CHAPTER 5
BUILDING CUSTOMER RELATIONSHIPS
What is Relationship Marketing?
Relationship marketing is a philosophy of doing business, a strategic orientation that focuses on
keeping and improving current customers rather than on acquiring new customers. Relationship
marketing is a strategy that focuses on building long-term relationships with customers rather
than just focusing on individual transactions. It emphasizes cultivating customer loyalty and trust
through ongoing engagement, personalized interactions, and delivering value beyond the initial
sale.
The ultimate out come of relationship marketing is the building of a unique company asset called
a marketing network. Marketing net-work -consists of the company all of its supporting stake
holders: customers, employees, suppliers, distributors, retailers, and agencies, university
scientists, and others with whom it has built mutually profitable business relationship. The
operating principle is: Build a good network of relationships with stakeholders, and profits will
follow.
Goals of Relationship Marketing
The goal of marketing relationship is to achieve five Benefits of Relationship Marketing
Customer Retention:
Relationship marketing aims to retain existing customers by building strong connections and
providing ongoing value. Loyal customers are more likely to make repeat purchases and
recommend the company to others, contributing to long-term business success.
Customer Loyalty:
By prioritizing customer satisfaction and engagement, relationship marketing seeks to cultivate
loyal customers who choose the company over competitors and are less sensitive to price
changes or promotions.
Increased Customer Lifetime Value:
Relationship marketing focuses on maximizing the lifetime value of each customer by
encouraging repeat purchases, cross-selling or upselling additional products or services, and
reducing churn.
Brand Advocacy:
Satisfied and loyal customers can become brand advocates who actively promote the company to
their friends, family, and social networks. Relationship marketing aims to create positive
experiences that inspire advocacy and word-of-mouth referrals.
Differentiation:
In a competitive marketplace, building strong relationships with customers can differentiate a
company from its competitors. By providing exceptional customer service, personalized
experiences, and ongoing support, companies can stand out and attract and retain customers.
Benefit of Long term relationship marketing
No matter what industry you operate in, relationship building is key to success in the long term.
As a recruitment company, we know how important it is to devote attention to this essential
business activity. Nurturing the needs of any client, candidate or customer can go a long way to
forging relationships that last forever. Here are some of the principal benefits of building long-
term business relationships.
1. Loyalty
It goes without saying, but if you invest time and effort into getting to know your clients,
listening to their needs and serving them to the best of your abilities, you are well on the way to
successful relationship building. Offering a great service will encourage repeat business,
establishing a loyal customer base. Once you have the right reputation, it is easier to gain trust
and confidence in those with whom you do business.
2. Reduced marketing effort
When you focus on the process of building relationships, you are creating life-long connections.
Having a regular, established client base means that you do not need to use excessive marketing
to try and win new customers, which can reduce overall costs. Nurturing those with whom you
have already built relationships can grow your business through repeat use and recommendations
to others.
3. Brand advocates
When you look after your clients correctly, they are more likely to be satisfied with your service,
which increases the chances of them promoting your business to others, through
recommendations. By acting as brand advocates for your business, long-term clients are
effectively doing the marketing of your brand for you, building your reputation and increasing
awareness
4. Successful outcome
If you take the time to get to know your clients you will be better equipped to fully understand
what they want. In our case, this would maximize the chances of placing the correct candidate
with the most appropriate employer, creating a successful outcome for all parties. This, in turn,
will encourage repeat business and enhance your company's profile. Conversely, businesses
which fail to nurture the needs of clients and customers are far less likely to achieve success, or
may take much longer to secure the desired result.
5. Competitive advantage
The recruitment industry is buoyant but crowded, particularly since the internet has
revolutionized how this sector conducts its operations. With an increasing number of businesses
jostling for the attention of candidates and clients, any recruitment firm looking for success
needs to make sure that it has a competitive advantage over its peers. One of the most effective
ways for any business to do this, is by forging long-term business relationships. By focusing on
the process and not the end result, customers will be more satisfied and increasingly likely to use
your services again.
