4th Sem Service MKTG

Defining the Essence of a Service
An act or performance offered by one party to another
An economic activity that does not result in ownership

A process that creates benefits by facilitating a desired change in:
customers themselves
physical possessions intangible assets

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Changing Structure of Employment as Economic Development Evolves

Agriculture Services
Industry
Time, per Capita Income
Source: IMF, 1997
% of GDP in INDIA
2012
2001 1995 1980 1970 0 48 40 36
62 26 28 26
19
19 26 32 38
31
20
24
40
Services
45
60
Industry
80
Agriculture
100
120
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Salt
Soft Drinks
Tangibility Spectrum
Detergents Automobile Cosmetics Fast Food
Intangible Dominant
Tangible Dominant Advertising Airlines Management Consulting Insurance

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Differences Between Goods & Services
Intangibility
Heterogeneity
Simultaneous Production and Consumption
Perishability
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Differences between Goods and Services

GOODS
Tangible
SERVICES RESULTING IMPLICATION

Intangible Services cannot be inventoried Cannot readily be displayed or communicated Pricing is difficult

GOODS SERVICES RESULTING IMPLICATION
Production Simultaneous Customers participate in and separate from affect the transaction consumption Customers affect each other Employees affect service outcome Decentralization may be essential Mass production is difficult
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Standardization Variability/ Service delivery & Heterogeneous customer satisfaction depend on employees action Service quality depends upon many uncontrollable factors There is no sure knowledge that the service delivered matches what 9 was planned and promoted

It is difficult to synchronize supply and demand with services Services cannot be returned or resold
Non Perishable Perishable
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Expanded Marketing Mix for Services

PRODUCT PLACE PROMOTION PRICE
Promotion blend Salespeople Advertising Flexibility
Physical good Channel type features Quality level Accessories Packaging Warranties Product lines Branding Exposure Intermediaries
Price level Terms Differentiation Allowances
Outlet location Sales promotion Transportation Publicity Storage
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PEOPLE
Employees Customers Communicating culture and values Employee research
PHYSICAL EVIDENCE
Facility design Equipment Signage Employee dress Other tangibles
PROCESS
Flow of activities Number of steps Level of customer involvement
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People
Physical Evidence
Process
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People
Employees Recruitment Training Motivation Rewards Teamwork Customers Education
Training
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Physical Evidence
Facility Design Equipment Employee Dress Signage Other tangibles Reports Business cards Statements
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Process
Flow of activities Standardized Customized No. of steps Simple Complex Customer Involvement
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The Services Marketing Triangle

Company (Management)
Internal Marketing
enabling the promise
External Marketing
setting the promise
Employees
Interactive Marketing
delivering the promise
Customers
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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The Services Triangle &Technology
Company
Technology
Providers
Source: Adapted from A. Parasuraman
Customers
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Services are Different

Goods
Tangible
Services
Intangible
Resulting Implications
Services cannot be inventoried. Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult.
Standardized
Heterogeneous Service delivery and customer satisfaction depend on employee actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what was planned and promoted. Simultaneous production and consumption Customers participate in and affect the transaction. Customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult. It is difficult to synchronize supply and demand with services. Services cannot be returned or resold.
Production separate from consumption
Nonperishable Perishable
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing, 19 Journal of Marketing 49 (Spring 1985): 33-46.
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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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 21 Zeithaml
Complex surgery
Motor vehicle
Foods
Chair
Entertainment
Lawn fertilizer
Easy to evaluate
Difficult to evaluate
Consumer Decision Making
Need Recognition
Information Search
Evaluation
Decision
Post Purchase Evaluation
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CONSUMER DECISION-MAKING PROCESS IN SERVICES

INFORMATION SEARCH Use Of Personal Sources Perceived Risk EVALUATION OF ALTERNATIVES Evoked Set
CULTURE
Values & Attitudes Manners & Customs Material Culture Aesthetics Educational & Social Institutions Language
PURCHASE & CONSUMPTION
Emotion And Mood Service Provision As Drama Service Roles And Scripts. Compatibility Of Customers
POST PURCHASE EVALUATION

Innovation Diffusion Brand Loyalty Attribution Of Dissatisfaction
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INFORMATION SEARCH
Use of personal source
Goods -personal and non-personal sources are used.
Services - personal sources are used.

As mass media can convey about search qualities but can communicate little about experience qualities.
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INFORMATION SEARCH
Perceived risk
Compare to goods more risk would be involved in purchase of services.
-Intangible nature -Since services are non-standardized always more uncertainty would accompany about the outcome each time it is purchased. -Services not accompanied by any warranties.
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EVALUATION OF SERVICE ALTERNATIVES

Evoked Set
Evoked set of services is smaller as compared to goods.

Reasons
Retailing between goods and services Retail outlet would display competing brands in close proximity of goods. Service providers almost always offer only a single brand for sale
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EVALUATION OF SERVICE ALTERNATIVES
Evoked Set
Less number of service providers for the same services in a given geographic area.
Difficulty to obtain adequate prepurchase information about services. Customers evoked set frequently includes self-provision of the service.
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SERVICE PURCHASE AND CONSUMPTION Emotion and Mood

Emotion and mood influence peoples (and therefore customers) perceptions and evaluations of their experiences. Services characterized by human interaction are strongly dependent on the moods and emotions. Ways in which mood can affect the behavior of service 28 customer
SERVICE PURCHASE AND CONSUMPTION Service Roles and Scripts

Roles are defined as combinations of social clues that guide and direct behaviors in a given setting. Service employees need to perform their roles according to expectations of the customers.
One of the factors that most influences the effectiveness of role performance is a script.
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SERVICE PURCHASE AND CONSUMPTION
The Compatibility of Service Customers

Customers can be incompatible for many reasons
Difference in beliefs Values Experience Abilities to pay Appearance Age, health etc.
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Attribution of Dissatisfaction
A customer may attribute their dissatisfaction to provider and also to themselves (as they participate in the service process) e.g. - Disappointed from a haircut - Doctors diagnosis depends greatly on this - Dry cleaners success in removing a spot depends on the customers knowledge of its cause
(Hence consumers may complain less frequently about services than about goods.)
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Innovation Diffusion
The rate of diffusion of an Innovation depends on the Consumers Perceptions of the innovation with regard to Five Characteristics:
Relative Advantage Compatibility Communicability Divisibility Complexity (Customers adopt innovations in services more slowly than
they adopt innovations in goods.)
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Brand Loyalty
The degree to which consumers are committed to particular brands of goods or services depends on a number of factors:
-Cost of changing brands (switching cost) -Availability of substitutes -Perceived risk associated with the purchase -Degree to which they obtained satisfaction in past (Consumers are more brand loyal with services than products)
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CULTURE
The Role Of Culture In Services
Culture is learned, shared, and transmitted from one generation to the next, and is multidimensional.
Culture would include:

Language (both verbal and non verbal) Values and attitudes Manners and customs Material culture Aesthetics Education and social institutions
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Levels of Customer Contact with Service Organizations
High
N ur sing H om e
Emphasizes encounters with service personnel

M a na ge me n t Consulti ng
H a ir Cut
4 - Sta r H ote l
G ood Re sta ur a nt Ai rl ine Tr a ve l (Econ.)
Tel ephone Ba nk ing
Re ta il Ba nk i ng M ote l
Ca r Repa i r I nsur a nce
Dr y Cl ea ning
Fa st Food Movie Theater
Ca bl e TV
Subway Internet Banking Mail Based Repairs
Emphasizes encounters with equipment
Internet-based Services
Low
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http://www.trendwatching.com/trends/ http://feeds.feedburner.com/Shotgun
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GAPS MODEL OF SERVICE QUALITY

EXPECTED SERVICE CUSTOMER GAP 5 PERCEIVED SERVICE
GAP 1
SERVICE DELIVERY GAP 3 GAP 4 CUSTOMER- DRIVEN SERVICE DESIGNS AND STANDARDS
EXTERNAL COMMUNICATIONS TO CUSTOMERS
GAP 2 COMPANY PERCEPTIONS OF CONSUMER EXPECTATIONS
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Nature & Determinants Of Customer Expectations Of Service

Enduring Service Intensifiers Explicit Service Promise Advertising Personal Selling Contacts Other Communications
Derived Expectations Personal Service Philosophies

Personal needs
Transitory Service Intensifier Emergencies Service Problems

Perceived Service Alternatives
Implicit Service Promises Tangibles Price Expected Service Desired Service Word Of Mouth Personal Expert (Consumer Reports, Publicity Consultants) Past Experience
Self Perceives Service Role Situational Factors Bad Weather Catastrophe Random Over Demand
Zone of Tolerance Adequate Service
Predicted Service
Gap 5 (Customer Gap) Perceived Service
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Service Quality Dimensions

Reliability Responsiveness Assurance Empathy Tangibles
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Relationships
The Customer Pyramid
Enhancing
Retaining
Satisfying
Getting
The Customer Pyramid

Most profitable customers
Platinum Gold Iron Lead

Least profitable customers
Which segment sees high value in our offer, spends more with us over time, costs less to maintain, and spreads positive word-of-mouth?
Which segment costs us in time, effort and money, yet does not provide the return we want? Which segment is difficult to do business with?
Relationship Hierarchy
Most profitable customers
Platinum Gold Iron Lead

Least profitable customers
Which segment sees high value in our offer, spends more with us over time, costs less to maintain, and spreads positive word-of-mouth?
Which segment costs us in time, effort and money, yet does not provide the return we want? Which segment is difficult to do business with?
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 higher priority with waits, faster service
How Firms See Relational Benefits in Service Industries
Increased Revenue from the Customer Reduced Marketing & Administrative Costs
Free Promotion through Word of Mouth

Customer Retention is employee Retention
The Customer Satisfaction Loyalty Relationship

