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Essentials of Health Care Marketing 2nd Ed.

Eric Berkowitz

Chapter 7

Developing Customer Loyalty

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Learning Objectives

• Understand the concept of relationship marketing

• Recognize the distinction between satisfaction and loyalty

• Describe the necessary components of a value added service delivery system

• Appreciate the importance and role of a recovery system

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Learning Objective 1

• Relationship marketing– An organization’s attempt to develop a long-

term, cost-effective link with a customer for the benefit of both the customer and the organization.

– Shift from individual transactions to the establishment of longer term relationships

– Table 7-1, page 196 shows a change in marketing efforts

• Regular, ongoing contact with patients

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Learning Objective 1

• Relationship marketing– Focus on what the customer is buying, not

what the organization is providing• VALUE

– Empowering employees to meet customer needs

– Quality focus – beyond the clinical side of service delivery

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Learning Objective 2

• Satisfaction or Loyalty?– Organizations benchmark, depending on their

measurement programs.– Must aim for more than satisfaction

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Learning Objective 2

• The Customer Loyalty Pyramid– Progression of customer psychological

movement toward loyalty• Awareness• Interest• Evaluation• Trial• Satisfaction• Repeat purchase• Loyalty

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Learning Objective 2

• The value of loyalty– The loyal customer makes frequent and

repeat purchases• Is immune from the pull of competition

– Reduction in acquisition costs• 5:1 ratio

– Lifetime value of customer– Referrals, word-of-mouth referral– More tolerant if there is a problem

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Learning Objective 3

• Creating customer value– The customer defines the appropriate service

quality and price level.– Customer defines the price/value relationship

of the service.– This value is relative to competitive offerings.

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Learning Objective 3

• Creating customer value (continued)– Health care service value equation

• Value=Clinical quality provided=process quality-(Price + Service Acquisition Cost)

• Clinical Quality Provided – technology and expertise

• Process quality – the ease with which a customer can access the clinical quality

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Learning Objective 3

• Conducting a Gap Analysis– See figure 7-2 on page 203– Five possible Gaps

1. Between Expectations of service quality and management perceptions of customer expectations

2. Between management perceptions of customer expectations and service quality specifications

3. Between service quality specifications and service delivery

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Learning Objective 3

• Conducting a Gap Analysis– Five possible Gaps continued

4. Between service delivery and external communications to customers• Promotional in nature

5. Between expected service and perceived service• PERCEPTION IS REALITY TO OUR CUSTOMERS!• Marketers set the expectations

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Learning Objective 3

• Measuring service performance– Must meet three criteria:

• Measurement tool must be managerially useful• Tool must recognize the role of customer

expectations• Tool must direct action to the most relevant areas

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Learning Objective 3

• Measuring service performance– Step 1 in developing a measurement tool is to

conduct a customer audit• Use of flow charts to observe process and identify

potential difficulties

– Medical service blueprints – mapping processes

• Moments of truth – customer contact points

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Learning Objective 4

• Developing a Customer Recovery System– An organized system that anticipates service

delivery failures or problems– Defined scripts for handling problems

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Learning Objective 4

• Developing a Customer Recovery System– Critical components for implementation

• Focused recovery training must be conducted with all employees

• Recovery standards must exist• The organization must be ‘easy to complain to’• Frontline employees must see themselves as part

of the system• Employees need to believe they are a part of a

quality-conscious organization.

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Summary• Relationship marketing is a shift from a

transactional perspective to the development of longer term loyalty.

• In a transactional focus, the perspective is more on what the organization is selling; in a relationship marketing focus, it is more on what the customer values.

• Satisfaction is not a sufficient goal for customer behavior; rather, the focus must be loyalty.

• The customer loyalty pyramid has multiple stages: awareness, interest, evaluation, trial, repeat, satisfaction, and ultimate loyalty.

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Summary continued

• The lower levels of the customer pyramid are referred to as the promotional levels.

• Loyal customers have multiple benefits in terms of reduced acquisition costs, longer term per revenue growth, more profitable to serve, able to refer others, and more willing to pay a price premium.

• Loyal patients have a broader zone of tolerance or are more willing to forgive an organization’s service lapses.

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Summary continued• Customer value equation has four

variables’ clinical quality, service process quality less out of pocket cost less effort expended.

• Conducting a Gap Analysis can help identify the opportunities for the delivery of customer value.

• A customer contact audit or medical service blueprint is a flowchart of each step in service delivery.

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Summary continued• A customer contact audit highlights

opportunities for establishing a differential advantage.

• Measuring satisfaction is a function of expectations and the importance of each point of contact.

• A customer recovery system is defined script that anticipates how to react when a problem arises in service delivery.