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Mos  revision slides Mos revision slides Presentation Transcript

  • SERVICE
    • According to Kotler, “ Any activity or benefit that is essentially intangible & does not result in the ownership of anything. It’s production may or may not 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 limited duration.
    www.a2zmba.com
    • 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 & Recreation
    • Legal, Education & Health
    www.a2zmba.com
  • 1. Intangibility - “u can’t touch this” 2. Production (or performing the service) and Consumption (using the service) - happens at the same time – Inseperability 3. Heterogeneity - services are not always delivered the same way 4. Perishability - cannot be put in inventory or stored for later use i.e. You can’t buy 2 haircuts 4 Characteristics of Services www.a2zmba.com
    • Intangibility - “u can’t touch this”
    • Services cannot be stored
    • Services cannot be protected through patents – therefore a really great travel package and service can be copied
    • Hard to explain and display Services if you can’t see them
    • Prices are difficult to set - depends on customers expectations
    Characteristics of Services www.a2zmba.com
    • 1. Intangibility - “u can’t touch this”
    • Marketing Strategies
    • stress tangible cues, eg. Smiling face
    • use personal information, sources, references
    • use word-of-mouth
    • contact customers after they buy to stimulate continued enthusiasm and hope they “talk it up”
    Characteristics of Services www.a2zmba.com
  • 2. Inseparability of Production (or performing the service) and Consumption (using the service) - happens at the same time Characteristics of Services
    • Many people involved in delivering a service
    • mass production of services is hard to do
    www.a2zmba.com
  • 2. Inseparability of Production (or performing the service) and Consumption (using the service) - happens at the same time Characteristics of Services
    • Marketing Strategies
    • Emphasize how much you train your people - so their ability to give you good service will be high
    • Have many locations so customers can get to you ie. Insurance sales come to your home
    www.a2zmba.com
  • 3. Heterogeneity - services are not always delivered the same way It is very difficult to standardize services eg. A machine can make ice cream cones a standard size 100% of the time A person filling an ice cream cone with a scoop cannot do it the same amount each time, unless you use a machine to dispense the ice cream Characteristics of Services www.a2zmba.com
  • 3. Heterogeneity - services are not always delivered the same way eg. A Taxi driver cannot drive you to the office in exactly the same time each day because the traffic patterns change eg. A travel agent can sell you a vacation package - but cannot guarantee you will like the trip exactly the same way another tourist did. Characteristics of Services www.a2zmba.com
  • 4. Perishability - cannot be put in inventory or stored for later use ie. You can’t buy 2 haircuts Demand fluctuates and changes, sometimes depending on the season, or weather eg. Taxi in the rain, vacation in summer Characteristics of Services www.a2zmba.com
  • 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
    www.a2zmba.com
  • Marketing Implications - 1
    • No ownership
      • Customers obtain temporary rentals, hiring of personnel, or access to facilities and systems
      • Pricing often based on time
      • Customer choice criteria may differ for renting vs. purchase--may include convenience, quality of personnel
      • Can’t own people (no slavery!) but can hire expertise and labor
    • Services cannot be inventoried after production
      • Service performances are ephemeral—transitory, perishable
      • Exception : some information-based output can be recorded
      • in 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 durable
    www.a2zmba.com
  • Marketing Implications - 2
    • Customers may be involved in production process
      • Customer involvement includes self-service and cooperation with service 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 in mind: 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 and communicating physical images or metaphors and tangible clues
    www.a2zmba.com
  • 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 can influence 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 is more difficult to shield customers from service failures
    www.a2zmba.com
  • 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
    www.a2zmba.com
  • www.a2zmba.com S.No. Physical Goods Services 1. Tangible Intangible 2. Homogeneous Heterogeneous 3. Product and distribution separated from consumption Production, distribution and consumption re simultaneous process 4. A thing An activity 5. 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 ownership
  • www.a2zmba.com People Processing Possession Processing Mental Stimulus Processing Information Processing (directed at intangible 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 the Service Act? Who or What is the Direct Recipient of the Service?