Apostle
100
Loyalty (Retention)
Zone of Affection
80
Near Apostle
60
Zone of Indifference Zone of Defection
40
20
Terrorist 0
1
Very dissatisfied
5
Very Satisfied
Neither satisfied Dissatisfied Satisfied nor dissatisfied
Satisfaction
The Wheel of Loyalty

3. Reduce Churn Drivers
Conduct churn diagnostic
1. Build a Foundation for Loyalty

Segment the market Be selective in acquisition Use effective tiering of service.
Address key churn drivers

Enabled through: Frontline staff Account managers Membership programs CRM Systems
Implement complaint handling & service recovery Increase switching costs
Customer Loyalty
Deliver quality service.
Build higher level bonds
2. Create Loyalty Bonds

Give loyalty rewards
Deepen the relationship
LIFE TIME VALUE OF A CUSTOMER

Life time value of a customer is a concept or calculation that looks at customer from the point of view of their lifetime revenue contributions to a company.
and profitability
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Integrated info. system Joint investments

4.St ructural bonds
Vol. & frequency rewards
Building & cross selling
Shared process and equipment
1. Fin. bonds
Stable pricing
Excellent service quality & value Anticipation innovation

3.Customisati on bonds
Continuous relationships
2. Social bonds
Mass customisati on
Personal relations hips
Customer intimacy
Social bonds among customers
LEVELS OF RETENSION STRATEGIES.
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BUILDING BLOCKS OF SATISFACTION AND SERVICE QUALITY

The service encounter or the moment of truth. Interactive marketing
This is where the promises are kept or broken. Real time marketing It is from these service encounters that custmers build their perceptions.
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SERVICE ENCOUNTER OR MOMENTS OF TRUTH

From a customers point of view, the most vivid impression of service occurs in the service encounter, or the moment of truth. e.g. For a hotel customer service encounters are checking into the hotel, being taken into the room by a bellroom, eating a restaurant meal, requesting a wake up call, checking out. From the organizations point of view, each encounter thus presents an opportunity to prove its potential as a quality 56 service provider and to increase customer loyalty.
TYPES OF SERVICE ENCOUNTERS
A service encounter occurs every time a customer interact with the service organization: There are three types of service encounters:1) 2) 3) REMOTE ENCOUNTER PHONE FACE-TO-FACE
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SOURCE OF PLEASURE AND DISPLEASURE IN SERVICE ENCOUNTERS Critical incidence technique is used to get customers and employees to provide verbatim stories about satisfying and dissatisfying service encounters they have experienced. With this technique, customers (either internal or external) are asked the following questions: Think of a time when, as a customer you had a particularly satisfying (or dissatisfying) interaction. When did the incidence happen? What specific circumstances led up this situation? Exactly what did the employee (firm) say or do? What resulted that made you feel the interaction was satisfying (or dissatisfying)? 58 What could or should have been done differently?
ON THIS BASIS OF THOUSANDS ON SERVICE ENCOUNTER STORIES, FOUR COMMON THEMES
1) 2) 3) 4)
RECOVERY (after failure) ADAPTABILITY SPONTANIETY COPING
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ON THIS BASIS OF THOUSANDS ON SERVICE ENCOUNTER STORIES, FOUR COMMON THEMES

RECOVERY : Employee response to service delivery system failures
ADAPTABILITY: Employee response to customer needs and requests SPONTANEITY: Unprompted and unsolicited employee action COPING: Employee response to problem customers
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SERVICE RECOVERY
Service Recovery refers to the action taken by an organization response to a service failure.
Failure occurs for all kinds of reasons The service may be unavailable when promised It may be delivered late or too slowly The outcome may be incorrect or poorly executed Employees may be rude or uncaring
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SERVICE RECOVERY
All of these types of failures bring about negative feelings and responses for the customers. Left Unfixed They can result in customers leaving Telling other customers about their negative experiences Even challenging the organization through customers rights organizations or legal channels
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SERVICE RECOVERY
Research has shown that resolving customer problems effectively has a strong impact on
Customer satisfaction Loyalty Bottom line performance

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SERVICE RECOVERY
It has been observed that customers who experience service failures, but are ultimately satisfied based on recovery efforts by the firm, will be more loyal than those whose problems are not resolved. Those who complain and their problems resolved quickly are much more likely to repurchase than are those whose complaints were not resolved. Those who never complain are likely least likely to repurchase
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SERVICE RECOVERY
An effective Service Recovery strategy can Increase customer Satisfaction and Loyalty Generate positive Word of Mouth A well designed, well documented services strategy also provides information that can be used to improve service as part of a continuous improvement effort
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SERVICE RECOVERY
Ineffective Service Recovery Strategies can lead to customers who are so dissatisfied they become Terrorist, actively pursuing opportunities to openly criticize the company. Repeated Service Failures without an effective Recovery Strategy in place can aggravate even the best employees. The costs in Employee Morale and even lost employee can be huge. 66
THE RECOVERY PARADOX
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Recovery Paradox is more complex than it may seem on the surface.
It is expensive to fix mistakes.
Empirical Research suggests that only under the very highest levels of customers Service Recovery ratings will we observe increased satisfaction and loyalty.
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It is safe to say that Doing it right the first time is still the best and safest strategy.
But when a failure does occur, then every effort at a superior Recovery should be made to mitigate its negative effects.
Failure when fully overcome the failure is less critical, or the Recovery Effort is Clearly superlative, it may be possible to observe evidence of the Recovery Paradox
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TYPES OF COMPLAINERS
Four categories on how the customers respond to failures have been identifies. These categories are:
(1) Passives (2) Voicers (3) Irate (4) Activist
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SWITCHING VERSUS STAYING FOLLOWING
SERVICE RECOVERY
Ultimately, how a Service Recovery failure is handled and the customers reaction to recovery effort can influence Future decisions to remain loyal to the service provider or to switch to another provider. The more serious the failure, the more likely the customer to switch no matter what the recovery effort. The nature of the Customers Relationship with the firm may also influence whether the customer stays or switches providers.
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TYPES OF RELATIONSHIPS
There are three types of relationships viz
True Relationships where the customer has had repeated
contact overtime with the same service provider.
First Time Encounter Relationship is where the customer

has had only one contact, on a transaction basis, with the provider.
Pseudo Relationship is one where the customer has

interacted many times with the same company, but with different service provider (people) each time.
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SERVICE RECOVERY STRATEGIES

Fail- Safe Your Service- Do it Right the First Time
Reliability or Doing it right the first time, is the most important dimension of service quality. Services adopt the TQM notion of POKA
YOKE to improve
service reliability. POKA YOKES are automatic warnings or controls in place to ensure mistakes are not made. It is important to create a culture of zero defections to ensure doing it right the first time.
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Welcome and encourage complaints

Even in a zero defect organization that aims for 100% service quality, failures occur. Service Recovery strategy should be such that it welcomes and encourages complaints. Complaints should be anticipated, encouraged and tracked. To track complaints customer research can be designed specifically through satisfaction surveys, critical 74 incidence studies and lost customer research.
Welcome and encourage complaints contd..

Employees can be important listening posts, discovering sources of customer dissatisfaction and service failure on the front line. Part of encouraging complaints also involves teaching customers how to complain. It is best to make this process as simple as possible. Technology has really helped customers to complain through e-mails, toll free numbers etc. Software applications in a number of companies allow complaints to be analyzed, sorted, responded to and tracked automatically. 75
Act Quickly
Complaining customers want quick responses.
To take quick action the company requires systems and procedures as well as empowered employees.
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To take quick action the company requires systems and procedures as well as empowered employees
Take care of the problems on the front line
Employees must be trained and empowered to solve problems as they occur Front line employees need the skills, authority and incentive to engage in effective recovery Allow customers to solve their own problems.
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Treat Customers Fairly
Customers expect to be treated fairly in terms of the outcome they receive, the process by which the service recovery takes place and the interpersonal treatment they receive.
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Learn from Recovery Experience

Problem resolution situations are source of improving customer service. By tracking service recovery efforts and solutions, managers can often learn about systematic problems in the delivery system that needs fixing.
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Learn from Lost Customers

Formal market research to discover the reasons customers have left can assist in preventing failures in future. Lost customer research typically involves in-depth probing of customers to determine their true reasons for leaving. It has been observed from research that the largest percentage of customers switching attributed to core
service failure.
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SERVICE GUARANTEES
A guarantee is particular type of recovery tool.
Guarantee is an assurance of the quality of or length of use to be expected from product offered for sale, often with a promise of reimbursement.
Guarantees are relatively common for manufactured products, they have only recently been used for services.
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SERVICE GUARANTEES contd..
Given the nature of services as intangible and variable the question is what could be guaranteed, and how. Companies are finding that effective guarantees
can complement the companys
recovery
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strategy.
Benefits of Service Guarantee

Guarantees not only serve as marketing tool but also as a means for defining, cultivating and maintaining quality throughout the organization
A good guarantee forces the company to focus on its customer.

In many cases Satisfaction is guaranteed, but in order for the guarantee to work effectively, the company must clearly understand what satisfaction means for its customers (what they value and expect).
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Benefits of Service Guarantee contd

An effective guarantee sets clear standards for the organization
It prompts the company to clearly define what it expects of its employees and to communicate that to them. The guarantee gives employees service oriented goals that quickly align employee behaviors around customer strategies. It lets employees know exactly what the should do if the 84 customer complaints.

