The Service Encounter ch4

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The Service Encounter

Technology in the Service Encounter2

The A mode is called technology-free service encounter, where the customer is in physical proximity to and
interacts with a human service provider. This mode represents the traditional high-touch service that we
experience at a hairdresser salon or chiropractor in which technology does not play a direct role. Most personal
care services fall into this category, along with some professional services such as law, consulting, and
psychiatry.

The B mode is called technology-assisted service encounter, because only the service provider has access to the
technology to facilitate the delivery of face-to-face service. Many health care procedures fall in this category,
such as an eye exam during the office visit to an optometrist or a full mouth x-ray at the dentist. Traditionally,
airline representatives used a computer terminal to check in passengers, represented by mode B, but today
passengers are encouraged to use check-in kiosks represented by mode E.

The C mode is called technology-facilitated service encounter, because both the customer and service provider
have access to the same technology. For example, a financial planner in consultation with a client can refer to a
financial model on a personal computer to illustrate projected returns for different risk profiles.

Beginning with the D mode, called technology-mediated service encounter, the customer and human service
provider are not co-located physically and, thus, the service encounter no longer is the traditional “face-to-face”
contact. Communication usually is enabled by voice telephone call to access services such as making a
restaurant reservation or getting technical help from a distant call center. Consider, also, how General Motors
has bundled a remote monitoring service in its automobiles called “OnStar” that uses GPS (global positioning
satellite) technology to reassure stranded motorists that assistance is on the way.

In mode E, called technology-generated service encounter, the human service provider is replaced entirely
with technology that allows the customer to self-serve (i.e., outsourcing the job to the customers). This mode is
becoming more common as firms attempt to reduce the cost of providing service. Examples are ubiquitous—
bank ATMs, check- out scanning, airport check-in kiosks, online reservations, and interactive voice response
(IVR) technology in call centers.
Emergence of a self-service P94
The proliferation of self-service has many implications for society.

Low-wage, unskilled, non-value-added service jobs are bound to disappear. The emergence of a self-service
sector means that the growth in service jobs will be limited to highly skilled (e.g., health care), intellectual (e.g.,
professional), and creative (e.g., entertainment) pursuits. Finally, the question of what constitutes economic
activity will need to be redefined to account for the value of self-service labor.

Evolution of Self-Service

The Service Encounter Triad P94

The service encounter triad shown in Figure 4.2 captures the relationships

Between the three parties in the service encounter and suggests possible sources of conflict.
1- Encounter Dominated by the Service Organization p95

To be efficient and, perhaps, to follow a cost leadership strategy, an organization might standardize service
delivery by imposing strict operating procedures and, thus, severely limit the discretion of the contact personnel.
Customers are presented with a few standard service options from which to choose, and personalized service is
not available. Many franchise services such as McDonald’s, Jiffy Lube, and H&R Block have been successful
with a structural organization and environment that dominates the service encounter.

Much of their success has resulted from teaching customers what not to expect from their service; however,
much of the frustration that customers experience with other institutions, labeled pejoratively as
“bureaucracies,” is the result of contact personnel having no autonomy to deal with individual customer’s needs.
Contact personnel in such organizations may sympathize with the customer but are forced to go “by the book,”
and their job satisfaction is diminished in the process.

‫ التي توصف بازدراء على أنها‬، ‫ فإن الكثير من اإلحباط الذي يعاني منه العمالء مع المؤسسات األخرى‬، ‫نتج الكثير من نجاحهم عن تعليم العمالء ما ال يتوقعونه من خدمتهم ؛ ومع ذلك‬
‫ قد يتعاطف موظفو االتصال في مثل هذه المنظمات مع العميل ولكنهم‬.‫ هو نتيجة لعدم تمتع موظفي االتصال باالستقاللية في التعامل مع احتياجات العمالء الفردية‬، "‫"بيروقراطية‬
‫ ويتضاءل رضاهم الوظيفي في هذه العملية‬، "‫مجبرون على الذهاب "حسب الكتاب‬.

