Marketing of Services Total

8/8/2019 Marketing of Services Total

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Contact: +923006641921 Usman Waheed

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SM

Services MarketingServices Marketing


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2

SM GrowthGrowth


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SM

Causes for growth ofCauses for growth of

sercauses of growthvice sectorsercauses of growthvice sector

Cause Effect Illustrations

Technologicaladvancements

Higher complexity ofproducts

Engg. Services,maintenance services

Globalisation Businessinternationalization

Multinationalcouriers

Deregulation policies Pvtisation ofregulated sectors Telecom, Insurance

Competition &Higherproductivity

Expert knowledge Market research,consultancy, businessprocess engg

Cost effectiveness Optimum manpower,subcontract

Security services,Payroll processing


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4

SM Contd..Contd..

Cause Effect Illustrations

Computer explosion Speed of work performance Multimedia, Advertisingservices

Overall increase in affluency Increased spending power forcomforts

Laundry services, ticketing,travel agency

Increase % of workingwomen

Work performed by womenis outsourced

Crches, baby sitting

More leisure time Shift towards pleasure &entertainment

Recreation

Greater life expectancy Special care facilities Nursing homes

Increased complexity of life Special services Consultants(law,I.T,marriage)


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5

SM IntroductionIntroduction

Services are deeds,processes andperformance

Intangible, but may have a tangiblecomponent

Generally produced and consumed at the

same time Need to distinguish between SERVICE and

CUSTOMER SERVICE


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6

SM I.B.MI.B.M

International Business Machines (IBM)

United States. IBM is the

world's fourth largest technology companyand the second most valuable global brand[4]

(afterCoca-Cola). offers infrastructure

services, hosting services, andconsulting services in areas ranging from

mainframe computers to nanotechnology
http://en.wikipedia.org/wiki/List_of_the_largest_global_technology_companieshttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/Coca-Colahttp://en.wikipedia.org/wiki/Internet_hosting_servicehttp://en.wikipedia.org/wiki/Consultanthttp://en.wikipedia.org/wiki/Mainframe_computerhttp://en.wikipedia.org/wiki/Nanotechnologyhttp://en.wikipedia.org/wiki/Nanotechnologyhttp://en.wikipedia.org/wiki/Mainframe_computerhttp://en.wikipedia.org/wiki/Consultanthttp://en.wikipedia.org/wiki/Internet_hosting_servicehttp://en.wikipedia.org/wiki/Coca-Colahttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/List_of_the_largest_global_technology_companies


7/175Contact: +923006641921 Usman Waheed

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SM Challenges for ServicesChallenges for Services

Defining and improving quality

Communicating and testing new services

Communicating and maintaining a consistentimage

Motivating and sustaining employee commitment

Coordinating marketing, operations and humanresource efforts

Setting prices

Standardization versus personalization



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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



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SM

Figure 1-1Figure 1-1

Tangibility SpectrumTangibility Spectrum

TangibleDominant

Intangible

Dominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

Management

ConsultingTeaching

Fast-foodOutlets

Fast-foodOutlets



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SM

Table 1-2Table 1-2

Services are DifferentServices are DifferentGoods Services Resulting ImplicationsTangible 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 deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

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 withservices.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 Marketing49 (Spring 1985): 33-46.



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The Services Marketing TriangleThe Services Marketing Triangle

InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

enabling thepromise

delivering the promise

setting thepromise

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler



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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 bywhom?

How will it be delivered and bywhom?

Are the supporting systems inplace to deliver the promisedservice?



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SM

Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology


The Services TriangleThe Services Triangle

and Technologyand Technology



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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



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SM

Traditional Marketing MixTraditional Marketing Mix

All elements within the control of the firm that

communicate the firms capabilities and image to

customers or that influence customer satisfactionwith the firms product and services:

Product

Price

Place

Promotion



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SM

Expanded Mix for Services --Expanded Mix for Services --

the 7 Psthe 7 Ps

Product

Price

Place

Promotion

People

Process

Physical Evidence



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SM

Table 1-3Table 1-3

Expanded Marketing Mix forExpanded Marketing Mix forServicesServices

PRODUCT PLACE PROMOTION PRICE

Physical goodfeatures

Channel type Promotionblend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Salespromotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding



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SM

PEOPLE PHYSICALEVIDENCE

PROCESS

Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicatingculture 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



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SM Ways to Use the 7 PsWays to Use the 7 Ps

Overall Strategic

Assessment

How effective is a firms

services marketing mix?

Is the mix well-aligned with

overall vision and strategy?

What are the strengths and

weaknesses in terms of the 7Ps?

Specific ServiceImplementation

Who is the customer?

What is the service?

How effectively does theservices marketing mix for aservice communicate its

benefits and quality? What changes/improvements

are needed?



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SM


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 ofthe three areas?

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SMSM

Part 1

FOCUS ON THE CUSTOMER

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PerceivedService

Expected

ServiceCUSTOMER

COMPANY

Customer

Gap

GAP 1

GAP 2

Gaps Model of Service QualityGaps Model of Service Quality

GAP 3

ExternalCommunications

to CustomersGAP 4Service Delivery

Customer-Driven ServiceDesigns and Standards

Company Perceptions of

Consumer ExpectationsPart 1 Opener

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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 promises

Part 1 Opener

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24

SM The Customer GapThe Customer Gap

Expected

Service

PerceivedService

GAP

Part 1 Opener

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SMSM

Chapter 3

CUSTOMER

EXPECTATIONS OF

SERVICES

26Obj ti f Ch t 3


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SM

Objectives for Chapter 3:Objectives for Chapter 3:Customer Expectations ofCustomer Expectations of

ServiceService

Recognize that customers hold different types ofexpectations for service performance

Discuss controllable and uncontrollable sources of

customer expectations Distinguish between customers global expectations of

their relationships and their expectations of the serviceencounter

Acknowledge that expectations are similar for manydifferent types of customers

Delineate the most important current issues surroundingcustomer expectations

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27

SM DEFINITIONSDEFINITIONS

Customers have different expectations reservices or expected service

Desired service customer hopes to receive Adequate service the level of service the

customer may accept

DO YOUR EXPECTATIONS DIFFER RESPUR and CAPTAIN DOREGO?


