Session 12

Session 12
Managing Relationships
and Building Loyalty
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 12 - 1
The search for customer loyalty
 Targeting, acquiring & retaining the right customers is at

the core of many successful service firms.
 All businesses aspire to have a database of loyal

customers.
 Loyalty is described as a
 customer’s willingness to continue patronizing a firm
 purchasing & using its goods & services on a repeated &
preferably exclusive basis &
 recommending the firm’s products to friends & associates.
What Makes Loyal Customers More Profitable?
 Tend to spend more as relationship develops

 customer’s balances may grow
 may consolidate purchases to one supplier
 Cost less to serve

 less need for information and assistance
 make fewer mistakes
 Recommend new customers to firm (act as unpaid sales

people or Customer Advocates)
 Trust leads to willingness to pay regular prices vs. shopping

for discounts
Analyzing Why Customers Are More Profitable
over Time
Profit from price

premium
Profit from references
Profit from reduced

op. costs
Profit from increased
usage
Base Profit
1 2 3 4 5 6 7
Year Source: Reichheld and Sasser
Understanding the customer/firm relationship
 Relationship strategies could be focused towards creating

single transaction or extended relationships with the customers.
 Research suggests that there are, 4 distinct types of

marketing:
 1. Transactional marketing
Relational marketing
 2. Database marketing
 3. Interaction marketing
 4. Network marketing
Understanding the customer/firm relationship
1.Transactional marketing:
A transaction is an event during which an exchange of value takes place
between two parties.
But even a series of transactions does not necessarily constitute a

relationship, which requires mutual recognition & knowledge between the
parties.
When each transaction between a customer & a supplier is essentially

discrete & anonymous, with no long-term record kept of a customer’s
purchasing history & little or no mutual recognition between the customer &
employees, no meaningful marketing relationship can be said to exist.
•Pay phone, Movie theatre, Restaurant

Cont……………..
2. Data base marketing: The focus is on the market transaction but also
includes information exchange. Marketers rely on information technology,
usually in the form of a database, to form a relationship with targeted
customers & retain their patronage over time.
• However, the nature of these relationships is often not a close one, with
communication being driven & managed by the seller.
•Relations still remain distant.

• Technology is used to :
a. Identify & build a database of current & potential customers
b. Deliver differentiated messages based on consumer’s characteristics &
preference
c. Track each relationship to monitor the cost of acquiring the customer &
the life-time value of the resulting purchases.
Utility Services (electricity, gas, cable TV)

Cont…………….
3. Interaction marketing: A closer relationship exists when there is face-to-

face interaction between customers & representatives of the supplier.
• Although service remains important, value is added by people & social

processes. Interactions may include negotiations & sharing of insights in
both directions.
• Both the firm & the customer are prepared to invest resources to develop a
mutually beneficial relationship. This invest may include time spent sharing &
recording information.
4. Network marketing: This type of marketing occurs primarily in a

business-to-business context, where firms commit resources to develop
positions in a network of relationships with customers, distributors, suppliers,
the media, consultants, trade associations, govt. agencies.
• The concept is also relevant in consumer marketing environment.

Creating “Membership” relationships
• It is a formalized relationship between the firm & an identifiable customer,

may offer special benefits to both parties.
• Services involving discrete transactions can be transformed into

membership relationships either by selling the service in bulk or by offering
extra benefits to customers who choose to register with the firm.
• The advantage to the service organization of having membership

relationships is that it knows who is its current customers & what use they
make of the services offered.
• This information can be valuable for segmentation purposes if good

records are kept & the data are readily accessible for analysis.
• Knowing the identities & addresses of current customers enables the

organization to make effective use of direct mail, telephone selling- all highly
targeted methods of marketing communication.
Types of Relationships with Customers
Type of Relationship--Firm and Customer

Nature of
Service Delivery
“Membership” No formal relationship
Continuous Cable TV Radio station
Insurance Police
College enrollment Lighthouse
Discrete transactions Subscriber phone Pay phone

Theater subscription Movie theater
Health Treatment for Public transport
corporate member
employee
Identifying and Selecting Target Segments
User characteristics
 demographics
 psychographics
 geographic location
 benefits sought
User behavior
 when, where, how services used
 quantity/value of purchases
 frequency of use
Targeting the right customers
1. Good relationships start with a good fit:
• If they want to build successful customer relationships, companies need to

be selective about the segments they target.
• Matching customers to the firm’s capabilities is vital.

