Service Management and Marketing: Managing the Service Profit Logic, 4th Edition

CHAPTER 6RETURN ON SERVICE AND RELATIONSHIPS

“Customers look for value. However, more value does not necessarily require new services but better service, meaning that all existing customer contacts are managed as value-supporting service for customers.”

INTRODUCTION

Building on the discussions of perceived service quality and relationship quality in Chapter 4 and quality management in service in Chapter 5, this chapter now turns to the question of whether investing in service can be expected to pay off. The issues of relationship costs and long-term customer sacrifice are discussed, and various approaches to understanding customer perceived value are described. Then a model of reciprocal return on relationship (ROR) and metrics for calculating this ROR are presented. Finally, a model of customer relationship profitability is presented. After having read the chapter, the reader should understand how to justify investments in service quality and in service in customer relationships, and how to quantify the total benefits of a service offering as well as how reciprocal ROR and the profitability of customer relationships are calculated.

WHY CUSTOMERS ARE NOT PREPARED TO PAY FOR IMPROVED SERVICE QUALITY

Service competition is a fact for a growing number of firms and industries. Service firms have always faced service competition, whereas this situation is less familiar for most manufacturing businesses. In spite of this new competitive situation, one often meets the sceptical suspicion ...