Full services marketing


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Full services marketing

  1. 1. Contact: +923006641921 Usman Waheed 1 SM Services MarketingServices Marketing
  2. 2. Contact: +923006641921 Usman Waheed 2 SMSM Contact: +923006641921 Usman Waheed Chapter 1 INTRODUCTION TO SERVICES
  3. 3. Contact: +923006641921 Usman Waheed 3 SM Objectives for Chapter 1:Objectives for Chapter 1: Introduction to ServicesIntroduction to Services • Explain what services are and identify service trends • Explain the need for special services marketing concepts and practices • Outline the basic differences between goods and services and the resulting challenges for service businesses • Introduce the service marketing triangle • Introduce the expanded services marketing mix • Introduce the gaps model of service quality
  4. 4. Contact: +923006641921 Usman Waheed 4 SM IntroductionIntroduction • Services are deeds,processes and performance • Intangible, but may have a tangible component • Generally produced and consumed at the same time • Need to distinguish between SERVICE and CUSTOMER SERVICE
  5. 5. Contact: +923006641921 Usman Waheed 5 SM Challenges for ServicesChallenges 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 prices • Standardization versus personalization
  6. 6. Contact: +923006641921 Usman Waheed 6 SM Examples of ServiceExamples of Service IndustriesIndustries • Health Care – hospital, medical practice, dentistry, eye care • Professional Services – accounting, legal, architectural • Financial Services – banking, investment advising, insurance • Hospitality – restaurant, hotel/motel, bed & breakfast, – ski resort, rafting • Travel – airlines, travel agencies, theme park • Others: – hair styling, pest control, plumbing, lawn maintenance, counseling services, health club
  7. 7. Contact: +923006641921 Usman Waheed 7 SM Figure 1-1Figure 1-1 Tangibility SpectrumTangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets            
  8. 8. Contact: +923006641921 Usman Waheed 8 SM Figure 1-2Figure 1-2 Percent ofPercent of U.S. Labor Force by IndustryU.S. Labor Force by Industry 0 10 20 30 40 50 60 70 80 1929 1948 1969 1977 1984 1996 PercentofGDP Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39. Yea r  Services  Manufacturing  Mining & Agriculture
  9. 9. Contact: +923006641921 Usman Waheed 9 SM 0 10 20 30 40 50 60 70 80 1948 1959 1967 1977 1987 1996 Figure 1-3Figure 1-3 Percent of U.S. Gross DomesticPercent of U.S. Gross Domestic Product by IndustryProduct by IndustryPercentofGDP Year Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.  Services  Manufacturing  Mining & Agriculture
  10. 10. Contact: +923006641921 Usman Waheed 10 SM Differences BetweenDifferences Between Goods and ServicesGoods and Services Intangibility Perishability Simultaneous Production and Consumption Heterogeneity
  11. 11. Contact: +923006641921 Usman Waheed 11 SM Implications of IntangibilityImplications of Intangibility  Services cannot be inventoried  Services cannot be patented  Services cannot be readily displayed or communicated  Pricing is difficult
  12. 12. Contact: +923006641921 Usman Waheed 12 SM Implications of HeterogeneityImplications 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 promoted
  13. 13. Contact: +923006641921 Usman Waheed 13 SM Implications of SimultaneousImplications of Simultaneous Production and ConsumptionProduction and Consumption Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult
  14. 14. Contact: +923006641921 Usman Waheed 14 SM Implications of PerishabilityImplications of Perishability  It is difficult to synchronize supply and demand with services  Services cannot be returned or resold
  15. 15. Contact: +923006641921 Usman Waheed 15 SM Table 1-2Table 1-2 Services are DifferentServices are Different Goods Services Resulting Implications Tangible Intangible Services cannot be inventoried. Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult. Standardized Heterogeneous 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 promoted. Production separate from consumption Simultaneous production and consumption Customers participate in and affect the transaction. Customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult. Nonperishable Perishable It is difficult to synchronize supply and demand with services. Services cannot be returned or resold. Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.
  16. 16. Contact: +923006641921 Usman Waheed 16 SM Figure 1-5Figure 1-5 The Services Marketing TriangleThe Services Marketing Triangle Internal Marketing Interactive Marketing External Marketing Company (Management) CustomersEmployees “enabling the promise” “delivering the promise” “setting the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
  17. 17. Contact: +923006641921 Usman Waheed 17 SM Ways to Use theWays to Use the Services Marketing TriangleServices Marketing Triangle Overall Strategic Assessment • How is the service organization doing on all three sides of the triangle? • Where are the weaknesses? • What are the strengths? Specific Service Implementation • What is being promoted and by whom? • How will it be delivered and by whom? • Are the supporting systems in place to deliver the promised service?
