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Service marketing capston


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Service marketing capston

  3. 3. EXECUTIVE SUMMARYService marketing is relatively new for most service providers. few largemanufacturers are aware of it, but this is new territory for most medium-to-smallersized manufacturers and independent service providers.Something that many forget is that, like any other product, service products needongoing management. Services and prices need to be adjusted over time to trackcustomers changing needs, competition, and the effect of new products on agingproducts. Costs can go up or down, competitors become weaker or stronger, newservice technologies may be employed. Marketing should be tracking these things,adjusting for them, and supplying information and training to those who sell services.When the time comes to sunset a product, marketing should be developing plans tophase out services on certain products, or handing over support to independents.It is a rapidly growing specialty, however, with demand for service marketersoutstripping the supply. This indicates the need of study of service marketing andmain motto behind selecting this topicService Marketing Page 3
  4. 4. INDEX s. Section Pages no 1. Service marketing 5-19 2. GAP model 20-21 3. Decision making and evaluation of services 22-25 4. Customer expectation of services 26-39 5. Building customer relationship 40 6. Service blue printing 41-42 7. Marketing information system 43-44 8. Employees role in service delivery 45-47 9. Customers role in service delivery 48-49 10. Yield management 50-51 11. Pricing of services 51-52 12. new service development 53- 13. Types of service marketing strategies 53-54 14. Tips for service industry 55-58 15. Bibliography 59Service Marketing Page 4
  5. 5. Service marketingServices marketing typically refer to both business to consumer (B2C) and business to business(B2B) services, and include marketing of services like telecommunications services, financialservices, all types of hospitality services, car rental services, air travel, health care services andprofessional services. The range of approaches and expressions of a marketing idea developedwith the hope that it be effective in conveying the ideas to the diverse population of people whoreceive it.Services are economic activities offered by one party to another. Often time-based,performances bring about desired results to recipients, objects, or other assets for whichpurchasers have responsibility. In exchange for money, time, and effort, service customersexpect value from access to goods, labor, professional skills, facilities, networks, and systems;but they do not normally take ownership of any of the physical elements involved.There has been a long academic debate on what makes services different from goods. Thehistorical perspective in the late-eighteen and early-nineteenth centuries focused on creationand possession of wealth. Classical economists contended that goods were objects of valueover which ownership rights could be established and exchanged. Ownership implied tangiblepossession of an object that had been acquired through purchase, barter or gift from theproducer or previous owner and was legally identifiable as the property of the current owner.Marketing a service differs from promoting a tangible product because consumers often need tobe educated about a service. Service marketing often requires more explanation as to why thecustomer needs the product, how it works and why you are the best entity to deliver the service.The world economy nowadays is increasingly characterized as a service economy. This isprimarily due to the increasing importance and share of the service sector in the economies ofmost developed and developing countries. In fact, the growth of the service sector has longbeen considered as indicative of a country‘s economic progress.Economic history tells us that all developing nations have invariably experienced a shift fromagriculture to industry and then to the service sector as the main stay of the economy.This shift has also brought about a change in the definition of goods and services themselves.No longer are goods considered separate from services. Rather, services now increasinglyrepresent an integral part of the product and this interconnectedness of goods and services isrepresented on a goods-services continuum.The service sector is going through almost revolutionary change, which dramatically affects theway in which we live and work. New services are continually being launched to satisfy ourexisting needs and to meet needs that we did not even know we had. Not even 10 years ago,few people anticipated a need for email, online banking, Web hosting, and many other newservices. Today, many of us feel we can‘t do without them. Similar transformations are occurringin business-to-business markets. Service organizations vary widely in size. At one end of thescale are huge international corporations operating in such industries as airlines, banking,insurance, telecommunications, and hotels. At the other end of the scale is a vast array ofService Marketing Page 5
  6. 6. locally owned and operated small businesses, including restaurants, laundries, optometrists,beauty parlors, and numerous business-to-business services, to name a few.. Stated simply, Services Marketing refers to the marketing of services as against tangibleproducts. As already discussed, services are inherently intangible, are consumedsimultaneously at the time of their production, cannot be stored, saved or resold once they havebeen used and service offerings are unique and cannot be exactly repeated even by the sameservice provider. Marketing of services is a relatively new phenomenon in the domain ofmarketing, having gained in importance as a discipline only towards the end of the 20th century.Services marketing first came to the fore in the 1980s when the debate started on whethermarketing of services was significantly different from that of products so as to be classified as aseparate discipline. Prior to this, services were considered just an aid to the production andmarketing of goods and hence were not deemed as having separate relevance of their own.The 1980s however saw a shift in this thinking. As the service sector started to grow inimportance and emerged as a significant employer and contributor to the GDP, academics andmarketing practitioners began to look at the marketing of services in a new light. Empiricalresearch was conducted which brought to light the specific distinguishing characteristics ofservices. By the mid 1990s, Services Marketing was firmly entrenched as a significant subdiscipline of marketing with its own empirical research and data and growing significance in theincreasingly service sector dominated economies of the new millennium. New areas of studyopened up in the field and were the subject of extensive empirical research giving rise toconcepts such as – the product-service spectrum, relationship marketing, franchising ofservices, customer retention etc.Importance of service marketingGiven the intangibility of services, marketing them becomes a particularly challenging and yetextremely important task. A key differentiator: Due to the increasing homogeneity in productofferings, the attendant services provided are emerging as a key differentiator in the mind of theconsumers. E.g.: In case of two fast food chains serving a similar product (Pizza Hut andDomino‘s), more than the product it is the service quality that distinguishes the two brands fromeach other. Hence, marketers can leverage on the service offering to differentiate them from thecompetition and attract consumers. Importance of relationships: Relationships are a key factorwhen it comes to the marketing of services. Since the product is intangible, a large part of thecustomers‘ buying decision will depend on the degree to which he trusts the seller. Hence, theneed to listen to the needs of the customer and fulfill them through the appropriate serviceoffering and build a long lasting relationship which would lead to repeat sales and positive wordof mouth. Customer Retention: Given today‘s highly competitive scenario where multipleproviders are vying for a limited pool of customers, retaining customers is even more importantthan attracting new ones. Since services are usually generated and consumed at the sametime, they actually involve the customer in service delivery process by taking into considerationhis requirements and feedback. Thus they offer greater scope for customization according tocustomer requirements thus offering increased satisfaction leading to higher customer retention.Service Marketing Page 6
  7. 7. Relationships Are KeyIn service marketing, because there is no tangible product, relationships are key. Servicemarketers must listen to and understand the needs of customers and prospective customers tobuild loyalty and trust. Ultimately, effective relationships in service marketing will lead to repeatsales and positive word of mouth.Multiple Touch pointsService marketing involves many touchpoints for the consumer. Interactions with multiplepeople and experiences that are less tangible than when buying an actual product all impact theconsumers perspective of the purchase process. These touchpoints work together to establisha perception in the consumers mind.Services ProliferateConsumers have many service options to choose from, and because the product is intangible,the challenge for the service marketer is to somehow make her services stand out from thecrowd. Because service marketing is so prolific, marketers must think of ways to communicatethe benefits of the service they offer in language that reflects consumer need and value.Feedback Improves ServiceUnlike the marketing process for a tangible product, service marketing actually involves theconsumer in the marketing process. He is engaged in the process and contributes to a positiveoutcome. For this reason, it is important to seek consumer feedback and to use that feedback toimprove service marketing effectiveness.Technology ImpactsTechnology is having a major impact on the service economy. You can use technology tostreamline service activities and provide do-it-yourself options for consumers. Internet-basedservices, for instance, allow consumers to participate actively in the service marketing process,often never involving contact with another human being. Having a website is important, becausepeople like to get information about service providers before deciding which one to use.Alternate viewA recently proposed alternative view is that services involve a form of rental through whichcustomers can obtain benefits. What customers value and are willing to pay for are desiredexperiences and solutions. The term, rent, can be used as a general term to describe paymentmade for use of something or access to skills and expertise, facilities or networks (usually for adefined period of time), instead of buying it outright (which is not even possible in manyinstances).There are five broad categories within the non-ownership framework 1. Rented goods services: These services enable customers to obtain the temporary right to use a physical good that they prefer not to own (e.g. boats, costumes) 2. Defined space and place rentals: These services obtain use of a defined portion of a larger space in a building, vehicle or other area which can be an end in its own rightService Marketing Page 7