•Managers also need to consider how well their service personnel can meet
the expectations of specific types of customers , in terms of both personal
style & technical competence.
• Finally, managers need to ask themselves whether their company can

match or exceed competing services that are directed at the same types of
customers.
2. Searching for value, not just numbers:
• Many service firms still focus on the number of customers they serve without giving
sufficient attention to the value of each customer.
• Service customers who buy based strictly on lower price are not good target
customers for relationship marketing at the first place. These deal-prone customers
continually seek the lowest price offer.
• Acquiring the right customers can bring in long-term revenues, continued growth
from referrals, & enhanced satisfaction.
• Attracting the wrong customers typically results in costly churn.

• Marketers shouldn’t assume that the “right customers” are always high spenders.
• Marketers also need to recognize that some customers simply are not worth serving
because they are too difficult to please or unable to decide what they want.
3. Selecting an appropriate customer portfolio:
• We can apply the concept of portfolio management to service businesses

with an established base of customers. Different segments offer different
value for a service firm.
• Like investments, some types of customers may be more profitable than

others in the short term, but others may have greater potential for long-term
growth.
• Similarly, the spending patterns of some customers may be stable over

time, whereas others may be more volatile.
• A wise firm may seek a mix of such segments in order to reduce the risks
that various types of customers might be affected.
Analyzing & managing the customer base
• Marketers should adopt a strategic approach to retaining, upgrading &

even terminating customers.
• Research has confirmed that most firms have several tiers of customers in
terms of profitability & that these tiers often different service expectations &
needs
The Customer Pyramid
Good Relationship
Customers
Which segment sees high value in
our offer, spends more with us over
Platinum time, costs less to maintain, and
spreads positive word-of-mouth?
Gold
Which segment costs us in time,

Iron
effort and money, yet does not
provide the return we want?
Which segment is difficult to do
Lead business with?
Poor Relationship
Customers
Tiering the customer base
1. Platinum: These customers constitute a very small percentage of a

firm’s customer base, are heavy users & contribute a large share of the
profits generated. Typically, this segment is less price sensitive but
expects highest service levels in return & is likely to be willing to invest &
try new services.
2. Gold: It forms a larger percentage of customers than the platinum, but

individual customers contribute less profit than do platinum customers. It
tend to be slightly more price-sensitive & less committed to the firms.
3. Iron: These customers provide the bulk of customer base. Because their
numbers give the firm economies of scale, they are often important so
that a firm can build & maintain a certain capacity level & infrastructure,
which is often needed for serving gold & platinum customers.
4. Lead: They generate low revenue for the firm.
Retaining, upgrading & terminating customers
• Each segment receives a customized service level, based on its requirements &
value to the firm.
• The platinum tier will receive some exclusive benefits not available to other
segments. The benefit levels for platinum & gold customers are often designed with
retention in mind, because these customers are the ones that competitors would like
to entice to switch.
• Marketing efforts can be used to encourage an increased volume of purchase,

upgrading the type of service used, or cross-selling additional services to any of the 4
tiers.
• For lead- customers, the options are to either migrate them to the iron segment or
terminate them.
• Terminating customers comes as a logical consequence of the realization that not

all existing customer relationships are worth keeping. Many relationships are no
longer profitable for the firm as they may cost more to maintain the revenues.
The foundations of customer loyalty
• The foundation for true loyalty lies in customer satisfaction. Highly

satisfied or even delighted customers are more likely to become loyal
apostles or a firm, consolidate their buying with one supplier & spread
positive word of mouth.
• In contrast, dissatisfaction drives customers away.

• The zone of defection is at low satisfaction levels. Customers will switch
unless switching costs are high or there are no viable or convenient
alternatives. Extremely dissatisfied customers can turn into “terrorists”
• The zone of indifference is at intermediate satisfaction levels. Here,

customers are willing to switch if they find a better alternative.
• The zone of affection is at very high satisfaction levels, & customers

