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SERVICEAccording to Kotler, Any activity or benefit that is
essentially intangible & does not result in the
ownership of anything. Its production may or maynot be tied to physical product
Service clients are paying for expertise, experience,
advice, skills, knowledge & the benefits they bring.The benefits may last but service itself is of limitedduration.
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Core Product Core Benefit of the Service
Insurance piece of mind
Hairdresser look & feel good
Football Team emotions & enjoyment
Car Mechanic safe, reliable motoring
Transport (Rail, Road, Air, Water)Communication (Telephone, Radio, TV)
Public Utilities (Electricity, LPG, Sanitary)
Finance, Insurance & Real Estate
Hospitality, Tourism & RecreationLegal, Education & Health
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1. Intangibility - u cant touch this
2. Production (or performing the service) and
Consumption (using the service) - happens
at the same time Inseperability
3. Heterogeneity - services are not alwaysdelivered the same way
4. Perishability - cannot be put in inventory or
stored for later use i.e. You cant buy 2 haircuts
4 Characteristics of Services
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1. Intangibility - u cant touch this
Services cannot be stored
Services cannot be protected through patents
therefore a really great travel package and service
can be copied
Hard to explain and display Services if you cant
see them
Prices are difficult to set - depends on customersexpectations
Characteristics of Services
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1. Intangibility - u cant touch this
Marketing Strategies
stress tangible cues, eg. Smiling face
use personal information, sources, references
use word-of-mouth
contact customers after they buy to stimulatecontinued enthusiasm and hope they talk it up
Characteristics of Services
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2. Inseparability of Production (orperforming the service) and Consumption
(using the service) - happens at the same
time
Characteristics of Services
Many people involved in delivering a service
mass production of services is hard to do
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2. Inseparability of Production (orperforming the service) and Consumption
(using the service) - happens at the same
time
Characteristics of Services
Marketing Strategies
Emphasize how much you train your people - so
their ability to give you good service will be high
Have many locations so customers can get to you
ie. Insurance sales come to your home
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3. Heterogeneity - services are not alwaysdelivered the same way
It is very difficult to standardize services
eg. A machine can make ice cream cones a
standard size 100% of the time
A person filling an ice cream cone with a
scoop cannot do it the same amount eachtime, unless you use a machine to dispense
the ice cream
Characteristics of Services
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3. Heterogeneity - services are not alwaysdelivered the same way
eg. A Taxi driver cannot drive you to the office
in exactly the same time each day becausethe traffic patterns change
eg. A travel agent can sell you a vacation
package - but cannot guarantee you will likethe trip exactly the same way another tourist
did.
Characteristics of Services
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4. Perishability - cannot be put ininventory or stored for later use ie. You cant
buy 2 haircuts
Demand fluctuates and changes, sometimes
depending on the season, or weather
eg. Taxi in the rain, vacation in summer
Characteristics of Services
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Distinguishing Characteristics of Services
Customers do not obtain ownership of services
Service products are ephemeral and cannot be inventoried
Intangible elements dominate value creation
Greater involvement of customers in production process
Other people may form part of product experience
Greater variability in operational inputs and outputs
Many services are difficult for customers to evaluate Time factor is more important--speed may be key
Delivery systems include electronic and physical channels
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Marketing Implications - 1 No ownership
Customers obtain temporary rentals, hiring of personnel, or access tofacilities and systems
Pricing often based on time
Customer choice criteria may differ for renting vs. purchase--may
include convenience, quality of personnel Cant own people (no slavery!) but can hire expertise and labor
Services cannot be inventoried after production
Service performances are ephemeraltransitory, perishable
Exception: some information-based output can be recordedin electronic/printed form and re-used many times
Balancing demand and supply may be vital marketing strategy
Key to profits: target right segments at right times at right price
Need to determine whether benefits are perishable or durablewww.a2zmba.com
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Marketing Implications - 2 Customers may be involved in production process
Customer involvement includes self-service and cooperation withservice personnel
Think of customers in these settings as partial employees
Customer behavior and competence can help or hinder productivity,so marketers need to educate/train customers
Changing the delivery process may affect role played by customers
Design service facilities, equipment, and systems with customers inmind: user-friendly, convenient locations/schedules
Intangible elements dominate value creation Understand value added by labor and expertise of personnel
Effective HR management is critical to achieve service quality
Make highly intangible services more concrete by creating andcommunicating physical images or metaphors and tangible clues
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Marketing Implications - 3 Other people are often part of the service product
Achieve competitive edge through perceived quality of employees Ensure job specs and standards for frontline service personnel reflect
both marketing and operational criteria
Recognize that appearance and behavior of other customers caninfluence service experience positively or negatively
Avoid inappropriate mix of customer segments at same time Manage customer behavior (the customer is not always right!)
