Service Marketing Strategy

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    Service Marketing Strategy - Presentation Transcript

    1. Service Marketing Strategy and the Customer Experience Revenue Management & Pricing in Travel USA 2007 9-10 October, Caesars Palace, Las Vegas
    2. Introduction
      • In this presentation I will focus on some key marketing components:
        • Product elements
        • Price and other user outlays
        • Promotion and education
    3. Product, Pricing and Communication Decisions
      • What price should we charge for our service?
      • How should we communicate what our service has to offer?
      • What should be the core and supplementary elements of our service product?
    4. Core and Supplementary Elements
      • The core addresses the customer’s need for a basic benefit – such as transportation to a desired location
      • Supplementary services facilitate and enhance use of the core service
      • In a mature industry with increased competition there is a risk of perceived commoditization
    5. What should be the elements of our service product?
      • What are the characteristics of our core product?
      • What supplementary service elements augment this core product?
      • What product benefits create the most value for target customers?
      • How can we differentiate our service product from the competition’s?
      • How should we go about designing new services?
    6. Augmented Product
      • The core product (a good or a service) plus all supplementary elements that add value for customers
      • Molecular model describes augmented products
    7. Molecular Model Distribution Price Marketing Positioning Transport Aircraft In-flight Service Food and Drink Pre- and Post-flight service Service Frequency Intangible Elements Tangible Elements G. Lynn Shostack, “Breaking Free from Product Marketing”
    8. The Flower of Service Pierre Eiglier and Eric Langeard, “Services as Systems: Marketing Implications” Information Consultation Order Taking Hospitality Safekeeping Exceptions Billing Payment Core
    9. Identifying and Classifying Supplementary Services
      • Facilitating supplementary services that aid in the use of the core product or are required for service delivery
        • Information
        • Order taking
        • Billing
        • Payment
      • Enhancing supplementary services that may add extra value for customers
        • Consultation
        • Hospitality
        • Safekeeping
        • Exceptions
    10. The Customer Experience in Five Stages
    11. Stage One – Discover
    12. Brand Level Objectives Source: AirCanada.com
    13. Stage Two – Evaluate Source: www.aircanada.com
    14. Value Positioning
    15. Multiple Value Propositions Multiple value propositions facilitate revenue optimization within and across brands
    16. Customer Choice Source: www.aircanada.com     
    17. Flight Change Functionality
    18. Opt-in or Opt-out Source: www.aircanada.com
    19. Up-Sell Proposition
    20. Pay to use Airport Check-in
    21.  
    22. “ A-la-carte” Access to Lounge
    23. Non-Ticket Revenues
      • Ryanair’s non-ticket revenues were 18% of the total in 2006
      • Profit margins on ancillaries are much higher than on seats
      • Very low selling costs – particularly if sold online
      • Justifies management unit
      • Measuring performance of ancillary product sales is still in its infancy
    24. Ancillary or Non-Ticket Revenue
    25.  
    26. Potential Revenues in IFE
    27. New Ways to Charge Customers
    28. A Captive Audience for Advertising
    29. The Value Exchange
    30. What Price Should we Charge?
      • What costs do we have to recover?
      • What prices are competitors charging?
      • How sensitive are customers to variations in price?
      • What out-of-pocket expenditures and non-financial outlays do customers incur beyond the price of our service?
      • Can we charge different prices at different times or to different customers?
    31. Pricing Strategy
      • Cost-based pricing – the practice of relating the price to be charged to the costs associated with producing, delivering, and marketing a product
      • Competition-based pricing – the practice of setting prices relative to those charged by competitors
      • Value-based pricing – the practice of setting prices with reference to what customers are willing to pay for the value they believe they will receive
      Leonard L. Berry and Manjit S. Yadav, “Capture and Communicate Value in Pricing of Services”
    32. Capturing and Communicating the Value of a Service
      • Uncertainty reduction – If customers are unsure about how much value they will receive from a particular service, they may remain with a known supplier or not purchase at all
      • Relationship enhancement – In general, discounting to win new business is not the best way to attract customers who will remain loyal over time, since those who are attracted by cut-rate pricing are easily enticed away by competing offers
      • Cost leadership – This strategy is based on achieving the lowest costs in an industry