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The Zone of ToleranceThe Zone of Tolerance

Adequate Service

Desired Service

Zone ofTolerance

30Figure 3 3Figure 3 3


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Zones of ToleranceZones of Tolerance VARYVARY forfor

Different Service DimensionsDifferent Service Dimensions

Most Important Factors Least Important Factors

Levelof

Expectation

Source: Berry, Parasuraman, and Zeithaml (1993)

Adequate Service

Desired Service

Zone of

ToleranceDesiredService

AdequateService

Zoneof

Tolerance

Desired Service

Adequate Service

31Figure 3-4Figure 3-4


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Zones of ToleranceZones of Tolerance VARYVARY forforFirst-Time and Recovery ServiceFirst-Time and Recovery Service

First-Time Service

Outcome

Process

Outcome

Process

Recovery Service

ExpectationsLOW HIGH

Source: Parasuraman, Berry and Zeithaml (1991)

32Figure 3 5Figure 3-5


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Factors that InfluenceFactors that Influence

Desired ServiceDesired Service

DesiredService

AdequateService

Zoneof

Tolerance

Enduring ServiceIntensifiers

Personal Needs

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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

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Adequate ServiceAdequate Service

DesiredService

AdequateService

Zoneof

ToleranceSelf-PerceivedService Role

SituationalFactors

Perceived ServiceAlternatives

Transitory ServiceIntensifiers

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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



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gu e 3g


Desired and Predicted ServiceDesired and Predicted Service

DesiredService

AdequateService

Zoneof

Tolerance

PredictedService

Explicit ServicePromises

Implicit Service

Promises

Word-of-Mouth

Past Experience

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SMSM

Chapter 4

CUSTOMER

PERCEPTIONS OF

SERVICE

38Objectives for Chapter 4:Objectives for Chapter 4:


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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



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SM

Figure 4 1Figure 4 1

Customer Perceptions ofCustomer Perceptions of

Service Quality andService Quality and

Customer SatisfactionCustomer Satisfaction

ServiceQuality

Reliability

Responsiveness

Assurance

Empathy

Tangibles

Product

Quality

PricePersonalFactors

CustomerSatisfaction

SituationalFactors

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Factors InfluencingFactors Influencing


Product/service quality

Product/service attributes or features

Consumer Emotions

Attributions for product/service success or

failure

Equity or fairness evaluations

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Outcomes ofOutcomes of


Increased customer retention

Positive word-of-mouth communications

Increased revenues



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Relationship between CustomerRelationship between Customer

Satisfaction and Loyalty inSatisfaction and Loyalty in

Competitive IndustriesCompetitive Industries

0%

20%

40%

60%

80%

100%

Verydissatisfied

Dissatisfied Neither satisfied nor

dissatisfied

Satisfied Verysatisfied

Satisfaction measure

Loyalty

(ret

ention)

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

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SM Service QualityService Quality

The customers judgment of overall

excellence of the service provided inrelation to the quality that was expected.

Process and outcome quality are both

important.

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SM

The Five Dimensions ofThe Five Dimensions of

Service QualityService Quality

Ability to perform the promisedservice dependably and accurately.

Knowledge and courtesy ofemployees and their ability toconvey trust and confidence.

Physical facilities, equipment, andappearance of personnel.

Caring, individualized attention thefirm provides its customers.

Willingness to help customers andprovide prompt service.

Tangibles

Reliability

Responsiveness

Assurance

Empathy

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SM Exercise toExercise to

Identify Service AttributesIdentify Service Attributes

In groups of five, choose a services industry and spend 10 minutes

brainstorming specific requirements of customers in each of the five

service quality dimensions. Be certain the requirements reflect the

customers point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

46SERVQUAL AttributesSERVQUAL Attributes


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SERVQUAL AttributesSERVQUAL Attributes

s Providing service as promised

s Dependability in handling customersservice problems

s Performing services right the first time

s Providing services at the promised time

s Maintaining error-free records

s Keeping customers informed as towhen services will be performed

s Prompt service to customers

s Willingness to help customers

s Readiness to respond to customersrequests

RELIABILITY

RESPONSIVENESS

s Employees who instill confidence incustomers

s Making customers feel safe in theirtransactions

s Employees who are consistently courteous

s Employees who have the knowledge toanswer customer questions

ASSURANCE

s Giving customers individual attention

s Employees who deal with customers in acaring fashion

s Having the customers best interest at heart

s Employees who understand the needs oftheir customers

s

Convenient business hours

EMPATHY

s Modern equipment

s Visually appealing facilities

s Employees who have aneat, professionalappearance

s Visually appealing materialsassociated with the service

TANGIBLES

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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 qualitybuild brand identity increase loyalty

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Check-InCheck-In

Request Wake-Up CallRequest Wake-Up Call

CheckoutCheckout

Bellboy Takes to RoomBellboy Takes to Room

Restaurant MealRestaurant Meal


A Service EncounterA Service Encounter

Cascade for a Hotel VisitCascade for a Hotel Visit

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Sales CallSales Call

Ordering SuppliesOrdering Supplies

BillingBilling

Delivery and InstallationDelivery and Installation

ServicingServicing

g

A Service EncounterA Service EncounterCascade for an IndustrialCascade for an Industrial

PurchasePurchase

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SM

Critical Service EncountersCritical Service Encounters

ResearchResearch

GOAL - understanding actual events and

behaviors that cause customer dis/satisfaction

in service encounters

METHOD - Critical Incident Technique

DATA - stories from customers and employees

OUTPUT - identification of themes underlyingsatisfaction and dissatisfaction with service

encounters

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Sample Questions for CriticalSample Questions for Critical

Incidents Technique StudyIncidents Technique Study

Think of a time when, as a customer, you had a

particularlysatisfying (dissatisfying) interaction with

an employee of . When did the incident happen?

What specific circumstances led up to this situation?

Exactly what was said and done?

What resulted that made you feel the interaction was

satisfying (dissatisfying)?

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SM Common Themes in CriticalCommon Themes in Critical

Service EncountersService Encounters

ResearchResearch

Recovery: Adaptability:

Spontaneity:Coping:

Employee Responseto Service Delivery

System Failure

Employee Responseto Customer Needs

and Requests

Employee Responseto Problem Customers

Unprompted andUnsolicited EmployeeActions and Attitudes

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SM RecoveryRecovery

Acknowledge

problem Explain causes

Apologize

Compensate/upgrade

Lay out options

Take responsibility

Ignore customer

Blame customer Leave customer to

fend for him/herself

Downgrade

Act as if nothing is

wrong

DO DONT

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SM AdaptabilityAdaptability

Recognize the

seriousness of the need

Acknowledge

Anticipate

Attempt to accommodate

Explain rules/policies Take responsibility

Exert effort to

accommodate

Promise, then fail to

follow through

Ignore

Show unwillingness to

try

Embarrass the customer Laugh at the customer

Avoid responsibility

DO DONT

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SM SpontaneitySpontaneity

Take time

Be attentive

Anticipate needs

Listen

Provide information

(even if not asked) Treat customers fairly

Show empathy

Acknowledge by name

Exhibit impatience

Ignore Yell/laugh/swear

Steal from or cheat a

customer Discriminate

Treat impersonally

DO DONT

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SM CopingCoping

Listen

Try to accommodate

Explain

Let go of the

customer

Take customers

dissatisfaction

personally

Let customers

dissatisfaction affectothers

DO DONT

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Evidence of Service from theEvidence of Service from the

