UNIT3

Service encounters
Service encounters are transactional interactions in which one person (e.g., a vendor, office clerk, and
travel agent) provides a service or good (e.g., a product, an appointment, airline tickets) to another
person

service encounter is "the process in which a customer directly interacts with a service over a
period of time" which mainly refers to the interaction between a customer and a service
delivery system

Types of Service Encounters

A service encounter occurs every time a customer interacts with the service organization. There are
three general types of service encounters –

1- Remote encounters,

2- Phone encounters,

3- Face-to-face encounters

A customer may experience any of these types of service encounters, or a combination of all three in
his/her relations with a service firm.

Remote Encounter: Encounter can occur without any direct human contact is called as Remote
Encounters. Such as, when a customer interacts with a bank through the ATM system, or with a mail-
order service through automated dial-in ordering. Remote encounters also occur when the firm sends its
billing statements or communicates others types of information to customers by mail. Although there
is no direct human contact in these remote encounters, each represents an opportunity for a firm to
reinforce or establish perceptions in the customer. In remote encounter the tangible evidence of the
service and the quality of the technical process and system become the primary bases for judging
quality. Services are being delivered through technology, particularly with the advent of Internet
applications. Retail purchases, airline ticketing, repair and maintenance troubleshooting, and package
and shipment tracking are just a few examples of services available via the Internet. All of these types of
service encounters can be considered remote encounters.

Phone Encounters:- In many organizations, the most frequent type of encounter between a
customer and the firm occurs over the telephone is called as phone encounter. Almost all firms
(whether goods manufacturers or service businesses) rely on phone encounters in the form of
customer-service, general inquiry, or order-taking functions. The judgment of quality in phone
encounters is different from remote encounters because there is greater potential variability in
the interaction. Tone of voice, employee knowledge, and effectiveness/efficiency in handling
customer issues become important criteria for judging quality in these encounters.

Face-to-Face Encounters: A third type of encounter is the one that occurs between an employee and a
customer in direct contact is called as Face-to-Face Encounter. In a hotel, face—to—face encounters
occurs between customers and maintenance personnel, receptionist, bellboy, food and beverage
servers and others. Determining and understanding service equality issues in face—to—face context is
the most complex of all. Both verbal and non-verbal behaviors are important determinants of quality, as
are tangible cues such as employee dress and other symbols of service (equipment’s, informational
brochures, physical settings). In face—to—face encounters the customer also play an important role in
creating quality service for herself through his/her own behavior during the interaction. For example,
at Disney theme parks, face-to-face encounters occur between customer and ticket-takers, maintenance
personnel, actors in Disney character costumes, ride personnel, food and beverage servers, and others.
For a company such as, IBM, in a business-to-business setting direct encounters occur between the
business customers and salespeople, delivery personnel, maintenance representatives, and professional
consultants.

Role of Service Encounter

Have an A* attitude. ...

Understand the customers' needs. ...

Provide the product/service that best meets their needs (not yours) ...

Do not serve with expectations. ...

Give them options. ...

Promptness is a virtue.

Managing service encounter;

1. Transparency of Customer Expectation Management:

The customer must know what they are signing up for. It is as simple as that. This is an ethical
code that all industries must adhere to. Let’s not forget that it is you as a brand who has complete
control over how you want to communicate. Therefore, it is your responsibility to clear the fog.
Determine the factors that influence your business and make sure you promise only what you can
provide. Starting from the website to the product information page, every piece of data should be
a fact and not extravagant mumbo-jumbo. All advertisements should limit themselves to
accuracy and must not be misleading. Clarify the dependability of your staff as customers hate to
wait in queues. To ensure, that customers are aware of the wait-time. Lastly, based on the
geography of the business, enforce properly trained, well-spoken agents who can communicate
with locals without language barriers.

2. Interpersonal Relationship for Customer Expectation

Management:
You expect your customers to trust you and you trust them to keep purchasing from you. It is a
two-way street. To ensure loyalty, building a relationship is imperative. This means you can no
longer alienate the customer. Proper omnichannel infrastructure will accumulate all the customer
information and readily provide it to the agent. The agent must be trained to use this data
whenever they communicate with the person. They should greet them with little details extracted
from this data, to incite a non-alienated environment. The customer will feel known and no
longer a stranger to your business. Your awareness will reinstate the trust in this relationship and
the customer will be more vocal and upfront about their woes. This eases the task of
communication, culminates trust, and manages the customer’s expectation. As long as they feel
heard and seen, they will keep coming back for more.

