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Services Marketing
Notes low-maintenance cost clientele. It underlines the importance of relationship marketing in such
an intangible area as services.
It would be very difficult and impracticable for a service firm to be all things to all people;
instead, it should concentrate on those customers who yield maximum profits, by giving them
maximum customer satisfaction. This segmentation will help the service firm optimize its
limited resources and get better return on capital employed (ROCE). To survive and prosper in
the service business, the firm has to map its competencies and capabilities, target profitable
customers, and work hard at retaining them.
Customer retention makes business sense. There are evidences through various researches that
there is a very strong relationship between customer satisfaction and profitability, just as there
is between customer retention (in other words, customer loyalty) and profitability. This is
explained in a model called the service-profit chain.
Self Assessment
State whether the following statements are true or false:
1. A service firm should look to acquire and retain customers.
2. It is more expensive to retain customers than acquire customers.
3. The service firm with better customer retention will need to acquire fewer customers than
its rival.
The Service-Profit Chain Model
The service-profit chain model is based on the following seven theorems:
1. Profit and growth are linked to customer loyalty.
2. Customer loyalty is linked to customer satisfaction.
3. Customer satisfaction is linked to service value.
4. Service value is linked to employee productivity.
5. Employee productivity is linked to employee loyalty.
6. Employee loyalty is linked to employee satisfaction.
7. Employee satisfaction is linked to internal quality of work life (internalizing the firms
brand).
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