Greater variability in operational inputs and outputs
Must work hard to control quality and achieve consistency Seek to improve productivity through standardization, and by training
both employees and customers
Need to have effective service recovery policies in place because it ismore difficult to shield customers from service failures
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Marketing Implications - 4 Often difficult for customers to evaluate services
Educate customers to help them make good choices, avoid risk Tell customers what to expect, what to look for Create trusted brand with reputation for considerate, ethical behavior Encourage positive word-of-mouth from satisfied customers
Time factor assumes great importance Offer convenience of extended service hours up to 24/7 Understand customers time constraints and priorities Minimize waiting time Look for ways to compete on speed
Distribution channels take different forms Tangible activities must be delivered through physical channels Use electronic channels to deliver intangible, information-based
elements instantly and expand geographic reach
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S.No. Physical Goods Services
1. Tangible Intangible
2. Homogeneous Heterogeneous3. Product and distribution
separated from
consumption
Production, distribution
and consumption re
simultaneous process
4. A thing An activity5. Core value produced in
factory
Core value produced in
buyer-seller interaction
6. Customers do not
participate in the
production process
Customers participate in
production
7. Can be kept in stock Cannot be kept in stock
8. Transfer of ownership No transfer of ownershipwww.a2zmba.com
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Four Categories of Services
Employing Different Underlying Processes
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People Processin g Possession Processing
Mental Stimulu s
Processing
Information Processing
(directed at intang ible assets)
e.g., airlines, hospitals,
haircutting, restaurants
hotels, fitness centers
e.g., freight, repair,
cleaning, landscaping,
retailing, recycling
e.g., broadcasting, consulting,
education, psychotherapy
e.g., accounting, banking,
insurance, legal, research
TANGIBLE
ACTS
INTANGIBLE
ACTS
DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS
What is the
Nature of th e
Service A ct?
Who or What is the Direct Recipient o f the Service?
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Elements of The Services Marketing Mix:
7Ps vs.the Traditional 4Ps
Rethinking the original 4Ps
Product elements
Place and time
Promotion and education
Price and other user outlays
Adding Three New Elements
Physical environment
Process
People
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The 7Ps:
(1) Product ElementsAll Aspects of Service Performance that Create Value Core product featuresboth tangible and
intangible elements
Bundle of supplementary service elements Performance levels relative to competition
Benefits delivered to customers (customers dont
buy a hotel room, they buy a good nights sleep) Guarantees
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The 7Ps:
(2) Place and TimeDelivery Decisions: Where, When, and How
Geographic locations served
Service schedules
Physical channels
Electronic channels
Customer control and convenience Channel partners/intermediaries
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The 7Ps:
(3) Promotion and EducationInforming, Educating, Persuading, and Reminding Customers
Marketing communication tools media elements (print, broadcast, outdoor, retail, Internet, etc.)
personal selling, customer service
sales promotion
publicity/PR
Imagery and recognition
branding
corporate design
Content
information, advice
persuasive messages
customer education/trainingwww.a2zmba.com
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The 7Ps:
(4) Price and Other User OutlaysMarketers Must Recognize that Customer Outlays InvolveMore than the Price Paid to Seller
Traditional Pricing Tasks
Selling price, discounts, premiums
Margins for intermediaries (if any)
Credit terms
Identify and Minimize Other Costs Incurred by Users
Additional monetary costs associated with service usage (e.g., travel toservice location, parking, phone, babysitting,etc.)
