SERVICE

According to Kotler, Any activity or benefit that is essentially intangible & does not result in the ownership of anything. Its production may or may not be tied to physical product
Service clients are paying for expertise, experience, advice, skills, knowledge & the benefits they bring. The benefits may last but service itself is of limited duration.

 Core Product Core Benefit of the Service

Insurance piece of mind Hairdresser look & feel good Football Team emotions & enjoyment Car Mechanic safe, reliable motoring
Transport (Rail, Road, Air, Water)

Communication (Telephone, Radio, TV) Public Utilities (Electricity, LPG, Sanitary) Finance, Insurance & Real Estate Hospitality, Tourism & Recreation Legal, Education & Health

4 Characteristics of Services
1. Intangibility - u cant touch this 2. Production (or performing the service) and Consumption (using the service) - happens at the same time Inseperability 3. Heterogeneity - services are not always
delivered the same way

4. Perishability - cannot be put in inventory or

stored for later use i.e. You cant buy 2 haircuts

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Characteristics of Services 1. Intangibility - u cant touch this

Services cannot be stored Services cannot be protected through patents therefore a really great travel package and service can be copied Hard to explain and display Services if you cant see them Prices are difficult to set - depends on customers expectations

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Characteristics of Services 1. Intangibility - u cant touch this

Marketing Strategies stress tangible cues, eg. Smiling face use personal information, sources, references use word-of-mouth contact customers after they buy to stimulate continued enthusiasm and hope they talk it up

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Characteristics of Services 2. Inseparability of Production (or performing the service) and Consumption (using the service) - happens at the same time
Many people involved in delivering a service mass production of services is hard to do

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Characteristics of Services 2. Inseparability of Production (or performing the service) and Consumption (using the service) - happens at the same time
Marketing Strategies Emphasize how much you train your people - so their ability to give you good service will be high Have many locations so customers can get to you ie. Insurance sales come to your home
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Characteristics of Services 3. Heterogeneity - services are not always

delivered the same way It is very difficult to standardize services eg. A machine can make ice cream cones a standard size 100% of the time A person filling an ice cream cone with a scoop cannot do it the same amount each time, unless you use a machine to dispense the ice cream
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Characteristics of Services
3. Heterogeneity - services are not always
delivered the same way

eg. A Taxi driver cannot drive you to the office in exactly the same time each day because the traffic patterns change eg. A travel agent can sell you a vacation package - but cannot guarantee you will like the trip exactly the same way another tourist did.
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Characteristics of Services
4. Perishability - cannot be put in
inventory or stored for later use ie. You cant buy 2 haircuts Demand fluctuates and changes, sometimes depending on the season, or weather eg. Taxi in the rain, vacation in summer

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Distinguishing Characteristics of Services

Customers do not obtain ownership of services Service products are ephemeral and cannot be inventoried Intangible elements dominate value creation Greater involvement of customers in production process

Other people may form part of product experience

Greater variability in operational inputs and outputs Many services are difficult for customers to evaluate

Time factor is more important--speed may be key

Delivery systems include electronic and physical channels
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Marketing Implications - 1
No ownership
Customers obtain temporary rentals, hiring of personnel, or access to

facilities and systems

Pricing often based on time Customer choice criteria may differ for renting vs. purchase--may

include convenience, quality of personnel

Cant own people (no slavery!) but can hire expertise and labor

Services cannot be inventoried after production

Service performances are ephemeraltransitory, perishable

Exception: some information-based output can be recorded in electronic/printed form and re-used many times
Balancing demand and supply may be vital marketing strategy Key to profits: target right segments at right times at right price Need to determine whether benefits are perishable or durable
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Marketing Implications - 2

Customers may be involved in production process

Customer involvement includes self-service and cooperation with

service personnel Think of customers in these settings as partial employees Customer behavior and competence can help or hinder productivity, so marketers need to educate/train customers Changing the delivery process may affect role played by customers Design service facilities, equipment, and systems with customers in mind: user-friendly, convenient locations/schedules

Intangible elements dominate value creation

Understand value added by labor and expertise of personnel Effective HR management is critical to achieve service quality Make highly intangible services more concrete by creating and

communicating physical images or metaphors and tangible clues

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Marketing Implications - 3
Other people are often part of the service product
Achieve competitive edge through perceived quality of employees Ensure job specs and standards for frontline service personnel reflect

both marketing and operational criteria Recognize that appearance and behavior of other customers can influence service experience positively or negatively Avoid inappropriate mix of customer segments at same time Manage customer behavior (the customer is not always right!)