  • 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
    www.a2zmba.com
  • The 7Ps: (1) Product Elements
    • All Aspects of Service Performance that Create Value
    • Core product features—both tangible and intangible elements
    • Bundle of supplementary service elements
    • Performance levels relative to competition
    • Benefits delivered to customers (customers don’t buy a hotel room, they buy a good night’s sleep)
    • Guarantees
    www.a2zmba.com
  • The 7Ps: (2) Place and Time
    • Delivery Decisions: Where, When, and How
    • Geographic locations served
    • Service schedules
    • Physical channels
    • Electronic channels
    • Customer control and convenience
    • Channel partners/intermediaries
    www.a2zmba.com
  • The 7Ps: (3) Promotion and Education
    • Informing, 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/training
    www.a2zmba.com
  • The 7Ps: (4) Price and Other User Outlays
    • Marketers Must Recognize that Customer Outlays Involve
    • More 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 to service location, parking, phone, babysitting,etc.)
    • Time expenditures, especially waiting
    • Unwanted mental and physical effort
    • Negative sensory experiences
    www.a2zmba.com
  • The 7Ps: (5) Physical Environment
    • Designing the Servicescape and providing tangible
    • evidence 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 marketing communications
    www.a2zmba.com
  • 7Ps: (6) Process
    • Method 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
    www.a2zmba.com
  • The 7Ps: (7) People
    • Managing 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 firm’s 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
    www.a2zmba.com
  • www.a2zmba.com Internal Marketing Interactive Marketing External Marketing Company (Management) Customers Employees enabling promises keeping promises setting promises Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
  • Ways to Use the Services Marketing Triangle
    • Overall Strategic Assessment
      • How is the service organization doing on all three sides of the triangle?
      • Where are the weaknesses?
      • What are the strengths?
    • Specific Service Implementation
      • What is being promoted and by whom?
      • How will it be delivered and by whom?
      • Are the supporting systems in place to deliver the promised service?
    www.a2zmba.com
  • www.a2zmba.com 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.
  • Service Employees
    • They are the service - provider.
    • They are the organization in the customer’s eyes.
    • They are the brand.
    • They are marketers.
    • Their importance is evident in:
      • The Services Marketing Mix (People)
      • The Service-Profit Chain
      • The Services Triangle
    • Frontline also drives customer loyalty, with employees playing key role in anticipating customer needs, customizing service delivery and building personalized
    • relationships
    www.a2zmba.com
  • 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 desired emotions during service transactions”.
      • Consider management expectations of restaurant servers:
      • deliver a highly satisfying dining experience to their customers
      • be fast and efficient at executing operational task of serving customers
      • do selling and cross selling, e.g. “We have some nice desserts to follow your main course”
    www.a2zmba.com
  • www.a2zmba.com
    • Person vs. Role
    • Conflicts between what jobs require and employee’s own personality and beliefs
    • Organization vs. Client
    • Dilemma whether to follow company rules or to satisfy customer demands
    • Client vs. Client
    • Conflicts between customers that demand service staff intervention
    • Quality vs. Productivity
  • Customer- Oriented Service Delivery Hire the Right People Provide Needed Support Systems Retain the Best People Develop People to Deliver Service Quality Compete for the Best People Hire for Service Competencies and Service Inclination Provide Supportive Technology and Equipment Treat Employees as Customers Empower Employees Be the Preferred Employer Train for Technical and Interactive Skills Promote Teamwork Measure Internal Service Quality Develop Service- oriented Internal Processes Measure and Reward Strong Service Performers Include Employees in the Company’s Vision www.a2zmba.com
  • Factors Favoring Employee Empowerment
    • Firm’s strategy is based on competitive differentiation and on personalized, customized service
    • Emphasis on long-term relationships vs. one-time transactions
    • Use of complex and non-routine technologies
    • Environment is unpredictable, contains surprises
    • Managers are comfortable letting employees work independently for benefit of firm and customers
    • Employees seek to deepen skills, like working with others, and are good at group processes
    www.a2zmba.com
  • Empowerment
    • Benefits:
      • quicker responses
      • employees feel more responsible
      • employees tend to interact with warmth/enthusiasm
      • empowered employees are a great source of ideas
      • positive word-of-mouth from customers
    • Drawbacks:
      • greater investments in selection and training
      • higher labor costs
      • slower and/or inconsistent delivery
      • may violate customer perceptions of fair play
      • “ giving away the store” (making bad decisions)
    www.a2zmba.com
  • Service Culture
    • “ A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.”