Customers Point of ViewCustomers Point of View

People

ProcessPhysical

Evidence

Contact employees

Customerhim/herself

Other customersOperational flow ofactivities

Steps in process

Flexibility vs.standard

Technology vs.human

Tangiblecommunication

Servicescape

Guarantees

Technology

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SMSM

Part 2

LISTENING TO

CUSTOMER

REQUIREMENTS

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SM

Provider GAP 1Provider GAP 1

CompanyPerceptions of

ConsumerExpectations

ExpectedService

CUSTOMER

COMPANY

GAP 1

Part 2 Opener

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SMSM

Chapter 5

UNDERSTANDING

CUSTOMEREXPECTATIONS AND

PERCEPTIONS THROUGHMARKETING RESEARCH



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j pj p

Understanding Customer ExpectationsUnderstanding Customer Expectations

and Perceptions throughand Perceptions through

Marketing ResearchMarketing Research Present the types of and guidelines for marketing

research in services

Show the ways that marketing research information

can and should be used for services

Describe the strategies by which companies can

facilitate interaction and communication between

management and customers Present ways that companies can and do facilitate

interaction between contact people and management

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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 forrewards

To determine expectations for a new service

To monitor changing expectations in an industry

To forecast future expectations



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SM

gg

Criteria for An EffectiveCriteria for An Effective

Services Research ProgramServices Research Program

Research

Objectives

Inclu

des

Qualitat

ive

Resea

rch

IncludesQuantitativeResearch Includes

Perceptions

and

Expectationsof

Customers

Includes

Measures

of

Loyalty or

BehavioralIntentions

Balan

cesCo

st

andValu

eof

Inform

ation

IncludesStatisticalValidity

When Necessary

MeasuresPriorities

orImportance

Occurs

with

Appropriate

Frequency

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Portfolio of Services ResearchPortfolio of Services Research

Customer ComplaintSolicitation

Relationship Surveys

Post-Transaction Surveys

Customer Focus Groups

Mystery Shopping ofService Providers

Employee Surveys

Lost Customer Research

Identify dissatisfied customers to attempt recovery;identify most common categories of service failurefor 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 aforum for customers to suggest service-improvementideas

Assess companys service performance compared tocompetitors; identify service-improvement priorities; trackservice improvement over time

Measure individual employee service behaviors for use incoaching, training, performance evaluation, recognition andrewards; identify systemic strengths and weaknesses inservice

Measure internal service quality; identify employee-perceived obstacles to improve service; trackemployee morale and attitudes

Determine the reasons why customers defect

Research Objective Type of Research

Future Expectations ResearchTo forecast future expectations of customersTo develop and test new service ideas

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Stages in the ResearchStages in the Research


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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



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gg

Service Quality PerceptionsService Quality PerceptionsRelative to Zones of ToleranceRelative to Zones of Tolerance

by Dimensionsby Dimensions

Retail Chain

9

8

7

6

5

4

3

2

1

0Reliability Responsiveness Assurance Empathy Tangibles

OO O O

Zone of Tolerance S.Q. PerceptionO

O

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Ser ice Q alit PerceptionsService Quality Perceptions


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Service Quality PerceptionsService Quality PerceptionsRelative to Zones of Tolerance byRelative to Zones of Tolerance by

DimensionsDimensions

ComputerManufacturer

10

8

6

4

2

0

Reliability Responsiveness Assurance Empathy Tangibles

OO OO

O

Zone of Tolerance S.Q. PerceptionO

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Importance/Performance MatrixImportance/Performance Matrix

HIGH

HIGHLOW

Performance

Import

ance

Attributes to Improve Attributes to Maintain

High

Leverage

Attributes to De-emphasizeAttributes to Maintain

Low

Leverage

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SMSM

Chapter 6

BUILDING

CUSTOMER

RELATIONSHIPS



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j pj p

Building CustomerBuilding Customer

RelationshipsRelationships

Explain relationship marketing, its goals, and the benefits

of long-term relationships for firms and customers

Explain why and how to estimate customer lifetime value Specify the foundations for successful relationship

marketing--quality core services and careful market

segmentation

Provide you with examples of successful customerretention strategies

Introduce the idea that the customer isnt always right

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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

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SM Lifetime Value of a CustomerLifetime Value of a Customer

Assumptions

Income

Expected Customer Lifetime

Average Revenue (month/year)

Other Customers convinced via WOM

Employee Loyalty??

Expenses Costs of Serving Customer Increase??

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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

wouldnt consider terminating the relationship--

psychological commitment

has a positive attitude about the supplier says good things about the supplier


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Benefits to the OrganizationBenefits to the Organization


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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

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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 qualityof life and other psychological benefits

avoidance of change

simplified decision makingsocial support and friendships

special deals

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The Customer Isnt AlwaysThe Customer Isnt Always


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The Customer Isn t AlwaysThe Customer Isn t Always

RightRight

Not all customers are good relationship

customers:

wrong segment

not profitable in the long term

difficult customers

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SStrategies for BuildingStrategies for Building


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Strategies for BuildingStrategies for Building

RelationshipsRelationships

Foundations:

Excellent Quality/Value

Careful Segmentation

Bonding Strategies:

Financial Bonds

Social & Psychological Bonds

Structural BondsCustomization Bonds

Relationship Strategies Wheel

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C t G l f


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SM

Getting

Satisfying

Retaining

Enhancing

Customer Goals ofCustomer Goals of

Relationship MarketingRelationship Marketing

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Underlying Logic of CustomerUnderlying Logic of Customer


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Underlying Logic of CustomerUnderlying Logic of Customer

Retention Benefits to theRetention Benefits to the

OrganizationOrganization

Customer Retention &Increased Profits

Employee Loyalty

QualityService

Customer Satisfaction

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SFigure 6-5Figure 6-5


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Steps in Market SegmentationSteps in Market Segmentation

andand

Targeting for ServicesTargeting for Services

IdentifyBases forSegmentingthe Market

STEP 1:

DevelopProfiles ofResultingSegments

STEP 2: DevelopMeasuresof SegmentAttractive-ness

STEP3:

Select theTargetSegments

STEP4:Ensure thatSegmentsAreCompatible

STEP5:

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Figure 6-6Figure 6-6Levels of Retention StrategiesLevels of Retention Strategies