Greater variability in operational inputs and outputs

Must work hard to control quality and achieve consistency

Seek to improve productivity through standardization, and by training

both employees and customers Need to have effective service recovery policies in place because it is more difficult to shield customers from service failures
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Marketing Implications - 4
Often difficult for customers to evaluate services

Educate customers to help them make good choices, avoid risk Tell customers what to expect, what to look for Create trusted brand with reputation for considerate, ethical behavior Encourage positive word-of-mouth from satisfied customers

Time factor assumes great importance

Offer convenience of extended service hours up to 24/7 Understand customers time constraints and priorities Minimize waiting time Look for ways to compete on speed

Distribution channels take different forms

Tangible activities must be delivered through physical channels Use electronic channels to deliver intangible, information-based

elements instantly and expand geographic reach

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S.No.

1. 2. 3.

4. 5.

6.

7. 8.

Physical Goods Tangible Homogeneous Product and distribution separated from consumption A thing Core value produced in factory Customers do not participate in the production process Can be kept in stock Transfer of ownership
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Services Intangible Heterogeneous Production, distribution and consumption re simultaneous process An activity Core value produced in buyer-seller interaction Customers participate in production Cannot be kept in stock No transfer of ownership

Four Categories of Services Employing Different Underlying Processes

What is the Nature of the Service Act?
TANGIBLE ACTS

Who or What is the Direct Recipient of the Service?

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

People Processing
e.g., airlines, hospitals, haircutting, restaurants hotels, fitness centers

Possession Processing
e.g., freight, repair, cleaning, landscaping, retailing, recycling

INTANGIBLE ACTS

Mental Stimulus Processing

e.g., broadcasting, consulting, education, psychotherapy

Information Processing
(directed at intangible assets)

e.g., accounting, banking, insurance, legal, research

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Elements of The Services Marketing Mix: 7Ps vs. the Traditional 4Ps
Rethinking the original 4Ps
Product elements Place and time Promotion and education Price and other user outlays

Adding Three New Elements

Physical environment Process People
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The 7Ps: (1) Product Elements

All Aspects of Service Performance that Create Value Core product featuresboth tangible and intangible elements Bundle of supplementary service elements Performance levels relative to competition Benefits delivered to customers (customers dont buy a hotel room, they buy a good nights sleep) Guarantees

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The 7Ps: (2) Place and Time Delivery Decisions: Where, When, and How
Geographic locations served
Service schedules Physical channels Electronic channels Customer control and convenience

Channel partners/intermediaries

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The 7Ps: (3) Promotion and Education

Informing, Educating, Persuading, and Reminding Customers Marketing communication tools
media elements (print, broadcast, outdoor, retail, Internet, etc.) personal selling, customer service sales promotion publicity/PR

Imagery and recognition

branding corporate design

Content
information, advice persuasive messages customer education/training
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The 7Ps: (4) Price Must and Recognize Other User Marketers that Outlays Customer Outlays Involve
More than the Price Paid to Seller
Traditional Pricing Tasks
Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms

Identify and Minimize Other Costs Incurred by Users

Additional monetary costs associated with service usage (e.g., travel to

service location, parking, phone, babysitting,etc.)

Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences
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The 7Ps: (5) Physical Environment Designing the Service scape and providing tangible
evidence of service performances Create and maintaining physical appearances
buildings/landscaping interior design/furnishings vehicles/equipment staff grooming/clothing sounds and smells other tangibles

Select tangible metaphors for use in marketing

communications

7Ps: (6) Process Method and Sequence in Service Creation and Delivery
Design of activity flows
Number and sequence of actions for customers Providers of value chain components Nature of customer involvement Role of contact personnel

Role of technology, degree of automation

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The 7Ps: (7) People Managing the Human Side of the Enterprise
The right customer-contact employees performing tasks well
job design recruiting/selection training motivation evaluation/rewards empowerment/teamwork