3. Learn and Adapt for Customer Expectation

Management:
Customers interact with a variety of businesses, every day. Some for their finances, some for
healthcare, some for social security, some for entertainment. Each of these businesses has an
infrastructure to ensure a smooth relationship. Imagine your customer experiences a first-class
service with one of these businesses while you lag behind with the same person. The customer
will compare their choices and will probably move away from your business. Thus, it is essential
for you as a business to studying the market. Learn more not only about your competitors but
also about your fellow businesses. Understand what they are offering and keep up with it. If
someone offers AI-driven interactions while you still provide IVR queues, then you are bound to
lose customers. The only solution is to keep yourself informed by being proactive. And
eventually adapting to the newest techniques to keep up with the service quality.

4. Analyze and Improve Customer Expectation

Management:
Once you meet the baseline expectations, you must not stop. Focus on your module and
understand where you can over-perform. Every business has its own perks. Determine those
perks and benefit from them. These make you stand out from your competitors, making you an
exception in your own game. Ask yourself about the strategies implemented like - demography,
target audience, cost of acquisition in every location, and more. Surround your business around
these. For example: If you can lower prices for some products without affecting quality, do it. If
you can improve quality with USPs that are not yet in the market, do it. Each business is unique
and has the potential to grow if strategized appropriately. To do this better, use different
analytical tools to understand your user demand, your user pipeline, and work around it.

5. Consistency in Customer Expectation Management:

It is universally understood that consistent effort bears the sweetest fruits. Whatever services you
provide, whatever strategies you implement, make sure you stick with them consistently. You
can’t provide the first few customers with the best quality of service and then discard them when
they become a constant buyers. No matter how often or how rarely the customer visits your
website or buys from you, you must consistently make an effort to engage, follow-up, help, and
interact. Many companies make the mistake of discarding their old customers while taking care
of the new ones. This increases their churn rate, making them lose more money in the long-run.
Invest in your existing customers to confirm them as your permanent source of income.

6. Be Realistic for Customer Expectation Management:

Often we get carried away with the promises we make and eventually they are not met. Let’s not
make this a habit for a business that is accountable for thousands of people. Businesses should
address their audience with realistic standards. Promise them solutions that you can really offer.
Many times, certain customers will come up with exceptional issues. The agent and the team
must work together within the framework of the company policies, to resolve the issue. It is
absolutely acceptable, to be honest with the customer about the status of their issues. If a
problem will take more than the usual time, inform them instead of delaying them.

Due to the COVID-19 scenario, a lot of companies have pushed themselves to meet expectations
at a faster rate but failed. Remember, your customers are also humans who are aware of their
surroundings. Be realistic and honest with them and they will appreciate you for your
transparency.

Conclusion:
These above-mentioned techniques will ensure that your customers stay longer. Customers only
want value for their product alongside a pleasant experience. Meeting these two basic needs will
ensure the longevity of your business. There is no harm if your business can’t immediately offer
these consistent services, but one has to start somewhere. We at C-Zentrix believe in providing
the ultimate customer service experience. Check out our customer management solutions to learn
more about cost-effective methods to ensure customer satisfaction.

Service failure
A service failure, simply defined, is service performance that fails to meet a customer's
expectations. Typically, when a service failure occurs, a customer will expect to be
compensated for the inconvenience in the form of any combination of refunds, credits,
discounts, or apologies.

Main causes of poor customer service

Hiring the wrong people. The quality of customer service provided by a company largely
depends on the people that are hired for the job. ...

Lack of proper training. ...

Lack of employee engagement. ...

Employee burnout. ...

Misunderstanding expectations.

Tips on How to Better Manage Customer Service Failures

A competent service failure measure will address the customer’s issue and handles their concerns.
Below are some tips for managing customer service failures better.

1. Identify and acknowledge the issue

Failures can’t be solved if the cause of the issue is not identified. The first thing to consider is to reduce
your customer’s pressure using their service channels, including email, social media, websites, and
physical outlets.

Check all your customer support channels to make sure that every inquiry is seen, read, and responded.
Be it a technical issue, or a third-party problem, or a concern about the product or service, it’s still
essential to analyze the issue for a business owner to understand the problem better and formulate the
best solution.

2. Apologize to the customer

Even if the failure is not within the organization’s control, customer service support must be willing to
respond when a customer gets in touch to complain.

The first and most important thing to do is to apologize to the customer. Apologizing can make a
difference and can even pacify a customer’s anger. It doesn’t matter if the service problem was a result
of an earthquake or a typhoon. The damage has been done, and what’s important is to have it fixed.

If any business fails to live up to expectations and disappoints customers, those customers rightly
deserve an apology.

Apologizing to the customers means that you’re acknowledging the situation and recognizing their
disappointment and that you highly value their relationship with your business. Be humble and say sorry
for any inconvenience you may have caused them.

