STRATEGIES AFFECTING CUSTOMER PERCEPTIONS

Now we describe management strategies only briefly here because much the rest of
book is aimed at providing in-depth understanding of all these approaches.

(1) Measure and Manage Customer Satisfaction and Service Quality

A key strategy for customer-focused firms is to measure and monitor customer
satisfaction and service quality. Such measurements are needed to track trends, to diagnose
problems, and to link to other customer-focused strategies, In examples provided throughout
the text, you will see how companies have linked their measurement of customer satisfaction
to strategies related to employee training, reward systems, internal process metrices,
organisational structure, leadership goals, customer-focused research, the measurement of
satisfaction and quality to specific financial outcomes. Strategies related to employee
training, reward systems, internal process metrices, organisational structure, leadership goals,
customer-focused research, the measurement of satisfaction and quality to specific financial
outcomes.

(2) Aim for Customer Quality and Satisfaction in Every Service Encounter
Because every service encounter is potentially critical to customer retention, many firms for
"zero defect/7 or 100 percent satisfaction in every encounter. To achieve this requires, first,
clear documentation of all the points, of contact between the organisation and its customers.
Development of understanding of customer expectations for each of these encounters is the
next step, so that strategies can be built, around meeting those expectations. Each of the four
themes underlying satisfaction/dissatisfaction in service encounters suggests specific types of
actions that would aid an organisation aiming for zero defects.
(i) Encourage Spontaneity: Memorable encounters occur for customers even when there
is no system failure request. Although employee behaviours within this third
theme would appear to be somewhat random and relatively uncontrollable, there
are things that organisations can do encourage positive spontaneous behaviours
and discourage negative behaviours. Recruitment and selection procedures can be
used to hire employees with strong service culture, employee empowerments
employees also will control to some extent the seeming randomness of these
behaviours.
(ii) Manage the Dimensions of Quality at the Encounter Level: Although the five
dimensions of service quality — reliability, responsiveness, assurance, empathy
 and tangibles — are generally applied to the overall quality of the firm, it is
certainly possible to relate them to each individual encounter. If we think of each
encounter in terms of these five themes, we can formulate strategies for ensuring
satisfaction in the "moment of truth" that will add to the broad strategies around
:<
the four themes just discussed. Many of the strategies related to the -four
encounter themes will reinforce the quality dimensions directly. For example,
strategies aimed at improving adaptability of service employees should enhance
customer perceptions of responsiveness and empathy.
(iii) Help Employees Cope with Problem Customers: The service encounters
classified within the coping theme represent times when customers were the cause
of their own dissatisfaction. Several management strategies are suggested by the
last theme. First, managers and customers need to acknowledge that the customer
isn't always light, nor will she always behave in acceptable ways. Contact
employees who have been on the job any length of time know this, but frequently
they are told that the "customer is king" and are not given the appropriate training
and tools to deal with problem customers. Employees need appropriate coping and
problem-solving skills to handle difficult customers a well^as their own feelings
in such situations. Another implication is the need for "training customers" so that
they will know what to expect and know the appropriate behaviours in given
situations.
Plan for Effective Recovery: As we know that service failures and subsequent recovery
efforts create strong memories for customers and for employees who empathise with their
customers. When service customers have been disappointed on the first try, "doing it very
right the second time" is essential to maintaining customer loyalty. This implies a need for
service process and system analysis to determine the root causes of failures so that a redesign
can ensure higher reliability. However, because of the inherent variability of services, failures
are inevitable even for the best of firms.

However, because of the inherent variability of services, failures are inevitable even for the
best of firms. Thus organisations need recovery systems that allow employees to turn the
failure around and leave the customer satisfied. (v) Facilitate Adaptability and Flexibility:
Customer perceptions of organisational adaptability and flexibility also create feelings of
satisfaction of dissatisfaction in service encounters. The existence of this encounter theme
suggests a need to know and how the system can be flexed, and when and how to explain to
customers why a particular request cannot be granted. Knowledge of the service concept, the
service delivery and its operation, and the system standards enables employees to inform
customers about what happened, what can be done, and why their needs or requests can or
cannot be accommodated. Such knowledge and willingness to explain can leave a lasting
positive impression on customers even when their specific requests cannot be met.

