Page 252 - DMGT522_SERVICES MANAGEMENT

Unit 11: Customer Loyalty

Notes

Note Data mining software is one of a number of analytical tools for analysing data.
Although data mining is a relatively new term, the technology is not. Companies have used
powerful computers to sift through volumes of supermarket scanner data and analyse market
research reports for years. However, continuous innovations in computer processing power,
disk storage, and statistical software are dramatically increasing the accuracy of analysis while
driving down the cost.

Example: One Midwest grocery chain used the data mining capacity of Oracle software
to analyses local buying patterns. They discovered that when men bought diapers on
Thursdays and Saturdays, they also tended to buy beer. Further analysis showed that these
shoppers typically did their weekly grocery shopping on Saturdays. On Thursdays, however,
they only bought a few items. The retailer concluded that they purchased the beer to have it
available for the upcoming weekend. The grocery chain could use this newly discovered
information in various ways to increase revenue. For example, they could move the beer
display closer to the diaper display. And, they could make sure beer and diapers were sold
at full price on Thursdays.

Data mining products are taking the industry by storm. The major database vendors have
already taken steps to ensure that their platforms incorporate data mining techniques. Oracle’s
Data Mining Suite (Darwin) implements classification and regression trees, neural networks, k-
nearest neighbors, regression analysis and clustering algorithms. Microsoft’s SQL Server also
offers data mining functionality through the use of classification trees and clustering algorithms.
If you’re already working in a statistics environment, you’re probably familiar with the data
mining algorithm implementations offered by the advanced statistical packages SPSS, SAS, and
S-Plus.

Task Discuss the factors influencing customer retention.

Self Assessment

Fill in the blanks:
11. A service firm services its customer really well and it works on the principle of current
satisfaction maximisation. This firm might be suffering from ..................................
12. A service firm is losing its customers to competitors, but can’t find out the exact reasons
for their switch over. In this situation .................................. can some their rescue.
13. Insurance companies have a variety of plans for young kids and advertise it using emotional
appeal. This relates to .................................. dimension of customer expectations.
14. According to some theorists, acquiring new customer is .................................. times expensive
than retaining existing customers.
15. Managing the customers well and giving them more than what they expect results in
customer ..................................

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