  18. 18. Contact: +923006641921 Usman Waheed 18 SM Source: Adapted from A. Parasuraman Company CustomersProviders Technology Figure 1-6Figure 1-6 The Services TriangleThe Services Triangle and Technologyand Technology
  19. 19. Contact: +923006641921 Usman Waheed 19 SM Services Marketing Mix:Services Marketing Mix: 7 Ps for Services7 Ps for Services • Traditional Marketing Mix • Expanded Mix for Services: 7 Ps • Building Customer Relationships Through People, Processes, and Physical Evidence • Ways to Use the 7 Ps
  20. 20. Contact: +923006641921 Usman Waheed 20 SM Traditional Marketing MixTraditional Marketing Mix • All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:  Product  Price  Place  Promotion
  21. 21. Contact: +923006641921 Usman Waheed 21 SM Expanded Mix for Services --Expanded Mix for Services -- the 7 Psthe 7 Ps • Product • Price • Place • Promotion • People • Process • Physical Evidence
  22. 22. Contact: +923006641921 Usman Waheed 22 SM Table 1-3Table 1-3 Expanded Marketing Mix forExpanded Marketing Mix for ServicesServices PRODUCT PLACE PROMOTION PRICE Physical good features Channel type Promotion blend Flexibility Quality level Exposure Salespeople Price level Accessories Intermediaries Advertising Terms Packaging Outlet location Sales promotion Differentiation Warranties Transportation Publicity Allowances Product lines Storage Branding
  23. 23. Contact: +923006641921 Usman Waheed 23 SM PEOPLE PHYSICAL EVIDENCE PROCESS Employees Facility design Flow of activities Customers Equipment Number of steps Communicating culture and values Signage Level of customer involvement Employee research Employee dress Other tangibles Table 1-3 (Continued)Table 1-3 (Continued) Expanded Marketing Mix forExpanded Marketing Mix for ServicesServices
  24. 24. Contact: +923006641921 Usman Waheed 24 SM Ways to Use the 7 PsWays to Use the 7 Ps Overall Strategic Assessment • How effective is a firm’s services marketing mix? • Is the mix well-aligned with overall vision and strategy? • What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation • Who is the customer? • What is the service? • How effectively does the services marketing mix for a service communicate its benefits and quality? • What changes/improvements are needed?
  25. 25. Contact: +923006641921 Usman Waheed 25 SM Services Marketing TriangleServices Marketing Triangle Applications ExerciseApplications Exercise • Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? • How is each type of marketing being carried out currently? • Are the three sides of the triangle well aligned? • Are there specific challenges or barriers in any of the three areas?
  26. 26. 26 SMSM Part 1 FOCUS ON THE CUSTOMER
  27. 27. 27 SM Perceived Service Expected Service CUSTOMER COMPANY Customer Gap GAP 1 GAP 2 Gaps Model of Service QualityGaps Model of Service Quality GAP 3 External Communications to CustomersGAP 4 Service Delivery Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Part 1 Opener
  28. 28. 28 SM Gaps Model of ServiceGaps Model of Service QualityQuality • 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 promisesPart 1 Opener
  29. 29. 29 SM The Customer GapThe Customer Gap Expected Service Perceived Service GAP Part 1 Opener
  31. 31. 31 SM Objectives for Chapter 2:Objectives for Chapter 2: Consumer Behavior inConsumer Behavior in ServicesServices • Overview the generic differences in consumer behavior between services and goods • Introduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior: • Information search • Evaluation of service alternatives • Service purchase and consumption • Postpurchase evaluation • Role of culture
  32. 32. 32 SM Consumer EvaluationConsumer Evaluation Processes for ServicesProcesses for Services • Search Qualities – attributes a consumer can determine prior to purchase of a product • Experience Qualities – attributes a consumer can determine after purchase (or during consumption) of a product • Credence Qualities – characteristics that may be impossible to evaluate even after purchase and consumption
  33. 33. 33 SM Figure 2-1Figure 2-1 Continuum of Evaluation forContinuum of Evaluation for Different Types of ProductsDifferent Types of Products Clothing Jewelry Furniture Houses Automobiles Restaurantmeals Vacations Haircuts Childcare Televisionrepair Legalservices Rootcanals Autorepair Medicaldiagnosis Difficult to evaluate Easy to evaluate {High in search qualities High in experience qualities High in credence qualities { {Most Goods Most Services
  34. 34. 34 SM Figure 2-2Figure 2-2 Categories in ConsumerCategories in Consumer Decision-Making and Evaluation ofDecision-Making and Evaluation of ServicesServices Information Search Evaluation of Alternatives Purchase and Consumption Post-Purchase Evaluation  Use of personal sources  Perceived risk  Evoked set  Emotion and mood  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty
  35. 35. 35 SM Figure 2-3Figure 2-3 Categories in Consumer Decision-Categories in Consumer Decision- Making and Evaluation of ServicesMaking and Evaluation of Services Information Search Evaluation of Alternatives Purchase and Consumption Post-Purchase Evaluation  Use of personal sources  Perceived risk  Evoked set  Emotion and mood  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty Culture  Values and attitudes  Manners and customs  Material culture  Aesthetics  Educational and social institutions