A good guarantee generates immediate and relevant feedback from customers.
It provides an incentive for customers to complain and thereby provides more representative feedback to the company than simply relying on the relatively few customers who typically voice their concerns.
The guarantee communicates to the customer that they have the right to complain.
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When the guarantee is invoked there is an instant opportunity to recover.
By doing this customer is satisfied and helps to retain his loyalty.
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Information generated through the guarantee can be tracked and integrated into continuous improvement efforts.
A feedback link between the customer and service operations decisions can be strengthened through the guarantee.
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Studies of the impact of service guarantees suggest that employee morale and customer loyalty can be enhanced as result.
A guarantee generates pride among employees. Through feedback from the guarantee, improvements can be made in the service that benefit customers as well as employees.
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A good guarantee forces the company to focus on its customer.

An effective guarantee sets clear standards for the organization. A good guarantee generates immediate and relevant feedback from customers.
When the guarantee is invoked there is an instant opportunity to recover.

Information generated through the guarantee can be tracked and integrated into continuous improvement efforts. Studies of the impact of service guarantees suggest that employee 89 morale and loyalty can be enhanced as result.
TYPES OF GUARANTEES
Satisfaction Versus Service Attribute Guarantees
Service guarantee can be unconditional satisfaction guarantee or service attribute guarantee Another type of service guarantee, combines the wide scope of the total satisfaction guarantee with specific performance standards.
Research suggests that this type of guarantee can be more effective than either of the above.
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TYPES OF GUARANTEES
External Versus Internal Guarantees

In this one part of the organization guarantees its services to another This is an effective way of aligning internal service operations
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CHARACTERISTICS OF EFFECTIVE GUARANTEES Unconditional
Meaningful
Easy to Understand and Communicate Easy to Invoke and Collect
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Service Failure
Dissatisfaction/ Negative Emotions
Complaint Action
No Complaint Action
Complain to Provider
Negative word of mouth
Third Party Action
Exit/Switch
Stay
Exit/Switch
Stay
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When to use (or not use) a guarantee
A guarantee is probably not the right strategy when:

1 Existing service quality in the company is poor 2 A guarantee does not fit the companys image 3 Service quality is truly Uncontrollable e.g. Training Session 4 Costs of the guarantee outweigh the benefit 5 Customers perceive little risk in the service
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SERVICE DEVELOPMENT & DESIGN

Challenges of Service Design
As services are difficult to describe and communicate.
When delivered over a long period complexity increases. As delivered by employees to customers, they are heterogeneous. These characteristics of services are heart of the challenge involved in designing services. 95

There are 4 risks of attempting to describe services in words alone. 1 Oversimplification To say that portfolio management means buying and selling of stock is like describing the space shuttle as Something that Flies. 2 Incompleteness In describing services, people (employees, managers, customers) tend to omit details or elements of the service with which they are not familiar.
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contd
There are 4 risks of attempting to describe services in words alone. 3 Subjectivity Any person describing a service inwords will be biased by personal experiences and degree of exposure to the service. 4 Biased Interpretation No two people will define Responsive, Quick or Flexible in exactly the same way.
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NEW SERVICE DEVELOPMENT

The fact that services are intangibles make it even more imperative for a new service development system to have 4 basic characteristics. (i) (ii) (iii) (iv) It must be objective, not subjective It must be precise, not vague It must be fact driven, not opinion driven It must be methodical, not philosophical
The intangibles process cannot be either defined precisely or that everyone knows what we mean. Neither of these explanations or defenses for imprecision in unjustifiable.
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If you do not actively participate in creating the future you want , you have no right to complain about the future you get.
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TYPES OF NEW SERVICES

Major Innovations: Are new services for the markets as yet undefined. E.g. First TV broadcast.
Start up Businesses: consists of new services for a market that is

already served by existing products that meet the same generic needs. E.g. On line Banking Transactions.
New Services for the Currently Served Markets: Represent

attempts to offer existing customers of the organization a service not previously available from the company. E.g. A Health Club offering nutrition classes, Airlines offering fax 100 service.
TYPES OF NEW SERVICES contd

Service Line Extensions:
Represents augmentation of the existing service line, such as a Restaurant adding new menu items, Airlines adding new routes.
Service Improvements: Represents perhaps the most common type of

service innovation.
E.g. Changes in features of the service as Extended Office hours in ICICI BANK.
Style Changes: Represent the most modest service innovations, although

they often are highly visible and can have a significant impact on the customers perceptions, emotions and attitudes. E.g. Changing the color, scheme of restaurant, changing logo, painting the aircraft. 101
SERVICE REDESIGN
There are 5 types of Service Redesign as potential ways of increasing customer benefits or reducing customers costs.
1 Self Service: One approach to redesign is to move the customer

into production mode rather than a passive, receiving mode. Redesigning the service process in this way increases benefits for the customer in terms of Personal Control, Accessibility & Timing. E.g. When companies offer their services via internet as in case of internet banking. 102
SERVICE REDESIGN contd.

2 Direct Service: Means bringing the service to the customer rather than
askinthe customer to come to provider. E.g. Delivering the service to the customer in his or her home or workplace. Restaurant food and dry-cleaning delivery to the office. Computer distance education and training services.
3 Pre Service: This type of redesign involves streamlining or improving the

activation of the service, focussing on front end processes. Making the front end of the service more efficient can dramatically change the customer experience during the actual service delivery. E.g. Express check in at a hotel, preadmission process at a hospital, prepayment 103 of tolls on highways.
SERVICE REDESIGN contd

4 Bundled Service: Grouping or bundling multiple
services together is another way to redesign current offerings. The benefit to the customer is in receiving great value, combined with convenience than they might have received by purchasing each service independently.
5 Physical Service: Physical redesign involves changing

the customers experience through the tangibles associated with the service or the physical surroundings of the 104 service.
The [Starbucks] Fix Is on

We have identified a third place. And I really believe that sets us apart. The third place is that place thats not
Its the place our customers come for refuge.

work or home.
Nancy Orsolini, District Manager
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CRM and B2B

B2B environment is a highly complex compared to B2C On the Internet, big businesses and small compete on a more equal footing. In other words, more and more companies need to look to their relationship with their customers to retain them.
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CRM and B2B contd

When a client could make his purchase at the click of a mouse, he naturally came to expect that his requirement would also be fulfilled with comparable speed and facility.
It was no longer tolerable for a response to take a few days everything now had to happen in hours.
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CRM and B2B contd.

CRM leverages the power of Internet Technologies. This helps reduce the frequency of human errors and minimize wastage. It has accelerated most manual business processes, which in a traditional setup would have taken months to accomplish.
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CRM and B2B contd.
Development cycles are much shorter and customers expect to be delivered information on demand, anytime, anywhere.
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CRM and B2B contd.

In the B2B environment, investing time and money on the few high value customers Rather than on the many low value ones. Customer value is based on the real cost and profitability of each customer.
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CRM and B2B contd.

IBM estimates that only 7% of the information available in corporate databases is used. This leaves 93% of the information untouched! Companies need more efficient tools to comb through their data warehouses and find the information that will give them a competitive edge.
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Customer Relationship Management tools work on two levels Operational & Analytical
At the front-office level it is called Operational CRM where the customer is directly in contact with the company. These interactions are referred to as touchpoints Inbound when the customer accesses the company support center or website. Outbound when a sales representative makes a sales call or e-mails a marketing message.
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Customer Relationship Management tools work on two levels Operational & Analytical Analytical CRM also known as back-office or strategic CRM
detects patterns from the various customer touchpoints and provides an analysis of the data to help customer service, sales and marketing departments to personalize communications with their customers.
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Customer Relationship Management
CRM improves opportunities for
Cross Selling and Up Selling,

that is, if you like this product, how about trying this one or that?
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CRM. Sales Force Automation (SFA)

CRM virtually has its beginnings in Sales Force Automation. Providing the sales force of a company with technology support in order to improve the efficiency of the selling process is called Sales Force Automation.
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Organizations which can benefit from SFA include those that have products / services that are technically complex have long selling cycles involve many people in the selling process
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Key benefits of SFA solutions are
Improvement in customer service by helping the sales force respond quickly & accurately
Improvement in sales force productivity Better management control and visibility of the sales process
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Integrated CRM tools have helped service organizations greatly improve efficiencies By integrating the web contact center with the call center. With the introduction of Internet banking and automated email, many banks web contact centers received on an average, 20,000 emails every month. Some 45 per cent of these are responded to automatically.
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Since SFA is also aimed at improving the customer experience when dealing with the organization, it is a key part of CRM.
SFA is beneficial for Organizations that sell complex products and services which are highly customizable. e.g. highly-engineered products such as EPBX systems, large computer servers, earth-moving equipment. Some service companies that undertake large consulting projects.
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Such companies frequently have a long, detailed selling process. This process does require the involvement of many participants, both from the seller and the customer. Often, external agencies such as subcontractors are also required to participate in the selling process. There is therefore a need to constantly exchange information & collaborate during the sales process.
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Technically complex products and services also need large amounts of information that has to be shared. Such information has to be maintained concurrent in the face of many revisions that take place. There are many options that customers can select depending upon their needs.
e.g. if a customer was to select a diesel engine for a mining application as compared to one that powers a generating set for a shop, the characteristics of both will be significantly different. 121

It is difficult for such organizations to quickly respond to customer needs as they have to deal with large amounts of technical information and involve many people in the response. Therefore, automation of such sales processes can yield significant benefits.
122

What are the benefits of implementing SFA systems?
The benefits fall under 3 main categories:

1 Improvement in customer service Speed Quality of Response
123

2 Improvement in sales force efficiency
Salespersons can handle many complex products.

Salesperson to remain current in their knowledge as they provide a lot of assistance and technical information.
New salespeople can be productive in no time.

