Using marketing research to understand customer expectation

Customer expectations are beliefs about service delivery that serve as standards or
reference points against which performance is judged. Because customers compare their
perceptions of performance with these reference points when evaluating service quality,
thorough knowledge about customer expectations is critical to services marketers.

Knowing what the customer expects is the first and possibly most critical step in
delivering good quality service. Being wrong about what customers want can mean
losing a customers business when another company hits the target exactly. Being
wrong can also mean expending money, time and other resources on things that do not
count to the customer. Being wrong can even mean not surviving in a fiercely
competitive market.

Types of service research

Quantitative and qualitative approaches can work independently or together for the
most comprehensive results. Market research is a continuum, blending various
approaches and methodologies:
Mail, telephone, Internet, focus groups, roundtable discussions, one-on-one interviews,
consumer rallies, central location clinics, event measurement, and many others can be
effective in the right climate and situation.

Standards development and measurement are keystones to defining and tracking

satisfaction and loyalty performance.

Brand and product development research may require more sophisticated statistical
techniques.

Product usage, purchase behavior, and buyer motivation should be carefully defined and
monitored over time.
 Advertising and merchandising concepts and execution require distinct methodologies
before costly investment and as follow-up.

Research for products and services that are gender or age specific should be assigned
tospecialists in the field.

In global markets, many research methodologies must be substantially modified to

accommodate market conditions recognizing geographic, political, cultural, economic,
and social influences unique to the region or country. New and emerging markets present
challenging and complex issues to effectively penetrate and sustain a profitable presence
in the market.

The paradigm has shifted in the market place. Products and services can no longer be
designed in a vacuum and then simply introduced in the market place, expecting
acceptance. Developing products and services starts with clearly defined customer needs
so that these products can be delivered to a receptive market place.
 Building customer relationship through retention strategies

Customer retention rate: -- The customer retention rate refers to the number of
customers lost over a period of time. It is normally calculated by the percentage of lost
customers versus existing customers over a quarterly or annual period, without tallying
new customer acquisitions.

While there are obvious benefits to keeping customers loyal and maintaining high
customer retention rates, it can be extremely challenging for management to keep
retention rates up.

Retention strategies
1. Maintain database

2. Stay in touch

3. Welcome complaints

4. Loyalty programs

5. Do a good job

Maintain a Database
If you dont keep track of who your customers are, how can you be sure that you are earning
their repeat business? It is vital to keep a database of customer details, including (if possible)
their names, contact information, and purchase history. This database will become an
invaluable tool in recognizing who your most valuable customers are and how to get in
contact with them.

Stay in Touch
No matter how happy your customers are with your business, they can be courted by more
aggressive salesman and special offers. Make sure you maintain your relationships by staying
in touch with your customers. You can use newsletters or e-mail lists to stay in touch and to
let customers know about your new products or sales. For repeat customers and large
accounts, the personal touch is best. Call and e-mail to check in to find out if your company
can provide any services or to find out if past purchases are living up to expectations. For
very high-end clients, a personal dinner is a nice touch. Remember: You dont have to keep in
touch just to try to sell them something. Customers appreciate the ongoing communication
and businesses that are also willing to listen.
 Welcome Complaints
Customer complaints might seem like a death sentence that means you have lost their
business forever. However, complaints are really an opportunity to win your customers
loyalty by showing them that you are committed to customer service and to providing the
best product. Complaints also show you how you can improve your product or service so that
you can win over new customers. Always welcome complaints and other feedback as a
chance to grow.

Loyalty Programs
Many businesses offer loyalty and rewards programs to entice customers into repeat business.
These can be discounts or point accrual programs based on the amount purchased or the
quantity of items purchased. Other value-added options for your customers include special
promotions for repeat customers, or even a special gift. These do not have to be significant
discounts or expensive gifts: Even small gestures make a big impression.

Do a Good Job
This is the easiest and most obvious customer-retention strategy there is: Offer the best product
or service that you can. If you do this, your customers will want to return to do business with
you. No amount of programming or special discounts will entice customers to buy an inferior
product or to pay for bad service. Always offer the highest-quality product or service that you
can, and your business will draw in customers.