Time expenditures, especially waiting
Unwanted mental and physical effort
Negative sensory experienceswww.a2zmba.com
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The 7Ps:
(5) Physical EnvironmentDesigning the Servicescape and providing tangibleevidence of service performances
Create and maintaining physical appearances buildings/landscaping
interior design/furnishings
vehicles/equipment
staff grooming/clothing
sounds and smells
other tangibles
Select tangible metaphors for use in marketingcommunications
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7Ps:
(6) ProcessMethod and Sequence in Service Creation and Delivery
Design of activity flows
Number and sequence of actions for customers
Providers of value chain components
Nature of customer involvement
Role of contact personnel Role of technology, degree of automation
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The 7Ps:
(7) PeopleManaging the Human Side of the Enterprise The right customer-contact employees performing tasks well
job design
recruiting/selection
training
motivation
evaluation/rewards
empowerment/teamwork
The right customers for the firms mission
fit well with product/processes/corporate goals
appreciate benefits and value offered
possess (or can be educated to have) needed skills (co-production)
firm is able to manage customer behavior
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The Services Marketing Triangle
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InternalMarketing
Interactive Marketing
ExternalMarketing
Company(Management)
CustomersEmployees
enablingpromises
keeping promises
settingpromises
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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Ways to Use the
Services Marketing Triangle Overall StrategicAssessment
How is the serviceorganization doing onall three sides of thetriangle?
Where are theweaknesses?
What are the strengths?
Specific ServiceImplementation
What is being promotedand by whom?
How will it be deliveredand by whom?
Are the supportingsystems in place todeliver the promisedservice?
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The Service Profit Chain
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Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, Putting
the Service-Profit Chain to Work,Harvard Business Review, March-April 1994, p. 166.
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Service Employees Theyare the service - provider.
Theyarethe organization in the customers eyes.
Theyare the brand.
Theyare marketers.
Their importance is evident in: The Services Marketing Mix (People)
The Service-Profit Chain
The Services Triangle
Frontline also drives customer loyalty, with employeesplaying key role in anticipating customer needs,customizing service delivery and building personalizedrelationships www.a2zmba.com
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Service Employees
Who are they?boundary spanners periphery, link the inside of the
organization to the outside world.
Emotional Labour - The act of expressing socially desiredemotions during service transactions.
Consider management expectations of restaurant servers:
deliver a highly satisfying dining experience to theircustomers
be fast and efficient at executing operational task ofserving customers
do selling and cross selling, e.g. We have some nicedesserts to follow your main course
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Sources of Conflict for
Boundary-Spanning Workers
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Person vs. Role
Conflicts between what jobs require and employees own personality and beliefs
Organization vs. Client
Dilemma whether to follow company rules or to satisfy customer demands
Client vs. ClientConflicts between customers that demand service staff intervention
Quality vs. Productivity
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Customer-
Oriented
Service
Delivery
Hire the
Right People
ProvideNeeded Support
Systems
Retain the
Best
People
Develop
People to
Deliver
Service
Quality
Hire for
Service
Competenciesand Service
Inclination
Provide
Support ive
Technology
an d
Equipment
Trea
t
Emp
loyees
as
Cus
tomers
Em
pow
er
Em
plo
yees
Human Resource Strategies for Closing GAP 3
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Factors Favoring Employee Empowerment
Firms strategy is based on competitive differentiation and onpersonalized, customized service
Emphasis on long-term relationships vs. one-timetransactions
Use of complex and non-routine technologies