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ExcellentQuality

and

Value

Levels of Retention StrategiesLevels of Retention Strategies

I. FinancialBonds

II.SocialBonds

IV.Structural

Bonds

III. Customization

Bonds

Volume andFrequency

Rewards

Bundling and

Cross Selling

Stable

Pricing

Social Bonds

Among

Customers

Personal

Relationships

Continuous

Relationships

Customer

IntimacyMass

Customization

Anticipation

/ Innovation

Shared

Processes

andEquipment

Joint

Investments

Integrated

Information

Systems

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SMSM

Chapter 7

SERVICE RECOVERY

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SObjectives for Chapter 7:Objectives for Chapter 7:


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j pj p

Service RecoveryService Recovery

Illustrate the importance of recovery from service

failures in building loyalty

Discuss the nature of consumer complaints and whypeople do and do not complain

Provide evidence of what customers expect and the

kind of responses they want when they complain

Provide strategies for effective service recovery Discuss service guarantees

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U h C t U h C t


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SM Unhappy CustomersUnhappy Customers

Repurchase IntentionsRepurchase Intentions

95%

70%

46%

37%

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Minor complaints ($1-$5 losses) Major complaints (over $100 losses)

Unhappy Customers Who Dont Complain

Unhappy Customers Who Do Complain

Percent of Customers Who Will Buy Again

Source: Adapted from data reported by the Technical Assistance Research Program.

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Customer ResponseCustomer Response


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Customer ResponseCustomer Response

Following Service FailureFollowing Service Failure

Service Failure

Do NothingTake Action

Stay with ProviderSwitch Providers

Complain to

ProviderComplain to

Family & Friends

Complain to

Third Party

Stay with ProviderSwitch Providers

87

S


S i R St t iS i R St t i


87/175

SM

Service Recovery StrategiesService Recovery Strategies

LearnfromRecoveryExperience

s

TreatC

ustom

ersF

airly

Learn fro

m

LostCustomers

Welcom

eand

EncourageComplaints

FailS

afethe

Servic

e

ActQ

uickly

ServiceRecoveryStrategies

88

S


Causes Behind ServiceCauses Behind Service

High Price Price Increases Unfair Pricing

Pricing


88/175

SM

Causes Behind ServiceCauses Behind Service

SwitchingSwitching

ServiceSwitchingBehavior

Deceptive 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

89

S S i G tS i G t


89/175

SM Service GuaranteesService Guarantees

guarantee = an assurance of the fulfillment of a condition

(Websters Dictionary)

for products, guarantee often done in the form of awarranty

services are often notguaranteed

cannot return the serviceservice experience is intangible

(so what do you guarantee?)

90

S

Table 7-7Table 7-7Ch i i fCh t i ti f


90/175

SM Characteristics of anCharacteristics of an

Effective Service GuaranteeEffective Service GuaranteeUnconditional

The guarantee should make its promise unconditionally -no strings attached.

Meaningful It should guarantee elements of the service that are

important to the customer. The payout should cover fully the customer's

dissatisfaction.

Easy to Understand and Communicate For customers - they need to understand what to expect.

For employees - they need to understand what to do.

Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way

of accessing or collecting on the guarantee.

Source: Christopher W.L. Hart, The Power of Unconditional Guarantees, Harvard Business Review, July-August, 1988, pp. 54-62.

91

SWhy a Good GuaranteeWhy a Good Guarantee


91/175

SM

yy

WorksWorks

forces company to focus on customers

sets clear standards

generates feedback

forces company to understand why it failed

builds marketing muscle

92

S S i G tS i G t


92/175


Does everyone need a guarantee?

Reasons companies do NOT offer guarantees:guarantee would be at odds with companys image

too many uncontrollable external variables

fears of cheating by customerscosts of the guarantee are too high

93

S S i G tS i G t


93/175


service guarantees work for companies who are

already customer-focused

effective guarantees can be BIG deals - they put thecompany at risk in the eyes of the customer

customers should be involved in the design of service

guarantees

the guarantee should be so stunning that it comes as asurprise -- a WOW!! factor

its the icing on the cake, not the cake

94

S

S


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SMSM

Part 3

ALIGNING STRATEGY,

SERVICE DESIGN

AND STANDARDS

95

S


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SM

CUSTOMER

COMPANY

GAP 2

Customer-DrivenService Designs and

Standards

CompanyPerceptions of

ConsumerExpectations


Part 3 Opener

96

S

S


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SMSM

Chapter 8

SERVICE DEVELOPMENTAND DESIGN

97

SObjectives for Chapter 8:Objectives for Chapter 8:Service Development andService Development and


97/175

SM Service Development andService Development and

DesignDesign

Describe the challenges inherent in service design

Present steps in the new service development

process Show the value of service blueprinting and quality

function deployment (QFD) in new service design

and service improvement

Present lessons learned in choosing andimplementing high-performance service

innovations

98

S


Risks of Relying on WordsRisks of Relying on Words


98/175

SM

Risks of Relying on Wordsy g

Alone toAlone to

Describe ServicesDescribe Services

Oversimplification

Incompleteness Subjectivity Biased Interpretation

99

S


New Service Development ProcessNew Service Development Process


99/175

SM

pp

Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.

Business Strategy Development or Review

New Service Strategy Development

Idea Generation

Concept Development and Evaluation

Business Analysis

Service Development and Testing

Postintroduction Evaluation

Commercialization

Market Testing

Screen ideas against new service strategy

Test concept with customers and employees

Test for profitability and feasibility

Conduct service prototype test

Test service and other marketing-mix elements

Front End

Planning

Implementation

100

S


New Service Strategy MatrixNew Service Strategy Matrix


100/175

SM

New Service Strategy MatrixNew Service Strategy Matrix

for Identifying Growthfor Identifying Growth

OpportunitiesOpportunitiesMarkets

Offerings

Existing

Services

New

Services

Current Customers New Customers

SHARE BUILDING

DIVERSIFICATION

MARKET

DEVELOPMENT

SERVICE

DEVELOPMENT



101/175

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 customers point of

view.

Service

Mapping

Process

Points of

Contact

Evidence

102

S Service Blueprint ComponentsService Blueprint Components


102/175

SM

Service Blueprint ComponentsService Blueprint Components

CUSTOMER ACTIONS

line of interaction

ONSTAGE CONTACT EMPLOYEE ACTIONS

line of visibility

BACKSTAGE CONTACT EMPLOYEE ACTION

line of internal interaction

SUPPORT PROCESSES

103

SExpress Mail Delivery ServiceExpress Mail Delivery Service

T k


103/175

SM

Driver

Picks

Up Pkg.