  8. 8. (e.g. storage container in a warehouse) or simply a means to an end (e.g. table in a restaurant, seat in an aircraft) 3. Labor and expertise rental: People are hired to perform work that customers either choose not to do for themselves (e.g. cleaning the house) or are unable to do due to the lack of expertise, tools and skills (e.g. car repairs, surgery) 4. Access to shared physical environments: These environments can be indoors or outdoors where customers rent the right to share the use of the environment (e.g. museums, theme parks, gyms, golf courses). 5. Access to and usage of systems and networks: Customers rent the right to participate in a specified network such as telecommunications, utilities, banking or insurance, with different fees for varying levels of accessIn defining service marketing we can modify the definition of American Marketing Association onMarketing by adding the following changes. Services marketing are an organizational functionand a set of process for identifying or creating, communicating, and delivering value tocustomers and for managing Customer relationship in a way that benefit the organization andstake holders.Definition and characteristics of ServicesThe American Marketing Association defines services as - ―Activities, benefits and satisfactionswhich are offered for sale or are provided in connection with the sale of goods.‖The defining characteristics of a service are: 1. Intangibility: Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt. This is most defining feature of a service and that which primarily differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering. 2. Heterogeneity/Variability: Given the very nature of services, each service offering is unique and cannot be exactly repeated even by the same service provider. While products can be mass produced and be homogenous the same is not true of services. eg: All burgers of a particular flavor at McDonalds are almost identical. However, the same is not true of the service rendered by the same counter staff consecutively to two customers. 3. Perishability: Services cannot be stored, saved, returned or resold once they have been used. Once rendered to a customer the service is completely consumed and cannot be delivered to another customer. eg: A customer dissatisfied with the services of a barber cannot return the service of the haircut that was rendered to him. At the most he may decide not to visit that particular barber in the future. 4. Inseparability/Simultaneity of production and consumption: This refers to the fact that services are generated and consumed within the same time frame. Eg: a haircut is delivered to and consumed by a customer simultaneously unlike, say, a takeaway burgerService Marketing Page 8
  9. 9. which the customer may consume even after a few hours of purchase. Moreover, it is very difficult to separate a service from the service provider. Eg: the barber is necessarily a part of the service of a haircut that he is delivering to his customer.Implications of Intangibility  Services cannot be inventoried  Services cannot be patented  Services cannot be readily displayed or communicated  Pricing is difficultImplications 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 promotedImplications of Simultaneous Production and ConsumptionService Marketing Page 9
  10. 10.  Customers participate in and affect the transaction  Customers affect each other  Employees affect the service outcome  Decentralization may be essential  Mass production is difficultImplications of Perishability  It is difficult to synchronize supply and demand with services  Services cannot be returned or resoldEx: When Michelle goes to her local restaurant, she sometimes gets her food fast and hot.Other times her order is slow, and her food arrives at her table cold. If Michelle wants a specialorder, like her burger with a baked potato instead of fries, she never knows how long she‘ll haveto wait for her food. Michelle is experiencing the service characteristic of?Michelle is experiencing the service characteristic of?� Intangibility� Inseparability� Variability� Autonomy� perish abilityService Marketing Page 10
  11. 11. Traditional Marketing MixThe first four elements in the services marketing mix are the same as those in the traditionalmarketing mix. However, given the unique nature of services, the implications of these areslightly different in case of services. 1. Product: In case of services, the ‗product‘ is intangible, heterogeneous and perishable. Moreover, its production and consumption are inseparable. Hence, there is scope for customizing the offering as per customer requirements and the actual customer encounter therefore assumes particular significance. However, too much customization would compromise the standard delivery of the service and adversely affect its quality. Hence particular care has to be taken in designing the service offering. 2. Pricing: Pricing of services is tougher than pricing of goods. While the latter can be priced easily by taking into account the raw material costs, in case of services attendant costs - such as labor and overhead costs - also need to be factored in. Thus a restaurant not only has to charge for the cost of the food served but also has to calculate a price for the ambience provided. The final price for the service is then arrived at by including a mark up for an adequate profit margin. 3. Place: Since service delivery is concurrent with its production and cannot be stored or transported, the location of the service product assumes importance. Service providers have to give special thought to where the service would be provided. Thus, a fine dine restaurant is better located in a busy, upscale market as against on the outskirts of a city. Similarly, a holiday resort is better situated in the countryside away from the rush and noise of a city. 4. Promotion: Since a service offering can be easily replicated promotion becomes crucial in differentiating a service offering in the mind of the consumer. Thus, service providers offering identical services such as airlines or banks and insurance companies invest heavily in advertising their services. This is crucial in attracting customers in a segment where the services providers have nearly identical offerings.Expanded Mix for Services the 7 PsWe now look at the 3 new elements of the services marketing mix - people, process andphysical evidence - which are unique to the marketing of services. 5. People:Service Marketing Page 11
  12. 12. People are a defining factor in a service delivery process, since a service is inseparable from the person providing it. Thus, a restaurant is known as much for its food as for the service provided by its staff. The same is true of banks and department stores. Consequently, customer service training for staff has become a top priority for many organizations today. 6. Process: The process of service delivery is crucial since it ensures that the same standard of service is repeatedly delivered to the customers. Therefore, most companies have a service blue print which provides the details of the service delivery process, often going down to even defining the service script and the greeting phrases to be used by the service staff. 7. Physical Evidence: Since services are intangible in nature most service providers strive to incorporate certain tangible elements into their offering to enhance customer experience. Thus, there are hair salons that have well designed waiting areas often with magazines and plush sofas for patrons to read and relax while they await their turn. Similarly, restaurants invest heavily in their interior design and decorations to offer a tangible and unique experience to their guests.Structure of the Service Sector The services sector is remarkably diverse. It comprises a widearray of industries that sell to individual consumers and business customers, as well as togovernment agencies and nonprofit organizations. Services make up the bulk of today‘seconomy and also account for most of the growth in new jobs. Unless you are alreadypredestined for a career in family manufacturing or agricultural business, the probability is highthat you will spend your working life in service organizations. The size of service sector isincreasing in almost all economies around the world .As national economy develops, the relativeshare of employment among agricultural industry, and services change dramatically. Even inemerging economies, service output is growing rapidly and often represents at least half of theGDP. 1. Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order with the company. 2. Delivery Ease: Delivery refers to how well the product or service is brought to the customer. It includes speed, accuracy, and care throughout the process. 3. Installation: It refers to the work done to make a product or service operational in its planned location. Ease of installation becomes a true selling point, especially when the target market is technology novice. 4. Customer Training: It refers to training the customers employees to use the vendors equipment properly and efficiently. 5. Customer Consulting: It refers to data, information systems, and advice services that the seller offers to buyers.Service Marketing Page 12