(3) Manage the Evidence of Service to Reinforce Perceptions

The evidence of service — people, process, physical evidence — provides a framework for
planning marketing strategies that address the expanded marketing mix elements for service.
These new elements, are a subset of them essentially tangibles the service for the customer
and thus represent important means for creating positive perception.

CUSTOMER SATISFACTION
Satisfaction is the consumer's fulfillment response. It is a judgment that a product or
service feature, or the product or service itself, provides a pleasurable level of consumption-
related fulfillment.

In less technical terms, we interpret this definition to mean that satisfaction is the
customer's evaluation of a product or service, in terms of whether that product or service has
met the customer's needs and expectations. Failure to meet needs and expectations is assumed
to result in dissatisfaction with the product or service.
Satisfaction may also be associated with feelings of pleasure for services that make
the consumer feel good or are associated with a sense of happiness. For those services that
really surprise the consumer in a positive way, satisfaction may mean delight. In some
situations, where the removal of a negative leads to satisfaction, the consumer may associate
a sense of relief with satisfaction. Finally, satisfaction may be associated with feelings of
ambivalence when there is a mix of positive and negative experiences associated with the
product or service.
What Determines Customer Satisfaction?

Customer satisfaction is influenced by specific product or service features,

perceptions of product and service quality, and price. In addition, personal factors such as the
customer's mood or emotional state and situational factors such as family member opinions
will also influence satisfaction.

Product and Service Features

Customer satisfaction with a product or service is influenced significantly by the

customer's evaluation of product or service features. For a service such as a resort hotel,
important features might include the pool area, access to golf facilities, restaurants, room
comfort and privacy, helpfulness and courtesy of staff, room price, and so forth. In
conducting satisfaction studies, most firms will determine through some means (often focus
groups) what the important features and attributes are for their service and then measure
perceptions of those features as well as overall service satisfaction.

Consumer Emotions
Customers' emotions can also affect their perceptions of satisfaction with products
and services. These emotions can he stable, preexisting emotion—for example, mood state or
life satisfaction. Think times when you are at a very happy stage in your life (such as when
you are on vacation), and your good, happy mood and positive frame of mind have
influenced how you feel about the services you experience. Alternatively, when you are in a
bad mood, your negative feelings may carry over into how you respond to services, causing
you to overreact or respond negatively to any little problem.
Specific emotions may also be induced by the consumption experience itself,
influencing a consumer's satisfaction with the service. Research done in a river-rafting
context showed that the river guides had a strong effect on their customers' emotional
responses to the trip and that those feelings (both positive and negative) were linked to
overall trip satisfaction. Positive emotions such as happiness, pleasure, elation, and a sense of
warm-heartedness enhanced customers' satisfaction with the rafting trip. In turn, negative
emotions such as sadness, sorrow, regret, and anger led to diminished customer satisfaction.
Overall, in the rafting context, positive emotions had a stronger effect than negative ones.
Similar effects of emotions on satisfaction were found in a Finnish study that looked at
consumers' satisfaction with a government labor bureau service. In that study, negative
emotions including anger, depression, guilt, and humiliation had a strong effect on customers'
dissatisfaction ratings.

Attributions for Service Success or Failure

Attributions—the perceived causes of events—influence perceptions of satisfaction

as well. When they have been surprised by an outcome (the service is either much better or
much worse than I expected), consumers tend to look for the reasons, and their assessments
of the reasons can influence their satisfaction. For example, if a customer of a weight-loss
organization fails to lose weight as hoped for, she will likely search or the causes—was it
something she did, was the diet plan ineffective, or did circumstances simply not allow her to
follow the diet regimen—before determining her level of satisfaction or dissatisfaction with
the weight-loss company. For many services, customers take at least partial responsibility for
how things turn out.

Perceptions o f Equity or Fairness

Customer satisfaction is also influenced by perceptions of equity and fairness.