3. Fix the issue

Of course, this is the most vital step in managing customer service failures. It’s not enough that you
apologize to the customer. They’ll appreciate it more if you’ll give attention to their concerns and take
action. Assure them that the issue will be fixed and that you’re doing your best to have the matter
settled at the earliest possible time.

To say sorry is secondary, but still, the most critical point to do is to ensure that the issue will be fixed. A
sign that an organization cares about the customers is how much effort they put into it. This also
includes the time frame within which an issue is resolved.

4. Keep the customer updated and informed

While the problem is being addressed, of course, it depends on how long the fixing will take. The
business owners should try as much as possible to keep the customer(s) updated and informed on the
status of their concern or how much longer it’ll take to get resolved.

Honesty is still the best policy, as we all know. It could be a weekly or monthly update via social media or
website. Another way is to make sure that their Support Desk ticket is updated on its status. Keeping
your clients and customers informed and updated reduces the negative impact on the brand as well as
the perception of other people about the company.

5. Follow up or reach out to customers

Let’s say the issue has been resolved. Your customers can now use the products and services without
issues. Should you act as if nothing happened? No. Something happened and the damage has been
done.

However, to maintain the trust and credibility of the company, you need to reach out to the customers.
This is even after the issue has been resolved. This is required to apologize again, thank the customers
for their understanding and patience, and assure them that the service delivery failure won’t happen
again in the future.

This is very important to build strong relationships between customers and the business and to improve
customer’s confidence in the products and services offered.

6. Analyze the problem and establish some learning points

This final step can be the most rewarding and critical part. It’s the part where you need to evaluate
everything and ask two vital questions: ‘What caused the service failure?’ and ‘What steps can be done
to prevent or eliminate the possible occurrence of this issue?’

When you find answers to those questions, then it’ll give you some important findings and conclusions
about the problems. You’ll learn something from every customer service complain that you’re going to
handle. The lessons to be learned from this will become stepping stones on how to better manage the
customer service support of every business.

Service recovery

Service recovery is a company's resolution of a problem from a dissatisfied customer,

converting them into a loyal customer. It is the action a service provider takes in response to
service failure.

Service recovery process

There are five logical steps in the service recovery process:

1-Anticipating customer needs

2-Acknowledging their feelings

3-Apologizing and owning the responsibility

4-Offering alternatives
5-Making amends

Anticipating means understanding customer expectations at key points along the experience
pathway. If we have a clear idea about what the customer expects at each point along the
experience pathway, we can anticipate and prepare for them. When we fail to understand and
manage the expectations, dissatisfaction results. The key to success is being able to anticipate
the customers’ needs at each step and strive to ensure that processes are in place that will
meet and exceed their expectations.

Service recovery begins the moment we recognize that expectations are not met. At that point,
it is vital that we acknowledge the problem and the customer’s feelings. Remember that
perception is reality. This is not the time to argue and explain your position. It is the time to
accept responsibility for acting on the customer’s complaint.

Most of us learned the importance of saying “I’m sorry” as young children. Those two words can often
diffuse anger and bridge an emotional gap between two people in a wide range of situations. An
apology, as simple as it may seem, is an important step in moving the situation away from the negative
and into the positive, action-focused arena. An apology is not an admission of guilt. Many people in
medical settings are hesitant to apologize for fear of looking like they have done something that could
result in a law suit. Not so. You can safely apologize by saying, “I’m sorry that happened.”

Offering alternatives whenever possible is a method for helping dissatisfied customers regain a sense of
control. Rather than telling customers what they can’t have, focus on options for what is possible. Put
them back into the driver’s seat.

Making amends is a means for righting a wrong. It can be as simple as making a sincere apology, sending
a follow-up letter, or may include a small gift or token of appreciation. Unfortunately, I find that many
healthcare organizations mistake these tokens for real service recovery. I have seen several hospitals
create “service recovery kits” consisting of gift certificates and other “perks” prepared to appease
disgruntled customers but miss the real opportunities to change systems and operations in order to
prevent future occurrences.

Use the information to drive change.

Keeping service recovery logs can help to identify opportunities for improvement. Be sure to record
date, time, department, nature of the complaint, and parties involved. Be sure to record contact
information from customers who made the complaint. This will allow you to contact them and delve
further into the situation if needed. Gather the data from service recovery logs from all the
departments. Summarize and find the common denominators and use the information to set goals and
make changes.

I frequently find organizations that keep logs of complaints but don’t make effective use of the
information to prevent further problems. The key is to mine the information for hidden opportunities.
These opportunities are revealed by identifying patterns and trends revealed by the information. Ask
questions about the trends. Are they most common at certain times of day, day of week, shifts, and
units? What systems may be contributing to these trends? Use this information to drill down into the
root causes.