6. Network opportunities
Solid relationships with clients can prove advantageous if you need advice, information or have a
specific requirement. As a recruitment company, we find that a long-term client may be able to
put you in touch with another business that could be looking to recruit, for example. Clients you
know well may even prove to be an asset the next time your own company is looking to recruit,
where you already have a strong base of network opportunities at your disposal.
CHAPTER 6: SERVICE RECOVERY
6-1. Defining Service Recovery
It is the action a service provider takes in response to service failure. Service recovery is an
organization's resolution of problems from dissatisfied customers, converting those customers
into loyal customers. By including customer satisfaction in the definition, service recovery is a
thought-out, planned process of returning dissatisfied customers to a state of satisfaction with an
organization/service. Service recovery differs from complaint management in its focus on
immediate reaction to service failures.
Complaint management is based on customer complaints, which, in turn, may be triggered by
service failures. But since most dissatisfied customers are reluctant to complain, service recovery
attempts to solve problems at the service encounter before customers complain or before they
leave the service encounter dissatisfied. Both complaint management and service recovery are
customer retention strategies.
6-2. Causes Of Service Failure
Even after giving due consideration to the service quality, the world class organizations may also
face service failure. There can be many reasons of service failures some of them Inexperienced
employee, Indifferent or rude behavior of employee, Delay in service delivery or slow service
delivery, Equipment breakdown, and Power system failure
Example of service failure
Service failure can happen in a hotel in various following forms:
1. Defect in goods:
Hotel fails to provide fresh and hot food and unavailability of food items mentioned in menu
2. Failure due to facility problems:
Cleanliness of facility and absence of right and appropriate signs and directions
3. Failure due to unfriendly behavior:
Rude behavior of employee at reception, limited options of modes of payments, long waiting
time at reception.
How service recovery is initiated?
Some of the service failures can be noticed specially if failure occurs due to service providers.
But in most of the instances failures go unnoticed. Customer complains can be a good
opportunity to recover from service failure. It is very important for service organizations to
attend to customer complaints and encourage customers to complain. The situation becomes
worst if customer does not complain at all. The unsatisfied customers will spread bad word of
mouth which may result in loss of any potential customer also.
6-3. Service Recovery Strategies
[Link]-safe the service
Do the service right the first time itself? When it is done like that there is no need for recovery as
there are no failures. It requires an efficient total quality service management. The companies
should target zero service defects. When such culture exists, the employees of the service
organization understand the importance of reliability and action to satisfy every customer. They
also look for ways to improve service quality continuously.
[Link] and encourage complaints
Though many service organizations aim at total service quality, failures do occur. Therefore, the
companies have to welcome and encourage customers to complain. They should consider
complaints as opportunities to excel. Service companies adopt several approaches to welcome
complaints from the customers. They include: customer satisfaction surveys, lost customer
research, customer feedback, toll free call centres, e-mail and pagers, and informal customer
interactions, etc.
C. Act quickly
Quick action requires the support of systems and procedures as well as empowerment of
employees. The employees must be trained and empowered to solve the customer problems in
the quickest possible time.
[Link] customers fairly
Customers expect fair treatment in handling of their complaints. They look for fairness in three
dimensions.
1. They are Outcome fairness:
Consumers expect outcomes in many forms that match the level of the dissatisfaction. The
expected outcome may be in the form of: monetary compensation, an apology, reduced service
charges, replacements, rectification of errors or future benefits. They look for fairness in the
form of equality in treatment.
2. Procedural fairness:
Customers expects fairness in company policies, rules and regulations, procedures and timeliness
of the complaint resolution process. Companies that are flexible in the policies to adopt to the
required recovery effort to match individual cases are appreciated by the customers.
3. Interaction fairness:
The uncaring attitude from the company employees become intolerable to the customers. They
look for empathy, care, honesty, and polite treatment from the company.
