Unit 2: Understanding Customer Expectation Through Market Research

2.1 Managing Relationships in Services

Building Customer Loyalty

Customer loyalty means customers keep coming back. Loyal customers tend to:

 Repeat purchases: They buy from you regularly.

 Refer others: They recommend your business to friends and family.

 Become brand advocates: They promote your brand passionately.

 Forgive mistakes: They are understanding if something goes wrong.

Strategies for Building Customer Loyalty

1. Deliver Exceptional Customer Service:

o Exceed Expectations: Always aim to go beyond what the customer expects.

 Example: A restaurant giving complimentary dessert to a birthday customer.

o Personalize Experiences: Tailor your services to fit individual needs.

 Example: A hotel remembering your preferences for room type or pillow.

o Empathy and Understanding: Show genuine care for customer concerns.

2. Create a Positive Customer Experience:

o User-Friendly Interfaces: Make your product easy to use.

o Pleasant Environment: Ensure a welcoming atmosphere.

o Value-Added Services: Offer extra benefits that improve the experience.

3. Build Trust and Credibility:

o Transparency: Be honest about your business practices.

o Reliability: Always deliver on your promises.

o Reputation Management: Handle negative feedback effectively.

4. Reward Customer Loyalty:

o Loyalty Programs: Offer rewards for repeat customers.

o Personalized Offers: Provide discounts based on past purchases.

o Exclusive Benefits: Give special perks for loyal customers.

5. Effective Communication:

o Proactive Communication: Inform customers about new products or changes.

o Personalized Communication: Tailor messages based on customer preferences.

o Active Listening: Address customer feedback carefully.

 6. Address Complaints Promptly:

o Acknowledge Complaints: Show you value their feedback.

o Resolve Issues Efficiently: Fix problems quickly.

o Learn from Feedback: Use complaints to improve your services.

7. Foster a Strong Brand Identity:

o Consistent Branding: Keep your brand message uniform.

o Emotional Connection: Create a bond through brand storytelling.

o Positive Associations: Link your brand to good qualities and experiences.

Complaint Handling and Service Recovery Strategies

Handling complaints effectively helps keep customers satisfied. Here are some strategies:

Complaint Handling Strategies:

 Active Listening: Pay full attention and understand their concerns.

 Empathy: Show understanding and apologize sincerely.

 Take Ownership: Accept responsibility for the issue.

 Identify the Problem: Ask questions to understand the complaint.

 Offer Solutions: Provide options to resolve the problem.

 Follow Up: Check in to ensure satisfaction post-resolution.

Service Recovery Strategies:

 Swift Resolution: Fix complaints quickly.

 Compensation: Offer refunds or discounts for the inconvenience.

 Customer Empowerment: Involve customers in the resolution.

 Learn from Feedback: Use insights from complaints to improve services.

 Overdeliver: Exceed expectations resolving a complaint.

2.2 Service Development and Design

Challenges of Service Design

Designing services can be tricky because:

1. Intangibility: Hard to visualize services before experiencing them.

o Example: You can't "try" a service before buying, like a haircut.

2. Perishability: Services can't be stored or resold.

 o Example: A missed flight can't be rescheduled for a refund.

3. Inseparability: Services are produced and consumed at the same time.

o Example: Dining in a restaurant – the service happens while you eat.

4. Heterogeneity: Service quality can vary greatly.

o Example: Two visits to the same restaurant can have different service levels.

5. Customer Expectations: Expectations may vary from person to person.

o Example: Some customers expect fast service, others expect a leisurely experience.

6. Complexity: Services involve many components and interactions.

o Example: A hotel experience includes booking, check-in, room service, etc.

7. Measurement and Evaluation: Hard to quantify service quality.

o Example: It's subjective to say if a service was "good" or "bad."

Types of New Services

1. Technology-Driven Services:

o Example: Mobile banking apps that let you manage finances online.

2. Experience-Based Services:

o Example: Subscription boxes that deliver unique products monthly.

3. Social Impact Services:

o Example: Eco-friendly delivery services that promote sustainability.

4. Niche Services:

o Example: Services tailored for specific audiences, like luxury travel planning.

5. Platform-Based Services:

o Example: Uber connects drivers with riders.

6. Hybrid Services:

o Example: Combining retail and dining experiences in a café store.

Core and Supplementary Elements

 Core Elements: The main reason customers choose your service.

o Example: The food in a restaurant.

 Supplementary Elements: Additional features that enhance the core service.

o Example: The restaurant’s ambiance and service style.

Importance of Balancing Core and Supplementary Elements:

 Customer Satisfaction: Both elements ensure a good overall experience.

  Differentiation: Unique supplementary elements can set you apart from competitors.

 Customer Loyalty: Satisfied customers are likely to return.

New Service Development Process

1. Idea Generation: Brainstorming and market research.

2. Idea Screening: Assess feasibility and gather customer feedback.

3. Concept Development: Define service concept and create service blueprints.

4. Business Analysis: Estimate financials and allocate resources.

5. Service Design: Apply design principles and develop prototypes.

6. Testing and Piloting: Launch pilot programs and gather feedback.

7. Launch and Commercialization: Market the service and establish sales channels.

8. Evaluation and Improvement: Monitor performance and make adjustments.

2.3 Service Blueprinting

Definition:

Service Blueprinting is a visual tool that maps out the entire customer journey, illustrating how
customers interact with a service.