  13. 13. 6. Maintenance and Repair: It describes the service program for helping customers keep purchased products in good working order.[5]Types of Services 1. Core Services: A service that is the primary purpose of the transaction. Eg: a haircut or the services of lawyer or teacher. 2. Supplementary Services: Services that are rendered as a corollary to the sale of a tangible product. Eg: Home delivery options offered by restaurants above a minimum bill value.Challenges for Services • Defining and improving quality • Communicating and testing new services • Communicating and maintaining a consistent image • Motivating and sustaining employee commitment • Coordinating marketing, operations and human resource efforts • Setting price • Standardization versus personalization 1. IntangibleOne of the most obvious challenges in marketing services is that you are selling somethingintangible. People can touch and see a product and are exchanging money for something theyneed and can take home to use. Conversely, people only see the results of a service, whichmay not always be immediate. It requires faith on the customers‘ part that they will get thedesired results for their money. For example, if you own a cleaning service, you have toconvince your customers to trust you that their homes will be cleaned to their satisfaction. 2. Demonstrating EmpathyConvince your customers in your marketing efforts that you understand their problems and areoffering a solution. Do this using people, processes and physical evidence. For example, if youand your employees have families and work full time, this identifies with working families whohave no time for housecleaning. Before-and-after pictures in your marketing materials, such asyour website, brochures and advertising, are all physical evidence. Finally, you may need tointeract personally with customers multiple times as part of the marketing process to establish arelationship and convince them you understand their needs. 3. Competitive PricingHow you price your services is an important marketing element. You need to be competitive, soresearch several competitors‘ prices to gauge what your prospective customers expect to pay.Then assess your costs -- your overhead such as rent, insurance, salaries and supplies -- todetermine if you can meet your costs and make a profit with that pricing. Consider bundlingextra features with your services to differentiate your company and garner a higher price. Forexample, you can offer to wax floors as part of your service, or do laundry as part of a bonuspackage. 4. PeopleAs a services company, marketing your people, including you, is paramount. A service isconsumed when it‘s purchased or produced -- just the results or effects linger, and sometimesService Marketing Page 13
  14. 14. temporarily. For example, your customer‘s home will get dirty again, so the result of yourcleaning delivery is temporary. The client may or may not call you again based on the overallexperience. How your people performed that service will impact repeat business. Therelationship is also important; follow up with your customer with personalized notes or atelephone reminder as part of your marketing tactics.Examples of Service Industries • Health Care – hospital, medical practice, dentistry, eye care Ex: • Financial Services – banking, investment advising, insurance Ex: • Hospitality – restaurant, hotel/motel, bed & breakfast, Ex:Service Marketing Page 14
  15. 15. • Travel – airlines, travel agencies, theme park – Ex: – • Others: – hair styling, pest control, plumbing, lawn maintenance, counseling services, health club Ex:Service Marketing Page 15
  16. 16. Service Marketers can influence• Make realistic accurate promises that reflect the service actually delivered rather thanidealized version of service• Ask contact people for feedback on the accuracy of promise made in advertising and selling• Ensure service tangibles accurately reflect the type and level of service provided.• Use market research to determine sources of derived customer expectation and theirrequirement• Educate customers to understand their role and perform better.• Identify influencers and opinion leaders for the service and concentrate marketing efforts onthem. Why study Service marketing???  Size of Service SectorI. The Services Sector contributes the most to the Indian GDP. The Sector of Services in India has the biggest share in the countrys GDP, it accounts for more than 50% contributionII. The various sectors under the Services Sector in India are construction, trade, hotels, transport, Restaurant, communication and storage, social and personal Services, community, insurance, financing, business services, and real estate.III Services marketing concepts and strategies have developed in response to the tremendousgrowth of service industriesiV. Most new employment is provided by services Strongest growth area for marketing  Deregulation and Services Marketing I. Specific demand for services marketing concepts has come from deregulated industries and professional services II. Deregulatory moves by governments have affected service industries such as airlines, banking, and telecommunications. As a result, marketing decisions that used to be tightly controlled by government are now partially, and sometimes totally, within the control of individual firms  Learning Objectives� Difference between services and consumer marketingService Marketing Page 16
  17. 17. � Consumer Behavior in services� Customer Expectation & perception of Services� Building customer relationship� Service development & design� Physical Evidence & People in service� Service Marketing Communication� Delivering Service� pricing of services� Strategies of Services The Services Marketing Triangle1. External MarketingIn an external marketing, marketers interact directly to the end users. They try to understandthe need of customers and satisfy them after fulfilling their demands.In an external marketing, marketers set the pricing policies and create awareness about theproducts and design promotional strategies and techniques that help to attract the customerstowards their products and services.They communicate with their customers directly and convince them to buy their products. Theyinvolve in constructive group of activities that helps to design excellent products that meet thecustomer‘s demands efficiently.Service Marketing Page 17
  18. 18. Their goal is to create awareness about their products or services among users bycommunicating with them directly. They also grab the attention of the market and produceinterest in their services. External marketing is one of the important parts of service marketingtriangle.2. Internal MarketingIn an internal marketing, marketers try to interact with their employees in order to know aboutthe strengths and weaknesses of their organization. The owner of the company tries to involveall of his employees in general discussion, believe on teamwork.Internal marketing involves general discussions, teamwork, training, motivation and rewards onbest performance. Employees communicate with themselves on specific project. Teamworkhelps to involve employees in their assigned tasks and generate output quickly.Organizational rewards motivate employees to make their performance effective. All employeesunderstand the goals and objectives of the company clearly and try to meet organizationalgoals. They also know how to grab the attention of their customers.Customers are highly satisfied with their products or services. They always try to satisfy theirclients at any cost. If employees of the company are satisfied with their job and performancerewards, they can become an effective asset of any organization.Executives of the organizations fully understand the service marketing triangle if they want togain a competitive advantage in the market.3. Interactive MarketingInteractive marketing involves in the delivery of products or service to the customers and front –office employees of the company. It is the most important part of the service marketing trianglebecause it establishes a long term or short term relations with customers.Customers who are highly satisfied with their products or services can become regularcustomers of their brand. Marketers who cannot compromise on quality and deliver high qualityproducts to their customers have a great community of loyal customers. Their loyal customersalways prefer them to buy products.Service Marketing Page 18
  19. 19. Service marketing triangle has great importance and its components are essential in thesuccess of any business. A well established business always follows the strategies of servicemarketing triangle.Today, marketers who know how to remove the company‘s weaknesses and increase thestrengths and assets are market leaders. They are aware of external threats and opportunitiesthat boost up their business. They also know how to communicate with their customers, clientsand employees in order to achieve organizational goals. Tangibility Spectrum Continuum of Evaluation for Different Types of ProductsService Marketing Page 19
  20. 20. Gaps Model of Service QualityToday‘s consumer has become increasingly demanding. They not only want high qualityproducts but they also expect high quality customer service. Even manufactured products suchas cars, mobile phones and computers cannot gain a strategic competitive advantage throughthe physical products alone. From a consumer‘s point of view, customer service is consideredvery much part of the product.Delivering superior value to the customer is an ongoing concern of Product Managers. This notonly includes the actual physical product but customer service as well. Products that do not offergood quality customer service that meets the expectations of consumers are difficult to sustainin a competitive market.Service Marketing Page 20
  21. 21. 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 and standards • Provider Gap 3: • not delivering to service standards • Provider Gap 4: • not matching performance to promisesService Marketing Page 21
  22. 22. Decision Making ProcessA consumer goes through several stages before purchasing a product or service. NEED ↓ INFORMATION GATHERING/SEARCH ↓ EVALUATION OF ALTERNATIVES ↓ PURCHASE OF PRODUCT/SERVICE ↓ POST PURCHASE EVALUATION 1. Step 1 - Need is the most important factor which leads to buying of products and services. Need infact is the catalyst which triggers the buying decision of individuals. An individual who buys cold drink or a bottle of mineral water identifies his/her need as thirst. However in such cases steps such as information search and evaluation of alternatives are generally missing. These two steps are important when an individual purchases expensive products/services such as laptop, cars, mobile phones and so on. 2. Step 2 - When an individual recognizes his need for a particular product/service he tries to gather as much information as he can. An individual can acquire information through any of the following sources:  Personal Sources - He might discuss his need with his friends, family members, co workers and other acquaintances.  Commercial sources - Advertisements, sales people (in Tim‘s case it was the store manager), Packaging of a particular product in many cases prompt individuals to buy the same, Displays (Props, Mannequins etc)  Public sources - Newspaper, Radio, Magazine  Experiential sources - Individual‘s own experience, prior handling of a particular product (Tim would definitely purchase a Dell laptop again if he had already used one)Service Marketing Page 22
