CUSTOMER PERCEPTIONS OF RELATIONSHIP BENEFITS ACROSS SERVICE TYPES

Transcription

1 Theme: Consumers & Producers CUSTOMER PERCEPTIONS OF RELATIONSHIP BENEFITS ACROSS SERVICE TYPES Work In Progress Paul G Patterson PhD Associate Professor University of New South Wales Address for all correspondence: Paul G. Patterson PhD. Associate Professor School of Marketing The University of New South Wales Sydney, NSW 2052 AUSTRALIA Phone: Fax: p.patterson@unsw.edu.au 1802

2 CUSTOMER PERCEPTIONS OF RELATIONSHIP BENEFITS ACROSS SERVICE TYPES Work In Progress ABSTRACT This study examines the benefits customers receive from engaging in long-term relational exchanges with service firms, as well as the perceived switching costs in exiting such relationships - in other words the motives for staying in a relationship with a service provider. Over 900 interviews were completed across four service industries. The industries were selected were based on high v low interpersonal contact during service delivery, and credence v experience properties of the service. Results indicate that consumer relational benefits can be categorised into two distinct benefit types: Social and Special Treatment benefits. Results indicate that Special Treatment benefits are consistently viewed as be more important than Social benefits. Responses segmented by type of service show a consistent pattern with respect to customer rankings of benefit importance. Several key switching costs were identified, which act as powerful inducements to stay in a service relationship. Furthermore, correlation analysis revealed a strong, positive association between perceived benefits, switching barriers and relationship strength. Management implications for relational strategies and future research implications of the findings will be discussed. 1803

3 INTRODUCTION Much of the recent published work expounds clearly the benefits to the firm of establishing long-term loyal customers (e.g., Morgan and Hunt 1994; Reichheld 1996). Yet successful, genuine relationships involve a mutual fulfilment of promises, with benefits flowing to both parties - i.e., a 'win-win' situation. There is however, a paucity of work which has seriously examined benefits flowing to the buyer from staying loyal to a service provider (exceptions include the recent work of Bitner 1995; and Gwinner, Gremler and Bitner 1998). However, to be successful in forging and maintaining long term relationships requires a clear understanding of customer motivations and perceived benefits of staying in a relationship (Barnes 1995). For service firms in particular, forging strong customer relationships is especially important due to the intangible, experiential and often interpersonal nature (e.g., in 'high-contact' services) of the delivered service. Furthermore, since many service industries possess vastly different characteristics (Lovelock, Patterson and Walker 1998) (e.g., credence v experience properties; high v low personal contact; continuous v discrete transactions; membership v non-membership relationship; customised v standardised, and so forth), it stands to reason that the nature and strength of perceived benefits in impacting on the strength of a relationship may indeed vary by service type. Finally. past research has also typically failed to examine the impact of switching costs on relational behaviour in service settings. Hence the purpose of this article is three-fold: 1. To analyse perceived benefits from the customers perspective, of staying in a relationship; and test whether the strength of these benefits vary by service type. 2. To examine the perceived switching costs in exiting (or failing to engage in) a relationship. 3. To assess the strength of correlation between perceived benefits, switching costs and relationship strength. CONCEPTUAL FRAMEWORK First time customers as well as those who have developed a relationship with a service supplier fully expect to receive satisfactory delivery of the core service. Customers of an auto service centre fully expect their car with be serviced (or repaired) dependably; while those engaging the services of a financial planner expect to receive a financial plan that will produce the required rate of return at a specified level of risk; or a hairdressor provides a professional hairstyling and colour tint that is consistent with the customers instructions. This core service or 1804