    www.a2zmba.com
  • Relationship Marketing
    • is a philosophy of doing business that focuses on keeping current customers and improving relationships with them
    • does not necessarily emphasize acquiring new customers
    • is usually cheaper (for the firm)
      • keeping a current customer costs less than attracting a new one
    • thus, the focus is less on attraction, and more on retention and enhancement of customer relationships
    www.a2zmba.com
  • www.a2zmba.com Customer Retention & Increased Profits Employee Loyalty Quality Service Customer Satisfaction
  • 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 and assistance & make fewer mistakes
    • employee retention is more likely with a stable customer base
    • Recommend new customers to firm (act as unpaid sales people)
    • Trust leads to willingness to pay regular prices vs. shopping for discounts
    • lifetime value of a customer can be very high
    www.a2zmba.com
  • 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 firm’s 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 service
    www.a2zmba.com
  • “ The Customer Isn’t 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 same time
      • Solution: Proper Segmenting OR Manage customer behavior
    www.a2zmba.com
  • 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
    www.a2zmba.com
  • 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
    www.a2zmba.com
  • Excellent Quality and Value I. Financial Bonds II. Social Bonds IV. Structural Bonds III. Customization Bonds Volume and Frequency Rewards Bundling and Cross Selling Stable Pricing Social Bonds Among Customers Personal Relationships Continuous Relationships Customer Intimacy Mass Customization Anticipation/ Innovation Shared Processes and Equipment Joint Investments Integrated Information Systems www.a2zmba.com
  • Service Quality
    • The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.
    • Service quality assessments are formed on judgments of:
      • Outcome quality eg: I’net connectivity
      • Process quality eg: support eqpmts used
      • Physical environment quality eg: infra
    www.a2zmba.com
    • Ability to perform the promised service dependably and accurately.
    • Knowledge and courtesy of employees and their ability to convey trust and confidence.
    • Physical facilities, equipment, and appearance of personnel.
    • Caring, individualized attention the firm provides its customers.
    • Willingness to help customers and provide prompt service.
    www.a2zmba.com T angibles R eliability R esponsiveness A ssurance E mpathy
    • 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 to when services will be performed
    • Prompt service to customers
    • Willingness to help customers
    • Readiness to respond to customers’ requests
    RELIABILITY RESPONSIVENESS
    • Employees who instill confidence in customers
    • Making customers feel safe in their transactions
    • 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 a caring fashion
    • Having the customer’s best interest at heart
    • Employees who understand the needs of their 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 www.a2zmba.com
  • Perceived Service Expected Service CUSTOMER COMPANY Customer Gap GAP 1 GAP 2 GAP 3 External Communications to Customers GAP 4 Service Delivery Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations www.a2zmba.com
  • Customer Expectations Customer Perceptions www.a2zmba.com Customer GAP
  • Customer Expectations Company Perceptions of Customer Expectations www.a2zmba.com GAP 1
  • Customer-Driven Service Designs and Standards Management Perceptions of Customer Expectations www.a2zmba.com GAP 2
  • Service Delivery Customer-Driven Service Designs and Standards www.a2zmba.com GAP 3
  • Service Delivery External Communications to Customers www.a2zmba.com GAP 4
  • 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 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 loyalty
    www.a2zmba.com
  • Critical Service Encounters Research
    • GOAL - understanding actual events and behaviors 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 dissatisfaction with service encounters
    www.a2zmba.com
  • www.a2zmba.com Recovery: Adaptability: Spontaneity: Coping: Employee Response to Service Delivery System Failure Employee Response to Customer Needs and Requests Employee Response to Problem Customers Unprompted and Unsolicited Employee Actions and Attitudes
    • Listen
    • Try to accommodate
    • Explain
    • Let go of the customer
    • Take customer’s dissatisfaction personally
    • Let customer’s dissatisfaction affect others
    www.a2zmba.com DO DON’T
    • Recognize the seriousness of the need
    • Acknowledge
    • Anticipate
    • Attempt to accommodate
    • Explain rules/policies
    • Take responsibility
    • Exert effort to accommodate
    • Promise, then fail to follow through
    • Ignore
    • Show unwillingness to try
    • Embarrass the customer
