2012 11-11- services marketing notes


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2012 11-11- services marketing notes

  1. 1. SERVICES MARKETING1. What are services? Categorize them. INTRODUCTION: The world economy is increasingly characterised as a services economy. This is because of the increased importance & the share of service sector in the economies of most developed & developing countries. There has been a rapid shift from agriculture to industry & then to the service sector. The shift has brought about a change in the definition of goods & services. Goods are no longer considered separate from services but represent an integral part of the product & this interconnectedness of goods & services is represented on a goods-services continuum. Definition & characteristics of services: According to the American Marketing Association services is defined as –activities, benefits & satisfactions which are offered for sale or provided in connection with the sale of goods. Services are deeds, processes &performances provided or co produced by one entity or person for another entity or person. eg: IBM –Global leader in IT, services & consulting ;Intangible deeds & performances are provided for its customers. Services are all economic activities whose output is not a physical product or construction. It is generally consumed at the time it is produced & provides added value in forms such as convenience ,amusement, timeliness, comfort or health that are essentially intangible concerns of its first purchaser. Service industries: Services as products, customer service & derived service Services- 4 categories
  2. 2. 1. Service industry & company 2. Services as products 3. Customer service 4. Derived service SERVICE INDUSTRIES & COMPANIES: Includes those industries & Companies are typically classified within service sector whose core product is a service. PURE SERVICE COMPANIES: Taj palace hotels-lodging Air India-transportation Birla sunlife-Insurance & financial services Fortis- healthcare Columbia asia –health care SERVICES AS PRODUCTS: Services as products represent a wide range of intangible product offerings that customers pay for in the market place. Service products are sold by service cos’& non-service cos’ such as manufacturing & technological cos’ .eg: IBM &HP offer IT consulting services to the marketplace competing with firms such as EDS, ACCENTURE, which are traditional pure service firms. CUSTOMER SERVICE: It is also a critical aspect of what we mean by “service.” It is the service provided in support of a company’s core products. Cos’ typically do not charge for customer service provided. Many companies operate customer service call centers, often staffed around the clock. Quality customer service is essential to build customer relationships. It should not be confused with services provided for sale by the company. DERIVED SERVICE: The value derived from physical goods is really the service provided by the good, not the good itself.eg: Computers provide information.
  3. 3. MODULE-31) Define customer expectations, customer satisfaction & customer delight. Should service marketers delight their customers? CUSTOMER EXPECTATIONS: They are beliefs about service delivery that serve as standards or reference points against which performance is judged. Customers are accustomed to compare their perceptions of performance with reference points when they are evaluating service quality. Therefore thorough knowledge about customers expectations is critical to services marketing. A service provider can deliver quality service only when he is aware about customer’s expectations. If he gauges customer’s expectations in a wrong way,then he is bound to lose out in the competitive market & may incur financial losses. CUSTOMER SATISFACTION: When the customer gets the desired treatment that he expects from the service provider. eg: When you visit a super market, you find the required product & also the sales executives very pleasing &informative. You are satisfied at the end of the purchase. CUSTOMER DELIGHT: As a customer you get value addition, something more than you actually expect from the service provider which is a desirable experience. eg: When you fly in Emirates, you get a, call from them asking about your choice of music & on the day of travel there is a chauffeur driven car-limousine at your service, playing your favourite music & all along you feel like a
  4. 4. queen/king with all this service. This is something more you get beyond you expectation-customer delight.2) What is the difference between desired service & adequate service? Why should a service marketer understand both the services? MEANING & TYPES OF SERVICE EXPECTATIONS: Usually, the level of expectation varies widely depending up on the reference point which the customer holds. Lets imagine that we are planning to dine in a restaurant. Ideal expectations or desires- HIGH-Everyone says that this place has fantastic service philosophy & I want to celebrate my birthday here. NORMATIVE ‘should’ EXPECTATIONS:HIGH-This is quite an expensive restaurant & so food ought to be good & service must be excellent. EXPERIENCE BASED NORMS: ADEQUATE-Most of the time, this place is good but when it gets busy the service is slow. ACCEPTABLE EXPECTATIONS: ADEQUATE- I expect this restaurant to serve me in a adequate way. MINIMUM TOLERABLE EXPECTATIONS: LOW- I expect terrible service from this restaurant but I have come as the price is low. CUSTOMER EXPECTATIONS:  Deeper & broader than requirement  Usually un stated  Drives all your intentions & decisions  Primary measure of your success