Dispatch

Driver

Airport

Receives

& Loads

Sort

Packages

Load on

Airplane

Fly toDestinati

on

Unload

&

Sort

Load

OnTruck

SUPPORT

PROCESS

CONTACT

PER

SON

(BackStage)

(On

Stage

)CUSTOME

R

PHYS

ICAL

EVID

ENCE

Customer

CallsCustomer

Gives

Package

TruckPackagingFormsHand-held

ComputerUniform

Receive

Package

TruckPackagingFormsHand-heldComputerUniform

Deliver

Package

Customer

Service

Order

Fly to

Sort

Center

104

S Overnight Hotel StayOvernight Hotel Stay


104/175

SM

g yg y

S

UPPORTPROCESS

CONTACT

PERSON

(BackStage)(

OnStage)

CUSTOME

R

HotelExteriorParking

Cart forBags

DeskRegistrationPapersLobbyKey

ElevatorsHallwaysRoom

Cart forBags

RoomAmenitiesBath

Menu DeliveryTrayFoodAppearance

Food

Bill

DeskLobbyHotelExteriorParking

Arrive

at

Hotel

Give Bags

to

Bellperson

Check inGo to

Room

Receive

Bags

Sleep

Shower

Call

Room

Service

Receive

FoodEat

Check out

and

Leave

Greet and

Take

Bags

Process

Registration

Deliver

Bags

Deliver

FoodProcess

Check Out

Take Bags

to Room

Take

Food

Order

Registration

SystemPrepare

Food

Registration

System

PHYSICA

L

EVIDENC

E

105

S Figure 8-8Figure 8-8


105/175

SM


Building a Service BlueprintBuilding a Service Blueprint

Step 1

Identify the

process to

be blue-

printed.

Step 1

Identify the

process to

be blue-

printed.

Step 2

Identify the

customer or

customer

segment.

Step 2

Identify the

customer or

customer

segment.

Step 3

Map the

process from

the

customerspoint of

view.

Step 3

Map the

process from

the

customerspoint of

view.

Step 4

Map contact

employee

actions,

onstage andback-stage.

Step 4

Map contact

employee

actions,

onstage andback-stage.

Step 5

Link customer

and contact

person

activities toneeded

support

functions.

Step 5

Link customer

and contact

person

activities toneeded

support

functions.

Step 6

Add

evidence of

service at

eachcustomer

action step.

Step 6

Add

evidence of

service at

eachcustomer

action step.

106

SApplication of ServiceApplication of Service


106/175

SM 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

107

SBlueprints Can Be Used By:Blueprints Can Be Used By:


107/175

SM

Service Marketers

creating realistic customer

expectations

service system design

promotion

Operations Management

rendering the service as promised

managing fail points

training systems

quality control

Human Resources

empowering the human element

job descriptions

selection criteria

appraisal systems

System Technology

providing necessary tools: system specifications

personal preference databases

108

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SM


108/175

SMSM

Chapter 9

CUSTOMER-DEFINEDSERVICE STANDARDS

109

SM

Objectives for Chapter 9:Objectives for Chapter 9:Customer-defined ServiceCustomer-defined Service


109/175

SM Customer-defined ServiceCustomer-defined Service

StandardsStandards

Differentiate between company-defined and

customer-defined service standards

Distinguish among one-time service fixes and

hard and soft customer-defined standards Explain the critical role of the service encounter

sequence in developing customer-defined standards

Illustrate how to translate customer expectationsinto behaviors and actions that are definable,

repeatable, and actionable

110

SM


AT&Ts Process Map for MeasurementsAT&Ts Process Map for Measurements


110/175

SM

Reliability (40%)Easy To Use (20%)

Features / Functions (40%)

Knowledge (30%)

Responsive (25%)

Follow-Up (10%)

Delivery Interval Meets Needs (30%)

Does Not Break (25%)

Installed When Promised (10%)

No Repeat Trouble (30%)

Fixed Fast (25%)

Kept Informed (10%)

Accuracy, No Surprise (45%)

Resolve On First Call (35%)

Easy To Understand (10%)

Business Process Customer Need Internal Metric

30% Product

30% Sales

10% Installation

15% Repair

15% Billing

% Repair Call% Calls for Help

Functional Performance Test

Supervisor Observations

% Proposal Made on Time

% Follow Up Made

Average Order Interval

% Repair Reports

% Installed On Due Date

% Repeat Reports

Average Speed Of Repair

% Customers Informed

% Billing Inquiries

% Resolved First Call

% Billing Inquiries

TotalQuality

Source: AT&T General Business Systems

111

SM

Exercise for CreatingExercise for CreatingCustomer-Defined ServiceCustomer-Defined Service


111/175

SM Customer-Defined ServiceCustomer-Defined Service

StandardsStandards

Form a group of four people

Use your schools undergraduate or graduate

program, or an approved alternative

Complete the customer-driven service standards

importance chart

Establish standards for the most important and

lowest-performed behaviors and actions

Be prepared to present your findings to the class

112

SM

Customer-Driven Standards andCustomer-Driven Standards and

Measurements ExerciseMeasurements Exercise


112/175

SM

Service Encounter Customer Requirements Measurements

ServiceQuality

113

SM


Getting to Actionable StepsGetting to Actionable Steps


113/175

SM

Gett g to ct o ab e Stepsg p

Satisfaction Value

RelationshipSolution Provider

Reliability Empathy

Assurance Tangibles

Responsiveness Price

Delivers on TimeReturns Calls QuicklyKnows My Industry

Delivers by Weds 11/4

Returns Calls in 2 HrsKnows Strengths of

My Competitors

Requirements:

Abstract

Concrete

Dig

Deeper

Dig

Deeper

Dig

Deeper

Diagnosticity:

Low

High

General Concepts

Dimensions

Behaviorsand Actions

Attributes

114

SM

Figure 9-3Figure 9-3Process for SettingProcess for Setting

C t D fi d St d dC t D fi d St d d


114/175

SM Customer-Defined StandardsCustomer-Defined Standards

1. Identify Existing or Desired Service Encounter Sequence

2. Translate Customer Expectations Into Behaviors/Actions2. Translate Customer Expectations Into Behaviors/Actions

4. Set Hard or Soft Standards

5. Develop FeedbackMechanisms

5. Develop FeedbackMechanisms

7. Track Measures Against Standards

Measure byAudits or

Operating Data

Hard Soft

Measure byTransaction-

Based Surveys

3. Select Behaviors/Actions for Standards 3. Select Behaviors/Actions for Standards

6. Establish Measures and Target Levels 6. Establish Measures and Target Levels

8. Update Target Levels and Measures 8. Update Target Levels and Measures

115

SM Importance/Performance MatrixImportance/Performance Matrix


115/175

SM Importance/Performance MatrixImportance/Performance Matrix

HIGH

HIGH

Performance

10.0

8.0

7.0

9.0

LOW

8.0 9.0 10.0

Importance

Improve Maintain

Delivers on promises specified in proposal/contract (9.49, 8.51)