Customers ask themselves: Have I been treated fairly compared with other customers? Did
other customers get better treatment, better prices, or better quality service? Did I pay a fair
price for the service? Was I treated well in exchange for what 1 paid and the effort f
expended? Notions of fairness are central to customers' perceptions of satisfaction with
products and services, particularly in service recovery situations. Satisfaction with a service
provider following a service failure is largely determined by perceptions of fair treatment.
The example of Sears Auto Centers division illustrates consumers' strong reactions to unfair
treatment. Over a decade ago the division was charged with defrauding customers in 44 states
by performing unnecessary repairs. Sears employee rewards had been based on the quantity
of repairs sold resulting in substantial unnecessary charges to customers. The $27 million that
Sears paid to settle complaints and the additional loss of business all resulted from extreme
dissatisfaction of its customers over the unfair treatment.
Other Consumers, Family Members, and Coworkers
In addition to product and service features and one s own individual feelings and
beliefs, consumer satisfaction are often influenced by other people. For example, satisfaction
with a family vacation trip is a dynamic phenomenon, influenced by the reactions and
expressions of individual family members over the duration of the vacation. Later, what
family members express in terms of satisfaction or dissatisfaction "with the trip will be
influenced by stories that are retold among the family and selective memories of the events.
Similarly, the satisfaction of the rafters is certainly influenced by individual perceptions, but
it is also influenced greatly by the experiences, behavior, and views of the other rafters. In a
lousiness setting, satisfaction with a new service or technology—for example, a new
customer relationship management software service—will be influenced not only by
individuals' Personal experiences with the software^ itself but also by what others say about it
in the company, how others use it and feel about it, and how widely it is adopted in the
organization.

SERVICE ENCOUNTERS: THE FOUNDATIONS FOR SATISFACTION

AND SERVICE QUALITY

Here we turn to what have been termed the foundations or building blocks for satisfaction
and service quality — namely, service encounters, or the “moment of truth.” It is where
promises are kept or broken and where the proverbial rubber meets the road— sometimes
called “real-time marketing.” It is from these service encounters that customers build their
perceptions.

MEANING OF SERVICE ENCOUNTERS

(1) From the Customers’ Point of View

The most vivid impression of service occurs in the service encounter or “moment of
truth,” when the customer interacts with the service firm. For example, among the service
encounters, a hotel customer experiences are checking into the hotel, being taken to a room
by a bellperson, seating a restaurant meal, requesting a wake-up call, and checking out. You
could think of the linking of these moments of truth as a service encounter cascade. It is in
these encounters that customers recei\ e a snapshot of the organisation’s service quality, and
each encounter contributes to the customers’ overall satisfaction and willingness to do
business with other organisation again.
(2) From the Organisations Point of View

Each encounter, thus, presents an opportunity to prove its potential as a quality

service provider and to increase customer loyalty. Some services have few service
encounters, and others have many. The Disney corporation estimates that each of its
amusement park customers experiences about 74 service encounters and that a negative
experience in any one of them can lead to a negative overall evaluation. Mistakes or problems
that occur in the early levels of the service cascade are particularly critical because a failure at
one point results in greater risk for dissatisfaction at each ensuing level. Marriott Hotels
learned this through their extensive customer research to determine what service elements
contribute most to customer loyalty. They found that four of the top five factors came into
play in the first 10 minutes of the guest’s stay.

DIFFERENT KINDS OF SERVICE ENCOUNTERS

There are three general types of service encounters: remote encounters, phone
encounters, and face-to -face encounter. A customer may experience any of these types of
encounters, or a combination of all three, in his or her relations with a service firm. First,
encounters can occur without any direct human contact (remote encounters), such as when a
customer interacts with a bank through the ATM system, with Ticketron through an
automated ticketing machine, with a retailer through its Internet web-site, or with a mail-
order service through automated dial-in ordering. Remote encounters also occur when the
firm sends its billing statements or communicates other types of information to customers by
mail. Although there is no direct human contact in these remote encounters, each represents
an opportunity for the firm to reinforce or establish quality perceptions in the customer. In
remote encounters, the tangible evidence of the service and the quality of the technical
processes and systems become the primary bases for judging quality. More and more services
are being delivered through technology, particularly with the advent of Internet applications.
Retail purchases, airline ticketing, repair and maintenance troubleshooting, and package and
shipment tracking are just a few examples of services available via the Internet. All of these
types of service encounters can be considered remote encounters. In many organisations
(such as insurance companies, utilities, and telecommunications), the most frequent type of
encounter between an end customer and the firm occurs over the telephone (phone
encounters). Almost all firms (whether goods manufacturers of service businesses) rely on
phone encounters in the form of customer ser ice, general inquiry, or order-taking functions.
The judgment of quality in phone encounters is different from remote encounters because
there is greater potential variability in the interaction. Tone of voice, employee knowledge,
and effectiveness/efficiency in handling customer issues become important criteria for
judging quality in these encounters. A third type of encounter is the one that occurs between
an employee and a customer in direct contact (face-to-face encounters). At Disney theme
parks, face-to-face encounters occur between customers and ticket-takers, maintenance
personnel, actors in Disney character costumes, ride personnel, food and beverage ser ers and
others. For a company such as IBM, in a business-to-business setting direct encounters occur
between the business customer and salespeople delivery personnel, maintenance
representatives, and professional consultants Determining and understanding service quality
issues in face-to-face contexts is the most complex of all. Both verbal and non-verbal
behaviours are important determinants of quality, as are tangible cues such as employee dress
and other symbols of service (equipment, informational brochures, physical setting). In face-
to-face encounters, the customer also plays a role in creating quality service for herself
through her own behaviour during the interaction.

