Service Marketing Module 3

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Understand the 3 stage model of service consumption
Learn how consumers evaluate and choose between alternatives services offerings and why they have difficulty in making those evaluations
Know the perceived risks that customer face in purchasing services and the strategies firms can use to reduce consumers risks perception
Understand how customers form service expectations and the components of these expectations
Contrast how customers experience and evaluate high and low contact services
Be familiar with servuction model and understand the interactions that together the services experience
Obtain insights from viewing service encounter and from of theater
Know how role and script theory contribute to a better understanding of services experiences
Know how costumers evaluate services and what determines their satisfaction

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Service Marketing Module 3

  1. 1. Marketing of Infrastructure Services and Utilities Customer Behavior and Customer Relationship Management Module 3
  2. 2. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES Learning Objectives 1. Understand the 3 stage model of service consumption 2. Learn how consumers evaluate and choose between alternatives services offerings and why they have difficulty in making those evaluations 3. Know the perceived risks that customer face in purchasing services and the strategies firms can use to reduce consumers risks perception 4. Understand how customers form service expectations and the components of these expectations 5. Contrast how customers experience and evaluate high and low contact services 6. Be familiar with servuction model and understand the interactions that together the services experience 7. Obtain insights from viewing service encounter and from of theater 8. Know how role and script theory contribute to a better understanding of services experiences 2
  3. 3. Marketing of Infrastructure Services and Utilities Module 3
  4. 4. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES Consumer Behavior • What consumers buy? • Where consumers buy? • When consumers buy? • How consumers buy? • What consumers buy? We study these behaviors 4
  5. 5. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES Consumers buying vegetables • • • • • • • Most consumers Buy „fresh‟ vegetables Roadside vendors Freshness concept In touch with air It might have been washed with dirty water Do consumers buy Safal frozen vegetables from Mother Diary? Very few buy. A feeling that is not ‘FRESH’ 5
  6. 6. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES COMPARED TO GOODS SERVICES ARE – More difficult to choose – More difficult to evaluate – Intangibility – Non-standardized – Production and consumption together 6
  7. 7. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES BENEFITS – UNDERSTANDING CONSUMER BEHAVIOR • Low chances of product failure • Products acceptability higher • Helps us to make right distribution strategies • Right promotional strategies 7
  8. 8. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES Consumer decision making process Five steps • Need recognition • Information search • Evaluation of alternatives • Purchase • Post purchase evaluation 8
  9. 9. Marketing of Infrastructure Services and Utilities The 3 stage model of service composition • Pre-purchase stage • Service encounter stage • Post encounter stage Module 3
  10. 10. Marketing of Infrastructure Services and Utilities Pre Purchase stage • Need Awareness – Uncurious minds (e.g personal identity and aspiration) – Physical conditions (e.g. if u r hunger drove o to Burger stall) – External Sources (e.g. a service firm‟s marketing activities) • Information Search • Evaluation of alternatives – Service attributes – Perceived Risk – Service expectations Module 3
  11. 11. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES 1. Information Search – In services – Rely more on personal resources Example • Legal services • Not advertised on the mass media • How to choose a lawyer? • Speak to friends, relatives • Word of mouth, relatives 11
  12. 12. Module 3 Marketing of Infrastructure Services and Utilities Evaluation of alternatives: Search attributes Most Goods Most Services Difficult to evaluate High in search qualities High in experience qualities High in credence qualities 12
  13. 13. Marketing of Infrastructure Services and Utilities Module 3 Evaluation of alternatives: Perceived Risk Type of Risk Examples of Customer Concern Functional Risk (Unsatisfactory performance outcome) • will this training course give me the skill to get better job • will this credit card be accepted wherever I want to make purchase • will the dry cleaner able to remove the stain from this jacket Financial (monetary loss, unexpected costs) • will I loose money if I make the investment recommended by the stock broker • could my identify be stolen if I make this purchase on the internet • will I incur a lot of unanticipated expenses if I go on this vacation ? Temporal (wasting time, consequences delays) • will I have to wait in queue before getting into the exhibition • will service @ this restaurant will be so slow, that I will be late for my afternoon meeting • will the renovation work of our bathroom be completed before e our friends come stay with us Physical (personnel injury or damage possession) • will I get hurt if I go skiing @ this resort • will the contents of this postage get damaged in the mail? • will I fall sick if I travel abroad on vocation Psychological (Personal Fear & emotions) • How can I be sure that this aircraft will not crash • will the consultant make me feel stupid? •Will the doctor‟s diagnosis upset me? Social ( How others think & react) • what will my friends think of me if they learnt that I stayed @ this cheap motel • will my relative approve the resonant I have chosen for the family reunion • will my college's disapprove of my selection of an unknown law firm Sensory (unwanted effects on any of the five senses) • will I get view of the parking lot rather than beach from my restaurant table • will the hotel bed is uncomfortable • will I be kept awake by noise from the guests in the room next door • will any room smell of state of cigarette smoke • will the coffee @ breakfast taste disgusting