Most organizations do not prepare staff adequately for these two steps, resulting in further customer
and employee dissatisfaction. When staff do not feel confident about handling customer complaints,
their job satisfaction suffers and customer satisfaction plummets.

Essentials of service recovery:

Examine the customer experience pathway and identify the expectations at each point
along the pathway.

Anticipate the key issues and needs at each point along the pathway and create
processes and systems that ensure that needs are met and exceeded.

Educate staff about expectations and engage them in anticipating customer needs at
each point along the experience pathway.

Train staff in communication skills for handling dissatisfied customers, including

acknowledging and apologizing when dissatisfaction occurs.

Provide staff with options and support for making amends to customers who have
encountered disappointing experiences. Make sure they understand what options they
can offer and who can assist them in dealing with dissatisfied customers.

Customer retention and benefits

Customer retention refers to a company's ability to turn customers into repeat buyers and prevent
them from switching to a competitor. It indicates whether your product and the quality of your service
please your existing customers. It is also the lifeblood of most subscription-based companies and service
providers.

Instead, customer retention is focused on existing customers. The goal is to increase repeat
purchases by building customer loyalty through excellent customer service, product value and a
distinct advantage over similar products or services.

How do you measure your customer retention rate?

The customer retention rate is the percentage of previous customers who remained loyal to your
business over a period of time. To calculate it, pick a period of time you want to measure and then
identify the following:

Number of customers at the start of a given time period (S)

Number of customers at the end of that period (E)

Number of new customers added over the duration of that period (N)

Then, you can calculate your customer retention rate (X) with the following formula:

Customer retention formula

6 strategies to improve customer retention

Deliver fast support

Personalize interactions

Invest in employees

Meet customers where they are

Gather customer feedback

Incentivise loyalty

Improving customer retention means improving the customer experience. In fact, 77 percent of
customers surveyed in our 2021 Customer Experience Trend Report report being more loyal to
a company that offers a good customer experience if they have an issue. 72 percent are willing
to spend more from a company that offers good customer experiences. And 50 percent say that
customer experience is more important to them now compared to a year ago. If you make
interactions more convenient, personal and rewarding for your customers, they are likely to be
more loyal in return.

1. Respond to customer support queries quickly

Data shows that quick first replies result in higher customer satisfaction. Our 73 percent of customers
surveyed in our 2021 Customer Experience Trend Report said that speedy support resolutions are key to
a good customer experience.

73 percent of customers surveyed in our 2021 Customer Experience Trend report said that speedy
support resolutions are key to a good customer experience.

Ideally, speedier replies will go hand in hand with faster resolutions. But even if you can not solve a
ticket right away, it still pays to respond to the customer ASAP. A quick reply can be a short message
letting the customer know you have received their question. Better yet, provide an estimate for the time
it will take to solve their problem. Customers are more willing to wait if they know you are actively
working towards a solution. Setting time frame expectations upfront helps with that.

2. Use context to deliver personalised support interactions

Customers feel frustrated when they have to explain an issue over and over. Exhausting, repetitive
interactions make customers more likely to leave. Give support agents the tools they need to easily pull
the customer information and elevate the conversation. Zendesk’s streamlined workspace gives
agents customer context to deliver a personalised experience. For example, agents can see relevant
customer information (such as language, contact details and notes). They can also view their previous
conversations.

3. Simplify customer service workflows

Helping your agents can help your customers, too. Simplify customer service workflows so tickets get
to the right departments and representatives. This makes the support process easier for agents and
faster for customers. Create multiple support request forms and conditional ticket fields. This will
provide customers with a personalised form that only asks for information related to their problem.
Then, streamline the process with support software. This will instantly direct different types of tickets
to specialised agents. Once you streamline and speed up ticket resolution, you will make agents
happier and retain more customers.

4. Offer omnichannel support to reach customers where they are

Do not limit your support channels to one or two select methods. Use omnichannel support to
empower customers to choose the channel they like best. Omnichannel experiences are likely to
increase customer retention. This is because you are decreasing the effort it takes to make a purchase or
contact support. According to our 2021 Trends Report, 50 percent of high-performing companies have
an omnichannel strategy in place, compared to just 18 percent of their lower-performing peers.

Zen desk enables customers to contact support any way they please—web, mobile app, email, phone or
chat. Customers can then continue the interaction across any other channel. Beyond support, some
retailers also use omnichannel experiences to connect their customer’s online, mobile and in-store
visits. For example, UGG uses Zendesk to manage their “Click and Collect” and “Click and Reserve”
programs. These services let customers buy boots online and have them shipped to their local store or
reserve stock in-store before purchasing.

5. Consistently gather customer feedback

Customer feedback is one of the most valuable tools you have to increase customer retention
and reduce attrition rates. If you want to know what is and is not working for your customers, it
helps to hear it straight from the horse’s mouth.