4 technical benefit (Gronroos 1983) is almost a 'given' which any service firm must deliver with consistency if it wishes to stay in business. Mere fault-free provision on the core service however is unlikely to be sufficient to encourage customers to engage in a long term relationship. Other benefits that relate to processes or how the service is delivered are necessary. Such benefits include social benefits which encompass the comfortable and friendly relationship that is built up in some service relationships (Goodwin 1994), as well as the extra things ('going the extra mile') that a service provider might do for a long term, loyal customer. Such benefits, labelled relational benefits, have not been the focus in previous studies (see Gwinner, Gremler and Bitner 1998 for an exception). Furthermore, it is know that services are far from homogeneous. Theory suggests (Lovelock 1983) that relational benefits may vary by service type. For example, we might expect social benefits to be more important in service settings where there is a high degree of interpersonal contact and the service is highly customised (such as hairdressing, physiotherapy, personal fitness trainer) versus say, a situation of low contact and standardised (retail banking). Indeed services could be classified along numerous dimensions as indicated earlier in this paper. To limit possible confounding effects, we limited our choice to services that were characterised by zero economic or financial switching barriers (such as often imposed by equity trusts, superannuation providers, financial planners, membership clubs in fitness centres), thus enabling customers to freely switch between suppliers if they so chose. Referring to figure 1, we then elected to focus on (a) the degree of interpersonal contact, and (b) credence versus search properties. We expect that both these dimensions will impact upon the nature and importance of benefits received. For example, services high in credence properties (medical services and other professional services) are intrinsically difficult for customers to confidently evaluate technical outcomes even after purchase and consumption. Hence how the service is delivered including the interpersonal skills of the doctor, the comfortable and friendly relationship built up, customer recognition and so forth can be expected to take on added significance in influencing relationship strength. And as argued earlier, for high contact services, social benefits might be expected to be more important than in a low contact situation. 1805

5 Figure 1 Classification of Service Firms with Low Economic Switching Barriers Evaluation Properties Degree of Interpersonal Contact High Medium Credence Medical services (GP only) Car Servicing Experience Hairdressing Travel Agency METHOD In phase one 10 qualitative interviews were conducted across a range of service types to gain an understanding of the dimensions of perceived relational benefits. This was followed by a cross sectional survey (using a self administered questionnaire) of four service industries as depicted in figure 1. The final sample comprised: Medical services (GPs) n = 231; Hairdressing n = 216; Car servicing n = 203; Travel agency n = 255. Ideally, it would have preferable if the same respondent had completed all four questionnaires. However due to the lengthy instrument, this was simply not possible. However respondents were recruited from the same region and monitored closely to ensure similar demographic profiles for each sample. This should ensure that any bias is minimised. Scales Ten statements relating to the benefits received from staying in a relational exchange situation were included in the questionnaire. Respondents were then asked to rate (on a 5 point scale) (a) the likelihood of the receiving each benefit if they were to stay in the relationship; and, (b) the importance of that benefit. A sample question is: If I stay with the same doctor, they: Will always recognise me the moment I contact them Highly unlikely 1.._2..._3.._4_...5 Highly likely 1806

6 If I stay with the same doctor, how important is it that they: Will always recognise me the moment I contact them Not important 1_..2_..3_..4_..5 Very important Switching costs were captured using a 5 point Likert scale. A sample is as follows. If I change (to another doctor) there is a risk that the new doctor won't be as good If I change, I will spend a lot of time explaining my medical history to a new doctor Strongly disagree 1_..2_..3_..4_..5 Strongly agree. Relationship strength was captured on a 10 point Juster scale ranging from 'Certain' (to continue using the present doctor) to 'No chance'. ANALYSIS Table 1 shows the results of a principal components factor analysis (with varimax rotation) of the ten benefit statements for the Car Servicing sample. The results clearly show two dimensions, labelled a Social Benefits factor and a Special Treatment factor. These two factors accounted for 66.0% of the variance. A similar factor rountine for the other three service types yielded similar results (i.e., a clean, two factor solution). The respective items in each factor were then summed and averaged to produce a composite benefit score. These composite scores for (a) the likelihood of receiving the benefits, and (b) the importance of the benefit for each service type, are shown in Table 2. Two consistent patterns emerge from this data. The first is that Special Treatment benefits are viewed as more important than Social benefits across all service types. The second is that both benefits are clearly more important in the medical situation (high credence service/ high contact). Table 3 (Switching costs) also provides some interesting results. For each the service it is the functional risk (if I change travel agents/ doctors etc, the new one won't be as good [at providing the core service]) which is the most important barrier to exit. Further, the importance of each switching cost as a barrier to exit is highest for the credence/ high-contact and lowest for experience properties/ low contact service. Impact of benefits on relationship strength When operationalised as a composite variable the two relational benefits are strongly correlated with relationship strength for all four service types. To illustrate for the Car Servicing sample, Social benefits r = 0.51, and Special Treatment benefits r =0.68. These significant correlations suggest that relational 1807