  14. 14. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES 2. EVALUATION OF SERVICE ALTERNATIVES – Lesser alternatives in services than goods – For goods, you go to retail shops – All brands are displayed – Choose any one out of competing brands – In services – Fewer options – Go to one bank at a time Very little display of simultaneous brands 14
  15. 15. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES EMOTION AND MOOD – Customer in “bad mood” – Enters service establishment – Service interpretation „NEGATIVE‟ – Customer in good “mood” – Service interpretation „POSTIVE‟ – Behavior of other customers 15
  16. 16. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES Example- AIR – INDIA • • • • • • • Traveling from Delhi to London Fellow companion passenger Misbehaving Though Air India Service is good What do you feel Bad experience A feeling that Air-India cannot control misbehavior of passengers • May decide not to travel again 16
  17. 17. Module 3 Marketing of Infrastructure Services and Utilities Evaluation of alternatives: Service Expectation • Desired services • Adequate services • Predicted services • Zone of tolerance Purchase Decision
  18. 18. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES SERVICE PURCHASE • Conformance to “script” important • Script • Logical sequence of events expected by the customer Example • • • • • • • Meeting reputed cardiologist at Apollo hospital Patient enters the hospital Observes other patients are waiting Cardiologist comes Talks to you Examines you Gives you feedback 18
  19. 19. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES Example • If the above script happens you are comfortable • But if. - no patients in hospital - Cardiologist sends his junior to examine you - Refuses to meet you due to lack of time • You feel that service is not up to the expectations Don’t change the expected script 19
  20. 20. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES CUSTOMER COMPATIBILITY • When you are visiting hospital, airlines, restaurant or a bank • How do you feel when there is overcrowding • Misbehavior of neighboring customers • Dissatisfied Compatibility of customers is critical 20
  21. 21. Marketing of Infrastructure Services and Utilities Module 3 2. Service Encounter Stage • Service encounters are “ Moments of Truth” • Service encounters range from High contact to Low contact • The Servuction system • Theater as Metaphor for services Delivery: An integrated perspective
  22. 22. Module 3 Marketing of Infrastructure Services and Utilities Emphasizes encounters with service personnel High • Nursing Home • Good Restaurant • Airline Travel • Hair Cut •Management Consulting •Four Star Hotel • Telephone Banking • Retail Banking • Insurance • Car Repair • Fast Food • Budget Hotel • Dry Cleaning • Movie Theater • Metro • Cable TV • Internet Banking • Mail Based Repairs •Internet Based Services Low Emphasizes encounters with physical service elements Fig : Level of Customer Contact with Service Organizations
  23. 23. Module 3 Marketing of Infrastructure Services and Utilities The servuction Model Service Delivery System Service Operations System Inanimate Environment Customer A Technical Core Contact Personnel Back Stage ( Invisible) Front Stage ( visible) Customer B
  24. 24. Marketing of Infrastructure Services and Utilities Theater as Metaphor for services Delivery: An integrated perspective • Services Facilities • Personnel • Role and script theories – Role theory – Script theory – Role and script theory complements each other Module 3
  25. 25. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES 4. POST-PURCHASE EVALUATION – – – – – – – You go for haircut Not up to your expectations Reasons Poor skills of hairstylist Blame yourself for choosing wrong hairstylist Not communicating what you wanted Quality of services depends on customer feedback – A doctor‟s diagnosis depends on customer feedback 25
  26. 26. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES A. Diffusion of innovation • As services are intangible • Sometimes impossible to test, taste before purchase • Difficult to introduce innovations Example • Blocked heart arteries • Bypass surgery is the traditional diagnosis • Now Stents • Resist such innovations • Not sure of the outcome • Resist innovation Consumers adopt innovations in services more slowly than they adopt innovations in goods 26
  27. 27. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES B. BRAND LOYALTY • • • • • Brand switching is less frequent in services than goods When you change brands Risk, uncertainty Costs may be associated It is higher in services Example Changing your Family doctor • If you choose a new cardiologist • Insist on new tests • New medical reports Switching cost are high. If perceived risks are high, consumers are unlikely to change brands. 27