  23. 23. 3. Step 3 - The next step is to evaluate the various alternatives available in the market. An individual after gathering relevant information tries to choose the best option available as per his need, taste and pocket. 4. Step 4 - After going through all the above stages, customer finally purchases the product. 5. Step 5 - The purchase of the product is followed by post purchase evaluation. Post purchase evaluation refers to a customer‘s analysis whether the product was useful to him or not, whether the product fulfilled his need or not?Factors Effecting decision making process• Culture• Value Attitude• Manners and Customs• Reference Group• Social class• Education• Perception• Motivation• Attitude• PersonalityService Marketing Page 23
  24. 24. ZONE OF TOLERANCE The zone of tolerance is usually defined as the range of customer perceptions of a service between desired and minimum acceptable standards ( Zeithaml, Berry, and Parasuraman, 1993 ). In essence it is the range of service performance that a customer considers satisfactory. Performance below the zone is seen as dissatisfying and performance above the zone is seen as delighting. The importance of this zone of tolerance is that customers may accept variation within a range of performance, and any increase or decrease in performance within this area will only have a marginal effect on perceptions. Only when performance moves outside this range will it have any real effect on perceived service quality. If a customers zone of tolerance is narrow, then he or she may be highly sensitive to the service experience, with a greater likelihood of dissatisfying or delighting outcomes. Conversely, if a customer has a wide zone of tolerance, then he or she may be much less sensitive to the service experience, thus increasing the likelihood of a satisfactory or acceptable outcome. The width of the zone of tolerance may vary from customer to customer and from situation to situation.• Services are heterogeneous i.e performance may vary across providers, across employeesof same provider.• The extent to which customer recognize and are willing to accept this variation is calledZone of tolerance• It is the range where customers do not particularly notice service performanceZone of tolerance vary from first time and service recovery Here first one is before recovery and second one after recoveryNature and determinants of customer expectation servicesService Marketing Page 24
  25. 25. Factors influencing desired servicesService Marketing Page 25
  26. 26. Customer‘s perception of service and satisfactionOutcomes of Customer Satisfaction  Increased customer retention  Positive word-of-mouth communications  Increased revenuesService Marketing Page 26
  27. 27. The Five Dimensions of Service Quality Reliability: Ability to perform the promised service dependably and accurately. Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence. Tangible: Physical facilities, equipment, and appearance of personnel. Empathy: Caring, individualized attention the firm provides its customers. Responsiveness: Willingness to help customers and provide prompt service.Service Marketing Page 27
  28. 28. Evidence of Service from the Customer’s Point of ViewExamples of how customer judge the five dimension of serviceService Marketing Page 28
  29. 29. Service encounter or moment of truthA moment of truth is usually defined as an instance wherein the customer and the organizationcome into contact with one another in a manner that gives the customer an opportunity to eitherform or change an impression about the firm. Such an interaction could occur through theproduct of the firm, its service offering or both. Various instances could constitute a moment oftruth – such as greeting the customer, handling customer queries or complaints, promotingspecial offers or giving discounts and the closing of the interaction.ImportanceIn today‘s increasingly service driven markets and with the proliferation of multiple providers forevery type of product or service, moments of truth have become an important fact of customerinteraction that marketers need to keep in mind. They are critical as they determine acustomer‘s perception of, and reaction to, a brand. Moments of truth can make or break anorganization‘s relationship with its customers.This is more so in the case of service providers since they are selling intangibles by creatingcustomer expectations. Services are often differentiated in the minds of the customer bypromises of what is to come. Managing these expectations constitutes a critical component ofcreating favorable moments of truth which in turn are critical for business success. Service encounter cascade for telephone serviceTypes of Service EncountersA service encounter occurs every time a customer interacts with the service organization. Thereare three general types of encounters – remote encounters, phone encounters, and face-to-faceencounters. A customer may experience any of these types of encounters, or a combination ofall three in his/her relations with a service firm.Service Marketing Page 29
  30. 30. 1. Remote Encounter: Encounter can occur without any direct human contact is called as Remote Encounters. Such as, when a customer interacts with a bank through the ATM system, or with a mail-order service through automated dial-in ordering. Remote encounters also occur when the firm sends its billing statements or communicates others types of information to customers by mail. Although there is no direct human contact in these remote encounters, each represents an opportunity for a firm to reinforce or establish perceptions in the customer. In remote encounter the tangible evidence of the service and the quality of the technical process and system become the primary bases for judging quality. Services are being delivered through technology, particularly with the advent of Internet applications. Retail purchases, airline ticketing, repair and maintenance troubleshooting, and package and shipment tracking are just a few examples of services available via the Internet. All of these types of service encounters can be considered remote encounters.2. Phone Encounters:- In many organizations, the most frequent type of encounter between a customer and the firm occurs over the telephone is called as phone encounter. Almost all firms (whether goods manufacturers or service businesses) rely on phone encounters in the form of customer-service, general inquiry, or order-taking functions. The judgment of quality in phone encounters is different from remote encounters because there is greater potential variability in the interaction. Tone of voice, employee knowledge, and effectiveness/efficiency in handling customer issues become important criteria for judging quality in these encounters.3. Face-to-Face Encounters: A third type of encounter is the one that occurs between an employee and a customer in direct contact is called as Face-to-Face Encounter. In a hotel, face–to–face encounters occurs between customers and maintenance personnel, receptionist, bellboy, food and beverage servers and others. Determining and understanding service equality issues in face–to–face context is the most complex of all. Both verbal and non-verbal behaviors are important determinants of quality, as are tangible cues such as employee dress and other symbols of service (equipments, informational brochures, physical settings). In face–to–face encounters the customer also play an important role in creating quality service for herself through his/her own behavior during the interaction. For example, at Disney theme parks, face- to-face encounters occur between customer and ticket-takers, maintenance personnel, actors in Disney character costumes, ride personnel, food and beverage servers, and others. For a company such as, IBM, in a business-to-business setting direct encounters occur between the business customers and salespeople, delivery personnel, maintenance representatives, and professional consultants. Service Marketing Page 30
  31. 31. Sources of pleasure and displeasure in service encounters:Critical incidence techniques used to get customers and employees to provide verbatim storiesabout satisfying and dissatisfying service encounters they have experiencedWith this technique customers asked the following questions. Think of a time when, as a customer you had a particular satisdfyingor dissatisfying interaction with When did the incidence happen What a specific circumstances led up this situation? Exactly what did the employee say or do? What resulted that made you feel General service behavior do‘s and don‘tsService Marketing Page 31
  32. 32. Relationship marketing With the growth of the internet and mobile platforms, relationship marketing has continued to evolve and move forward as technology opens more collaborative and social communication channels. This includes tools for managing relationships with customers that goes beyond simple demographic and customer service data. Relationship marketing extends to include inbound marketing efforts, (a combination of search optimization and strategic content), PR, social media and application development. Relationship marketing is a broadly recognized, widely-implemented strategy for managing and nurturing a company‘s interactions with clients and sales prospects It also involves using technology to organize, synchronize business processes, (principally sales and marketing activities), and most importantly, automate those marketing and communication activities on concrete marketing sequences that could run in autopilot, (also known as marketing sequences). The overall goals are to find, attract and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Goals of relationship marketing Satisfaction Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an "opt-in" system.With particular relevance to customer satisfaction the relative price and quality of goods and services produced or sold through a company alongside customer service generally determine the amount of sales relative to that of competing companies. Retention A key principle of relationship marketing is the retention of customers through varying means and practices to ensure repeated trade from preexisting customers by satisfying requirements above those of competing companies through a mutually beneficial relationshipThis technique is now used as a means of counterbalancing new customers and opportunities with current and existing customers as a means of maximizing profit and counteracting the "leaky bucket theory of business" in which new customers gained in older direct marketing oriented businesses were at the expense of or coincided with the loss of older customers.Service Marketing Page 32