Environment is unpredictable, contains surprises
Managers are comfortable letting employees workindependently for benefit of firm and customers
Employees seek to deepen skills, like working with others, andare good at group processes
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Empowerment Benefits: quicker responses
employees feel more
responsible employees tend to
interact withwarmth/enthusiasm
empowered employeesare a great source ofideas
positive word-of-mouthfrom customers
Drawbacks:
greater investments inselection and training
higher labor costs slower and/or
inconsistent delivery
may violate customer
perceptions of fair play giving away the store
(making bad decisions)
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Relationship Marketing is a philosophy of doing business that focuses on
keeping current customers and improvingrelationships with them
does not necessarily emphasize acquiring newcustomers
is usually cheaper (for the firm)
keeping a current customer costs less than attracting anew one
thus, the focus is less on attraction, and more onretention and enhancement of customerrelationshi swww.a2zmba.com
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Underlying Logic of Customer Retention
Benefits to the Organization
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Customer Retention &
Increased Profits
Employee Loyalty
Quality
Service
Customer Satisfaction
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Benefits to the Organization of Customer Loyalty
loyal customers tend to spend more with the organization
over time on average costs of relationship maintenance are lower
than new customer costs: less need for information andassistance & make fewer mistakes
employee retention is more likely with a stable customerbase
Recommend new customers to firm (act as unpaid salespeople)
Trust leads to willingness to pay regular prices vs. shoppingfor discounts
lifetime value of a customer can be very high
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How Customers See Relational Benefits in Service
Industries
Confidence benefits
less risk of something going wrong, less anxiety
ability to trust provider
know what to expect
get firms best service level Social benefits
mutual recognition, known by name
friendship, enjoyment of social aspects
Special treatment benefits
better prices, discounts, special deals unavailable to others
extra services
higher priority with waits, faster servicewww.a2zmba.com
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The Customer Isnt Always
Right Not all customers are good relationship customers:
wrong segment
not profitable in the long term
difficult customers
Avoid inappropriate mix of customer segments at sametime
Solution: Proper Segmenting OR Manage customerbehavior
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Measuring Customer Equity:
Calculating Life Time Value of Each Customer
Value at Acquisition revenues (application fee + initial purchase)
Less costs (marketing +credit check + account set up)
Annual Value (project for each year of relationship)
revenues (annual fee + sales + service fees + value of referrals)
Less costs (account management + cost of sales + write-offs)
Net Present Value
Determine anticipated customer relationship lifetime Select appropriate discount figure
Sum anticipated annual values (future profits) at chosen discount rate
Customer Equity is total sum of NPVs of all current customers
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Strategies for Building
Relationships Foundations:
Excellent Quality/Value
Careful Segmentation
Bonding Strategies:
Financial Bonds
Social & Psychological Bonds
Structural Bonds Customization Bonds
Relationship Strategies Wheel slide 37
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Service Quality The customers judgment of overall excellence of the
service provided in relation to the quality that wasexpected.
Service quality assessments are formed on judgmentsof:
Outcome quality eg: Inet connectivity
Process quality eg: support eqpmts used Physical environment quality eg: infra
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The Five Dimensions of
Service Quality
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Ability to perform the promised servicedependably and accurately.
Knowledge and courtesy of employees andtheir ability to convey trust andconfidence.
Physical facilities, equipment, andappearance of personnel.
Caring, individualized attention the firmprovides its customers.
Willingness to help customers and provideprompt service.
