Service Incidents and Failures Can Actually Present Opportunities for Firms by John Gironda * [37]

                                                                  Photo Credit: Clay Banks

While most firms should strive to provide their customers with the best experience possible at all times, service incidents and failures will occur from time to time. Although these issues aren’t ideal, they do present companies with opportunities as well. Obviously, companies should not make it a habit of experiencing ongoing service incidents and failures with customers. However, in the hopefully rare times in which they do occur, if companies are able to rectify the situation, many times this ends up with customers actually being happier than they would have if things went off completely without a hitch to begin with.

This might not sound quite right at first, but if we think about it for a moment, it should make more sense. If everything goes very smoothly during a service encounter, it should lead to happy and satisfied customers, which is a very good thing. Nevertheless, when there are incidents of service failures or dissatisfied customers, and there will inevitably be at some point, this gives firms the opportunity to show customers that they care by doing what it takes to get things fixed and possibly go above and beyond in order to make things right. By doing this, companies can turn dissatisfied customers to not only satisfied customers, but also delighted ones at that.

This is because consumers tend to remember any hiccups (i.e., service incidents or failures) that occur during their interactions with companies. These hiccups can go a multitude of ways. One way is that a company does not rectify the situation and people leave as unhappy dissatisfied customers, or now ex-customers in many cases. When this happens, people tend to keep this negative feeling with them, recalling it and thinking twice the next time they consider doing business with a company. In addition, consumers may tell friends, family, and other individuals online or in-person about their poor experience, leading to negative word-of-mouth for the company. A second way that a service incident can go, is that the firm does what is necessary to make things right with the customer. In this case, customers will remember that the incident happened, but will also carry positive feelings with them, recalling that the company cared about their experience and satisfaction, and made sure it did what it could to remedy the situation.

Good companies understand this, which is related to a concept in marketing called customer lifetime value. That is, the entire stream of purchases that a customer will make with a company over the course of their lifetime. By keeping customers happy and doing what it takes to correct incidents when they occur, companies stand a much better chance of keeping loyal repeat customers for longer periods of time.

In some cases, this may mean taking a short-term loss on a particular transaction with a customer to keep them happy and retain them for years to come. This is because in order to fix a service failure or incident and retain a customer, it may be necessary for companies to compensate customers for the issue that occurred. Perhaps the customer was inconvenienced by a long wait time for their order, which can happen at a variety of businesses, from restaurants to online retailers. Additionally, perhaps there was an inability to fully accommodate a customer’s request, or the customer simply did not like a particular product and would like a refund.

In terms of customer compensation for inconvenience caused by service incidents, a little bit of compensation can go a very long way in terms of being meaningful to customers. These can be things as simple as taking something off of a customer’s bill, giving the customer an additional item for free, a discount voucher for a future purchase, or additional points towards the company’s loyalty program. Clearly, the type of compensation needs to be commensurate with the type of incident that occurred. However, as the old adage goes, many times it’s the thought that counts more than anything. Additionally, another important factor in the exchange is speed. Incidents should be corrected as quickly as possible, which also means that companies should empower employees and give them some autonomy and leeway to make things right promptly without having to wait on approval for every little thing, within reason of course.

What are your thoughts on this? Do you agree that service incidents can actually present an opportunity for firms? Can you think of any positive examples of times when an incident occurred and a company went out of its way to remedy the situation for you? What impact did that have on you and your future relationship with that company? Please share your thoughts in the comments section below.

 

John Gironda, Ph.D., is an Associate Professor of Marketing at Nova Southeastern University, Fort Lauderdale, Florida. His teaching and research interests include digital and social media marketing, consumer behavior, marketing strategy, consumer privacy issues, and integrated marketing communications. He can be reached at: jgironda@nova.edu

 

Customer Delight - That Sounds About Right or Not Quite? * [36]

There are two schools of thought on customer delight -- it is an extreme form of customer satisfaction (very satisfied) or it is a distinct marketing construct. While the latter position has gained traction recently, this debate is far from settled.

Highly Satisfied or Customer Delight?