  33. 33. Advantages and disadvantages Customer ValueAn advantage of customer relationship marketing is that it tends to identify the customers whoare more likely to be of higher value to a company. This saves the company time and money interms of its sales and order-fulfillment efforts. Customer relationship marketing also helpspinpoint customers who are too costly to maintain relationships with, as well as opportunities forgrowing underdeveloped potential. For example, a customer who is unprofitable for thecompany might become a long-term account once he is encouraged to buy more of the sameproduct. CommunicationCommunication and customer satisfaction tend to increase when customer relationshipmarketing is used, according to Phillip Kotler and Kevin Lane Keller, authors of the book"Marketing Management." Businesses find it easier and more efficient to obtain and keep theircustomers. Databases and customer relationship management software help companies keeptrack of who is buying what and how often. There is more of a two-way interaction between thecompany and the person who wishes to make a purchase. Promotional incentives such asloyalty discounts and perks help foster a sense of appreciation and reward for repeat business. CostsDirect marketing is typically more expensive per customer than other forms. Because there is ahigher level of personalization, it might be more time-consuming for a small business tocommunicate with its customers on an individual basis. It might also be difficult to decide whattype of customer information to capture and store, since only some of it may prove useful. Asmall-business owner and his staff might need to receive training on how to interpret customerdata and buying behavior. SecurityThe security issues associated with maintaining sensitive data are a major disadvantage ofcustomer relationship marketing. Personal customer information is often stored on servers andin computerized databases, which puts the business at risk for liabilities. Some customers willrefuse to share some of their information, making it more difficult to take full advantage of theconcepts behind customer relationship marketing. Protecting personal data is costly forbusinesses because electronic security measures must be executed. In addition, companiesneed to tell customers how their data is used, when it might be shared and why. Benefits of relationship marketing to organizationRetaining customers for the long-term offers many benefits. The aim is for the company toobtain life time custom. Some of the benefits of relationship marketing include:Loyal customers will recommend your business to others, thus expanding your business for you.Loyal customers are willing to try some of your new products, because they trust you.Customers will be willing to pay more for your services/products if there are adjustments inpricing because they are loyal to you and trust your services/products.Service Marketing Page 33
  34. 34. Loyal customers will tell you about problems with your products/services enabling to improveyour products/services.The ultimate benefit will be an increase sales, market share and dominance. Service recovery Service recovery is an umbrella term for systematic efforts by a company to correct a problem following a service failure and retain a customers goodwill. Service recovery plays a crucial role in achieving or restoring customer satisfaction. In every organization things may occur that have a negative impact on its relationships with customers. The true test of a firms commitment to satisfaction and service quality isnt the advertising promises but in the way it responds when things go wrong for the customer. Effective service recovery requires thoughtful procedures for resolving problems and handling disgruntled customers. It is critical for firms to have effective recovery strategies because under the following conditions even a single service problem can destroy a customers confidence in a firm: · The failure is totally outrageous (blatant dishonesty on the part of an employee) · The problem fits a pattern of failure rather than being an isolated incident. · The recovery efforts are weak, serving to compound the original problem rather than correct it. · The risk of defection is high, especially when a variety of competing alternatives are available. SERVICE RECOVERY STAGES: Service Recovery in an organization progresses through a series of stages, shown in the following points: Stage 1, Expiring: The service of the consumer in this stage is expire means finished. There is no complaint handling. Angry customers are ignored. Letters to VIPs and even the CEO about a damaged shipment go unanswered. Stage 2: Reactive: Customer complaints are heard, and a response is made. But its a careless process with no defined goals for the response and no one owning this business process. Stage 3: Active Listening: At this stage, the response to issues voiced by customers is structured. Specific people have the responsibility to respond to complaints and guidelines are in place for the response. However, it is still reactive.Service Marketing Page 34
  35. 35. Stage 4: Attentiveness: The critical change from Stage 3 to 4 is the move from reactive to proactive solicitation of customers with issues. The reason this is so important is that most customers dont bother to complain. They just move on to other suppliers of products. Havent we all done this? Its a lot of work to complain! The solicitous role is accomplished by encouraging customer to voice their complaints. Event surveys (also known as transactional or transaction-driven survey) are a commonly used technique to get issues voiced. The survey design must be such that more than just high level measurement of customer satisfaction is captured. The design must allow for action to be taken. The desire for anonymity complicates the task. (Our Survey Workshops help attendees create such actionable survey instruments.) Stage 5: Rechecking/ Frequentness: The pinnacle of Service Recovery Practices is achieved when the complaint identification merges with business process improvement or six sigma programs to support root cause identification and resolution. The owners of business processes that cause customer issues are notified of the occurrences to prompt reexamination of the process design. In essence, we see two levels of feedback loops. First, feedback from the customer to the organization. Second, feedback from the customer-facing groups to its business partners within the organization. Complaint handling Complaint handling needs to be seen as a profit centre and not as a cost centre. With thedeparture of a dissatisfied customer the firm loses more than the value of the next transaction. It may lose a long - term stream of profits and also any prospective customers he complains to. Hence it pays to invest in service recovery designed to protect to those long - term profits.Service recovery paradoxIt has sometimes been observed that Customers who experience a service failure and then have itresolved to their full satisfaction are more likely to make future purchases than are customers whohave no problem in the first place. It has sometimes been true of the first service failure, but after thesecond customers has been disillusioned. Hence, this has not been not proven universally true.Components of effective service recovery systemseffective complaint handlingidentify service complaintsresolve complaints effectivelylearn from the recovery experienceService Marketing Page 35
  36. 36. take feedback from the customer Service recovery paradox The service recovery paradox is a supposed paradoxical effect where a product failure ultimately results in increased customer satisfaction, producing a level of satisfaction even greater than that expected with no product failure. Empirical tests of the effect have had mixed results. One study concluded that the effect was most likely to occur when a number of conditions were met, such as the customer considering the failure not to be serious, and to be out of the companys control. Customer reaction to service failureService Marketing Page 36
  37. 37. CUSTOMER RESPONSE CATOGORIES TO SERVICE FAILUERS: When service is faiulre or not satisfied, the customers can take may a kind of public action or public process or may take some kind of private action or private movement or they may can not take any kind of action as they are enough of thire findings. If customer take public action or government action , they can complain directile to the service firm or to the organization or they can complain to the third party or they may take any kind of legal action to seek their redress or to get thire right or benefits. If customer take any kind of private action, they can used to defects or switch directly to the provider or may be used any kind of negative word of mouth to the organization. And if customer is comfortable to their recommendations anout their complaints or they get benefits they can not take any kind of action. Understanding Customer Responses to Service Failure: Why do customers complain? o Obtain compensation o Release their anger o Help to improve the service o Because of concern for others What proportion of unhappy customers complain? Generally 9% to 37% of unhappy customers can make complaints to the firms. Why don‘t unhappy customers complain? There are three primary reasons why dissatisfied customers don‘t complaint: 1] They think that it is not worth the time or effort. 2] They further think that no one would be concerned about their problem or solving it. 3] They do not know where to go or what to do. Who is most likely to complain? Where do customers complain? What do customers expect once they have made a complaint? Dealing with Complaining Customers and Recovering from Service Failure: Take complaints professionally and not personally. Be prepared to deal with angry customer who may behave in an insulting way to service personnel who may not be at fault. Take the perspective that customer complaints allow firm a chance to o Correct problems,. o Restore relationships. o Improve future satisfaction for all. Develop effective service recovery procedures. REASONS OF COMPLAINTS: Restitution: Restitution means making good a loss. If a customer facing any kind of damage or dissatisfaction during the working from the organization, they can make complaint to that institution to take the proper restitution from such firms. Self-Esteem: Some customer can make complaint only for their self- esteem. Self- esteem means toService Marketing Page 37
