"Happy customers will drive your business.

You must care for them, nurture them, and do

whatever it takes to earn their undying loyalty. We all know that advertising can bring a
customer through the doors to your business once. The challenge is to keep them coming back
to you, to provide them with service that is so exceptional they wouldn't think of taking their
business elsewhere. That includes solving their problems."
- Tschohl (2010)
 
SERVICE FAILURE
 Service Failure is a state when a customer has not been served
what he was promised and subsequent redressal also did not
take place.

Hoffman and Bateson (1997) found service failure as “service

performance that fails to meet customer expectations. “

Maxham (2001) defined service failure as

“any service-related mishaps or problems (real and/or perceived)
that occur during a consumer’s experience with the firm”.
2
Reasons of Service Failures:
 outcome (flaw in the core service)
 process (flaw in the delivery of service).
 organization procedures,
 mistakes,
 employee behaviour
 functional/technical failures, and
 actions/omissions of the organization that are
against the sense of fair trade.
3
Bitner, Booms, and Tetreault (1990) classified service failures into above four categories. 4
SERVICE RECOVERY
Service recovery has been perceived as a satisfactory
solution to the problem of service failure.
Grönroos (1990) found service recovery to be the
service provider’s response in case of service failure.
Service recovery is also described as doing the service
right the second time.
Refunds, compensation, apologies and excuses are
some of the service recovery methods. Along with
these ways of recovery, rectifying the mistake and
serving the customer again is also important.

5
SERVICE RECOVERY:
Definitions
Bell and Ridge (1992) perceived service recovery as a
well-accepted term used to denote service companies’
attempt to make up for the customers’ negative
reaction to the service failures.

Kelley and Davis (1994) defined service recovery as

the service provider’s response to a service failure.

6
Essentials of Service Recovery Management

Attribution

Apologizing

Compensation

Empowerment

Employee Behaviour

Recovery Action
7
Measuring Service Recovery
Effectiveness

 It takes into account six dimensions of service recovery:

1. Communication refers to the front line employees’ way of addressing the
customer who wishes to lodge a complaint.
2. Empowerment refers to the level of authority in the hands of employees to take
the decisions, use the resources and act independently.
3. Feedback refers to the process of providing information about a problem which
has been registered by the customer.
4. Atonement refers to the act of apologizing for the inconvenience caused to the
customer due to the service failure as well as providing the compensation.
5. Explanation refers to the act of clearly stating the reason behind the service
failure.
6. Tangibles refer to the physical proofs of service like employees’ appearance,
means of communication, service equipments, and the physical environment of
service outlet.
8
Antecedents to Service Recovery
Expectations

 Customer commitment or loyalty: It is the degree to which a customer

is committed to the organization, determines the level of his recovery
expectations.
 Service quality: Service recovery expectations tend to be higher in case
of a higher perceived service quality.
 Failure severity: Higher degree of severity of a service failure
contributes to the increase in the level of service recovery
expectations.
 Service guarantee: A is expected to fulfil an expressed guarantee
related to the procedures to be followed in case of a specific failure
and a service guarantee may increase the recovery expectations as
well.
9
Types of Service Recovery
Management
 Psychological: Psychological recovery efforts are considered as a

recovery attempt through “showing concern” for customers’ needs.

Empathizing and apologizing are widely accepted as main psychological
techniques to be used in every instance of service recovery.

 Tangible: Compensation is categorised for both, real and perceived

damages, as tangible recovery efforts. The primary purpose remains to be

providing fair compensation for the costs incurred and inconveniences
caused due to service failure.
10
Advantages of Service Recovery
Management

Effective service recovery management may offer several advantages to

the company which are presented below:
 Building Customer Loyalty

 Increasing Customer Satisfaction

 Greater Customer Retention

 Developing higher repurchase intention

 Positive Customer Perception

 Generate Positive word of mouth

 Increased profits
11
CRM: A COST BENEFIT ANALYSIS

 CRM Benefits:
 To The Organization: Increased Revenue and Reduced cost
 To The Customer: Simplified buying process and friendly services
leading to superior satisfaction.