Tangibles
Reliability
Responsiveness
Assurance
Empathy
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Providing service as promised
Dependability in handling customersservice problems
Performing services right the first time
Providing services at the promised time
Maintaining error-free records
Keeping customers informed as towhen services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customersrequests
RELIABILITY
RESPONSIVENESS
Employees who instill confidence incustomers
Making customers feel safe in theirtransactions
Employees who are consistently courteous
Employees who have the knowledge to
answer customer questions
ASSURANCE
Giving customers individual attention
Employees who deal with customers in acaring fashion
Having the customers best interest at heart
Employees who understand the needs oftheir customers
Convenient business hours
EMPATHY
Modern equipment
Visually appealing facilities
Employees who have a neat,professional appearance
Visually appealing materials
associated with the service
TANGIBLES
SERVQUAL Attributes
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Perceived
Service
ExpectedService
CUSTOMER
COMPANY
Customer
Gap
GAP 1
GAP 2
GAP 3
ExternalCommunications
to CustomersGAP 4Service
Delivery
Customer-DrivenService Designs and
Standards
Company Perceptionsof Consumer
Expectations
Gaps Model of Service Quality
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ey ac ors ea ng o e
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Provider Gap 1: Not knowing what customers expect
Provider Gap 2: Not selecting the right service designs and standards
Provider Gap 3: Not delivering to service standards
Provider Gap 4: Not matching performance to promises
Customer
Expectations
CustomerPerceptions
ey ac ors ea ng o eCustomer Gap
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Customer
GAP
Key Factors Leading to Provider Gap 1: Not
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Customer
Expectations
Company Perceptions ofCustomer Expectations
Inadequate Marketing Research Orientatio nInsufficient marketing researchResearch not focused on service qualityInadequate use of market research
Lack of Upward CommunicationLack of interaction between management and customersInsufficient communication between contact employeesand managersToo many layers between contact personnel and topmanagement
Insu ff ic ient Relat ions hip Focu s
Lack of market segmentationFocus on transactions rather than relationshipsFocus on new customers rather than relationshipcustomers
Inadequate Service Recovery
Key Factors Leading to Provider Gap 1: Not
Knowing What Customers Expect
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GAP
1
Key Factors Leading to Provider Gap 2: Not having the
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Customer-Driven Service
Designs and Standards
Management Perceptions ofCustomer Expectations
Poor Service Design
Unsystematic new service development processVague, undefined service designs
Failure ot connect service design to servicepositioning Absence of Custom er-Dr iven Standards
Lack of customer-driven service standardsAbsence of process management to focus oncustomer requirementsAbsence of formal process for setting servicequality goals
Inapp rop r iate Physical Evidence and Servicescape
Key Factors Leading to Provider Gap 2: Not having the
Right Service Designs & Standards
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GAP
2
Key Factors Leading to Provider GAP 3: Not
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Service Delivery
Customer-Driven Service
Designs and Standards
Deficienc ies in Human Resou rce PoliciesIneffective recruitmentRole ambiguity and role conflictPoor employee-technology job fitInappropriate evaluation and compensation systemsLack of empowerment, perceived control and teamwork
Failure to Match Supp ly and DemandFailure to smooth peaks and valleys of demandInappropriate customer mixOver-reliance on price to smooth demand
Customers Not Fulf i l l ing RolesCustomers lack knowledge of their roles and responsibilities
Customers negatively impact each other
Prob lems w ith Service IntermediariesChannel conflict over objectives and performanceChannel conflict over costs and rewardsDifficulty controlling quality and consistencyTension between empowerment and control
Key Factors Leading to Provider GAP 3: Not
delivering to Service Standards
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GAP
3
Key Factors Leading to Provider GAP 4: Promises
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Service Delivery
Lack o f Integrated Services Market ing Communicat ions Tendency to view each external communication as
independentNot including interactive marketing in communications planAbsence of strong internal marketing program
Inef fect ive Management o f Customer Expectat ionsNot managing customer expectations through all forms ofcommunicationNot adequately educating customers
Overpromis ingOverpromising in advertisingOverpromising in personal selling
Overpromising through physical evidence cues Inadequate Horizontal Comm unicat ions
Insufficient communication between sales and operationsInsufficient communication between advertising and operationsDifferences in policies and procedures across branches or units
External Communications to
Customers
Key Factors Leading to Provider GAP 4: Promises
do not Match Performances
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GAP
4
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The Service Encounter is the moment of truth
occurs any time the customer interacts with thefirm
can potentially be critical in determining customersatisfaction and loyalty
types of encounters: remote encounters, phone encounters, face-to-face
encounters
is an opportunity to: build trust
reinforce quality
build brand identity
increase loyaltywww.a2zmba.com
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Critical Service Encounters