The right customers for the firms mission

fit well with product/processes/corporate goals appreciate benefits and value offered possess (or can be educated to have) needed skills (co-production) firm is able to manage customer behavior
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The Services Marketing Triangle Company

(Management)
Internal Marketing
enabling promises

External Marketing
setting promises

Employees

Interactive Marketing
keeping promises

Customers

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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Ways to Use the Services Marketing Triangle Overall Strategic Specific Service
Assessment
How is the service

Implementation
What is being promoted

organization doing on all three sides of the triangle? Where are the weaknesses? What are the strengths?

and by whom? How will it be delivered and by whom? Are the supporting systems in place to deliver the promised service?

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The Service Profit Chain

Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, Putting the Service-Profit Chain to Work, Harvard Business Review, March-April 1994, p. 166.

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Service Employees
They are the service - provider.
They are the organization in the customers eyes. They are the brand. They are marketers. Their importance is evident in:
The Services Marketing Mix (People) The Service-Profit Chain The Services Triangle

Frontline also drives customer loyalty, with employees

playing key role in anticipating customer needs, customizing service delivery and building personalized relationships www.a2zmba.com

Service Employees
Who are they?
boundary spanners periphery, link the inside of the organization to the outside world. Emotional Labour - The act of expressing socially desired emotions during service transactions. Consider management expectations of restaurant servers: deliver a highly satisfying dining experience to their customers be fast and efficient at executing operational task of serving customers do selling and cross selling, e.g. We have some nice desserts to follow your main course
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Sources of Conflict for Boundary-Spanning Workers

Person vs. Role
Conflicts between what jobs require and employees own personality and beliefs

Organization vs. Client

Dilemma whether to follow company rules or to satisfy customer demands

Client vs. Client

Conflicts between customers that demand service staff intervention

Quality vs. Productivity

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Human Resource Strategies for Closing GAP 3

Hire for Service Competencies and Service Inclination

Hire the Right People Develop People to Deliver Service Quality

Empower Employees

Treat Employees as Customers

Retain the Best People

CustomerOriented Service Delivery

Provide Needed Support Systems

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Provide Supportive Technology and Equipment

Factors Favoring Employee Empowerment

Firms strategy is based on competitive differentiation and on

personalized, customized service

Emphasis on long-term relationships vs. one-time

transactions
Use of complex and non-routine technologies Environment is unpredictable, contains surprises Managers are comfortable letting employees work

independently for benefit of firm and customers

Employees seek to deepen skills, like working with others, and

are good at group processes

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Empowerment 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
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Drawbacks: greater investments in selection and training higher labor costs slower and/or inconsistent delivery may violate customer perceptions of fair play giving away the store (making bad decisions)

Service 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.

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Relationship Marketing
is a philosophy of doing business that focuses on keeping current customers and improving relationships with them
does not necessarily emphasize acquiring new customers is usually cheaper (for the firm)
keeping a current customer costs less than attracting a

new one

thus, the focus is less on attraction, and more on retention and enhancement of customer
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Underlying Logic of Customer Retention Benefits to the Organization

Customer Satisfaction

Customer Retention & Increased Profits

Quality Service

Employee Loyalty
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Benefits to the Organization of 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: less need for information and assistance & make fewer mistakes employee retention is more likely with a stable customer base Recommend new customers to firm (act as unpaid sales people) Trust leads to willingness to pay regular prices vs. shopping for discounts lifetime value of a customer can be very high
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How Customers See Relational Benefits in Service Industries Confidence benefits

less risk of something going wrong, less anxiety

ability to trust provider

know what to expect get firms best service level

Social benefits
mutual recognition, known by name friendship, enjoyment of social aspects

Special treatment benefits

better prices, discounts, special deals unavailable to others extra services
www.a2zmba.com higher priority with waits, faster service

The Customer Isnt Always Right

Not all customers are good relationship customers:
wrong segment not profitable in the long term difficult customers Avoid inappropriate mix of customer segments at same

time Solution: Proper Segmenting OR Manage customer behavior

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Measuring Customer Equity: Calculating Life Time Value of Each Customer