124

3 Process improvement
The third area where SFA tools can help is in the area of management visibility and process control. For organizations that are geographically spread in many locations and have large sales forces, SFA systems can deliver much needed visibility to what is happening in the field and be better placed to handle customer and market needs. Early warnings and alerts are frequently provided 125 management information by SFA tools.
Components of SFA software solutions

Opportunity Management this solution helps sales
management establish a step-by-step process. The sales process can then be monitored and control to ensure that it is effective. Sales management also gets visibility to what is happening in the field enabling the organization to respond quickly to changing customer needs and/or competitive action. Such tools also facilitate collaborative large teams.
selling involving
126

Product catalogs these are very useful for
technical products that need lots of illustrations. Product catalogs are kept concurrent to ensure that the sales team and the customer have access to the latest information.
127

Needs analyzer / buying advisor this component
helps the sales person or the customer in the buying process by taking them to a guided, step-by-step process.
Solutions provide interactive, what-if scenarios and product comparisons so that the customer needs can be specified and understood more accurately.
128

Product Configurator this tool is very useful
when the products being sold are highly customizable.
It provides the product options that can be selected to meet different needs. For highly engineered products, this tool can help improve the technical accuracy of the quotation to the customer and reduce the lead-time taken for 129 responding to the customer

Pricing Engine for complex, multi-level pricing of
products with different business rules involving taxes and multiple currencies, pricing engines are very effective.
Such tools also provide for margin analysis and commission calculations.
130

Quotation and Proposal Generator for companies
that need to generate comprehensive technical and financial quotations and proposals. These tend to take a lot of time and effort from the sales people. By using the automated tool, the salesperson can spend more time on the actual customer needs rather than on elaborate (but required) paperwork. This is also very useful in the face of frequent changes in product information. 131
SUCCESS IN NUTSHELL
Hire people with a sense of humor. Quit pretending. Give yourself the freedom to be yourself. Train for skill. Hire for spirit & enthusiasm. Be religious religious about hiring right people. Do whatever it takes. Remember, there is very little traffic in the extra mile. Treat everyone with kindness & equal respect; you never know whom youre talking to.
132
133
134
Customer Service
Let us explore the business processes that occur once a customer has bought a product. The after sales process of most companies include: Delivery and installation Registration Warranty support & help desk Post-warranty maintenance support
135
Customer Service
Organizations that provide an integrated sales
and delivery process can give the customer an

overall satisfactory experience which then leads to retaining customers.
136
Customer Service
In recent years, call centers have gained popularity as costeffective avenues for selling and servicing customers. It has been estimated that 70 per cent of all business transactions are executed over the phone, making this the primary form of customer contact today.
137
Customer Service
Call centres play a very important role in managing the customers relationship with the organization. In several product companies the call center representative is the first contact that the customer makes with the organization and this form of customer service is extremely important in influencing the customers view of the organization.
138
Customer Service
There are several technology aids that are used to manage large call center operations. These include:
Automatic Call Distribution (ACD) Interactive Voice Response Systems (IVR) Computer Telephony Integration (CTI)
139
There is within our nature as human beings an inherent need to sing,
dance, love, laugh, mourn, tell stories & celebrate

140
SUCCESS IN NUTSHELL
Use celebrations to create memories. Have celebrations acknowledge whats important, what you value. Let celebrations give people the opportunity to say hello and good-bye. Use celebrations to build relationships. Celebrate to make the mundane fun and unusual. If youre going to celebrate, do it right .
141
"You don't know what you can get away with until you try."
You know the expression, "it's easier to
get forgiveness than permission."

Well,it's true. Good leaders don't wait for official blessing to try things out. They're prudent, not reckless.
142
"You don't know what you can get away with until you try. contd.
But they also realize a fact of life in most organizations: if you ask enough people for permission, you'll inevitably come up against someone who believes his job is to say
"no."
So the moral is, don't ask.

Less effective middle managers endorsed the sentiment, "If I haven't explicitly been told 'yes,' I can't do it, whereas the good ones believed, "If I haven't explicitly been told 'no,' I can." 143 There's a world of difference between these two points of view.
If you have an unhappy customer on Internet , he doesnt tell his six friends, he tells his 6000 friends.
- Jeff Bezos, President amazon.com
144
I think theres a world market for maybe five computers.

- Thomas Watson, IBM Chairman, 1943
145
The Difference between E-COMMERCE and E-BUSNESS

E-commerce primarily involves transactions that cross the firm boundaries. E-Business primarily concerns the application of digital technologies to business processes within the firm.
146
THE INTERNET AND WORLD WIDE WEB
Most people will not stay on a site if the page and its contents take more than 8 seconds to load. Sometimes WORLD WIDE WEB is referred as WORLD
WIDE WAIT
147
STAGES IN THE DEVELOPMENT OF THE INTERNET
Innovation 1961-1974
Institutionalization 1975-1995
Commercialization 1995
148
Unique Features of E-Commerce Technology E-Commerce Technology Dimension

Ubiquity - Internet/Web Technology
is available everywhere: at work, at home, and elsewhere via mobile devices anytime.
Business Significance
The market place is extended beyond traditional boundaries and is removed from a temporal and geographic location.
Marketspace is created;
shopping can take place anywhere. Customer convenience is enhanced and shopping costs are reduced.
Commerce is enabled across cultural and national boundaries seamlessly and without modification. Marketspace includes potentially billions of consumers and millions 149 of businesses worldwide.
Global Reach - The technology

reaches across national boundaries around the world.
Unique Features of E-Commerce Technology

E-Commerce Technology Dimension Business Significance
There is one set of technical media standards across the globe.
Universal Standards There is one set of standards, namely Internet Standards. text messages are possible.
Richness Video, audio and Video, audio and text messages are Interactivity The
technology works through interaction with the user.
integrated into a single marketing message and consuming experience
Consumers are engaged in a dialog that dynamically adjusts the experience to the individual & makes the consumer a coparticipant in the process of delivering goods to the market .
communication costs drop dramatically, while accuracy & timeliness improve greatly. Information becomes plentiful, 150 cheap & accurate.
Information Density The Information processing, storage &

technology reduces information costs and raises quality.
5 PRIMARY REVENUE MODELS

Revenue Model
Advertising
Revenue source
Fees from advertisers in exchange for advertisements Fees from subscribers in exchange for access to content or service Fees (commissions) for enabling or executing a transaction Sales of goods, information or services Fee for business referrals
Example
yahoo.com
Subscription
wsj.com,
consumersexports.org,
sportsline.com
Transaction Fee
Sales Affiliate
ebay.com, e-trade.com
amazon.com mypoints.com
151
eCRM
The incremental use of Internet Technologies to machinate key processes and leverage business has gradually led to the integration of eCRM forcing businesses to adapt and change accordingly or risk failure.
152
eCRM
eCRM is the forging of marketing, sales &
call center functions to disseminate current and

consistent information across all three functions to build a 360-degree view of the customer So as to offer highly personalized services and increase customer satisfaction and market share.
153
eCRM
Companies with CRM-enabled processes, effect highly personalized communication directed to customers individually or by household. Using sophisticated technology they develop individual profiles of customers, detect and monitor behavior and react to customer events in near real-time or soon after the event occurs.
154
! Contrasts
WAS IS Technology helps links parts of an The network is the organization organization Every department uses IS/IT Every department lives on the web Department = Compartment Access = Success Project teams have regular phone Project teams meet 365/24/60/60 conferences
We favor independence We savor interdependence

We are proud of being close to our We are proud at one with our customer customer We sell rigorously engineered product We sell information enabled awesome experience Here today here tomorrow Here today. reconfigured tomorrow Men in suit Women in charge
155
The Perfect Answer

Jill and Jack buy slacks in black
156
157
The Connection Proclivity in women starts early. When asked, How was school today? a girl usually tells her mother every detail of what happened, while a boy might grunt, Fine.
EVEolution
158
Women dont buy brands.
They join them.

EVEolution
159
Nothing is so contagious as enthusiasm.

Samuel Taylor Coleridge
160
When land was the scarce resource, nations battled over it. The same is happening now for
talented people.
Stan Davis & Christopher Meyer, futureWEALTH
161
Historically, smart people have always turned to where the money was. where the smart are. Today, money is turning to
people
162
You must the change you wish to see in the world.

Gandhi
163
be
THE GROWTH OF B2C E-COMMERCE

300
Revenue $ (Billions)
$ 270 billions
250 200 150 100 50 0 Revenue
19 95
19 97
19 99
20 01
20 03
Years
164
20 05
THE GROWTH OF B2B E-COMMERCE

6000
Revenue $ (Billions)
$ 5.4 trillion
5000 4000 3000 2000 1000 0 Revenue
19 97
19 99
20 01
20 03
Years
20 05
165
THE CRITICAL IMPORTANCE OF SERVICE EMPLOYEES

They are the SERVICE They are the ORGANIZATION in the customers eyes They are the BRANDS They are MARKETERS
166
The Service Profit Chain

Employee Retention External Service Value Revenue Growth
Internal Employee Service Satisfaction Quality
Customer satisfaction
Customer loyalty
Profitability
Employee Productivity
167
SUCCESS IN NUTSHELL
Lighten up: Dont take yourself so seriously. Associate with fun people
Be the first to find humor in tense moments.