SIGNIFICANCE OF ENCOUNTERS

Although early events in the encounter cascade are likely to be especially important,
any encounter can potentially be critical in determining customer satisfaction and loyalty. If a
Customer is interacting with a firm for the first time, that initial encounter will create a first
impression of the organisation. In these first encounter situations, the customer frequently has
no other basis for judging the organisation, and the initial phone contact or face-to- face
experience with a representative of the firm can take an excessive importance in the
customer’s perceptions of quality. A customer calling for repair service on a household
appliance may well hang up and call a different company if he is treated rudely by a customer
service representative, put on hold for a lengthy period, or told that two weeks is the soonest
someone can be sent out to make the repair. Even if the technical quality of the firm’s repair
service is superior, the firm may not get the chance to demonstrate it if the initial telephone
encounter drives the customer away. Even when the customer has had multiple interactions
with a firm, each individual encounter is important in creating a composite image of the firm
in the customer’s memory. Many positive experiences add up to a composite image of high
quality, whereas many negative interactions will have the opposite effect. On the other hand,
a combination of positive and negative interactions will leave the customer feeling unsure of
the firm’s quality, doubtful of it consistence in service delivery, and vulnerable to the appeals
of competitors. For example, a large corporate customer of an institutional food provider the
provides food service in all of its company dining rooms and cafeterias could have a series of
positive encounters with the account manager or salesperson who handles the account. These
experiences could he followed by positive encounters with the operations staff who actually
set up the food service facilities. However, even with these positive encounters, later negative
experiences with the staff who serve the food or the accounting department that administers
the account and billing procedures can result in a mixture of overall quality impressions. This
variation in experiences could result in the corporate customer wondering about the quality of
the organisation and unsure of what to expect in the future. Each encounter with different
people and departments representing the food service provider adds to or detracts from the
potential for a continuing relationship. Logic suggests that not all encounters are equally
important in building relationships. For every organisation, certain encounters are probably
key to customer satisfaction, For Marriott Hotels, as noted, it is the early encounters that are
most important. In a hospital context, a study of patients revealed that encounters with
nursing staff were more important. In predicting satisfaction that were encounters with meal
service or patient discharge personnel. And research at GTE Laboratories documents that
small business customers’ relationships with GTE depend on specific installation, repair, and
sales encounters. Beside from common key encounters, there are some momentous
encounters that, like the proverbial “one had apple, simply ruin the rest” and drive the
customer away no matter how many or what type of encounters have occurred in the past.
These can occur in connection with very important events (such as the failure to deliver an
essential piece of equipment before a critical deadline) or they may seem inconsequential.
Similarly, momentous positive encounters can sometimes bind a customer to an organisation
for life.
SOURCES OF SERVICE ENCOUNTERS