here can have such high attitudinal loyalty that they do not look for
alternative service providers. Customers who praise the firm in public &
refer others to the firm are described as “apostles”.
The Customer Satisfaction-Loyalty Relationship
Apostle
100
Zone of Affection
80
Loyalty (Retention)
Near Apostle
60 Zone of Indifference
40 Zone of Defection
20
Terrorist 0
1 2 3 4 5
Very Neither Very
dissatisfied Dissatisfied satisfied Satisfied Satisfied
nor dissatisfied
Satisfaction
The Wheel of Loyalty
3. Reduce 1. Build a
Churn Drivers Foundation
for Loyalty
 Conduct churn diagnostic
 Segment the market
 Address key churn drivers
 Be selective in acquisition
Enabled through:
 Implement complaint
handling & service  Use effective tiering of
 Frontline staff service.
 Account
recovery Customer
 Increase switching  Deliver quality
managers
 Membership costs
Loyalty service.
programs
 CRM
Systems 2. Create Loyalty
Bonds
 Build higher level  Deepen the
bonds relationship
 Give loyalty
rewards
Customer Feedback and
Service Recovery
Key Questions for Managers to Ask about
Customer Complaining Behavior
 Why do customers complain?

 What proportion of unhappy customers complain?
 Why don’t unhappy customers complain?
 Who is most likely to complain?
 Where do customers complain?
Customer Response categories to service failures
Complain
Complaintotothe
the
service firm
service firm
Take
Takesome
someform Complain
form Complaintotoaathird
third
ofofpublic action
public action party
party
Take
Takelegal
legalaction
action
Service Take
Takesome
someform
formofof
ServiceEncounter
Encounterisis private
totoseek redress
seek redress
Dissatisfactory
Dissatisfactory privateaction
action
Defect
Defect(switch
(switch
provider)
provider)
Take
Takeno
noaction
action
Negative
Negativeword-of-
word-of-
mouth
mouth
Any
Anyone
oneororaacombination
combinationofof
these
theseresponses
responsesisispossible
possible
Understanding customer responses to service
failures
• To be able to deal effectively with dissatisfied & complaining customers,
managers need to understand key aspects of complaining behavior
•Why do customers complain?

a.Obtain restitution or
compensation: Often consumers complain to recover some
economic loss by seeking a refund, compensation, &/or have the service performed
again.
b.Vent their anger: Some customers complain to rebuild self-esteem &/or to vent
their anger & frustration. When service processes are unreasonable or when
employees are rude or uncaring.
c. Help to improve the service: When customers are highly involved with a service,
they give feedback to try & contribute toward service improvements. These
customers are motivated by the prospect of getting better service in the future.
d. For altruistic reasons: These customers want to spare other customers from
experiencing the same problems.
Cont……………..
2. What proportion of unhappy customers complain?
• Research shows that an average, only 5-10% of customers who have

been unhappy with a service actually complain.
• Although generally only a minority of dissatisfied customers complain,

there is evidence that consumers across the world are becoming better
informed, more self- confident, & more assertive about seeking satisfactory
outcomes for their complaints.
Cont…………..
3. Why don’t unhappy customers complain?
• Some don’t wish to take the time to write a letter, fill out a form, or make a
phone call, especially if they don’t see the service sufficiently important to
merit the effort.
• Many customers see the payoff as uncertain & believe that no one would
be concerned about their problem or willing to resolve it.
• In some situations, people simply do not know where to go or what to do

• Additionally, many people may feel that complaining is unpleasant.
Cont……………
4. Who is most likely to complain?
• Research findings consistently show that people in higher socioeconomic

levels are more likely to complain than those in lower levels.
• Better education, higher income, & greater social involvement give them
the confidence, knowledge & motivation to speak up when they encounter
problems.
5. Where do customers complain?
• Studies show that majority of complaints are made at the place where the
service was received.
Customer expectations about their complaints
• When a service failure occurs, people expect to be adequately

compensated in a fair manner. It was found in a research, that
satisfaction with a service recovery was determined by the 3 dimensions
of fairness:
1. Procedural justice: It deals with the policies & rules that any customer will have to go
through in order to seek fairness. Customers expect the firm to assume responsibility, which
is the key to the start of a fair procedure
2. Interactional justice: It involves the firm’s employees who provide the service recovery &
their behavior towards the customer. Giving an explanation for the failure & making an effort
to resolve the problem are very important. The recovery effort must be perceived as
genuine, honest & polite.
3. Outcome justice: The compensation that a customer receives as a result of the losses &
inconvenience incurred because of the service failure. It includes compensation for time &
effort spent during service process recovery.
Dimensions of Perceived Fairness in Service
Recovery Process
Complaint Handling & Service Recovery

Process
Justice Dimensions of the Service Recovery Process
Procedural Interactive Outcome

