SRVCMKTG 1463

Chapter 11
Managing
People for
Service
Advantage
Copyright 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 12- 1
Service Employees Are Crucially

Important
Chapter 12- 2
Service Personnel: Source of Customer

Loyalty and Competitive Advantage
Customers perspective: Encounter with service staff key
Firms perspective: Frontline is differentiation and competitive
advantage. It is:
A core part of the product
the service firm
The brand
Frontline is an important driver of customer loyalty

Anticipating customer needs
Customizing service delivery
Building personalized relationships
Chapter 12- 3
Frontline in Low-Contact Services

Many routine transactions are now conducted without involving
frontline staff, e.g.,
ATMs (Automated Teller Machines)
IVR (Interactive Voice Response) systems
Websites for reservations/ordering, payment, etc.
Frontline employees deliver crucially important moments of truth

Customers have special requests or problems
Because contact happens less frequently service quality is highly visible
when needed
Chapter 12- 4
Service Leadership and Culture
Chapter 12- 5
Service Leadership and Culture

Service culture can be defined as:
Shared perceptions of what is important
Shared values and beliefs of why they are important
Charismatic/transformational leadership:
Change frontlines values, goals to be consistent with firm
Motivate staff to perform their best
Internal Marketing:
Play a vital role in maintaining and nurturing a corporate culture
Help ensure service delivery, working relationships, employee trust,
respect, and loyalty
Chapter 12- 6
The Inverted Organizational Pyramid

Fig 11.11
Customer Base
Frontline Staf
Top Management
Middle Management
Middle Mgmt
And Top Mgmt
Support Frontline
Frontline Staf
Traditional
Organizational Pyramid
Legend:
Inverted Pyramid with a

Customer and Frontline
Focus
= Service encounters, or Moments of Truth
Chapter 12- 7
Human Resources Management

How to Get It Right?
Chapter 12- 8
Hire the Right People
The old saying People are your most important

asset is wrong. The RIGHT people are your most
important asset.
Jim Collins
The wrong people are a liability that is often difficult

to get rid of
Chapter 12- 9
How to Manage People for

Service Advantage?
Staff performance involves both ability and motivation
How can we get able service employees who are motivated to productively deliver
service excellence?
Hire the right people

Enable these people
Motivate and energize your people
Chapter 12- 10
The Wheel of Successful HR in

Service Firms (Fig 11.7)
Leadership that:
1. Hire the
Right People
Focuses the entire

organization on supporting
the frontline
Fosters a strong
service culture with
passion for service
and productivity
3. Motivate and
Energize Your People
Utilize the full
range of rewards
Drives values that

inspires, energizes
and guides service
providers
Be the preferred
employer & compete
for talent market share
Service Excellence
& Productivity
Intensify the
selection
process
2. Enable Your People

Empower frontline
Build high performance service
delivery teams
Extensive training
Chapter 12- 11
Summary Chapter 11
Service employees are a key competitive differentiator and driver of
customer loyalty
Frontline work can be difficult due to role conflict, emotional labor
and need to serve both marketing and operations
Organizations determine their fate through cycles of failure,
mediocrity, and success through their management of employees and
customers
We need to use the integrated and progressive Human Resources
Management approaches
Value driven leadership inspires employees to give their best
Chapter 12- 12
Chapter 12
Managing
Relationships
and Building
Loyalty
Chapter 12- 13
The Search for Customer

Loyalty
Chapter 12- 14
Why Is Customer Loyalty Important to

a Firms Profitability?
Customers become more profitable the longer they remain

with a firm:
Increase purchases and/or account balances
Reduced operating costs
Referrals to other customers
Price premiums
Chapter 12- 15
Why Customers Are More Profitable

Over Time (Fig 12.2)
Profit from price
premium
Profit from references
Profit from reduced
op. costs
Profit from increased
usage
Base Profit/Loss
Loss
1
4
Year
Source: Why Are Customers More Profitable Over Time from Fredrick R. Reichheld and W. Earl Sassar, Jr., Zero Defections: Quality Comes from
Services, Harvard Business Review 73 (Sep.Oct. 1990): p. 108.
Chapter 12- 16
Assessing the Value of a

Loyal Customer
Must not assume that loyal customers are always more
profitable than those making one-time transactions
Profit impact of a customer varies according to stage of
service in product life cycle
Determine costs and revenues for customers from
different market segments at different points in their
customer lifecycles
Chapter 12- 17
Gap Between Actual and