Gets project within budget, on time (9.31, 7.84)Completes projectscorrectly, on time (9.29, 7.68)

Does whatever it takes tocorrect problems (9.26, 7.96)

Provides equipment that operates as vendor said it would (9.24, 8.14)

Gets price we originally agreed upon (9.21, 8.64)

Takes responsibility for their mistakes (9.18, 8.01)Delivers or installs onpromised date (9.02, 7.84)

Tells me cost ahead of time (9.06, 8.46)

Gets back to me when

promised (9.04, 7.63)

116

SM


Linkage between Soft Measures andLinkage between Soft Measures and


116/175

SM

ggHard Measures for Speed ofHard Measures for Speed of

Complaint HandlingComplaint Handling

S

A

T

IS

F

A

C

T

I

O

N

2 4 6 8 12 16 20 24

W O R K I N G H O U R S

Large Customers

Small Customers

10

9

8

7

6

5

4

3

2

1

0

117

SM

Figure 9-6Figure 9-6 Aligning CompanyAligning CompanyProcesses with Customer ExpectationsProcesses with Customer Expectations


117/175

SM Processes with Customer ExpectationsProcesses with Customer Expectations

Customer Expectations

CustomerProcessBlueprint

CompanyProcessBlueprint

Company Sequential Processes

AA BB CC DD EE FF GG HH

40 DaysNew Card

MailedLost CardReported

Report Lost

Card

Receive New

Card

48 Hours

118

SM

SM


118/175

SMSM

Chapter 10

PHYSICAL EVIDENCEAND THE SERVICESCAPE

119

SM

Objectives for Chapter 10:Objectives for Chapter 10:Physical Evidence and thePhysical Evidence and the


119/175

SM Physical Evidence and thePhysical Evidence and the

ServicescapeServicescape

Explain the impact on customer perceptions of physical

evidence, particularly the servicescape

Illustrate differences in types and roles of servicescapesand their implications for strategy

Explain why the servicescape affects employee and

customer behavior

Analyze four different approaches for understanding theeffects of physical environment

Present elements of an effective physical evidence

strategy

120

SM

Table 10-1Table 10-1

Elements of PhysicalElements of Physical


120/175

SM

yy

EvidenceEvidence

Servicescape Other tangibles

Facility exteriorExterior design

SignageParkingLandscapeSurrounding environment

Facility interior

Interior designEquipmentSignageLayoutAir quality/temperature

Business cardsStationery

Billing statementsReportsEmployee dressUniformsBrochuresInternet/Web pages

121

SM

Table 10-2Table 10-2Examples of Physical Evidence from theExamples of Physical Evidence from theCustomers Point of ViewCustomers Point of View


121/175

SM Service Physical evidence

Servicescape Other tangiblesInsurance Not applicable Policy itself

Billing statementsPeriodic updatesCompany brochureLetters/cards

Hospital Building exteriorParkingSignsWaiting areas

Admissions officePatient care roomMedical equipmentRecovery room

UniformsReports/stationeryBilling statements

Airline Airline gate areaAirplane exteriorAirplane interior (dcor, seats, airquality)

TicketsFoodUniforms

Express mail Not applicable PackagingTrucksUniformsComputers

Sportingevent

Parking, Seating, RestroomsStadium exteriorTicketing area, Concession AreasEntrance, Playiing Field

SignsTicketsProgramUniforms

122

SM

Table 10-3Table 10-3Typology of Service OrganizationsTypology of Service Organizations

Based on Variations in FormBased on Variations in Form


122/175

M Based on Variations in FormBased on Variations in Form

and Use of the Servicescapeand Use of the ServicescapeComplexity of the servicescape evidence

Servicescapeusage

Elaborate Lean

Self-service(customer only)

Golf LandSurf 'n' Splash

ATMTicketronPost office kioskInternet servicesExpress mail drop-off

Interpersonalservices(both customer andemployeee)

HotelRestaurantsHealth clinicHospitalBankAirline

School

Dry cleanerHot dog standHair salon

Remote service(employee only)

Telephone companyInsurance companyUtilityMany professional services

Telephone mail-order deskAutomated voice-messaging-based services

123

SM

Figure 10-3Figure 10-3A Framework for UnderstandingA Framework for Understanding

Environment user RelationshipsEnvironment-user Relationships


123/175

M Environment-user RelationshipsEnvironment-user Relationships

in Service Organizationsin Service Organizations

Source: Adapted from Mary Jo Bitner, Servicescapes.

PHYSICALENVIRONMENTAL

DIMENSIONS

HOLISTICENVIRONMENT

INTERNALRESPONSES

BEHAVIOR

AmbientConditions

Space/Function

Signs, Symbols,and Artifacts

PerceivedServicescape

Cognitive

Emotional

Physiological

Cognitive

Emotional

Physiological

EmployeeResponses

CustomerResponses

IndividualBehaviors

SocialInteractionsbetween and

amongcustomer and

employees

IndividualBehaviors

124

SM

SM


124/175

MM

Part 4

DELIVERING AND

PERFORMING SERVICE

125

SM Provider GAP 3Provider GAP 3


125/175

M

CUSTOMER

COMPANY


Service Delivery

GAP 3

Customer-DrivenService Designs and

Standards

Part 4 Opener

126

SM

SM


126/175

MM

Chapter 11

EMPLOYEES ROLES INSERVICE DELIVERY

127

SM

Objectives for Chapter 11:Objectives for Chapter 11:Employees Roles inEmployees Roles in


127/175

M p yp yService DeliveryService Delivery

Illustrate the critical importance of service employees in

creating customer satisfaction and service quality

Demonstrate the challenges inherent in boundary-

spanning roles

Provide examples of strategies for creating customer-

oriented service delivery

Show how the strategies can support a service culture

where providing excellent service is a way of life

128

SM Service EmployeesService Employees


128/175

M p yp y

They are the service

They are the firm in the customers eyes

They are marketers Importance is evident in

The Services Marketing Mix (People)

The Service-Profit Chain

The Services Triangle

129

SM Service EmployeesService Employees


129/175

M p yp y

Who are they?

boundary spanners

What are these jobs like?emotional labor

many sources of potential conflict

person/role

organization/client interclient

quality/productivity


130/175

131

SM


Sources of Conflict forSources of Conflict for


131/175

M

Boundary-Spanning WorkersBoundary-Spanning Workers

Person vs. Role

Organization vs. Client

Client vs. Client

Quality vs. Productivity

132

SM

Figure 11-5Figure 11-5Human Resource Strategies for Closing GAP 3Human Resource Strategies for Closing GAP 3