2- Contact Personnel–Dominated Encounter

In general, service personnel attempt to limit the scope of the service encounter to reduce their own stress in
meeting demanding customers. When contact personnel are placed in an autonomous position, they may
perceive themselves as having a significant degree of control over customers. The customer is expected to place
considerable trust in the contact person’s judgment because of the service provider’s perceived expertise. ، ‫بشكل عام‬
‫ فقد يرون أنهم يتمتعون بدرجة كبيرة من‬، ‫ عندما يتم وضع موظفي االتصال في وضع مستقل‬.‫يحاول موظفو الخدمة الحد من نطاق الخدمة لتقليل إجهادهم في مقابلة العمالء المطالبين‬
‫ من المتوقع أن يضع العميل ثقة كبيرة في حكم الشخص المسؤول عن االتصال بسبب الخبرة المتصورة لمزود الخدمة‬.‫السيطرة على العمالء‬.

The relationship between physician and patient best illustrates the shortcomings of the contact personnel–
dominated encounter. The patient, who is not even referred to as a “customer,” is placed in a subordinate
position with no control over the encounter. Further, an allied organization, such as a hospital in this case, is
subjected to tremendous demands placed on it by individual staff physicians with no regard for matters of
efficiency.

‫ في وضع ثانوي‬، "‫ الذي ال ُيشار إليه على أنه "عميل‬، ‫ يتم وضع المريض‬.‫توضح العالقة بين الطبيب والمريض بشكل أفضل أوجه القصور في اللقاء الذي يهيمن عليه أفراد االتصال‬
‫ تخضع لمطالب هائلة من قبل األطباء العاملين دون أي اعتبار لمسائل الكفاءة‬، ‫ مثل مستشفى في هذه الحالة‬، ‫ فإن منظمة حليفة‬، ‫ عالوة على ذلك‬.‫ دون أي سيطرة على اللقاء‬.

3- Customer-Dominated Encounter ‫مواجهة يهيمن عليها العميل‬

The extremes of standardized and customized services represent opportunities for customers to control the
encounter. For standardized services, self-service is an option that gives customers complete control over the
limited service that is provided. For example, at a self-service gasoline station that is equipped with a credit card
reader, the customer need not interact with anyone. The result can be very efficient and satisfying to the
customer who needs or desires very little service. For a customized service such as legal defense in a criminal
case, however, all of the organization’s resources might be needed, at great cost in efficiency.

The online encounter is an increasing popular variation on Figure 4.2 where the “contact personnel” box is
replaced with a website. Designing a website that will attract repeat customers is a challenge for the service
organization. In an effort to measure the effectiveness of websites, a survey instrument called E-S-QUAL was
developed.4 The 22-item survey consists of four dimensions: efficiency (e.g., the site is easy to navigate), system
availability (e.g., site does not crash), fulfillment (e.g., ordered items arrive quickly), and privacy (e.g., one’s
credit card is protected).

A satisfactory and effective service encounter should balance the need for control by all three participants. The
organization’s need for efficiency to remain economically viable can be satisfied when contact personnel are
trained properly and the customer’s expectations and role in the delivery process are communicated effectively.
Our discussion of approaches to managing the service encounter begins with the service organization.
The Service Organization P96
1- Culture
Why do we choose employment or seek service at one firm versus another? Often the choice is based on the
firm’s reputation as a good place to work or shop. This reputation is based upon the organization’s culture or
identity. The following definitions of culture share the idea that beliefs and traditions create a unique identity for
an organization:
- Culture is a pattern of beliefs and expectations that is shared by the organization’s members and produces
norms that powerfully shape the behavior of individuals or groups in organizations.
- Culture is the traditions and beliefs of an organization that distinguish it from other organizations and infuse a
certain life into the skeleton of structure.
- Organizational culture is a system of shared orientations that hold the unit together and give a distinctive
identity.