Try to make someone smile or laugh every morning and every night. Laugh at yourself at least once a day!
168
Service Marketing System: (1) High Contact Service-e.g., Hotel

Service Marketing System
Service Delivery System Service Operations System
Interior & Exterior Facilities Other Customers
Other Contact Points

Advertising Sales Calls Market Research Surveys Billing / Statements Miscellaneous Mail, Phone Calls, Faxes, etc. Random Exposure to Facilities / Vehicles
Technical Core
Equipment
The Customer
Service People
Backstage (invisible)
Front Stage (visible)
Other Customers
Chance Encounters with Service Personnel Word of Mouth

169
Service Marketing System: (2) Low Contact Service-e.g., Credit Card

Service Marketing System
Service Delivery System Service Operations System Other Contact Points
Advertising Mail Technical Core Self Service Equipment Phone, Fax, Web site etc.
Backstage (invisible) Front Stage (visible)
170
The Customer
Market Research Surveys

Random Exposures Facilities, Personnel
Word of Mouth
Service as Theater
All the worlds a stage and all the men and women merely players. They have their exits and their entrances and each man in his time plays many parts
William Shakespeare As You Like It

171
Positioning Services in Competitive Markets

Search for Competitive Advantage in Services Requires Differentiation and Focus
Intensifying competition in service sector threatens firms with no distinctive competence and undifferentiated offerings
Slowing market growth in mature service industries means that only way for a firm to grow is to take share from competitors
Rather than attempting to compete in an entire market, firm must focus efforts on those customers it can serve best Must decide how many service offerings with what distinctive (and 172 desired) characteristics
Standing Apart from the Competition
A business must set itself apart from its competition. To be successful it must identify and promote itself as the best provider of attributes that are important to target customers
GEORGE S. DAY
173
The Boston Consulting Groups Growth-Share Matrix
174
The Strategic-Planning Gap
175
Ansoffs Product -Market Expansion Grid
176
Ansoffs Service-Market Expansion Grid

SERVICE OFFERINGS
Current Services
Current Markets MARKETS SERVED New Markets
Market Penetration
New Services
Service Development
Market Development
Diversification
177
Basic Focus Strategies for Services

BREADTH OF SERVICE OFFERINGS
Narrow Many
NUMBER OF MARKETS SERVED Service Focused
Wide
Unfocused (Everything for everyone)
Few
Fully Focused (Service and market focused)
Market Focused
Source: Robert Johnston 178
Service Design Involves Matching Marketing Concept with Operations Concept
Corporate Objectives and Resources

Marketing Assets
(Customer Base, Mkt. Knowledge, Implementation Skills, Brand Reput.)
Operating Assets
(Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure)
Service Marketing Concept

Benefits to customer from core/ supplementary elements, style, service level, accessibility User costs/outlays incurred Price/other monetary costs Time Mental and physical effort Neg. sensory experiences
Service Operations Concept

Nature of processes Geographic scope of ops Scheduling Facilities design/layout HR (numbers, skills) Leverage (partners, self-service) Task allocation: front/backstage staff; customers as co-producers
Service Delivery Process

179
Understanding the Components of the Augmented Service Product
180
Shostacks Molecular Model of a Total Market Entity Passenger Airline Service

Distribution Price
Service
frequency
Vehicle
Transport
In-flight service
Pre- and post-flight service

KEY
Food and drink
Tangible elements Intangible elements

Marketing Positioning (Weighted toward evidence) Source: Shostack
181
Core Products and Supplementary Services

Most firms offer customers a package of benefits:
core product (a good or a service) supplementary services that add value to the core In mature industries, core products often become commodities Supplementary services help to differentiate core products and create competitive advantage by:
facilitating use of the core service enhancing the value and appeal of the core
182
What Should Be the Core and Supplementary Elements of Our Service Product?
How is our core product defined and what supplementary elements currently augment this core?
What product benefits create the most value for customers?

Is our service package differentiated from the competition in ways that are meaningful to target customers? What are current levels of service on the core product and each of the supplementary elements?
Can we charge more for higher service levels on key attributes (e.g., faster response, better physical amenities, easier access, more staff, superior caliber personnel)? Alternatively, should we cut service levels and charge less?
183
Core and Supplementary Services in a Luxury Hotel (Offering Guests Much More than a Cheap Motel!)
Reservation Cashier Business Center A Bed for the Night in an Elegant Private Room with a Bathroom Valet Parking Reception Baggage Service
Room Service Wake-up Call T elephone
Cocktail Bar
Entertainment/ Sports / Exercise
Restaurant
184
What Happens, When, and in What Sequence? The Time Dimension in the Augmented Service Product
Reservation Parking Check in USE ROOM Get car Check out Phone USE GUESTROOM OVERNIGHT Porter Meal Pay TV Room service
Pre Visit
Time Frame of an Overnight Hotel Stay (real-time service use)

185
The Flower of Service: Categorizing Supplementary Services

Information Payment Billing
Core
Consultation Order-Taking
Exceptions
KEY:
Hospitality Safekeeping
186
Facilitating elements Enhancing elements
Facilitating Services - Information
Core
Customers often require information about how to obtain and use a product or service. They may also need reminders and documentation
187
Facilitating Services - Order-Taking
Many goods and services must be ordered or Reserved in advance.

Core
Customers need to know what is available and may want to secure commitment to delivery
188
Facilitating Services - Billing

How much do I owe you?
Core
Customers deserve clear, accurate and intelligible bills and statements
189
Facilitating Services - Payment
Core
Customers may pay faster and more cheerfully if you make transactions simple and convenient for them
190
Enhancing Services - Consultation
Core
Value can be added to goods and services by offering advice and consultation tailored to each customers needs and situation
191
Enhancing Services - Hospitality

Customers who invest time and effort in visiting a business and using its services deserve to be treated as welcome guests (after all, marketing invited them there!)
192
Core
Enhancing Services - Safekeeping

Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site. They may also want delivery and after-sales services for goods that they purchase or rent
193
Core
Enhancing Services - Exceptions
Core
Customers appreciate some flexibility in a business when they make special requests.
They expect it when not everything goes according to plan
194
ALIGNING STRATEGY, SERVICE DESIGN, AND STANDARDS
195
Provider GAP
CUSTOMER
Expected Service
GAP 1 Company Perceptions of Consumer Expectations
COMPANY
Part 2 Opener
196
Provider GAP 2
CUSTOMER
COMPANY
Customer-Driven Service Designs and Standards

GAP 2
Part 3 Opener
Company Perceptions of Consumer Expectations

197
Service Development and Design

Challenges of Service Design New Service Development Types of New Services Service Redesign Stages in New Service Development Service Blueprinting Quality Function Deployment High-Performance Service
198
New Service Development Process

Business Strategy Development or Review New Service Strategy Development
Front End Planning
Idea Generation Screen ideas against new service strategy Concept Development and Evaluation Test concept with customers and employees Business Analysis Test for profitability and feasibility Service Development and Testing Conduct service prototype test
Implementation
Market Testing
Test service and other marketing-mix elements Commercialization Postintroduction Evaluation 199
Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.
Service Blueprinting
A service blueprint is a picture or map that accurately portrays the service system so that the different people involved in providing it
can understand and deal with it objectively

regardless of their roles or their individual
point of view.
200
Service Mapping/Blueprinting
A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customers point of view.
Process
Service Mapping
Points of Contact Evidence
201
Service Blueprint Components

CUSTOMER ACTIONS line of interaction ONSTAGE CONTACT EMPLOYEE ACTIONS line of visibility BACKSTAGE CONTACT EMPLOYEE ACTIONS line of internal interaction SUPPORT PROCESSES
202
Service Blueprint Components
203
Service Blueprinting: Key Components

1. Define standards for front stage activities
2. Specify physical evidence

3. Identify principal customer actions 4. ------------line of interaction (customers and front stage personnel)--------
5. Front stage actions by customer-contact personnel

6. ------------line of visibility (between front stage and backstage)-------------7. Backstage actions by customer contact personnel
8. Support processes involving other service personnel

9. Support processes involving IT
Where appropriate, show fail points and risk of excessive waits
204
Simplified Example: Blueprinting a Hotel Visit

(extract only)
Physical Evidence Stage
Hotel exterior, lobby, employees, key Make Customer reservation Actions Employee Actions Face-to-face Phone Contact Rep. records, confirms Valet Parks Car Enter data Register guest data
Elevator, corridor, room, bellhop Go to room
Arrive, valet park

Doorman greets, valet takes car
Check-in at reception
Receptionist verifies, gives key to room
Line of Interaction Front Line of Visibility Backstage
Make up Room
205
Express Mail Delivery Service

CUSTOMER PHYSICAL EVIDENCE Truck Packaging Forms Hand-held Computer Uniform Truck Packaging Forms Hand-held Computer Uniform
Customer Calls
Customer Gives Package
Receive Package
CONTACT PERSON (On Stage) (Back Stage)
Driver Picks Up Pkg.
Deliver Package
Customer Service Order
SUPPORT PROCESS
Dispatch Driver
Airport Receives & Loads
Fly to Sort Center Load on Airplane Sort Packages
Fly to Destination
Unload & Sort
Load On Truck
206
Overnight Hotel Stay

Hotel Exterior Parking Cart for Desk Elevators Cart for Bags Registration Hallways Bags Papers Room Lobby Key
Give Bags Check in to Bellperson Go to Room Receive Bags
Room Amenities Bath
Menu
Delivery Food Tray Food Appearance
CONTACT PERSON SUPPORT PROCESS(Back Stage) (On Stage) CUSTOMER
Bill Desk Lobby Hotel Exterior Parking

Check out and Leave
PHYSICAL EVIDENCE
Arrive at Hotel
Sleep Shower
Call Room Service
Receive Food
Eat
Greet and Process Take Registration Bags
Deliver Bags
Deliver Food
Process Check Out
Take Bags to Room
Take Food Order
Registration System
Prepare Food
Registration System
207
Building a Service Blueprint
Step 1
Identify the process to be blueprinted.
Step 2
Identify the customer or customer segment.
Step 3
Map the process from the customers point of view.
Step 4
Map contact employee actions, onstage and backstage.
Step 5
Link customer and contact person activities to needed support functions.
Step 6
Add evidence of service at each customer action step.
215
Service Blueprinting Steps

1. Identify processes
2. Isolate fail points
3. Establish a time frame
4. Analyze profitability
216
Application of Service Blueprints

New Service Development
concept development market testing
Supporting a Zero Defects Culture

managing reliability identifying empowerment issues
Service Recovery Strategies

identifying service problems conducting root cause analysis modifying processes
Blueprints Can Be Used By:

