Hello, so our concluding topics for the 7th
week will be from service recovery, service
complaint and service recovery which we discussed
in the last session.
.
How do we reach our ultimate aim that we have
been talking about during this week, the customer
advocacy through the pathway of Customer Loyalty.
As we discuss this pyramid that first of all
you must have service quality and service
quality will not automatically lead to customer
satisfaction, you have to have a manage process
to reach customer satisfaction.
And in that, one part of that is the service
recovery strategy and if you have customer
satisfaction, good service recovery strategy,
then you are able to over lay the processes
for customer delight and that is the pathway
ultimately to reach customer advocacy and
we are going to discuss today many issues
relating to this journey.
.
Let us look at this a very interesting research
paper that we know right from 1990 and this
was published in Harvard business review and
this research very clearly shows that for
services like credit card, industrial laundry,
industrial distribution, auto servicing, how
year upon year the life time value of the
customer increases almost exponentially.
So, it is just not incremental benefit that
you get from long term relationship with the
customer, but you get multiple multi tear
benefits.
.
For example, as you can see here in this diagram,
this is also reprinted from that same research
paper that this is year one, where actually
you just have, if you have done everything
well then some small surplus.
Now, as it goes on then it is not that only
you get every year this base profit with the
base profit.
But, then you have this pile up benefits,
pile up benefits are profit from increased
usage, a satisfied customer with the mobile
service, a satisfied customer with a credit
card service tend to use the service more
and therefore, you have some incremental revenue.
Then; obviously, as the customer becomes known
to you and the customer knows you and each
party develops more confidence in each other,
then due to this additional revenues coming
in, you are doubly benefited.
Because, your operating cost also come down
and we are not also discussing that you no
longer have a customer acquisition cost that
is already given that we have discussed before.
But, now you also start getting profit from
references, the customer becomes your advocate,
so there are referral revenue sources.
So, the customer recommends your credit card
service to others and the customer knows what
kind of credit check system that you have,
what kind of people will qualify and therefore,
the right kind of references and you can actually
further reinforce it.
Many credit card companies do that if your
reference ultimately is issued a credit card,
then you are given some points, reward points
and so on.
So, you can therefore, make these references
beneficial to the service organization as
well as the service customer.
And then of course, a service customer who
is bounded with you will tend to will more
amendable to higher level of service.
So, a gold credit card customer may agree
to go to the platinum level here with some
persuasion with some reward points and also
can therefore, continue to bring you additional
revenue.
So, profit from price premium, profit from
reference, profit from reduced operating cost,
profit from increased usage, these are all
that piles up on top of the based profit year
after year.
So, that is why customers always become more
and more profitable over time and that is
why today in all most all businesses, because
as we discussed right in the beginning of
this week in the hyper competitive world of
service business today, the cost of acquiring
a new customer is going higher and higher.
Therefore, the more emphasis you do to retention
rather than to acquisition, you will be better
of operationally as well as financially.
.
Customers become profitable as we discussed
due to reduced operating cost, increase purchases,
referrals to other customers, price premiums
and so on.
This same points are discussed in more detail
in this slide and the following slide.
.
Now, of course, it is not that every where
you want this repeat customer, like if a,
your healthcare facility and you have successfully
dealt with a cardiac patient, you are not
really looking for a repeat business from
that.
Because, that is not neither ethical not desirable
not practical and some types of repeat customers
are long term relationships and may be quite
costly and therefore, in such cases the walk
in traffic will also be quite important, this
is true again in certain health care cases,
this is true in some very high value exclusive
services.
And that is because if you in certain high
values services, a long term customer will
expect some price discount.
And therefore, it may be business wise may
be not the right approach, but I would say
that this particular, these are exceptions
and we can ignore this exceptions in today's
hyper competitive service businesses and focus
more on this diagram that longer the customer
stays with you, the longer is the relationship,
better are your opportunities and most importantly
that is the pathway to develop the relationship
towards customer advocacy.
.
So, the value of a customer can be the profit
impact of a customer can vary depending on
the product life cycle and in the early stage
for example, a repeat customer is far more
valuable than in the saturation stage, where
you know they are may be in some cases not
so profitable to serve some low value customers
and so on, we will discussed that just now.
At this stage I would like to point out thus
the relationship is far more important for
younger companies, for startups than for much
older companies.
So, guard with hawks eye the relationships
that you develop at the early stage of the
product life cycles, service life cycle.
.
Measuring the customer equity or what we call
life time value of each customer, we it is
a basically acquisition revenue less costs.
So, revenues are in a if we take for example,
credit card or mobile service, then revenues
are your application fee plus initial purchase
and plus recurring revenues coming and costs
will be marketing and the credit check, setting
up the account and so on.
So, revenues will be annual fee, sales, service
fees, value of referrals and cost will be
account management, cost of sales and write
offs.
So; obviously, this line minus this line if
that keeps growing, then you are on the right
track of developing relationship.
.
The value of referrals can be actually a big
multiplier depending on how you handle it
and actually this referral system can be a
ripple and therefore, one person can refer
five persons and those five persons can bring
in five each.
And that will in fact, many of the network
marketing companies use this method, the pyramid
marketing is not a good approach it is illegal
in many countries, but creating a network
of customers as your co-marketer can be a
very powerful force multiplier.