2- Empowerment
Jan Carlzon, the innovative president of SAS, is quoted as saying:

Instructions only succeed in providing employees with knowledge of their own limitations. Information, on the
other hand, provides them with a knowledge of their opportunities and possibilities. . . . To free someone from
rigorous control by instructions, policies and orders, and to give that person freedom to take responsibility for
his ideas, decisions and actions, is to release hidden resources which would otherwise remain inaccessible to
both the individual and the company. . . . A person who has information cannot avoid taking responsibility.6

Perhaps it is surprising that Taco Bell has become the new service model of employee empowerment. Other
firms adopting this new model include ServiceMaster, Marriott, and Dayton Hudson. Senior managers of these
firms all share a belief that people want to do good work—and will do so if given the opportunity.
Consequently, they have made the following commitments: (1) to invest in people as much as, or more than, in
machines; (2) to use technology to support contact personnel rather than to monitor or replace them; (3) to
consider the recruitment and training of contact personnel as critical to the firm’s success; and (4) to link
compensation to performance for employees at all levels. In this type of organization, a much-reduced middle
management no longer has the traditional

3- Control Systems p98

Table 4.2 describes four organizational control systems to encourage creative employee empowerment. The
belief system is facilitated by a well-articulated organizational culture. A boundary system defines limits to
employee initiative (e.g., do not commit the organization to a financial liability in excess of $1,000) without
creating an environment of negative thinking that can be generated by using standard operating procedures.
Diagnostic systems define measurable goals to achieve (e.g., 90 percent on-time performance). The interactive
control system is most appropriate for “knowledge industries” such as consulting firms, because the
organization’s very survival depends on delivering creative solutions for its customers.

Empowered contact personnel must be motivated, informed, competent, committed, and well-trained. Frontline
personnel should exhibit the ability to take responsibility, manage themselves, and respond to pressure from
customers.
Organizational Control P98
Contact Personnel p99
Ideally, customer contact personnel should have personality attributes that include flexibility, tolerance for
ambiguity, an ability to monitor and change behavior on the basis of situational cues, and empathy for
customers. The last attribute (i.e., empathy for customers) has been found to be more important than age,
education, sales-related knowledge, sales training, and intelligence.

‫ والقدرة على مراقبة‬، ‫ والتسامح مع الغموض‬، ‫ يجب أن يتمتع موظفو االتصال بالعمالء بسمات شخصية تشمل المرونة‬، ‫من الناحية المثالية‬
‫ تم العثور على السمة األخيرة (أي التعاطف مع العمالء) لتكون أكثر أهمية‬.‫ والتعاطف مع العمالء‬، ‫السلوك وتغييره على أساس اإلشارات الظرفية‬
‫من العمر والتعليم والمعرفة المتعلقة بالمبيعات والتدريب على المبيعات والذكاء‬.

1- Selection
An example of a question that assesses an applicant’s attention to the environment would be “From your past
work experience, what type of customer was most difficult for you to deal with and why?” To determine if an
applicant actively collects information, a questioner might ask, “What was the customer’s primary complaint or
negative characteristic?” Some final questions to evaluate the applicant’s interpersonal style could be “How did
you handle the customer?” and “What would be the ideal way to deal with that type of customer?”

1-Abstract questioning ‫ستجواب مجردة‬


also can be used to reveal a person’s willingness to adapt. An effective employee will take notice of details in
his or her personal life as well as on the job. People who consider the events around them and can describe their
significance usually are able to learn more as well as faster. ‫ايمكن استخدامها أيًض ا للكشف عن استعداد الشخص للتكيف سيالحظ الموظف الفعال‬
‫ األشخاص الذين يفكرون في األحداث التي تدور حولهم ويمكنهم وصف أهميتها عادة ما يكونون قادرين على تعلم المزيد بشكل أسرع‬.‫التفاصيل في حياته الشخصية وكذلك في الوظيفة‬