Value at Acquisition
revenues (application fee + initial purchase)
Less costs (marketing +credit check + account set up)

Annual Value (project for each year of relationship)

revenues (annual fee + sales + service fees + value of referrals) Less costs (account management + cost of sales + write-offs)

Net Present Value

Determine anticipated customer relationship lifetime Select appropriate discount figure Sum anticipated annual values (future profits) at chosen discount rate

Customer Equity is total sum of NPVs of all current customers

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Strategies for Building Relationships

Foundations: Excellent Quality/Value Careful Segmentation Bonding Strategies: Financial Bonds Social & Psychological Bonds Structural Bonds Customization Bonds Relationship Strategies Wheel slide 37
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Levels of Retention Strategies

Volume and Frequency Rewards Integrated Information Systems Stable Pricing Bundling and Cross Selling

I. Financial Bonds
IV. Structural Bonds

Continuous Relationships

Joint Investments

Excellent Quality and Value

II. Social Bonds

Personal Relationships

Shared Processes and Equipment

III. Customization Bonds

Social Bonds Among Customers

Anticipation/ Innovation Mass Customization

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Customer Intimacy

Service Quality
The customers judgment of overall excellence of the

service provided in relation to the quality that was expected. Service quality assessments are formed on judgments of:
Outcome quality eg: Inet connectivity Process quality eg: support eqpmts used

Physical environment quality eg: infra

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The Five Dimensions of Service Quality

Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and Assurance their ability to convey trust and confidence. Physical facilities, equipment, and Tangibles appearance of personnel. Caring, individualized attention the firm Empathy provides its customers. Responsiveness Willingness to help customers and provide prompt service.

Reliability

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SERVQUAL Attributes
RELIABILITY

EMPATHY

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 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
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RESPONSIVENESS

Giving customers individual attention Employees who deal with customers in a caring fashion Having the customers best interest at heart Employees who understand the needs of their customers Convenient business hours Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service

TANGIBLES

ASSURANCE

Gaps Model ofExpected Service Quality

CUSTOMER
Customer Gap

Service

Perceived Service
Service Delivery
External Communications GAP 4 to Customers

COMPANY
GAP 1 GAP 3

Customer-Driven Service Designs and Standards

GAP 2
Company Perceptions of Consumer Expectations
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Key Factors Leading to the Customer Gap

Customer GAP

Customer Expectations

Provider Gap 1: Not knowing what customers expect Provider Gap 2: Not selecting the right service designs and standards Provider Gap 3: Not delivering to service standards Provider Gap 4: Not matching performance to promises

Customer Perceptions
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Key Factors Leading to Provider Gap 1: Not Knowing What Customers Expect
Customer Expectations

GAP 1

Inadequate Marketing Research Orientation

Insufficient marketing research Research not focused on service quality Inadequate use of market research

Lack of Upward Communication

Lack of interaction between management and customers Insufficient communication between contact employees and managers Too many layers between contact personnel and top management

Insufficient Relationship Focus

Lack of market segmentation Focus on transactions rather than relationships Focus on new customers rather than relationship customers

Inadequate Service Recovery

Company Perceptions of Customer Expectations www.a2zmba.com

Key Factors Leading to Provider Gap 2: Not having the Right Service Designs & Standards
Customer-Driven Service Designs and Standards

GAP 2

Poor Service Design Unsystematic new service development process Vague, undefined service designs Failure ot connect service design to service positioning Absence of Customer-Driven Standards Lack of customer-driven service standards Absence of process management to focus on customer requirements Absence of formal process for setting service quality goals Inappropriate Physical Evidence and Servicescape

Management Perceptions of Customer Expectations

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Key Factors Leading to Provider GAP 3: Not delivering to Service Standards

Customer-Driven Service Designs and Standards

GAP 3

Deficiencies in Human Resource Policies

Ineffective recruitment Role ambiguity and role conflict Poor employee-technology job fit Inappropriate evaluation and compensation systems Lack of empowerment, perceived control and teamwork

Failure to Match Supply and Demand

Failure to smooth peaks and valleys of demand Inappropriate customer mix Over-reliance on price to smooth demand

