Exam 2 Services Marketing

What is the primary focus of relationship marketing as a business philosophy?

Keeping current customers and improving relationships with them.

True or False: Relationship marketing emphasizes the acquisition of new customers over retention.

FALSE

In terms of firm costs, why is relationship marketing usually more efficient than traditional marketing?

Keeping a current customer costs less than attracting a new one.

According to the 'bucket' metaphor, what represents the 'holes' that relationship development seeks to plug?

Lost customers and decreased purchases by existing customers.

List the four stages of the typology of exchange relationships in order of development.

Strangers, Acquaintances, Friends, and Partners.

What is the primary marketing goal when dealing with customers categorized as 'Strangers'?

Acquire the customer’s business.

In the 'Acquaintance' stage of a relationship, what is the firm's primary goal?

Satisfy the customer’s needs and wants.

What is the primary relationship goal for customers categorized as 'Friends'?

Retain the customer’s business.

In the 'Partner' stage of a relationship, what is the firm's primary marketing goal?

Enhance the relationship with the customer.

How does the sustainability of competitive advantage change as a relationship moves from 'Stranger' to 'Partner'?

It increases from Low to High.

Which exchange relationship stage relies on a 'parity offering' consistent with industry standards?

Acquaintances

Which exchange relationship stage is characterized by 'individualized offerings' and 'dedicated resources'?

Partners

Term: Customer Relationship Value

Definition: The consideration of customers based on their lifetime revenue and/or profitability contributions to a company.

In the Relationship Development Model, what term describes the customer's 'share of heart' on the horizontal axis?

Loyalty

What type of customer benefit in relationship marketing involves reduced anxiety and trust in the provider?

Confidence benefits

Special deals and price breaks are examples of which type of relationship marketing benefit for customers?

Special treatment benefits

What type of customer benefit includes familiarity, social support, and personal relationships?

Social benefits

Strong word-of-mouth endorsements and acting as mentors to other customers are examples of _____ benefits for the firm.

Customer behavior

What is an example of a Human Resource Management benefit for a firm engaging in relationship marketing?

Employee retention or customers assisting in service delivery.

In the Customer Lifetime Value ($CLV$) calculation, what does the variable $i$ represent?

The company’s discount rate.

In the Customer Lifetime Value ($CLV$) calculation, what does the variable $AC$ represent?

Acquisition cost.

Research shows a $1\%$ increase in retention rate results in a _____ increase in $CLV$.

$4.9\%$

A $1\%$ increase in margin results in only a _____ increase in $CLV$.

$1.1\%$

Why should a company focus more on increasing retention than increasing margin for $CLV$?

Retention has a significantly larger impact on $CLV$ ($4.9\%$ vs $1.1\%$).

Define the 'Platinum' tier of the Customer Pyramid regarding profitability.

The most profitable customers who are heavy users, not price sensitive, and committed to the firm.

Define the 'Gold' tier of the Customer Pyramid regarding profitability.

Profitable customers who may be heavy users but are less loyal or demand price discounts.

Define the 'Iron' tier of the Customer Pyramid regarding profitability.

Essential customers providing volume for capacity whose spending and loyalty do not merit special treatment.

Define the 'Lead' tier of the Customer Pyramid regarding profitability.

Least profitable customers who cost the firm money, demand excessive attention, and may be 'problem' customers.

What is a potential challenge or risk of customer profitability segmentation?

Customers in lower tiers may resent receiving unequal or lower levels of service.

List the three main categories of 'Relationship Drivers' according to the Relationship Development Model.

Core Service, Switching Barriers, and Relationship Bonds.

What relationship driver refers to a customer's perception that switching providers requires 'too much effort'?

Customer inertia

Setup costs, learning costs, and contractual costs are all types of _____.

Switching costs

List the four types of relationship bonds in the hierarchy of relationship development strategies.

Financial bonds, Social bonds, Customization bonds, and Structural bonds.

Which type of relationship bond is the lowest level, often based on pricing and financial incentives?

Financial bonds

Which type of relationship bond involves providing services that are designed into the service delivery system for a specific client?

Structural bonds

Term: Service Failure

Definition: Service performance that falls below a customer’s expectations, leading to dissatisfaction.

Term: Service Recovery

Definition: Actions taken by a firm in response to service failure to improve the situation for the customer.

According to the 'Iceberg' of complaining customers, what percentage of dissatisfied customers do not complain at all?

$50\%$

What percentage of dissatisfied customers complain to management or company headquarters?

$1\% - 5\%$

What percentage of dissatisfied customers complain to a frontline employee?

$45\%$

Scenario: A customer is satisfied after a service recovery. What percentage are likely to recommend the firm?

$71\%$

Scenario: A customer remains dissatisfied after a service recovery. What percentage are likely to recommend the firm?

$4\%$

How many people does a dissatisfied complainant tell about their experience on average?

$7.0$ people

How many people does a satisfied complainant tell about their recovery experience on average?