Because of their nature and preparation for the interview, some applicants will be better able than others to talk
extensively about their past experiences. Careful listening and probing by the interviewer for the substance of an
answer to an abstract question will lessen the possibility of being deceived with “puffery.” Finally, there is no
assurance that the ability to reflect on past events necessarily will guarantee that such perceptiveness and
flexibility will transfer to the job. ‫ إن‬.‫ سيكون بعض المتقدمين أفضل من غيرهم للتحدث بشكل مكثف عن تجاربهم السابقة‬، ‫وبسبب طبيعتهم والتحضير للمقابلة‬
‫ ليس هناك ما يضمن أن القدرة على التفكير في األحداث الماضية‬، ‫ أخيًر ا‬."‫االستماع الدقيق والتحقيق من قبل المحقق في جوهر إجابة سؤال مجرد سيقلل من احتمالية الخداع بـ "النفخ‬
‫ستضمن بالضرورة نقل هذا اإلدراك والمرونة إلى الوظيفة‬.

2-Situational Vignette ‫طلب منه انه يجاوب على اسئلة ذات سيناريو محدد‬
Conducting a pre-employment interview that requires the applicant to answer a question regarding a specific
episode is called a situational vignette

The day after a catering service has catered a large party, a customer returns some small cakes, claiming they
were stale. Although the man is demanding a refund, he is so soft spoken and timid that you can hardly hear him
across the counter. You know that your business did not make those cakes, because they don’t look like your
chef’s work. What would you do?

Presenting a situation like this may reveal information regarding an applicant’s instincts, interpersonal
capabilities, common sense, and judgment. To gain more information about a candidate’s adaptability, further
questions about the situation can be asked: “How would you handle the man if, suddenly, he were to become
irate and insistent? What steps would you take to remedy the situation?” ‫قد يؤدي تقديم موقف كهذا إلى الكشف عن معلومات تتعلق‬
:‫ يمكن طرح المزيد من األسئلة حول الموقف‬، ‫ للحصول على مزيد من المعلومات حول قدرة المرشح على التكيف‬.‫ والحكم‬، ‫ والفطرة السليمة‬، ‫ وقدراته الشخصية‬، ‫بغرائز مقدم الطلب‬
‫" "كيف ستتعامل مع الرجل إذا أصبح فجأة غاضًبا ومصًر ا؟ ما الخطوات التي ستتخذها لتصحيح الوضع؟‬

3-Role Playing
Role playing provides a way for an interviewer to observe an applicant under stress. Interviewers using this
technique can probe and change the situation as the session progresses. This method allows for more realistic
responses than either the abstract questioning or situational vignette interviews; applicants are required to use
their own words and react to the immediate situation instead of describing them.

Although role playing provides an excellent opportunity to observe a candidate’s strengths and weaknesses in a
realistic customer encounter, direct comparison of applicants is difficult. Role playing does require careful
scripting, and the “actors” need to rehearse their roles before the interview.

‫ إال أن المقارنة‬، ‫على الرغم من أن لعب األدوار يوفر فرصة ممتازة لمراقبة نقاط القوة والضعف لدى المرشح في مقابلة واقعية مع العمالء‬
‫ ويحتاج "الممثلون" إلى التمرين على أدوارهم قبل المقابلة‬، ‫ يتطلب لعب األدوار كتابة نصوص برمجية دقيقة‬.‫المباشرة للمتقدمين أمر صعب‬
2- Training
Unrealistic Customer Expectations ‫توقعات العمالء غير الواقعية‬
Approximately 75 percent of the reported communication difficulties arise from causes other than a breakdown
in the technical service delivery. These difficult encounters involve customers with unrealistic expectations that
cannot be met by the service delivery system. Examples include passengers who bring oversized luggage aboard
an airplane or diners who snap fingers and yell at servers. Unrealistic customer expectations can be broken
down into five challenges: ‫ تتضمن هذه المواجهات الصعبة‬.‫ في المائة من صعوبات االتصال المبلغ عنها تنشأ من أسباب أخرى غير انهيار في تقديم الخدمات الفنية‬75 ‫ما يقرب من‬
‫ تشمل األمثلة الركاب الذين يجلبون أمتعة كبيرة الحجم على متن طائرة أو رواد المطعم الذين يفقدون أصابعهم ويصرخون على‬.‫العمالء الذين لديهم توقعات غير واقعية ال يمكن أن يلبيها نظام تقديم الخدمة‬
‫ يمكن تقسيم توقعات العمالء غير الواقعية إلى خمسة تحديات‬.‫الخوادم‬:

 Unreasonable demands. Services that the firm cannot offer, or customer demands that require inappropriate
time and attention (e.g., “I want to carry all my luggage on board,” or “Please sit with me; I’m afraid of
flying”).

 Abusive or hostile attitude. Customer’s treatment of employee with verbal or physical abuse (e.g., “You
idiot! Where is my drink?” or a diner pinching a waitress).

 Inappropriate behavior. Customers becoming intoxicated or acting inappropriately (e.g., an inebriated


passenger trying to exit the plane while in flight or guests swimming nude in the hotel pool).

 Unanticipated demands. Special attention to customers with medical or language difficulties (e.g., “My
wife is in labor,” or “Wieviel kostet das?”).

 Demands contrary to policies. Requests that are impossible to fulfill because of safety regulations, laws, or
company policies (e.g., “We’ve been waiting an hour for takeoff, and I must have my smoke,” or “Our
party of 10 wants separate checks for the meal”).

Service Failure p101


A failure in the service delivery system places a communication burden on the contact personnel. Service
failures, however, provide a unique opportunity for contact personnel to demonstrate innovation and flexibility
in their recovery. Three types of service failures can be identified:

‫يمكن تحديد ثالثة أنواع من حاالت فشل‬.‫ فإن فشل الخدمة يوفر فرصة فريدة لموظفي االتصال إلظهار االبتكار والمرونة في تعافيهم‬، ‫ ومع ذلك‬.‫يضع الفشل في نظام تقديم الخدمة عبًئا على موظفي االتصال‬
‫الخدمة‬:

1- Unavailable service. Services that normally are available or expected are lacking (e.g., “I reserved a table by the
window,” or “Why is the ATM out of order?”). ، ‫ الخدمات التي عادة ما تكون متاحة أو متوقعة غير متوفرة (على سبيل المثال‬.‫الخدمة غير متوفرة‬
)"‫"لقد حجزت طاولة بجوار النافذة" أو "لماذا جهاز الصراف اآللي خارج الخدمة؟‬.

2- Slow performance. Service is unusually slow, creating excessive customer waiting (e.g., “Why hasn’t our plane arrived?”
or “We’ve been here for an hour, and no one has taken our order”).
• ‫ ولم‬، ‫ "لماذا لم تصل طائرتنا؟" أو "لقد كنا هنا لمدة ساعة‬، ‫ مما يؤدي إلى زيادة انتظار العمالء (على سبيل المثال‬، ‫ الخدمة بطيئة بشكل غير عادي‬.‫أداء بطيء‬
)"‫يأخذ أحد طلبنا‬.
3- Unacceptable service. Service does not meet acceptable standards (e.g., “My seat doesn’t recline,” or “Eeegads, there’s a
hair in my soup!”).

Challenges Facing Customer Contact Personnel


3- Creating an Ethical Climate
Customer-contact employees working without close supervision often are placed in situations where ethical
standards might be compromised in an effort to serve multiple conflicting demands at the same time. Table 4.4
illustrates how employees might engage in unethical behaviors to cover their mistakes, to increase the firm’s
revenues, or to satisfy a demanding customer. To prevent the negative consequences of unethical opportunism
and build a culture of trust and integrity, managers must have a means of instilling ethical behavior in their
employees.