  5. 5. EXPECTATIONS OF SERVICE: Desired service expectations are influenced by explicit service promises, implicit service promises, word of mouth communication & past experience. SUB CATEGORIES OF SERVICE: Restaurant-expensive, ethnic, fast food or airport-desired expectations across categories of service i.e fast food restaurant-quick convenient tasty food in a clean setting while in an expensive restaurant-elegant surroundings, gracious employees, candle light dinner, fine food.3) Explain zone of tolerance with examples. ZONE OF TOLERANCE: Range or window in which customers do not particularly notice service performance. When it falls out of the range –very high or low; the service attracts the customer’s attention either in a positive or negative way. eg: Service at a check –out line in a grocery store. If service consumes a period of 5 to 10 mins ,he may grumble & look at the watch. The longer the wait is below the zone of tolerance[10 min],the more frustrated he becomes. Performance basically varies across providers, across employees from the same providers & even with the same service employee. The extent to which the customers recognise & are willing to accept this variation is called as zone of tolerance. This zone of tolerance can expand or contract for a given customer. An airline customer’s zone of tolerance will narrow when she is running late & she has to make the plane while on the other hand, a customer who arrives at the airport early
  6. 6. may have a longer zone of tolerance, making the wait in line far less noticeable, then when he is pressed for time.  Different customers possess different zones of tolerance. Very busy customers are time pressed & desire short waiting time. eg: when it comes to having repair personnel or guy who presses clothes, working women in particular have a more restricted window of acceptable time duration for that appointment than customers who work from home or the ones who are homemakers.  An individual customer’s zone of tolerance increase or decreases depending on a number of factors including company controlled factors such as price. When there is increase in price, customers are less tolerant of poor service.  Zone of tolerance vary for service dimensions. Customers’ tolerance zones vary for different service attributes or dimensions. Customers are likely to be less tolerant about unreliable services[broken promises or service errors]than other service deficiencies.  Desired service is relatively idiosyncratic & stable compared with adequate service which moves up & down in response to competition & other factors.4. Which are the factors that influence customer’s expectations? Factors that influence customer’s expectations of service Personal needs Lasting service intensifiers 1. Personal needs are those states or conditions essential to the physical or psychological wellbeing of the customer. They are pivotal factors that decide what the customers decide in service.
  7. 7. Personal needs can be categorised into four divisions: o Physical o Social o Psychological o Functional A person who goes to a café right after work expects quick & efficient service as he is hungry & tired, while a person who goes to chat with friends would wait longer to get served as he comes there for entertainment purpose. 2. Lasting service intensifiers: They are individual stable factors that lead the customer that lead the customer to a heightened sensitivity to service. One of the most important of these factors is1. Desired service expectations ,which occur when customer expectations are driven by another person or group of people. eg: A parent choosing a vacation for the family-customer’s individual expectation is intensified because they represent & must answer to other parties who derive the service. 3. Personal service philosophy: the customer’s underlying generic attitude about the meaning of service & the proper conduct of service providers. Customers who are themselves into service business have strong service philosophies. eg:An air hostess who is trained for ettiquecy will be well mannered & courteous. She would expect similar treatment from another person of the same job profile & her expectations from the service providers will be intensified.5. Which are the factors that influence adequate service? Sources of adequate service expectations;
  8. 8. 1. Adequate service-is the level of service the customer finds acceptable. These influences are short term & tend to fluctuate more compared to desired service expectations. Factors that influence adequate service: • Temporary service intensifiers • Perceived service alternatives • Customer self perceived service role • Situational factors • Predicted service  Temporary service intensifiers: Personal emergency situations where there is an urgent need for service eg: accidents-need for automobile insurance  Perceived service alternatives: Other service providers  Customer’s self perceived service role: they specify the level of service expected. eg:I want my dosa piping hot, nicely roasted & golden in color2) PERCEIVED SERVICE ALTERNATIVES: Other providers from whom customers can obtain service. If customers believe that they have multiple service providers to choose from or if they can provide the service for themselves, their levels of adequate service are higher than those of customers who believe that it is not possible to get better service anywhere.3) Customer’s self perceived service role: Customer’s perceptions of the degree to which customers exert an influence on the level of service they receive.4) SITUATIONAL FACTORS: Service performance that many people conditions that customers view as beyond the control of service provider. eg: catastrophes like