  36. 36. 36 SM Information searchInformation search • In buying services consumers rely more on personal sources. WHY? Refer p32 • Personal influence becomes pivotal as product complexity increases • Word of mouth important in delivery of services • With service most evaluation follows purchase
  37. 37. 37 SM Perceived RiskPerceived Risk • More risk would appear to be involved with purchase of services (no guarantees) • Many services so specialised and difficult to evaluate (How do you know whether the plumber has done a good job?) • Therefore a firm needs to develop strategies to reduce this risk, e.g, training of employees, standardisation of offerings
  38. 38. 38 SM Evoked SetEvoked Set • The evoked set of alternatives likely to be smaller with services than goods • If you would go to a shopping centre you may only find one dry cleaner or “single brand” • It is also difficult to obtain adequate prepurchase information about service • The Internet may widen this potential • Consumer may choose to do it themselves, e.g. garden services
  39. 39. 39 SM Emotion and MoodEmotion and Mood • Emotion and mood are feeling states that influence people’s perception and evaluation of their experiences • Moods are transient • Emotions more intense, stable and pervasive • May have a negative or positive influence
  40. 40. 40 SM Service Provision asService Provision as DramaDrama • Need to maintain a desirable impression • Service “actors” need to perform certain routines • Physical setting important, smell, music, use of space, temperature, cleanliness, etc.
  41. 41. 41 SM Global Feature:Global Feature: Differences in the ServiceDifferences in the Service Experience in the U.S. and JapanExperience in the U.S. and Japan  Authenticity  Caring  Control Courtesy  Formality  Friendliness  Personalization  Promptness
  42. 42. Contact: +923006641921 Usman Waheed 42 SMSM Chapter 3 CUSTOMER EXPECTATIONS OF SERVICES
  43. 43. Contact: +923006641921 Usman Waheed 43 SM Objectives for Chapter 3:Objectives for Chapter 3: Customer Expectations ofCustomer Expectations of ServiceService • Recognize that customers hold different types of expectations for service performance • Discuss controllable and uncontrollable sources of customer expectations • Distinguish between customers’ global expectations of their relationships and their expectations of the service encounter • Acknowledge that expectations are similar for many different types of customers • Delineate the most important current issues surrounding customer expectations
  44. 44. Contact: +923006641921 Usman Waheed 44 SM DEFINITIONSDEFINITIONS • Customers have different expectations re services – or expected service • Desired service – customer hopes to receive • Adequate service – the level of service the customer may accept • DO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?
  45. 45. Contact: +923006641921 Usman Waheed 45 SM Figure 3-1Figure 3-1 Dual CustomerDual Customer Expectation LevelsExpectation Levels (Two levels of expectations)(Two levels of expectations) Adequate Service Desired Service Zone of Tolerance
  46. 46. Contact: +923006641921 Usman Waheed 46 SM Figure 3-2Figure 3-2 The Zone of ToleranceThe Zone of Tolerance Adequate Service Desired Service Zone of Tolerance
  47. 47. Contact: +923006641921 Usman Waheed 47 SM Figure 3-3Figure 3-3 Zones of ToleranceZones of Tolerance VARYVARY forfor Different Service DimensionsDifferent Service Dimensions Most Important Factors Least Important Factors Level of Expectation Source: Berry, Parasuraman, and Zeithaml (1993) Adequate Service Desired Service Zone of Tolerance Desired Service Adequate Service Zone of Tolerance Desired Service Adequate Service
  48. 48. Contact: +923006641921 Usman Waheed 48 SM Figure 3-5Figure 3-5 Factors that InfluenceFactors that Influence Desired ServiceDesired Service Desired Service Adequate Service Zone of Tolerance Enduring Service Intensifiers Personal Needs
  49. 49. Contact: +923006641921 Usman Waheed 49 SM • Personal needs include physical, social, psychological categories • Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service This can further divided into Derived Service Expectations and Personal service Philosophies
  50. 50. Contact: +923006641921 Usman Waheed 50 SM Figure 3-6Figure 3-6 Factors that InfluenceFactors that Influence Adequate ServiceAdequate Service Desired Service Adequate Service Zone of Tolerance Self-Perceived Service Role Situational Factors Perceived Service Alternatives Transitory Service Intensifiers
  51. 51. Contact: +923006641921 Usman Waheed 51 SM • Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-ends • Perceived service alternatives • Perceived service role of customer • Situational factors
  52. 52. Contact: +923006641921 Usman Waheed 52 SM Figure 3-7Figure 3-7 Factors that InfluenceFactors that Influence Desired and Predicted ServiceDesired and Predicted Service Desired Service Adequate Service Zone of Tolerance Predicted Service Explicit Service Promises Implicit Service Promises Word-of-Mouth Past Experience