$3.7$ people

Term: Service Recovery Paradox

Definition: The idea that a customer who experiences a failure followed by exemplary recovery may be more satisfied than if no failure occurred.

What are the three main types of customer complaint actions following a service failure?

Voice response, Negative word-of-mouth, and Third-party action.

What are the two major components of 'Fixing the Underlying Problem' in service recovery?

Learning from recovery experiences and making the service fail-safe.

In service recovery, what is the strategy 'Fix the Customer' primarily focused on?

Addressing the customer's immediate emotional and physical needs through communication and fairness.

According to research on response timeliness, what percentage of customers are completely satisfied if a final response is given immediately?

$38\%$

What is the satisfaction rate for a firm response that takes more than 1 week?

$18\%$

What is the top remedy customers seek from firms, with $35\%$ wanting it but only $14\%$ actually receiving it?

Money back

Scenario: A firm provides a clear explanation of why a flight was delayed. Which dimension of fairness does this address?

Procedural fairness

Scenario: A customer is compensated for lost time after a service failure. Which fairness dimension is this?

Outcome fairness

Scenario: An employee is empathetic and respectful while handling a complaint. Which fairness dimension is this?

Interactional fairness

Term: Service Guarantee

Definition: A pledge or assurance that a service will perform as promised and, if not, reparation will be provided.

List the four characteristics of an effective service guarantee.

Limited Restrictions/Exclusions, Meaningful, Easy to Understand, and Easy to Invoke.

What type of service guarantee has no limits or conditions and covers any aspect of the service?

Unconditional Satisfaction Guarantee

What type of service guarantee focuses on specific attributes like timeliness or accuracy?

Service Attribute Guarantee

When should a company NOT offer a service guarantee?

When service quality is poor, uncontrollable, or when the potential for customer abuse is high.

In the 'Causes of Service Switching' model, list three examples of 'Inconvenience'.

Location/hours, Wait for appointment, and Wait for service.

Cheat, hard sell, and unsafe practices fall under which category of service switching causes?

Ethical problems

List the five principles of Service Design Thinking.

User-centered, Co-creative, Sequencing, Evidencing, and Holistic.

Which service design principle states that services should be experienced through the customer's eyes?

User-centered

Which service design principle involves visualizing intangible services through physical artifacts?

Evidencing

What are the two main phases of the Service Innovation and Development Process?

Phase 1: Front-End Planning and Phase 2: Implementation.

In the New Service Strategy Matrix, what is the strategy for selling 'New Services' to 'Existing Customers'?

Service Development

In the New Service Strategy Matrix, what is the strategy for 'Existing Services' in 'New Markets'?

Market Development

Term: Service Blueprinting

Definition: A technique for simultaneously depicting the service process, points of customer contact, and evidence of service from the customer's point of view.

In a service blueprint, what line separates 'Customer Actions' from 'Onstage/Visible Contact Employee Actions'?

Line of interaction

In a service blueprint, what line separates 'Onstage' actions from 'Backstage/Invisible' actions?

Line of visibility

In a service blueprint, what line separates 'Backstage' contact employee actions from 'Support Processes'?

Line of internal interaction

What is Step 3 in the 'Six Steps of Building a Service Blueprint'?

Map the process from the customer’s point of view.

Term: Company-defined standards

Definition: Standards reflecting internal goals for productivity, efficiency, cost, and technical quality.

Term: Customer-defined standards

Definition: Operational standards based on pivotal requirements identified by customers.

FedEx's Service Quality Indicator (SQI) is unique because it reports errors in _____ rather than percentages.

Absolute numbers

What specific indicator has the highest weight ($50$) in the FedEx SQI system?

Lost packages

Term: Hard standards

Definition: Things that can be counted, timed, or observed (e.g., answering a call within 2 hours).

Term: Soft standards

Definition: Opinion-based measures that cannot be directly observed and must be collected via surveys or interviews.

Term: One-time fixes

Definition: Technology, policy, or procedure changes that address customer requirements without requiring ongoing employee motivation or monitoring.

What is the first step in the 'Process for Setting Customer-Defined Standards'?

Identify existing or desired service encounter sequence.

In translating customer expectations into actions, 'Attributes' are more _____ than 'Behaviors and Actions'.

Abstract

According to the criteria for appropriate standards, they should be predictive rather than _____.

Reactive

Relationship marketing is generally _____ for a firm than acquiring new customers.

Cheaper

In the exchange relationship typology, 'Trust' first evolves during which stage?

Friends

In the Customer Pyramid, which segment is 'difficult to do business with'?

Lead Tier

What is the primary benefit of the 'Service Recovery Paradox' for a firm if handled correctly?

The customer may become more impressed or satisfied than they were before the failure.

In the FedEx SQI, how much weight is assigned to 'Damaged packages'?

$30$

The 'united breaks guitars' example highlights how poor service recovery can spread through _____.

The Internet/Social Media

Term: Service Performance Index

Definition: A comprehensive composite of the most critical performance standards used to reward performers and improve service.