Potential Customer Value
What is current purchasing behaviour of customers in each target

segment?
What would be impact on sales and profits if they exhibited ideal

behaviour profile of:
(1) buying all services offered by the firm,
(2) using these to the exclusion of any purchases from competitors,
(3) paying full price?
How long, on average, do customers remain with firm?
What impact would it have if they remained customers for life?
Chapter 12- 18
The Wheel of Loyalty
Chapter 12- 19
The Wheel of Loyalty
(Fig 12.4)
3. Reduce
Churn Drivers
Conduct churn diagnostic
Address key churn drivers
Enabled through:
Frontline staff
Account
managers
Membership
programs
CRM
Systems
Implement complaint
handling and service
recovery
Increase switching
costs
1. Build a
Foundation
for Loyalty
Segment the market
Be selective in acquisition
Use effective tiering of service.
Customer
Loyalty
Deliver quality service.
2. Create Loyalty
Bonds
Build higher level bonds
Deepen the relationship
Give loyalty rewards
Chapter 12- 20
Building a Foundation for

Loyalty
Chapter 12- 21
Customer Needs and

Company Capabilities
Identify and target the right customers
How do customer needs relate to operations elements?
How well can service personnel meet expectations of different types of
customers?
Can company match or exceed competing services that are directed at
same types of customers?
Should result in a superior service offering in the eyes of those

customers who value what firm has to offer
Chapter 12- 22
Searching for ValueNot Just

Volume
Focus on number of customers served as well as value of each
customer
Heavy users are more profitable than occasional users
Avoid targeting customers who buy based on lowest price
Firms that are highly focused and selective in their acquisition of

customers grow faster
Right customers are not always high spenders
Can come from a large group of people that no other supplier is serving
well
Different segments offer different value
Chapter 12- 23
Effective Tiering of Service

The Customer Pyramid (Fig 12.5)
Good Relationship
Customers
Which segment sees high value in

our offer, spends more with us over
time, costs less to maintain, and
spreads positive word-of-mouth?
Platinum
Gold
Iron
Lead
Poor Relationship
Customers
Which segment costs us time,

effort, and money, yet does not
provide return we want? Which
segment is difficult to do
business with?
Source: Valarie A Zeithaml, Roland T Rust, and Katharine N. Lemon, The Customer Pyramid: Creating
and Serving Profitable Customers, California Management Review 43, no. 4, Summer 2001, pp.118
142. By permission of the Regents.
Chapter 12- 24
The Customer Satisfaction

Loyalty Relationship (Fig 12.6)
Apostle
Loyalty (Retention)
100
Zone of Affection
80
Near Apostle
Zone of Indifference
60
40
Zone of Defection
20
Terrorist
0
1
Very
Dissatisfied
Dissatisfied
Source: Adapted from Thomas O. Jones and W. Earl
Sasser, Jr., Why Satisfied Customers Defect, Harvard
Business Review, November-December 1995, p. 91.
Reprinted by permission of Harvard Business School.
Neither
Satisfied
Satisfaction
Very
Satisfied
Chapter 12- 25
Creating Loyalty Bonds
Chapter 12- 26
Strategies for Developing Loyalty

Bonds with Customers
Deepening the relationship
Reward-based Bonds
Social Bonds
Customization Bonds
Structural Bonds
Transform discrete transactions into relationships
Chapter 12- 27
Create Customer Bonds by Membership

Relationships and Loyalty Programs
How customers perceive reward programs
Brand loyalty versus deal loyalty
Buyers value rewards according to:
Cash value of redemption award
Range of choice among rewards
Aspirational value of rewards
Amount of usage required to obtain award
Psychological benefits of belonging to reward program
Timing
Send customers periodic updates on account status and progress towards
particular milestones
Chapter 12- 28
Strategies for Reducing

Customer Defections
Chapter 12- 29
Analyze Customer Defections and

Monitor Declining Accounts
Understand reasons for customer switching
Churn diagnostics common in mobile phone industry
Analysis of data warehouse information on churned and declining
customers
Exit interviews
Churn Alert Systems
Chapter 12- 30
What Drives Customers to Switch?

(Fig 12.9)
Service Failure/Recovery
Value Proposition
Core Service Failure
Pricing
Service Mistakes
Billing Errors
Service Catastrophe
Service Encounter Failures

Uncaring
Impolite
Unresponsive
Unknowledgeable
Service
Switching
High Price
Price Increases
Unfair Pricing
Deceptive Pricing
Inconvenience
Location/Hours
Wait for Appointment
Wait for Service
Response to Service Failure

Negative Response
No Response
Reluctant Response
Competition
Found Better Service
Others
Involuntary Switching
Ethical Problems
Customer Moved
Provider Closed
Unsafe
Cheat
Hard Sell Conflict of Interest
Source: Adapted from Susan M. Keaveney, Customer Switching Behavior in Service Industries: An Exploratory Study, Journal of Marketing 59 (April 1995), pp. 7182.
Chapter 12- 31
Addressing Key Churn Drivers
Delivery quality
Minimize inconvenience and nonmonetary costs
Fair and transparent pricing
Industry specific drivers
Reactive measures
Implement effective complaint handling and service
recovery procedures
Increase switching costs
Chapter 12- 32
CRM: Customer Relationship

