ppt on service marketing

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SERVICES MARKETING



S M

Chapter 1

INTRODUCTION

TO

SERVICES



OBJECTIVES FOR CHAPTER 1:

INTRODUCTION TO SERVICES

Explain what services are and identify service

trends

Explain the need for special services marketing

concepts and practices

Outline the basic differences between goods and

services and the resulting challenges for service

businesses

Introduce the service marketing triangle

Introduce the expanded services marketing mix

Introduce the gaps model of service quality



INTRODUCTION

Services are deeds,processes andperformance

Intangible, but may have a tangible

componentGenerally produced and consumed at the

same time

Need to distinguish between SERVICE andCUSTOMER SERVICE



WHAT IS A SERVICE?

A service is an act or performance offered byone party to another

They do not directly produce a physical

productE.g.- car, a good is usually sold with the

benefit of intangible service elements like

warranty, financial facility etc.On the other hand a intangible service like a

holiday package includes tangible elementslike taxi pick up, hotel room etc.



CHALLENGES FOR SERVICES

Defining and improving quality

Communicating and testing new services

Communicating and maintaining a consistentimage

Motivating and sustaining employee

commitment

Coordinating marketing, operations and

human resource efforts

Setting prices

Standardization versus personalization



EXAMPLES OF SERVICE

INDUSTRIES

Health Care hospital, medical practice, dentistry, eye care

Professional Services accounting, legal, architectural

Financial Services

banking, investment advising, insurance Hospitality restaurant, hotel/motel, bed & breakfast, ski resort, rafting

Travel airlines, travel agencies, theme park

Others: hair styling, pest control, plumbing, lawn

maintenance, counseling services, health club



FIGURE 1-1

TANGIBILITY SPECTRUM

TangibleDominant

Intangible

Dominant

SaltSoft Drinks

Detergents

Automobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

Management

ConsultingTeaching

Fast-foodOutlets

Fast-foodOutlets



POWERFUL FORCES ARE

TRANSFORMING SERVICE MARKETS



Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on:

● Understanding customers and competitors

● Viable business models

● Creation of value for customers and firm

● New markets and product categories

● Increase in demand for services

● More intense competition

FORCES TRANSFORMING THE SERVICE

ECONOMY



Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

● Changes in regulations

● Privatization

● New rules to protect customers,employees, and the environment

● New agreement on trade in services


ECONOMY (1)



Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

● Rising consumer expectations

● More affluence

● Increased desire for buying experiences vs.things

● Rising consumer ownership of high techequipment

● Easier access to more information

● Immigration


ECONOMY (2)



Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

● Push to increase shareholder value

● Emphasis on productivity and cost savings

● Manufacturers add value through service andsell services

●More strategic alliances

● Focus on quality and customer satisfaction

● Growth of franchising


ECONOMY (3)



Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

● Growth of Internet

● Greater bandwidth

● Compact mobile equipment

● Wireless networking

● Faster, more powerful software

● Digitization of text, graphics, audio, video


ECONOMY (4)



Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

● More companies operating on transnationalbasis

● Increased international travel

● International mergers and alliances

● “Offshoring” of customer service

● Foreign competitors invade domestic markets


ECONOMY (5)



FOUR BROAD CATEGORIES OF

SERVICES



FOUR BROAD CATEGORIES OF SERVICES

Based on differences in nature of serviceact (tangible/intangible) and who or what

is direct recipient of service(people/possessions), there are four categories of services: People processing

Possession processingMental stimulus processing

Information processing



FOUR CATEGORIES OF SERVICES (FIG 1.10)



FOUR CATEGORIES OF SERVICES

People Processing

Customers must:

physically enter the servicefactory

co-operate actively with theservice operation

Managers should think aboutprocess and output from

customer’s perspective

to identify benefits createdand non-financial costs:

- Time, mental, physicaleffort



POSSESSION PROCESSING

Possession Processing

Customers are lessphysically involvedcompared to peopleprocessing services

Involvement is limited



MENTAL STIMULUS PROCESSING

● Mental Stimulus Processing

● Ethical standards requiredwhen customers who depend onsuch services can potentially be

manipulated by suppliers

● Physical presence of recipientsnot required

● Core content of services is

information-based



INFORMATION PROCESSING

Information Processing

Information is the mostintangible form of serviceoutput,

Line between informationprocessing and mental

stimulus processing may beblurred.



CHALLENGES POSED BY SERVICES



SERVICES POSE DISTINCTIVE MARKETING

CHALLENGES

Marketing management tasks in the service sector differ from those in

the manufacturing sector.

The eight common differences are:

Most service products cannot be inventoried

Intangible elements usually dominate value creation

Services are often difficult to visualize and understand

Customers may be involved in co-production

People may be part of the service experience

Operational inputs and outputs tend to vary more widely

The time factor often assumes great importance

Distribution may take place through nonphysical channels



DIFFERENCES, IMPLICATIONS, AND

MARKETING-RELATED TASKS (1) (TABLE 1.1)

Difference

Most service productscannot be inventoried

Intangible elementsusually dominatevalue creation

Services are oftendifficult to visualize &understand

Customers may beinvolved in co-Production

Implications

Customers may beturned away

Harder to evaluateservice & distinguishfrom competitors

Greater risk &uncertainty perceived

Interaction betweencustomer & provider;but poor task executioncould affect satisfaction

Marketing-Related Tasks

Use pricing, promotion,reservations to smoothdemand; work with ops tomanage capacity

Emphasize physical clues,employ metaphors and vividimages in advertising

Educate customers onmaking good choices; offer

guarantees

Develop user-friendlyequipment, facilities &systems; train customers,provide good support