132/175

M

Customer-oriented

Service

Delivery

Hire the

Right People

Provide

Needed SupportSystems

Retain the

Best

People

Develop

People to

Deliver

Service

Quality

Comp

etef

or

theBes

t

People

Hire for

Service

Competencies

and ServiceInclination

Provide

Supportive

Technology

and

Equipment

Treat

Employees

as

Customers

Empower

Employees

Bethe

P

referred

Employer

Trainfo

r

Technicala

nd

Interactiv

e

Skills

Prom

ote

Team

work

Measu

re

Intern

al

Servi

ce

Qualit

y

DevelopService-

orientedInternal

Processes

Measu

reand

Rew

ard

Stron

g

Service

Provide

rs

Includ

e

Emp

loy

ees

in

the

Com

pany

s

Vision

133

SM

EmpowermentEmpowerment


133/175

M

Benefits:quicker responses

employees feel more

responsible

employees tend to interact

with warmth/enthusiasm

empowered employees are a

great source of ideas

positive word-of-mouth from

customers

Drawbacks: greater investments in

selection and training

higher labor costs

slower and/or inconsistentdelivery

may violate customer

perceptions of fair play

giving away the store(making bad decisions)

134

SM Service CultureService Culture


134/175

M

A culture where an appreciation for good service

exists, and where giving good service to internal

as well as ultimate, external customers, isconsidered a natural way of life and one of the

most important norms by everyone in the

organization.

135

SM

SM

Ch t 12


135/175

MMChapter 12

CUSTOMERS ROLES INSERVICE DELIVERY

136

SM

Objectives for Chapter 12:Objectives for Chapter 12:Customers Roles in ServiceCustomers Roles in Service

D li


136/175

MDeliveryDelivery

Illustrate the importance of customers in successful servicedelivery

Enumerate the variety of roles that service customers play

Productive resources

Contributors to quality and satisfaction

Competitors

Explain strategies for involving service customers

effectively to increase both quality and productivity

137

SM

Importance ofImportance ofOtherOtherCustomers in ServiceCustomers in Service


137/175

DeliveryDelivery

Other customers can detractfrom satisfaction disruptive behaviors

excessive crowding

incompatible needs

Other customers can enhancesatisfaction mere presence

socialization/friendships roles: assistants, teachers, supporters

138

SM How Customers Widen Gap 3How Customers Widen Gap 3


138/175

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

139

SM


Customer Roles in ServiceCustomer Roles in Service

D liD li


139/175

DeliveryDelivery

Productive Resources

Contributors toQuality andSatisfaction

Competitors

140

SM

Customers as ProductiveCustomers as Productive

Reso rcesResources


140/175

ResourcesResources

partial employees

contributing effort, time, or other resources to

the production process customer inputs can affect organizations

productivity

key issue:should customers roles be expanded? reduced?

141

SM

Customers as ContributorsCustomers as Contributorsto Service Quality andto Service Quality and


141/175

yy

SatisfactionSatisfaction

Customers can contribute to

their ownsatisfaction 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

142

SM

Customers as CompetitorsCustomers as Competitors


142/175

customers may compete with the service provider

internal exchange vs. external exchange

internal/external decision often based on:

expertise

resources

time

economic rewards

psychic rewards

trust

control

143

SM

Technology Spotlight:Technology Spotlight:

Services Production ContinuumServices Production Continuum


143/175

Services Production ContinuumServices Production Continuum

1 2 3 4 5 6

Gas Station Illustration1. Customer pumps gas and pays at the pump with automation

2. Customer pumps gas and goes inside to pay attendant

3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation

5. Attendant pumps gas and customer goes inside to pay attendant

6. Attendant pumps gas and attendant takes payment at the pump

Customer Production Joint Production Firm Production

144

SM


Strategies for EnhancingStrategies for Enhancing

Customer ParticipationCustomer Participation


144/175


EffectiveCustomer

Participation

Recruit, Educate,

and RewardCustomers

Define CustomerJobs

Manage theCustomer

Mix

145

SM

Strategies for EnhancingStrategies for Enhancing



145/175


1. Define customers jobs

- helping himself

- helping others

- promoting the company

2. Individual differences: not everyone wants

to participate

146

SM

Strategies for Recruiting,Strategies for Recruiting,Educating and RewardingEducating and Rewarding

C tC t


146/175

CustomersCustomers

1. Recruit the right customers

2. Educate and train customers to perform

effectively

3. Reward customers for their contribution4. Avoid negative outcomes of inappropriate

customer participation

Manage the Customer Mix

147

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SM

Chapter 14


147/175

Chapter 14

MANAGING DEMANDAND CAPACITY

148

SM

Objectives for Chapter 14:Objectives for Chapter 14:Managing Demand andManaging Demand and


148/175

g gg g

CapacityCapacity Explain:

the underlying issue for capacity-constrained services

the implications of capacity constraints

the implications of different types of demand patterns on

matching supply and demand

Lay out strategies for matching supply and demand through:

shifting demand to match capacity or

flexing capacity to meet demand

Demonstrate the benefits and risks of yield management strategies

Provide strategies for managing waiting lines

149

SM

Understanding CapacityUnderstanding CapacityConstraints and DemandConstraints and Demand


149/175

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

150

SM


Strategies for Shifting DemandStrategies for Shifting Demand

t M t h C itt M t h C it


150/175

to Match Capacityto Match Capacity

Use signage to communicate busy days and times

Offer incentives to customers for usage during non-peak

times

Take care of loyal or regular customers first

Advertise peak usage times and benefits of non-peak use

Charge full price for the service--no discounts

Use sales and advertising to

increase business from currentmarket segments

Modify the service offering toappeal to new market segments

Offer discounts or price

reductions Modify hours of operation Bring the service to the

customer

Demand Too High Demand Too LowShift Demand

151

SM


Strategies for Flexing CapacityStrategies for Flexing Capacity


151/175

to Match Demandto Match Demand

Stretch time, labor, facilities and equipment

Cross-train employees

Hire part-time employees

Request overtime work from employees

Rent or share facilities

Rent or share equipment

Subcontract or outsource activities

Perform maintenance

renovations Schedule vacations Schedule employee training Lay off employees

Demand Too High Demand Too LowFlex Capacity

152

SM

Table 14-1Table 14-1

What is the Nature of DemandWhat is the Nature of Demand

Relative to Supply?Relative to Supply?


