Services Marketing: Concepts, Cases and Strategies
Hoffman, Bateson, Wood & Kenyon
ISBN: 9781844808137
SHORT-ANSWER ESSAYS
Chapter 13: Customer Relationship Marketing
1. State what the VCP model is and discuss the three phases.
ANS:
 The VCP (Visibility, Credibility and Profitability) model is the process that organisations
go through when establishing their relationship management system. Phase one is
Visibility - organisations make themselves known to potential and existing customers –
the more visual they are the more chance customers will accept and be aware of them.
Phase two is Credibility – organisations need to demonstrate reliability and ensure
customers are confident that the organisation will keep their promises. The third Phase –
Profitability will occur is a mutually rewarding stage for both the organisation and the
customer as both gain satisfaction – organisations receive a profit and customers are
satisfied and they can trust and rely on the organisation to deliver a quality service.
2. Under what conditions is it no longer worthwhile to keep a customer?
ANS:
 The answer is when: the account is no longer profitable; contract conditions are no
longer being met; the customer is abusive to the point that it lowers employee morale; the
customer's reputation is so poor that it tarnishes the reputation of the selling firm; and
customer demands are beyond reasonable, and fulfilling those demands would result in
poor service for the remaining customer base.
3. Discuss the five types or levels of relationship marketing.
ANS:
 There are five types or levels of relationship marketing – basic – 1. transaction and
service use, 2. reactive – organisation sells the service but encourages customer to get
back in touch if they have any questions or problems, 3. accountable – organisation
telephones the customer during an aftersales process to ensure satisfaction and seek
comments, 4. proactive – the organisation contacts the customers from time to time to
advise them of new services available and 5. partnership – organisation works in
partnership with the customer to help improve performance.
4. Not all organisations will be able to achieve partnership marketing. Discuss, with examples,
why this is so.
ANS:
 Some organisations can achieve partnership marketing; others can only achieve basic
Services Marketing: Concepts, Cases and Strategies
Hoffman, Bateson, Wood & Kenyon
ISBN: 9781844808137
marketing. The reason that not all organisations can receive partnership marketing is
because some institutions may have customers that are too diverse which makes contact
too expensive. Additionally, some customers value their privacy and will not share
personal, behavioural or transactional details. Table 13.2 shows that there are different
types of relationship marketing. Examples will vary dependant upon the student’s
choice.
5. Discuss the stages of the ladder of loyalty and give suggestions of how service organisations
can move customers “up the loyalty ladder”.
ANS:
 The stages of the loyalty ladder are – Prospects – those that become Customers,
Customers – those that are Customers, Clients – Customers who keep returning to the
service organisation, Supporters – Customers who continue to support the business
through greater involvement, Advocates- customers who continue to return to the
business, support it and become more involved in it, Partners – customers who repeat
their business, become involved in the business and become “friends” of the business and
Lapsed Customers – customers that have taken their business elsewhere. Suggestions
will vary dependant upon the student’s choice.
6. Discuss the differences between an implicit guarantee, a specific result guarantee, and an
unconditional guarantee.
ANS:
 An implicit guarantee is an unwritten, unspoken guarantee that establishes an
understanding between the firm and its customers. A specific results guarantee applies
only to specific steps or outputs in the service delivery process. An unconditional
guarantee promises complete customer satisfaction, and at a minimum, a full refund or
complete, no-cost problem resolution.
7. Discuss strategies that are available to minimize the risk associated with a
guarantee payout.
service
ANS:
 Firms can minimize a payout by fully understanding the customer's needs prior to service
delivery; tracking and monitoring the firm's performance throughout the service delivery
process; limiting the payout so that it pertains to the key activities and not to minor
details, specifying up front who has the authorization to approve a payout; and specifying
prior to service delivery the amount involved in the payout.
8. Discuss the customer defection management process.
Services Marketing: Concepts, Cases and Strategies
Hoffman, Bateson, Wood & Kenyon
ISBN: 9781844808137
ANS:
 Defection management is a systematic process that actively attempts to retain customers
before they defect. Steps in the process include: communicating to employees the
importance of retaining customers; training employees in defection management--how to
react to defecting customers; tying incentives to defection rates; and considering the
creation switching barriers that discourage defections.