Implications

Behavior of servicepersonnel & customerscan affect satisfaction

Hard to maintain quality,consistency, reliability

Difficult to shieldcustomers from failures

Time is money;customers want serviceat convenient times

Electronic channels orvoice telecommunications

Difference

People may be part ofservice experience

Operational inputs andoutputs tend to varymore widely

Time factor oftenassumes greatimportance

Distribution may takeplace throughnonphysical channels

Marketing-Related Tasks

Recruit, train employees toreinforce service concept

Shape customer behavior

Redesign for simplicity andfailure proofing

Institute good servicerecovery procedures

Find ways to compete on

speed of delivery; offerextended hours

Create user-friendly,secure websites and freeaccess by telephone

DIFFERENCES, IMPLICATIONS, AND

MARKETING-RELATED TASKS (2) (TABLE 1.1)



DIFFERENCES BETWEEN

GOODS AND SERVICES

Intangibility

Perishability

SimultaneousProduction

andConsumption

Heterogeneity



IMPLICATIONS OF INTANGIBILITY

Services cannot be inventoried

Services cannot be patented

Services cannot be readily displayed or communicated

Pricing is difficult



IMPLICATIONS OF HETEROGENEITY

Service delivery and customer satisfaction

depend on employee actions

Service quality depends on many

uncontrollable factors

There is no sure knowledge that the service

delivered matches what was planned and

promoted



IMPLICATIONS OF SIMULTANEOUS PRODUCTION

AND CONSUMPTION

Customers participate in and affect

the transaction Customers affect each other

Employees affect the service

outcome Decentralization may be essential

Mass production is difficult



IMPLICATIONS OF PERISHABILITY

It is difficult to synchronize supply

and demand with services

Services cannot be returned or

resold



TABLE 1-2

SERVICES ARE DIFFERENT

Goods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.

Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.

Standardized Hetero eneous Service delivery and customer satisfaction depend on

employee actions.Service ualit de ends on man uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.

Decentralization may be essential.Mass production is difficult.

Non erishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.

Source : Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,”

Journal of Marketing 49 (Spring 1985): 33-46.



FIGURE 1-5

THE SERVICES MARKETING TRIANGLE

InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

“enabling the promise”

“delivering the promise”

“setting the promise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler



WAYS TO USE THE

SERVICES MARKETING TRIANGLE

Overall Strategic Assessment

• How is the serviceorganization doing

on all three sides of the triangle?

• Where are theweaknesses?

• What are thestrengths?

Specific Service Implementation

• What is being promotedand by whom?

• How will it be deliveredand by whom?

• Are the supportingsystems in place to

deliver the promisedservice?



Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology

Figure 1-6

The Services Triangleand Technology



SERVICES MARKETING MIX:

7 PS FOR SERVICES

Traditional Marketing Mix

Expanded Mix for Services: 7 Ps

Building Customer Relationships

Through People, Processes, and

Physical Evidence

Ways to Use the 7 Ps



TRADITIONAL MARKETING MIX

All elements within the control of the firm

that communicate the firm’s capabilities and

image to customers or that influence customer satisfaction with the firm’s product and services:

Product

Price

Place

Promotion



EXPANDED MIX FOR SERVICES --

THE 7 PS

Product

Price

PlacePromotion

People

ProcessPhysical Evidence



TABLE 1-3

EXPANDED MARKETING MIX FOR

SERVICES

PRODUCT PLACE PROMOTION PRICE

Ph sical oodfeatures

Channel type Promotionblend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Salespromotion

Differentiation

Warranties Trans ortation Publicity Allowances

Product lines Storage

Branding



TABLE 1-3 (CONTINUED)

EXPANDED MARKETING MIX FOR

SERVICES

PEOPLE PHYSICALEVIDENCE

PROCESS

Employees Facility design Flow of activities-customized/standardized

Customers Equipment Number of steps-simple/complex

Communicatingculture and values

Signage Level of customerinvolvement

Employee research Employee dress

Ambient conditions

Guarantee

Corporate image



WAYS TO USE THE 7 PS

Overall Strategic Assessment

How effective is a

firm’s servicesmarketing mix?

Is the mix well-alignedwith overall vision andstrategy?

What are thestrengths andweaknesses in termsof the 7 Ps?

Specific ServiceImplementation

Who is the customer?

What is the service? How effectively doesthe services marketingmix for a servicecommunicate itsbenefits and quality?

Whatchanges/improvementsare needed?



SERVICES MARKETING TRIANGLE APPLICATIONS

EXERCISE

Focus on a service organization. In the

context you are focusing on, who occupies

each of the three points of the triangle?

How is each type of marketing being carried

out currently?

Are the three sides of the triangle well

aligned? Are there specific challenges or barriers in

any of the three areas?



S M

Part 2

FOCUS ON THE CUSTOMER



PerceivedService

Expected

ServiceCUSTOMER

COMPANY

CustomerGap

GAP 1

GAP 2

Gaps Model of Service Quality

GAP 3

ExternalCommunications

to CustomersGAP 4Service Delivery

Customer-Driven ServiceDesigns and Standards

Company Perceptions ofConsumer Expectations

Part 1 Opener



GAPS MODEL OF SERVICE QUALITY

Customer Gap:difference between expectations and

perceptions Provider Gap 1:

not knowing what customers expect Provider Gap 2:

not having the right service designs andstandards

Provider Gap 3:not delivering to service standards

Provider Gap 4:not matching performance to promises

Part 1 Opener



The Customer Gap

Expected

Service

PerceivedService

GAP

Part 1 Opener



S M

Chapter 2

CONSUMER BEHAVIOR IN SERVICES



OBJECTIVES FOR CHAPTER 2:CONSUMER BEHAVIOR IN SERVICES

Overview the generic differences in consumer behavior between services and goods

Introduce the aspects of consumer behavior that a

marketer must understand in five categories of consumer

behavior:

• Information search

• Evaluation of service alternatives

• Service purchase and consumption• Postpurchase evaluation

• Role of culture



CONSUMER EVALUATION

PROCESSES FOR SERVICES

Search Qualities

attributes a consumer can determine prior to

purchase of a product Experience Qualities

attributes a consumer can determine after

purchase (or during consumption) of a

product Credence Qualities

characteristics that may be impossible to

evaluate even after purchase and

consumption



FIGURE 2-1

CONTINUUM OF EVALUATION FORDIFFERENT TYPES OF PRODUCTS

Difficult to evaluateEasy to evaluate

High in search

qualities

High in experience

qualities

High in credence

qualities

MostGoods

MostServices



FIGURE 2-2

CATEGORIES IN CONSUMER

DECISION-MAKING AND EVALUATION OF SERVICES

InformationSearch

Evaluation ofAlternatives

Purchase andConsumption

Post-PurchaseEvaluation

Use of personal sourcesPerceived risk

Evoked setEmotion and mood

Service provision as dramaService roles and scriptsCompatibility of customers

Attribution of dissatisfactionInnovation diffusionBrand loyalty

FIGURE 2-3



FIGURE 2 3

CATEGORIES IN CONSUMER DECISION-MAKING

AND EVALUATION OF SERVICES

InformationSearch

Evaluation ofAlternatives

Purchase andConsumption

Post-PurchaseEvaluation

Use of personal sourcesPerceived risk

Evoked setEmotion and mood

Service provision asdrama

Service roles and scriptsCompatibility of customers

Attribution of dissatisfactionInnovation diffusionBrand loyalty

Culture Values and attitudes Manners and customs Material culture Aesthetics

Educational and socialinstitutions



INFORMATION SEARCH

In buying services consumers rely more onpersonal sources. WHY?

Personal influence becomes pivotal as

product complexity increasesWord of mouth important in delivery of

services

With service most evaluation followspurchase



PERCEIVED RISK

More risk would appear to be involved withpurchase of services (no guarantees)

Many services so specialised and difficult to

evaluate (How do you know whether theplumber has done a good job?)

Therefore a firm needs to develop strategiesto reduce this risk, e.g, training of employees, standardisation of offerings



EVOKED SET

The evoked set of alternatives likely to be smaller with services than goods

If you would go to a shopping centre you may onlyfind one dry cleaner or “single brand”

It is also difficult to obtain adequate prepurchaseinformation about service

The Internet may widen this potential

Consumer may choose to do it themselves, e.g.garden services



EMOTION AND MOOD

Emotion and mood are feeling states thatinfluence people’s perception and evaluation

of their experiences

Moods are transient

Emotions more intense, stable and pervasive

May have a negative or positive influence



SERVICE PROVISION AS DRAMA

Need to maintain a desirable impression

Service “actors” need to perform certain

routines

Physical setting important, smell, music, use

of space, temperature, cleanliness, etc.

GLOBAL FEATURE:



GLOBAL FEATURE:

DIFFERENCES IN THE SERVICE EXPERIENCE IN THE

U.S. AND JAPAN

Authenticity

Caring Control Courtesy

Formality

Friendliness Personalization

Promptness



S M

Chapter 3

CUSTOMER

EXPECTATIONS OFSERVICES





CUSTOMER EXPECTATIONS OF

SERVICE

Recognize that customers hold different types of expectations for service performance

Discuss controllable and uncontrollable sourcesof customer expectations

Distinguish between customers’ globalexpectations of their relationships and their expectations of the service encounter

Acknowledge that expectations are similar for

many different types of customersDelineate the most important current issues

surrounding customer expectations



DEFINITIONS

Customers have different expectations reservices – or expected service

Desired service – customer hopes to receive

Adequate service – the level of service thecustomer may accept

Figure 3-1



Figure 3-1

Dual CustomerExpectation Levels

(Two levels of expectations)

Adequate Service

Desired Service

Zone ofTolerance



Figure 3-2

The Zone of Tolerance

Adequate Service

Desired Service

Zone ofTolerance

Figure 3-3

Z f T l VARY f



Zones of Tolerance VARY forDifferent Service Dimensions

Most Important Factors Least Important Factors

Levelof

Expectation

Source: Berry, Parasuraman, and Zeithaml (1993)

Adequate Service

Desired Service

Zone of

Tolerance

Desired

Service

AdequateService

Zoneof

Tolerance

Desired Service

Adequate Service

Figure 3-4

Z f T l VARY f



Zones of Tolerance VARY forFirst-Time and Recovery Service

First-Time Service

Outcome

Process

Outcome

Process

Recovery Service

ExpectationsLOW HIGH

Source: Parasuraman, Berry and Zeithaml (1991)

Figure 3-5

F t th t I fl



Factors that InfluenceDesired Service

DesiredService

AdequateService

Zoneof

Tolerance

Enduring ServiceIntensifiers

Personal Needs



Personal needs include physical, social,psychological categories

Enduring service intensifiers are individual, stablefactors that lead to heightened sensitivity to service

This can further divided into Derived Service

Expectations and Personal service Philosophies

Figure 3-6



Factors that InfluenceAdequate Service

DesiredService

AdequateService

Zoneof

Tolerance Self-Perceived

Service Role

SituationalFactors

Perceived ServiceAlternatives

Transitory ServiceIntensifiers



Transitory service intensifiers – temporary – a computer breakdown will be less tolerated

at financial year-ends

Perceived service alternatives

Perceived service role of customer

Situational factors

Figure 3-7

Factors that Influence



Factors that InfluenceDesired and Predicted Service

DesiredService

AdequateService

Zoneof

Tolerance

PredictedService

Explicit ServicePromises

Implicit Service

Promises

Word-of-Mouth

Past Experience



S M

Chapter 4

CUSTOMER

PERCEPTIONS OF

SERVICE




CUSTOMER PERCEPTIONS OF

SERVICE

Provide you with definitions and understandingof customer satisfaction and service quality

