SERVICE MARKETING

Books to be Referred

• Services Marketing- By Christopher Lovelock.

• Services Marketing- By K.Rama Mohana Rao.

• Services Marketing- Dr. S. Shajahan.

Marketing Services V/S Goods

Philip Kotler has classified products into the following five categories for establishing goods-service relationship:

Pure tangible goods. Tangible goods with accompanying service. Hybrid. Service with accompanying goods. Pure Service.

Service Package

• The “package” concept of service product suggest that what you offer to the market is a bundle of different services, tangible and intangible, but there is a “core” service and around it are built the other services which are:

Facilitating servicesSupporting services

Developing New Service Offering

If a new service offer is to be developed, then the following five steps should be systematically followed in a sequence:

Consumer Benefit Concept. Developing Service Concept. Developing the Augmented Service Offer. Service Delivery System. Managing Image & Communication.

Augmented Service Offering

• Basic service package is not always equivalent to the service product the customer perceives.

• Therefore, basic service package has to be expanded to a more holistic model of augmented service offering.

• Elements of Augmented Service Offer:

Accessibility of Service. Interaction with service organization. Customer Participation.

Pricing Techniques

There are many pricing concepts and techniques which organization may use in developing their pricing policy, some of them are:

Penetration Pricing.Price Skimming.Competitor Pricing.Differential Pricing.Marginal Pricing.

Winning Strategies through lowering price

Two firms that have won substantial market shares by offering the lowest prices to their customers are:

Southwest Airlines.

Wal-Mart (the world’s largest retailer)

Place (Distribution)

• Most services are distributed through direct sales.

• For certain services, agents can be identified and deployed with selling as a chief function to be performed by them.

• Sometimes, services are generally not delivered to the buyer and the creation of time and place utilities is a vital function in the service marketing.

Promotion

Various techniques used for promoting services are:

Advertising (Print, Internet and Direct Mail)

Sales Promotion (Coupons and Prize promotions)

Personal Communication (Selling, Customer service and Word of mouth)

Corporate Design (Interior décor, Uniforms and Stationery)

The Three additional ‘P’s of Service Marketing

• People. All human actors who play a part in service delivery and thus

influence the buyer’s perceptions.

This fifth P is by far the most important determinant of customer brand loyalty.

Two types of service employees which are commonly seen in service industry are Support personnel and Customer Contact Personnel.

The Three additional ‘P’s of Service Marketing

• Physical Evidence It includes all the tangible representations of service such as

brochures, letterhead, business card etc.

In some cases it also includes the environment of the place where the service is delivered (servicescape)

For restaurants, health clubs, hospitals and schools the physical facility is critical in communicating the service and making the entire customer experience positive.

The Three additional ‘P’s of Service Marketing

• Process

The mechanism by which the consumer consume the services (customer management process) also gives customers evidence on which he judge the service.

Another characteristic of the process that can provide evidence to the customer is whether the service follow a STANDARDIZED APPROACH or whether the process is CUSTOMIZED ONE.

Southwest Airlines• Southwest Airlines occupies a solid position in the minds of U.S air

travelers as a reliable, convenient, fun, low fare, no frills airline.

• It has maintained this position consistently for over 30 years while

making money every year.

• Success has come to the airline for number of reasons like it keeps its costs down by not serving meals, having no pre assigned seats and keeping employee turnover very low.

• Airlines has the best customer service record in the airline industry and has won the industry “Triple Crown” award for best baggage handling and best customer complaint statistics many years in the row.

Tourism as a Service

• Liberalization of the Indian economy has brought about changes across various dimensions.

• Tourism is also developing as an important service industry in India.

• The characteristic features of a service like Intangibility, Variability and Inseparability apply to the travel and tourism industry as well.

The Tourism Marketing Mix

• Product & Price.• Place.• Promotion.• People.• Process.• Physical Evidence.

Service Quality

The Customer Gap

• Customer gap is the difference between customer expectations and perceptions.

• Customer expectations are standards that customers bring into the service.

• Customer perceptions are subjective assessments of actual service experiences.

Customer

Gap

Expected Service

Perceived service

The Provider Gaps

• Not Knowing What Customers Expect (Gap 1)• Not Having the Right Service Quality Designs

and Standards (Gap 2)• Not Delivering to Service Designs and

Standards (Gap 3)• Not Matching Performance to Promises. (Gap 4)

Knowledge Gap (Gap 1)

• A Primary reason why firms r not meeting the quality standards is because they lack accurate understanding of customer expectations.

• Knowledge gap also occurs due to lack of communication between management and frontline employees.

• It can also be due to lack of company strategies to retain customers and strengthen relationship with them

Standard Gap (Gap2)

• Standard gap is the difference between management perception of customer expectations and quality standards established for service delivery.

• Understanding of customers expectations should be translated into customer-driven standards.

• When service standards are absent or when the standards in place do not reflect customers expectations, quality of service is likely to suffer because quality of service delivered by customer contact personnel is critically influenced by the standards against which they are evaluated.

Delivery Gap (Gap3)

• Delivery gap is the difference between specified delivery standards and the service providers actual performance on these standards.