  28. 28. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES IMPLICATIONS FOR SERVICE MARKETERS • StanChart Credit card division • Convincing Citibank credit card customers to switch to Stanchart credit cards. • How? • Membership fees waived off • Lower interest rate on outstanding/overdue payments • Free saving bank account in StanChart Bank • Stan Chart trying to making switching cost lower Marketers need to lower switching costs to shift brand loyalty 28
  29. 29. Marketing of Infrastructure Services and Utilities Module 3 CONSUMER BEHAVIOR IN SERVICES CUSTOMER COMPATIBILITY CRITICAL : Singapore Airlines – Seating plan – Vegetarian customers – Sit together – Smokers sit together – Customers with similar taste and preferences are made to sit together Affects customer satisfaction 29
  30. 30. Marketing of Infrastructure Services and Utilities RELATIONSHIP MARKETING IN SERVICES Module 3
  31. 31. Marketing of Infrastructure Services and Utilities Module 3 Learning Objectives 1. Recognize the important role of customer loyalty plays in driving a service forms profitability. 2. Calculate the life time value (LTV) of a loyal customer 3. Understand why customers are loyal to a particular service firm 4. Explain the different types of marketing relationship to the customer firm relationship and understand how membership can be created 5. Know the core strategies of the Wheel of loyalty that explain how to develop a loyal customer base 6. Appreciate why it is so important for service firms to target the “right” customers 7. Use service tiering to manage the customer base and build loyalty 8. Understand the relationship between customer satisfaction and loyalty 9. Know how to deepen the relationship though cross selling and budlning 10. Understand the role of financial and non financial rewards in enhancing customer loyalty. 11. Appreciate the power of social, customization, and structural bonds in enhancing loyalty 12. Understand what factors cause customers to switch to a competitors and how to reduce such switching
  32. 32. Marketing of Infrastructure Services and Utilities Module 3 The Search for Customer loyalty • Why is customer loyalty important to a firms profitability? • Assessing the value to the loyal Customer • The Gap between Actual and Potential Customer Value • Why are the customer loyal?
  33. 33. Marketing of Infrastructure Services and Utilities Understanding the Customer – Firm Relationship • Transactional Marketing • Relationship Marketing • DATABASE marketing • Interaction marketing • Network Marketing • Creating “ Membership” Relationships Module 3
  34. 34. Module 3 Marketing of Infrastructure Services and Utilities The Wheel Of loyalty 3. Reduce Churn Drivers Enabled through: • Frontline staff • Account managers • Loyalty programs • CRM Systems • Conduct Churn diagnostic and monitor declining / churning customers 1. Build a Foundation for loyalty * Segment the market to match customer needs and firm capabilities. • Address key churn drivers: -Proactive retention measures - Reactive retention measures (e.g. save teams) • Put effective complaint handling and service recovery process in place * Be selective: Acquire only customers who fit the core value proposition Customer Loyalty * Manage t customer base via effective tiering of service. * Deliver quality service • Increase switching costs 2. Create Loyalty Bonds • Building higherlevel bonds: Social Customization Structural • Give Loyalty rewards • financial •Non financial • Higher tier service levels • Recognition and appreciation • Deepen the relationship Via : • Cross Selling • Bundling
  35. 35. Marketing of Infrastructure Services and Utilities Module 3 Building a foundation for Loyalty • Targeting the right Customers • Searching for value, not just volume • Managing the customer base though effective tiering of service • Customer satisfaction and service quality are prerequisites for loyalty
  36. 36. Marketing of Infrastructure Services and Utilities Module 3 Strategies for developing loyalty bonds with customers • Deeping the Relationship • Encouraging loyalty though financial and non financial rewards – Financial rewards – Non financial rewards • Building higher – Level Bonds – Social Bonds – Customization Bonds
  37. 37. Marketing of Infrastructure Services and Utilities Strategies for reducing Customer Defections • Analyze customer defections and monitor declining accounts • Address key churn drivers • Implement effective complaint handling and service recovery procedures • Increase switching costs Module 3
  38. 38. Marketing of Infrastructure Services and Utilities CRM : Customer Relationship Management • Common objective of CRM systems • Common CRM applications – Data Collection – Data analysis – Sales force automation – Marketing automation – Call center automation Module 3
  39. 39. Marketing of Infrastructure Services and Utilities What doest a Comprehensive CRM strategy Encompass? 1. Strategy Development 2. Value creation 3. Multichannel integration 4. Information Management 5. Performance assessment Module 3
  40. 40. Marketing of Infrastructure Services and Utilities Common Failures in CRM Implementation • Viewing CRM as a technology initiative • Lack of customer focus • Insufficient appreciation of customer lifetime value (LTV) • Inadequate support from top management • Failing to re-engineer business process • Underestimating the challenges in data integration Module 3
  41. 41. Marketing of Infrastructure Services and Utilities How to get CRM implementation Right Module 3

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