Module 3

MBA@GIT http://www.mba.git.edu.

Services Marketing

Module 3Understand customer expectations through market

researchAccording to VTU syllabus,

Service Marketing, 12MBAMM 14.

ObjectivesAfter studying this module you will be able to1. Know the reasons for GAP 12. Understand types of research.3. Learn relationship marketing concept and

strategies.4. Assess the retention strategies adopted by

service firms.5. Discuss market segmentation and targeting

in services.

Common Research Objectives for ServicesTo identify dissatisfied customersTo discover customer requirements or expectationsTo monitor and track service performanceTo assess overall company performance compared to

competitionTo assess gaps between customer expectations and

perceptionsTo gauge effectiveness of changes in serviceTo appraise service performance of individuals and teams

for rewardsTo determine expectations for a new serviceTo monitor changing expectations in an industryTo forecast future expectations

Criteria for An Effective Services Research Program

ResearchObjectives

Includes

Qualitativ

Research

IncludesQuantitative

Research IncludesPerceptions

and Expectations

of Customers

IncludesMeasures

ofLoyalty orBehavioralIntentions

Balances Cost

and Value of

InformationIncludesStatisticalValidity

When Necessary

Measures Priorities

or Importance

Occurswith

AppropriateFrequency

Portfolio of Services Research

Customer Complaint Solicitation

“Relationship” Surveys

Post-Transaction Surveys

Customer Focus Groups

“Mystery Shopping” of Service Providers

Employee Surveys

Lost Customer Research

Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial action

Obtain customer feedback while service experience is still fresh; act on feedback quickly if negative patterns develop

Use as input for quantitative surveys; provide a forum for customers to suggest service-improvement ideas

Assess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over time

Measure individual employee service behaviors for use in coaching, training, performance evaluation, recognition and rewards; identify systemic strengths and weaknesses in service

Measure internal service quality; identify employee-perceived obstacles to improve service; track employee morale and attitudes

Determine the reasons why customers defect

Research Objective Type of Research

Future Expectations ResearchTo forecast future expectations of customersTo develop and test new service ideas

Stages in the Research Process

Stage 1 : Define ProblemStage 2 : Develop Measurement StrategyStage 3 : Implement Research ProgramStage 4 : Collect and Tabulate DataStage 5 : Interpret and Analyze FindingsStage 6 : Report Findings

Service Quality Perceptions Relative to Zones of Tolerance by Dimensions

Retail Chain

9 8 7 6 5 4 3 2 1 0

Reliability Responsiveness Assurance Empathy Tangibles

Zone of Tolerance S.Q. PerceptionO

Service Quality Perceptions Relative to Zones of Tolerance by Dimensions

Computer Manufacturer

Reliability Responsiveness Assurance Empathy Tangibles

OO O OO

Zone of Tolerance S.Q. PerceptionO

Importance/Performance MatrixHIGH

HIGHLOW

Performance

Attributes to Improve Attributes to Maintain

HighLeverage

Attributes to De-emphasizeAttributes to Maintain

LowLeverage

Relationship Marketing

is a philosophy of doing business that focuses on keeping and improving current customers

does not necessarily emphasize acquiring new customersis usually cheaper (for the firm)--to keep a current customer

costs less than to attract a new one goal = to build and maintain a base of committed customers

who are profitable for the organizationthus, the focus is on the attraction, retention, and

enhancement of customer relationships

Lifetime Value of a Customer

AssumptionsIncome– Expected Customer Lifetime– Average Revenue (month/year)– Other Customers convinced via WOM– Employee Loyalty??

Expenses– Costs of Serving Customer Increase??

A Loyal Customer is One Who...Shows Behavioral Commitment

– buys from only one supplier, even though other options exist

– increasingly buys more and more from a particular supplier– provides constructive feedback/suggestions

Exhibits Psychological Commitment– wouldn’t consider terminating the relationship--

psychological commitment– has a positive attitude about the supplier– says good things about the supplier

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

employee retention is more likely with a stable customer base

lifetime value of a customer can be very high

Benefits to the Customer

inherent benefits in getting good valueeconomic, social, and continuity benefits– contribution to sense of well-being and quality

of life and other psychological benefits– avoidance of change– simplified decision making – social support and friendships– special deals

“The Customer Isn’t Always Right”

Not all customers are good relationship customers:

– wrong segment– not profitable in the long term– difficult customers

Strategies for Building Relationships

Foundations: – Excellent Quality/Value– Careful Segmentation

Bonding Strategies:– Financial Bonds– Social & Psychological Bonds– Structural Bonds– Customization Bonds

Relationship Strategies Wheel

Getting

Satisfying

Retaining

Enhancing

Customer Goals of Relationship Marketing

Underlying Logic of Customer Retention Benefits to the Organization

Customer Retention &Increased Profits

Employee Loyalty

QualityService

Customer Satisfaction

Steps in Market Segmentation and Targeting for Services

IdentifyBases forSegmentingthe Market

STEP 1:

DevelopProfiles ofResultingSegments

STEP 2: DevelopMeasuresof SegmentAttractive-ness

STEP 3: Select the

TargetSegments

STEP4:Ensure thatSegmentsAre Compatible

STEP 5:

ExcellentQuality

andValue

Levels of Retention Strategies

I. Financial Bonds

II. Social Bonds

IV. Structural

III. CustomizationBonds

Volume and Frequency Rewards

Bundling and Cross Selling

Stable Pricing

Social Bonds Among Customers

Personal Relationships

Continuous Relationships

Customer Intimacy

Mass Customization

Anticipation/ Innovation

SharedProcesses and Equipment

Joint Investments

Integrated Information Systems

Module 3

Business

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