    • Laugh at the customer
    • Avoid responsibility
    www.a2zmba.com DO DON’T
    • Acknowledge problem
    • Explain causes
    • Apologize
    • Compensate/upgrade
    • Lay out options
    • Take responsibility
    • Ignore customer
    • Blame customer
    • Leave customer to fend for him/herself
    • Downgrade
    • Act as if nothing is wrong
    www.a2zmba.com DO DON’T
    • 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 a customer
    • Discriminate
    • Treat impersonally
    www.a2zmba.com DO DON’T
  • The Purchase Process for Services
    • Prepurchase Stage
    • Awareness of need
    • Information search
    • Evaluation of alternative service suppliers
    • Service Encounter Stage
    • Request service from chosen supplier
    • Service delivery
    • Postpurchase Stage
    • Evaluation of service performance
    • Future intentions
    www.a2zmba.com
  • www.a2zmba.com
  • Components of Customer Expectations
    • Desired Service Level: wished-for level of service quality that customer believes can and should be delivered
    • Adequate Service Level: minimum acceptable level of service
    • Predicted Service Level: service level that customer believes firm will actually deliver
    • Zone of Tolerance: range within which customers are willing to accept variations in service delivery
    www.a2zmba.com
  • www.a2zmba.com
    • 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
    • - Explicit Service Promise
    • - Implicit Service Promise
    • - Word of Mouth
    • - Past Experiences
    • Service Encounter Expectation vs Overall Service Expectation
    • Encounter expectation are more specific
    www.a2zmba.com
  • Intangible Attributes, Variability, and Quality Control Problems Make Services Hard to Evaluate
    • Search attributes – Tangible characteristics that allow customers to evaluate a product before purchase
    • Experience attributes – Characteristics that can be experienced when actually using the service
    • Credence attributes – Characteristics that are difficult to evaluate confidently even after consumption
    • Goods tend to be higher in search attributes, services tend to be higher in experience and credence attributes
    • Credence attributes force customers to trust that desired benefits have been delivered
    www.a2zmba.com
  • www.a2zmba.com Source: Adapted from Zeithaml Most Goods High in search attributes High in experience attributes High in credence attributes Difficult to evaluate Easy to evaluate Most Services Clothing Chair Motor vehicle Foods Restaurant meals Lawn fertilizer Haircut Entertainment Computer repair Legal services Complex surgery Education
  • Customer Satisfaction is Central to the Marketing Concept
    • Satisfaction defined as attitude-like judgment following a service purchase or series of service interactions
    • Customers have expectations prior to consumption, observe service 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/quality tradeoffs, personal and situational factors
    • Research shows links between customer satisfaction and a firm’s financial performance
    www.a2zmba.com
  • Customer Delight: 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 very
    • mundane services?
    • Progressive Insurance has found ways to positively surprise customers with customer-friendly innovations and
    • extraordinary customer service
    www.a2zmba.com
  • CUSTOMER SATISFACTION SURVEY
    • Relationship Survey
    • Questions about customer relationship with the company 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 -
    www.a2zmba.com
  • www.a2zmba.com
  • Courses of Action Open to a Dissatisfied Customer www.a2zmba.com Service Encounter is Dissatisfactory Take some form of public action Take some form of private action Take no action Complain to the service firm Complain to a third party Take legal action to seek redress Defect (switch provider) Negative word-of-mouth Any one or a combination of these responses is possible
  • Types of Complainers
    • Passive – no complain, stay or exit/switch
    • Voicers – complain to provider, stay
    • Activitist – complain to provider, negative word of mouth, complaint to third party
    • Irates – negative word of mouth, switch to other providers but don’t complaint to third parties
    www.a2zmba.com
  • 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
  • www.a2zmba.com Learn from Recovery Experiences Treat Customers Fairly Learn from Lost Customers Welcome and Encourage Complaints Fail Safe the Service Act Quickly Service Recovery Strategies
  • How to Enable Effective Service Recovery
    • Be proactive—on 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
    www.a2zmba.com
  • Service Guarantees
    • guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary)
    • for products, guarantee often done in the form of a warranty
    • services are often not guaranteed
      • cannot return the service
      • service experience is intangible
          • (so what do you guarantee?)