Research GOAL - understanding actual events and behaviors
that cause customer dis/satisfaction in serviceencounters
METHOD - Critical Incident Technique
DATA - stories from customers and employees
OUTPUT - identification of themes underlying
satisfaction and dissatisfaction with service encounters
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Common Themes in Critical
Service Encounters Research
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Recovery: Adaptability:
Spontaneity:Coping:
Employee Responseto Service Delivery
System Failure
Employee Responseto Customer Needs
and Requests
Employee Responseto Problem Customers
Unprompted andUnsolicited EmployeeActions and Attitudes
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Coping
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Listen
Try to accommodate
Explain
Let go of the customer
Take customersdissatisfaction personally
Let customersdissatisfaction affect others
DO DONT
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Adaptability
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Recognize the seriousness ofthe need
Acknowledge Anticipate
Attempt to accommodate
Explain rules/policies
Take responsibility Exert effort to accommodate
Promise, then fail tofollow through
Ignore
Show unwillingness to try
Embarrass the customer
Laugh at the customer
Avoid responsibility
DO DONT
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Recovery
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Acknowledge problem
Explain causesApologize
Compensate/upgrade
Lay out options Take responsibility
Ignore customer
Blame customer Leave customer to fend
for him/herself
Downgrade
Act as if nothing iswrong
DO DONT
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Spontaneity
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Take time
Be attentive
Anticipate needs
Listen
Provide information (even if
not asked) Treat customers fairly
Show empathy
Acknowledge by name
Exhibit impatience
Ignore Yell/laugh/swear
Steal from or cheat acustomer
Discriminate
Treat impersonally
DO DONT
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oss e eve s o us omer
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oss e eve s o us omerExpectations
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C f C
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Components of Customer
Expectations Desired Service Level:wished-for level of servicequality that customer believes can and should bedelivered
Adequate Service Level: minimum acceptable levelof service
Predicted Service Level: service level that customer
believes firm will actually deliverZone of Tolerance:range within which customers
are willing to accept variations in servicedelivery
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Factors that Influence
Customer Expectations of Services
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Desired Service:- Personal Needs & Philosophies
- Enduring Service Intensifiers (Belief about what is possible &
Derived)
Adequate Service:
- Transitory Service Intensifiers (urgent need-ATM)
- Perceived Service Alternative (multiple or self service)- Self Perceived Service Role (how well they are performing:
How well they specify the level of service expected & Complain)
- Situational Factors (not in control)
Predicted service
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Predicted service
- Explicit Service Promise
- Implicit Service Promise
- Word of Mouth
- Past Experiences
Service Encounter Expectation vs Overall ServiceExpectation
Encounter expectation are more specific
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Intangible Attributes, Variability, and Quality Control
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Problems Make Services Hard to Evaluate
Search attributes
Tangible characteristics thatallow customers to evaluate a product beforepurchase
Experience attributes Characteristics that can be
experienced when actually using the service Credence attributes Characteristics that are
difficult to evaluate confidently even afterconsumption
Goods tend to be higher in search attributes, servicestend to be higher in experience and credenceattributes
Credence attributes force customers to trust thatdesired benefits have been delivered
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How Product Attributes Affect
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o oduct tt butes ect
Ease of Evaluation
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Source: Adapted from Zeithaml
Most Goods
High in searchattributes
High in experienceattributes
High in credenceattributes
Difficultto evaluate
Easyto evaluate
Most Services
Clothing
Chair
Motorvehicle
Foods
Resta
urantmeals
Lawnfertilizer
Haircut
Entertainment
Com
puterrepair
Legalservices
Comp
lexsurgery
Customer Satisfaction is Central to the
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Marketing Concept
Satisfaction defined as attitude-like judgment following aservice purchase or series of service interactions
Customers have expectations prior to consumption, observeservice performance, compare it to expectations
Satisfaction judgments are based on this comparison Positive disconfirmation if better than expected
Confirmation if same as expected
Negative disconfirmation if worse than expected
Satisfaction reflects perceived service quality, price/qualitytradeoffs, personal and situational factors
Research shows links between customer satisfaction and afirms financial performance
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Customer Delight:
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Going Beyond Satisfaction
Research shows that delight is a function of 3 components
Unexpectedly high levels of performance
Arousal (e.g., surprise, excitement)
Positive affect (e.g., pleasure, joy, or happiness)
Is it possible for customers to be delighted by verymundane services?