Show that service encounters or the “moments

of truth” are the building blocks of customer perceptions

Highlight strategies for managing customer

perceptions of service

FIGURE 4-1





SERVICE QUALITY AND

CUSTOMER SATISFACTION

ServiceQuality

Reliability

Responsiveness

Assurance

Empathy

Tangibles

Product

Quality

PricePersonalFactors

CustomerSatisfaction

SituationalFactors

FACTORS INFLUENCING



FACTORS INFLUENCING


Product/service quality

Product/service attributes or features

Consumer Emotions

Attributions for product/service success

or failure

Equity or fairness evaluations

OUTCOMES OF



OUTCOMES OF


Increased customer retention

Positive word-of-mouth communications

Increased revenues

FIGURE 4-3

RELATIONSHIP BETWEEN CUSTOMER



RELATIONSHIP BETWEEN CUSTOMER

SATISFACTION AND LOYALTY IN

COMPETITIVE INDUSTRIES

0%

20%

40%

60%

80%

100%

Verydissatisfied

Dissatisfied Neithersatisfied nor

dissatisfied

Satisfied Verysatisfied

Satisfaction measure

L o y a l t y

( r e

t e n t i o n )

Source : James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain , (New York, NY: The Free Press, 1997), p. 83.



SERVICE QUALITY

The customer’s judgment of overall

excellence of the service provided in

relation to the quality that was expected.

Process and outcome quality are both

important.

THE FIVE DIMENSIONS OF



THE FIVE DIMENSIONS OF

SERVICE QUALITY

Ability to perform the promisedservice dependably andaccurately.

Knowledge and courtesy of employees and their ability toconvey trust and confidence.

Physical facilities, equipment,and appearance of personnel.

Caring, individualized attentionthe firm provides its customers.

Willingness to help customersand provide prompt service.

Tangibles

Reliability

Responsiveness

Assurance

Empathy

SERVQUAL Attributes



Providing service as promised

Dependability in handling customers’service 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 customers’requests

RELIABILITY

RESPONSIVENESS

Employees who instill confidence incustomers

Making customers feel safe in theirtransactions

Employees who are consistently courteous

Employees who have the knowledge toanswer customer questions

ASSURANCE

Giving customers individual attention

Employees who deal with customers in acaring fashion

Having the customer’s 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



THE SERVICE ENCOUNTER

is the “moment of truth”

occurs any time the customer interacts with the firm

can potentially be critical in determining customer satisfaction andloyalty

types of encounters: remote encounters

phone encounters

face-to-face encounters is an opportunity to:

build trust reinforce quality build brand identity increase loyalty

FIGURE 4-4



Check-In

Request Wake-Up Call

Checkout

Bellboy Takes to Room

Restaurant Meal

A SERVICE ENCOUNTER

CASCADE FOR A HOTEL VISIT

Figure 4-5

A Service Encounter



Sales Call

Ordering Supplies

Billing

Delivery and Installation

Servicing

A Service EncounterCascade for an Industrial

Purchase



CRITICAL SERVICE ENCOUNTERS RESEARCH

GOAL - understanding actual events andbehaviors that cause customer

dis/satisfaction in service encounters METHOD - Critical Incident Technique

DATA - stories from customers and

employees OUTPUT - identification of themes

underlying satisfaction and dissatisfactionwith service encounters

SAMPLE QUESTIONS FOR CRITICAL INCIDENTS



SAMPLE QUESTIONS FOR CRITICAL INCIDENTS

TECHNIQUE STUDY

Think of a time when, as a customer, you hada particularly satisfying (dissatisfying) interaction with an employee of .

When did the incident happen?

What specific circumstances led up to thissituation?

Exactly what was said and done?What resulted that made you feel the

interaction was satisfying (dissatisfying)?

COMMON THEMES IN CRITICAL



COMMON THEMES IN CRITICAL

SERVICE ENCOUNTERS RESEARCH

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



RECOVERY

Acknowledge

problem

Explain causes

Apologize

Compensate/upgra

de

Lay out options

Take responsibility

Ignore customer

Blame customer Leave customer to

fend for him/herself

Downgrade

Act as if nothing is

wrong

DO DON’T

ADAPTABILITY



ADAPTABILITY

Recognize theseriousness of the

needAcknowledgeAnticipateAttempt to

accommodate Explain

rules/policies Take responsibility Exert effort to

accommodate

Promise, then fail

to follow through Ignore

Showunwillingness to

try

Embarrass thecustomer

Laugh at the

DO DON’T

SPONTANEITY



SPONTANEITY

Take time

Be attentive Anticipate needs

Listen

Provideinformation (evenif not asked)

Treat customers

fairly

Exhibit impatience

Ignore Yell/laugh/swear

Steal from or cheat

a customer

Discriminate

Treat impersonally

DO DON’T

COPING



COPING

Listen

Try to

accommodate

Explain

Let go of thecustomer

Take customer’s

dissatisfactionpersonally

Let customer’s

dissatisfaction affectothers

DO DON’T

FIGURE 4-6



EVIDENCE OF SERVICE FROM THE

CUSTOMER’S POINT OF VIEW

People

ProcessPhysicalEvidence

Contact employees

Customer him/herself

Other customers Operational flow ofactivities

Steps in process

Flexibility vs.standard

Technology vs.human

Tangiblecommunication

Servicescape

Guarantees

Technology

S



S M

Chapter 5

UNDERSTANDING

CUSTOMER EXPECTATIONS AND

PERCEPTIONS THROUGH MARKETING RESEARCH


UNDERSTANDING CUSTOMER EXPECTATIONS



UNDERSTANDING CUSTOMER EXPECTATIONS

AND PERCEPTIONS THROUGH

MARKETING RESEARCHPresent the types of and guidelines for marketing

research in services

Show the ways that marketing research information can

and should be used for services

Describe the strategies by which companies can

facilitate interaction and communication between

management and customers

Present ways that companies can and do facilitateinteraction between contact people and management