  38. 38. thing yourself highly of or high regard. These people think that we are the best in the organization and do the complaints only just for satisfying their objective or to collect some kind of attention or praise from other peoples. Theoretical Explanation: These kinds of customers are listening or got any kind of information from some other source and believe only on that. Theoretical explanation means dealing with theory only. These people can sort some form of theory about the organization whether it is good or bad and make a complaint about it. CUSTOMER COMPLAINT ACTION: Customer complaint action following service failure. The action can be of various types. A classified customer can chose to complaint on the spot to the service provider given by the company, the opportunity to respond immediately. This is often the best- case scenario for the company. It has the second chance right at that movement, to satisfy the customer. Keep his or her business in future; he may potentially avoid any negative word of mouth. Some customers choose not to complaint directly to the provider but rather spread negative word of mouth about the company to friends, relatives and co- workers. This negative word of mouth can be extremely detrimental because it can reinforce the customer‘s feeling of negativism and spread that negative impression to others as well. Further the company has no chance to recover unless the negative word of mouth is accompanied by a complaint, directly to the company. Many customers are very passive about their dissatisfaction. They are simply saying or doing nothing, take action or not and at some point of time they will decide weather to stay with that provider or not. TYPES OF COMPLAINRES: Research suggests that people can be grouped into categories based on how they respond to failures. Four categories of response types were identified in a study that focused on grocery stores, automotive repair service, medical care and banking and financial services. These are as follows: 1] Passive: This group of customer is least likely to take any action. They are unlikely to say anything to the provider, less likely than others to spread negative words of mouth, and unlikely to complaint to a third parties. 2] Voices: These customers actively complaint to service providers, but they are less likely to spread negative word of mouth to go to third parties with their complaint. They tend to believe complaining as a social benefit and therefore don‘t hesitate to voice their opinion. 3] Irritate: These consumers are more likely to engage in the negative word of mouth to the friends and relatives to switch provider than the others. They are about average in their prosperity to complain to the provider. They are unlikely to complain to the third parties. 4] Activists: These consumers are characterized by above propensity to complain on theService Marketing Page 38
  39. 39. entire dimension. They will complain to the provider, they will tell others, and they are more likely than any other group to complain to third parties COMPLAINT HANDLING PROCEDURE: According to TIO- a telecommunication industry, there is a specific & suitable procedure of complaint handling which is necessary to be followed in any organization. But you will need to tailor your own procedures to suit the size of your business and the services you offer. At a minimum your complaint handling procedure should require the following for your staff or organization: 1] An acknowledgement of receipt of the complaint: It is a strong need that you acknowledge the receipt of all complaints, verbal or written. It is a good idea to allocate a complaint reference number and provides the customer with a contact point for further correspondence. 2] An accurate and accessible record of complaint information: Be sure that your recorded version of the complaint matches exactly that of the customer. Also make sure that the complaint record is accessible by any area of the organization that the customer may contact. 3] Attachment to timeframes for resolution: According to TIO, the company or firm should attempt to resolve complaints on first contact, but if this isn‘t possible, then a complaint should be finalized within 30 days. 4] Customers must be inform about any delays in resolving a complaint: As soon as the company realizes that they are unable to resolve a complaint in the timeframes given, contact the customer, advising him or her of the delay and set a new timeline. 5] Rewarding Attachment amongst Your Staff: The complaint handling procedures should be a standard component of your employee induction training and should also be included in Ongoing training as required. 6] Inform Customers Of Complaint Handling Procedures: A brochure or fact sheet is a great way to make customers aware of your Complaint handling procedures. You should outline the main components of your procedure and send it to customers with your first bill and when they lodge a verbal or written complaint with you. If a brochure is too expensive or not practical, place some information on your website, or consider sending your customers an email outlining your policies and procedures. Just make sure that you make it accessible and easy to read and understand.Service Marketing Page 39
  40. 40. Building Customer Relationship: Enhancing Retaining Satisfying1. The first step in managing a loyalty based business system is finding andacquiring the right customers.2. After acquisition of the desirable customers the next step is to buildrelationships and turn them into loyal customers who will generate agrowing Revenue stream for the company.3. A loyal customer is a consistent source of revenue for the organization.This loyalty has to be Sustained by continuously providing superior qualityand value.  Customer Lifetime Value• It is equivalent to life time profitability generated by a loyal customer. Itdepends on the average revenue generated over a period of time, referralsgenerated by the customer over the period of time and also the costsincurred to serve the customer.  Foundations For Relationship Strategies1. Quality offered in the core service2. Careful market segmentation & targeting 3. Continuous monitoring ofrelationships  Continuous Monitoring of Relationships.Annual customer relationship surveys through basic market research helpin monitoring strategy. A well designed customer data base is beneficial toprovide all relevant information.Service Marketing Page 40
  41. 41. Service blueprinting:A service blueprint is a schematic diagram that represents all the details of a service from thecustomer and organization‘s perspective. It shows how the different service components linkinto each other – showing the different touch points and options customers have to choose fromand how the internal workings support those choices.Because it maps out chronologically and in sequence all the various interactions and actionsthat occur in parallel when customer and company meet, it shows all the interactions by andwith the customer. So it also illustrates the stages and complexity of the encounter anddistinguishes between the customer experiences (and decisions) and the systems, invisible tothe customer, that operate backstage to ensure that these are delivered.When and why are they useful?Blueprints are flexible and powerful in that they depict a service at multiple levels of analysis –they can facilitate the refinement of a single step as well as the creation of an entire serviceprocess. It is a way of ‗seeing‘ the service from the customer focus; the key part of thecompliance outcome. In creating the current and future state blueprints it allows the Team toarticulate and act upon customer insights, and focus on what‘s working, what‘s not working andwhat needs to be changed.For designing: The development of new services, assessment and improvement of existing servicesService Marketing Page 41
  42. 42. Capturing how long processes within the service take, and how that equates to cost because they are presented with a base of time Comparison of differences in basic services, standards and processes Capturing of processes, architecture and systems in the context of service, not in isolation or solely from the internal business perspective Testing of assumptions on paper to identify fail points and thoroughly work out the bugs Cuts down time and inefficiency of random service developmentFor implementing: Becomes a reference for planning and change Represents the new or changed service for a staff member to see during integration activity Forms a common point of reference for all parties (project team, affected staff and management) concerned with achieving a successful launch – also serves as focal point for later refinements or last-minute changes Can be stored electronically for later reference, available for everyone involved Facilitates comparison of the desired and actual serviceAs a communication tool: Provides a focus for conversations Is more precise than verbal descriptions, and less subject to misinterpretation Can be a formalised way to inspire corporate-wide change directed at integrating customer focus across the organisation Can help convince the organisation that changes are in order and what specifically can be done What’s in a service blueprint The blueprint sets out how the customer and organisation (back-office supporting people, processes and systems) interact through five components and three lines: Physical evidence Customer actions ————————–Line of interaction Visible contact, employee actions (onstage) ————————–Line of visibility Invisible contact, employee actions (backstage) ————————–Line of internal interaction Support processesService Marketing Page 42