Management
Chapter 12- 33
Common Objectives of CRM Systems (1)

(Service Perspectives 12.3)
Data collection
Data analysis
Sales force automation
Marketing automation
Call centre automation
Chapter 12- 34
An Integrated Framework for CRM Strategy

(Fig 12.10)
Chapter 12- 35
Common Failures in
CRM Implementation
Service firms equate installing CRM systems with having a
customer relationship strategy
Challenge of getting it right with wide-ranging scope of CRM
Common reasons for failures
Viewing CRM as a technology initiative
Lack of customer focus
Insufficient appreciation of customer lifetime value (CLV)
Inadequate support from top management
Failure to reengineer business processes
Underestimating the challenges in date integration
Chapter 12- 36
Key Issues in Defining a

Customer Relationship Strategy
How should our value proposition change to increase customer

loyalty?
How much customization or one-to-one marketing and service

delivery is appropriate and profitable?
What is incremental profit potential of increasing share-ofwallet with current customers? How much does this vary by
customer tier and/or segment?
How much time and resources can we allocate to CRM right

now?
If we believe in customer relationship management, why

havent we taken more steps in that direction in past?
What can we do today to develop customer relationships

without spending on technology?
Chapter 12- 37
What Is Service Quality?

Service quality is a comparison of expectations
withperformance. A business with high service quality will
meetcustomer needswhilst remaining economically
competitive. Improved service quality may increase
economiccompetitiveness.
Chapter 12- 38
Components of Quality:
Service-based
Tangibles: Appearance of physical elements

Reliability: Dependable and accurate performance
Responsiveness: Promptness; helpfulness
Assurance: Competence, courtesy, credibility,
security
Empathy: Easy access, good communication,
understanding of customer
Chapter 12- 39
The Gaps ModelA Conceptual

Tool to Identify and Correct
Service Quality Problems
Chapter 12- 40
Seven Service Quality Gaps

(Fig 14.3)
CUSTOMER
Customer needs and

expectations
1. Knowledge Gap
MANAGEMENT
Management definition
of these needs
2. Standards Gap
Translation into
design/delivery specs
4. Internal
Communications Gap
3. Delivery Gap
Execution of
design/delivery specs
4.
Advertising and
sales promises
5. Perceptions Gap
Customer perceptions
of service execution
6. Interpretation Gap
Customer
interpretation of
7. Service Gap communications
Customer experience
relative to expectations
Chapter 12- 41
Prescriptions for Closing the

Seven Service Quality Gaps (Table 14.3)
1. Knowledge gap: Learn what customers expect
2. Standards gap: Specify SQ standards that reflect expectations
3. Delivery gap: Ensure service performance meets standards
4. Internal communications gap: Ensure that communications promises
are realistic
5. Perceptions gap: Educate customers to see reality of service quality
delivered
6. Interpretation gap: Pretest communications to make sure message is
clear and unambiguous
7. Service gap: Close gaps 1 to 6 to meet customer expectations
consistently
Chapter 12- 42
World Class Service Delivery

Strategies to move a firm toward status of world class
service delivery
Mutual dependence among marketing, operations and human
resources
Deliver superior value and quality
Marketing strategies that beat the competition
Viewed as trustworthy and ethical
Outstanding place to work
All actions are well coordinated
All managers participate in strategic planning
Chapter 12- 43

SRVCMKTG 1463

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

SRVCMKTG 1463

Hochgeladen von

Copyright:

Verfügbare Formate

Chapter 11

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Service Employees Are Crucially

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Service Personnel: Source of Customer

Frontline is an important driver of customer loyalty

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Frontline in Low-Contact Services

Frontline employees deliver crucially important moments of truth

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Service Leadership and Culture

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Service Leadership and Culture

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

The Inverted Organizational Pyramid

Inverted Pyramid with a

= Service encounters, or Moments of Truth

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Human Resources Management

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Hire the Right People

The old saying People are your most important

The wrong people are a liability that is often difficult

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

How to Manage People for

Hire the right people

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

The Wheel of Successful HR in

Focuses the entire

Drives values that

2. Enable Your People

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

The Search for Customer

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Why Is Customer Loyalty Important to

Customers become more profitable the longer they remain

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Why Customers Are More Profitable

Services Marketing, Canadian Edition

Assessing the Value of a

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Gap Between Actual and

What is current purchasing behaviour of customers in each target

What would be impact on sales and profits if they exhibited ideal

How long, on average, do customers remain with firm?