Service Marketers
creating realistic customer expectations
service system design promotion
Human Resources
empowering the human element
job descriptions selection criteria appraisal systems
Operations Management
rendering the service as promised
managing fail points training systems quality control
System Technology
providing necessary tools:
system specifications personal preference databases
Degree of Interaction & Customization of Services

CUSTOMIZATION
Standardized
Service Factory
Customized
Service Shops
Hospitals Auto repair Other repair services
Capital Intensive
DEGREE OF LABOR INTENSITY
Airlines Trucking Hotels

Resorts & Recreations
Mass service
Labor Intensive
Professional Retailing/Warehousing Services Doctors Schools Lawyers Retail aspects of Accountants Commercial Banking
Architects
Source: Robert Johnston 219
Creating Services as Substitutes for Owning and/or Using Goods
Own a Physical Good
Rent the Use of a Physical Good

Rent car and drive it
Rent word processor and type
Perform the Work Oneself

Hire Someone to Do the Work
Drive own car Type on own word processor
Hire chauffeur to drive car Hire typist to use word processor
Hire a taxi or limousine Send work to secretarial service
220
CUSTOMER DEFINED SERVICE STANDARDS Once marketers understand what customers expect
Critical Challenge is using this knowledge to set service quality standards and goals for the organization
Difficulty in Setting Standards to match or exceed customer Expectations is because it requires that the
Marketing & Operations within a company work together. ( Also known as Functional Integration)
221
Factors Necessary for Appropriate Service Standards

The translation of Customer Expectations-Service Quality Standard Degree to which tasks and behaviors performed can be
Standardized or Routinized Some managers feel that services cannot be standardized

As standardizing the tasks is perceived as being impersonal, inadequate and not in customers best interest. It is also inconsistent with employee empowerment- they feel controlled Services are too intangible to be standardized (This leads to vague & loose standard setting with little or no measurement or feedback.)
222
Factors Necessary for Appropriate Service Standards In reality many service tasks are routine specific rules and standards can be fairly established and effectively executed. Employees may welcome how to perform actions most efficiently : It frees them to use their ingenuity in the more personal & individual aspects of their jobs.
223
Factors Necessary for Appropriate Service Standards Even in Highly Customized Services Many aspects of Service can be Routinized Dentist & Physician - Checking patients in, weighing patients, billing patients, collecting patients & taking routine measurements. More time of the dentist & physician can be spent on the expert services of diagnosis or patient care
224
Factors Necessary for Appropriate Service Standards
Standardization can take 3 forms:

1 Substitution of technology for personal contact & human effort Improvement in work methods Combination of these two methods
2 3
225
Factors Necessary for Appropriate Service Standards Standardizing whether accomplished by technology or by improvements in work processes, reduces
GAP 2
Both technology & improved work processes structure important elements of service provision and also facilitate goal setting
226
Customer Not Company Defined Standards

Company Defined Established to reach internal company goals for productivity, efficiency, cost, or technical quality. To close GAP 2 standards must be based on Customer Requirements and Expectations rather than just on internal company goals
Instead company should set Customer-Defined StandardsOperational standards based on pivotal customer requirements that are visible to & measured by customers
227
Customer-Defined Service Standards
1. 2. 3. 4. 5. 6.
Hard Customer-Defined Standards Soft Customer-Defined Standards One-Time Fixes Building Blocks: The Service Encounter Sequence Expressing Customer Requirements as Specific Behaviors and Action Measurements of Behavior and Actions
228
Process For Developing Customer-Defined Standards

1. Identify Existing or Desired Service Encounter 2. Translate Customer expectations into Behaviors / Actions 3. Select Behaviors/Actions for Standards
Measured by audits or operating data
4. Set Hard or Soft Standards

Hard
5. Develop Feedback Mechanisms

6. Establish measures against standards 7. Track Measures Against Standards
Soft
Measured by transaction based surveys
8. Provide Feedback about Performance to Employees 9. Periodically Update Target Levels and Measures
229
Marketing Information System

Marketing Information System is defined as an assembly of inter-related information subsystems: receiving, processing and disseminating information on a continued basis to help make marketing decision.
230
THE SUBSYSTEMS OF MARKETING INFORMATION

Subsystem Internal Reporting System Information Internal reports as order, sales, deliveries, inventory, credit sales etc. It is data of events occurred and results obtained. Information about relevant events or developments external to the firm.
The sources are newspapers, magazines, journal and other publications, conferences, exhibitions, meetings etc.
Marketing Intelligence System
Marketing Research System
Systematic investigation of information about a phenomenon specific to marketing situation. Desk or field research own research or through agency.
Decision Support System
A coordinated set of models and procedures with supporting computer software & hardware. 231
Market Research
Type of Research Primary Research Objectives
Qualitative/Q uantitative Monetary Time Frequency
Complaint solicitation
To identify/attend to dissatisfied customers

To identify common service failure points To identify best practices at transaction level To identify customers requirements as input for qualitative studies To identify common service failure points To identify systemic strengths and weaknesses in customer-contact services
Qualita tive
Low
Low
Continu ous
Critical incident studies
Qualita tive
Low
Mod Periodic erate
232
Market Research contd ..

Requirements research
To identify customer requirements as input for qualitative research
Qualita tive
Moder ate
Mode rate Low
Annual
Relationship surveys and SERVQUAL surveys
To monitor and track service Quantit Low performance ative To assess overall company performance compared with that of competition To determine the links between satisfaction and behavioral intentions To assess gaps between customer expectations and perceptions
Contin uous
233

Qualitative/ Quantitative Monetary Time Frequency
Trailer calls
To obtain immediate feedback Quantit on performance of service ative transactions To measure effectiveness of changes in service delivery To assess service performance of individuals and teams To use as input for process improvements To identify common service failure points
Low
Low
Continuo us
Service expectation meetings and reviews
To create dialogue with Qualitat Modera Mode important customers ive te rate To identify what individual large customers expect and then to assure that it is delivered To close the loop with important customers
Annual
234

Type of Research
Process checkpoint evaluations
Primary Research Objectives
Qualitative/ Quantitative
Monetary
Time
Frequency
To determine customer perceptions of long term professional services during service provision To identify service problems and solve them early in the service relationship
Qualita Moder tive ate
Mode Periodic rate
Market oriented ethnography
To research customers in Qualita Moder natural settings tive ate To study customers from cultures other than your home country
High
Periodic
235

Qualitative/ Quantitative Monetary Time Frequency
Mystery shopping
To measure individual employee performance for evaluation , recognition and rewards To identify systemic strengths and weaknesses in customer-contact services To monitor changing customer expectations To provide a forum for customers to suggest and evaluate new service ideas
Quanti Low tative
Low
Quarterl y
Customer panels
Qualita Moder Mode Continuo tive ate rate us
Lost customer To identify reasons for research customer defection
Qualita Low tive
Low
Continuo us
236

Future To forecast future expectations expectations of research customers
Qualitat High ive
High Periodic
To develop and test new service ideas

Database marketing research Quantit High To identify the individual requirements ative of customers using information technology and database information High Continuous
237
Provider Gap 3
CUSTOMER
Service Delivery
COMPANY
Service Performance Gap Customer-Driven Service Designs and Standards
238
Employees Roles In Service Industry
One of the main clues to corporate excellence has come to be incidents of unusual effort on the part of apparently ORDINARY EMPLOYEES.
239
The Critical Importance of Service Employees

They are the service.
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
The Services Marketing Triangle

Company (Management)
Internal Marketing
Enabling the promise
External Marketing
Making the promise
Employees
Interactive Marketing
Delivering the promise
Customers
243
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
Services Marketing Triangle Applications Exercise

Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? How is each type of marketing being carried out currently? Are the three sides of the triangle well aligned? Are there specific challenges or barriers in any of the three areas? 244
Ways to Use the Services Marketing Triangle

Overall Strategic Assessment
How is the service organization doing on all three sides of the triangle? Where are the weaknesses? What are the strengths?
Specific Service Implementation

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

245
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. 246
Not everything that counts can be counted , and not everything that can be counted , counts. -Albert Einstein
247
"People will forget what

you
said, did,
they will even forget what

you
but they will never forget what you made them
Feel
- Maya Angelou
248
Team
When people work really hard for
something they believe in, a special bond inevitably develops
between them.
249
Think Like An Owner

Nonowners are more apt to worry
about how their actions are being

perceived by their superiors. Owners focus on the business results of their actions, regardless of who is watching.
250
Success In a Nutshell
Hire people with a sense of humor. Quit pretending. Give yourself the freedom to be yourself. Train for skill. Hire for spirit and enthusiasm. Treat family members as best friends; dont take them for granted. Treat everyone with kindness and equal respect; you 251 never know whom youre talking.
Southwest Flight Attendants Make Flying Fun
252
Service Employees
Who are they?
boundary spanners
What are these jobs like?

emotional labor many sources of potential conflict
person/role organization/client interclient
quality/productivity tradeoffs
Boundary Spanners Interact with Both Internal and External Constituents

External Environment
Internal Environment
254
Boundary-Spanning Workers Juggle Many Issues

Person versus role
Organization versus client Client versus client
255
Person/Role Conflict
This conflict arises when what they are asked to do things that are quite different from their personalities.
256
Organization/Client Conflict
Front line executives have two bosses:

the organization & the individual customer The conflict may arise when the employee has to make a difficult choice between the customer, the rules & satisfaction for the customer
257
Interclient Conflict
Employee
Serving customers in turn
Serving many customers simultaneously
258
Quality/Productivity Trade-Offs
Front-line service employees have to both :

Effective & Efficient They are expected to deliver satisfying service to customers and at the same time have to be cost effective & productive .
259
Human Resource Strategies for Delivering Service Quality through People