 CRM Cost:
 To The Organization: Requires greater investment
 To The Customer: Opportunity cost

12
Customer Value

Value creation is a strategic process to manage a product,

service or a business unit's growth and competitive share.
It is built on a core foundation of market research
applying advanced techniques, called customer value
analysis (CVA).

13
14
Customer Lifetime Value

Customer lifetime value (CLV) is the net present value of

the total profits that a company could realize with the
average new customer within a given customer segment
during a given number of years.

 It is the true value of a customer that can be considered

as the most appropriate measurement of how much an
organization would or should be willing to invest to
acquire/ retain him.

15
Issues in Calculating CLV:

 The precise calculation depends on the nature of the customer

relationship program. It calls for accounting of following issues:

1. Lack of data

2. Lost customers

3. Newer company

4. Choosing a formula

16
 Customer Profitability

Customer profitability (CP) is the profit the firm makes

from serving a customer or customer group over a

specified period of time, specifically the difference

between the revenues earned from and the costs

associated with the customer relationship in a specified

period.

17
Customer Profitability

Analyzing the activities, costs, and profit

associated with serving specific customers.

Customer makes frequent order

changes.
For various reasons,
some customers are
less profitable than Customer needs special
others. attention.

Customer is difficult
to please.

18
Customer classification based on CRM
 Platinum Heavy, reliable users, not price-sensitive, try
new products, loyal

 Gold Large users who push for price breaks, shop

around and not so loyal

 Iron Low volume or intermittent users; cost to serve

them is quite high

 Lead Demanding, want special attention but don’t buy

much and show no loyalty
19
 Customer Classification Based on Customer
Profitability

1. The first category customer receives high value from a firm's

products and services and provides high value in the form of high
margins, loyalty and retention.

2. The second category customer is the "lost cause" who do not get
much value from the firm's products and services.

3. The third category of customers is the one who provides high value
to the firm but does not get lots of value from the firm's services.

4. The fourth category of customers is one who gets superior value

from a firm's products and services but provides little value, maybe
because of their large size or intensity of competition.

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Customer-centric Organizational Structure
 A customer-centric organization has to fulfill the four
essential steps:
1. Communal coordination
2. Serial coordination
3. Symbiotic coordination
4. Integral coordination

21
Customer Recall Management

 Customer recall management is about winning back the customers

who have either reduced their level of business transactions with the
company or have stopped transacting at all.
 It adopts a specific management process consisting of analysis, actions
and controlling and offers marketers a profitable customer market.

 In order to recall the lost customers, the marketers may adopt the
following strategies:
 Personalization Strategy
 Differentiation Strategy
 Customer Delight Approach

22
22
Customer Experience Management
As Bernard Schmidt of Columbia Business School, in his book "Customer
Experience Management", explained that the customer experience
could be looked at in terms of three key components —

1. the brand experience (encompasses the "look and feel" of logos and
signage, packaging, and retail space. It also includes messages and
imagery in advertising, collaterals, websites, and the design and
experiential features of the product itself. It is mostly about static
design elements.)

23
As Bernard Schmidt of Columbia Business School, in his book "Customer
Experience Management", explained that the customer experience
could be looked at in terms of three key components —

1. The brand experience

2. The customer interface

3. Innovation

24
Features of Indian Rural Markets:

 Large and Scattered market

 Agriculture based economy
 Infrastructure related Issues
 Regional Divide of
development
 Low standard of living
 Diverse socio-economic
backwardness

25
Issues

 Underdeveloped People and Underdeveloped Markets

 Lack of Proper Physical Communication Facilities
 Media for Rural Communication
 Many Languages and Dialects
 Market Segmentation
 Dispersed Market
 Low Per Capita Income
 Low Levels of Literacy
 Prevalence of spurious brands and seasonal demand
 Different way of thinking

26
CUSTOMER RELATIONSHIP MANAGEMENT IN RURAL
INDIA

Product Customization: Making the product suitable, usable,

affordable, addressing the specific needs of the rural customers
is a must.

