Building Customer Relationships

The Gaps Model of Service Quality

• Central Idea: The Gaps Model helps identify and close gaps in service quality to enhance customer satisfaction.

Main Branches:

1. Gap 1: Customer Expectations vs. Management Perceptions

   • Sub-branches:

     • Lack of market research

     • Inadequate understanding of customer needs

     • Insufficient communication between management and customers

2. Gap 2: Management Perceptions vs. Service Quality Specifications

   • Sub-branches:

     • Lack of clear service quality standards

     • Inadequate training and empowerment of employees

     • Failure to align service delivery with customer expectations

3. Gap 3: Service Quality Specifications vs. Service Delivery

   • Sub-branches:

     • Inconsistent service delivery

     • Poor service design and processes

     • Ineffective service recovery strategies

4. Gap 4: Service Delivery vs. External Communications

   • Sub-branches:

     • Misleading advertising and promotion

     • Inaccurate information provided to customers

     • Failure to manage customer expectations effectively

5. Gap 5: Customer Expectations vs. Customer Perceptions

   • Sub-branches:

     • Differences in customer expectations

     • Variations in service delivery

     • Perception biases and subjective experiences

6. Closing the Gaps

   • Sub-branches:

     • Conducting market research and customer feedback

     • Setting clear service quality standards

     • Training and empowering employees

     • Improving service design and processes

     • Implementing effective service recovery strategies

     • Managing customer expectations through communication

Relationship Marketing: A strategic orientation that focuses on keeping and improving customer relationships with current customers rather than acquiring new customers

Evolution of Customer Relationships

• 1. Customers as Strangers: customers are unaware of or have not had any transactions yet.

  • Goal: Attraction

    • EX: Lincoln DMV

• 2. Customers as Acquaintances: awareness and trial have been achieved, and familiarity is established

  • Goal: Satisfaction

    • EX: UNL parking and transit

• 3. Customers as friends: provision of a unique offering and creation of trust

  • Goal: Retention

    • EX: Medical field- doctor, dentist, etc

• 4. Customers as Partners: provision of highly personalized and customized offerings and creation of commitment

  • Goal: Enhance Partnership

    • EX: Hairdressers

Benefits for Customers

• Confidence Benefits

  • feelings of trust and confidence in the provider

    • EX: Hairdresser or banks

• Social Benefits

  • Familiarity and social relationships with the service provider

  • Service providers may become part of a social support system

    • EX: Personal Trainer

• Special Treatment Benefits

  • Being given a special deal or price

  • Getting the benefits of the doubt

    • EX: reservation in a restaurant, dry cleaner

Benefits for the Firm

• Economic Benefits

  • Increased purchases over time

  • Lower Cost

• Customer Behavior Benefits

  • Free Advertising through word of mouth

  • Customer voluntary performance

    • EX: Another customer recommending food choices at a restaurant

  • Customers Providing social benefits to other customers

    • EX: Bars, Medical Settings

  • Customers as mentors

• Human Resource Management Benefits

  • Make employees’ jobs easier

  • social benefits for employees

  • Employee Retention

Relationship Drivers- switching barriers

• Customer Inertia

  • certain effort necessary to switch providers (“it’s just not worth it”)

  • to retain customers

    • increase the perceived effort required to switch

    • Automate the switching process to attract customers from competitors

• Switching Costs

  • monetary and nonmonetary

  • to retain customers

    • increase switching cost

    • lower switching costs to attract customers

1. Financial bonds

2. Social Bonds

3. Customization Bonds

4. Structural Bonds

1. Level 1- Financial Bonds

   • The customer is tied to the firm primarily through financial incentives

   • Disadvantages → usually doesn’t lead to sustained competitive advantage (easy to imitate

     • EX: Hyvee fuel saver, frequent flyer program

2. Level 2-Social Bonds

   • Customer is tied to the firm through social and interpersonal as well as financial bonds.

   • Customers become clients instead of nameless faces

     • EX: professional services (lawyer, accountants, hairdressers) and Harley Owner Groups

3. Level 3- Customization Bonds

   • Level 1 and 2 strategies encompassed with customization strategy

     • EX: Ritz Carlton

4. Level 4-Structural Bonds

   • Created by providing services that are frequently designed right into the service delivery system for the client

   • Most difficult to imitate

     • EX: Fidelio (Hotel Software), Otis Elevator Remote, Canvas

Relationship Challenges

• the customer is not always right (not all customers are good relationship customers)

  • The wrong segment

    • The company cannot target its services to all customers

    • EX:

  • Not Profitable in the long run

    • Companies prefer not to have long-term relationships with unprofitable customers.

    • EX:

  • Difficult or dysfunctional customers

    • Customers that interrupt (intentionally or unintentionally) otherwise functional service encounters (also called problem customers or jay customers)

    • It can affect employees, other customers, and the organization

    • EX: