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Marketing and Customer Relationship Management Code No: - ML0006 MBA Semester 4 Assignment Set- 1 Q.1A. Point out the distinctive characteristics of services with examples.
Stanton points out that the special nature of services stems form several distinctive characteristics and he singles out four for particular comment. They 1. Intangibility 2. Inseparability 3. Heterogeneity (Kotler terms this as variability), and 4. Perishability and fluctuating demand. These four have been identified by Kotler also as the major characteristics greatly affecting the design of marketing programmers for services. 1. Intangibility Services are essentially intangible. Because services are performances or actions rather than objects, they cannot be seen, felt, tasted, or touched in the same manner that we can sense tangible goods. For example, health-care services are actions e.g. surgery, diagnosis, examination, treatment performed on the patient, although the patient may be able to see and touch certain tangible components of the service e.g. equipment, hospital room. In fact, many services such as health care are difficult for the consumer to grasp even mentally. Even after a diagnosis or surgery has been completed, the patient may not fully comprehend the service performed. Marketing Implications Intangibility presents several marketing challenges. Services cannot be inventories, and therefore fluctuations in demand are often difficult to manage. For example, there is tremendous demand for resort accommodations in Simla/Ooty in May, but little demand in December. Yet resort owners have the same number of rooms to sell year-round. Services cannot be patented legally, and new service concepts can therefore be communicated to competitors. Services cannot be readily displayed or easily communicated to customers, so quality may be
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difficult for consumers to assess. Decisions about what to include in advertising and other promotional materials are challenging, as is pricing. The actual cost of a “unit of service” is hard to determine and the price/ quality relationship is complex. 2. Inseparability Services are created and consumed simultaneously and generally they cannot be separated from the provider of the service. The service provider customer interaction is a specialist of service marketing. Unlike the tangible goods, service cannot be distributed using conventional channels. Inseparability makes direct sales as the only possible channel of distribution and thus delimits the markets for the seller’s services. This characteristic also limits the scale of operation of the service provider. For example, a doctor can give treatment to limited number of patients only in a day. This characteristic also emphasizes the importance of the quality provided to clients in services. This poses another management challenge to the service marketer. For example, an airline company may provide excellent fight service, but a discourteous onboard staff may keep the customer permanently off that company. There are exemptions also to the inseparability characteristic. A television coverage, travel agency or stock broker may represent and help marketing the service provided by another service firm. Marketing Implications Because services often are produced and consumed at the same time, mass production is difficult if not impossible. The quality of service and customer satisfaction will be highly dependent on what happens in “real time”, including actions of employees and the interactions between employees and customers. 3. Heterogeneity This characteristic is referred to as variability by Kotler. We have already seen that services cannot be standardized. They are highly variable depending upon the provider, the time and place where they are provided. A service provided on a particular occasion is somewhat different from the same service provided on other occasions. Also the standard of quality perceived by different consumers may differ accordingly. For example, the treatments given in a hospital to different persons on different occasions cannot similar. Consumers of services are aware of this variability and by their interaction with other consumers
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they also get influenced or influence others in the selection of service provider. Marketing Implications The services are heterogeneous across time, organizations, and people ensuring consistent service is fully controlled by the service supplier; such as the ability of the consumer to articulate his or her needs, the ability and willingness of personnel to satisfy those needs, the presence (or absence) of other customers, and the level of demand for the services. 4. Perishability and Fluctuating Demand Perishability refers to the fact that a seat in an airplane or in a restaurant, an hour of a lawyer’s time, or telephone line capacity not used cannot be reclaimed and used or resold at a later time. This is in contrast to goods that can be in inventory or resold another day, or even returned if the consumer is unhappy. Marketing Implications A primary issue that marketers face in relation to service perish ability is the inability to inventory. Demand forecasting and creative planning for capacity utilization is therefore important in challenging the decision areas. The fact that services cannot typically be returned or resold also implies a need for strong recovery strategies when things do go wrong. For example, while a bad haircut cannot be returned, the hairdresser can and should have strategies for recovering the customer’s goodwill if and when such a problem occurs.

B. Discuss briefly the significance physical evidence in services.

of process and

The process by which the service is created and delivered to the customer is critical to the service operations as customer often perceive the service delivery system as part of the service itself. Process means all work activities. Process involve the procedures, tasks schedules, mechanisms, activities and routines by which a product or service is delivered to the customer. It involves policy decisions about customer involvement and employee discretion. Identification of process management as a separate activity is a must for service quality improvement. Its importance in service businesses is evident because of the inseparability of production and consumption. The customer not only thinks about the service product alone but also attaches importance to the manner in which it is delivered. Under these circumstances, a poorly designed service process leads to poor service quality. Banks provide a good example of this. By reconfiguring the way they deliver service through the introduction of automatic teller machines (ATMs) banks have
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been able to free staff to handle more complex customer needs by diverting cash only customers to the ATMs. Processes are seen as structural elements that can be engineered to help deliver a desired strategic positioning. They can be analyzed according to the complexity and divergence. Processes can be changed to reinforce the positioning. A clear understanding of the configuration processes in terms of this complexity and divergence, on a balance of marketing and operations activities are important factors for improving service systems. Processes are thus a marketing mix element which can have a substantial role in reinforcing positioning and in product development. 4.8 Physical Evidence The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service is known as physical evidence in service. The physical evidence of service includes all of the tangible representations of the service such as brochures, letterhead, business cards, report formats, signage, and equipment. In some cases, it includes the physical facility. Physical evidence cues provide excellent opportunities for the firm to send consistent and strong messages regarding the organization’s purpose, the intended market segments and the nature of the service