The Customer
Expectations and Attitudes
Service customers are motivated to look for a service much as they would for a product; similarly, their
expectations govern their shopping attitudes. Gregory Stone developed a now-famous topology in which
shopping-goods customers were classified into four groups. The definitions that follow have been modified for
the service customer: ‫ طور جريجوري ستون‬.‫ فإن توقعاتهم تحكم اتجاهات التسوق لديهم‬، ‫يتم تحفيز عمالء الخدمة للبحث عن خدمة بقدر ما يبحثون عن منتج ؛ وبالمثل‬
‫ تم تعديل التعريفات التالية لعميل الخدمة‬.‫طوبولوجيا مشهورة اآلن تم فيها تصنيف عمالء التسوق في أربع مجموعات‬:

1. The economizing customer. This customer wants to maximize the value obtained for his or her expenditures
of time, effort, and money. He or she is a demanding and some- times fickle customer who looks for value that
will test the competitive strength of the service firm in the market. Loss of these customers serves as an early
warning of potential competitive threats.
‫ هو أو هي عميل متطلب ومتقلب في بعض‬.‫ يريد هذا العميل تعظيم القيمة التي تم الحصول عليها مقابل إنفاقه للوقت والجهد والمال‬.‫الزبون المقتصد‬
‫ يعتبر فقدان هؤالء العمالء بمثابة تحذير مبكر للتهديدات التنافسية‬.‫األحيان يبحث عن القيمة التي ستختبر القوة التنافسية لشركة الخدمة في السوق‬
‫المحتملة‬.

2. The ethical customer. This customer feels a moral obligation to patronize socially responsible firms. Service
firms that have developed a reputation for community service can create such a loyal customer base; for
example, the Ronald McDonald House program for the families of hospitalized children has helped the image of
McDonald’s in just this way.
‫ يمكن لشركات الخدمات التي اكتسبت سمعة طيبة في خدمة‬.‫ يشعر هذا العميل بواجب أخالقي لرعاية الشركات المسؤولة اجتماعيًا‬.‫العميل األخالقي‬
‫ ساعد برنامج رونالد ماكدونالد هاوس لعائالت األطفال في المستشفيات‬، ‫المجتمع إنشاء مثل هذه القاعدة من العمالء المخلصين ؛ على سبيل المثال‬
‫على صورة ماكدونالدز بهذه الطريقة فقط‬
3. The personalizing customer. This customer wants interpersonal gratification, such as recognition and
conversation, from the service experience. Greeting customers on a first-name basis always has been a staple of
the neighborhood family restaurant, but computerized customer files can generate a similar personalized
experience when used skillfully by frontline personnel in many other businesses.

‫ لطالما كان الترحيب بالعمالء على أساس االسم‬.‫ من تجربة الخدمة‬، ‫ مثل التقدير والمحادثة‬، ‫ يريد هذا العميل إشباًعا شخصًيا‬.‫العميل المخصص‬
‫ لكن ملفات العمالء المحوسبة يمكن أن تولد تجربة شخصية مماثلة عند استخدامها بمهارة من قبل‬، ‫األول عنصًر ا أساسًيا في مطعم العائلة في الحي‬
‫موظفي الخطوط األمامية في العديد من الشركات األخرى‬.

4. The convenience customer. This customer has no interest in shopping for the service; convenience is the
secret to attracting him or her. Convenience customers often are willing to pay extra for personalized or hassle-
free service; for example, supermarkets that provide home delivery may appeal to these customers.
‫ غالًبا ما يكون العمالء المريحون على استعداد‬.‫ ال يهتم هذا العميل بالتسوق للحصول على الخدمة ؛ الراحة هي سر جذبه أو جذبها‬.‫العميل المالئم‬
‫ قد تجذب محالت السوبر ماركت التي توفر خدمة التوصيل‬، ‫لدفع مبالغ إضافية مقابل الخدمة الشخصية أو الخالية من المتاعب ؛ على سبيل المثال‬
‫إلى المنازل هؤالء العمالء‬.
Customers who were interviewed appeared to be using the following dimensions in their selection: (1) amount
of time involved, (2) customer’s control of the situation, (3) efficiency of the process, (4) amount of human
contact involved, (5) risk involved, (6) amount of effort involved, and (7) customer’s need to depend on others.

