chapter 8

1. chapter8 Service Quality Management and Customer Loyalty

2. Chapter Objectives • Describe the importance of customer service in commercial recreation and tourism. • Discuss today’s service imperative. • Explain the cost of delivering poor service. • Evaluate service principles in recreation. • Describe the process of winning back clients through service recovery. • Understand the importance of developing and maintaining relationships and loyalty. • Evaluate RET service, why it is needed, and how to do it.

3. Superior Service Breeds Loyalty • Superior service does not happen on its own. • Principles of superior service must be followed. • Customer-friendly systems must be established. • Staff are trained. • RET companies, more than almost any type of business, must provide positive and memorable experiences, not just a generic product. • Another critical element of service is evaluation and dedication to change based on feedback.

4. Service Is Imperative • Consumers are no longer satisfied with just a purchase. • They demand services that provide more value than their purchases alone. • Clear link between the physical product (e.g., a fishing rod) and intangible personal service that goes along with and adds value to the product (e.g., setting up rod with line and lures). • Before your guests arrive, they expect you to know what they will likely need and want. • If there is a large gap between what was expected and the benefits clients received, most customers will not complain to you or your staff—but they will never come back and will give a negative report about your business to their friends.

5. Costs of Inadequate Service • 26 out of 27 unhappy customers fail to report it to the business. • 67 percent of those will not come back. • Each one tells an average of 9 people, who then tell others (20 total). • In comparison, a satisfied customer tells an average of only 2 people. (continued)

6. Costs of Inadequate Service (continued) • Businesses consistently providing poor service do not have any idea it is considered below par. • Will never again see majority of dissatisfied customers. • Unhappy ex-clients will spread negative word of mouth (WOM). • This level of negative WOM could potentially overwhelm sales increases from promotions, leading to a slow and agonizing company death.

7. Benefits of Superior Service • New customer acquisition, purchases, and retention greatly influenced by customer service level. • Companies rated high on service have the following characteristics (Bell and Zemke 2007; Nam, Manchanda, and Chintagunta 2007): • Kept customers longer (50 percent longer or more) • Have lower sales and marketing costs (20-40 percent lower) • Experience higher return on sales (7-12 percent higher) • Have better net profits (7-17 percent better)

8. Various Service Types • Fix things: Businesses that repair consumer products. • Provide assistance: Professionals who can plan, prepare, or direct a person in leisure pursuits • Add value. • Give additional benefits to purchaser of a tangible good. • Friendly staff person makes a client feel appreciated. • Salesperson helps client find the right product. • Set up equipment purchase. • Offer lessons on using new purchase, providing guided trips in the local area where she can use her purchase. • Have expedited repair service when there is a problem. • Provide exclusive offers for past clients.

9. Relationship Between Service Level and Price Charged Adapted from T. Peters, 1987, Thriving on chaos: Handbook for a management revolution (New York: Knopf), 114.

10. Intangible and Perishable • RET service is a combination of tangible opportunity (e.g., ecolodge room and meals) and intangible elements (friendliness of staff, making your stay easy, or learning about wildlife in the area). • Cannot be touched, heard, or felt the same as a manufactured product. • They are perishable. • They cannot be produced and stored for later sale • Tend to be delivered on demand • Generated by provider for an individual person. • Experience is intangible, created simultaneously by both provider and the guest.

11. Differences Between Service and Experience • Experience has active involvement of the guest. • Experience is created by guest’s active participation in response to staging by the commercial operator. • Operator functions as a stager of the engagement. • When guest responds as an active participant, then experiential dimension has ability to transform person’s emotional, physical, and spiritual state. • Collective sensations create a memorable experience: Fulfills psychic need of the guest. • Quality is intrinsic and at individual level of satisfaction: If a memorable experience results, a guest is willing to repurchase and share with others.

12. Service Steps • Bottom step is a commodity • Very low product differentiation and price • Considered generic • The good step: More distinction between companies and higher average price • The goods and service level: • Products are truly distinct in the minds of the consumers • Willing to pay more • Can more easily find what they want (continued)

13. Service Steps (continued) • Top step is an experience • Creates a very positive hoped-for emotional state in guest • Strong loyalty • Goal of RET business is to move up the service steps, from commodity to experience, to differentiate its service from competitors’ and be able to profit more

14. Mass Customization • Key to moving up service steps is individual customization. • Consumers increasingly want it their way, not necessarily the way your company likes to do it. • Not willing to settle for mass market product. • Want service individualized to extent possible for their wants. • The more you customize . . . • The more desirable it is to client. • The more they are willing to pay. • Customization can make services more expensive: Potentially price many buyers out of the market. • Mass customization: Service providers offer a range of service alternatives that allow consumers to mix, match, and individualize their experience to their desires while keeping the price reasonable (Pine and Gilmore 1999).

15. Underlying Factors of Exceptional Service Organizations • A service-oriented company philosophy unifying recognition from top to bottom that service is important, valued, and rewarded • Customer-friendly systems developed from thorough investigation into making entire customer service cycle as easy and convenient as possible • Customer-oriented frontline staff, such as reservationists, ride operators, servers, and guides, make or break a good customer experience • Client safety orientation • Unique emphasis in RET industry • Means making guest safety the main priority

16. Finding and Retaining High-Quality Frontline Staff Exceptional service starts with exceptional frontline staff • Hire frontline staff with great care (no panic hiring). • Provide extensive training. • Strong management support, frontline jobs can be challenging. • Involve staff in decisions that affect their jobs. • Empower them to make decisions and take responsibility. (continued)

17. Finding and Retaining High-Quality Frontline Staff (continued) • Do everything you can to retain your best staff. • Provide opportunities for advancement of your best staff. • Recognize and reward frontline staff contributions. • Celebrate successes. • Create a team, not individual, focus. • Managers must be visionary, positive role models, strong leaders (energizing and inspirational).

