Chapter 10 – Encouraging Customer Loyalty
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Chapter 10
Encouraging Customer Loyalty
Table of Contents
Teaching Tools …………………………………………………………………………………………………. 2
Instructor Teaching Tools ……………………………………………………………………………….. 2
Student Learning Tools ………………………………………………………………………………….. 2
Brief Chapter Outline …………………………..…………………………………………………………….. 3
Chapter Outline and Lecture Notes ……………………………………………………………………… 5
Class Activities and Sample Assignments …………………………………………………………. 222
Discussion Opportunities ………………………………………………………………………………… 233
In the Real World Notes ………………………………………… Error! Bookmark not defined.4
Shipping—United Parcel Service of America, Inc. (UPS). ………. Error! Bookmark not
defined.4
Work It Out Notes ………………………………………………………………………………………….. 277
Work It Out 10.1—Preventing Customer Defection …………………………………………. 277
Work It Out 10.2—Problem Solving ……………………………………………………………… 277
Work It Out 10.3—Showing Respect…………………………………………………………….. 277
Work It Out 10.4—Personal Customer Relationship Experiences …………………….. 277
Work It Out 10.5—Personal Service Expectations ………………………………………….. 277
Work It Out 10.6—Passing Time ………………………………………………………………….. 288
Work It Out 10.7—Preparing for Contingencies ……………………………………………… 288
Work It Out 10.8—Personal Customer Experiences ……………………………………….. 288
Work It Out 10.9—Strategies for Making Customers Number One…………………..
……………………………………………………………………………………………………………….. 288
End-of-Chapter Material Notes ……………………………….. Error! Bookmark not defined.9
Key Terms ………………………………………………………………………………………………… 279
Review Questions ……………………………………………………………………………………… 299
Collaborative Learning Activity ………………………………………………………………………. 31
Face to Face—Assessing the Need for Reorganization at Get Away ………………….. 31
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Teaching Tools
Teaching Tools
This book has several tools for both students and instructors to assist in the learning
and development on the topic of customer service. Those tools are listed below:
Instructor Teaching Tools
▪ Instructor’s Manual
▪ PowerPoint Presentations
▪ Asset Map
▪ Test Bank
▪ Customer Service Videos
▪ Sample Syllabi
Student Learning Tools
▪ Customer Service Interactions
▪ Customer Service Videos
▪ Chapter Objectives
▪ Flashcards
▪ Online Quizzes
▪ Practice Tests
▪ Glossary
▪ Spanish Glossary
▪ Worksheets
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Brief Chapter Outline
Learning Outcomes
➢ 10.1: Establish and maintain trust with customers.
➢ 10.2: Relate the role of customer and brand loyalty to organizational success.
➢ 10.3: Explain customer relationship management and explain its importance to
quality service.
➢ 10.4: Develop the service provider characteristics that will enhance customer
loyalty.
➢ 10.5: Describe the provider’s responsibility for establishing and maintaining positive
customer relationships.
➢ 10.6: Identify strategies that can be used to make customers feel like they are
number one.
➢ 10.7: Discuss strategies that can enhance customer satisfaction.
➢ 10.8: Define quality service.
I. The Role of Trust
A. Communicate Effectively and Convincingly
B. Display Caring and Concern
C. Be Fair
D. Admit Errors or Lack of Knowledge
E. Trust Your Customers
F. Keep Your Word
G. Provide Peace of Mind
H. Be Responsible for your Customer Relationships
I. Personalize Your Approach
J. Keep an Open Mind
K. Individualize Service
L. Show Respect
M. Elicit Customer Input
II. Customer Loyalty
III. The Importance of Customer Relationship Management
A. Benefits of Customer Relationship Management
B. Cost of Dissatisfied Customers
IV. The Role of Channel Partner Relationships on Customer Loyalty
A. Three Types of Channel Partners
V. Provider Characteristics Affecting Customer Loyalty
A. Responsiveness
B. Adaptability
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C. Communication Skills
D. Decisiveness
E. Enthusiasm
F. Ethical Behavior
G. Initiative
H. Knowledge
I. Perceptiveness
J. Planning Ability
K. Problem-Solving Ability
L. Professionalism
VI. Making the Customer Number One
A. Make Positive Initial Contact
B. Establish Rapport
C. Identify and Satisfy Needs Quickly
D. Exceed Expectations
E. Follow Up
VII. Enhancing Customer Satisfaction as a Strategy for Retaining Customers
A. Pay Attention
B. Deal with One Customer at a Time
C. Know Your Customers
D. Give Customers Special Treatment
E. Service Each Customer At Least Adequately
F. Do the Unexpected
G. Handle Complaints Effectively
H. Sell Benefits, Not Features
I. Know Your Competition
VIII. Strive for Quality
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Chapter Outline and Lecture Notes
I. The Role of Trust
• Trust is at the heart of any relationship, especially when there is an exchange of
money for products or services.