Q.2 Briefly explains the gaps model in service marketing.
Quality can be viewed from two perspectives – internal and external. Internal quality is based on conformance to specifications. External quality is based on relative customer perceived quality. It is essential that quality is measured from the customer perspective, not from what managers within a company think their customer views are!
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A model has been developed by Parasuraman and his colleagues which helps to identify the gaps between the perceived service qualities that customers receive and what they expect. The model identifies five gaps: 1. Consumer expectation – management perception gap. 2. Management perception – service quality expectation gap. 3. Service quality specifications – service delivery gap. 4. Service delivery – external communications to consumer’s gap. 5. Expected service – perceived service gap. Gap – 5 is the service quality shortfall as seen by the customers, and gaps 1-4 are shortfalls within the service organization. Thus gaps 1-4 contribute to gap – 5. These gaps are given in the following

Figure 2.1 The first gap is the difference between consumer expectations and management perceptions of consumer expectations. Research shows that financial service organizations often treat issues of privacy as relatively unimportant, whilst consumers consider them very important. The second gap is the difference between the management perceptions of consumer expectations and service quality specifications. Managers will
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set specifications for service quality based on what they believe the consumer requires. However, this is not necessarily accurate. Hence many service companies have put much emphasis on technical quality, when in fact the quality issues associated with service delivery are perceived by clients as more important. The third gap is the difference between service quality specification and the service actually delivered. This is of great importance to service where the delivery system relies heavily on people. It is extremely hard to ensure that quality specifications are when a service involves immediate performance and delivery in the presence of the client. This is the case in many service industries: for example, a medical practice is depending on all the administrative, clerical and medical staff performing their tasks according to certain standards. The fourth gap is the difference between service delivery intention and what is communicated about the service to customers. These established expectations within the customer may not be met. Often this is the result of inadequate communication by the service provider. The fifth gap represents the difference between the actual performance and the customer perception of the service. Subjective judgment of service quality will be affected by many factors, all of which may change the perception of the service which has been delivered. Thus a guest in a hotel may receive excellent service throughout his stay, apart from poor checking out facilities. But this last experience may damage his entire perception of the service, changing his overall estimation of the quality of the total service provided from good to poor. The gap model outlined above provides a framework for developing a deeper understanding of the causes of service quality problems, identifying shortfalls in service and determining the appropriate means to close the gaps.

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Q3.What are the bases for segmenting in services marketing? Explain with examples.
Market segmentation is the process of aggregating customers with similar wants, needs, preferences, or buying behaviour. Market targeting involves evaluating the attractiveness of the segments and selecting the ones that the firm will serve. In other words, segmentation is the analysis conducted about customers and targeting is the managerial decision about whom to serve. Both of these are required for effective market positioning, which involves establishing the competitive position for the service in the mind of the customer and creating or adapting the service mix to fit the position. Segmentation by Service One area which has received relatively little attention is the consideration of how customers respond to varying service offerings. This may be considered a subset of benefit segmentation, but it is of sufficient importance to be addressed separately. The various elements of customer service that can be offered, and possible differentiation in terms of service levels within these elements, represent a considerable opportunity to design service packages appropriate to different market segments. Segmenting markets by service involves addressing the following issues:  Can groupings of customers be identified with similar service requirements?  Can we differentiate our service offering?  Do all our products require the same level of service? The types of segmentation outlined above are illustrative of the main forms of segmentation used by services companies. They are, however, by no means exhaustive. To a large extent the identification of segmentation bases involves the element of creativity and those marketing services should constantly be considering alternative ways of segmenting the market and seeking ways in which they can alternative advantage over their competitors. This stage of the segmentation process should result in the selection of the best bases(s) for segmentation. The segmentation process should result in one of the four basis decisions being reached: 1. The service firm may decide to target one segment of the market. 2. The service firm may decide to target several segments and so will develop different marketing mix plans for each segment.
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3. Management may decide not to segment the market but to offer the service to the mass market. This may be appropriate if the market is very small and single portion would not be profitable. 4. Analysis may show that there is no viable market niche for the service offering. The relevance of market segmentation is now being increasingly recognized in the service sector. A number of studies have pointed to the importance of market segmentation. One study ranked ‘problems in recognizing, defining, understanding and segmenting markets’ as the most important problem facing the senior executives surveyed. Another survey ranked the segmentation as the third most important marketing tool. However, despite the recognition of the importance of market segmentation methodology, some service firms are still basing their marketing strategies methodology, some service firms are still basing their marketing strategies and tactics on either aboard approach to the market, or a relatively unsophisticated approach to segmentation. Many service firms need to be more disciplined in their focus on their marketplace. Segmentation is at the heart of marketing strategy and is concerned with the development of a market position that minimizes competitor’s strengths and maximizes the strength of the service provide. Segmentation and the associated steps of positioning provide the opportunity to tailor the service offered to better meet the needs of specific segments.

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