7 benefits may be important in encouraging relationship continuance and even loyalty. Further analysis of results is in progress and will be presented at the conference Table 1 Importance of Relational Benefits - Factor Loadings Car Servicing Sample Item M SD Social Benefits Special Treatment Will always recognise me the moment I contact them Will have a genuine relationship with me Is more likely to treat me like a personal friend Is more likely to make me feel important Is more likely to listen to my needs Will go out of their way to search for best deal for me Will pay more attention to my specific needs Will always search for the most reasonably priced solution for me Be more likely to help me when something goes wrong Will be more likely to do what I want

8 Table 2 Overall Pattern of Means - Service Type by Benefit Factor Likelihood Receiving Benefits Importance of Benefits Social Benefits Special Treatment Social Benefits Special Treatment Doctors (Credence/ High Contact) 4.05 (1.06) 4.17 (.87) 3.93 (1.07) 4.39 (.67) Hairdressers (Experience/ High Contact) 3.76 (1.08) 3.91 (.88) 3.29 (1.12) 4.28 (.75) Mechanic (Credence/ Medium contact) 3.37 (1.18) 3.72 (.97) 3.56 (1.11) 4.37 (.59) Travel Agent (Experience/ Medium contact) 3.58 (1.10) 3.95 (.89) 3.20 (1.29) Note: 1 = Highly unlikely to 5 = Highly likely to receive benefits; 1 = Not important to 5 = Very important. Standard Deviations in brackets (.45) Table 3 Wasted Time Switching Costs - Means & StD Loss of Comfortable Start-up Relationship Costs Functional Risk Medical Service (GP) 3.93 (1.23) 3.83 (1.35) 4.04 (1.27) 4.16 (1.09) Hairdressing 3.56 (1.37) 3.59 (1.36) 3.69 (1.30) 3.83 (1.12) Car Servicing 3.46 (1.29) 3.26 (1.36) 3.22 (1.34) 3.59 (1.19) Travel Agency 3.26 (1.35) 3.32 (1.33) 3.10 (1.37) 3.42 (1.30) 1809

9 DISCUSSION AND MANAGERIAL IMPLICATIONS To be presented at the conference. REFERENCES Barnes, J.B. (1995), "The Quality and Depth of Customer Relationships." In 24 th European Marketing Academy Conference Proceedings "Marketing Today and for the 21 st Century", Berry, Leonard L. (1983), Relationship Marketing, in Emerging Perspectives on Services Marketing, L. L. Berry, G. L. Shostack and G. D. Uptah, eds. Chicago: American marketing association, Bitner, Mary Jo (1995), "Building Service Relationships: It's All About Promises," Journal of the Academy of Marketing Science, 23 (Fall), Goodwin, Cathy (1994), "Between Friendship and Business: Communal Relationships in Service Exchanges", Working Paper, University of Manitoba. Grönroos, C. (1983), Strategic Management and Marketing in the Service Sector. Boston: Marketing Science Institute. Gwinner, Kevin P., Dwayne D. Gremler and Mary Jo Bitner (1998), "Relational Benefits in Services Industries: The Customer's Perspective," Journal of the Academy of Marketing Science, 26 (2), Lovelock, Christopher H. (1983), "Classifying Services to Gain Strategic Marketing Insights", Journal of Marketing, 47(3) (Summer), Lovelock, Christopher H., Paul G. Patterson and Rhett H. Walker, (1998), Services Marketing: Australia and New Zealand, Prentice Hall: Sydney Morgan, Robert M. and Shelby D. Hunt (1994), "The Commitment-Trust Theory of Relationship Marketing", Journal of Marketing, 58 (July), Reichheld, Frederick F. (1996), The Loyalty Effect. Boston: Harvard Business School Press. 1810