Compete for the best people Measure and reward strong service performers Hire for service competencies and service inclination Be the preferred employer Train for technical and interactive skills
Hire the right people
Treat employees as customers
Retain the best people
CustomerOriented Service Delivery
Develop people to deliver service quality
Empower employees
Include employees in the companys vision Develop service-oriented internal processes
Provide needed support systems
Promote teamwork
Provide supportive technology and equipment
Measure internal service quality
260
Service Culture
Corporate culture is defined as

the pattern of shared values and beliefs that give the members of an organization meaning, and provide them with the rules for behavior in the organization.
261
Benefits:
Empowerment
Drawbacks:
potentially greater dollar investment in selection and training higher labor costs potentially slower or inconsistent service delivery may violate customers perceptions of fair play employees may give away the store or make bad decisions
quicker responses to customer needs
quicker responses to dissatisfied customers

employees feel better about their jobs and themselves employees tend to interact with warmth/enthusiasm empowered employees are a great source of ideas great word-of-mouth advertising from customers
Traditional Organizational Chart

Manager
Supervisor
Supervisor
Front-line Employee
Front-line Employee
Front-line Employee
Front-line Employee
Front-line Employee
Front-line Employee
Front-line Employee
Front-line Employee
Customers
263
Customer-Focused Organizational Chart
Customers
Front-line Employee Front-line Employee Front-line Employee Front-line Employee
Front-line Employee Front-line Employee Front-line Employee Front-line Employee
Supervisor
Supervisor
Manager
264
Customers Roles in Service Delivery

Levels of Customer Participation across Different Services
Low: Consumer Presence Required during Service delivery Products are standardized . Service is provided regardless of any individual purchase. Moderate : Consumer Inputs Required during Service Creation Client inputs customize a standard service. Provision for service requires customer purchase. High : Customer Cocreates the Service Product Active client participation guides the customized service. Service cannot be created apart from the customers purchase and active participation Customer inputs are mandatory and cocreate the outcome.
265
Payment may be the Customer inputs only required customer (information, materials) input. are necessary for an adequate outcome, but the service firm provides the service.
Customers Roles in Service Delivery contd.

Levels of Customer Participation across Different Services
End Consumer Examples Airline travel Motel stay Fast-food restaurant Business-to-Business Customers examples Haircut Marriage counseling Annual physical test Personal training Full-service restaurant Weight reduction program Major illness or surgery
Uniform cleaning service Pest Control Interior greenery maintenance service
Agency-created advertising campaign Payroll service Freight transportation
Management consulting Executive management seminar Installation of computer network

266
The Importance of Customers in Service Delivery

Customer Receiving the Service:
Inputs could include

(a) Information (b) Effort (c) Physical possession Other Customers:
Other customers can either enhance or detract from customer satisfaction and perceptions of Quality.
267
Customers Role
Customers as Productive Process
Customers as Contributors to Service Quality and Satisfaction Customers as Competitors
268
Customers as Productive Process
Service customers have been referred to as partial employees of the organization.
If customers contribute effort, time, or other resources to the service production process, they should be considered as part of the organization.
269
Customers as Contributors to Service Quality and Satisfaction
Effective customer participation can increase the likelihood that needs are met and that the benefits the customer seeks are actually attained.
e.g. students, health care, personal fitness, weight loss.
270
Customers as Competitors
A final role played by service customers is that of potential competitor. Whether to produce a service for themselves (internal exchange) for example, child care, home maintenance , car repair or have someone else provide the service for them (external exchange) is common dilemma for consumers. 271
Customers as Competitors contd

Whether a household or a firm produce a particular service for itself or contract externally for the service depends on a variety of factors: Expertise Capacity Resource Capacity Time Capacity Economic Rewards Psychic Rewards Trust Control
272
Strategies for Enhancing Customer Participation
Define Customers Jobs

Recruit, Educate and reward Customers Manage the Customer Mix
273
Define Customers Jobs
Helping Oneself Helping Others Promoting the Company Individual Differences: Not Everybody Wants to Participate
274
Recruit, Educate and Reward Customers

Recruit the Right Customers Educate and train Customers to Perform Effectively Reward Customers for Their Contributions Avoid Negative Outcomes of Inappropriate Customer Participation
275
Manage the Customer Mix

The Process of managing multiple and sometimes conflicting segments is known as Compatibility Management
276
Managing Demand and Capacity
277

Relating Demand to Capacity: Four Key Concepts
Excess demand: too much demand relative to capacity at a given time
Excess capacity: too much capacity relative to demand at a given time

Maximum capacity: upper limit to a firms ability to meet demand at a given time Optimum capacity: point beyond which service quality 278 declines as more customers are serviced
Variations in Demand Relative to Capacity

VOLUME DEMANDED Demand exceeds capacity (business is lost)
CAPACITY UTILIZED Maximum Available Capacity Optimum Capacity (Demand and Supply Well Balanced Demand exceeds optimum capacity (quality declines)
Low Utilization (May Send Bad Signals)
Excess capacity (wasted resources)

TIME CYCLE 1
TIME CYCLE 2
279
To identify effective strategies for managing supply and demand fluctuations,

an organization needs a clear understanding of the constraints on its capacity and the underlying demand patterns.
280
Understanding Capacity Constraints

Nature of Constraint
Time
Type of Service
Legal , Consulting ,Accounting ,Medical
Labor
Law firm, Accounting firm, Consulting firm, Health clinic
Equipment
Delivery services, Telecommunications ,Utilities ,Health club Hotels, Restaurants, Hospitals, Airlines, Schools, Theatres Churches 281
Facilities
Understanding Demand Patterns

Charting Demand Patterns Predictable Cycles Random Demand Fluctuations Demand Patterns by Market Segments
282

Shifting Demand to Match Capacity :
Vary the Service Offering Communicate with Customers Modify Timing and Location of Service delivery Differentiate on Price
283
Understanding Demand Patterns Flexing Capacity to Meet Demand:

Stretch Existing Capacity
Stretch Time Stretch Labor Stretch Facilities Stretch Equipment
284

Flexing Capacity to Meet Demand:
Align Capacity with Demand Fluctuation
Use Part-Time Employees Outsourcing Rent or Share Facilities or Equipment Schedule Downtime during Periods of Low Demand Cross-Train Employees Modify or Move Facilities and Equipment
285
Yield Management
Yield = Actual Revenue/Potential Revenue
where Actual Revenue = Actual Capacity x Average Actual Price Potential Revenue = Total Capacity x Maximum Price
286
Pricing Of Services
287
Three Key Ways Service Prices Are Different For Consumers

1 Customer knowledge of Service Prices 2 The Role of Nonmonetary Costs 3 Price as an Indicator of Service Quality
288
Customer Knowledge of Service Prices
1 2 3 4 5
Service heterogeneity limits knowledge Providers are unwilling to estimate prices Individual customer needs vary Price information is overwhelming in services Prices are not visible
289
The Role of Nonmonetary Costs
1 2 3 4
Time Costs Search Costs Convenience Costs Psychological Costs
290
Price as an Indicator of Service Quality
Customers depend on price as a cue to quality and because price sets expectations of quality, service prices must be determined carefully.
291
Approaches to Pricing Services

Cost-based
292
Cost-Based Pricing
1 Costs are difficult to trace.
2 Labor is more difficult to price than materials. 3 Cost may not equal value.
293
Cost-Based Pricing
1 Costs are difficult to trace.
2 Labor is more difficult to price than materials. 3 Cost may not equal value.
294
Competition-Based Pricing
1 Small firms may charge too little to be viable.
2 Heterogeneity of services limits comparability. 3 Prices may not reflect customer value.
295
Demand-Based Pricing
Monetary price must be adjusted to reflect the value of nonmonetary costs. Information on service costs is less available to customers, hence price may not be a central factor.
296
Four Customer Definitions of Value

Value is everything I want in a service.
Value is low price.
Value is the quality I get for the price I pay.
Value is all that I get for all that I give.

297
Value is Low Price

For dry cleaning : Value means the lowest price. For carpet steam cleaning: Value is price-which is on sale. For a fast-food restaurant: When I can use coupons, I feel that the service is a value. For airline travel: Value is when airline tickets are discounted.
298
Value Is Whatever I Want in a Service

For an MBA degree: Value is the very best education I can get. For Medical services: Value is high quality. For a social club: Value is what makes me look good to my friends and family. For a rock or country music concert: Value is the best performance.
299
Value Is the Quality I Get for the Price I Pay
For hotel vacation : Value is price first and quality second. For hotel for business travel : Value is the lowest price for a quality brand. For a computer service contract : Value is the same as quality.
300
Value is What I Get for What I Give
For a housekeeping service : Value is how many rooms I can get cleaned for what the price is. For a hairstylist : Value is what I pay in cost and time for the look I get. For executive education : Value is getting a good educational experience in the shortest time possible.
301
Value is What I Get for What I Give
For a housekeeping service : Value is how many rooms I can get cleaned for what the price is. For a hairstylist : Value is what I pay in cost and time for the look I get. For executive education : Value is getting a good educational experience in the shortest time possible.
302
What Makes Service Pricing Strategy Different (and Difficult)? No ownership of services --hard for firms to calculate financial costs of creating an intangible performance Variability of inputs and outputs --how can firms define a unit of service and establish basis for pricing?
Many services hard for customers to evaluate --what are they getting in return for their money?
Importance of time factor --same service may have more value to customers when delivered faster Delivery through physical or electronic channels --may 303 create differences in perceived value
Objectives of Pricing Strategies

Revenue and profit objectives
Seek profit Cover costs
Patronage and user base-related objectives

Build demand Build a user base
304
The Pricing Tripod

Pricing Strategy
Competition
Costs
Value to customer
305
Three Main Approaches to Pricing

Cost-Based Pricing
Set prices relative to financial costs (problem: defining costs) Competition-Based Pricing Monitor competitors pricing strategy (especially if service lacks differentiation) Who is the price leader? (one firm sets the pace) Value-Based Relate price to value perceived by customer
306
Activity-Based Costing: Relating Activities to the Resources They Consume

Managers need to see costs as an integral part of a firms effort to create value for customers When looking at prices, customers care about value to themselves, not what production costs the firm Traditional cost accounting emphasizes expense categories, with arbitrary allocation of overheads ABC management systems examine activities needed to create and deliver service (do they add value?) Must link resource expenses to:
variety of products produced complexity of products demands made by individual customers

307
Net Value = (Benefits Outlays)
Effort Time
Perceived Benefits
Perceived Outlays
308
Enhancing Gross Value

Pricing Strategies to Reduce Uncertainty
service guarantees benefit-driven (pricing that aspect of service that creates value) flat rate (quoting a fixed price in advance)
Relationship Pricing
non-price incentives discounts for volume purchases discounts for purchasing multiple services
Low-cost Leadership
Convince customers not to equate price with quality Must keep economic costs low to ensure profitability at low price
309
Paying for Service: The Customers Perspective

Customer expenditures on service comprise both financial and non-financial outlays Financial costs: price of purchasing service expenses associated with search, purchase activity, usage
Time expenditures
Physical effort (e.g., fatigue, discomfort) Psychological burdens (mental effort, negative feelings) Negative sensory burdens (unpleasant sensations affecting any of the five senses)
310
Determining the Total Costs of a Service to the Consumer

Price Related Monetary Costs Time Costs Purchase and Use Costs
Search Costs
Operating Costs
Incidental Expenses
Physical Costs
Psychological Costs Sensory Costs Necessary follow-up Problem solving
After Costs
311
Trading off Monetary and Non- Monetary Costs

Which clinic would you patronize if you needed a chest x-ray (assuming all three clinics offer good quality) ? Clinic A
Price $45 Located 1 hour away by car or transit Next available appointment is in 3 weeks Hours: Monday Friday, 9am 5pm Estimated wait at clinic is about 2 hours
Clinic B
Price $85 Located 15 min away by car or transit Next available appointment is in 1 week Hours: Monday Friday, 8am 10pm Estimated wait at clinic is about 30 45 minutes
Clinic C
Price $125 Located next to your office or college Next appointment is in 1 day Hours: Mo Sat, 8am 10pm By appointment estimated wait at clinic is about 0 to 15 minutes
312
Increasing Net Value by Reducing Non-financial Costs of Service Reduce time costs of service at each stage Minimize unwanted psychological costs of service Eliminate unwanted physical costs of service Decrease unpleasant sensory costs of service
313
Revenue Management: Maximizing Revenue from Available Capacity at a Given Time

Based on price customization - charging different customers (value segments) different prices for same product Useful in dynamic markets where demand can be divided into different price buckets according to price sensitivity
Requires rate fences to prevent customers in one value segment from purchasing more cheaply than willing to pay
RM uses mathematical models to examine historical data and real time information to determine what prices to charge within each price bucket how many service units) to allocate to each bucket
314
The Strategic Levers of Revenue (Yield) Management

Price Fixed Duration
Quadrant 1:
Variable
Quadrant 2:
Hotel Rooms Airline Seats Rental Cars Cruise Lines
Predictable
Movies Stadiums/Arenas Function Space
Quadrant 3:
Unpredictable Restaurants Golf Courses
Quadrant 4:
Continuing Care Hospitals
315
Dealing with Common Customer Conflicts Arising from Revenue Customer conflict can arise from: Marketing tools to reduce customer conflicts: Management Perceived Unfairness & Perceived Fenced Pricing
Financial Risk Associated with Multi-Tier Pricing and Selective Inventory Availability
Bundling Categorising High Published Price Well designed Customer Recovery
Unfulfilled Inventory Commitment Unfulfilled Demand of Regular
Programme for Oversale

Preferred Availability Policies Offer Lower Displacement Cost
Customers Unfulfilled Price Expectation of Group Customers Change in the Nature of the Service
Alternatives Physical Segregation & Perceptible Extra Service Set Optimal Capacity Utilisation Level
316
Price Elasticity
Price per unit of service
Di De
De Di
Quantity of Units Demanded

De : Demand is price elastic. Small changes in price lead to big changes in demand. Di : Demand for service is price inelastic. Big changes have little impact on demand.
317
Key Categories of Rate Fences

Rate Fences Examples Physical (Product-related) Fences Basic Product Class of travel (Business/Economy class) Size and furnishing of a hotel room Seat location in a theatre Amenities Free breakfast at a hotel, airport pick up etc. Free golf cart at a golf course Service Level Priority wait listing Increase in baggage allowances Dedicated service hotlines Dedicated account management team
318

Non Physical Fences Transaction Characteristics Time of booking or Requirements for advance purchase reservation Must pay full fare two weeks before departure
Location of Passengers booking air tickets for an booking or identical route in different countries reservation are charged different prices Flexibility of ticket Fees/penalties for canceling or usage changing a reservation (up to loss of entire ticket price) Non refundable reservation fees
319

Non Physical Fences (contd) Consumption Characteristics Time or duration of use Early bird special in restaurant before 6pm Must stay over on Sat for airline, hotel Must stay at least five days Price depends on departure location, esp in international travel Prices vary by location (between cities, city centre versus edges of city)
320
Location of consumption

Non Physical Fences (contd) Buyer Characteristics Frequency or Member of certain loyalty-tier volume of with the firm get priority pricing, consumption discounts or loyalty benefits Group Child, student, senior citizen membership discounts Affiliation with certain groups (e.g. Alumni) Size of customer Group discounts based on size of group group
321
Relating Price Buckets and Fences to the Demand Curve

Price per Seat
First Class Full Fare Economy (No Restrictions) One-Week Advance Purchase One-Week Advance Purchase, Saturday Night Stayover 3-Week Advance Purchase, Saturday Night Stayover 3-Week Adv. Prchs, Sat. Night Stay., $100 for Changes 3-Wk Adv. Prchs, Sat. Night Stay, No changes/refunds Late Sales through Consolidators/ Internet, no refunds
Capacity of 1st-class Cabin
Capacity of Aircraft
No. of Seats Demanded

322
Ethical Concerns in Pricing

Customers are vulnerable when service is hard to evaluate or they dont observe work Many services have complex pricing schedules
hard to understand difficult to calculate full costs in advance of service
Unfairness and misrepresentation in price promotions

misleading advertising hidden charges
Too many rules and regulations

customers feel constrained, exploited customers unfairly penalized when plans change
323
Pricing Issues: Putting Strategy into Practice

How much to charge? What basis for pricing? Who should collect payment? Where should payment be made? When should payment be made?
How should payment be made?

How to communicate prices?
324
Consumption follows the Timing of Payments

Frequency of Health Club Visits Annual Payment Plan Quarterly Payment Plan
Frequency of Health Club Visits
Semiannual Payment Plan
Monthly Payment Plan
Time Line
Source: John Gourville and Dilip Soman, Pricing and the Psychology of Consumption, Harvard Business Review, September 2002, 90-96.
Time Line
325

4th Sem Service MKTG

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Defining the Essence of a Service

An act or performance offered by one party to another

An economic activity that does not result in ownership

physical possessions intangible assets

Changing Structure of Employment as Economic Development Evolves

Time, per Capita Income

Source: IMF, 1997

Tangible Dominant Advertising Airlines Management Consulting Insurance

Differences Between Goods & Services

Simultaneous Production and Consumption

Differences between Goods and Services

SERVICES RESULTING IMPLICATION

Differences between Goods and Services

Differences between Goods and Services

Differences between Goods and Services

Non Perishable Perishable

Expanded Marketing Mix for Services

Price level Terms Differentiation Allowances

Outlet location Sales promotion Transportation Publicity Storage

Expanded Marketing Mix for Services

Expanded Marketing Mix for Services

The Services Marketing Triangle

The Services Triangle &Technology

Services are Different

Production separate from consumption

Four Categories of Services Employing Different Underlying Processes

Who or What is the Direct Recipient of the Service?

Mental Stimulus Processing

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

How Product Attributes Affect Ease of Evaluation

High in search attributes

High in experience High in credence attributes attributes

Consumer Decision Making

Post Purchase Evaluation

CONSUMER DECISION-MAKING PROCESS IN SERVICES

PURCHASE & CONSUMPTION

POST PURCHASE EVALUATION

Services - personal sources are used.

EVALUATION OF SERVICE ALTERNATIVES

Evoked set of services is smaller as compared to goods.

EVALUATION OF SERVICE ALTERNATIVES

SERVICE PURCHASE AND CONSUMPTION Emotion and Mood

SERVICE PURCHASE AND CONSUMPTION Service Roles and Scripts

SERVICE PURCHASE AND CONSUMPTION

The Compatibility of Service Customers

POST PURCHASE EVALUATION

POST PURCHASE EVALUATION

they adopt innovations in goods.)

POST PURCHASE EVALUATION

Culture would include:

Levels of Customer Contact with Service Organizations

Emphasizes encounters with service personnel

Tel ephone Ba nk ing

Ca r Repa i r I nsur a nce

Subway Internet Banking Mail Based Repairs

Emphasizes encounters with equipment

GAPS MODEL OF SERVICE QUALITY

EXTERNAL COMMUNICATIONS TO CUSTOMERS

GAP 2 COMPANY PERCEPTIONS OF CONSUMER EXPECTATIONS

Nature & Determinants Of Customer Expectations Of Service

Derived Expectations Personal Service Philosophies

Transitory Service Intensifier Emergencies Service Problems