  54. 54. 54 SM Objectives for Chapter 4:Objectives for Chapter 4: Customer Perceptions ofCustomer Perceptions of ServiceService • Provide you with definitions and understanding of customer satisfaction and service quality • Show that service encounters or the “moments of truth” are the building blocks of customer perceptions • Highlight strategies for managing customer perceptions of service
  55. 55. 55 SM Figure 4-1Figure 4-1 Customer Perceptions ofCustomer Perceptions of Service Quality andService Quality and Customer SatisfactionCustomer Satisfaction Service Quality Reliability Responsiveness Assurance Empathy Tangibles Product Quality Price Personal Factors Customer Satisfaction Situational Factors
  56. 56. 56 SM Factors InfluencingFactors Influencing Customer SatisfactionCustomer Satisfaction • Product/service quality • Product/service attributes or features • Consumer Emotions • Attributions for product/service success or failure • Equity or fairness evaluations
  57. 57. 57 SM Outcomes ofOutcomes of Customer SatisfactionCustomer Satisfaction • Increased customer retention • Positive word-of-mouth communications • Increased revenues
  58. 58. 58 SM Service QualityService Quality • The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected. • Process and outcome quality are both important.
  59. 59. 59 SM The Five Dimensions ofThe Five Dimensions of Service QualityService Quality Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to convey trust and confidence. Physical facilities, equipment, and appearance of personnel. Caring, individualized attention the firm provides its customers. Willingness to help customers and provide prompt service. Tangibles Reliability Responsiveness Assurance Empathy
  60. 60. 60 SM SERVQUAL AttributesSERVQUAL Attributes Providing service as promised Dependability in handling customers’ service problems Performing services right the first time Providing services at the promised time Maintaining error-free records Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests RELIABILITY RESPONSIVENESS Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions ASSURANCE Giving customers individual attention Employees who deal with customers in a caring fashion Having the customer’s best interest at heart Employees who understand the needs of their customers Convenient business hours EMPATHY Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service TANGIBLES
  61. 61. 61 SM The Service EncounterThe Service Encounter • is the “moment of truth” • occurs any time the customer interacts with the firm • can potentially be critical in determining customer satisfaction and loyalty • types of encounters: – remote encounters – phone encounters – face-to-face encounters • is an opportunity to: – build trust – reinforce quality – build brand identity – increase loyalty
  62. 62. 62 SM Check-InCheck-In Request Wake-Up Call Request Wake-Up Call CheckoutCheckout Bellboy Takes to Room Bellboy Takes to Room Restaurant Meal Restaurant Meal Figure 4-4Figure 4-4 A Service EncounterA Service Encounter Cascade for a Hotel VisitCascade for a Hotel Visit
  63. 63. 63 SM Common Themes in CriticalCommon Themes in Critical Service EncountersService Encounters ResearchResearch Recovery: Adaptability: Spontaneity:Coping: Employee Response to Service Delivery System Failure Employee Response to Customer Needs and Requests Employee Response to Problem Customers Unprompted and Unsolicited Employee Actions and Attitudes
  64. 64. 64 SM Figure 4-6Figure 4-6 Evidence of Service from theEvidence of Service from the Customer’s Point of ViewCustomer’s Point of View People Process Physical Evidence  Contact employees  Customer him/herself  Other customers  Operational flow of activities  Steps in process  Flexibility vs. standard  Technology vs. human  Tangible communication  Servicescape  Guarantees  Technology
  66. 66. 66 SM Provider GAP 1Provider GAP 1 Company Perceptions of Consumer Expectations Expected Service CUSTOMER COMPANY GAP 1 Part 2 Opener
  68. 68. 68 SM Common Research ObjectivesCommon Research Objectives for Servicesfor Services • To identify dissatisfied customers • To discover customer requirements or expectations • To monitor and track service performance • To assess overall company performance compared to competition • To assess gaps between customer expectations and perceptions • To gauge effectiveness of changes in service • To appraise service performance of individuals and teams for rewards • To determine expectations for a new service • To monitor changing expectations in an industry • To forecast future expectations
  69. 69. 69 SM Figure 5-1Figure 5-1 Criteria for An EffectiveCriteria for An Effective Services Research ProgramServices Research Program Research Objectives Includes Qualitative Research Includes Quantitative Research Includes Perceptions and Expectations of Customers Includes Measures of Loyalty or Behavioral Intentions Balances Cost and Value of InformationIncludes Statistical Validity When Necessary Measures Priorities or Importance Occurs with Appropriate Frequency