Need for Blueprinting:

1. Customer-Centric Design:

o Ensures that services are designed around the needs and preferences of customers.

o Example: A restaurant designing its menu and layout based on customer feedback.

2. Process Optimization:

o Identifies inefficiencies in service delivery, helping to streamline processes.

o Example: Recognizing a bottleneck in the checkout line at a store.

3. Employee Training:

o Provides a clear guide for training staff on effective customer interactions.

o Example: Staff training on the steps of the customer journey in a hotel.

Blueprinting Process:

1. Identify Customer Segments:

o Determine different groups of customers.

o Example: Segmenting by age, preferences, or buying behavior.

2. Define the Customer Journey:

o Outline the steps customers take from first contact to service completion.

o Example: From discovering a product to making a purchase.

3. Identify Touchpoints:

o Identify all interaction points between the customer and the service.

o Example: Website, customer service, and in-store experience.

4. Create a Blueprint:

o Develop a visual representation of the customer journey and touchpoints.

5. Analyze the Blueprint for Improvements:

o Look for areas to enhance the service experience or reduce inefficiencies.

6. Implement Changes and Monitor Effectiveness:

o Make adjustments based on the analysis and track the outcomes.

Elements of a Blueprint:

 Customer Actions: Steps taken by the customer during the service process.

 Front-Stage Activities: Visible activities performed by employees that customers can see.

 Back-Stage Activities: Behind-the-scenes actions that support service delivery but are not
visible to customers.

 Evidence of Service: Tangible elements that represent the service, such as brochures or
service guarantees.

Nature of Physical Evidence

Definition:

Physical Evidence refers to tangible elements that help shape customer perceptions of a service.

Characteristics:

1. Tangible Representation:

o Helps customers visualize and understand the service being offered.

o Example: A menu in a restaurant that illustrates food options.

2. Signaling Quality:
 o High-quality physical evidence indicates a high-quality service.

o Example: Well-maintained facilities signal reliability.

3. Brand Identity:

o Consistent physical evidence reinforces the brand’s image and values.

o Example: Logo and color schemes used consistently across marketing materials.

Importance of Physical Evidence:

 Signaling Quality: Indicates the level of service customers can expect.

 Brand Identity: Enhances recognition and perception of the brand.

 Customer Experience: Contributes positively to the overall service experience.

 Differentiation: Unique physical elements can set a service apart from competitors.

 Trust and Credibility: Good physical evidence builds trust with customers.

 Customer Satisfaction: Well-designed environments and materials increase overall

satisfaction.

Types of Physical Evidence

1. Facilities and Environment:

o The physical location and its ambiance.

o Example: A spa's calming décor.

2. Equipment and Technology:

o Tools and technology used in service delivery.

o Example: High-quality coffee machines in a café.

3. Signage and Branding:

o Visual cues that guide customers.

o Example: Clear directions in a store.

4. Employee Appearance:

o The way staff present themselves.

o Example: Uniforms and grooming standards.

5. Tangible Outputs:

o Physical items customers receive from the service.

o Example: Business cards or receipts.

 6. Marketing Materials:

o Brochures, flyers, and ads that communicate service offerings.

o Example: Travel brochures from an agency.

7. Customer Communications:

o All forms of communication with customers.

o Example: Email confirmations or newsletters.

Nature of Servicescapes

Definition:

Servicescapes are the physical environments where services are delivered.

Importance of Servicescapes:

 Customer Perception: Affects how customers perceive the quality of the service.

 Brand Identity: Reflects the brand’s image and values.

 Customer Satisfaction: A well-designed environment enhances satisfaction.

 Differentiation: Unique servicescapes help a business stand out.

 Emotional Connection: Creates a connection with customers.

 Customer Engagement: Encourages interaction and engagement with the service.

Types of Servicescapes:

1. Retail Servicescapes:

o Environments in retail stores.

o Example: The layout and design of a clothing store.

2. Hospitality Servicescapes

o Environments in hotels and restaurants.

o Example: A cozy, inviting hotel lobby.

3. Healthcare Servicescapes:

o Environments in hospitals and clinics.

o Example: Clean and calming hospital waiting areas.

4. Financial Servicescapes:

o Environments in banks and financial institutions.

o Example: A bank’s organized and secure layout.

5. Entertainment Servicescapes:
 o Environments in theaters and amusement parks.

o Example: The atmosphere of a cinema.

6. Professional Servicescapes:

o Environments in offices providing professional services.

o Example: An architect’s office with design displays.

Role and Effect on Consumer Behavior

Influence on Consumer Behavior:

Roles influence consumer behavior by shaping their needs and desires:

 Family Roles:

o Decisions made by family members can influence purchases.

o Example: Parents deciding on a family vacation.

 Occupational Roles:

o Jobs can shape purchasing behaviors and preferences.

o Example: A chef might prioritize quality kitchen tools.

 Social Roles:

o Social circles can impact preferences and choices.

o Example: Friends influencing restaurant choices.

 Reference Groups:

o Groups that impact decision-making and preferences.

o Example: A popular trend among friends leading to a clothing choice.