• For trust to start and grow, the customers must believe several things about the
service providers and their organization:
o Service providers and the organization have the customer’s best interests in
mind before, during, and after the transaction.
o Service providers and the organization are honest and forthcoming with
customers and their goal is to deliver the best products and services
possible in a timely manner and at a fair price.
o Service providers have quality products and services that are backed by a
guarantee that should something go wrong, it will be quickly and earnestly
taken care of.
• For customers to continue doing business with service providers, they must trust
service providers and their organization.
• Even when service providers win trust and achieve customer satisfaction, the
customer relationship is very fragile.
• The good news for North American businesses is that as the economic recession
has started to show signs of slowing down and reversing, customer satisfaction
levels for a number of industries have begun a slow movement toward
improvement on the University of Michigan American Customer Service Index
(ACSI) scale of 100 possible points.
• While organizations are starting to gain access to more capital due to loosening
of restrictions on lending and other economic factors, the average consumer has
yet to experience higher income flows or levels of disposable income.
• Part of the trust equation is gaining consumer satisfaction with products and
services offered by a provider.
• To gain and maintain trust, service providers and their organization must actively
work toward incorporating the values and beliefs into daily actions.
o Service providers must exhibit trustworthiness in words and actions, for
although it takes a long time to gain trust, it can be lost in seconds.
• One way that consumers are turned off from a trust standpoint is through a loss
of confidence that follows a breakdown in an organization’s manufacturing and
distribution processes.
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A. Communicate Effectively and Convincingly
• If service providers cannot articulate or clearly explain (verbally and in
writing) information in a manner that customers can comprehend and act
upon, they will not believe in the service providers.
• Service providers must provide more than facts and figures; they must send
a message of sincerity, knowledge, and honesty.
• As service providers communicate, they should project their feelings and
emotions by being positive and enthusiastic.
• Service providers should communicate frequently and keep customers
informed.
B. Display Caring and Concern
• Service providers should emphasize to their customers that they have their
best interests at heart.
• Service providers should work to demonstrate that they are willing to assist in
satisfying their needs.
• Too often, service providers send a message that customers are not really
that important.
o This can happen when service providers adopt a “next” mentality and
treat customers as if they were numbers, not people.
C. Be Fair
• Service providers should make sure that they treat all customers (internal
and external) with respect and consistency.
• If a customer believes that another customer is getting something that they
are not, service providers could have problems.
D. Admit Errors or Lack of Knowledge
• Service providers are human and are expected to make mistakes.
o The key is to recover from errors by apologizing, accepting
responsibility, and then quickly and appropriately solving the problem or
getting the necessary information.
• In light of the costs associated with procuring new customers and keeping
current ones, Forrester Research found that when service providers exceed
customer expectations in solving problems, loyalty levels rise.
• In an era of strong competition and product and service availability
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worldwide, failure to work proactively to resolve issues quickly and efficiently
makes little fiscal sense and does nothing to stimulate and maintain customer
loyalty.
E. Trust Your Customers
• Most customers are not out to cheat or “rip the service providers (or their
organization) off.”
o They just want the best value and service for their money and expect
the service providers to provide it.
• One of the most common mistakes service providers make in dealing with
customers who have a complaint or problem is to verbally acknowledge and
agree, but nonverbally send a message of skepticism.
F. Keep Your Word
• Customers have many choices in selecting a service or product provider.
o If they feel a service provider cannot be depended upon to take action,
they simply leave, often without complaint or comment.
• One’s goal should be to provide customers with competitively priced, reliable
products or services that one delivers with little or no inconvenience or
difficulty.
• If feasible after delivering a product or providing service, service providers
should contact their customer to make sure that he or she was satisfied and
that their service met expectations.
o This follow-up can be an informal call, a more formal questionnaire, or a
friendly e-mail or text message (assuming he or she authorized the
service provider to send such correspondence).
G. Provide Peace of Mind
• Service providers should be positive and assertive.
o They should assure customers through their words and actions that
they are confident, have their best interests at heart, and are in control
of the situation.