Customer feedback is one of the most valuable tools you have in order to increase customer retention.
Give customers a voice by conducting more surveys. Customer satisfaction surveys can be as
simple as asking for a “thumbs up or thumbs down” after you resolve a ticket. But it is also
useful to ask more specific questions, such as:

How would you describe your experience with our product?

What is not working for you, and why?

Which of the following channels do you prefer using for customer support?

Be sure to ask questions that get to the heart of customer effort. For example, customers often
prefer self-service because of the convenience. So you might use surveys to see if your
customers like your self-service options or if you are making it too difficult for them to find the
answers they need. Supplement your surveys with feedback from customer service team
members. They are closest to customers and can identify common complaints and general
preferences.

6. Incentivise loyalty

Rewarding customer loyalty is a good way to increase customer retention. Customers like it
when brands appreciate them and give them reasons to stick around. Strong incentives include
loyalty programs, discount codes or special offers. These will motivate customers to continue
buying from your business. There are several types of loyalty programs, from points-based
systems to tiered rewards. Loyalty programs also help your company collect more detailed
customer data. The more purchasing data you have available, the more personalized rewards
and offers you can provide to your customers. A loyalty program can not only reward shoppers,
but also provide a positive and customized experience based on sales insights. Both
components are crucial to customer retention.

Customer retention examples

1. Offer a seamless online experience (Amazon)

One of the most basic customer retention examples is meeting customer expectations. And
customers today expect online experiences that are on-par with or better than, in-person
experiences. In fact, 65 percent of customers want to buy from companies that offer quick and
easy online transactions, according to our Trends Report. And 49 percent gave Amazon the
highest marks for service for that reason. Are there pain points in your online experience? How
can you make things easy for customers?

2. Make every customer feel like a VIP customer (Four Seasons)

Luxury hotels are known for their heritage of high-touch, exclusive customer service. The Four
Seasons is able to expand that feeling of luxury to every customer through its combination of
technology and white glove service. Guests can use Four Seasons Chat to message staff
through channels such as WhatsApp for any inquiry or service, including requests for restaurant
recommendations and reservations, ordering room service, arrival or early checkout and even
ordering a private jet.
3. Build empathic customer relationships (Zappos)

If there is one thing the pandemic showed us, it is that empathy is key to building lasting
customer relationships. In fact, 49 percent of customers want agents to be empathetic,
according to our Trends Report. During the pandemic, Zappos started a hotline where
customers could call or chat with its support team about anything, even the best Netflix shows.

4. Be proactive (Dollar Shave Club)

Customers expect brands to anticipate their needs and get in front of issues before they even
happen. That is why proactive service is so important in retaining customers. Dollar Shave Club
welcomes website visitors with a chatbot to answer common questions before a customer has
to reach out to customer support or abandons their cart.

5. Support causes your customers to care about (Bombas)

54 percent of customers want to buy from companies that prioritise diversity, equity and
inclusion in their communities and workplaces and 63 percent want to buy from companies that
are socially responsible, according to our Trends Report. Bombas donates a clothing item to a
homeless shelter or homelessness-related charity with every purchase.

Improve your customer retention strategy with better customer experiences

Improving customer retention and building customer loyalty does not happen overnight. It will
take time and effort to grow your relationship with your customers and earn their trust.
Exceptional end-to-end customer experiences are the best way to earn customer trust. Provide
great service and make customers’ lives easier and they will likely turn into advocates for your
brand.

Benefits of customer retention

1. Reducing the cost of customer acquisition
Acquiring new customers is costly, time-consuming, and energy intensive. Often,
after you’ve spent weeks or months nurturing a lead, they may decide to head to a
competitor. When you have a high degree of customer churn (your customers
don’t return to your business after an initial purchase), you’re forced to look for
new customers.

However, when you focus on customer retention instead, your existing customers
are more likely to make multiple purchases from your business, meaning you don’t
have to invest as heavily in the customer acquisition side of your business.

2. Increasing the value of each sale

Even when a customer has made a purchase, the sale isn’t over. A big mistake
organizations make is not following up with customers to upsell or cross-sell
additional products and services. Those follow-up efforts can not only increase
customer retention but also increase the value of the current sale.

For example, if your customer purchased a subscription from your business, why
not reach out to them in a month to see if they’re interested in increasing their
subscription to the next level? If the customer bought your product, see whether
they would also like to add a related product to round out their purchase.

3. Gaining insight into your customers

Successful businesses are good at what they do because they know their
customers. They aren’t just familiar with their demographics; they have detailed
insight into the challenges their customers face, the emotions they feel, the level
of transformation they want to achieve, their readiness to buy, and their sense of
loyalty to a brand.

Customer retention requires businesses to have this level of understanding.

