the actual quality Diagnostic tool used to determine “gap scores” The larger the gap, the lower the service quality evaluation 44 Item Scale the Compares “Should” to Perceptions Criticism of SERVQUAL compares perceptions to what a customer should expect from a firm that delivers high-quality services. 1. Length of the Questionnaire The 5 dimensions of service quality: reliability, responsiveness, assurance, empathy, & tangibles. – Expectation and perception questions seem They do not hold up under statistical scrutiny. redundant The Tangibles Dimension: Firm’s ability to manage its tangibles; will be neat in appearance/measures consumer – What’s the value of including the expectation views. set? The Reliability Dimension: Reflects the consistency and dependability of the firm’s performance; will perform the 2. Validity of the Five Dimensions service right the first time. – Questions need to be adjusted to fit specific The Responsiveness Dimension: The commitment of employees to provide the service. industry The Assurance Dimension: Reflects the competence of the firm, the courtesy extended to its customers, and the under examination security of its operations – Measurement issues The Empathy Dimension: Ability to experience one’s feelings as one’s own; customer's best interest at heart. 3. Predictive Power: Ability to predict consumer The reliability dimension is most important and tangibles dimension is the least important. purchase intentions Service Quality Information System Key Components Noncustomer research Mystery shopping – Measures individual employee performance/behavior 1. Listening: The quality is defined by the customer; Their expectations are a rising bar – Aids in coaching, training, and evaluating NOT a key component that needs to be built into every service quality system. Employee surveys 2. Reliability: little else matters when the service is unreliable – Employee satisfaction is directly related to customer satisfaction 3. Basic service: deliver the basics first, the frills can come later – Employee surveys should examine morale, attitudes, and perceived obstacles 4. Service design: design flaws hinder the basic service Solicitation of customer complaints 5. Recovery: firms that do not respond to customer complaints escalate the service failure – Identify unhappy customers 6. Surprising customers – Identify weaknesses in the firm’s service delivery system 7. Fair play: be careful of the “squeaky wheel” Customer research After-sale surveys 8. Teamwork: service team building should not be left to chance – More active approach than above 9. Employee research: employee needs are as important as customer needs – Survey taken while the encounter is fresh on the customer’s mind 10. Servant Leadership: leadership must serve the servers, inspiring and enabling focus group interviews – Group interaction provides ideas Customer research, examine(s) the customer’s – Other forms of research are needed to confirm the group’s ideas perspective of a firm’s strengths and weaknesses Total market service quality surveys: Assesses the firm’s and its competitors’ service quality/satisfaction ratings Overpromise causes communications gap  NAME: JUHANA SUBAYTA Chapter 13: Complaints and Service Recovery Chapter Objectives Discuss the four different categories of service failure types. Explain customer complaining behavior, including the reasons customers do and do not complain and the outcomes associated with customer complaints. Describe the issues involved in mastering the art of service recovery. Understand the value of tracking and monitoring service failures and employee recovery efforts. Types of Complaints Types of Complainers 1. Instrumental: expressed for the purpose of altering an undesirable state 1. The Meek (humble) Customer: customer who never complains of affairs 2. The Aggressive Customer: customer who complain in regular basis and loudly enough for 2. Noninstrumental: expressed without the expectation that an everyone else to hear undesirable state will be altered 3. Ostensive (supposed): complaints directed at someone or something 3. The High-Roller Customer: a customer who expects the best and is willing to pay for it, outside the realm of the complainer typically complain in a reasonable manner 4. Reflexive (automatic): complaints directed at some inner aspect of the 4. The Rip-Off Customer: a customer who wants more than they’re entitled to receive complainer 5. The Chronic (prolong) Complainer Customer: a customer who is never satisfied yet continues to return Why Do Customers Complain? Why Don’t Customers Complain? 1. Correct the problem 1. Don’t know who to complain to 2. Emotional release from frustration 2. Don’t think it will do any good 3. Regain some measure of control by spreading negative word-of-mouth 3. May doubt their own subjective evaluation 4. Solicit (seek) sympathy 4. May accept part of the blame 5. Test for consensus 5. May want to avoid confrontation/conflict 6. Create an impression of being more intelligent and discerning (eagle -eyed) 6. May lack expertise Complaining Outcomes The most common forms of outcomes are exit, voice, retaliation, or some combination of all three, which can vary from high, medium, to low. 1. Voice: a complaining outcome in which the customer verbally communicates dissatisfaction with the store or the p roduct 1. High => store manager 2. Medium => sales clerk 3. Low => no one associated with the store 2. Exit: a complaining outcome in which the consumer stops patronizing (supporting) the store or using the product 1. High => never purchases again 2. Medium => only purchases if other alternatives are not available 3. Low => continues to shop as usual 3. Retaliation (Revenge): a complaining outcome in which the consumer takes action deliberately designed to damage the physical operation or hurt futur e business 1. High => tells lots of people and attempts to physically damage the store 2. Medium => tells a few people and created minor inconveniences 3. Low => does not retaliate at all Basic differences between organic and mechanistic approaches to service recovery and the Steps involved in the management program Mechanistic processes: Formalized step-by-step processes that are developed to facilitate the firm's failure analysis and service recovery efforts. Organic processes: Informal sets of values and beliefs that comprise the firm's service recovery. Step 1. Develop a positive internal recovery culture: Service recovery culture: informal set of belief, behaviours, and practices that set the tone for how the firm wishes to address customer complaints. Step 5. Implement recovery strategy. How Should the Recovery Strategy Firms that develop a positive internal recovery culture recognize the need Be Presented to the Customer? to openly discuss the possibility of service failures. Perceived justice consists of 3 components: distributive justice, procedural justice, and interactional justice. Step 2. Identify service failure. Distributive justice: focuses on the specific outcome of the firm's recovery Core Service Failures; Unavailable service, unreasonably slow service, and other core effort. e.g., compensation service failures Procedural justice: examines the process that is undertaken to arrive at Customer Needs and Requests; Implicit needs (obvious to service providers) and Explicit the final outcome. e.g., time needs (overtly requested) Interactional justice: the manner in which the service recovery process is Consist of employee responses to four types of possible failures: Special needs, implemented and how recovery outcomes are presented. e.g., Human Customer preferences¸ Customer errors, Disruptive others content (empathy, friendliness) Unprompted/Unsolicited Employee Actions: Level of attention, unusual action, Cultural norms, Gestalt (evaluations made overall and not separately) and Adverse conditions Problematic Customers: Drunkenness, Verbal and physical abuse, Breaking company Bonus: Step 6. Track, monitor, and evaluate effectiveness. policies, Uncooperative customers OR Provide feedback to employees. Step 3. Identify the root cause Improve Service Recovery efforts Locus (core): possible source of the failure 1. Measure the costs Stability: likelihood the service failure will recur 2. Actively encourage complaints Controllability: whether or not the firm had control over the cause of the failure 3. Anticipate needs for recovery 4. Respond quickly Step 4. Select recovery strategy (Offset the Failure) 5. Train employees Compensatory Strategies: offset the costs of the service failure 6. Empower the front-line Restoration Strategies: offset the situation by providing an identical offering 7. Close the Loop Apologetic Strategies: verbal recovery strategies Reimbursement Strategies: refund Unresponsive Strategies: decides not to respond to customer complaints.  NAME: JUHANA SUBAYTA Chapter 14: Customer Loyalty & Retention Chapter Objectives Understand the difference between the service marketing concepts of loyalty and retention and the relationship between the two. Discuss why the concept of customer retention has become increasingly important. Master successful tactics for retaining existing customers. Describe emerging customer retention programs Explain defection management. Concepts and explain the relationship between customer loyalty and customer retention. Customer loyalty is Customer retention is the rational/emotional attachment as well as a business attachment to the 1. focusing the firm's marketing efforts toward the existing customer base service firm. 2. Firms engaged in customer retention efforts work to satisfy existing/current It is a deeper conviction to the firm than pure retention alone. customers in hope of further developing the customer-provider appealing to believe that customer satisfaction leads to customer loyalty relationship. leading to customer retention. 3. opposite of conquest marketing It has Higher levels of customer satisfaction, and does not always necessarily 4. futuristic than customer satisfaction exist. Satisfaction ➔ Retention Importance of Customer Retention 1. Markets are stagnant: decrease in population growth Strategies for Cultivating Customer Loyalty 2. Increase in competition: relative parity 1. Developing a proper perspective 3. Rising costs of marketing 2. Staying in touch increase in the cost of advertising 3. Providing discretionary (fixable) effort loss of “share of voice” 4. Leading through top-down loyalty 4. Changes within the channels of distribution: distance marketing 5. Training and empowering employees 5. Customers have changed 6. Providing incentives more informed 7. Remembering your customers’ purchases increasingly skeptical 8. Building trust through reliability 9. Flexibility Benefits of Customer Retention 10. Replace technology with humans 1. Profits derived from sales: Reducing defections by 5% can boost profits 25% 11. Be great with names to 85% depending on the industry 12. Being available when you’re needed the most 2. Profits from reduced operation costs: It is 3 to 5 times cheaper to keep a customer than to recruit a new one 3. Profits from referrals: Positive word-of-mouth advertising generated by satisfied customers Lifetime value of a customer: refers to the average dollar amount per sale multiplied by the average number of times customers’ reorder. Lifetime Average Lifetime Value = (Average Sale) x (Estimated number of times customer reorder) Lifetime Average Profit Value = (Average Profit Per Sale) x (Estimated number of times customer reorder) Break-even Customer acquisition cost = (Average Lifetime Profit) + (Average Customer Acquisition Cost) Under what conditions is it no longer worthwhile to keep a customer? The account is no longer profitable. Conditions specified in the sales contract are no longer being met. Customers are abusive to the point that it lowers employee morale. Customer demands are beyond reasonable, and fulfilling those demands would result in poor service for the remaining customer base. The customer’s reputation is so poor that associating with the customer tarnishes the image and reputation of the selling firm. Concepts of frequency marketing, relationship marketing, and after marketing: The primary goal of frequency marketing is to make existing customers purchase more often from the same provider. Relationship marketing employs techniques based on developing long-term relationships with customers. Aftermarketing emphasizes the importance of marketing efforts after the initial sale has been made. Differences between an implicit guarantee, a specific result guarantee, and an unconditional guarantee An implicit guarantee is an unwritten, unspoken guarantee that establishes an understanding between the firm and its customer s. A specific result guarantee applies only to specific steps or outputs in the service delivery process. An unconditional guarantee promises complete customer satisfaction, and at a minimum, a full refund or complete, no-cost problem resolution. An unconditional guarantee is the most powerful of the three types. Defection Management: Businesses commonly lose 15% to 20% of their customers each year Types of defectors: 1. price defectors 2. product defectors 3. service defectors 4. market defectors 5. technological defectors 6. organizational defectors Defection management is a systematic process that actively attempts to retain customers before they defect. The key to defection management is the creation of a zero defections culture within the firm. The 1 st step is communicating to employees the importance of retaining current customers and the benefits obtained by reducing defections. The 2 nd step in creating a zero defections culture is to train employees in defection management. The 3 rd and perhaps most critical step in the defection management process is to tie incentives to defection rates. Finally, firms successful in defection management also carefully consider creating switching barriers that discourage defections.