H. Be Responsible For Your Customer Relationships
• Customers tend to enjoy dealing more with people whom they believe are
caring and have their best interests at heart.
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o Interacting with someone they like is a pleasant experience and is likely
to encourage trust and an enhanced relationship.
I. Personalize Your Approach
• Helping one’s customers feel accepted can create a bond that will keep them
coming back.
• To create a social bond with customers, service providers will need to take
time to get to know their regular customers and serve them individually.
o Recognizing them and using their names while interacting goes a long
way toward creating that bond.
J. Keep an Open Mind
• To develop and maintain an open mind, service providers should make it a
habit to assess their own attitude about their job, customers, products, and
services before making contact with their customers.
• If service providers are facing personal problems that seem overwhelming,
they should contact their supervisor, human resources, or personnel
department, or any other appropriate resource to help them sort out their
problems.
o Failure to do so could lead to poor customer service or a less-than-
professional image.
K. Individualize Service
• Each customer is unique and has his or her own desires and needs.
o For that reason, every situation service providers handle will be slightly
different.
• One should view each person as an individual and not deal with customers
on the basis of preconceived ideas or the demographic group of which they
are part.
• By addressing a customer as an individual, listening so that one can discover
his or her personal needs and problems, and then working to satisfy the
needs or solve the problems, one potentially creates a loyal customer.
• A simple way of accomplishing individualized service is to ask what else the
customer would like.
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L. Show Respect
• Even if service providers don’t agree with a customer, they should respect his
or her point of view or need and provide the best possible service.
• Some easy ways to show respect to customers include:
o When addressing the customer, use his or her last name and title.
o Stop talking when the customer begins to speak.
o Take time to address the customer’s questions or concerns.
o Return calls or e-mail messages within reasonable amounts of time.
o Show up on time for scheduled meetings.
M. Elicit Customer Input
• Some people actually encourage rewarding customers who complain.
• Complaints provide feedback that can enable service providers and
organizations to rapidly shift resources to fix things that are not working well
in an effort to satisfy the customer.
• To increase one’s own effectiveness and that of the organization, service
providers should actively and regularly seek input from their customers.
o Service providers should take the time to ask the customer, and then
listen and act upon what they are told.
II. Customer Loyalty
• Customer loyalty is the term used to describe the tendency of customers to
return to a product or organization regularly because of the service and
satisfaction they receive.
• Each time there is contact at a touch point where the customer and provider
come together, there is opportunity for further cementing the customer
relationship and loyalty or driving a wedge between the customer and
organization due to failure to meet expectations or needs.
• An important point to keep in mind about customer loyalty is that it does not
happen as a result of a single customer–provider encounter.
o Rather, true customer loyalty stems from an organization’s concerted,
ongoing efforts that are part of their strategic goals to meet and exceed the
expectations and needs of their customers.
• Lasting customer relationships are built on trust.
o The most important thing to remember about trust is that, without it, there is
no relationship.
• Customer loyalty has been impacted to some degree by the advent of mobile and
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other types of electronic communication devices that allow consumers to easily
find a way to provide feedback on products and services to others and to reach
out for information that helps them make a buying decision.
• By using technology, customers can access product and service experts from
around the world in a matter of seconds to find out about a company’s reputation,
products, and services.
o They can check forums that focus on and organizations that gather
consumer feedback to see if an organization or person is credible and
worthy of their trust and business.
• The key to establishing and maintaining customer loyalty is to put forth an honest
and ongoing series of initiatives and efforts that demonstrate to customers that
they are important to the organization.
o Through words and actions, service providers can show that they are truly
there to assist customers meet their needs, wants, and expectations.
• One way that organizations try to cement relationships and encourage customer
loyalty and retention is through loyalty or rewards programs.
III. The Importance of Customer Relationship Management
• Customer relationship management (CRM) is the concept of identifying
customer needs; understanding and influencing customer behavior through
ongoing communication strategies in an effort to acquire, retain, and satisfy the
customer.
• There are a number of components in the CRM process:
o Operational (involving sales and service representatives)
o Collaborative (involving interaction with customers through such means as
e-mail)
o Web pages and automated voice response, or AVR, systems
o Analytical (involving analyzing customer data for efforts like marketing and
financial forecasting)
• Through CRM, organizations and employees get to better know their customers
and project needs that can be satisfied through appropriate products and
services.
• With B2B (business-to-business), customers are often companies.
o This makes managing customer relationships more difficult because of
the number of contacts one might have in an organization and the varying
requirements or needs each might have.
• Typically, many service providers look at customer interactions from a short-term
perspective.
o However, a more customer-focused approach is to view customers from a
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relationship standpoint.
o It means that service providers should strive to employ as many of the
positive relationship-building skills that they have learned as possible.
• People usually gravitate toward organizations and people with whom they have
developed rapport, respect, and trust, and who treat them as if they are valued as
a person.
• Service providers should remember that long-term customer relationships
(customer retention) are the ones that sustain organizations.
• In many organizations, particularly those that have contractual customers (e.g.,
members or subscribers), the churn rate is often an indicator of customer
dissatisfaction, better targeted marketing and sales efforts or better or cheaper
pricing by competitors, or factors related to service provider relationships with
customers.
• It is not unusual for customers to switch back and forth between products or
organizations simply because of pricing.
o This is sometimes referred to as service churn.
• Seeking out new or replacement customers through advertising and other means
is a very costly proposition.
o This is because in addition to having to find new customers, service
providers and their organizations have to educate and win them over.
• Major organizations spend millions of dollars on customer loyalty programs—
an incentive program offered by an organization to reward customers for
spending money and purchasing products and services.
A. Benefits of Customer Relationship Management
• When organizations attain a high degree of brand recognition and a
reputation for providing quality products and services at a competitive price,
while going above and beyond their customers’ expectations, they are
typically rewarded with customer loyalty and repeat and referral business.
• Direct benefits of going above customer expectations include:
o Less need to obtain new customers through marketing because current
customers are aware of offerings and take advantage of them.
o Reduced marketing costs because direct mail, follow-up, and other
customer recruitment activities are reduced.
o Increased return on investment (ROI) because marketing can target
specific customer needs.
o Enhanced customer loyalty due to pricing and product service offerings
that meet current customer needs.
o Elevated profitability due to increased sales, customer referrals, and
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longer customer retention during life cycle.
• By providing excellent customer service and dealing with dissatisfaction as
soon it is identified, service providers can help ensure that customers remain
loyal and keep coming back.
• Traditionally, customers will remain loyal to a product, service, or
organization that they believe meets their needs.
o According to the Technical Assistance Research Program (TARP)
Worldwide, many organizations have found that, when complaints were
acted upon and resolved quickly, most customers returned to the
organization.
• Service providers must realize that customer service is everyone’s business
and that relationships are the basis of that business.
B. Cost of Dissatisfied Customers
• Cost of dissatisfied customers is a phrase that refers to any formula used
to calculate the cost of acquiring a new customer or replacing a current one
as a result of having a dissatisfied customer leave an organization.
• Too often, service providers look at the loss of a sale when a customer is
dissatisfied as a single event.
o However, one dissatisfied customer can cost the organization a lot.
IV. The Role of Channel Partner Relationships on Customer Loyalty
• A key component of managing customer loyalty is for organizations to effectively
manage its channel partner relationships.
o Such partners can help gain access to new business opportunities at lower
costs, without having to merge or acquire more assets and employees.
o This provides a more competitive posture for the organization and
potentially attracts and holds customers based on reduced pricing and
enhanced product and service availability.
A. Three Types of Channel Partnerships
• There are three types of typical channel partners with which an organization
might have a relationship:
o Transactional or indirect—this type of organization provides a
distribution outlet or link for the company’s products and services.
o Tactical—this category of partners includes organizations that are
intricately meshed with the company’s internal operations.
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o Strategic—the third type of channel partnership involves signing
agreements through which one organization creates a long-term
alliance with another organization to brand, develop, or produce each
other’s products or services.
V. Provider Characteristics Affecting Customer Loyalty
A. Responsiveness
• If customers feel that they are not appreciated or not welcome by a service
provider, they will likely take their business elsewhere.
• A simple way to demonstrate responsiveness is to attend to customer needs
promptly.
• Once service providers get to serve the customer, and before getting to the
business at hand, service providers should greet the customer with a smile
and start the interaction on a friendly note in one or more of the following
ways:
o Be enthusiastic—service providers should use open body language,
vocal cues, and gestures to let the customers know that they are glad
customers have chosen them and their organization.
o Use the customer’s title and name—if service providers know the
customer’s name, they should use it.
o Show appreciation
o Engage in small talk
o Compliment
B. Adaptability
• In a continually evolving world, service providers will have many opportunities
to deal with customers who have different beliefs, values, perceptions,
needs, and expectations.
o Each of these meetings will provide an opportunity for service providers
to adapt their approach in dealing with others.
