Lecture 4: Managing Expectations, Customer Delight & Perceived Value

Question 1

Define Expectations

Answer 1

Pre-purchase beliefs about service provision, provide a standard of comparison, a benchmark.

Question 2

What are the types of expectations?

Answer 2

Ideal - the optimal level of performance desired by a customer

Should - what a customer feels he/she ought to receive
Will. - what a customer thinks he/she will actually get
Adequate. - the minimum a customer is willing to accept

Question 3

What are Expectation Levels?

Answer 3

Definition: Baseline comparison for post- experience perceptions (customer satisfaction evaluation) is will (expected or predictive expectations), that is what consumers “would” expect
Explanation: Customers use a ‘better-than’, ‘worse-than’ heuristic

Question 4

How are expectations formed?

Answer 4

Past experiences with service

Awareness of competing brands

E-word-of-mouth (eWOM)

• Personal eg. Facebook friend reviews
• Expert eg. Instagram bloggers

Explicit service promises
- Marketing communications

Implicit service promises

• Tangibles
• Price

Customer Sensitivity

Customer needs

Question 5

What is the Zone of Indifference/Tolerance? Provide an example.

Answer 5

The extent to which customers are willing to accept some degree of variation in service received

Zone of Indifference/Tolerance = (Ideal expectations) minus (minimum tolerable expectations)

Example

• Ideal: Customer wants to be served in 3 minutes
• Adequate/Minimum: based on past experience, will tolerate 10 minutes waiting time
• Zone of Tolerance: If bank takes 3-10 minutes, customer will be satisfied with bank’s speed of service

Question 6

What causes Variations in Zone of Tolerance?

Answer 6

Transitory service intensifiers
Perceived service alternatives
Self-perceived service role (causal attribution?)
Situational factors (control attribution?)
Will expectations set

Question 7

Compare the Zones of Indifference for First-time and Service Recovery situations

Answer 7

For First-Time Service, the expectations are high but extent to which customers are willing to accept variation in Outcome is large. Expectations on the process of service delivery is low to mid and customers are willing to accept a large range in variation.

For Service Recovery Situations, expectations are higher compared to First-Time and the extent to which customers are willing to accept variation in Outcome is is very small. Expectations on the process of service delivery is high and customers are willing to accept a only a small range in variation.

Question 8

How can firms manage customer expectations?

Answer 8

1. Managing the service promises they make.
2. Dependably performing the promised service.
3. Effectively communicating with customers

Question 9

How can firms work on Managing the service promises they make?

Answer 9

Over-promising undermines client tolerance & trust
Under-promising to lower expectations reduces the value of the offering

Managers should ensure promises reflect reality by painting a honest picture explicitly (through communications) and implicitly (through the price you charge)

To further ensure that the promised service is consistent with the deliverable service, managers should solicit pre-campaign feedback from frontline staff and customers about accuracy of promotional messages

Question 10

How can firms Dependably performing the promised service?

Answer 10

Perform the service right the first time.

When service problems occur, client’s tolerance zones shrink and their expectations rise.

Question 11

How can firms Effectively communicate with customers?

Answer 11

Keep clients informed of services issues widens zone of tolerance.

Question 12

What are some strategies for managing customer expectations?

Answer 12

Making company reps easily accessible to customers

Encouraging customers to contact the firm

Training and facilitating service workers to provide personalised, responsive and caring service

Initiating contact with customers and following up regularly

Rewarding service workers for nurturing customer relationships

Question 13

Explain the non-linear effects of satisfaction levels on customer loyalty?

Answer 13

** diagram

Question 14

Define Customer Delight

Answer 14

Customer Delight occurs when expectations are exceeded to a surprising degree.

Usually happens when ‘perfect; product is found, bargain price, or service personnel who went above and beyond.

Question 15

What are sources of Customer Delight?

Answer 15

Employee affect
- Being caring and friendly

Employee effort
- Attentiveness and helpfulness, going above and beyond

Employee skill
- Knows firm policies in-and-out

Time issue
- promptness

Core Product
-Quality of food or comfort of servicescape

Bend Rules/ free stuff
- Service failure recovery

Question 16

What are the pitfalls of customer delight?

Answer 16

Can make it more difficult to please the customer in the future

Difficulties in achieving delight for low
involvement products or functionalor utilitarian products

Potential high costs associated with delivering delight

Low Customer Lifetime
Value cuz customers are not worth extra resources to delight them

Developing a delight package that is difficult for competitors to copy

Question 17

Define Value Proposition

Answer 17

Consists of the whole cluster of benefits the firm promises to deliver

It is a statement about the total experience clients can expect

Question 18

Define Equity Theory/Perceived Fairness and explain marketing implications

Answer 18

Ratio of buyer’s value derived from exchange relative to service provider’s value

Value = Sum of benefits/Sum of costs
“I feel I was ripped of by that hair salon!”