COMMON RESEARCH OBJECTIVES



COMMON RESEARCH OBJECTIVES

FOR SERVICES

To identify dissatisfied customersTo discover customer requirements or

expectationsTo monitor and track service performanceTo assess overall company performance

compared to competitionTo assess gaps between customer expectations

and perceptionsTo gauge effectiveness of changes in serviceTo appraise service performance of individuals

and teams for rewardsTo determine expectations for a new serviceTo monitor changing expectations in an industryTo forecast future expectations

FIGURE 5-1

CRITERIA FOR AN EFFECTIVE SERVICES



CRITERIA FOR AN EFFECTIVE SERVICES

RESEARCH PROGRAM

Research

Objectives

Includes

Perceptions

and

Expectationsof

Customers

Includes

Measures

of

Loyalty or

Behavioral

Intentions

IncludesStatisticalValidity

When Necessary

MeasuresPriorities

orImportance

Occurs

with

Appropriate

Frequency

PORTFOLIO OF SERVICES RESEARCH



PORTFOLIO OF SERVICES RESEARCH

Customer ComplaintSolicitation

“Relationship” Surveys

Post-Transaction Surveys

Customer Focus Groups

“Mystery Shopping” of Service Providers

Employee Surveys

Lost Customer Research

Identify dissatisfied customers to attempt recovery;identify most common categories of service failure forremedial action

Obtain customer feedback while service experience is still

fresh; act on feedback quickly if negative patterns develop

Use as input for quantitative surveys; provide a forumfor customers to suggest service-improvement ideas

Assess company’s service performance compared tocompetitors; identify service-improvement priorities; trackservice improvement over time

Measure individual employee service behaviors for use incoaching, training, performance evaluation, recognition andrewards; identify systemic strengths and weaknesses inservice

Measure internal service quality; identify employee-perceived obstacles to improve service; trackemployee morale and attitudes

Determine the reasons why customers defect

Research Objective Type of Research

Future Expectations ResearchTo forecast future expectations of customersTo develop and test new service ideas

STAGES IN THE RESEARCH PROCESS



STAGES IN THE RESEARCH PROCESS

Stage 1 : Define Problem

Stage 2 : Develop Measurement Strategy

Stage 3 : Implement Research Program

Stage 4 : Collect and Tabulate Data

Stage 5 : Interpret and Analyze Findings

Stage 6 : Report Findings

S



S M

Chapter 6

BUILDING

CUSTOMER

RELATIONSHIPS


BUILDING CUSTOMER



BUILDING CUSTOMER

RELATIONSHIPS

Explain relationship marketing, its goals, and thebenefits of long-term relationships for firms andcustomers

Explain why and how to estimate customer lifetimevalue

Specify the foundations for successful relationshipmarketing--quality core services and careful marketsegmentation

Provide you with examples of successful customer retention strategies

Introduce the idea that “the customer isn’t alwaysright”

RELATIONSHIP MARKETING




is a philosophy of doing business that

focuses on keeping and improving currentcustomers

does not necessarily emphasize acquiring

new customers is usually cheaper (for the firm)--to keep a

current customer costs less than to attract a

new one

goal = to build and maintain a base of

committed customers who are profitable for

the organization

thus, the focus is on the attraction, retention,



A LOYAL CUSTOMER IS ONE WHO...

Shows Behavioral Commitment buys from only one supplier, even though other options

exist

increasingly buys more and more from a particular

supplier provides constructive feedback/suggestions

Exhibits Psychological Commitment wouldn’t consider terminating the relationship--

psychological commitment

has a positive attitude about the supplier

says good things about the supplier

CUSTOMER LOYALTY EXERCISE



CUSTOMER LOYALTY EXERCISE

Think of a service provider you are loyal to.

What do you do (your behaviors, actions,feelings) that indicates you are loyal?

Why are you loyal to this provider?

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

employee retention is more likely with a

stable customer base

lifetime value of a customer can be very high

BENEFITS TO THE CUSTOMER



BENEFITS TO THE CUSTOMER

inherent benefits in getting good value

economic, social, and continuity benefits

contribution to sense of well-being andquality of life and other psychological

benefits

avoidance of change

simplified decision making

social support and friendships

special deals



STRATEGIES FOR BUILDING RELATIONSHIPS



STRATEGIES FOR BUILDING RELATIONSHIPS

Foundations:

Excellent Quality/Value

Careful Segmentation

Bonding Strategies:

Financial Bonds

Social & Psychological Bonds

Structural Bonds

Customization Bonds

Relationship Strategies Wheel

Figure 6-6 Levels of Retention Strategies



ExcellentQuality

and

Value

g

I. FinancialBonds

II.SocialBonds

IV.Structural

Bonds

III. Customization

Bonds

Volume and

Frequency

Rewards

Bundling andCross Selling

Stable

Pricing

Social Bonds

Among

Customers

Personal

Relationships

Continuous

Relationships

Customer

IntimacyMass

Customization

Anticipation

/ Innovation

Shared

Processes

andEquipment

Joint

Investments

Integrated

Information

Systems

FIGURE 6-1

CUSTOMER GOALS OF



Getting

Satisfying

Retaining

Enhancing

CUSTOMER GOALS OF


FIGURE 6-3

UNDERLYING LOGIC OF CUSTOMER



RETENTION BENEFITS TO THE

ORGANIZATION

Customer Retention &Increased Profits

Employee Loyalty

QualityService

Customer Satisfaction

SM



S M

Chapter 7

SERVICE RECOVERY


SERVICE RECOVERY



SERVICE RECOVERY

Illustrate the importance of recovery fromservice failures in building loyalty

Discuss the nature of consumer complaints

and why people do and do not complain

Provide evidence of what customers expectand the kind of responses they want whenthey complain