  9. 9. earthquakes which affect a large no of people-for insurance companies ,customers service expectations will reduce because people recognize that there are inundated demands for their service.6. Which sources hold good for both desired & predictable services? SOURCES: 1) EXPLICIT SERVICE PROMISES-They are personal & non-personal statements about service made by the organization to the customer. Statements are personal when they are communicated by sales people or repair personnel; they are non-personal when they come from web pages ,advertising, brochures & other written publications. 2) IMPLICIT SERVICE PROVIDERS-service related cues that lead to inferences about what these service should & would be like. These quality cues are dominated by price & tangibles associated with service. 3) WORD –OF –THE-MOUTH COMMUNICATION-It is unbiased. Influences both desired & predicted service. 4) PAST EXPERIENCE-Customer’s previous exposure to service that is relevant to the focal service, is another force in shaping predictions & desires.6. How do we measure the quality of service in marketing? Outline the importance of service quality in marketing with relevant illustrations. Quality in service is defined by the degree of compliance between stated goals & achieved targets. It is easy to conform to a standard. Because of intangibility factor, it is difficult to understand service & comprehend it.
  10. 10. • Perception of service quality is felt by all parties involved in a service delivery process: service providers, customers & suppliers. Quality can be viewed from multiple perspectives:• Product-based: Based on measurable parameters. It is suitable for goods but is a challenge for services. The number of times the telephone rings before the receiver is picked up by a service provider can be a basis of measuring service quality.IMPORTANCE OF QUALITY IN SERVICE:  Lower costs-Quality control processes lower cost & increase productivity.  Immune or less vulnerable to price wars: High quality services have higher price. eg: Bose music systems.  Higher customer loyalty: SQ ensures customer satisfaction that drives customer loyalty & enhanced profits.  Higher market share: loyal customers contribute to positive word –of-mouth publicity.  Higher ROI-High quality service contributes to higher profitability. eg: AppleQUALITY IN SERVICE :  The measurement & assessment of service quality is very challenging owing to the intangibility factor.  Quality can be viewed on following basis:  Product based-The no of times a phone rings before its attended by service provider can be a basis of measuring responsiveness.
  11. 11.  User based: Quality is in the eyes of the beholder. TYPES OF SERVICE QUALITY:  MANUFACTURING BASED  Conformance based  Output is considered to be of high quality if it conforms to design specifications.  VALUE BASED: Service provider must strike a balance between conformance & performance.  Transcendental: Quality can only be experienced; cannot be described or documented. eg: tourism Sub categories:  Internal service quality: conformance & compliance to design standards.  External quality: it is customer’s perception7. Service dimensions are determinants of service quality & performance. Justify. The various service dimensions are: Eight dimensions were identified by David. A. Garvin.  PERFORMANCE  FEATURES  RELIABILITY  CONFORMANCE-Delivery quality meeting design standards.  SERVICABILITY-behavioral dimension; politeness  AESTHETICS-external appearance  PERCEIVED QUALITY
  12. 12. Eg: When we consider the case of ‘The Mumbai dabbawalahs’,we understand their commitment towards their work which was 99.99% accurate. Their work culture is amazing where they give importance to delivering quality products that are inexpensive that’s affordable by the common man & are punctual, reliable & conform with quality standards (six sigma)qualifying all the service dimensions, thus set an example that working in teams is effective to implement their action plan.8. What are the challenges posed by service industry? Main challenges are: Intangibility factor. Service marketers are faced with the need to provide value to consumers based on intangibles that can be difficult to quantify and deliver. Increasingly, consumers are requiring higher and higher levels of service and more convenient access to information. With tangible products, consistency can be maintained more readily and quality can be monitored and impacted. In service industries, the number of people or touch- points involved in the delivery process and the inconsistencies in human behaviors and actions make maintaining quality and brand consistency an ongoing challenge. Ultimately past experience given by the service provider plays a vital role in making future decisions regarding consumption of the service repeatedly from the same service provider.