  70. 70. 70 SM Portfolio of Services ResearchPortfolio of Services Research Customer Complaint Solicitation “Relationship” Surveys Post-Transaction Surveys Customer Focus Groups “Mystery Shopping” of Service Providers Employee Surveys Lost Customer Research Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial action Obtain customer feedback while service experience is still fresh; act on feedback quickly if negative patterns develop Use as input for quantitative surveys; provide a forum for customers to suggest service-improvement ideas Assess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over time Measure individual employee service behaviors for use in coaching, training, performance evaluation, recognition and rewards; identify systemic strengths and weaknesses in service Measure internal service quality; identify employee- perceived obstacles to improve service; track employee morale and attitudes Determine the reasons why customers defect Research Objective Type of Research Future Expectations Research To forecast future expectations of customers To develop and test new service ideas
  71. 71. 71 SM Stages in the ResearchStages in the Research ProcessProcess • Stage 1 : Define Problem • Stage 2 : Develop Measurement Strategy • Stage 3 : Implement Research Program • Stage 4 : Collect and Tabulate Data • Stage 5 : Interpret and Analyze Findings • Stage 6 : Report Findings
  72. 72. 72 SM Figure 5-5Figure 5-5 Service Quality PerceptionsService Quality Perceptions Relative to Zones of ToleranceRelative to Zones of Tolerance by Dimensionsby Dimensions Retail Chain 9 8 7 6 5 4 3 2 1 0 Reliability Responsiveness Assurance Empathy Tangibles OO O O Zone of Tolerance S.Q. PerceptionO O
  74. 74. 74 SM Relationship MarketingRelationship Marketing • is a philosophy of doing business that focuses on keeping and improving current customers • does not necessarily emphasize acquiring new customers • is usually cheaper (for the firm)--to keep a current customer costs less than to attract a new one • goal = to build and maintain a base of committed customers who are profitable for the organization • thus, the focus is on the attraction, retention, and enhancement of customer relationships
  75. 75. 75 SM A Loyal Customer is One Who...A Loyal Customer is One Who... • Shows Behavioral Commitment – buys from only one supplier, even though other options exist – increasingly buys more and more from a particular supplier – provides constructive feedback/suggestions • Exhibits Psychological Commitment – wouldn’t consider terminating the relationship-- psychological commitment – has a positive attitude about the supplier – says good things about the supplier
  76. 76. 76 SM Benefits to the OrganizationBenefits to the Organization of Customer Loyaltyof Customer Loyalty • loyal customers tend to spend more with the organization over time • on average costs of relationship maintenance are lower than new customer costs • employee retention is more likely with a stable customer base • lifetime value of a customer can be very high
  77. 77. 77 SM Benefits to the CustomerBenefits to the Customer • inherent benefits in getting good value • economic, social, and continuity benefits – contribution to sense of well-being and quality of life and other psychological benefits – avoidance of change – simplified decision making – social support and friendships – special deals
  78. 78. 78 SM Strategies for BuildingStrategies for Building RelationshipsRelationships • Foundations: – Excellent Quality/Value – Careful Segmentation • Bonding Strategies: – Financial Bonds – Social & Psychological Bonds – Structural Bonds – Customization Bonds • Relationship Strategies Wheel
  79. 79. 79 SM Getting Satisfying Retaining Enhancing Figure 6-1Figure 6-1 Customer Goals ofCustomer Goals of Relationship MarketingRelationship Marketing
  80. 80. 80 SM Figure 6-3Figure 6-3 Underlying Logic of CustomerUnderlying Logic of Customer Retention Benefits to theRetention Benefits to the OrganizationOrganization Customer Retention & Increased Profits Employee Loyalty Quality Service Customer Satisfaction
  81. 81. 81 SM Figure 6-5Figure 6-5 Steps in Market SegmentationSteps in Market Segmentation andand Targeting for ServicesTargeting for Services Identify Bases for Segmenting the Market STEP 1: Develop Profiles of Resulting Segments STEP 2: Develop Measures of Segment Attractive- ness STEP 3: Select the Target Segments STEP4: Ensure that Segments Are Compatible STEP 5:
  82. 82. 82 SM Excellent Quality and Value Figure 6-6Figure 6-6 Levels of Retention StrategiesLevels of Retention Strategies I. Financial Bonds II. Social Bonds IV. Structural Bonds III. Customization Bonds Volume and Frequency Rewards Bundling and Cross Selling Stable Pricing Social Bonds Among Customers Personal Relationships Continuous Relationships Customer Intimacy Mass Customization Anticipation / Innovation Shared Processes and Equipment Joint Investments Integrated Information Systems
  83. 83. 83 SMSM Chapter 7 SERVICE RECOVERY
  84. 84. 84 SM Figure 7-5Figure 7-5 Service Recovery StrategiesService Recovery Strategies Learn from Recovery Experiences Treat Custom ers Fairly Learnfrom LostCustomers Welcome and Encourage Complaints Fail Safe the Service ActQuickly Service Recovery Strategies
