CUSTOMER EXPERIENCE (CX)

• All companies need to have

customer experience plans and
procedures in place but it is
arguable such strategies are
most important for customer
facing service companies…

WHY?
WHAT ARE SERVICES?
 Definition of a Service
 Key Industries in the Service Sector
 The Service Economy
 Characteristics of Services
 Services Marketing
 The Marketing Mix for Services
 Services Marketing Challenges
SERVICES
Definition of a Service
• A service is any activity or benefit that one
party can offer to another that is essentially
intangible and does not result in the
ownership of anything.

• ‘Anything that can’t be dropped on your foot’

Services / Customer Service
Key Industries in the Service
Sector
Lovelock’s Classification of
Services
Service Industries

•Education = schools, colleges and training centres. 1 in

4 Europeans are enrolled in educational institutions

•Healthcare expenditure rising significantly across

Europe due to ageing population.

•Huge growth in communications and media services =

establishments that produce, distribute and transmit info
and cultural products eg publishing industries, internet
service providers etc
The Service Sector
• Within these industries, companies range
from huge global corporations to one man
bands.
The Service Economy
• In the UK, US and Australia approx 75% of
GDP is accounted for by the services sector.

• The tourism industry in the UK employs

more people than agriculture, coal mining,
steel, car manufacturers, aircraft, food
production & textiles combined.
The Service Economy
Growth has occurred due to many factors including:

– rapid developments in technology – affecting

service innovation, how services are
accessed and delivered as well as payment
options, enabling customers and employees,
information seeking, extending the global
reach etc
– Ability to reach global markets
– increased prosperity
– increase in leisure time
– greater life expectancy etc
Service Characteristics
Goods are produced. Services are
performed.
Idea of theatre.

In general, more personal involvement,

personal
contact and customer input are required to
market
services than to market goods.
5 Characteristics
A company must consider 5 service
characteristics when
designing marketing programs:

1. Intangibility
2. Inseparability
3. Variability
4. Perishability
5. Non ownership
1. Intangibility
Services cannot be seen, tasted, inspected or
felt before
they are bought - a service operator can only
describe the
benefits to be derived from the service
experience.
Goods v Services
• Scale of intangibility - goods are
tangible dominant whereas services
are intangible dominant.

• Very few pure tangible or intangible

products - in reality most products are
a combination of goods and services.

• The distinction is not always clear

between goods and services.
Tangibility Spectrum
Tangibility v Intangibility

• Pick up the shoes • Entitles the consumer

• Feel the quality to an experience
• View style & colour • Subjectively evaluated
• Sample the fit
Intangibility
• Difficult to communicate the
properties of services
• Prices are difficult to set
Intangibility
Due to intangibility the risk associated with
purchasing a service is often higher.

To reduce uncertainty, buyers look for signs of

service quality from the people, price,
environment
communication material etc.

Whereas marketers of goods try to add

intangibles to
their tangible offers, service marketers try to add
tangibles to their intangible offers
Shostack’s “Molecular” Model
Comparethemarket.com
Creating a
character to
represent the
service is very
successful in
helping to make to
make this highly
intangible product
(car insurance)
more tangible.
2. Inseparability
Services are usually consumed as they are
produced.
The person providing the service is very much part
of the service product.

Production and consumption usually take place on

the premises (or in the equipment) of the producer
and not in the consumer’s home.

Customer is involved in the production process.

3.Variability/Heterogenity
Due to the significant human element, the
quality of
the service is likely to vary each time the
service is
provided (even if completed by the same
operator).

The quality of services depends on who

provides
them as well as when, where and how they are
provided.
Variability

Service firms should:-

• endeavour to keep
their performance as
efficient and
consistent as
possible.
• select and train
personnel carefully
and monitor customer
satisfaction.
• Use technology to
standardise service
4. Perishability

Services cannot be stored for future sale or

use eg an
airline seat not sold today is lost forever.

This is no problem when demand is steady but

when demand fluctuates problems can occur.

Careful attention is paid to production

scheduling
and demand forecasting
Perishability
A service firm often tries to match demand with
supply using various methods including:-

• educating consumers to use services during

non-peak periods.
• offering incentives and price reductions
during non-peak periods.

Pricing & promotion are used extensively to

encourage customers to utilise services at a
time
convenient to the service operator.
5. Non-ownership
Customers only have access to, or use
of, a
service, rather than ownership.

NB Any given service will display a

different
combination of each of the five factors.
Basic Differences Between
Goods and Services
• Customers do not obtain ownership of services
• Service products are intangible performances -
not objects
• Customers and employees are often actively
involved in production process
• Other people may form part of product
experience
• More variability in operational inputs and
outputs - harder to improve productivity,
control & quality
• Typically cannot be produced in advance for
stock
Services Marketing
• The growth in the service sector has led to
an increase in the need for marketing and
improving the customer experience.

• In contrast to goods, services lack the

physical properties that can be sensed by
consumers prior to purchase thus creating
different marketing challenges.
Services Marketing
• ‘The core principles of marketing and its
main theoretical elements can be applied in
all industries , however differences occur in
the application of the theory.’ Kotler

• Key aims are the same

• More complex?
Aims of Service Marketing
Very much the same as with goods:-

• To understand and anticipate customer

needs

• To ensure consistent quality and customer

satisfaction

• To retain existing customers and attract

new ones

• To achieve organisational objectives

The Marketing Mix for Services
4 Ps needs to be extended to 7 Ps:-
3 additional P’s are:-

• People
• Physical Evidence
• Process
The 7 Ps
People

All human actors who play a part in service

delivery and thus influence the buyer’s
perceptions: namely, the firm’s personnel,
the customer, and the other customers in
the service environment.

Integration with HR
Physical Evidence

The environment in which the service is

delivered and where the firm and customer
interact, and any tangible components that
facilitate performance or communication of
the service.
‘The Servicescape’
Process

The actual procedures, mechanisms, and

flow of activities by which the service is
delivered – the service delivery and
operating systems.
The Services Marketing
Triangle
Services Marketing Challenges
Services marketing presents some difficult challenges:-

• Differentiating from competitors very similar products

• Protecting new service ideas
• Defining and achieving consistent quality
• Coping with fluctuating demand
• Motivating and sustaining employee commitment
• Setting prices
• Standardisation v customisation
 Classifications of Services
For marketing purposes, methods include by:

• Service field
• Degree of tangibility
• Frequency of interaction & degree of contact
• Degree of customisation
• Degree of demand fluctuation
• Method of service delivery
• Profit orientation etc
Service Profit Chain
o Customer loyalty drives profitability and growth.
o Customer satisfaction drives customer loyalty.
o Value drives customer satisfaction.
o Quality and productivity drive value.
o Employee loyalty drives service quality and
productivity.
o Employee satisfaction drives employee loyalty.
o Internal quality as delivered by operations and
IT drives employee satisfaction.
o Top management leadership underlies the
chain’s success.