> Position A - Highly Satisfied

Customer satisfaction is frequently measured on a five-point Likert scale. While there are many variants of the approach, it is typically measured as follows: 1) highly dissatisfied, 2) dissatisfied, 3) neither satisfied or dissatisfied, 4) satisfied, and 5) highly satisfied. The “5” option may be viewed as a proxy for customer delight. In such cases, customers tend to be highly loyal and not prone to defection. The “4” score implies satisfaction but since it is not strong, customers generally are not very loyal and may defect. Customer satisfaction measures of 1-3 imply major or minor levels of dissatisfaction. In such cases, customers are likely to seek alternative vendors.  

This is analogous to the single-item, 11-point Net Promoter Score scale where respondents that give the organization a 9 or 10 are highly satisfied (promoters); 7 or 8 are somewhat satisfied (passives); and 0-6 are dissatisfied (detractors). Bain & Company has found that long-term value creators such as American Express, Publix Super Markets, Ritz-Carlton, and USAA have NPS scores of twice that of the average company and leaders grow at twice the rate of competitors. The customer satisfaction metric is so important that Lexus uses this basic scale in assessing service quality for their vehicles. In fact, one of their research instruments advised customers to immediately call the service manager if they were not totally satisfied with the service experience (i.e., unable to respond with a “5”).                          

> Position B - Customer Delight

Superior customer value means to continually create business experiences that exceed customer expectations. Innovative companies such as Tesla are not content with customer satisfaction; they strive to amaze, astound, delight or wow them (at least some of the time). Tesla’s $35,000 Model 3 electric vehicles received more than 400,000 pre-orders more than a year before it went to market. Other exciting business initiatives by Tesla include its multi-billion dollar Gigafactory (a battery production facility) and futuristic Hyperloop transportation system. 

While the pursuit of exceeding customer expectations is quite desirable, reality often dictates that customers are most satisfied when firms avoid disappointing them rather than trying too hard to delight them. Therefore, organizations must focus on the business fundamentals and have a flawless execution of operational basics. In rare instances of service failure, service recovery must be a priority. In most cases, customers can not truly articulate how to improve service experiences or what they are seeking to be delighted. 

In contrast, customers can readily identify attributes that are dissatisfiers/hygiene factors (must-haves) and satisfiers (nice-to-have attributes). The hygiene factors constitute the minimally acceptable level of service attributes that customers would expect to be present in the service offering.  For example, a mid-priced hotel catering to business travelers would be expected to offer such services as express check-out, fitness room, high-speed internet connections, a restaurant, and a lounge. Failure to offer these services or to perform or deliver them poorly will likely lead to dissatisfaction. In contrast, simply offering these services and performing them adequately will not delight the customer --the customer expects them as part of doing business. 

Truly delighting customers requires service providers to carefully consider satisfiers.   Satisfiers are those service attributes that both differentiate the service firm from its competitors, while at the same time exceeding customer expectations in one or more areas of service by delivering above what is expected.  Hygiene factors need to be delivered at an acceptable level before satisfiers become important. Satisfiers have the potential to create high customer satisfaction levels once expectations on hygiene factors have been met.  Firms that would offer satisfiers need to consider the value-added services that would both delight and surprise the customer. It should be emphasized that service quality is more than simply meeting specifications and that the customer's point of view is what matters (i.e., is the customer delighted?) Hence, customer satisfaction is what the customer says it is.

Consider some of the following examples in the effective use of satisfiers. Before a guest ever sets foot in Le Parker Meridian Hotel in New York they can use the hotel’s QuickTime Virtual Reality (QTVR) enabling potential guests to "walk" through the lobby and rooms.  In addition to virtual reality tours, the site offers in depth, timely information about room rates, events and points of interest for the business and pleasure traveler. The hotel also welcomes repeat guests with amenity baskets accompanied by handwritten notes.                          

Zappos, a billion dollar shoe, handbag, and clothing company owned by Amazon, aims to deliver “Happiness in a Box.” Their three-part formula is to: 1) meet expectations by delivering the right items, 2) meet desires through free shipping, free return shipping when necessary, and a 365 day return policy and 3) often delight customers via surprise upgrades to overnight shipping.

And conversely, bad-mouthing by dissatisfied customers can be not only harmful, but the very death knell to a company. Consider a case in point: one unhappy buyer at a computer superstore determined that this company lost $50,000 of his business (direct lifetime value) and another $350,000 (indirect lifetime value) due to negative word-of-mouth comments to his family and friends! Today, it’s very likely that dissatisfied consumers will post a bad review on Yelp, Facebook or Google. Negative comments via social media (word-of-mouse) can easily go viral leading to the need for damage control, a potential significant loss of business or even consumer boycotts.

Art Weinstein, Ph.D., is a Professor of Marketing at Nova Southeastern University. His research interests are customer value, market segmentation and entrepreneurial marketing strategies. He may be reached at art@nova.edu 

 

Know Your Customer to Bulletproof Your Marketing Strategy by Fernanda Almada * [35]

Working in today’s digital marketing landscape has become increasingly challenging. The markets are crowded, and changes are happening in an extremely fast pace. As marketers, we know that it is necessary to find a way to learn and adapt quickly. Otherwise, we will fail — as professionals or as businesses. However, there is one key component of any marketing strategy that is bulletproof: your customer.

It may seem obvious, but the truth is that the current times require a much higher-level understanding of who your customers are, and what are their needs, wants, and desires. And this goes way beyond demographics. It is essential to dive deep into their biggest dreams and fears so you can develop an effective marketing strategy that speaks to these very specific pain points and transformation goals.

When you have this level of comprehension around your customers, you will be able to craft the best offers that will turn them into raving fans and will make them stick around for much longer. That is when the magic happens: highly satisfied customers who are willing to buy repeatedly from you and advocate for your brand and business. This is when you will see an increase in your customer lifetime value and will be able to accomplish continued revenue growth.

Targeting Strategy

Before you start working on the real understanding of your customers, it is essential to take a step back and define who these dream customers are, which target markets you should go after, and assess this decision before moving forward. Some of the key factors to consider are the size of the segment (is it large enough to be profitable?), the competition it faces (how strong are your competitors?), and its alignment with your business’ overall goals (is targeting this segment compatible with your long-term goals?).

When you analyze different marketing campaigns from companies such as LinkedIn, Hulu, and Clorox, it is clear that they target different market segments and may have various lines of businesses to cater to them. LinkedIn, for instance, the world’s largest professional network, runs ads directed both at job seekers and advertisers.

Hulu also targets advertisers in addition to subscribers. And if you are wondering if Clorox only targets women in their marketing campaigns, that is not the case. Headlines such as “Cleans & kills germs: Helps build business” show that their strategy and creativity go further than traditional segments and that they also cater to business owners.

Booking.com is another great example of company with unique ad campaigns running simultaneously but targeting distinct audiences. Besides travelers (“Book the perfect stay with peace of mind”), they also promote their services to hotel professionals (“Attract summer bookings”) and business professionals (“All your company’s travel in one place”).

Standing Out from Competitors

The origin of these powerful headlines is in the company’s value proposition. Many marketers underestimate the importance of crafting a well-written value proposition, skipping this important step that dictates the entire marketing strategy. The combination of what your customer wants and what you are able to offer like no other business is what will help you create outstanding marketing strategies to propel your growth.

Strong taglines such as Amazon’s “Spend less. Smile more.” or Gillette’s “The best a man can get.” translate these companies’ value proposition in an attractive way and reinforce the reason why their dream customers should buy from them, and not from the competition.  

The same happens with the creation of marketing campaigns. The high-level understanding of your customer will come into play at the execution phase as well, with the development of variations of ad creative and copy that translate both the company’s positioning and the fulfilment of the client’s desires.

By highlighting benefits (instead of features), showing the removal of problems, elevating power-status, or providing sensory gratification, marketers create opportunities to continuously drive customers that are interested in each offer.

As Philip Kotler says, “Good marketing is no accident. It is both an art and a science”. And it does take a lot of testing and optimizing to create winning strategies. And if something doesn’t seem right, it is probably time to revisit the initial definition of what your company is and who your dream clients really are before going back to the drawing board of your ad campaigns.

Sources:

- Consumer Behavior, Leon Schiffman & Joe Wisenblit, 12^th edition, 2019.

- A Framework for Marketing Management, Philip Kotler & Kevin Lane Keller, 6^th edition, 2016.

-  Facebook Ad Library

* Fernanda Almada is a digital marketing strategist with 15 years of professional experience. She currently works as a marketing project manager at a digital marketing agency in South Florida in addition to managing her own online business. Fernanda has an MBA with a concentration in Marketing from Nova Southeastern University and can be found on Instagram @fernanda.almada.