Customers Not Fulfilling Roles

Customers lack knowledge of their roles and responsibilities Customers negatively impact each other

Problems with Service Intermediaries

Channel conflict over objectives and performance Channel conflict over costs and rewards Difficulty controlling quality and consistency Tension between empowerment and control
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Service Delivery

Key Factors Leading to Provider GAP 4: Promises do not Match Performances

Service Delivery

GAP 4

Lack of Integrated Services Marketing Communications Tendency to view each external communication as independent Not including interactive marketing in communications plan Absence of strong internal marketing program Ineffective Management of Customer Expectations Not managing customer expectations through all forms of communication Not adequately educating customers Overpromising Overpromising in advertising Overpromising in personal selling Overpromising through physical evidence cues Inadequate Horizontal Communications Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedures across branches or units

External Communications to www.a2zmba.com Customers

The 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
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Critical Service Encounters Research

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 underlying satisfaction and dissatisfaction with service encounters

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Common Themes in Critical Service Encounters Research

Recovery:
Employee Response to Service Delivery System Failure

Adaptability:
Employee Response to Customer Needs and Requests

Coping:
Employee Response to Problem Customers

Spontaneity:
Unprompted and Unsolicited Employee Actions and Attitudes

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Coping
DO
Listen
Try to accommodate Explain

DONT
Take customers dissatisfaction personally
Let customers

Let go of the customer

dissatisfaction affect others

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Adaptability
DO
Recognize the seriousness of

DONT
Promise, then fail to

the need Acknowledge Anticipate Attempt to accommodate Explain rules/policies Take responsibility Exert effort to accommodate

follow through Ignore Show unwillingness to try Embarrass the customer Laugh at the customer Avoid responsibility

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Recovery
DO
Acknowledge problem

Explain causes
Apologize Compensate/upgrade Lay out options Take responsibility

DONT Ignore customer Blame customer Leave customer to fend for him/herself Downgrade Act as if nothing is wrong

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Spontaneity
DO
Take time

DONT
Exhibit impatience

Be attentive
Anticipate needs Listen

Ignore
Yell/laugh/swear Steal from or cheat a

Provide information (even if

not asked) Treat customers fairly Show empathy Acknowledge by name

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customer Discriminate Treat impersonally

The Purchase Process for Services

Prepurchase Stage
Awareness of need Information search Evaluation of alternative service suppliers

Service Encounter Stage

Request service from chosen supplier Service delivery

Postpurchase Stage
Evaluation of service performance Future intentions

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Possible Levels of Customer Expectations

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Components of Customer Expectations

Desired Service Level: wished-for level of service quality that customer believes can and should be delivered Adequate Service Level: minimum acceptable level of service Predicted Service Level: service level that customer believes firm will actually deliver

Zone of Tolerance: range within which customers are willing to accept variations in service delivery
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Factors that Influence Customer Expectations of Services Desired Service:

- Personal Needs & Philosophies - Enduring Service Intensifiers (Belief about what is possible & Derived)
Adequate Service: - Transitory Service Intensifiers (urgent need-ATM) - Perceived Service Alternative (multiple or self service) - Self Perceived Service Role (how well they are performing: How well they specify the level of service expected & Complain) - Situational Factors (not in control)
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 Predicted service

- Explicit Service Promise - Implicit Service Promise - Word of Mouth - Past Experiences
Service Encounter Expectation vs Overall Service

Expectation Encounter expectation are more specific

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Intangible Attributes, Variability, and Quality Control Problems Make Services Hard to Evaluate
Search attributes Tangible characteristics that

allow customers to evaluate a product before purchase Experience attributes Characteristics that can be experienced when actually using the service Credence attributes Characteristics that are difficult to evaluate confidently even after consumption Goods tend to be higher in search attributes, services tend to be higher in experience and credence attributes Credence attributes force customers to trust that desired benefits have been delivered
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How Product Attributes Affect Ease of Evaluation

