It may seem as if the topic of service management has been exhausted. Legions of scholars and practitioners have applied queuing theory to bank lines, measured response times to the millisecond, and created cults around “delighting the customer.” But practitioners haven’t carefully considered the underlying psychology of service encounters—the feelings that customers experience during these encounters, feelings often so subtle they probably couldn’t be put into words. Fortunately, behavioral science offers new insights into better service management. In this article, the authors translate findings from behavioral-science research into five operating principles: (1) finish strong; (2) get the bad experiences out of the way early; (3) segment the pleasure, combine the pain; (4) build commitment through choice; and (5) give people rituals and stick to them. Ultimately, only one thing really matters in a service encounter—the customer’s perception of what occurred. This article will help you engineer your service encounters to enhance your customers’ experiences during the process as well as their recollections of the process after it is completed.

With more and more companies chasing a limited pool of customers, smart companies are focusing on customers—how to keep the valuable ones and grow the relationship. Customer relationship management experts Don Peppers and Martha Rogers recently introduced an innovative metric that they believe may be the next great breakthrough concept in customer strategy and business: return on customer. Analogous to the return on investment concept, return on customer is designed to measure the lifetime value of the customer. Rogers speaks with Balanced Scorecard Report about why this metric matters.

Most managers rejoice if the majority of customers who respond to customer-satisfaction surveys say they are satisfied. But some of those managers may have a big problem. When most customers are saying they are satisfied but not completely satisfied, they are saying that they are unhappy with some aspect of the product or service. If they have the opportunity, they will defect. Companies that excel in satisfying customers excel both in listening to customers and in interpreting what customers with different levels of satisfaction are telling them.

Even as loyalty programs are launched left and right, many are being scuttled. How can that be? These days, everyone knows that an old customer retained is worth more than a new customer won. What is so hard about making a simple loyalty program work? Quite a lot, the authors say. The biggest challenges include clarifying business goals, engineering the reward structure, and creating incentives powerful enough to change buying behavior but not so generous that they erode margins. Additionally, companies have to sort out the puzzles of consumer psychology, which can result, for example, in two rewards of equal economic value, inspiring very different levels of purchasing. Companies striving to generate customer loyalty should avoid five common mistakes: don’t create a new commodity, which can result in price wars and other tit-for-tat competitive moves; don’t cater to the disloyal by making rewards easy for just anyone to reap; don’t reward purchasing volume over profitability; don’t give away the store; and, finally, don’t promise what can’t be delivered.

Few companies have systematically revamped their operations with customer loyalty in mind. When a company consistently delivers superior value and wins customer loyalty, market share and revenues go up and the cost of acquiring new customers goes down. The company then can pay workers better. Increased pay boosts employee morale and commitment; as employees stay longer, their productivity goes up and training costs fall; employees’ overall job satisfaction, combined with their experience, helps them serve customers better; and customers are then more inclined to stay loyal to the company. Finally, as the best customers and employees become part of the loyalty-based system, competitors are left to survive with less desirable customers and less talented employees.

Who wouldn’t want loyal customers? Surely loyal customers should cost less to serve, they’d be willing to pay more than other customers, and they’d actively market your company by word of mouth, right? Maybe not. Study of the relationship between customer loyalty and profits plumbed from sixteen thousand customers in four companies’ databases tells a different story. The authors found that the link between customers and profitability was more complicated because customers fall into four groups, not two. Simply put: not all loyal customers are profitable, and not all profitable customers are loyal. The authors suggest an alternative to traditional tools for segmenting customers, based on well-established “event-history modeling” techniques that more accurately predict future buying probabilities. Armed with such a tool, marketers can correctly identify which customers belong in which category and market accordingly.

What’s a customer worth? The company that can answer this question precisely is the company with an edge in the customer-based, technology- and information-intensive economy of today. But how can an asset as intangible as customer value be measured? This book provides a solution: a fully developed, highly practical new marketing system for measuring and managing customer value as a financial asset—a system uniquely suited to today’s rapidly changing, increasingly digital marketplace.

This Harvard Management Communication Letter resource collection contains the following seven articles:

• “Are You Reaching Your Customers?”

• “Communicating with Your Customers on the Web”

• “Connecting with Your Customers”

• “Mapping the Frontiers of E-Mail Marketing”

• “The Secrets and Science of Direct-Mail Marketing”

• “Zeroing in on What Customers Really Want”

• “Zyman on Marketing”

The authors show how to instill a commitment to quality service throughout the organization by establishing a companywide program of continuous service improvement, eliminating ineffective management practices, and creating a sense of accountability for quality service in every employee.

Mass marketing is back, say Paul Nunes and Brian Johnson—but with a new target and a fresh approach that companies ignore at their peril. Whereas the mass marketing concepts of the 1950s consisted of lowest common denominator strategies aimed at the “middle class,” Nunes and Johnson argue that the rules of mass marketing must be rewritten to appeal to today’s burgeoning mass of different—and far more affluent— consumers. The “moneyed masses” have more disposable income than ever, and research shows the richest among them are not spending up to their potential—thus creating a windfall of opportunity for marketers. Based on extensive consumer research, Mass Affluence outlines seven new rules for capturing this largely ignored market.

Case in Point is a flexible set of online cases, designed to help prepare middle- and senior-level managers for a variety of leadership challenges. These short, reality-based scenarios provide sophisticated content to create a focused view into the realities of the life of a leader. Your managers will experience: Aligning Strategy, Removing Implementation Barriers, Overseeing Change, Anticipating Risk, Ethical Decisions, Building a Business Case, Cultivating Customer Loyalty, Emotional Intelligence, Developing a Global Perspective, Fostering Innovation, Defining Problems, Selecting Solutions, Managing Difficult Interactions, The Coach’s Role, Delegating for Growth, Managing Creativity, Influencing Others, Managing Performance, Providing Feedback, and Retaining Talent.

Developing excellent service relationships is key to attracting and retaining customers. However, providing good service goes beyond interacting pleasantly with customers. The “service-profit chain” is a framework that demonstrates how loyal employees and satisfied customers can lead to substantial growth for an organization. Service Success places strong emphasis on the impact a manager can have on developing employees, improving service capability, and ultimately, contributing to an organization’s bottom line. Service Success is based on the research and analysis by the Harvard Business School Service Management Group, including professors James Heskett and Jeffrey Rayport, and developed from proven and reliable content. It is based on seminal research by multiple HBS and other experts in the field of business communications and includes twenty-three Harvard Business Review articles as resources.