18. 10 Service Principles • View your service quality through the customer’s eyes. • Consider full cycle of service (from first company contact to communications after sale). It ends only when client wants to end relationship. • Little things mean a great deal. • Underpromise and overimplement. • Human touch is powerful. • Treat customers as an appreciating asset. • Buyers’ expectations are always advancing. • Show enthusiasm toward the customer. • Keep establishment clean and employees within company dress and grooming codes. • Service should be convenient for the customer.

19. Moments of Truth • An emotionally charged contact with a client is where a timely and appropriate response can make a big difference in customer satisfaction (e.g., client is very upset over a problem with service received). • High-quality service organization identifies in advance where these will occur and develops plans to deal with them when they arise. • Key element in managing moments of truth is empowering frontline staff to handle situations without having to automatically call a manager.

20. Service Recovery • People make mistakes; machines stop working. • Even the best service providers have customer service breakdowns. • If done promptly and correctly, recovery can actually increase customer loyalty. • View most client complaints as a gift from guest. They are going out of their way to identify problem and potential solution. • Wrong staff response is becoming upset with client and blaming guest for company-generated problem.

21. Considerations for Empowering Staff in Service Recovery • Clearly convey to staff their responsibilities. • Give them authority equal to their responsibilities. • Set standards of excellence in service recovery. • Provide staff training and mentoring to meet standards. • Set service recovery boundaries (e.g., one night free or 10 percent off next service). • Role-play common service recovery situations and responses. • Give employees feedback on their performance. • Support staff on their recovery decision, if within designated boundaries.

22. Service Recovery Procedures Apply HEAT • Hear the person out • Empathize with the person • Acknowledge the problem • Take immediate action

23. Creating Positive Moments • Emotionally charged incidents with clients need not just be negative in nature. • Gross (2004) says a smart organization should strive to create positive moments where you foster a positive unexpected emotional response. • Can be done through these means: • Surprise (an unexpected offering) • Contests • Giveaway items (e.g., cookies or supplier demos; the most effective giveaway items are offered at random times)

24. Retaining Existing Clients and Relationships • Some RET organizations have placed more emphasis on attracting new customers than retaining existing clients. • Can cost six times less to retain a current customer than to get a new one (Sawyer and Smith 1999). • Develop a relationship with the client: An association between buyer and seller that focuses on keeping customer happy with seller during and after the sale. • A good customer relationship increases loyalty.

25. Methods of Building Strong Customer Relationships • Make use of databases: Identify repeat visitors, track their preferences and interests in advance of arrival. • Personalize: Frontline staff know clients’ names at arrival. • Offer incentives (e.g., frequent buyer programs, preferred supplier arrangements) • Exclusive service alternatives: Offer extras to repeat visitors, including upgrades, free T-shirts, and preferred placements. (continued)

26. Methods of Building Strong Customer Relationships (continued) • Adopt repeat pricing: Develop repeat buyer discounts. • Communicate frequently: Send newsletters, e-mail updates, and birthday cards. • Develop buyer club: Group of clients who receive special offers, newsletters, and invitations to local social events (e.g., Halloween party for member kids, prerelease movie). • Use guest relationship software systems.

27. Service Gaps • How does a company know if it provides high-quality service? • Standardization is not what most clients are seeking. • Frequently used approach is reducing or minimizing the gaps between perceptions of quality service held by provider and customers. (continued)

28. Service Gaps (continued) • Potential gaps that might arise show importance of using a client-centered approach to identifying service gaps: • Between participant expectations and frontline staff (e.g., employee understanding of customer expectations) • Between the expectations of the participant and service quality specifications (e.g., limits placed due to company safety policies) • Between perceptions communicated to customer during marketing of services and what was provided • Between client and staff views of how well services were rendered (e.g., staff were considered impersonal or rude)

29. Viewing Service Through Customers’ Eyes • Extremely difficult for staff to objectively evaluate their service quality. They unknowingly filter their assessment through internal lenses, such as budget limitations, staffing problems, or manager–employee relationships. • Staff tend to believe they provide outstanding service, but many fewer clients believe it. • Consumers are in best position to determine if their unique needs and wants are met or exceeded. • Most accurate way to evaluate service is through eyes of the consumers.

30. Ideal Service Evaluation Many elements of RET services are intangible. • Does that mean it is impossible to measure and evaluate? • Effective evaluation of service is possible and must be done. An ideal service evaluation: • Representative of all clients, not just those who complain • Evaluates the full cycle of service • Unbiased and not likely to be falsified by staff • Provides specific client feedback to improve service

31. Evaluation Techniques • Comment cards are the most frequently used method • Inexpensive and can capture most flagrant problems • Can easily be altered, removed, or “stuffed” by staff • Miss the many unhappy guests who do not complain • E-mail or telephone surveys • Can be representative • Highly accurate if collected by a contractor (continued)

32. Evaluation Techniques (continued) • Exit survey given as guests leave • Representative • But can slow down or interrupt your guest • Secret shopper • Evaluates actual client–staff interaction and equipment operation • More expensive • Multiple evaluation methods often used

33. Building Customer Service Into Business Plan • Customer service falls into operations more than business plan. • Need to integrate customer service into business plan. Where service should be discussed in plan: • In description of your business, show you are aware of importance of service. • Include key service standards in product description. • Identify and compare service features among competitors. • Identify a customer service manager in organizational chart. • Show customer service experience of key managers. • Plan appendixes should contain letters of reference elaborating manager’s knowledge and skills while working for previous employers.