Question 19

Define Customer Perceived Value, explain and give examples.

Answer 19

Perceived value is a client’s overall assessment of the utility of a service based upon perceptions of what is received & what is given.

Perceived Value = Sum of Benefits / Sum of costs

Question 20

Explain Perceived Costs and give examples

Answer 20

Perceived costs or sacrifices can include:

Monetary price. of the service

Time costs. – the time the customer has to spend to acquire the service

Energy costs. – the physical energy spent by the customer to acquire the service

Psychic costs. – the mental energy spent by the customer to acquire the service

Question 21

Give examples of Costs and Benefits

Answer 21

BENEFITS

Quality of goods, range of brands on offer, level of staff assistance, variety of goods, store ambience, comfort, cleanliness, opportunities for sampling new products, extended opening hours, petrol discounts, fly buy points.

COSTS

Price of goods, difficulty in parking, lack of trolleys, waiting time to be served at deli or to check out

Question 22

Explain Co-creation of value

Answer 22

Your goal is not to create value for customers but rather to mobilize customers to create value with you.

Question 23

Explain the Total Service Product Concept

Answer 23

Core product

• Key benefit
• Problem solving solution

Supplementary services

• Help differentiate product offering and helps customer maximise value derived from offering
• Facilitating services
• Supporting services

Question 24

Explain Facilitating Services

Answer 24

Facilitating services – facilitate the delivery and consumption of the core service. If lacking the core service cannot be consumed.

They include:

Information
Order-taking
Billing/Invoicing
Payment

Question 25

In the context of Facilitating Services, explain Information.

Answer 25

Information : Customers need relevant and accurate information

 For new users:						
 What service will best meet my needs?					
 How do I acquire it?					
 How much do I pay?				
 How do I use or experience it?

For existing users:
Confirmation of bookings
Receipts and tickets
Summaries of transactions or account activity

Sources: Web pages, service workers, print materials, video tapes, software- driven tutorials, menu-driven technology

Question 26

In the context of Facilitating Services, explain Order-taking.

Answer 26

Customer purchases, bookings, orders, appointments, applications must bE documented and processed

Above processes should be (1) polite, (2) fast and (3) accurate

Minimise time, mental or physical effort on behalf of customers

Question 27

In the context of Facilitating Services, explain Billing/Invoicing.

Answer 27

Should be clear, informative and itemised in such a way that how the total was derived is obvious

Inaccurate, complicated, incomplete, non-transparent or untimely bills often a source of customer dissatisfaction

Minimise time, mental or physical effort on behalf of customers

Question 28

In the context of Facilitating Services, explain Payment.

Answer 28

Customers expect ease and convenience of payment: cash, cheques, EFTPOS, credit, automatic deductions

Self-service payment systems

Question 29

Define Supporting Services.

Answer 29

Supporting Services - supplement or add value to the core products. Help differentiate service.

They include:

• Consultation & counselling
• Hospitality
• Safekeeping
• Exceptions
• Strip Supporting Services

Question 30

In the context of Supporting Services, explain Consultation & counselling.

Answer 30

Probe customer requirements in order to offer a tailored solution

Counselling helps customers better understand their own situation and come up with their own solutions and actions

Question 31

In the context of Supporting Services, explain Hospitality.

Answer 31

Take care of customer, treat as guest especially if at service factory for an extended period

Pay attention to waiting area comfort, toilet facilities, drink and food availability

Question 32

In the context of Supporting Services, explain Safekeeping.

Answer 32

Caring for the customer’s personal possessions which they bring with them.

For example: cloak room, baggage transport handling and storage, car park, safety deposit box, child and pet car

Caring for goods purchased or rented by customers

For example: packaging, pick up and delivery, assembly, cleaning, refuelling, preventative maintenance, repairs and renovations

Question 33

In the context of Supporting Services, explain Exceptions.

Answer 33

Fall outside routine of normal service provision.

Managers should develop contingency plans and guidelines in advance so that employees know what to do and do not ignore, appear helpless or surprised by customer request

Question 34

In the context of Supporting Services, explain Strip Supporting Services

Answer 34

Some customers do not value supporting services highly and would rather pay a lower price

Eg. Jetstar

• No in-flight meal
• Required check-in 30 minutes before departure
• Shorter leg room
• No unaccompanied minors

Question 35

What are a few types of Exceptions?

Answer 35

Types:

Special requests: for customised treatment which deviates from normal operating procedures
Eg. special dietary requirements, children’s services, disability

Problem solving: when service failures arise

Handling complaints/ suggestions/ compliments: via personnel or telephone lines

Restitution: for performance failures such as refunds, compensation, free repairs

Question 36

Why should Exceptions be discouraged?

Answer 36

Compromises safety

Likely to upset other customers

Places unreasonable burden on employees