  85. 85. 85 SM Figure 7-6Figure 7-6 Causes Behind ServiceCauses Behind Service SwitchingSwitching Service Switching Behavior • High Price • Price Increases • Unfair Pricing • Deceptive Pricing Pricing • Location/Hours • Wait for Appointment • Wait for Service Inconvenience • Service Mistakes • Billing Errors • Service Catastrophe Core Service Failure • Uncaring • Impolite • Unresponsive • Unknowledgeable Service Encounter Failures • Negative Response • No Response • Reluctant Response Response to Service Failure • Found Better Service Competition • Cheat • Hard Sell • Unsafe • Conflict of Interest Ethical Problems • Customer Moved • Provider Closed Involuntary Switching Source: Sue Keaveney
  86. 86. 86 SM Why a Good GuaranteeWhy a Good Guarantee WorksWorks • forces company to focus on customers • sets clear standards • generates feedback • forces company to understand why it failed • builds “marketing muscle”
  88. 88. 88 SM CUSTOMER COMPANY GAP 2 Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Provider GAP 2Provider GAP 2 Part 3 Opener
  90. 90. 90 SM Figure 8-1Figure 8-1 Risks of Relying on WordsRisks of Relying on Words Alone toAlone to Describe ServicesDescribe Services  Oversimplification  Incompleteness  Subjectivity  Biased Interpretation
  91. 91. Figure 8-4Figure 8-4 Service Mapping/BlueprintingService Mapping/Blueprinting A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view. Service Mappin g Process Points of Contact Evidence
  92. 92. 92 SM Service Blueprint ComponentsService Blueprint Components CUSTOMER ACTIONS line of interaction “ONSTAGE” CONTACT EMPLOYEE ACTIONS line of visibility “BACKSTAGE” CONTACT EMPLOYEE ACTIONS line of internal interaction SUPPORT PROCESSES
  93. 93. 93 SM Application of ServiceApplication of Service BlueprintsBlueprints • New Service Development • concept development • market testing • Supporting a “Zero Defects” Culture • managing reliability • identifying empowerment issues • Service Recovery Strategies • identifying service problems • conducting root cause analysis • modifying processes
  95. 95. 95 SM Table 10-1Table 10-1 Elements of PhysicalElements of Physical EvidenceEvidence Servicescape Other tangibles Facility exterior Exterior design Signage Parking Landscape Surrounding environment Facility interior Interior design Equipment Signage Layout Air quality/temperature Business cards Stationery Billing statements Reports Employee dress Uniforms Brochures Internet/Web pages
  96. 96. 96 SM Table 10-2Table 10-2 Examples of Physical Evidence from theExamples of Physical Evidence from the Customer’s Point of ViewCustomer’s Point of View Service Physical evidence Servicescape Other tangibles Insurance Not applicable Policy itself Billing statements Periodic updates Company brochure Letters/cards Hospital Building exterior Parking Signs Waiting areas Admissions office Patient care room Medical equipment Recovery room Uniforms Reports/stationery Billing statements Airline Airline gate area Airplane exterior Airplane interior (décor, seats, air quality) Tickets Food Uniforms Express mail Not applicable Packaging Trucks Uniforms Computers Sporting event Parking, Seating, Restrooms Stadium exterior Ticketing area, Concession Areas Entrance, Playiing Field Signs Tickets Program Uniforms
  98. 98. 98 SM CUSTOMER COMPANY Provider GAP 3Provider GAP 3 Service Delivery GAP 3 Customer-Driven Service Designs and Standards Part 4 Opener
  100. 100. 100 SM Service EmployeesService Employees • They are the service • They are the firm in the customer’s eyes • They are marketers • Importance is evident in – The Services Marketing Mix (People) – The Service-Profit Chain – The Services Triangle
  101. 101. 101 SM Service EmployeesService Employees • Who are they? – “boundary spanners” • What are these jobs like? – emotional labor – many sources of potential conflict • person/role • organization/client • interclient • quality/productivity
  102. 102. 102 SM Figure 11-3Figure 11-3 Boundary Spanners InteractBoundary Spanners Interact with Both Internalwith Both Internal and External Constituentsand External Constituents Internal Environment External Environment
  103. 103. 103 SM Figure 11-4Figure 11-4 Sources of Conflict forSources of Conflict for Boundary-Spanning WorkersBoundary-Spanning Workers • Person vs. Role • Organization vs. Client • Client vs. Client • Quality vs. Productivity
  104. 104. 104 SM Figure 11-5Figure 11-5 Human Resource Strategies for Closing GAP 3Human Resource Strategies for Closing GAP 3 Customer- oriented Service Delivery Hire the Right People Provide Needed Support Systems Retain the Best People Develop People to Deliver Service Quality Com pete for the Best People Hire for Service Competencies and Service Inclination Provide Supportive Technology and Equipment Treat Employees as Customers Empower Employees Be the Preferred Em ployer Train for Technicaland Interactive SkillsProm ote Team work Measure Internal Service Quality Develop Service- oriented Internal Processes Measureand RewardStrongService Providers Include Employeesin the Company’s Vision
  105. 105. 106 SM Service CultureService Culture “A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.”
