CUSTOMERS THE FOCUS

OF SERVICE MANAGEMENT
CHAPTER - 3

CHAPTER OBJECTIVES

This chapter is about how to

understand and develop customer
relationships.
Customers, who are they?
What are the benefits of retaining
good customers?
How can managers develop good
customer relationships?
How can managers develop good
business relationships?

CUSTOMERS, WHO ARE THEY?

A customer is the recipient and

often also a provider (co-producer) in
a service process.
According to Service operation
management, the word customer
to refer to all the individuals, units or
even organizations to whom, and
often with whom, an individual, unit
or organization provides service.

Customers and services in booking

a holiday

Everyone in the diagram is a

customer of somebody.
Some customers are individuals,
some are units and some are
organizations.
Service is usually a two-way process;
i.e., things flow both ways.
Services are delivered through
networks.

Customers and services in booking

a holiday

There are internal service providers, such

as the restaurant in the hotel, and also
external service providers such as their
beverage supplier. Thus there are both
external and internal customers.
Different organizations use different
names for their customers; to the airline
you are a
passenger, to the tour operator you are a
client, to the hotel you are a guest.

Classifying customers

We can classify our customers into

several broad and overlapping types:
external or internal customers
intermediaries or end users or consumers
stakeholders: payers, beneficiaries or

participants
valuable or not-so-valuable customers.

Customer types

Customer types - Ally

The Ally . These valued customers

usually arrive in a positive frame of
mind, willing to help and give positive
feedback to facilitate the service.
The most helpful Ally is the customer
whose opinion is respected by others.
If the Ally is happy, then other
customers will infer, that the service
must be good.

Customer types Hostage

The Hostage . These customers

require service, but may be locked
in to a particular service provider
contractually.
An example is customers who must
have their car serviced by the dealer
appointed by the manufacturer.

Customer types Anarchist

The Anarchist . These customers dislike

rules and systems.
Indeed, notices suggesting what should
and should not be done present a
challenge.
It is tempting to let the customer get
away with not following the system, but
this may set up problems with other
customers who feel that they have not
been treated fairly.

Customer types Anarchist

The Patient . These customers are

very similar to the Hostage in that
they are locked into the service.
examples are hospital patients or
students at school or university.
These customers may be positively or
unequivocally oriented towards the
organization and are willing to submit
themselves to rules and regulations.

Customer types Patient

The Patient . These customers are

very similar to the Hostage in that
they are locked into the service.
examples are hospital patients or
students at school or university.
These customers may be positively or
unequivocally oriented towards the
organization and are willing to submit
themselves to rules and regulations.

Customer types Tolerant

The Tolerant . These customers may

be passive, always waiting patiently
for service providers to acknowledge
their presence and deliver service.
In fact they may be so patient that
they become invisible to service staff
and get ignored as a result.
It may be dangerous to trade on their
apparent goodwill.

Customer types Intolerant

The Intolerant
These customers are seldom passive
or patient, and often cause stress and
problems within the service for
themselves, the service providers
and other customers.

Customer types Victim

The Victim . When something goes

wrong in service organizations, some
customers appear to attract bad luck.
Some jobs seem to be dogged by ill
fortune.
Victims may react in a number of ways,
perhaps blowing incidents up out of all
proportion or alternatively becoming
resigned to their inevitable fate.

Customer types
Terrorist

The Terrorist . The Terrorist is the

customer who mounts a damaging
attack when you least expect it.
An example might be the customer
who declares their dissatisfaction
loudly in the middle of a crowded
restaurant, having said earlier how
good the food was.

Customer types Incompetent

The Incompetent . Front-line staff

should pay particular attention to these
customers.
It is possible that new customers may be
confused by the organization's procedures
and, if not trained by staff, may find the
experience threatening, with the result
that they do not return.
It is possible, of course, that some
customers are incapable of being trained.

Customer types Champion

The Champion . What all

organizations want valued
customers who are not only
supportive of their staff and its
service and helpfully participate in
the process, but who also make a
point of providing positive word-ofmouth about the organization, its
services and staff.

Creating Allies

What are the benefits of

retaining good customers?

Valuable customers:
Are easy to deal with
Act as advocates and provide positive word-of-mouth

advertising
Assist in service provision
Reduce operating costs
Increase revenues
Help the organization maintain and improve its services
Do not place undue demands on the service
Generate long-term revenue streams (high lifetime values)
Spend more than other customers
Increase spending over time
May pay premium prices.

How can managers develop

good customer relationships?

Three types of customer

relationships:
Portfolio relationships
Personal relationships
Temporary customer

relationships

Portfolio relationships

Portfolio relationships involve the

capture of the customer using a
variety of products or services.
Banks, for example, work hard to
establish a relationship with their
customers by selling (and in order to
sell) multiple products, such as
current accounts, loans, house loans,
insurance and executor services.

Portfolio relationships Benefits

Provide higher-value customers

A longer-term revenue stream
Opportunities to cross-sell other
services or products to customers
who are already engaged with the
organization
Valuable information from and about
that customer base.

Personal relationships

Personal relationships exist in

many professional and lowvolume, high-margin services,
where there is time and value
in developing one-on-one
relationships with clients or
customers.

Personal relationships

There are four key elements to a personal relationship

between service provider and customer:
Communication . The extent to which there is two-way

communication; the ability to deliver clear messages and the

ability to listen carefully.
Trust . The degree to which one partner depends on the
work or recommendation of the other, without seeking extra
justification or collaboration. In some cases, the partner may
commit the other to work without prior consultation.
Intimacy . The extent to which each partner shares their
plans, strategies, profits, etc.
Rules . A mutual acceptance of how this particular
relationship operates: what is acceptable and desirable, and
what is not.

Temporary customer
relationships

High-volume consumer services often

require the formation of temporary
relationships, where customer
connections are made quickly.
Many sales processes depend on the
ability of the salesperson to establish
common ground with the prospective
customer.

How can managers develop

good business relationships?

The drivers for improving B2B

relationships include:
Gain in market share
Acquisition of intellectual property rights

(IPR) or technology
Portfolio re-balancing
Reduced cost base
Improved productivity
Margin growth

How can managers develop

good business relationships?

and the most frequently cited benefi ts

arising from improved business
relationships are :
Improved bottom line
Long-term differentiation
Growth
Shifts in behavior
Increased trust
Fruitful co-operation
Improved working patterns
Enhanced capacity for problem solution

END