the services marketing triangle

8/6/2019 The Services Marketing Triangle

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InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

enabling promises

keeping promises

setting promises

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler



Ways to Use the

Services Marketing Triangle

• Overall Strategic

Assessment

–How is the service

organization doing on allthree 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 andby whom?

–Are the supporting systems

in place to deliver the

promised service?

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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.



Service Employees• They are the service - provider.

• They are the organization in the customer’s 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

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Service Employees• Who are they?

“boundary spanners” – periphery, link the inside of theorganization to the outside world.

Emotional Labour - “The act of expressing socially desiredemotions during service transactions”.

Consider management expectations of restaurant servers: – deliver a highly satisfying dining experience to their customers

– be fast and efficient at executing operational task of serving

customers

– do selling and cross selling, e.g. “We have some nice dessertsto follow your main course”

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Person vs. Roleonflicts between what jobs require and employee’s own personality and beliefs

Organization vs. Clientilemma whether to follow company rules or to satisfy customer demands

Client vs. Clientonflicts between customers that demand service staff intervention

Quality vs. Productivity



Customer-

Oriented

Service

Delivery

Hire the

Right People

ProvideNeeded Support

Systems

Retain the

Best

People

Develop

People to

Deliver

Service

Quality

C o m p

e t e f o r

t h e B

e s t

P e o p l e

Hire for

Service

Competenciesand Service

Inclination

Provide

Supportive

Technology

and Equipment

Treat

Employees

as

Customers

Empower

Employees

B e t h e

P r e f e r r e d

E m p l o y e r

T r a i n f o

r

T e c h n i c a l a

n d

I n t e r a c t i v

e

S k i l l s

P r o m

o t e

T e a m

w

o r k

M e a s u

r e

I n t e r n

a l

S e r v i

c e

Q u a l i t

y

D e v e l o p S e r v i c e -

o r i e n t e d I n t e r n a l

P r o c e s s e s

M e a s u r e

a n d

R e w

a r d

S t r o n

g

S e r v i c e

P e r f o r m e r s

I n c l u d

e

E m p

l o y e e s i n

t h e

C o m p

a n y

’ s

V i s i o n

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Factors Favoring Employee Empowerment

• Firm’s strategy is based on competitive differentiation and onpersonalized, customized service

• Emphasis on long-term relationships vs. one-time transaction

• Environment is unpredictable, contains surprises

• Managers are comfortable letting employees work independently for benefit of firm and customers

• Employees seek to deepen skills, like working with others, and are good

at group processes

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Empowerment• Benefits:

– quicker responses

– employees feel more

responsible

– employees tend to interactwith warmth/enthusiasm

– empowered employees are

a great source of ideas

– positive word-of-mouth from

customers

• Drawbacks:

– greater investments in

selection and training

– higher labor costs

– slower and/or inconsistentdelivery

– may violate customer

perceptions of fair play

– “giving away the store”

(making bad decisions)

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Service Culture

“A culture where an appreciation for good

service exists, and where giving good service to

internal as well as ultimate, external customers,

is considered a natural way of life and one of themost important norms by everyone in the

organization.”

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Relationship Marketing

• is a philosophy of doing business that focuses on keeping

current customers and improving relationships with them

• does not necessarily emphasize acquiring new

customers

• is usually cheaper (for the firm)

– keeping a current customer costs less than attracting a

new one

• thus, the focus is less on attraction, and more onretention and enhancement of customer relationships

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Customer Retention &

Increased Profits

Employee Loyalty

Quality

Service

Customer Satisfaction



Benefits to the Organization of Customer Loyalty

• loyal customers tend to spend more with the organization

over time

• on average costs of relationship maintenance are lower

than new customer costs: less need for information and

assistance & make fewer mistakes

• employee retention is more likely with a stable customer

base

• Recommend new customers to firm (act as unpaid sales

people)

• Trust leads to willingness to pay regular prices vs.

shopping for discounts

• lifetime value of a customer can be very high

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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 firm’s 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

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“The Customer Isn’t Always

Right”

• Not all customers are good relationship

customers:

–wrong segment

–not profitable in the long term –difficult customers

–Avoid inappropriate mix of customer segments at same

time

Solution: Proper Segmenting OR Managecustomer behavior

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Measuring Customer Equity:

Calculating Life Time Value of Each Customer

• Value at Acquisition

– revenues (application fee + initial purchase)

– Less costs (marketing +credit check + account set up)

• Annual Value (project for each year of relationship)

– revenues (annual fee + sales + service fees + value of referrals) – Less costs (account management + cost of sales + write-offs)

• Net Present Value

– Determine anticipated customer relationship lifetime

– Select appropriate discount figure

– Sum anticipated annual values (future profits) at chosen discount rate

• Customer Equity is total sum of NPVs of all current customers

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Strategies for Building Relationships

• Foundations:

– Excellent Quality/Value

– Careful Segmentation

• Bonding Strategies: – Financial Bonds

– Social & Psychological Bonds

– Structural Bonds

– Customization Bonds• Relationship Strategies Wheel

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the services marketing triangle

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