Progressive Insurance has found ways to positively surprisecustomers with customer-friendly innovations andextraordinary customer service
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CUSTOMER SATISFACTION SURVEY
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CUSTOMER SATISFACTION SURVEY
Relationship Survey
Questions about customer relationship with thecompany including service, product and price.
Helps a company diagnose its relationship
strengths and weaknesses. Monitor & Track service performance.
Benchmarking with best competitors.
Performance Improvements.
On the basis of SERVQUAL and provider Gaps. Trailer Calls -
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C t C l i t A ti
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Customer Complaint Actions
Following Service Failure
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C f A ti O t
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Courses of Action Open to a
Dissatisfied Customer
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Service Encounteris Dissatisfactory
Take some formof public action
Take some formof private action
Take no action
Complain to theservice firm
Complain to athird party
Take legal actionto seek redress
Defect (switchprovider)
Negative word-of-
mouth
Any one or a combination ofthese responses is possible
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Types of Complainers Passive no complain, stay or exit/switch
Voicers complain to provider, stay
Activitist complain to provider, negative word ofmouth, complaint to third party
Irates negative word of mouth, switch to otherproviders but dont complaint to third parties
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Complaint Barriers for Dissatisfied
Customers
Inconvenience Difficult to find the right complaint procedure. Effort, e.g., writing a letter.
Doubtful Pay Off Uncertain whether any action, and what action will be taken by
the firm to address the issue the customer is unhappy with.
Unpleasantness Complaining customers fear that they may be treated rudely, may have to hassle, or may feel embarrassed to complain.
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Service
Recovery
Strategies
Service Recovery Strategies
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How to Enable Effective Service
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How to Enable Effective Service
Recovery Be proactiveon the spot, before customers
complain
Plan recovery procedures Teach recovery skills to relevant personnel
Empower personnel to use judgment and skills to
develop recovery solutions
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S i G t
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Service Guarantees guarantee = an assurance of the fulfillment of a
condition (Websters Dictionary)
for products, guarantee often done in the form of awarranty
services are often not guaranteed
cannot return the service
service experience is intangible(so what do you guarantee?)
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Types of Service Guarantees Single attribute-specific guarantee one keyservice attribute is covered
Multiattribute-specific guarantee a fewimportant service attributes are covered
Full-satisfaction guarantee all service aspectscovered with no exceptions
Combined guarantee like the full-satisfaction,adding explicit minimum performance standardson important attributes
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Characteristics of an Effective
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Characteristics of an Effective
Service Guarantee Unconditional The guarantee should make its promise unconditionally - no
strings attached.
Meaningful It should guarantee elements of the service that are important to
the customer.
The payout should cover fully the customer's dissatisfaction.
Easy to Understand and Communicate For customers - they need to understand what to expect. For employees - they need to understand what to do.
Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way of
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Three Basic Price Structures and
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Difficulties Associated with Usage for
Services
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PROBLEMS:1. Costs difficult to trace
2. Labor more difficult to
price than materials
3. Costs may not equal value
PROBLEMS:1. Small firms may charge too
little to be viable
2. Heterogeneity of services
limits comparability
3. Prices may not
reflect customer
value
PROBLEMS:1. Monetary price must be adjusted to reflect
the value of non-monetary costs
2. Information on service costs less available to
customers, hence price may not be a central factor
Customer definition of Value
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Customer definition of ValueValue is low pricePrimary concern: PriceExample When I can use coupons, I feel that the service is a value
Value is when airline tickets are discounted
Value is whatever I want in a product or servicePrimary concern: QualityExample Value is the very best education I can get
Value is the best performance
Value is the quality I get for the price I payPrimary concern: Price & QualityTrade-off between price and qualityExample Value is price first and quality second
Value is the lowest price for a quality brand
Value is what I get for what I give
Primary concern what I give: Price, Time, Effort What I get: Quality, Quantity, ConvenienceExample Value is how many rooms I can get cleaned for what the price is
Value is getting a good educational experience in the shortest time possible
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Value is low pr ice. Value is everythin g
I want in a service.