Provide strategies for effective servicerecovery

Discuss service guarantees

FIGURE 7-1

UNHAPPY CUSTOMERS’



UNHAPPY CUSTOMERS

REPURCHASE INTENTIONS

95%

70%

46%

37%

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Minor complaints ($1-$5 losses) Major complaints (over $100 losses)

Unhappy Customers Who Don’t Complain

Unhappy Customers Who Do Complain

Percent of Customers Who Will Buy Again

Source: Adapted from data reported by the Technical Assistance Research Program.

FIGURE 7-3

CUSTOMER RESPONSE FOLLOWING



SERVICE FAILURE

Service Failure

Do NothingTake Action

Stay with Provider Switch Providers

Complain to

Provider

Complain to

Family & Friends

Complain to

Third Party

Stay with Provider Switch Providers

Figure 7-5

Service Recovery Strategies



Service Recovery Strategies

ServiceRecoveryStrategies

FIGURE 7-6

CAUSES BEHIND SERVICE

• High Price

• Price Increases

• Unfair Pricing

• Deceptive Pricing

Pricing



SWITCHING

Service

SwitchingBehavior

• Location/Hours

• Wait for Appointment

• Wait for Service

Inconvenience

• Service Mistakes

• Billing Errors

• Service Catastrophe

Core Service Failure

• Uncaring

• Impolite

• Unresponsive• Unknowledgeable

Service Encounter Failures

• Negative Response

• No Response

• Reluctant Response

Response to Service Failure

• Found Better Service

Competition

• Cheat

• Hard Sell

• Unsafe

• Conflict of Interest

Ethical Problems

• Customer Moved

• Provider Closed

Involuntary SwitchingSource: Sue Keaveney

SERVICE GUARANTEES



SERVICE GUARANTEES

guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary )

for products, guarantee often done in the formof a warranty

services are often not guaranteedcannot return the serviceservice experience is intangible

TABLE 7-7

CHARACTERISTICS OF AN EFFECTIVE



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.

Source : Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review , July-August, 1988, pp. 54-62.

WHY A GOOD GUARANTEE WORKS



forces company to focus on customers

sets clear standards

generates feedback

forces company to understand why it failed

builds “marketing muscle”

SERVICE GUARANTEES



SERVICE GUARANTEES

Does everyone need a guarantee?

Reasons companies do NOT offer guarantees:

guarantee would be at odds with company’s

image too many uncontrollable external variables

fears of cheating by customers

costs of the guarantee are too high

SERVICE GUARANTEES



SERVICE GUARANTEES

service guarantees work for companies whoare already customer-focused

effective guarantees can be BIG deals - theyput the company at risk in the eyes of thecustomer

customers should be involved in the design of service guarantees

the guarantee should be so stunning that itcomes as a surprise -- a WOW!! factor

“it’s the icing on the cake, not the cake”



New Service Development Process

Figure 8-2New Service Development Process

B i S D l R i



Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.

Business Strategy Development or Review

New Service Strategy Development

Idea Generation

Concept Development and Evaluation

Business Analysis

Service Development and Testing

Postintroduction Evaluation

Commercialization

Market Testing

Screen ideas against new service strategy

Test concept with customers and employees

Test for profitability and feasibility

Conduct service prototype test

Test service and other marketing-mix elements

Front End

Planning

Implementation

FIGURE 8-3

NEW SERVICE STRATEGY MATRIX



FOR IDENTIFYING GROWTH

OPPORTUNITIES

Markets

Offerings

Existing

Services

New

Services

Current Customers New Customers

SHARE BUILDING

DIVERSIFICATION

MARKET

DEVELOPMENT

SERVICE

DEVELOPMENT

FIGURE 8-4

SERVICE MAPPING/BLUEPRINTING



SERVICE MAPPING/BLUEPRINTING

A tool for simultaneously depicting the service

process, the points of customer contact, and

the evidence of service from the customer’s

point of view.

Service

Mapping

Process

Points of Contact

Evidence

SERVICE BLUEPRINT COMPONENTS



CUSTOMER ACTIONS line of interaction

“ONSTAGE” CONTACT EMPLOYEE ACTIONS

line of visibility

“BACKSTAGE” CONTACT EMPLOYEE ACTIONS

line of internal interaction

SUPPORT PROCESSES

EXPRESS MAIL DELIVERY SERVICETruck Truck

P k i



Driver

Picks

Up Pkg.

Dispatch

Driver

Airport

Receives

& Loads

Sort

Packages

Load on

Airplane

Fly toDestinatio

n

Unload

&

Sort

Load

OnTruck

S U P P O R T

P R O C E S S

C O N T A C T P E R

S O N

( B a c k S t a g e )

( O n

S t a g e )

C U S T O M E

R

P H Y

S I C A L

E V I D

E N C E

Customer

CallsCustomer

GivesPackage

PackagingFormsHand-held

ComputerUniform

Receive

Package

PackagingFormsHand-heldComputer

Uniform

Deliver

Package

Customer

Service

Order

Fly to

Sort

Center

OVERNIGHT HOTEL STAY



S U P P O R T P R O C E S S

C O N T A C T P E R S O N

( B a c k S t a g e ) ( O n S t a g e )

C U S T O M E R

HotelExteriorParking

Cart forBags

DeskRegistrationPapersLobbyKey

ElevatorsHallwaysRoom

Cart forBags

RoomAmenitiesBath

Menu DeliveryTrayFoodAppearance

Food

Bill

DeskLobbyHotelExteriorParking

Arrive

at

Hotel

Give Bags

to

Bellperson

Check inGo to

Room

Receive

Bags

Sleep

Shower

Call

Room

Service

Receive

FoodEat

Check out

and

Leave

Greet and

Take

Bags

Process

Registration

Deliver

Bags

Deliver

FoodProcess

Check Out

Take Bags

to Room

Take

Food

Order

Registration

SystemPrepare

Food

Registration

System

P H Y S I C A L

E V I D E N C E

Figure 8-8

B ildi S i Bl i



Building a Service Blueprint

Step 1

Identify the

process to

be blue-

printed.

