Customer Relationship Management & Service Design Strategies

Optimizing Customer Relationships

Customer and Firm Advantages

Customer Benefits

• Confidence
• Social Connection
• Special Treatment

Firm Benefits

• Economic Gains
• Improved Customer Behavior
• Enhanced Human Resource Management

Navigating Relationship Challenges

• The customer is not always right
• Targeting the wrong segment
• Customers not profitable in the long term
• Managing difficult customers

Effective Defection Management

A systematic approach to retain customers before they defect. This contrasts the concept of zero defects (Total Quality Management) with zero defectors.

Defection Management Process

1. Develop a zero-defections culture.
2. Communicate this goal to employees.
3. Train employees in defection management techniques.
4. Tie incentives to defection rates.
5. Develop switching barriers.

Mastering Service Recovery

Actions taken by an organization in response to a service failure.

The Service Recovery Paradox

An initially disappointed customer who experiences good service recovery might become even more satisfied and loyal as a result.

Understanding Complaint Types

• Instrumental: The customer complains and expects a resolution.
• Non-Instrumental: Complaining without expecting any specific action.
• Ostensive: Blaming someone else for the issue.
• Reflexive: Blaming oneself for the issue.

Strategic Product and Service Design

Common Product Development Errors

• Drop Error: When a business decides to abandon a product idea that, in hindsight, may have been successful if developed.
• Go Error: When a business fails to identify a poor product idea that has already moved into the development phase.

Goals of Service Operational Design

1. Support the firm’s target operational position.
2. Lower the unit cost of producing the service.
3. Provide customers with the desired level of service quality.

Competing Factors in Service Design

• Cost Efficiency: Limits customization due to higher costs.
• Service Quality: Higher quality often means higher costs, potentially sacrificing other aspects.
• Customization: Tailoring services to individual customer needs.

Service Positioning Strategies

Firms emphasizing functional aspects of service quality will require greater customization and fewer cost-efficiency procedures. Conversely, firms stressing technical aspects of service quality will require greater cost efficiency with less customization. In any case, firms need to consider the necessary tradeoffs before developing the service design.

Key Operational Concepts

Scoping for Problem Identification

The ability to isolate a specific area that is causing a problem or loss of opportunity.

FAST Program (Functional Analysis System Technique)

Provides a zoomed-in view of a process, confirming the correct scope to understand it effectively.

SITOC Framework

Suppliers, Input, Transformation, Output, Customer.

Value Creation

Ensuring the customer experiences high quality and a positive interaction.

Conquest Marketing

Strategies focused on acquiring new customers.