Process for Market Segmentation and Targeting in services:

1. Identify bases for segmenting the market:

Market segments are formed by grouping customers who share characteristics that are in
some way meaningful to the design, delivery, promotion, or pricing of the service.
Common segmentation bases for consumer markets include demographic segmentation,
geographic segmentation, psychographic segmentation, and behavioral segmentation.
Segments may be identified on the basis of one of these characteristics or a combination.

2. Develop profiles of Resulting Segments:

Once the segments have been indentified, it is critical to develop profiles of the in
consumer markets, these profiles usually involve demographic characterizations of
psychographic or usage segments. Of most importance in this stage is clearly understanding
how and whether the segments differ from each other in terms of their profiles. If they are
not different from each other, the benefits to be derived from segmentation, that is, from
more precisely identifying sets of customers will not be realized.

3. Develop Measures of segment Attractiveness:

The fact that segments of customers exist does not justify a firms choice of them as
targets. Segments must be evaluated in terms of their attractiveness. The size and
purchasing power of the segments must be measurable so that the company can determine
if the segments are worth the investment in marketing and relationship costs associated
with the group. They must be profitable in the long term in terms of revenues generated,
and they also should not place a disproportionate drain on the firms time and /or human
energy. These costs are not always easy to determine in advance.

4. Select the Target Segments:

Based upon the evaluation criteria in step 3, the services marketer will select the target
segment or segments for the service. The service firm must decide if the segment is large
enough and trending toward growth. Market size will be estimated and demand forecasts
completed to determine whether the segment provides strong potential.
5. Ensure that the target segments are compatible:

This step, of all the steps in segmentation strategy, is arguably more critical for service
companies than for goods companies. Because services are often performed in the presence
of the customer, the services marketer must be certain that the customers are compatible
with each other for example, families who are attracted by the discounted prices and
college students on their fees it may find that the two groups do not merge well. It may be
possible to manage the segments in this example so that they do not directly interact with
each other but if not, they may negatively influence each others experiences, hurting the
hotel future business. In identifying segments it is thus important to think through how they
will use the service and whether segments will be compatible.

Retention Strategy Monitoring relationships

A basic strategy for customer retention is to implement a through means of monitoring and
evaluating relationship quality over time. Current customers should be surveyed to
determine their perceptions of value received, quality, satisfaction with services and
satisfaction with the provider relative to competitors. The organizations will also regularly
communicate with its customers in person or over the telephone. In a competitive market, it
is difficult to retain customers unless they are receiving a base level of quality and value.

Three levels of Retention Strategy

1. Financial bonds

2. Social bonds

3. Structural bonds

Level 1: Financial bonds

At level 1 the customer is tied to the firm primarily through financial incentives lower
prices for greater volume purchases or lower prices for customers who have been with the
firm a long time. Examples of level 1 relationship marketing are not hard to find. Think
about the airline industry and related travel service industries like hotels and car rental
companiesFrequent flyer programs provide financial incentives and rewards for travelers
who bring more of their business to a particular airline.

Level 2: Social Bonds

Strategies bind customers to the firm through more than pricing incentives. While price is
still assumed to be important, level 2 retention marketers build long-term relationships
through social as well as financial bonds. Customers are viewed as clients not nameless
faces and become individuals whose needs and wants the firm seeks to understand.
Services are customized to fit individual needs and marketers find ways of staying in touch
with their customers, thereby developing social bonds with them. For example in a study of
customer relationships in the insurance industry, it was found that behaviours such as
staying in touch with clients to assess their changing needs, providing personal touches like
cards and gifts and sharing personal information with clients all served to increase the
likelihood that the client would stay with the firm. Personal relationship becomes very
important.

Level 3: Structural Bond

Level 3 strategies are the most difficult to imitate and Structural bond involve (2) financial
as well as (3) social bonds between the customer and the firm. Structural bonds are created
by providing services to the client that are highly customized and frequently designed right
into the service delivery system for that client. Structural bonds often are created by
providing customized services to the client that are technology based and serve to make the
customer more productive.

How to close the GAP1

Listen to customers through research.

Cover company strategy to retain and strengthen the relationship.

Service recovery