Because of the importance of service encounters in building quality perceptions and

ultimately influencing customer satisfaction, researchers have extensively analysed service
encounters in many contexts to determine the sources of customers’ favourable and
unfavourable perceptions The research uses the critical incident technique to get customers
and employees to provide verbatim stories about satisfying and dissatisfying service
encounters they have experienced. With this technique, customers (either internal or external)
are asked the following questions: Think of a time when, as customer, you had a particularly
satisfying (or dissatisfying) interaction with. When did the incident happen? What specific
circumstances led up to this situation? Exactly what did the employee (or firm) say or do?
What resulted that made you feel the interaction was satisfying (or dissatisfying? What could
or should have been done dfferently? Sometimes contact employees are asked to put
themselves in the shoes of a customers and answer the same questions: “Put yourself in the
shoes of customers of your firm. In other words, try to see your firm had a particularly
satisfying dissatisfying interaction with you or a fellow employee.” The stories are then
analysed to determine common themes of satisfaction/dissatisfaction underlying the events.
On the basis of thousands of service encounter stories, four common themes — recovery
(after failure), adaptability, spontaneity, and coping have been identified as the sources of
customer satisfaction! dissatisfaction in memorable service encounters. The theme encompass
service behaviours in encounters spanning a wide variety of industries.

(1) Recovery — Employee Responses to, Service Delivery System Failures

The first theme includes all incidents in which where there has been a failure of the
service delivery system and an employee is required to respond
in some way to consumer complaints and disappointments. The failure
maybe, for example, a hotel room that isn’t available, an airplane flight that is delayed
six hours, an incorrect item sent from a mail-order company, or a
critical error on an internal document. The content or form of the employee’s response
is what causes the customer to remember the event either favourably or unfavourablv.

(2) Adaptability — Employee Responses to Customer Needs and Requests

A second theme underlying satisfaction/dissatisfaction in service encounters is how

adaptable the service delivery system is when the customer has special needs or
requests that place demands on the process. In these cases, customers judge service
encounter quality in terms of the flexibility of the employees and the system.
Incidents categorised within this theme all contain an implicit or explicit request for
customisation of the service to meet a need. Much of what customers see as special
needs or requests may actually be rather routine from the employee’s point of view;
what is important is that the customer perceives that something special is being done
for her based on her own individual needs. External customers and internal customer
alike are pleased when the service provider puts forth the effort to accommodate and
adjust the system to meet their requirements. On the flip side, they are angered and
frustrated by an unwillingness to try to accommodate and by promises that are never
followed through. Contact employees also see their abilities to adapt the system as
being a prominent source of customer satisfaction, an often they are equally frustrated
by constraints that keep then from being flexible.
(3) Spontaneity — Unprompted and Unsolicited Employee Actions

Even when there is no system failure and no special request or need,

customers can still remember service encounters as being very satisfying or very
dissatisfying. Employee spontaneity in delivering memorably good or poor service is
the third theme. Satisfying incidents in this group represent
very pleasant surprises for the customer (special attention, being treated like royalty,
receiving something nice but not requested), whereas dissatisfying incidents in this
group represent negative and unacceptable employee behaviours (rudeness, stealing,
discrimination, ignoring the customer).

(4) Coping — Employee Response to Problem Customers

The incidents categorised in this group came to light when employees were asked to
describe service encounter incidents in which customers were either very satisfied or
dissatisfied In addition to describing incidents of the types outlined under the first
three themes, employees described many incidents in which customers were the cause
of their own dissatisfaction. Such customers were basically uncooperative — that is,
unwilling to cooperate with the service provider, other customers, industry
regulations, and/or laws. In these cases nothing the employee could do would result in
the custhner feeling pleased about the encounter. The term “coping” is used to
describe these incidents because this is the behaviour generally required of employees
to handle problem customer encounters.

(5)General Service Behaviours

Individual encounters are the most fundamental, concrete, and vivid events through
which consumers can begin building their overall impressions of an organisation.
Because of the potential importance of these immediate events, many organisations
have found it useful to capture customer impressions of service encounters on the spot
before the memory of the events has faded.

(6) Satisfaction with Technology-Based Service Encounters

All of these on service encounters described thus far and the resulting themes
underlying service encounters satisfaction are based on interpersonal
services — that is personal encounters between customers and employees of service
organisations. Recently researchers have begun to look t the factors underlying
satisfaction in technology-based service encounters. These types of encounters
involve customers interacting with Internet based services, automated phone services,
kiosk services, and services delivered via CD or video technology. Often these are
referred to as 5elf -service technologies because the customer essentially provides his
or her own service. The research reveals that customer experiences with self-service
technologies (SSTs) suggest some different themes in terms of what drives customer
satisfaction and dissatisfaction.