E. Learning from lost customers
Learning from customers who have defected is an important service recovery strategy. There
may be many reasons for the switching behaviors of the customers. e.g: price inreament,
emplyee behavior. etc
6-4. Customer Complaint
A consumer complaint is an expression/reflection of dissatisfaction with the performance of any
product or a service as promised by the seller. Services are intangible in nature. For a consumer
there is no standard yard of measurement to evaluate the service performance. The only way a
consumer feels satisfied is his/her own expectations from the service and its comparison with
his/her own perception of the service performance. In case of any discrepancy in the expectations
and the perception, the consumer will be dissatisfied.
Generally, the consumer could be dissatisfied if he/she is not delivered a service quality which
was promised at the time of service sale. The reasons for a poor service quality could be due to
the lack of trained service staff or due to technical fault. The dissatisfaction could be the result of
ill managed or poorly planned service delivery procedures. The support system or the
infrastructural support also plays a very important role in the service performance. Any
discrepancy in the working of the above mentioned dimensions of service quality may lead to
dissatisfaction of the consumer resulting in a complaining behavior.
Types of customer complaint actions
There are four types of dissatisfied customers:
1. Passive:
These types of customers never complain for any mistake encountered by them from a
company‘s side. They may or may not switch towards a new brand for that particular
service/product but most likely to switch.
2. Voices:
These are the type of customers who raise their voice against the company‘s service/ product if
they encounter any mistake from the company‘s side. They actively complain because they care
for the brand or company. They may or may not switch towards a new brand, most unlikely to
switch to a new brand.
3. Irate: Angry
These types of customers are mainly engaged in a negative word of mouth. After voicing
ferociously if no action is taken by the company to rectify its mistake for a long period of time
then they mostly switch to a new brand.
4. Activist:
These are the type of customers who would actively complain to a third party i.e. law enforcing
bodies when they encounter any mistake from the companies side. Activists are the type of
customers who would surely switch to a new brand.
Chapter Seven: Service Design and Development
Service design is the activity of planning and arranging people, infrastructure, communication
and material components of a service in order to:improve its quality, and the interaction between
the service provider and its users. Service design process is comprised of service system
elements which form a blueprint to communicate the service concept to customers and
employees. Service system elements can be categorized as structural and managerial elements
which should be in place to offer services that achieve strategic service vision.
1. Structural Elements
The decisions pertaining to structural elements are of strategic in nature, which have to be
planned considering long-time horizon while designing service delivery system. These structural
elements are presented below.
A. Delivery System: Front & back office operations, Automation like self-service technologies,
and Customer participation
B. Facility Design: Size of facility, Aesthetics/appearance and ambience/atmosphere, and
Layout and expansion consideration
C. Facility Location: Customer demographics, Single versus multiple sites. Site characteristics,
and Service concepts and objectives of service delivery
D. Capacity Planning: Managing waiting lines, Accommodating average and / or peak demand,
and Service –line balancing
2. Managerial Elements
Once structural elements are in place, service organization take into account the activities require
personal interaction or virtual interaction with the customer as a service encounter. It is
important to consider managerial elements while designing service which can improve customer
interaction and service quality at the same time provide hassle/trouble free service with less
waiting time. Such elements are discussed below.
Service Encounter: Characteristics of service provider, employees & customer, Quality:
Reducing gaps between customer expectation and perceptions, Managing capacity & demand,
and Information.
7-2. Types Of New Services
Major/Radical Innovations: Are new services for markets as yet undefined. E.g., first broadcast
television services
Start up businesses:New services for a market that is already served by existing products E.g.,
online banking for financial transactions. A startup is a young company that is just beginning to
develop.
New services for the currently served market:Attempts to offer existing customers of the
organization, a service not previously available from the company. E.g., Barnes and Noble
offering coffee.
Service line extensions: Augmentation of the existing service line. E.g., restaurant adding new
menu items, an airline offering new routes.