Most Goods Most Services

Clothing

Restaurant meals

Computer repair

Haircut

Legal services

High in search attributes

High in experience High in credence attributes attributes

Source: Adapted from Zeithaml

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Complex surgery

Motor vehicle

Foods

Chair

Entertainment

Lawn fertilizer

Easy to evaluate

Difficult to evaluate

Customer Satisfaction is Central to the Marketing Concept

Satisfaction defined as attitude-like judgment following a

service purchase or series of service interactions Customers have expectations prior to consumption, observe service performance, compare it to expectations Satisfaction judgments are based on this comparison
Positive disconfirmation if better than expected Confirmation if same as expected Negative disconfirmation if worse than expected

Satisfaction reflects perceived service quality, price/quality

tradeoffs, personal and situational factors Research shows links between customer satisfaction and a firms financial performance
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Customer Delight: Going Beyond Satisfaction

Research shows that delight is a function of 3 components
Unexpectedly high levels of performance
Arousal (e.g., surprise, excitement) Positive affect (e.g., pleasure, joy, or happiness)

Is it possible for customers to be delighted by very

mundane services?
Progressive Insurance has found ways to positively surprise

customers with customer-friendly innovations and extraordinary customer service

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CUSTOMER SATISFACTION SURVEY

Relationship Survey Questions about customer relationship with the

company including service, product and price. Helps a company diagnose its relationship strengths and weaknesses. Monitor & Track service performance. Benchmarking with best competitors. Performance Improvements. On the basis of SERVQUAL and provider Gaps. Trailer Calls www.a2zmba.com

Customer Complaint Actions Following Service Failure

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Courses of Action Open to a Dissatisfied Customer

Take some form of public action Take some form of private action Service Encounter is Dissatisfactory

Complain to the service firm Complain to a third party

Take legal action to seek redress Defect (switch provider) Negative word-ofmouth

Take no action

Any one or a combination of these responses is possible

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Types of Complainers
Passive no complain, stay or exit/switch
Voicers complain to provider, stay Activitist complain to provider, negative word of

mouth, complaint to third party Irates negative word of mouth, switch to other providers but dont complaint to third parties

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Complaint Barriers for Dissatisfied Customers

Inconvenience Difficult to find the right complaint procedure. Effort, e.g., writing a letter.

Doubtful Pay Off Uncertain whether any action, and what action will be taken by the firm to address the issue the customer is unhappy with.
Unpleasantness Complaining customers fear that they may be treated rudely, may have to hassle, or may feel embarrassed to complain.
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Service Recovery Strategies

Service Recovery Strategies

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How to Enable Effective Service Recovery

Be proactiveon the spot, before customers

complain
Plan recovery procedures Teach recovery skills to relevant personnel

Empower personnel to use judgment and skills to

develop recovery solutions

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Service Guarantees
guarantee = an assurance of the fulfillment of a

condition (Websters Dictionary)

for products, guarantee often done in the form of a

warranty
services are often not guaranteed cannot return the service service experience is intangible
(so what do you guarantee?)

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Types of Service Guarantees

Single attribute-specific guarantee one key

service attribute is covered

Multiattribute-specific guarantee a few important service attributes are covered

Full-satisfaction guarantee all service aspects covered with no exceptions

Combined guarantee like the full-satisfaction, adding explicit minimum performance standards on important attributes
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Characteristics of an Effective Service Guarantee

Unconditional

The guarantee should make its promise unconditionally - no strings attached. It should guarantee elements of the service that are important to the customer. The payout should cover fully the customer's dissatisfaction. For customers - they need to understand what to expect. For employees - they need to understand what to do. There should not be a lot of hoops or red tape in the way of accessing or collecting on the guarantee.
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Meaningful

Easy to Understand and Communicate

Easy to Invoke and Collect

Three Basic Price Structures and Difficulties Associated with Usage for Services
PROBLEMS:
1. Small firms may charge too little to be viable 2. Heterogeneity of services limits comparability 3. Prices may not reflect customer value

PROBLEMS:
1. Costs difficult to trace 2. Labor more difficult to price than materials 3. Costs may not equal value

PROBLEMS:
1. Monetary price must be adjusted to reflect the value of non-monetary costs 2. Information on service costs less available to customers, hence price may not be a central factor
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 Value is low price Primary concern: Price Example When I can use coupons, I feel that the service is a value Value is when airline tickets are discounted