Justice Justice Justice
Customer Satisfaction with the

Service Recovery
Source: Tax and Brown
Customer responses to effective service recovery
•
•Service recovery is an umbrella term for systematic efforts by a firm to
correct a problem following a service failure & retain a customer’s goodwill.
• Service recovery efforts play a crucial role in achieving customer

satisfaction.
• The true test of a firm’s commitment to satisfaction & service quality is not
in the advertising promises but in the way it responds when things go wrong
for the customer.
• Effective service recovery requires thoughtful procedures for resolving

problems & handling dissatisfied customers.
Impact of Effective Service Recovery
on Retention
No
Problem
84%
Problem,
but effectively 92%
resolved
Problem
46%
Unresolved
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Customer Retention
Source: IBM-Rochester study
Principles of effective service recovery systems
 Make it easy for customers to give feedback:
• Many companies have improved their complaint- collection procedures

by adding special toll-free phone lines, links on the Web sites,
prominently displayed customer comment cards in their branches.
• In the customer newsletter, some companies feature service

improvements that were the direct result of customer feedback under the
motto “ you told us, & we responded”
Strategies to Reduce Customer Complaint
Barriers
Complaint Barriers for Dissatisfied Strategies to Reduce These Barriers
Customers
Inconvenience Make feedback easy and convenient by:
 Difficult to find the right complaint  Printing Customer Service Hotline numbers, e-
procedure. mail and postal addresses on all customer
 Effort, e.g., writing a letter. communications materials.
Doubtful Pay Off Reassure customers that their feedback will be
taken seriously and will pay off by:
 Uncertain whether any action, and what  Having service recovery procedures in place,
action will be taken by the firm to and communicating this to customers.
address the issue the customer is  Featuring service improvements that resulted
unhappy with. from customer feedback.
Unpleasantness Make providing feedback a positive experience:

 Complaining customers fear that they  Thank customers for their feedback.
may be treated rudely,  Train the frontline not to hassle and make
 may have to hassle, or customers feel comfortable.
 may feel embarrassed to complain.  Allow for anonymous feedback.
Cont…………..
2. Enable effective service recovery:
•Effective service recovery procedure should be:

a.Proactive: Service recovery needs to be initiated on the spot, ideally before
customers have a chance to complain. Service personnel should be sensitized to
signs of dissatisfaction & ask whether customers might be experiencing a problem.
b.Planned: Contingency plans have to be developed for service failures, especially

for those that can occur regularly.
c.Recovery skills must be taught: Effective training arms frontline staff with the
confidence & competence to turn distress into delight.
d. Recovery requires empowered employees: Employees should be empowered to

use their judgment & communication skills to develop solutions that will satisfy
complaining customers. Employees need to have the authority to make decisions &
spend money in order to resolve service problems promptly & recover customer
goodwill.
Cont……………
3. How generous should compensation be?
How much compensation should a firm offer when there has been a service
failure? Or would an apology be sufficient instead?
The following rules of thumb can help to answer these questions:
a.What is the firm’s market positioning?

b.How severe was the service failure?
 Let the punishment fit the crime
a.Who is the affected customer?

 Long term Loyal or discrete
Cont……………….
4. Dealing with complaining customers :
Both managers & frontline employees must be prepared to deal with angry
customers who are confrontational & sometimes behave in insulting ways
toward service personnel.
Cont……………..
The following guidelines provide specific guidelines for effective problem

resolution, designed to calm upset customers & deliver a resolution.
 Act quickly, Admit mistakes, but don’t be defensive

Show that you understand the problem from each customer’s point of view
 Don’t argue with customers
Acknowledge the customer’s feelings
 Give customers the benefit of the doubt
 Clarify the steps needed to solve the problem
 Keep customers informed of progress
 Consider compensation
 Persevere to regain customer goodwill
Components of an Effective Service Recovery
System
+
Do the Job Right the
Do the Job Right the
First Time
First Time
Service Guarantees
 A growing number of companies offer customers a satisfaction guarantee,

promising that if service delivery fails to meet predefined standards, the
customer is entitled to one or more forms of compensation, such as easy-to-
claim replacement, refund or credit.
 From the customer’s perspective, the primary function of service guarantees

is to lower the perceived risks associated with purchase.
The power of service guarantees
• Guarantees are powerful tools for both promoting & achieving service quality
for the following reasons:
1.Guarantees force firms to focus on what their customers want & expect in
each element of the service.
2.Guarantees set clear standards, telling customers & employees alike what
the company stands for.
3.Guarantees require the development of systems for generating meaningful

customer feedback & acting on it.
4.Guarantees force service organization to understand why they fail &

encourage them to identify & overcome potential fail points.
5.Guarantees help in reducing the risk of the purchase decision & building
long-term loyalty.
How to design service guarantees
•Some guarantees are simple & unconditional. Others appear to have been
written by lawyers & contain many restrictions.
• Service guarantees should be designed to meet the following criteria:

1.Unconditional
2.Easy to understand & communicate
3.Meaningful to customers
4.Easy to invoke
5.Easy to collect
6.Credible
Types of Service Guarantees
 Single attribute-specific guarantee – one key service

attribute is covered
 Multiattribute-specific guarantee – a few important service
attributes are covered
 Full-satisfaction guarantee – all service aspects covered
with no exceptions
 Combined guarantee – like the full-satisfaction, adding
explicit minimum performance standards on important
attributes
Is it always appropriate to introduce a service
guarantee?
• Managers should think carefully about their firm’s strength & weaknesses
before deciding to introduce a service guarantee.
• Companies that have a strong reputation for high-quality service may not
need a guarantee.
• In contrast, a firm whose service is currently poor must first work to improve
quality to level above that at which the guarantee might be invoked on a regular
basis by most of its customers.
• In a market where consumers se little financial, personal or physiological risk

associated with purchasing & using a service, a guarantee adds little value but
still costs money to design, implement & manage.
• Where little perceived difference in service quality among competing firms

exists, the first company to institute a guarantee may be able to obtain a first-
mover advantage & create a valued differentiation for its services.
Key objectives of effective customer feedback
systems
• Many strategists have concluded that in increasingly competitive markets, the
ultimate competitive advantage for a firm is to learn & change more rapidly than
competition.
• Specific objectives of effective customer feedback systems typically fall into

three main categories:
1.Assessment & benchmarking of service quality & performance:

•The objective is to answer the question, How satisfied are the customers?
•This objective includes learning about how well a firm performed in
comparison to its main competitors?
•How it performed in comparison to the previous year?
Cont………………..
• Whether investments in certain service aspects have paid off in terms of

customer satisfaction?
• Often, a key objective of comparison against other units (branches, teams,

competitors) is to motivate managers & service staff to improve
performance, especially when the results are linked to compensation.
2. Customer-driven learning & improvements: The objective is to answer:
• Why our customers are unhappy?

• Where & how can we improve?
• This objective is about gaining an understanding of the things that other
suppliers do well & those that make customers happy.
3. Creating a customer-oriented service culture

Customer feedback collection tools
• Recognizing that different tools have different strengths & weaknesses,

service marketers should select a mix of customer feedback collection tools
that jointly deliver the needed information.
1.Total market surveys, annual surveys & transactional surveys:

•Total market surveys & annual surveys measure satisfaction with all major
customer service processes & products.
•The level of measurement is usually at high level, with the objective of

obtaining a global index or indicator of overall service satisfaction for the
entire firm.
•Overall indices tell how satisfied customers are but not why they are happy
or unhappy.
•There is a limit to the number of questions that can be asked about each
individual process or product.
Cont……………
• In contrast, transactional surveys are typically conducted after customers

have completed a specific transaction & query them about this process in
some depth.
• All three types are representative & reliable when designed properly.
Representativeness & reliability are required for:
1.Accurate assessment of where the company, a process, branch or

individual stands relative to quality goals.
2.Evaluation of individuals, staff, teams, branches &/or processes especially

when incentive schemes are linked to such measures.
Cont……………
2. Service feedback cards:
• This powerful & inexpensive tool involves giving customers a feedback

card following completion of each major service process & inviting them to
return it by mail or other means to central customer feedback unit.
• Although these cards are good indicator of process quality & yield specific
feedback on what works well & what doesn’t, the respondents tend not to be
representative & are biased.
3. Mystery shopping
4. Focus group discussions & service reviews
5.Unsolicited customer feedback: E.g. Singapore Airlines prints

complaints & compliment letters in its monthly employee magazine, Outlook.
Strengths and Weakness of Key Customer Feedback
Collection Tools
Multi-level Measurement Represen- Potential for

Action- First Hand Cost
Collection Tools Service Process Specific able
tative, Service
Learning Effective
Satisfaction Satisfaction Feedback Reliable Recovery
Total Market Survey (inclu.