.
The gap between potential and actual value,
to know that we have to basically find out
that what is the current purchasing behavior
of the customer in each target segment.
How long an average to customers remain with
the company?
What impact would it have if they remained
customers for life?
.
And then you have to analyze this with data
and then that is how you will actually determine
the customer life time value and the importance
of CLV in your kind of services business.
So, if you are in the business of credit card,
if you are in business of mobile telephony,
if you are in the business of relationship
banking for high net worth individual, in
all these cases long term relationships are
crucial and the life time value of the customer
are normally much higher than transactional
value.
In the text book that we are using for this
course there are some interesting insides
at chapter number 12, which is the chapter
relating to managing relationship and building
loyalty.
So, you will see that the, we have given some
small cases from where you can see that when
we create value, we can create this value
to different mechanism through social benefit,
where you know there is a mutual recognition.
So, if the customer is greeted by name, if
the customer is treated with a smile and saying
the usual professor Chatterjee then; obviously,
that service establishment delights me.
Because, they remember me, recognize me and
those are the kind of social benefits of course,
you can develop this much further you can
develop.
Now a day's many service organizations do
it routinely that greet you on your birthday
send you a card on your anniversary may be
sometimes they will if you are high value
customer, they will send you some gift or
some flowers on social occasions.
These are benefits for the customer give some
psychological feeling of goodness of feeling
good and of course, it has a much bigger impact
in on the service business, because it often
creates impulse purchases it often creates...
So, if you get a greeting card on your birthday
from a restaurant which you are frequent it
is likely that evening party you will hold
at that restaurant and they may even some
times if you have done it once or twice then
a you will not be surprise when that restaurant
calls you a day before your birthday and say
shall we are organize the party like last
time and so on and so forth.
So, you can create these opportunities for
conversation, the conversation and communication
and a continuing loop of this conversation
and communication is the way relationship
is kept alive and kept interesting.
And these are very important this may appear
to be innocuous, but these small actions can
give you this big result in developing loyalty
and relationship.
.
So, basically today we want to any service
marketing, you want to claim this stairway
at the lowest level we have transactional
marketing, which is one time, one transaction
or just some series of transaction in near
vicinity it is then recall relational, where
as oppose to transactional, where the service
provider may have no knowledge about the service
customer in relationship, obviously, you have
develop the knowledge about the customer.
So, this is a more knowledge based relationship
and which is only possible if your organization
has the learning capability of about your
customer to gather data, to interpret that
data, to format the data and make it available
at the right time to the front line personnel
who are giving the service.
And then of course, from relational we want
to go to advocacy or customer as your co marketer
and this is the desired state and this is
the stairway.
.
So, from no recognition to mutual recognition
and knowledge between the parties and going
forward to the extended relationship, this
is what we want to achieve to do this fortunately
today, there are number of good technical
tools that are available.
First tool that is very important, very simple
data base marketing, even a simple spread
sheet or a very minimal database can actually
create a excellent opportunities for creating
repeat sales, for creating up sales and cross
sales opportunities.
So, it allows you to therefore, understand
the customers as individuals or understand
the customer as a particular class or define
the segment much more clearly in terms of
demographics, psycho graphics and behavior
almost important by the behavioral patterns.
So, that you are able to contact the customer
at the right time when you can create a sales
revenue opportunity.
.
And then besides the face to face interaction
which is obviously, the most the costliest
you can use therefore, technology the information
and communication technology to keep the interaction
going.
In B2B marketing or high value marketing,
we also pickup something called network marketing,
where actually we have not only the directly
from the service organization.
But, you also have number of distributors
and service representatives and other people
in the network who will sustain each other's
effort.
So, hardware manufacturers, software manufacturers,
network equipment manufacturers they often
indirectly keep this interactions going and
give each other leads.
So, that the sales, so if somebody a data
center customer a first contacts a contractor
who will give a turnkey supply of the data
center will automatically lead to contacts
with work station suppliers or server suppliers
or other networking equipment suppliers or
the specialized air conditioning supplier
and so on.
.
So, today many of these businesses are performed
as networks and therefore, network marketing
is based on a relationship among the network
partners.
And so now, we will look a different types
of relationship with customers and at this
moment before I conclude I will only list
these...
So, there is a nature of service delivery
can be continuous and can be discrete transaction.
So, there can be within this there can be
a relationship based and there is no formal
relationship based therefore obviously, we
are actually interested in this block.
There are certain services where creating
relationship is not that easy.
Because, if you are having a radio broadcast
or a television telecast, then it is difficult
to create formal relationship.
But, these days as you see with the power
of telephone and the with the high penetration
of phone across India many radio programs
have call in opportunities.
So, as your favorite songs are getting played,
you can call in you can chat with the jockey,
radio jockey and you can actually create a
recognition and some sort of relationship.
In movie theater also normally you know people
just go there buy a ticket and see the movie.
But, now more and more theaters are actually
trying to create a subscription based a membership
relation.
So, the idea therefore, is that more and more
businesses are trying to move in this direction,
where you have better a continuous relationship
at least if there is no continuous relationship,
each transaction is based on mutual knowledge
that is what we are trying to achieve.
We will see details of these processes in
the next session.
Thank you.
