Chapter 10 – Encouraging Customer Loyalty
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K. Problem-Solving Ability
• If a customer has a problem, service providers have a problem.
o Remembering this simple concept can go a long way in reminding
service providers of their purpose for being a service provider.
• Service providers’ primary job function is to address the needs of their
customer.
o To do this when a customer is dissatisfied or has a concern, service
providers should take responsibility for the problem instead of trying to
place blame and defer the issue to someone else.
• Problem resolution is not difficult if it is approached systematically.
L. Professionalism
• Projecting a positive personal image—through manner of dress, knowledge,
appearance of one’s work area, and one’s mental attitude—is a crucial
element in communicating an “I care” image to customers and potential
customers.
o By paying close attention to such factors, service providers better
position themselves to establish and maintain a strong customer
relationship.
VI. Making the Customer Number One
• Most people like to feel that they are important and valued.
o By recognizing and acting on that fact, service providers can go a long way
toward providing solid customer service, reducing churn, and building a
strong relationship with customers.
• Some companies call a service encounter the moment of truth or refer to them
as contact points, in which the customer comes into contact with some facet of
the organization.
o At this point service providers have an opportunity to deliver “knock your
socks off” service.
A. Make Positive Initial Contact
• First impressions are crucial and often lasting.
• To ensure that service providers put their best effort forward, they should
remember the basics of positive verbal and nonverbal communication—
giving a professional salutation, projecting a positive attitude, and sincerely
Chapter 10 – Encouraging Customer Loyalty
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offering to assist.
o This is crucial because the average customer will come into an initial
contact with certain expectations.
o If the expectations are not met, service providers and their organization
can lose relationship rating points that can ultimately cost the
organization a customer.
o Service providers should use a relationship-rating point scale
frequently to evaluate their rating as they deal with various customers.
B. Establish Rapport
• Customers react to and deal effectively with employees whom they perceive
as likable, helpful, and effective.
o Throughout the interaction, service providers should continue to be
helpful, smile, listen, use the customer’s name frequently, and attend to
the customer’s needs or concerns.
• When something goes wrong, people who feel a kinship with service
providers typically give higher ratings on the relationship-rating point scale
than people who do not feel this connection.
C. Identify and Satisfy Customer Needs Quickly
• Service providers should use their questioning, listening, observing, and
feedback skills to focus on issues of concern to the customer.
• By effectively gathering information, service providers can then move to the
next phase of customer service.
D. Exceed Expectations
• Customers typically expect that, if they pay a certain price for a product or
service, they will receive a specific quality and quantity in return.
• Today’s customers tend to be better-educated consumers who recognize that
if they cannot fulfill their needs in one place, they can easily access the same
or similar products and services on the Internet or by visiting a competitor.
• Many terms are used to describe the concept of exceeding expectations—
knock-their-socks-off service, positive memorable customer experiences, E-
plus service, customer delight, dazzling service, fabled service, and five
diamond or five-star service.
o All these phrases have in common the concept of going above and
beyond customer expectations—underpromise and overdeliver.
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E. Follow Up
• Service professionals regrettably often overlook follow up, although it can be
one of the most crucial in establishing long-term relationships.
o Follow-through is a major factor in obtaining repeat business.
• After service providers have satisfied a customer’s needs, they should follow
up with the customer on his or her next visit or via mail, e-mail, or telephone
to ensure that he or she was satisfied.
o The prime objective is to let them know that the service provider has not
forgotten them and appreciate their business and support.
VII. Enhancing Customer Satisfaction as a Strategy for Retaining Customers
• By providing a personal, professional strategy, service providers can help ensure
that customers return.
o This is because building good relationships in order to increase customer
satisfaction is valuable—it can lead to repeat business—the key to keeping
a business productive and profitable.
A. Pay attention
• As service providers listen, they should focus all their attention on the
customer so that they can identify and address his or her needs.
• If service providers are serving in person, they should use positive nonverbal
cues (e.g., face the customer, smile, use open gestures, etc.) and language.
B. Deal with One Customer at a Time
• Service providers cannot effectively handle two people (on the phone or in
person) simultaneously.
• When more than one call or customer comes in at the same time, service
providers should seek assistance or ask one customer either if he or she
could wait or if the service providers might get back to him or her at a later
time.
C. Know Your Customers
• Knowing one’s customer is crucial with long-term customers, but it is also
important with everyone.
Chapter 10 – Encouraging Customer Loyalty
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• Service providers could use notes or their computer to keep a record of
conversations with customers.
o They can review or refer to these notes in subsequent encounters.
o This avoids having customers repeat themselves, and they will feel
“special” because service providers remembered them.
D. Give Customers Special Treatment
• Service providers should try to take the time for a little small talk once in a
while.
o This will help them learn about their customers and what’s important to
them.
E. Service Each Customer At Least Adequately
• Service providers should take the necessary time to handle their customer’s
questions, complaints, or needs.
• If service providers have a number of customers on the phone or in person,
they should service one at a time and either ask to get back to the others or
get help from a co-worker, if possible.
F. Do the Unexpected
• Service providers should not just provide service, they should provide
exceptional service.
o They should provide additional information, offer suggestions that will
aid the customer, send articles that may be of interest, follow up
transactions with calls or letters to make sure that needs were met, or
send cards for special occasions and to thank customers.
G. Handle Complaints Effectively
• Service providers should treat complaints as opportunities to redeem missed
service expectations, and handle them effectively.
o They should acknowledge any error on their part and do everything
possible to resolve the problem quickly and to the customer’s
satisfaction.
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H. Sell Benefits, Not Features
• Salespeople focus on benefits and not feature of a product or service.
o A feature differs from a benefit in that it is a descriptive aspect of a
product or service.
• Service providers should show each customer how their product, service, or
information addresses his or her needs.
o If the product or service doesn’t fit their needs, service providers should
admit it and offer any available alternatives.
o The customers will appreciate the service provider’s honesty, and even
if he or she can’t help them, they will probably return in the future
because he or she is trusted.
I. Know Your Competition
• Service providers should stay abreast of what other, similar organizations are
offering in order to counter comments about them.
o This does not mean that they should criticize or belittle their competitors
or their products and services.
• Staying aware of the competition helps service providers describe and offer
the products, services, and features of their organization that are comparable
to those being offered by others.
VIII. Strive for Quality
• A final strategy for helping to increase customer loyalty relates to the quality of
service the service providers and their organization provide.
o A customer’s perception of quality service is often one of the prime reasons
for his or her return.
• Terms such as total quality management (TQM) and continuous quality
improvement (CQI) are often used in many industries and by manufacturers to
label the goal of improvement.
o Quality service involves efforts and activities that are done well and that
meets or exceeds customer needs and expectations.
• On a personal level, service providers can strive for quality service by working to
achieve an Exemplary rating on the relationship-rating point scale.
o If service providers do not adopt a professional attitude and continually
strive to improve their knowledge, skills, and efforts in dealing with
Chapter 10 – Encouraging Customer Loyalty
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Class Activities and Sample Assignments
2. Ask students to discuss a customer loyalty program that they are part of. Examples
3. As a group or individual project, have students design their own customer loyalty
4. Ask students to discuss in groups a proper procedure for handling customer
5. Ask students to research on TQM and the Malcolm Baldrige awards. What are the
criteria for the award? What organizations have recently been awarded this honor?
10–23
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Education.
Discussion Opportunities
1. What happens when trust is broken in a customer service relationship? Can this
trust be repaired? (LO 10-1)
2. What is the actual financial cost of poor customer service? How can you calculate
3. What do you think defines average customer service and great customer service?
4. What are some ways to measure the level of customer satisfaction? How would you
5. Using the relationship-rating point scale, describe and assess the transaction. (LO
Chapter 10 – Encouraging Customer Loyalty
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In the Real World Notes
Shipping—United Parcel Service of America, INC. (UPS)
United Parcel Service (commonly referred to as UPS) is an American success story that
started in 1907 when two teenagers (Claude Ryan and Jin Casey) started The
American Messenger Service out of a basement in Seattle, Washington. From the
beginning, their goal was to provide professional, reliable, and courteous message and
parcel delivery services. Since telephones and automobiles were not yet well
established, they hired other teens to deliver messages and products such as drug
prescriptions to customers via bicycle and on foot.
As telephone and motorized vehicles began to become more prevalent, the founders
realized a need to expand and improve their methods to remain competitive. To do this,
they merged with a company that had motorcycles and one car, specialized in delivering
orders from grocery and drug stores, and changed their name to Merchants Parcel
Delivery.
By 1919, they had convinced numerous companies to turn over their parcel services to
them. The owners changed the name of the organization to United Parcel Services and
at the same time painted all their vehicles brown, due to the stately message that this
color communicated. As technology improved, the company introduced the conveyor
belt inside its warehouse facilities to improve speed and efficiency in moving packages
to their trucks. Such enhancements allowed the company to continue to grow and they
started using private airplanes to deliver parcels to their expanded geographic locations.
From the 1950s through the mid-1970s, UPS fought a series of legal battles with the
U.S. Department of Commerce to gain access and to provide common delivery services
throughout the United States. In 1975, they became the first package delivery company
to serve all addresses in the 48 contiguous states.
The UPS of today is a mega-organization that delivers over 15 million packages and
documents in 200 countries and territories every day. To increase efficiency, the
corporate headquarters moved to Atlanta, Georgia. Part of that move was to focus on
evolving technology to enhance package tracking and delivery services. In addition to
UPS.com, the organization uses web based shipping and tracking systems such as
WorldShip, Quantum View, and CampusShip. These leading-edge technologies provide
efficient customer tools to process, track, and manage packages.
To capitalize on emerging financial opportunities in recent years, UPS has acquired
Chapter 10 – Encouraging Customer Loyalty
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transportation and distribution operations to allow delivery of larger shipments via land,
air, and sea to supply-chain management and financial business services. The
company went public, offering stock in 1999.
1. What do you personally know about UPS and how does this impact your
perspective of the company as a current or potential customer?
2. From a customer perspective, why do you think some companies like UPS have
survived and flourished when competitors have not done as well?
3. What role do you think management decisions to improve services since its
inception have impacted customer service from UPS? Explain.
4. What positive aspects about the company do you think help contribute to its
worldwide success and reputation? Explain.
Chapter 10 – Encouraging Customer Loyalty
10–26
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
reputation of being trustworthy and tremendously efficient. Not only have they
expanded within the country, they have always looked for overseas expansion and
tie ups with operators across the globe. Associating with UPS is considered as a
prestige and local operators often merge their operations with UPS to get extra
mileage and an added reputation. Today, the company operates out of more than
200 countries across the globe.
5. Would you like to work for a company like UPS? Why or why not?
Chapter 10 – Encouraging Customer Loyalty
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Work It Out Notes
Work It Out 10.1—Preventing Customer Defection
Working in groups of three to five members, students are asked to create a list of
industries or companies that they know of that offer incentives to new customers,
seemingly at the expense of existing ones. Ask students to discuss the impact that such
policies have on existing customer loyalty. Also, ask them to talk about actions that
customers might take as a result of such initiatives and how a front-line service provider
might help stem such behavior.
Work It Out 10.2—Problem Solving
This situation is a typical customer service situation. A customer has purchased a lamp
but realizes the person she bought it for already has one. She doesn’t have the receipt,
but she remembers the name of the salesperson (who no longer works there). You are
allowed to give refunds up to $50 but only with a receipt. Ask students what they would
do in this situation, and try to encourage them to think of creative ways to solve the
situation. For example, they might try to find another item for the customer to replace
the lamp and only have to make an exchange. If the customer isn’t willing to do this,
offering her the refund despite the company policy is probably the best way to keep this
customer.
Work It Out 10.3—Showing Respect
This box asks simply asks students to discuss how they can show respect for
customers. Ask them to work on this in groups and brainstorm a comprehensive list to
put on the whiteboard or flipcharts. You can also ask students to rank their ideas from
most important to least important. Or, to make it interesting, have groups exchange their
lists and rank each others’ lists.
Work It Out 10.4—Personal Customer Relationship Experiences
This box asks students to reflect on a place that they are loyal to and list the qualities of
the customer service provider. It may be as simple as the Starbucks person knowing
their name or knowing what they like to drink. Ask students, based on this list, to set
some goals on things they can do to mimic the great customer service they receive.
Work It Out 10.5—Personal Service Expectations
Chapter 10 – Encouraging Customer Loyalty
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This box is very general, as it asks students how they would expect to be treated if they
were a customer of their current organization. Ask students to discuss in groups and
then cite reasons why customers are not always treated that way at the students’
organizations.
Work It Out 10.6—Passing Time
Everyone’s concept of time is different and this exercise illustrates that. Have students
get into groups and say go. Then have one student stop the other when they think 30
seconds (or 1 minute, or 2 minutes if you have time) have elapsed. This shows that
when people are waiting in line, for example, the time will go much slower than time
normally feels. This is an important concept to realize when students work with
customers who must wait for periods of time to get service.
Work It Out 10.7—Preparing for Contingencies
This box asks students to consider situations in which things might not work out as
planned. For example, a system goes down so you can’t see appointment times or a
website goes offline. Ask students what should be said to the customer by the service
provider and what should be done until the situation is resolved. Then, you can discuss
the importance of contingency plans and the role they play in providing excellent
customer service.
Work It Out 10.8—Personal Customer Experiences
This box asks students to self-assess their own ability to deal with customers. It asks
students what someone would write about them if handed a piece of paper as soon as
an interaction is over. What comments do the students think would be said about them?
Then, ask students to write down what they could change if the comments weren’t
good.
Work It Out 10.9—Strategies for Making Customers Number One
This box asks students to think about strategies they might use to make customers
number one. This activity can be important because oftentimes students are told what
needs to be done but not told how to actually do it. Consider making this a longer
assignment or even a final project. Have students work in groups to write a report on
action plans for improving customer service in their own organizations.
Chapter 10 – Encouraging Customer Loyalty
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End-of–Chapter Material Notes
Key Terms
• Channel partner (p. 384)
• Churn (p. 380)
• Churn rate (p. 380)
• Code of ethics (p. 389)
• Contact points (p. 395)
• Contingency plans (p. 393)
• Cost of dissatisfied customers (p. 382)
• Customer loyalty (p. 376)
• Customer loyalty program (p. 381)
• Customer relationship management (CRM) (p. 379)
• Customer relationships (p. 379)
• Customer retention (p. 380)
• Customer satisfaction (p. 365)
• Moment of truth (p. 395)
• Planning process model (p. 393)
• Relationship-rating points (p. 396)
• Relationship-rating point scale (p. 396)
• Technical Assistance Research Program (TARP) Worldwide (p. 382)
• Total quality management (TQM) and continuous quality improvement (CQI) (p.
403)
• Touch point (p. 376)
• Trust (p. 364)
Review Questions
1. How can you build customer trust?
2. What are some key reasons why customers remain loyal to a product, a service, or
an organization?
Chapter 10 – Encouraging Customer Loyalty
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Education.
Service representatives who are knowledgeable, helpful, have excellent
communication skills, and care about their job and customers; service and
assistance that is readily available and easily accessible 24/7/365 and in a variety of
formats (e.g., telephone, fax, Internet, face to face); and unique products that
differentiate you from competitors, creating a one-stop shopping experience where
customers can obtain multiple types of products and services at one location. Also,
having a flexible return policy and quality products can create loyalty.
3. What are some of the provider characteristics that affect customer loyalty?
4. What are the steps in the planning-process model? Describe.
5. What are six common customer needs?
6. What are ways for service providers to take responsibility for customer relations?
7. What are some techniques for making the customer feel that he or she is number
one?
Chapter 10 – Encouraging Customer Loyalty
10–31
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Education.
exceeding customer expectations, and following up.
Collaborative Learning Activity
This activity first asks students to create a list of things that frustrated or dissatisfied
them with regard to a service received from a provider. This is a great activity in groups
and can take up to 20 or 30 minutes, or you can ask students to create a quick list on
flipcharts or on the board. The second part of this activity asks students to take a field
trip around town and note the things that organizations are doing to encourage and
discourage customer loyalty. The purpose of this activity is to help make students aware
that in all businesses, either one or the other is encouraged. Signs such as “restrooms
for customers only” or “must have exact change” do not create the kind of customer
service environment that breeds customer loyalty. The last part to this activity asks
students to survey people (at least 20) of different age groups and cultural and ethnic
backgrounds and ask for their feedback on customer-service-related issues. This would
be a great end-of-class project in teams. To take it a step further, ask students to not
only report on their findings but also make suggestions as to what can be done to meet
the needs of the customers, similar to a customer service strategy, for the business of
their choice.
Face to Face—Assessing the Need for Reorganization at Get Away
The situation described is a failing travel business and the student has been put in
charge of figuring out why the organization isn’t doing well while competitors are doing
well. The student goes on a covert mission before actually working for the company and
places phone calls and office visits. During this “mission” the student finds very poor
customer service, both in person and on the phone. The case asks students to describe
how they would tell the owners of the business about the situation and what they would
do to improve the situation. To take this case a step further, you could ask students to
develop a training manual or training presentation for the employees of the organization,
addressing customer service specifically.