mos- revision slides[1]

7/29/2019 Mos- Revision Slides[1]

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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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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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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


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2. Inseparability of Production (orperforming the service) and Consumption

(using the service) - happens at the same

time


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


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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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


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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.


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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


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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


46/90

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


49/90

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


50/90

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

www.a2zmba.com

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

bl k d l


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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


66/90

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


67/90

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.

www.a2zmba.com


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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

accessing or collecting on the guarantee.www.a2zmba.com

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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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



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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

mos- revision slides[1]

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