However, this insight isn’t just helpful for customer retention. You can apply it to
other parts of your business as well, such as product development or customer
service.

4. Building referrals and loyalty

One of the biggest benefits of customer retention is that it helps you get more
people interested in your business. When a customer continues to return to your
business, they build a sense of loyalty toward your products and services.
In turn, they begin to refer your business to their family, friends, and
acquaintances. Not only that, but they may also leave positive online reviews,
which act as word-of-mouth marketing online.

As a result of customer retention efforts, you can further reduce your cost of
customer acquisition. New customers will come to you because they’ve seen how
well you’ve treated others.

5. Reducing customer churn

Customer churn is the polar opposite of customer retention. There are many
reasons for customer churn, such as poor quality of products, bad customer
service, or better offers from competitors.

Losing a customer, no matter the reason, isn’t good for any business. When you
actively focus on customer retention strategies, you can reduce the number of
people who stop doing business with you. This can also lead to fewer negative
reviews — in person and online.

Customer retention should be a primary strategy for every business, no matter

how successful you are. Be sure to apply customer retention tactics, such as
personalizing each engagement with customers and giving them opportunities to
provide feedback.

You can automate many customer retention processes using software like Jotform
to make your processes more efficient and to ensure you reach out to as many
customers as possible

1
Unit 4

Service segmentation
Market segmentation is the process of aggregating customers with similar wants, needs,
preferences, or buying behaviour. Market segmentation is the process of aggregating
customers with similar wants, needs, preferences, or buying behaviour.

Services Markets Segmentation

Market segmentation is the process of aggregating customers with similar wants, needs,
preferences, or buying behavior. Market targeting involves evaluating the attractiveness of the
segments and selecting ones 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 he
competitive position for the service in the mind of the customer and creating or adapting the
service mix to fit the position.

The segmentation process, shown in the following figure is concerned to divide a

heterogeneous follows four broad steps:

The definition of the market to be addressed.•

The identification of alternative bases for segmentation•

An examination of these bases and the choice of the best base or bases for
segmentation.•
The identification of individual market segments, an assessment of their
attractiveness and the selection of specific target segments.•

Once the market segment has been selected, the process of target marketing involves developing a
positioning for the target segments selected and then developing a marketing mix for each target
market.

Services market segmentation

Definition of Relevant Market

The definition of the relevant market to be addressed involves specifying the

customer group to which the company is seeking to market its services. This can be
a broad group such as retail customers for a supermarket in a given geographic
region, or a much more specific group which can be further segmented.

Successful market segmentation means satisfying the needs of existing and

potential customers in a clearly defined market. This involves understanding
customer attitudes, and customer preferences, as well as the benefits which are
sought. Definition of the target market and its requirements is the first essential
step in the segmentation process.

Bases of Segmentations

Market segments are formed by grouping customers who share common

characteristics that are in some way meaningful to the design, delivery, promotion,
or pricing of the service.
Demographics and socio-economic segmentation

Demographic segmentation includes a number of factors including sex, age, family

size etc. Socio-economic variables may also be considered here, including income
education, social class and ethnic origins. Many retail stores target different
customer group.

Psychographic segmentation

This form of segmentation cannot be explained in clearly defined quantitative

measures it is concerned with people‟s behaviour and ways of living..
Geographic segmentation

Geographic segmentation divides customers according to where they live or work

and correlates this with other variables.

A geographic analysis is a relatively simple means of segmenting a market, it is

frequently one of the first segmentation variables to be considered by a service
firm Geographic segmentation dimensions are typically grouped into market scope
factor and geographic market measures.

1. Market scope factors include a consideration of where the markets to be

served are located: this maybe local, national, regional or global.

2. Geographic market measures include examination of population density,

climate-related factors, and standardized market areas. Geographic measures are
especially important in the selection of specialized mass communications media.

Benefit segmentation

The segmentation variables listed above focus on the personal attributes of the
customer. Segmentation can can also be carried out on the basis of the customer‟s
response.

Usage segmentation
Usage segmentation focuses on the type and extent of usage patterns. Consumers
are typically divided into heavy users, medium users, occasional users or non-users
of the service being considered.

Promotional response segmentation

Promotional response segmentation considers how customers respond to a

particular form of promotional activity. This may include response to advertising,
sales promotions, in-store displays and exhibitions.

Segmentation by service

One area which has received relatively little attention is the consideration of how
customers respond to varying service offerings..

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. The segmentation process should result in one of four basic decisions
being reached:

1. The service firm may be 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.

Management may decide not to segment the market bout to offer the service to he
mass market. This may be appropriate if the market is very small and single
portion would not be profitable. It also may be the case that the service company
dominates the market so that targeting a few segments would not increase volume
or profit.

4. Analysis may show that there is no viable market niche for the service
offering.

The relevance of market segmentation if now being increasingly recognized in the

services sector.
Targeting;
A target market is a group of customers with shared demographics who have been identified as
the most likely buyers of a company's product or service. Identifying the target market is
important for any company in the development and implementation of a successful marketing
plan.

Market Targeting Definition Strategies and

Examples
In this article, we will discuss market targeting. What is it and why need to know it. We have
already discussed market segmentation and learnt that companies are unable to reach all
customers in the market. The company cannot fulfil all customers needs that is too large.
Therefore, to solve this problem marketers segment the market into small segments. After this,
one should target those segments which can be better served is market targeting.

Market Targeting Process

There are two steps of market targeting process, the first step is to evaluate market
segmentation and select those segments that suit the business. In the second step, marketers
select appropriate market targeting strategies.

Step1. Evaluation Market Segments

The market targeting process involves assessing those segments marketers already identified in
the market segmentation. But when we talk about evaluating market segments, it is based on
certain criteria. Business owners and marketers must answer these questions while assessing
the market segments.

▪ What are the sizes of the segments I am looking for?

▪ What are the demographics of identified segments?
▪ What is the competition level of each segment?
▪ What is the growth potential in the segments?
▪ What segments can help to achieve company goals?
▪ How to best utilize company resources pursuing the segments?
These are not the only questions. The questions may vary according to industry,
business nature and the depth of research you conducted.
Step 2. Market Targeting Strategies
In todays’ business environment every business needs market targeting strategies. Targeting
the right market is very important. Here we will discuss four types of market targeting
strategies with examples.

Undifferentiated Market Targeting

Undifferentiated market targeting strategy ignores market segmentation and goes after the
whole market. This strategy considers buyers as homogeneous group. Undifferentiated
marketing is also known as mass marketing. In this strategy, companies do not produce
different products for different market segments.

This type of marketing strategy relies on mass distribution and mass advertising. Companies
aim to create superior image of the product in the minds of consumers. Company uses this
strategy to appeal a wider audience based on common customer needs and wants other than
differentiated and concentrated strategies.

Marketing It has a narrow product line which leads to low advertising cost. Lack of segment
reduces the costs of marketing research.

Example
Henry Ford adopted undifferentiated marketing strategy for T Ford Model. This model was
available in only black color in 1930s. Another example of undifferentiated strategy is Hershey
company, few years back they have only one chocolate candy bar for all.

Differentiated Market Targeting.

In Differentiated market targeting strategy, a company opt to target multiple market segments
and design different and effective marketing mix for each market segment. A Differentiated
market targeting approach is likely to create more sales than does undifferentiated marketing.
But due to distinct marketing mix, the promotion cost also increases. The increasing sales must
be weighed with increasing costs.

Number of different companies adopted differentiated marketing strategies. For example, the
segmentation of Unilever generates more sales by achieving higher market share through various
detergent brands which they could not with just one brand.

Example
Another example is McDonalds, they have developed unique menus for local consumers in
many countries of the world. In India McDonald create a unique menu for local consumers i.e.
the McCurry Pan which a vegetarian dish. The Indian version of Big Mac is called the Maharaja
Mac “the Social Burger” make with grilled chicken, tomatoes and onions. Both products are
according to the Indian religious sensitivities as beef is not consumed.

Concentrated Market Targeting

In concentrated / niche market targeting strategy, resources are focused and target specific
market segments. Concentrated marketing strategies are effective for those small companies
having limited resources. Due to focused strategy they can perform better compare to large
businesses.
Due to better knowledge of specific segment’s needs, company can achieve a higher
market position. If company choose the right segment at the right time, it can achieve
lucrative rate of return on investment.

Examples
Pizza Hut successfully developed database of 9 million pizza lovers customers. By
using this database, Pizza Hut developed target market campaigns to reach its
consumers.

Micromarketing Market Targeting

Micromarketing strategy involves developing products, services and marketing programs best
match with individuals and locations. Small business owners can use micromarketing strategy
to target customers at personal level. micromarketing includes local marketing and individuals
marketing.

Example

A good market targeting examples is Citibank, it offers different services on branch level based
on neighborhood demographics. Walmart and Sears Store customizes its inventory and
promotion to meet the requirements of specific clients.

Individual marketing examples include hotel industry, clothing, furniture and bicycle industry.
This strategy is based on the preferences on individual’s customers.