competitors)
Annual Survey on overall
satisfaction
Transactional Survey
(process specific)
Service Feedback Cards
(process specific)
Mystery Shopping
(service testers)
Unsolicited Feedback Recd
(Online feedback system)
Focus Group Discussions
Service Reviews
Meets Requirements: Fully Moderate Little/Not at all
Entry Points for Unsolicited Feedback
 Employees serving customers face-to-face or by phone

 Intermediaries acting for original supplier
 Managers contacted by customers at head/regional office
 Complaint cards mailed or placed in special box
 Complaints passed to company by third-party recipients
 consumer advocates
 trade organizations
 legislative agencies
 other customers
Analysis, reporting & dissemination of customer
feedback
• Choosing the relevant feedback tools & collecting customer feedback is
meaningless if company is unable to disseminate the information to the
relevant parties to take action.
• Hence, to drive continuous improvement & learning, a reporting system

needs to deliver feedback & analysis to frontline staff, process owners, branch
or department managers & top management.
• The feedback loop to the frontline should be immediate for complaints &
complements as is practiced in a number of service businesses where
complaints, compliments & suggestions are discussed with the staff.
• There are 3 types of service performance reports to provide information

necessary for service management :
1. A monthly Service Performance update provides process owners with

timely feedback on customer comments. Here the feedback is provided to the
process manager who can discuss it with service staff.
2. A quarterly service performance review provides process owners &

branch or department managers with trends in process performance &
service quality.
3. An annual service performance report gives top management a

representative assessment of the status & long-term trends relating to
customer satisfaction with the firm’s services.
• The reports should be short & reader friendly, focusing on key indicators.

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 Targeting, acquiring & retaining the right customers is at

 All businesses aspire to have a database of loyal

 Tend to spend more as relationship develops

 Cost less to serve

 Recommend new customers to firm (act as unpaid sales

 Trust leads to willingness to pay regular prices vs. shopping

Profit from price

Profit from reduced

 Relationship strategies could be focused towards creating

 Research suggests that there are, 4 distinct types of

But even a series of transactions does not necessarily constitute a

When each transaction between a customer & a supplier is essentially

•Pay phone, Movie theatre, Restaurant

•Relations still remain distant.

Utility Services (electricity, gas, cable TV)

3. Interaction marketing: A closer relationship exists when there is face-to-

• Although service remains important, value is added by people & social

4. Network marketing: This type of marketing occurs primarily in a

• The concept is also relevant in consumer marketing environment.

• It is a formalized relationship between the firm & an identifiable customer,

• Services involving discrete transactions can be transformed into

• The advantage to the service organization of having membership

• This information can be valuable for segmentation purposes if good

• Knowing the identities & addresses of current customers enables the

Type of Relationship--Firm and Customer

Discrete transactions Subscriber phone Pay phone

1. Good relationships start with a good fit:

• If they want to build successful customer relationships, companies need to

• Matching customers to the firm’s capabilities is vital.

• Finally, managers need to ask themselves whether their company can

2. Searching for value, not just numbers:

• Attracting the wrong customers typically results in costly churn.

3. Selecting an appropriate customer portfolio:

• We can apply the concept of portfolio management to service businesses

• Like investments, some types of customers may be more profitable than

• Similarly, the spending patterns of some customers may be stable over

• Marketers should adopt a strategic approach to retaining, upgrading &

Which segment costs us in time,

1. Platinum: These customers constitute a very small percentage of a

2. Gold: It forms a larger percentage of customers than the platinum, but

4. Lead: They generate low revenue for the firm.

• Marketing efforts can be used to encourage an increased volume of purchase,

• Terminating customers comes as a logical consequence of the realization that not

• The foundation for true loyalty lies in customer satisfaction. Highly

• In contrast, dissatisfaction drives customers away.

• The zone of indifference is at intermediate satisfaction levels. Here,

• The zone of affection is at very high satisfaction levels, & customers

 Why do customers complain?

•Why do customers complain?

2. What proportion of unhappy customers complain?

• Research shows that an average, only 5-10% of customers who have

• Although generally only a minority of dissatisfied customers complain,

3. Why don’t unhappy customers complain?

• In some situations, people simply do not know where to go or what to do

4. Who is most likely to complain?

• Research findings consistently show that people in higher socioeconomic

5. Where do customers complain?

• When a service failure occurs, people expect to be adequately

Complaint Handling & Service Recovery

Justice Dimensions of the Service Recovery Process

Procedural Interactive Outcome

Customer Satisfaction with the

Session 12 - Managing Relationships & Building Loyalty

Session 12 - Managing Relationships & Building Loyalty