Step 2

Identify the

customer

or

customer segment.

Step 3

Map the

process

from the

customer’spoint of

view.

Step 4

Map

contact

employee

actions,onstage

and back-

stage.

Step 5

Link

customer

and contact

personactivities to

needed

support

functions.

Step 6

Add

evidence

of service

at eachcustomer

action

step.

APPLICATION OF SERVICE BLUEPRINTS



New Service Development concept development

market testing

Supporting a “Zero Defects” Culture managing reliability

identifying empowerment issues

Service Recovery Strategies identifying service problems

conducting root cause analysis

modifying processes

BLUEPRINTS CAN BE USED BY:



Service Marketers creating realistic customer

expectations service system design

promotion

Operations Management rendering the service as

promised managing fail points

training systems quality control

Human Resources empowering the human

element job descriptions

selection criteria

appraisal systems

System Technology providing necessary tools:

system specifications personal preference databases

S M



M

Chapter 9

CUSTOMER-DEFINED

SERVICE STANDARDS


CUSTOMER-DEFINED SERVICE



STANDARDS

Differentiate between company-defined and

customer-defined service standards

Distinguish among one-time service fixes and

“hard” and “soft” customer -defined standardsExplain the critical role of the service encounter

sequence in developing customer-defined

standards

Illustrate how to translate customer expectationsinto behaviors and actions that are definable,

repeatable, and actionable

CUSTOMER-DRIVEN STANDARDS AND

MEASUREMENTS EXERCISE



Service Encounter Customer Requirements Measurements

ServiceQuality

Figure 9-3Process for Setting

Customer-Defined Standards



Customer Defined Standards 1. Identify Existing or Desired Service Encounter Sequence

2. Translate Customer Expectations Into Behaviors/Actions

4. Set Hard or Soft Standards

5. Develop FeedbackMechanisms

7. Track Measures Against Standards

Measure byAudits or

Operating Data

Hard Soft

Measure byTransaction-

Based Surveys

3. Select Behaviors/Actions for Standards

6. Establish Measures and Target Levels

8. Update Target Levels and Measures

Figure 9-6 Aligning Company Processes withCustomer Expectations



p

Customer Expectations

CustomerProcessBlueprint

CompanyProcessBlueprint

Company Sequential Processes

A B C D E F G H

40 DaysNew Card

MailedLost CardReported

Report Lost

Card

Receive New

Card

48 Hours

S M



Chapter 11

EMPLOYEES’ ROLES IN

SERVICE DELIVERY


EMPLOYEES’ ROLES IN SERVICE



DELIVERY

Illustrate the critical importance of serviceemployees in creating customer satisfaction andservice quality

Demonstrate the challenges inherent in

boundary-spanning rolesProvide examples of strategies for creating

customer-oriented service delivery

Show how the strategies can support a service

culture where providing excellent service is a wayof life

SERVICE EMPLOYEES



They are the service They are the firm in the customer’s eyes

They are marketers

Importance is evident in

The Services Marketing Mix (People)

The Service-Profit Chain

The Services Triangle

SERVICE EMPLOYEES



Who are they?

“boundary spanners”

What are these jobs like? emotional labor

many sources of potential conflict

person/role

organization/client

interclient

quality/productivity

FIGURE 11-3

BOUNDARY SPANNERS INTERACT

WITH BOTH INTERNAL



AND EXTERNAL CONSTITUENTS

Internal Environment

External Environment

FIGURE 11-4

SOURCES OF CONFLICT FOR



BOUNDARY-SPANNING WORKERS

• Person vs. Role

• Organization vs. Client

• Client vs. Client

• Quality vs. Productivity

FIGURE 11-5

HUMAN RESOURCE STRATEGIES FOR CLOSING GAP 3



Customer-oriented

Service

Delivery

Hire the

Right People

Provide

Needed SupportSystems

Retain the

Best

People

Develop

People to

Deliver

Service

Quality

Hire for Service

Competencies

and Service Inclination

Provide Supportive Technology

and Equipment

T r e a t

E m p l o y e e s

a s

C u s t o m e r s

E m p ow er

E m pl o y e e s

SERVICE CULTURE



“A culture where an appreciation for good

service exists, and where giving good service

to internal as well as ultimate, externalcustomers, is considered a natural way of life

and one of the most important norms by

everyone in the organization.”