  43. 43. Market information systemA marketing information system (MIS) is a set of procedures and methods designed togenerate, analyze, disseminate, and store anticipated marketing decision information on aregular, continuous basis. An information system can be used operationally, managerially, andstrategically for several aspects of marketing.A marketing information system can be used operationally, managerially, and strategically forseveral aspects of marketing.We all know that no marketing activity can be carried out in isolation, know when we say itdoesn‘t work in isolation that means there are various forces could be external or internal,controllable or uncontrollable which are working on it. Thus to know which forces are acting on itand its impact the marketer needs to gathering the data through its own resources which interms of marketing we can say he is trying to gather the market information or form a marketinginformation system. This collection of information is a continuous process that gathers data froma variety of sources synthesizes it and sends it to those responsible for meeting the marketplaces needs. The effectiveness of marketing decision is proved if it has a strong informationsystem offering the firm a Competitive advantage. Marketing Information should not beapproached in an infrequent manner. If research is done this way, a firm could face these risks:1. Opportunities may be missed.2. There may be a lack of awareness of environmental changes and competitors‘ actions.3. Data collection may be difficult to analyze over several time periods.4. Marketing plans and decisions may not be properly reviewed.5. Data collection may be disjointed.6. Previous studies may not be stored in an easy to use format.7. Time lags may result if a new study is required.8. Actions may be reactionary rather than anticipatory.The total information needs of the marketing department can be specified and satisfied via amarketing intelligence network, which contains three components.1. Continuous monitoring is the procedure by which the changing environment is regularlyviewed.2. Marketing research is used to obtain information on particular marketing issues.3. Data warehousing involves the retention of all types of relevant company records, as well asthe information collected through continuous monitoring and marketing research that is kept bythe organization.Depending on a firm‘s resources and the complexity of its needs, a marketing intelligencenetwork may or may not be fully computerized. The ingredients for a good MIS are consistency,Service Marketing Page 43
  44. 44. completeness, and orderliness. Marketing plans should be implemented on the basis ofinformation obtained from the intelligence network.An Marketing Information time and labor costs and the complexity of setting up an informationsystem. Marketers often complain that they lack enough marketing information or the right kind,or have too much of the wrong kind. The solution is an effective marketing informationsystem.The information needed by marketing managers comes from three main sources:1) Internal company information – E.g. sales, orders, customer profiles, stocks, customerservice reports etc2) Marketing intelligence – This can be information gathered from many sources, includingsuppliers, customers, and distributors. Marketing intelligence is a catchall term to include all theeveryday information about developments in the market that helps a business prepare andadjust its marketing plans. It is possible to buy intelligence information from outside suppliers(e.g. IDC, ORG, MARG) who set up data gathering systems to support commercial intelligenceproducts that can be profitably sold to all players in a market.(3) Market research – Management cannot always wait for information to arrive in bits andpieces from internal sources. Also, sources of market intelligence cannot always be relied uponto provide relevant or up-to-date information (particularly for smaller or niche market segments).In such circumstances, businesses often need to undertake specific studies to support theirmarketing strategy – this is market research.Service Marketing Page 44
  45. 45. Employees role in service delivery People are a defining factor in a service delivery process, since a service is inseparable from the person providing it. Thus, a restaurant is known as much for its food as for the service provided by its staff. The same is true of banks and department stores. Consequently, customer service training for staff has become a top priority for many organizations today.Service Marketing Page 45
  46. 46. Boundary spanning roles: Boundary Spanning is concerned with the detection of information. It has two primary roles 1) to detect information and bring it into the organisation. 2) Send information into the environment presenting the company in a favourable light. There are two main sources of information 1) business intelligence which is information about the general environment. 2) Competitive Information which is information about an organizations competitors. An example of boundary spanning can be seen in the teen fashion company Genesco Inc who hire people of the same age as the target market to provide first hand intelligence of what the consumer wants. Background The post-WWII years saw the burgeoning of the American corporation and in particular major R&D labs, for example, Tushman examined the "communication activity of all theService Marketing Page 46
  47. 47. professionals (N=345) in the R&D facility of large mid-Western U.S Corporation. The laboratory is isolated from the rest of the corporation and is divided into seven departments (divisional laboratories). The departments are, in turn, organized into separate project areas. The projects were stable over the course of the research and each respondent was a member of only one project." With this increase in spending on R&D, there was increased interest in the effectiveness of that spending and how to improve the efficiency of commercial research. Of course, all the academic research presented anonymous data from the firms with which they had been working so it is hard to know who the participating laboratories were. Boundary spanning jobs are high-stress jobs These positions require: Mental labor Physical laobour Emotional labour Sources of conflict Front line employees often face interpersonal and interorganisational conflict on the job their frustrationand confiusion canif left unattended, lead to stress, job dissatisfaction, a diminished abilityto serve customers. As these employees represent customer to the organistion and often need to manage a number of customers simultaneously front liners inevitably have to deal with conflicts. These conflicts can be: Personal conflict: in some situation front line employees face conflictbetween what what they are asked to do and their own personalities,orientation,values. Organizational conflict: a more common conflict among employees and two bosses. The organization and individual customerService Marketing Page 47
  48. 48. Customer participation:The Problem of Customer MisbehaviorCustomers form an important element in many services‘ encounters. Firms that fail to dealeffectively with customer misbehaviors, risks damaging their relationships with all the othercustomers that they would like to keep. Following are the problems (P) & solutions (S)P—the thief ( Shop lifter, Towel, Linen theft, ―E‘ crime )S---a) Find the route of theft and try toplug it, and if necessary prosecute. b) But take care that honest customers do not suffer.Genuine mistakes are to be ignored. c) be sensitive and handle carefully.P) ---the rule breaker (Carrying gun in airlines, No shoe, No shirt in clubs etc. Jump the ‗Q‖ ) S)---Rules should be properly conveyed, may be on a billboard.---Take help of other customers.---Too many rules and control reduces the pleasure of service.---The fewer the rules, themore explicit, the important ones can be. P) ---the vandals (Breaking of Nursing Homes, Burningof buses etc.)S) The best cure for vandalism is prevention. --- Improved security, better lighting,design with grills etc Customer Expectations Customer is defined as anyone who receives that which is produced by the individual or organization that has value. Customer expectations are continuously increasing. Brand loyalty is a thing of the past. Customers seek out products and producers that are best able to satisfyService Marketing Page 48
  49. 49. their requirements. A product does not need to be rated highest by customers on all dimensions, only on those they think are important. Measuring Customer Satisfaction To execute a successful client satisfaction survey, build one that your customers have the time and inclination to respond to, and that delves into the types of information that will truly help enhance your performance. By carefully constructing a brief, yet strong, survey, you can discover what your customers believe your strengths and weaknesses are and what makes your customers loyal to your company. Managing Demand and Capacity: • The Underlying Issue: Lack of Inventory Capability • Understanding Capacity Constraints • Understanding Demand Patterns • Strategies for Matching Capacity and Demand • Yield Management • Waiting Line Strategies Variations in demand relative to capacityService Marketing Page 49