Whether a company, business owner or marketer, you should evaluate and target the
market very carefully and effectively. Market targeting strategies are designed to promote a
brand or resonate a message to target audience. Evaluate market segments and select target
market according to your overall business objectives and plans.
 Positioning of services

Positioning of Services in Service Marketing

The concept of positioning involves establishing a distinctive place in the minds of target
customers relative to competing products. In The New Positioning: The Latest on the World's #1
Business Strategy, Jack Trout distills the essence of positioning into the following four
principles:
1. A company must establish a position in the minds of its targeted customers.
2. The position should be singular, providing one simple and consistent message.
3. The position must set a company apart from its competitors.
4. A company cannot be all things to all people it must focus its efforts.
Cirque du Soleil is an example of a company that has taken these four principles to heart. Most
Americans can't even pronounce the name (which is French for "circus of the sun"), and less than
one in five know what Cirque offers. But the goal of the Quebec-based founders is to become a
worldwide brand a Circus without Boundaries. Cirque provides a mystical mixture of stunningly
choreographed dance, original music, exotic costumes, and amazing acrobatics that is more art
than traditional circus entertainment.

And the atmosphere is intimate, since the audience for most performances is limited to a few
thousand people compared to crowds of ten thousand or more at typical circus events. Cirque's
extravagant shows with ticket prices of $60 to $100 per seat are produced at multimillion dollar
theaters on three different continents.

The company is extremely profitable, and its long-term strategy is to become a mega brand
targeted at the wealthy. Cirque has already cashed in on its brand equity with a licensed
wallpaper line (a top seller in the United States), a Cirque du Soleil watch marketed by Swatch,
and a $12 million IMAX film about the company that recently debuted in Berlin.
 Positioning and Marketing Strategy
Companies use positioning strategies to distinguish their services from competitors and to design
communications that convey their desired position to customers and prospects in the chosen
market segments. There are a number of different dimensions around which positioning
strategies can be developed, including:
1. Product attributes America Online's e-mail service is "so easy to use, no wonder it's # 1” (see
Figure)
2. Price I’ quality relationship Super cuts sells good haircuts at a "reasonable" price
3. Reference to competitors "You'd better take your Visa card, because they don't take American
Express"
4. Usage occasions Ski resorts offer downhill and cross-country skiing in the winter; hiking and
mountain biking in the summer
5. User characteristics Cheap Ticket's online ticketing service is for travelers who are
comfortable with both Internet usage and self-service
6. Product class Blue Cross provides a variety of different health insurance packages for its
corporate customers to choose from in putting together their employee benefit plans
Marketers often use a combination of these positioning approaches. Whatever strategy a firm
chooses, the primary goal is to differentiate itself from competitors by emphasizing the
distinctive advantages of its service offerings.

If the core benefits are similar to those of the competition, the company may decide to stress
different advantages in its promotional efforts. For example, at one point Sprint was stressing the
price and value of its long-distance services, while AT&T emphasized reliability and expertise.
Table summarizes how positioning strategies relate to critical marketing issues like service
development and delivery, pricing, and communications.

Service Repositioning
Market positions are rarely permanent. Competitive activity, new technologies, and internal
changes may cause a company to reposition itself and its services. Repositioning involves
changing the position a firm holds in a consumer's mind relative to competing services. This may
be necessary to counter competitive attacks, remain attractive and appealing to current
customers, or target new and additional segments.
 Repositioning can involve adding new services or abandoning certain offerings and withdrawing
completely from some markets. In response to major changes in its business environment,
Andersen Consulting recently repositioned itself and changed its name to Accenture to reflect its
"accent on the future" (see the boxed story "Repositioning a Consulting Firm"

Principal Uses of Positioning in Marketing Management

Provide a useful diagnostic tool for defining and understanding the relationships between
products and markets:
a. How does the product compare with competitive offerings on specific attributes?
b. How well does product performance meet consumer needs and expectations on specific
performance criteria?
c. What is the predicted consumption level for a product with a given set of performance
characteristics offered at a given price?
Identify market opportunities:
a. Introduce new products
• What segments should be targeted?
• What attributes should be offered relative to the competition?
b. Redesign (reposition) existing products
• Should we appeal to the same segments or to new ones?
• What attributes should be added, dropped, or changed?
• What attributes should be emphasized in advertising?
c. Eliminate products that
• Do not satisfy consumer needs
• Face excessive competition
Make other marketing mix decisions to preempt or respond to competitive moves:
a. Distribution strategies
• Where should the product be offered (locations and types of outlet)?
• When should the product be available?
b. Pricing strategies
• How much should be charged?
• What billing and payment procedures should be used?
c. Communication strategies
• What target audience(s) are most easily convinced that the product offers a competitive
advantage on attributes that are important to them?
• What message and attributes should be emphasized and which competitors, if any, should be
mentioned as the basis for comparison on those attributes?
• Which communication channels should be used, personal selling or different advertising
media (selected not only for their ability to convey the chosen message to the target audience
but also for their ability to reinforce the desired image of the product)?