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The Financial &

Economic
Impact Of Service

Services Marketing
Chapter # 18

What is Service???
Service is the action of helping or doing work for
someone, act of assistance, favor, kindness or
helping hand

Service quality is a comparison of expectations with


performance
A business with high service quality will meet
customer needs whilst remaining economically
competitive. Improved service quality may increase
economic competitiveness

What is Service Quality ???


An assessment of how well a delivered
service conforms to the client's expectations.
Service business operators often assess the
service quality provided to their customers in
order to improve their service, to quickly
identify problems, and to better assess client
satisfaction

Objectives
1. Examine the direct effects of service on
profits
2. Consider effect of service in getting New
Customers
3. Evaluate role of service in Customer Retention
4. Key Service Drivers of
1. Service Quality
2. Customer Retention
3. Profitability

5. Balanced performance score card

Importance !
1. What return can I expect on SQ
improvements?
2. How do I know that SQ improvement will
be a good investment?
3. Where in the company do I invest money
to achieve highest returns?

ROSQ Approach
SQ is an investment
SQ efforts must be financially
accountable
It is possible to spend too much on
SQ
Not all SQ expenditures are equally
valid

Conceptual Framework
Service/ SQ as a cost rather than as
contribution to profit
Identify relationship btw service &
profits
The link btw service & profit is
neither straight forward nor simple

Service & Profitability : Direct


Relationship
1980 - Disney & FedEx
1990 GE & IBM
GAO 22 Companies

Market Share
Sales Per Employee
Return on Sales
Return on Assets

Service

???
?

Profits

Offensive Marketing
SQ can help companies to attract
more & better customers
Service

Profits
Market
Share
Reputati
on
Price
Premiu
m

Sale
s

Defensive Marketing Effects Of


Service: Customer Retention

Servi
ce

Custome
r
Retentio
n

Lower
Costs
Volume
Of
Purchas
es
Price
Premiu
m
Word Of
Mouth

Margins

Profits

Defensive Marketing
Customer Retention
The longer a customer remains with the company the more
profitable the relationship is for organization

Lower Costs - Attracting a new customer is five times


as costly as retaining an existing one
Volume of purchase
Price Premium
Word-of-Mouth Communication

Effects of Service on behavioral


Intentions & Behavior

Customer
Retention

Servic
e

Behavior
al
Intention
s

Lower
Costs
Volume
Of
Purchas
es
Price
Premiu
m
Word Of
Mouth

Margins

Profits

Sale
s

Balanced Performance Scorecard


A set of measures that gives top managers a
fast but comprehensive view of the business
. that complements the financial measures
with operational measures of customer
satisfaction, internal processes, and the
organizations innovation and improvement
activities operational measures that are
the drivers of future financial performance

Sample Scorecard

Financial Measurement
Perceptual Measures
Operational Measures
Innovation & Learning
The Balanced Scorecard