Value is the quality
I get fo r the price I pay.Value is all th at I get
for all th at I giv e.
Discounting Odd pricing - Psycho
Synchro-pricing
Penetration Pricing
Prestige pricingPremium
Skimming pricing
Value pricing
Market segmentation
pricing
Price framing
Price bundling
Complementary pricing
Results-based pricing
Summary of Service Pricing Strategies
for Four Customer Definitions of Value
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Odd pricing- Strategy in which price is set just below the exact rupeeamount.
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Synchro-pricing- Strategy in which price is differentiated based on Time,Place, Quantity, Incentive
Prestige pricing- Strategy in which service provider offer high-quality
services Value pricing- giving more for less. Low cost for a bundle of desirableservice attributes
Market segmentation pricing- Based on the different segments showdifferent quality level. Market segmentation byclient category (Ex.:night-worker, day-worker)
Price framing- Strategy in which the service could be framed in anappropriate price Price bundling- Strategy in which interrelated services are packaged Complementary pricing- Captive pricing, two-part pricing, loss
leadership (Ex.: mobile-phone service, Internet service) Pricing the basegood at a relatively low price to the complementary good - this approach
allows easy entry by consumers (e.g. consumer printer vs ink jetcartridge) OR Pricing the base good at a relatively high price to thecomplementary good - this approach creates a barrier to entry and exit(e.g. golf club membership vs green fees)
Result-based pricing- Based on the result of the service (Contingencypricing, Money back guarantees, Commission)
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Challenges in Service Marketing Giving a feel for the product
Managing Demand Fluctuations
Maintaining Quality
Cost Containment
Attitudinal block in using proven marketingprinciples in service marketing
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Some Impacts of Technological Change
Radically alter ways in which service firms do business: with customers (new services, more convenience)
behind the scenes (reengineering, new value chains)
Create relational databases about customer needs and
behavior, mine databanks for insights
Leverage employee capabilities and enhance mobility
Centralize customer servicefaster and more responsive
Develop national/global delivery systems Create new, Internet-based business models
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Services Intermediaries franchisees e.g., Jiffy Lube, H&R Block, McDonalds
agents and brokers
e.g., travel agents, independent insurance agents
electronic channels e.g., ATMs, university video courses, TaxCut software
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Benefits and Challenges for
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Benefits and Challenges for
Franchisers of Service
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Leveraged businessformat for greater
expansion andrevenues
Consistency in outlets
Knowledge of local
markets Shared financial risk
and more workingcapital
Difficulty in maintaining and
motivating franchisees
Highly publicized disputes
and conflict
Inconsistent quality
Control of customerrelationship by intermediary
Benefits Challenges
Benefits and Challenges for
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Benefits and Challenges for
Franchisees of Service contd.
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An establishedbusiness format
National or regionalbrand marketing
Minimized risk of
starting a business
Encroachment
Disappointing profits andrevenues
Lack of perceived control
over operations
High fees
Benefits Challenges
Benefits and Challenges in Distributing
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Services through Agents and Brokers
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Reduced selling anddistribution costs
Intermediaryspossession of specialskills and knowledge
Wide representation
Knowledge of localmarkets
Customer choice
Loss of control over
pricing and other
aspects of marketing
Representation of
multiple service
principals
Benefits Challenges
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Benefits and Challenges in Electronic
Distribution of Services
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Consistent delivery forstandardized services
Low cost
Customer convenience
Wide distribution
Customer choice andability to customize
Quick customerfeedback
Customers are active, not passive
Lack of control of electronicenvironment
Price competition Inability to customize with highly
standardized services
Lack of consistency with customerinvolvement
Requires changes in consumer behavior
Security concerns
Competition from widening geographies
Benefits Challenges
Strategies for Effective Service
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Strategies for Effective Service
Delivery through Intermediaries Measurement
Review
Control Strategies
Alignment of goals
Consultation andcooperation
Help the intermediarydevelop customer-oriented service
processes
Provide needed supportsystems
Develop intermediariesto deliver service quality
Change to a cooperativemanagement structure
Empowerment Strategies
Partnering Strategies