  107. 107. 108 SM Importance ofImportance of OtherOther Customers in ServiceCustomers in Service DeliveryDelivery • Other customers can detract from satisfaction • disruptive behaviors • excessive crowding • incompatible needs • Other customers can enhance satisfaction • mere presence • socialization/friendships • roles: assistants, teachers, supporters
  108. 108. 109 SM How Customers Widen Gap 3How Customers Widen Gap 3 • Lack of understanding of their roles • Not being willing or able to perform their roles • No rewards for “good performance” • Interfering with other customers • Incompatible market segments
  109. 109. 110 SM Customers as ContributorsCustomers as Contributors to Service Quality andto Service Quality and SatisfactionSatisfaction • Customers can contribute to – their own satisfaction with the service • by performing their role effectively • by working with the service provider – the quality of the service they receive • by asking questions • by taking responsibility for their own satisfaction • by complaining when there is a service failure
  110. 110. 111 SM Strategies for EnhancingStrategies for Enhancing Customer ParticipationCustomer Participation 1. Define customers’ jobs - helping himself - helping others - promoting the company 2. Individual differences: not everyone wants to participate
  111. 111. 112 SMSM Chapter 14 MANAGING DEMAND AND CAPACITY
  112. 112. 113 SM Understanding CapacityUnderstanding Capacity Constraints and DemandConstraints and Demand PatternsPatterns • Time, labor, equipment and facilities • Optimal versus maximal use of capacity • Charting demand patterns • Predictable cycles • Random demand fluctuations • Demand patterns by market segment Capacity Constraints Demand Patterns
  114. 114. 115 SM CUSTOMER COMPANY External Communications to CustomersGAP 4 Service Delivery Provider GAP 4Provider GAP 4 Part 5 Opener
  116. 116. 117 SM Figure 15-1Figure 15-1 Communications and theCommunications and the Services Marketing TriangleServices Marketing Triangle Internal MarketingInternal Marketing Vertical Communications Horizontal Communications Interactive Marketing Personal Selling Customer Service Center Service Encounters Servicescapes External Marketing Communication Advertising Sales Promotion Public Relations Direct Marketing Company CustomersEmployees Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler
  117. 117. 118 SM Approaches forApproaches for Integrating Services MarketingIntegrating Services Marketing CommunicationCommunication Goal: Delivery greater than or equal to promises Improve Customer Education Manage Service Promises Manage Customer Expectations Manage Internal Marketing Communication Figure 15-3Figure 15-3
  118. 118. 119 SM Goal: Delivery greater than or equal to promises Offer Service Guarantees Create Effective Services Communications MANAGING SERVICE PROMISES Make Realistic Promises Coordinate External Communication Figure 15-4Figure 15-4 Approaches forApproaches for Managing Service PromisesManaging Service Promises
  119. 119. 120 SM Communicate Criteria for Service Effectiveness Create Tiered-Value Offerings Figure 15-8Figure 15-8 Approaches forApproaches for Managing Customer ExpectationsManaging Customer Expectations Negotiate Unrealistic Expectations Goal: Delivery greater than or equal to promises Offer Choices
  120. 120. 121 SM Goal: Delivery greater than or equal to promises Prepare Customers for the Service Process Clarify Expectations after the Sale Figure 15-9Figure 15-9 Approaches forApproaches for Improving Customer EducationImproving Customer Education Teach Customers to Avoid Peak Demand Periods and Seek Slow Periods Confirm Performance to Standards
  121. 121. 122 SM Goal: Delivery greater than or equal to promises Figure 15-10Figure 15-10 Approaches for ManagingApproaches for Managing Internal Marketing CommunicationsInternal Marketing Communications Create Effective Vertical Communications Align Back Office Personnel w/ External Customers Create Effective Horizontal Communications Create Cross-Functional Teams
  122. 122. Contact: +923006641921 Usman Waheed 123 SMSM Chapter 17 THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY
  123. 123. Contact: +923006641921 Usman Waheed 124 SM Objectives for Chapter 17:Objectives for Chapter 17: The Financial and EconomicThe Financial and Economic Impact of ServiceImpact of Service • Examine the direct effects of service on profits • Consider the impact of service on getting new customers • Evaluate the role of service in keeping customers • Examine the link between perceptions of service and purchase intentions • Emphasize the importance of selecting profitable customers • Discuss what is know about the key service drivers of overall service quality, customer retention and profitability • Discuss the balanced performance scorecard to focus on strategic measurement other than financials
  124. 124. Contact: +923006641921 Usman Waheed 125 SM Figure 17-1Figure 17-1 The Direct Relationship betweenThe Direct Relationship between Service and ProfitsService and Profits Profits ?Service Quality
  125. 125. Contact: +923006641921 Usman Waheed 126 SM Figure 17-2Figure 17-2 Offensive Marketing Effects ofOffensive Marketing Effects of Service on ProfitsService on Profits Profits Market Share Reputation Sales Price Premium Service Quality
  126. 126. Contact: +923006641921 Usman Waheed 127 SM Figure 17-3Figure 17-3 Defensive Marketing Effects ofDefensive Marketing Effects of Service on ProfitService on Profit Margins Profits Customer Retention Costs Price Premium Word of Mouth Volume of PurchasesService Quality
  127. 127. Contact: +923006641921 Usman Waheed 128 SM Figure 17-5Figure 17-5 Perceptions of Service,Perceptions of Service, BehavioralBehavioral Intentions and ProfitsIntentions and Profits Customer Retention Costs Price Premium Word of Mouth Margins Profits Volume of Purchases Service Behavioral Intentions Sales
  128. 128. Contact: +923006641921 Usman Waheed 129 SM Figure 17-6Figure 17-6 The “80/20” Customer PyramidThe “80/20” Customer Pyramid Most Profitable Customers Least Profitable Customers What segment spends more with us over time, costs less to maintain, spreads positive word of mouth? What segment costs us in time, effort and money yet does not provide the return we want? What segment is difficult to do business with? Other Customers Best Customers
  129. 129. Contact: +923006641921 Usman Waheed 130 SM Figure 17-7Figure 17-7 The Expanded Customer PyramidThe Expanded Customer Pyramid Most Profitable Customers Least Profitable Customers What segment spends more with us over time, costs less to maintain, spreads positive word of mouth? What segment costs us in time, effort and money yet does not provide the return we want? What segment is difficult to do business with? Gold Iron Lead Platinum
  130. 130. Contact: +923006641921 Usman Waheed 131 SM Figure 17-8Figure 17-8 The Key Drivers of Service Quality,The Key Drivers of Service Quality, Customer Retention, and ProfitsCustomer Retention, and Profits Key Drivers Service Quality Service Encounter Service Encounter Service Encounter Customer Retention Behavioral Intentions Profits Service Encounter Service Encounters
  131. 131. Contact: +923006641921 Usman Waheed 132 SM Figure 17-9Figure 17-9 Sample Measurements for theSample Measurements for the Balanced ScorecardBalanced Scorecard Adapted from Kaplan and Norton Innovation and Learning Perspective Customer Perspective Service Perceptions Service Expectations Perceived Value Behavioral Intentions: Operational Perspective: Right first time (% hits) Right on time (% hits) Responsiveness (% on time) Transaction time (hours, days) Throughput time Reduction in waste Process quality Financial Measures Price Premium Volume Increases Value of Customer Referrals Value of Cross Sales Long-term Value of Customer % Loyalty % Intent to Switch # Customer Referrals # Cross Sales # of Defections Number of new products Return on innovation Employee skills Time to market Time spent talking to customers
  132. 132. Contact: +923006641921 Usman Waheed 133 SM Figure 17-10Figure 17-10 Service Quality Spells ProfitsService Quality Spells Profits Service Quality Customer Retention Costs Price Premium Word of Mouth Margins Profits Defensive Marketing Volume of Purchases Market Share Reputation Sales Price Premium Offensive Marketing