    www.a2zmba.com
  • Types of Service Guarantees
    • Single attribute-specific guarantee – one key service attribute is covered
    • Multiattribute-specific guarantee – a few important service attributes are covered
    • Full-satisfaction guarantee – all service aspects covered with no exceptions
    • Combined guarantee – like the full-satisfaction, adding explicit minimum performance standards on important attributes
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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.
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  • www.a2zmba.com Demand-Based Cost-Based Competition- Based 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
    • • Value is low price
    • Primary concern: Price
    • Example – “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 service
    • Primary concern: Quality
    • Example – “Value is the very best education I can get”
    • – “ Value is the best performance”
    • • Value is the quality I get for the price I pay
    • Primary concern: Price & Quality
    • Trade-off between price and quality
    • Example – “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, Convenience
    • Example – “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 price. Value is everything I want in a service. Value is the quality I get for the price I pay. Value is all that I get for all that I give.
    • Discounting
    • Odd pricing - Psycho
    • Synchro-pricing
    • Penetration Pricing
    • Prestige pricing –
    • Premium
    • Skimming pricing
    • Value pricing
    • Market segmentation pricing
    • Price framing
    • Price bundling
    • Complementary pricing
    • Results-based pricing
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    • Odd pricing- Strategy in which price is set just below the exact rupee amount.
    • 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 desirable service attributes
    • Market segmentation pricing- Based on the different segments show different quality level. Market segmentation by client category ( Ex.: night-worker, day-worker)
    • Price framing- Strategy in which the service could be framed in an appropriate 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 base good at a relatively low price to the complementary good - this approach allows easy entry by consumers (e.g. consumer printer vs ink jet cartridge) OR Pricing the base good at a relatively high price to the complementary 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 (Contingency pricing, 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 marketing principles 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 service—faster 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, McDonald’s
    • agents and brokers
      • e.g., travel agents, independent insurance agents
    • electronic channels
      • e.g., ATMs, university video courses, TaxCut software
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    • Leveraged business format for greater expansion and revenues
    • Consistency in outlets
    • Knowledge of local markets
    • Shared financial risk and more working capital
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    • Difficulty in maintaining and motivating franchisees
    • Highly publicized disputes and conflict
    • Inconsistent quality
    • Control of customer relationship by intermediary
    Benefits Challenges
    • An established business format
    • National or regional brand marketing
    • Minimized risk of starting a business
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    • Encroachment
    • Disappointing profits and revenues
    • Lack of perceived control over operations
    • High fees
    Benefits Challenges
    • Reduced selling and distribution costs
    • Intermediary’s possession of special skills and knowledge
    • Wide representation
    • Knowledge of local markets
    • Customer choice
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    • Loss of control over pricing and other aspects of marketing
    • Representation of multiple service principals
    Benefits Challenges
    • Consistent delivery for standardized services
    • Low cost
    • Customer convenience
    • Wide distribution
    • Customer choice and ability to customize
    • Quick customer feedback
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    • Customers are active, not passive
    • Lack of control of electronic environment
    • Price competition
    • Inability to customize with highly standardized services
    • Lack of consistency with customer involvement
    • Requires changes in consumer behavior
    • Security concerns
    • Competition from widening geographies
    Benefits Challenges
    • Measurement
    • Review
    www.a2zmba.com Control Strategies
    • Alignment of goals
    • Consultation and cooperation
    • Help the intermediary develop customer-oriented service processes
    • Provide needed support systems
    • Develop intermediaries to deliver service quality
    • Change to a cooperative management structure
    Empowerment Strategies Partnering Strategies