    33. The Basis for Pricing
      • Price bundling – the practice of charging a base price for a core service plus additional fees for optional supplementary elements
      • Discounting – a strategy of reducing the price of an item below the normal level
    34. New Customer Options
      • Airline services are going a la carte
      • Tools to price a la carte on website
      • Seat location pricing
      • United’s “Economy Plus Access”
      • Special check-in and security lines
      • Any reasonable proposition
      • Ultimately individual customer pricing
    35. Types of Customized Pricing
      • Self selection
      • Controlled availability
      • Point of sale control
      • Buyer characteristics
      • Transaction characteristics
    36. How should we communicate what our service has to offer?
      • What do customers need to know about our service, its benefits, and how best to use it?
      • What communications methods and media will be most effective in reaching target audiences?
      • What impressions can we convey through physical evidence?
      • How well are our organization, its capabilities, and its brand names regarded?
    37. Communicating with Customers
      • Communication efforts serve not only to attract new users but also to maintain contact with existing customers and build relationships with them
      • Nurturing customer relationships depends on a comprehensive and up-to-date customer database, and the ability to make use of this in a personalized way
    38. Communication Strategies for Services
      • Intangible nature of service performances
      • Customer involvement in production
      • Evaluating service offerings
      • Supply-and-demand management
      • Importance of contact personnel
      • Reduced role of intermediaries
      • Setting communication objectives
    39. Stage Three – Acquire
    40. Credit Cards
      • $3 billion spent worldwide each year on credit card merchant fees
      • Credit card fees are trending higher (3%)
      • Credit card companies are not negotiating
    41. Lower-Cost Alternatives
      • Having already cut labour, commissions and GDS costs, credit card fees are the next savings opportunity
      • Find lower-cost alternatives to credit card payments or transfer fees to someone else
      • Cash payments
      • UATP cards
      • PayPal service
      • Western Union
    42. Where Credit Cards Not the Norm
    43. Stage Four – Integrate Source: Scandinavian Airlines Intercontinental passenger offerings
    44. Service Delivery
      • 40 percent of marketing investment is wasted, as ill-informed or de-motivated behaviour by staff unwittingly undermines the promotional promise
      • The result is that 68 percent of those who do buy, go away because of how they were treated
    45. Stage Five – Extend
      • From the highest life-time value, we can find groups that are represented by:
        • Corporate customers
        • Loyal customers
        • Contracted customers
        • Registered customers
        • The all customers category that might not have any loyalty to our company
    46. Frequent Flyer Programs Source: Marginal revenues. www.unige.ch
    47. What Matters to Travellers?
      • Flight problems 28.1%
      • Baggage 26.7%
      • Reservations, ticketing and boarding 11.7%
      • Customer service 10.6%
      • Fares 2.6%
      Source: The U.S. Department of Transportation’s Air Travel Consumer Reports.
    48. Consumer-Centric Strategies
      • An optimized CRM strategy can really separate your travel company from the rest of the pack
      • Online travel sales are still expanding, but at a diminished level
      • 71% of Americans are currently online, by 2011 it will be 81% (Forrester Research)
      • Companies must retain their customers by building loyalty and consistently providing an experience in line with their brand promise
      • JetBlue and Southwest remain a firm favourite with customers
    49. JetBlue Customer Satisfaction
      • JetBlue has managed to rank highest in customer satisfaction levels among low-cost carriers (JD Power and Associates)
      • Vicky Stennes, VP Inflight Experience, JetBlue said “we built JetBlue as a customer service company – not just an airline. We desire to be compared to other best-in-class service companies, such as retail organizations like Neiman Marcus, and “experience” companies like Walt Disney”.
    50. Southwest Rapid Rewards Program
      • For 20 years Southwest’s loyalty program has proved profitable for them, with the credit card alone generating $50M of fees
      • Their enviable loyalty scheme has been recognized by the industry and wins first place awards, year on year
      • “ We are excited the flying public recognizes the value and simplicity of the Rapid Rewards program," said Debra Benton, Southwest's Director of Loyalty and Partnership Marketing. "We strive to make the program Customer friendly and easy to use."
    51. Service Marketing Strategy and the Customer Experience Revenue Management & Pricing in Travel USA 2007 9-10 October, Caesars Palace, Las Vegas

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