• Gap 3 can be narrowed by ensuring that all the resources needed to achieve the standards are in place.

• Main two reasons for Delivery gap to occur are: Ineffective recruitment of employees (wrong job-fit) Customers not fulfilling their roles.

Internal Communication Gap (Gap 4)

• It is the difference between what the company’s advertising and sales promotion speak about product features, performance and service quality level and what the company is actually able to deliver.

• The discrepancy between actual and promised service has an adverse effect on the customer gap.

In services, the last experience remains

uppermost in your mind. Therefore, it is not enough to

be good, you have to be consistently good

Service Recovery• Service recovery refers to the actions taken by an organization in

response to a service failure.

• Any type of failure bring negative feelings and responses from customers.

• Resolving customer problems effectively has a strong impact on customer satisfaction, loyalty and word of mouth communication.

• Customers who’s complain are resolved quickly are more likely to repurchase a service than those whose complains are not resolved.

Recovery Paradox

• Some organizations have customers who are initially dissatisfied with the service experience and then experience a high level of excellent service recovery, leading them to be even more satisfied after they experience a service failure than they otherwise would have been.

• Is this strategy of “screwing up” just a little so that it can “fix the problem” superbly can work for an organization if that leads to more satisfied customers.

The Recovery Paradox

Problems faced by an firm in using this approach

Majority of customers do not complain when they experience a problem.

It is expensive to fix mistakes. It appear ludicrous to encourage service failures. There is certainly “no guarantee” that the customer actually

will end up more satisfied.

How Customers Respond to Service Failures

• Why People Do (& Do Not) Complain.

• Types of Customer Complaint Actions: Complaining to the service provider. Spreading negative word of mouth about the company to friends.

• Switching Versus Staying.(How a service failure is handled and customers reaction to the recovery

will influence the decision of the customer of switching or staying back with the same service provider)

Types of Complainers

• Passives(This group of customers is least likely to take any action and

unlikely to say anything to the provider)• Voicers (This group of customers actively complain to the service provider)• Irates(This group of customers are more likely to engage in negative

word of mouth communication)• Activists (This group of customers actively complain on all dimensions)

Service Recovery StrategiesDo It Right

the First Time

Encourage and Track

Complaints

ActQuickly

Provide Adequate

Explanations

Cultivate Relationship

with customers

Act Quickly

Company must be prepared to act on the complaints quickly:

• Take care of Problems on the Front Line(First person to hear a complaint from a customer “owns” that

complaint until the employee is sure it is resolved)

• Empower Employees(Employees must be trained and empowered to solve problems

as they occur)

Customer Expectations of Service

Customer holds two types of expectations about services:

• Desired Service – the ‘wished for’ service(It is a blend of what the customer believes “can be” & “should

be”)

• Adequate Service – the service that would be acceptable(Adequate service is “minimum tolerable expectation” )

The Zone of Tolerance

• Performance of service vary across providers and across employees from the same provider, the extent to which customers recognize and are willing to accept this variation is called the zone of tolerance.

• Zone of tolerance is the range or window in which customers do not particularly notice service performance. Customer only notices when it falls outside the range, than the service gets the customers attention in either a negative or positive way.

Different Customers Possess Different Zones of Tolerance

Some Customers have narrow zone of tolerance. The zone of tolerance representing the difference between desired service and

adequate service can expand or contract within a customer.

Customer Satisfaction

• Satisfaction is the customers evaluation of a product or service in terms of whether that product or service has met the customer’s needs and expectations.

• For customer satisfaction it is necessary to establish and maintain certain important characteristics like :

• Quality.• Fair Prices.• Effective Delivery.• Serious consideration

What Determines Customer Satisfaction?

• Attributions for Service Success or Failure.• Perceptions of Equity or Fairness.• Other Consumers, Family Members and

Coworkers.

Service Encounter (Moments of Truth)

• A service encounter (moment of truth) occurs every time a customer interacts with the service organization.

• Customer is mentally evaluating the service they are experiencing and forming a lasting opinion about the organization at every service encounter.

• From organization point of view, each encounter thus presents an opportunity to prove its potential as a quality service provider.

The Importance of First Encounter

• Since many customers are aware that they are engaged in a new experience, they pay particular attention to the details of this interaction.

• With first impressions being very powerful and long lasting, its essential that the employee put their best foot forward.

• Customers that feel valued and appreciated from the very start will have a strong tendency to return for future business.

• Each customer contact is a unique, unrepeatable opportunity for a company to differentiate itself from the competition.

Types of Service Encounters

There are three general types of service encounters:

• Remote encounters(In remote encounters the tangible evidence of the service and the quality of

the technical processes becomes the primary base for judging quality)

• Phone encounters(Tone of voice, employee knowledge and efficiency in handling customer

issues become important in judging quality here)

• Face-to-Face encounters(Both verbal and non verbal behaviors are important determinants of quality

in case of face to face encounters)

Employees Roles in Service Delivery

Types of Marketing in Service Firms

Strategies for Delivering Service Quality through People

• Hire the Right People.• Develop People to Deliver Service Quality.• Provide Needed Support Systems.• Retain the Best People.