The Role of Scripts in Coproduction

Customers possess a variety of scripts that are learned for use in different service encounters. Following the
appropriate script allows both the customer and the service provider to predict the behavior of each other as they
play out their respective roles. Thus, each participant expects some element of perceived control in the service
encounter. Problems can arise if customers abuse their script. For example, upon finishing a meal at a fast-food
restaurant, a customer is expected to clear his or her table, but if this script is not followed, an employee must do
the task.

Service Profit Chain13 P106


Satisfied and loyal employees begin with selection and training, but require investment in information
technology and other workplace support that allow decision-making latitude to serve customers.

1. Internal quality drives employee satisfaction. Internal service quality describes the environment in which
employees work and includes employee selection and development, rewards and recognition, access to
information to serve the customer, workplace technology, and job design. At USAA, a financial services
company serving the military community, for example, a telephone service representative is supported by a
sophisticated information system that puts complete customer information files on his or her monitor when a
customer gives a membership number. The facility is headquartered in suburban San Antonio and resembles a
small college campus. Using 75 classrooms, state-of-the-art job-related training is an expected part of
everyone’s work experience.

2. Employee satisfaction drives retention and productivity. In most service jobs, the real cost of employee
turnover is the loss of productivity and decreased customer satisfaction. In personalized service firms, low
employee turnover is linked closely to high customer satisfaction. The cost of losing a valued broker at a
securities firm, for example, is measured by the loss of commissions during the time a replacement is building
relationships

3- Employee retention and productivity drive service value. At Southwest Airlines, customer perceptions of
value are very high, even though the organization does not assign seats, offer first-class seating, or integrate its
reservation system with other airlines. Customers place high value on frequent departures, on-time service,
friendly employees, and very low fares (60 to 70 percent lower than existing fares in markets it enters). These
low fares are possible in part because highly trained flexible employees can perform several jobs and because
they can turn around an aircraft at the gate in fewer than 15 minutes.

4- Service value drives customer satisfaction. Customer value is measured by comparing results received to the
total costs incurred in obtaining the service. Progressive Corporation, the casualty insurance company, creates
customer value by processing and paying claims quickly and with little policyholder effort. Progressive, for
example, flies a team to the scene of major catastrophes and is able to process claims immediately, provide
support services, reduce legal costs, and actually place more money in the hands of injured parties.
5- Customer satisfaction drives customer loyalty. When Xerox polled its customers using a five-point scale
ranging from “extremely dissatisfied” to “very satisfied,” it discovered that “very satisfied” customers were six
times more likely to repurchase Xerox products and services than those who were just “satisfied.” Xerox called
these very satisfied customers “apostles,” because they would convert the uninitiated to their product. At the
other extreme are the “terrorists,” customers who are so unhappy that they speak out against the firm.

6- Customer loyalty drives profitability and growth. Because a 5 percent increase in customer loyalty can
produce a profit increase from 25 to 85 percent, the quality of market share, measured in terms of customer
loyalty, deserves as much attention as the quantity of share. Banc One, a profitable bank based in Columbus,
Ohio, for example, has developed a sophisticated system to track customer loyalty by measuring the number of
services that customers use and the depth of their relationship with Banc One

Summary
with customers. Employee satisfaction also can contribute to productivity. Southwest Airlines has been the most
profitable airline consistently owing in part to its high rate of employee retention. Its turnover rate of less than 5
percent per year is the lowest in the industry.

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