  13. 13.  Innovation in service is also expected by youth centric customers that poses a challenge in services marketing. The profit a customer is expected to generate while he maintains a relationship with the company.CUSTOMER RELATIONSHIP MANAGEMENT:1) Why marketing concepts & philosophies are premises for developing a CRM system? CRM consists of three components; customer, relationship & management. Customer: The customer is the only source of company’s present profit & future growth. A good customer who provides more profit with less resource is scarce because customers are knowledgeable & the competition is fierce. CRM can be thought as a marketing approach that is based on customer information. Relationship: The relationship between a company & its customers involves continuous bidirectional communication & interaction. The relationship can be short term or long term continuous or discrete, repeating or one-time. It can be attitudinal or behavioural. Customers may have positive attitude towards the company & its products but their buying behaviour is highly situational. Management: It is not only a marketing activity but also involves continuous corporate change in culture & processes. CRM requires a comprehensive change in the organisation & its people. CRM extends itself from customer acquisition to customer retention to customer delight. The important steps are: 1) Identifying the right customer: Right customer segmentation. The segmentation criteria must change needs to changer from conventional demographic/psychographic segmentation to need based behavioural segmentation. This will need to right definition
  14. 14. of the right target customer. Consumer behavioural variables are more relevant & actionable & can help in right targeting. Hence marketers can develop sustainable business models & can differentiate themselves from others by using high-level consumer behavioural variables.2) Retaining the right customer: It is v. important to measure customer profitability. ROC (return on customers) should be calculated on three dimensions that are Frequency of customer purchase, Value per transaction, Profitability. The customers who are low on all these dimensions need least focus. The customers scoring high on all these three need maximum focus. The customers lying between these two extremes need to be carefully analyzed to decide the degree of focus required for each of the segments. Marketers need to lay down systems & processes to keep track of these dimensions. Identification & sizing of these clusters can help develop right strategies of each customer group.3) Delighting the customer: Marketers need to develop strong value prepositions in terms of better products & better services so that strategies are not only consumer-centric but also lead to high profitability. Pleasing the customers should not be at the cost of hurting the company. The CRM BUSINESS CYCLE: Acquire & retain Understand & differentiate Develop & customize Interact & deliver1) Acquisition & retaining: Acquisition is a vital stage in building customer relationship. For the purpose of
  15. 15. customer acquisition, an organization is likely to focus its attention on prospects, enquiries, lapsed customers, former customers, competitor’s customers’ referrals & the existing buyers.2) Understand & differentiate: Organizations cannot have a relationship with customers unless they understand them, find out what they value, what type of services are important to them, how & when they like to interact & what they want to buy. They should involve in these activities.3) Develop & customize: Service provider should also cater to the nische segment by customizing service to their requirements. eg:. Dell has a service philosophy wherein the customer specifies his configuration to the service provider & the same is delivered in 21 days.4) Interact & deliver: Sales personnel must be pleasant with customers & offer them information relevant to the product or service provided; deliver desired service on time avoiding delays & deficiencies in service performance.PRINCIPLES OF CRM: Treat customers individually. Acquire & retain customer loyalty through personal relationship. Select “Good” customers instead of Bad customers based on life time valueEVOLUTION OF CRM: Customers as strangers Customers as acquaintances Customers as friends Customers as partners.RELATIONSHIP CHALLENGES: The customer is not always right.
  16. 16.  The wrong segment Not profitable in the long run Difficult customers-dysfunctional customers Ending business relationshipsSHOULD FIRMS FIRE THEIR CUSTOMERS?LIFETIME VALUE OF A CUSTOMER: The profit a customer isexpected to generate while he maintains a relationship with thecompany.