152/175

Relative to Supply?Relative to Supply?Extent of demand fluctuations over time

Extent to whichsupply isconstrained

Wide Narrow

Peak demand canusually be metwithout a majordelay

1ElectricityNatural gasTelephoneHospital maternity unitPolice and fireemergencies

2InsuranceLegal servicesBankingLaundry and dry cleaning

Peak demandregularly exceedscapacity

4Accounting and taxpreparation

Passenger transportationHotels and motelsRestaurantsTheaters

3Services similar to those in2 but which have

insufficient capacity fortheir base level of business

Source: Christopher H. Lovelock, Classifying Services to Gain Strategic Marketing Insights, Journal of Marketing, 47, 3 (Summer 1983): 17.

153

SM

Table 14-2Table 14-2What is the Constraint onWhat is the Constraint on

Capacity?Capacity?


153/175

y

Nature of the constraint Type of serviceTime Legal

ConsultingAccountingMedical

Labor Law firmAccounting firmConsulting firmHealth clinic

Equipment Delivery servicesTelecommunicationUtilitiesHealth club

Facilities HotelsRestaurantsHospitalsAirlinesSchoolsTheatersChurches

154

SM Waiting Line IssuesWaiting Line Issues

d St t id St t i


154/175

and Strategiesand Strategies unoccupied time feels longer

preprocess waits feel longer

anxiety makes waits seem longer

uncertain waits seem longer than finite waits

unexplained waits seem longer

unfair waits feel longer

longer waits are more acceptable for valuable

services solo waits feel longer

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Part 5


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Part 5

MANAGING SERVICEPROMISES

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CUSTOMER

COMPANYExternal

Communicationsto CustomersGAP 4

Service Delivery

Provider GAP 4

Part 5 Opener

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Chapter 15


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Chapter 15

INTEGRATED

MARKETINGCOMMUNICATION

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Objectives for Chapter 15:Objectives for Chapter 15:

Integrated ServicesIntegrated Services

Marketing CommunicationsMarketing Communications


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Marketing CommunicationsMarketing Communications

Introduce the concept of Integrated Services MarketingCommunication

Discuss the key reasons for service communication problems

Present four key ways to integrate marketing communication in

service organizations Present specific strategies for managing promises, managing

customer expectations, educating customers, and managing

internal communications

Provide perspective on the popular service objective of

exceeding customer expectations

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Communications and theCommunications and theS i M k ti T i lS i M k ti T i l


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Internal MarketingInternal MarketingVertical Communications

Horizontal Communications

Interactive MarketingPersonal Selling

Customer Service CenterService Encounters

Servicescapes

External MarketingCommunicationAdvertising

Sales PromotionPublic RelationsDirect Marketing

Company

CustomersEmployees

Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

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Approaches forApproaches forIntegrating Services MarketingIntegrating Services Marketing

CommunicationCommunication



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Goal:Delivery

greater thanor equal topromises

ImproveCustomerEducation

ManageService

Promises

ManageCustomer

Expectations

ManageInternal

MarketingCommunication

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Approaches forApproaches forManaging Service PromisesManaging Service Promises


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Goal:Delivery


OfferService

Guarantees

CreateEffectiveServices

Communications

MANAGING SERVICE PROMISES

MakeRealisticPromises

CoordinateExternal

Communication

Managing Service PromisesManaging Service Promises

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Figure 15-8Figure 15-8Approaches forApproaches for

Managing Customer ExpectationsManaging Customer Expectations


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Communicate Criteria forService Effectiveness

Create Tiered-ValueOfferings

NegotiateUnrealistic

Expectations

Goal:Delivery


Offer Choices

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Approaches forApproaches forImproving Customer EducationImproving Customer Education


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Goal:Delivery


PrepareCustomers

for theServiceProcess

ClarifyExpectationsafter the Sale

p gp g

TeachCustomers

to AvoidPeak

DemandPeriods

andSeek Slow

Periods

ConfirmPerformanceto Standards

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Approaches for ManagingApproaches for ManagingInternal Marketing CommunicationsInternal Marketing Communications


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Goal:

Deliverygreater thanor equal topromises

Internal Marketing CommunicationsInternal Marketing Communications

Create Effective

VerticalCommunications

Align BackOffice Personnelw/ External Customers

Create EffectiveHorizontal

Communications

CreateCross-Functional

Teams

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Chapter 17


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Chapter 17

THE FINANCIAL AND

ECONOMIC IMPACT OF

SERVICE QUALITY

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Objectives for Chapter 17:Objectives for Chapter 17:The Financial and EconomicThe Financial and Economic

Impact of ServiceImpact of Service


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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 purchaseintentions

Emphasize the importance of selecting profitable customers

Discuss what is know about the key service drivers of overallservice quality, customer retention and profitability

Discuss the balanced performance scorecard to focus onstrategic measurement other than financials

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The Direct Relationship betweenThe Direct Relationship betweenService and ProfitsService and Profits


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Service and Profits

Profits?ServiceQuality

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Offensive Marketing Effects ofOffensive Marketing Effects ofService on ProfitsService on Profits


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Service on Profits

ProfitsMarketShare

Reputation Sales

PricePremium

ServiceQuality

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Defensive Marketing Effects ofDefensive Marketing Effects ofService on ProfitService on Profit


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Margins

Profits

CustomerRetention

Costs

PricePremium

Word of

Mouth

Volume of

PurchasesServiceQuality

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Perceptions of Service,Perceptions of Service,BehavioralBehavioral

Intentions and ProfitsIntentions and Profits


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Intentions and ProfitsIntentions and Profits

CustomerRetention

Costs

PricePremium

Word ofMouth

Margins

Profits

Volume ofPurchases

Service BehavioralIntentions

Sales

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The 80/20 Customer PyramidThe 80/20 Customer Pyramid


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Most Profitable

Customers

Least Profitable

Customers

What segment spends more withus over time, costs less to maintain,

spreads positive word of mouth?

What segment costs us intime, effort and money yet

does not provide the returnwe want? What segment is

difficult to do business with?

Other

Customers

BestCustomers

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The Expanded Customer PyramidThe Expanded Customer Pyramid


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Most ProfitableCustomers

Least ProfitableCustomers

What segment spends more withus over time, costs less to maintain,spreads positive word of mouth?

What segment costs us intime, effort and money yet

does not provide the returnwe want? What segment isdifficult to do business with?

Gold

Iron

Lead

Platinum

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The Key Drivers of Service Quality,The Key Drivers of Service Quality,

Customer Retention, and ProfitsCustomer Retention, and Profits


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,,

Key Drivers

ServiceQuality

ServiceEncounter

ServiceEncounter

ServiceEncounter

CustomerRetention

BehavioralIntentions Profits

ServiceEncounter

Service Encounters

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Sample Measurements for theSample Measurements for the

Balanced ScorecardBalanced Scorecard


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Adapted from Kaplan and Norton

Innovation andLe

Documents

Marketing of Services Total