FIGURE 12-3

STRATEGIES FOR ENHANCING

CUSTOMER PARTICIPATION




EffectiveCustomer

Participation

Recruit, Educate,

and RewardCustomers

Define CustomerJobs

Manage theCustomer

Mix

STRATEGIES FOR ENHANCING





1. Define customers’ jobs

- helping himself

- helping others

- promoting the company

2. Individual differences: not everyone wants

to participate

STRATEGIES FOR RECRUITING,

EDUCATING AND REWARDING CUSTOMERS



1. Recruit the right customers

2. Educate and train customers to perform

effectively

3. Reward customers for their contribution4. Avoid negative outcomes of inappropriate

customer participation

Manage the Customer Mix

S M

Chapter 15



Chapter 15

INTEGRATED

MARKETINGCOMMUNICATION


INTEGRATED SERVICES

MARKETING COMMUNICATIONS



MARKETING COMMUNICATIONS

Introduce the concept of Integrated ServicesMarketing Communication

Discuss the key reasons for service communicationproblems

Present four key ways to integrate marketingcommunication in service organizations

Present specific strategies for managing promises,managing customer expectations, educatingcustomers, and managing internal communications

Provide perspective on the popular service objectiveof exceeding customer expectations

FIGURE 15-1

Communications and the



Services Marketing Triangle

Internal Marketing Vertical Communications

Horizontal Communications

Interactive Marketing Personal Selling

Customer Service Center Service Encounters

Servicescapes

External Marketing Communication Advertising

Sales PromotionPublic Relations

Direct Marketing

Company

Customers Employees

Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

APPROACHES FORINTEGRATING SERVICES MARKETINGCOMMUNICATION

Figure 15-3



COMMUNICATION

Goal:Delivery

greater thanor equal topromises

ImproveCustomerEducation

ManageService

Promises

ManageCustomer

Expectations

ManageInternal

MarketingCommunication

Figure 15-4

Approaches forManaging Service Promises



Goal:Deliverygreater thanor equal topromises

OfferService

Guarantees

CreateEffectiveServices

Communications

MANAGING SERVICE PROMISES

MakeRealisticPromises

CoordinateExternal

Communication

Managing Service Promises

Figure 15-8Approaches for

Managing Customer Expectations



Communicate Criteria forService Effectiveness

Create Tiered-ValueOfferings

g g p

NegotiateUnrealistic

Expectations

Goal:Delivery


Offer Choices

Figure 15-9

Approaches forImproving Customer Education



Goal:Delivery


PrepareCustomers

for theServiceProcess

ClarifyExpectationsafter the Sale

Improving Customer Education

TeachCustomers

to AvoidPeak

DemandPeriods

andSeek Slow

Periods

ConfirmPerformanceto Standards

Figure 15-10

Approaches for ManagingInternal Marketing Communications



Goal:Delivery


Internal Marketing Communications

Create Effective

VerticalCommunications

Align BackOffice Personnelw/ External Customers

Create EffectiveHorizontal

Communications

CreateCross-Functional

Teams

S M

Chapter 17



Chapter 17

THE FINANCIAL AND

ECONOMIC IMPACT OF

SERVICE QUALITY


THE FINANCIAL AND ECONOMIC IMPACT

OF SERVICE



OF SERVICE

Examine the direct effects of service on profits Consider the impact of service on getting new

customers

Evaluate the role of service in keeping customers

Examine the link between perceptions of service andpurchase intentions

Emphasize the importance of selecting profitablecustomers

Discuss what is know about the key service drivers of

overall service quality, customer retention andprofitability

Discuss the balanced performance scorecard to focuson strategic measurement other than financials

FIGURE 17-1

THE DIRECT RELATIONSHIP BETWEEN

SERVICE AND PROFITS



SERVICE AND PROFITS

Profits? ServiceQuality

FIGURE 17-2

OFFENSIVE MARKETING EFFECTS OF

SERVICE ON PROFITS



SERVICE ON PROFITS

ProfitsMarketShare

Reputation Sales

PricePremium

ServiceQuality

FIGURE 17-3

DEFENSIVE MARKETING EFFECTS OF

SERVICE ON PROFIT



Margins

Profits

CustomerRetention

Costs

PricePremium

Word of

Mouth

Volume ofPurchasesService

Quality



Figure 17-6

The “80/20” Customer Pyramid



Most Profitable Customers

Least Profitable Customers

What segment spends more with

us over time, costs less to maintain,

spreads positive word of mouth?

What segment costs us in

time, effort and money yet does not provide the return

we want? What segment is

difficult to do business with?

Other

Customers

BestCustomers

Figure 17-7

The Expanded Customer Pyramid



Most Profitable

Customers

Least Profitable

Customers

What segment spends more with

us over time, costs less to maintain, spreads positive word of mouth?

What segment costs us in

time, effort and money yet

does not provide the return we want? What segment is

difficult to do business with?

Gold

Iron

Lead

Platinum

FIGURE 17-8

THE KEY DRIVERS OF SERVICE QUALITY,

CUSTOMER RETENTION, AND PROFITS



,

Key Drivers

ServiceQuality

ServiceEncounter

ServiceEncounter

ServiceEncounter

CustomerRetention

BehavioralIntentions Profits

ServiceEncounter

Service Encounters

Figure 17-9

Sample Measurements for the

Balanced Scorecard



Adapted from Kaplan and Norton

Innovation andLearning Perspective

CustomerPerspective

Service Perceptions

Service Expectations

Perceived Value

Behavioral Intentions:

OperationalPerspective:

Right first time (% hits)Right on time (% hits)Responsiveness (% on

time)Transaction time (hours,

days)

Throughput timeReduction in wasteProcess quality

Financial Measures

Price Premium

Volume Increases

Value of Customer

Referrals

Value of Cross Sales

Long-term Value of

Customer

% Loyalty% Intent to Switch

# CustomerReferrals# Cross Sales# of Defections

Number of new productsReturn on innovationEmployee skillsTime to marketTime spent talking tocustomers

Figure 17-10

Service Quality Spells Profits



ServiceQuality CustomerRetention

Costs

PricePremium

Word ofMouth

Margins

Profits

DefensiveMarketing

Volume ofPurchases

MarketShare

Reputation

Sales

PricePremium

OffensiveMarketing



Last Module-

Service sector & Indian Economy

Presentation by Students!!

ppt on service marketing

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