  50. 50. Yield managementYield management is the process of understanding, anticipating andinfluencing consumer behavior in order to maximize yield or profits from a fixed, perishableresource (such as airline seats or hotel room reservations or advertising inventory). As aspecific, inventory-focused branch of revenue management, yield management involvesstrategic control of inventory to sell it to the right customer at the right time for the right price.This process can result in price discrimination, where a firm charges customers consumingotherwise identical goods or services a different price for doing so. Yield management is a largerevenue generator for several major industries; Robert Crandall, former Chairman and CEOof American Airlines, gave Yield Management its name and has called it "the single mostimportant technical development in transportation management since we entered deregulation.Yield management has become part of mainstream business theory and practice over the lastfifteen to twenty years. Whether an emerging discipline or a new management science (it hasbeen called both), yield management is a set of yield maximization strategies and tactics meantto improve the profitability of certain businesses that focus on yield. It is complex because itinvolves several aspects of management control, including rate management, revenue streamsmanagement, and distribution channel management, just to name a few of them. Yieldmanagement is multidisciplinary because it blends elements of marketing, operations, andfinancial management into a highly successful new approach. Yield management strategistsfrequently must work with one or more other departments when designing and implementingyield management strategiesEX:AirlinesIn the passenger airline case, capacity is regarded as fixed because changing what aircraft fliesa certain service based on the demand is the exception rather than the rule. When the aircraftdeparts, the unsold seats cannot generate any revenue and thus can be said to have perished,or have spoiled. Airlines use special software to monitor how seats are being reserved and reactaccordingly. There are various inventory controls such as a nested inventory system. Forexample, airlines can offer discounts on low demand flights, where the flight will likely not sellout. The converse, selling more expensive seats when there is excess demand, managing offdemand.Another way of capturing varying willingness to pay is to attempt market segmentation. A firmmay repackage its basic inventory into different products to this end. In the passenger airlinecase this means implementing purchase restrictions, length of stay requirements and requiringfees for changing or canceling tickets.HotelsHotels use this system in largely the same way, to calculate the rates, rooms and restrictions onsales in order to best maximize their return. These systems measure constrained andunconstrained demand along with pace to gauge which restrictions to implement, e.g. length ofstay, non-refundable rate, or close to arrival. Yield management teams in the hotel industryhave evolved tremendously over the last 10 years and in this global economy targeting the rightdistribution channels, controlling costs, and having the right market mix plays an important rolein yield management. Yield management in hotels is selling rooms and services at the rightprice, at the right time, to the right people.Service Marketing Page 50
  51. 51. RentalIn the rental car industry, yield management deals with the sale of optional insurance, damagewaivers and vehicle upgrades. It accounts for a major portion of the rental companysprofitability, and is monitored on a daily basis. In the equipment rental industry, yieldmanagement is a method to manage rental rates against capacity (available fleet) and demand Pricing of servicesService Marketing Page 51
  52. 52. Service Pricing Strategies Factors Contributing to Incremental profits in a Business Profit derived from increased purchases. Profit from reduced operating costs. Profits from referrals to other customers. Profit from Price premium.Service Marketing Page 52
  53. 53. New Service DevelopmentService Innovation Process• Service innovation process consists of five phases (designed for new Innovations wheresuccess is less certain)(Thomke, 2003)(1) Evaluate ideas – Conceive, assess, and prioritize ideas from internal and external sources(2) Plan and design – Assign design needs, complete design, build rollout plan(3) Implement – Develop test plan, implement idea(4) Test – Monitor performance of idea, report results of fast feedback by market, improveprocess in a stable operating environment(5) Recommend – Complete, review and approve, communicate recommendationService Marketing Page 53
  54. 54. Types of Service Marketing StrategiesReferralsOne of the best ways to market an intangible is through word of mouth. A happy customer willnot wait to be asked about a service from friends and will often want to share her experienceand tell people why she likes the service. Some service providers use referral programs as anintegral part of their marketing. You can offer clients a cash bonus for each referral they send toyou, offer them a free service for each lead or offer their friends a reduced rate on service if theymention the customer.EducationAnother way to market a service is to provide customer education. You can do this by offeringfree seminars, lunch-and-learns or other educational meetings. You can write articles formagazines and newspapers and give talks at trade shows and conferences. With aneducational marketing strategy, you do not emphasize your product features or prices, but thebenefits of using the service. For example, if you own a dog grooming business, you might writearticles for local newspapers discussing the effects of pet ticks and fleas on a family‘s healthand a pet‘s well-being, showing how regular grooming can alleviate these problems.DemonstrationsCustomers might be gun shy about trying a service if they aren‘t sure what they are getting.Offering free demonstrations helps ease their concerns and can result in immediate sales. Forexample, if you offer personal training, you might contact a large company with a wellnessprogram and offer to give an employee talk and free exercise class. If you offer public relationsservices, you might offer meet with a business owner, discuss his current marketing strategyand suggest PR initiatives he could try and outline the cost to do so.Social MediaSocial media are hard to escape, with millions of people sending texts and emails to friendswhen they see interesting items they want to share. They can also be an inexpensive way forsmaller businesses with few advertising dollars to make an impact. A social media marketingstrategy lets service providers take advantage of free tools such as Facebook and Twitter toeducate consumers and get them to spread the word to their network of contacts. WithFacebook, for example, you can create a free business page that lets you detail your service.Put customer testimonials and case histories on your page or run contests offering a cash prizeor a free session or visit. Place place Facebook "Like" buttons on your website pages toencourage visitors to share what they find with friends. Send Twitter messages that givecustomers free tips. For example, a landscaper might tweet, "Watering your lawn more thanonce per week isnt necessary. Once a week for 30 minutes is all you need."Service Marketing Page 54
  55. 55. Relationship ManagementOne key factor in service businesses is the relationships made with clients. Keeping intouch with them through newsletters, mailings, follow-up phone calls helps to keep abusiness top of mind. Additionally, providing them with free information can help toestablish credibility. For example, a lawyer specializing in start-up incorporation canprovide clients with relevant small business legal news. Maintaining consistentcorrespondences with clients will increase the chances or frequency of them using theservices. Furthermore, with Internet social media applications, online newsletters andblogs can be a less expensive way to maintain client relations.Providing IncentivesIncentives can be the deciding factor in choosing one service-oriented company overanother. It can be linked to the businesss services, like a bank offering discounted lifeinsurance to its checking account holders. Or it can be discounts in conjunction with apartnered, non-competitive, service provider that can end up benefiting both parties andthe client. For instance, a wedding planner can have an agreement with a localphotographer to provide cheaper packages to her clients, in exchange for referrals. Thisarrangement provides an incentive to the client, resulting in cheaper photos of herwedding day.PromotionThe strategy used when promoting a service typically focuses on awareness, recall andretention. The first step is to inform the potential client of the company and servicesexistence, which can be as costly as a national print and TV advertisement campaign oras cheap as small ads in the local paper. Providing promotional items, such as pens,brochures, magnets and t-shirts, can help the customer recall the company when itsservices are needed. Once the customer has been served, discounts and value customerincentives can be used to retain them.Establishing the BrandBranding a company gives credibility to its services. It is the only representation of thecompany--since there is no physical product--so the imagery should be consistent inevery aspect of the marketing campaign. Inconsistencies in brand visuals can lead toconfusion, and even lack of trust. For example, if a customer receives a business card,and finds the website has a completely different look, he might assume that it is for adifferent company. The same corporate palette, fonts, logos and photography should allbe integrated into everything from brochures to social media applications.Service Marketing Page 55
  56. 56. The Top Eight Marketing Tips for the Service IndustryDeveloping a marketing strategyGrowth has nothing to do with the size of your business. It‘s about how many customers andprospects you can market to you need to be aware that marketing efforts require carefulplanning and, in order to you assess your return on investment and effectively plan futuremarketing; you must keep a record of the sales generated as a result of your campaigns. Tryand set some time aside each week for brainstorming new ideas or calculating your businessgrowth.TIP: There are, however, ways to market more cost effectively, perhaps by reducing your adspace or by sending out promotional SMS messages which reach customers cheaply, directlyand quickly.Data CaptureBuild a mailing list. This will enable you to target your campaigns more effectively. Collecting thenames is the hard part, so give your prospects a reason for them to provide you with their nameand address – competitions, discounts, maybe even a loyalty card. Work at keeping your listaccurate and up to date. Try to get hold of email addresses as well as (or even in preference to)contact details: email is cheaper and more versatile than postage. It is vital to monitor yourcustomer‘s purchase history. This will indicate whether they are cutting back.TIP: You can use purchase history information to target those who have reduced the frequencyof their visit. This will encourage them to revisit your business.The power of the InternetMany businesses still do not collect the email addresses of everyone who contacts them. Everytime a business fails to capture someone‘s email address they‘re turning down the opportunityto contact them for FREE, for weeks, months and years ahead. Once you have EmailAddresses – use them!TIP: You can use email to thank people for their business, make them a special offer, give thema free article or report, send a newsletter, and recommend a product or service they may beinterested in or ask for referrals.Utilizing technologyService Marketing Page 56