Communication Customization: Creating awareness then,

means utilizing targeted, unconventional media including
ambient media.

Packaging Customization: Affordability is another important

key in customization. Two of the most effective elements of a
package designed for rural India include the size and visual
communication.
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Distribution Customization: Making the
product available

Leveraging Rural Retailing: Innovative retail

models which take into account the nuances of
rural markets is the way forward.

Leveraging Technology: A strategic use of

technology by the Marketers is to get closer to the
customers.
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Employee- Organization
Relationship
The employees play a very vital role in the growth
of the organization also as they are the ones who
actually buy the service organsation's business
concept and concretise it by providing their
knowledge, skill, effort and time. They interact
with all other stakeholders and satisfy the interest
of each of the stakeholders

29
“If you want to be customer-focused, start by focusing
on your employees. Give them the go-ahead to meet
your customers' needs. That's the lesson we've learned
during the past three years at Guest Quarters suite
Hotels”

- John J. Weaver

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Factors Affecting Employee
Behavior towards Customers:

Overwork

Fatigue

Freedom

Interpersonal Issues

Mutual Trust

31
Essentials of Building Relationship with Employees through
Employee Relationship Management:
Recruitment and
Selection
•Recruitment strategy
from customer perspective
•Finding persons of
customer first orientation

Employee Motivation Training & Development

•Building Employee Customer •Training with Customer first
Parity approach
•Sharing Customer Profile •Training to listen to the customers
•Directing to remain focused •Training to build empathy with
customers
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The pillars to build strong relationship of employees with
the organization are as follows:

Finding right person of customer first

orientation
Establishing employee-customer parity
Designing recruitment strategy from
customer perspective
Sharing the customer profile with the
employees
Training the employees with customer-first
approach

33
Initiatives by the service
companies for Employees
Relations Management
Employee referrals in recruitment

Employee's participation in decision-making

Proper communication about the strategic views of the

management
Making customer satisfaction as a parameter in employee's
appraisal
Motivating them for innovating with customer service

Providing them amp le learning opportunity

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Employee's Customer Orientation

 To check the effectiveness of the employees in managing

the customer relationship, by conducting regular surveys
of their employees on several parameters. A questionnaire
is as follows to check their understanding of the
customers. It may provide an opportunity to the to assess
customer orientation towards and correct if need be.

35
QUESTIONNAIRE
 Employee's Customer Orientation:  Leadership's Approach Towards
Customers:
1. Do you know who your customers are 1. As a manager, do you know how many
and how many customers do complaints are received
you have? weekly/monthly?
2. Do you listen effectively to all your 2. Is there commitment at top
customers? management for customer orientation?
3. Does management set a good record
3. Do you regularly make up an inventory with regard to customer-
of all the needs and friendly behaviour?
expectations of your customers? 4. Is management available at all times to
the customer?
4. Are complaints replied within a day and
solved within a day or two? 5. Does customer satisfaction also belong
to the evaluation criteria of
5. Do you make recommendations to management?
customers about the products 6. Does top management also handle
and services that best suit their needs? complaints of customers
personally?
6. Do you know what the costs are when
you lose a customer?
7. Do you regularly organise meetings with
customer groups to learn
about their needs, wants, ideas and
complaints?
36
36
 Service Recovery Paradox

The service recovery paradox is a supposed

paradoxical effect where a product failure
ultimately results in increased customer
satisfaction, producing a level of satisfaction
even greater than that expected with no
product failure.

37
Service Recovery Paradox

 The service recovery paradox is more likely to occur

when:
 the failure is not considered by the customer to be severe
 the customer has not experienced prior failures with the
firm
 the cause of the failure is viewed as unstable by the
customer
 the customer perceives that the company had little
control over the cause of the failure

38
Causes Behind Service Switching

39
 Operational CRM and analytical CRM

40
41