Customer definition of Value

Value is whatever I want in a product or service Primary concern: Quality Example Value is the very best education I can get Value is the best performance
Value is the quality I get for the price I pay Primary concern: Price & Quality Trade-off between price and quality Example Value is price first and quality second Value is the lowest price for a quality brand Value is what I get for what I give Primary concern what I give: Price, Time, Effort What I get: Quality, Quantity, Convenience Example Value is how many rooms I can get cleaned for what the price is Value is getting a good educational experience in the shortest time possible

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Summary of Service Pricing Strategies for Four Customer Definitions of Value

Value is low price. Discounting
Odd pricing - Psycho Synchro-pricing Penetration Pricing

Value is everything I want in a service. Prestige pricing

Premium Skimming pricing

Value is the quality I get for the price I pay.

Value pricing Market segmentation pricing

Value is all that I get for all that I give.

Price framing Price bundling Complementary pricing Results-based pricing

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 Odd pricing- Strategy in which price is set just below the exact rupee

amount. Synchro-pricing- Strategy in which price is differentiated based on Time, Place, Quantity, Incentive Prestige pricing- Strategy in which service provider offer high-quality services Value pricing- giving more for less. Low cost for a bundle of desirable service attributes Market segmentation pricing- Based on the different segments show different quality level. Market segmentation by client category (Ex.: night-worker, day-worker) Price framing- Strategy in which the service could be framed in an appropriate price Price bundling- Strategy in which interrelated services are packaged Complementary pricing- Captive pricing, two-part pricing, loss leadership (Ex.: mobile-phone service, Internet service) Pricing the base good at a relatively low price to the complementary good - this approach allows easy entry by consumers (e.g. consumer printer vs ink jet cartridge) OR Pricing the base good at a relatively high price to the complementary good - this approach creates a barrier to entry and exit (e.g. golf club membership vs green fees) Result-based pricing- Based on the result of the service (Contingency pricing, Money back guarantees, Commission)
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Challenges in Service Marketing

Giving a feel for the product Managing Demand Fluctuations

Maintaining Quality
Cost Containment Attitudinal block in using proven marketing

principles in service marketing

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Some Impacts of Technological Change

Radically alter ways in which service firms do business:
with customers (new services, more convenience) behind the scenes (reengineering, new value chains)

Create relational databases about customer needs and

behavior, mine databanks for insights

Leverage employee capabilities and enhance mobility Centralize customer servicefaster and more responsive Develop national/global delivery systems Create new, Internet-based business models

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Services Intermediaries
franchisees e.g., Jiffy Lube, H&R Block, McDonalds
agents and brokers e.g., travel agents, independent insurance agents electronic channels e.g., ATMs, university video courses, TaxCut software

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Benefits and Challenges for Franchisers of Service

Benefits
Leveraged business

Challenges
Difficulty in maintaining and motivating franchisees Highly publicized disputes and conflict Inconsistent quality Control of customer relationship by intermediary

format for greater expansion and revenues Consistency in outlets Knowledge of local markets Shared financial risk and more working capital
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Benefits and Challenges for Franchisees of Service contd.

Benefits
An established

Challenges
Encroachment Disappointing profits and revenues Lack of perceived control over operations High fees

business format National or regional brand marketing Minimized risk of starting a business

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Benefits and Challenges in Distributing Services through Agents and Brokers

Benefits
Reduced selling and

Challenges
Loss of control over pricing and other aspects of marketing Representation of multiple service principals

distribution costs Intermediarys possession of special skills and knowledge Wide representation Knowledge of local markets Customer choice
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Benefits and Challenges in Electronic Distribution of Services

Benefits
Consistent delivery for

Challenges
Customers are active, not passive Lack of control of electronic environment Price competition Inability to customize with highly standardized services Lack of consistency with customer involvement Requires changes in consumer behavior Security concerns Competition from widening geographies

standardized services Low cost Customer convenience Wide distribution Customer choice and ability to customize Quick customer feedback

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Strategies for Effective Service Delivery through Intermediaries

Control Strategies Empowerment Strategies
Help the intermediary develop customeroriented service processes Provide needed support systems Develop intermediaries to deliver service quality Change to a cooperative management structure
Measurement Review

Partnering Strategies
Alignment of goals Consultation and cooperation

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