• One way to show one’s ability to adapt relates to technology.
o By quickly learning and mastering new technology systems provided to
one by the organization, one can respond faster and more efficiently to
customer needs.
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C. Communication Skills
• One’s ability to obtain and give information; listen, write, and speak
effectively; and deal with emotional situations are keys to successful
customer service.
• To help ensure the most effective service possible, service providers should
continually strive to improve their ability to interact and communicate with a
variety of people.
D. Decisiveness
• Decisiveness relates to being able and willing to make a decision and take
necessary actions to fulfill customer needs.
• Taking a wait-and-see approach to customer service often leads to customer
dissatisfaction.
o By keeping them waiting while one runs to someone else for a decision
or answer can be frustrating.
o If service providers face such barriers, they should think of alternative
ways of handling them, and then approach their supervisor with
suggestions for improvement.
o Once the service provider has supportive systems in place, he or she
should gather information effectively, carefully and quickly analyze the
situation, and then make a decision on how to solve the problem.
E. Enthusiasm
• People typically react positively to enthusiastic employees who appear to be
enjoying themselves as they work.
• If service providers and their organization can generate return customers
through enthusiasm, the potential for organizational growth and prosperity
exists.
F. Ethical Behavior
• With a heightened incidence of actual or alleged corporate wrongdoing,
customers have been sensitized and made wary of organizations, their
leaders, and practices.
• Many organizations have formed ethics committees made up of employees
from across their organization to deal with actual or perceived violations of
ethical standards or organization codes.
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• Many organizations have adopted a code of ethics or codes of conduct that
are taught to all employees, new and old, and to which they are held
accountable.
o By having a written standard of conduct, organizations demonstrate to
customers that they are concerned for their welfare and have the
intention of operating in an ethical manner.
• Establishing (and maintaining) high legal, social, and ethical standards in all
interactions with customers is imperative.
o Failure to do so can lead to loss of reputation and business, and/or legal
liability.
G. Initiative
• Taking an action related to one’s job or customer service without having to
receive instructions from others is a sign of initiative.
o Such actions also help to ensure that one’s customer’s needs are
identified and met in a timely fashion.
• Initiative does not only apply to external customer situations.
o What one does around one’s boss and co-workers (internal customers)
also sends powerful messages about oneself.
H. Knowledge
• One’s customers expect the service providers to know what businesses their
organization is in.
• With all the products and service variations available to customers, the high
level of technology, deregulation of industries, and innovations coming on the
market daily, customers depend on service providers to educate and guide
them in making purchases and decisions.
• If the organization service providers work for does not provide training or
resources, service providers should take the initiative to ask supervisors or
team leaders for materials and information.
o They should also develop a network with other employees throughout
the organization and use that network to gain access to information.
I. Perceptiveness
• Recognizing the need to pay close attention to verbal and nonverbal cues,
cultural factors, and the feelings or concerns of others is important.
• By staying focused on customers and the signals they send, service
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providers can often recognize hesitancy, interest in a product or adamant
rejection, irritation, anxiety, and a multitude of other unspoken messages.
o Once service providers have identified customers’ signals, they can
react appropriately and address their needs.
• One way service providers can address customer needs is to anticipate
them, depending on where they work.
o By taking care of the customer’s basic needs, service providers might
encourage him or her to shop longer.
J. Planning Ability
• Planning is a crucial skill to possess when operating in today’s fast-paced,
changing customer service environment, especially in technology-based
environments.
o To prepare for all types of customer situations, service providers and
their organization must assess various factors related to the
organization, industry, products, services, policies and procedures,
resources, and customer base.
• Service providers should also consider alternative strategies for dealing with
unusual situations—contingency plans.
o Such alternatives are helpful when things do not go as originally
planned.
• The basic steps of the planning process model are:
o Set a goal—in a customer service situation, the obvious goal is to
prevent problems from occurring.
o Examine and evaluate the situation—in this phase of planning, service
providers should look at all possible factors that could affect a customer
interaction.
o Identify alternatives—service providers should meet with peers and
supervisors or team leaders to develop a list of alternatives for dealing
with various customer situations.
o Select the best alternative—after reviewing all the options, service
providers should select the one (or more) that best addresses the
targeted goal of providing quality service to customers.
o Create an implementation plan—working with peers and supervisors or
team leaders, service providers should decide which resources (human
and otherwise) will be needed to deliver effective service.