Service improvements:Changes in features of service that are already offered. E.g., extended
hours of service
Style changes: The most modest service innovations, which have a significant effect on
customer perception, emotion and attitude. E.g., changing the color scheme, revising the logo
7-3. New Service Development Stages
A. Front End Planning
Business strategy review/development
New service strategy development
Idea generation
Concept development and evaluation
Business analysis
B. Back End Implementation
Service development and testing
Market testing
Commercialization
Post introduction evaluation
1. Business Strategy Development
At this stage we must review and understand the vision, mission, values and strategic orientation
of the company. A strategy is essentially a means to reaching business goals that our company
has decided for itself. Generic strategies are game plans for operating and surviving in the market
place. These are: cost leadership strategy- becoming the lowest cost provider of services,
differentiation strategy-providing unique set of benefits to customers which are not offered by
our competitors, and focus strategy- focusing on a niche or narrow market segment and fulfilling
the needs of that segment through its service offerings.
2. New Service Strategy Development
We must decide the strategy that our company would like to take to grow in the marketplace and
align new service development in that direction.
These include: intensive growth-focus on increasing sales and market share within the company's
existing markets and product lines. integrative growth-involve expanding the company's
operations through mergers, acquisitions, or alliances with other companies, and diversification-
expanding into new markets with new products,
3. Idea Generation
Ideas generated at this phase can be passed through the new service strategy screen. Many
methods and avenues are available for searching out new service ideas.
Methods: Interacting with others and Creativity techniques
4. Service Concept Development and Evaluation
The idea that appears feasible and profitable is taken up for development of the service concept.
The service concept is the description of the service in terms of: the value it will provide
customers, the form and functions of the service, the type and level of experience that customers
are likely to receive from the service, and the outcome of the service.
The concept is developed by involving customers, service personnel, service managers, suppliers
and other professionals such that it is acceptable to all and everybody agree that it is likely to
provide much needed benefit to the customers. The service concept is tested with customers and
employees and is dropped if it is not found to offer substantial benefits to customers in
comparison to existing alternate methods by which customers can satisfy their needs.
5. Business Analysis
A. Marketing Assessment
Target market
Forecasting of sales volume
Indication of product positioning
Competitor reaction
Specification of new product development
B. Financial Assessment
Sales volume and value
Variable cost of production
Incremental fixed cost
Contribution and profitability of the new service
6. Implementation
This is the service development and testing stage. Develop a detailed service blue print. Translate
the blue print in to specific implementation plan.
7. Market Testing/feedback
It is needed to determine:
Market place acceptance of the product
Acceptance of marketing mix variables: - pricing, promotion, and distribution systems.
8. Commercialization
This is the introduction stage of the service to the market place.
Two primary objectives:
To build and maintain acceptance of the new service
To monitor all aspects of the service during introduction and through the complete service
cycle.
9. Post Introduction Evaluation
At this stage:
Review the information gathered during the commercialization of the service.
Make changes to the delivery process, staffing, or marketing mix variables based on the
response of the market to the new service offer.
7-4. Service Blueprinting
It is a picture or map that accurately portrays the service system so that different people can
understand and deal with it regardless of their roles.
It visually displays:
The process of the service delivery
The points of customers contact
The roles of employees and customers
Visible elements of the service evidence.
A. The Purpose of Service Blueprinting
To enable employees, customers, & managers know what the service is.
To make employees and customers see their roles in the service delivery.
To understand all of the steps and flows involved in the service process.
B. Blue Print Components
Customer action: All the steps, choices, activities, and interactions that the customer
performs in the process of purchasing, consuming, and evaluating the service. Customers
actions in legal service, A decision to contact an attorney, A face-to-face meeting, Receipt of
documents, and Receipt of a bill
Onstage contact employees action: All the steps and activities that the contact employee
performs that are visible to the customer. Onstage employee actions in a legal service, Initial
interview, Intermediate meetings, and Final delivery of legal documents.
Backstage contact employees action: Actions that occur behind the scenes to support the
onstage activities. Backstage contact employees actions in a legal service, Preparation of the
attorney for a meeting, Preparation of the final document.
Support process: Covers the internal services, steps, and interactions that take place to
support the contact employees in delivering the service. Support processes in a legal service,
Legal research by staff, and Secretarial service etc.