"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”.

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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, andactions/omissions of the organization

that are against the sense of fair trade.

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Bitner, Booms, and Tetreault (1990) classified service failures into above four categories. 4

SERVICE RECOVERYService 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: DefinitionsBell 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.

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Attribution

Apologizing

Compensation

Empowerment

Employee Behaviour

Recovery Action7

Essentials of Service Recovery Management

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.

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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.

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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 profits11

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

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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).

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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.

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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

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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.

Customer Profitability

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Analyzing the activities, costs, and profit associated with serving specific customers.

Analyzing the activities, costs, and profit associated with serving specific customers.

For various reasons, some customers are less profitable than

others.

For various reasons, some customers are less profitable than

others.

Customer makes frequent order changes.

Customer needs special attention.

Customer is difficultto please.

Customer Profitability

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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

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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.

Customer-centric Organizational Structure A customer-centric organization has to fulfill the

four essential steps:1.Communal coordination2.Serial coordination3.Symbiotic coordination4.Integral coordination

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Customer Recall Management

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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

Customer Experience ManagementAs 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.)

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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

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Features of Indian Rural Markets:

Large and Scattered market

Agriculture based economy

Infrastructure related Issues

Regional Divide of development

Low standard of livingDiverse socio-economic

backwardness

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Issues

Underdeveloped People and Underdeveloped MarketsLack of Proper Physical Communication FacilitiesMedia for Rural CommunicationMany Languages and DialectsMarket SegmentationDispersed MarketLow Per Capita IncomeLow Levels of LiteracyPrevalence of spurious brands and seasonal demandDifferent way of thinking

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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 RelationshipThe 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

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“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

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Essentials of Building Relationship with Employees through Employee Relationship Management:

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Recruitment and Selection

•Recruitment strategy from customer perspective •Finding persons of customer first orientation

Recruitment and Selection

•Recruitment strategy from customer perspective •Finding persons of customer first orientation

Employee Motivation•Building Employee Customer Parity•Sharing Customer Profile•Directing to remain focused

Employee Motivation•Building Employee Customer Parity•Sharing Customer Profile•Directing to remain focused

Training & Development•Training with Customer first approach•Training to listen to the customers•Training to build empathy with customers

Training & Development•Training with Customer first approach•Training to listen to the customers•Training to build empathy with customers

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

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Initiatives by the service companies for Employees Relations ManagementEmployee 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 opportunity34

Employee's Customer Orientation

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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.

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QUESTIONNAIRE

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Employee's Customer Orientation:

1. Do you know who your customers are and how many customers doyou have?

2. Do you listen effectively to all your customers?

3. Do you regularly make up an inventory of all the needs andexpectations of your customers?

4. Are complaints replied within a day and solved within a day or two?

5. Do you make recommendations to customers about the productsand services that best suit their needs?

6. Do you know what the costs are when you lose a customer?

7. Do you regularly organise meetings with customer groups to learnabout their needs, wants, ideas and complaints?

Leadership's Approach Towards Customers:

1. As a manager, do you know how many complaints are receivedweekly/monthly?

2. Is there commitment at top management for customer orientation?

3. Does management set a good record with regard to customer-friendly behaviour?

4. Is management available at all times to the customer?

5. Does customer satisfaction also belong to the evaluation criteria ofmanagement?

6. Does top management also handle complaints of customerspersonally?

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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.

Service Recovery Paradox

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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

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Causes Behind Service Switching

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Operational CRM and analytical CRM

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