SERVICES MARKETING

1. What are services? Categorize them.

INTRODUCTION:

The world economy is increasingly characterised as a

services economy. This is because of the increased

importance & the share of service sector in the economies of

most developed & developing countries. There has been a

rapid shift from agriculture to industry & then to the service

sector. The shift has brought about a change in the definition

of goods & services. Goods are no longer considered

separate from services but represent an integral part of the

product & this interconnectedness of goods & services is

represented on a goods-services continuum.

Definition & characteristics of services:

According to the American Marketing Association services is

defined as –activities, benefits & satisfactions which are

offered for sale or provided in connection with the sale of

goods.

Services are deeds, processes &performances provided or co

produced by one entity or person for another entity or person.

eg: IBM –Global leader in IT, services & consulting ;Intangible

deeds & performances are provided for its customers.

Services are all economic activities whose output is not a

physical product or construction. It is generally consumed at

the time it is produced & provides added value in forms such

as convenience ,amusement, timeliness, comfort or health

that are essentially intangible concerns of its first purchaser.

Service industries: Services as products, customer service &

derived service

Services- 4 categories

1. Service industry & company

2. Services as products

3. Customer service

4. Derived service

SERVICE INDUSTRIES & COMPANIES: Includes those

industries & Companies are typically classified within service

sector whose core product is a service.

PURE SERVICE COMPANIES: Taj palace hotels-lodging

Air India-transportation

Birla sunlife-Insurance & financial services

Fortis- healthcare

Columbia asia –health care

SERVICES AS PRODUCTS:

Services as products represent a wide range of intangible

product offerings that customers pay for in the market place.

Service products are sold by service cos’& non-service cos’

such as manufacturing & technological cos’ .eg: IBM &HP

offer IT consulting services to the marketplace competing with

firms such as EDS, ACCENTURE, which are traditional pure

service firms.

CUSTOMER SERVICE:

It is also a critical aspect of what we mean by “service.” It is

the service provided in support of a company’s core products.

Cos’ typically do not charge for customer service provided.

Many companies operate customer service call centers, often

staffed around the clock. Quality customer service is essential

to build customer relationships. It should not be confused with

services provided for sale by the company.

DERIVED SERVICE: The value derived from physical goods

is really the service provided by the good, not the good

itself.eg: Computers provide information.

MODULE-3

1) Define customer expectations, customer

satisfaction & customer delight. Should service

marketers delight their customers?

CUSTOMER EXPECTATIONS:

They are beliefs about service delivery that serve as

standards or reference points against which

performance is judged. Customers are accustomed to

compare their perceptions of performance with

reference points when they are evaluating service

quality. Therefore thorough knowledge about customers

expectations is critical to services marketing. A service

provider can deliver quality service only when he is

aware about customer’s expectations. If he gauges

customer’s expectations in a wrong way,then he is

bound to lose out in the competitive market & may incur

financial losses.

CUSTOMER SATISFACTION:

When the customer gets the desired treatment that he

expects from the service provider. eg: When you visit a

super market, you find the required product & also the

sales executives very pleasing &informative. You are

satisfied at the end of the purchase.

CUSTOMER DELIGHT:

As a customer you get value addition, something more

than you actually expect from the service provider

which is a desirable experience. eg: When you fly in

Emirates, you get a, call from them asking about your

choice of music & on the day of travel there is a

chauffeur driven car-limousine at your service, playing

your favourite music & all along you feel like a

queen/king with all this service. This is something more

you get beyond you expectation-customer delight.

2) What is the difference between desired service &

adequate service? Why should a service marketer

understand both the services?

MEANING & TYPES OF SERVICE EXPECTATIONS:

Usually, the level of expectation varies widely

depending up on the reference point which the

customer holds. Lets imagine that we are planning to

dine in a restaurant.

Ideal expectations or desires- HIGH-Everyone says

that this place has fantastic service philosophy & I want

to celebrate my birthday here.

NORMATIVE ‘should’ EXPECTATIONS:HIGH-This is

quite an expensive restaurant & so food ought to be

good & service must be excellent.

EXPERIENCE BASED NORMS: ADEQUATE-Most of

the time, this place is good but when it gets busy the

service is slow.

ACCEPTABLE EXPECTATIONS: ADEQUATE- I

expect this restaurant to serve me in a adequate way.

MINIMUM TOLERABLE EXPECTATIONS: LOW- I

expect terrible service from this restaurant but I have

come as the price is low.

CUSTOMER EXPECTATIONS:

Deeper & broader than requirement

Usually un stated

Drives all your intentions & decisions

Primary measure of your success

EXPECTATIONS OF SERVICE:

Desired service expectations are influenced by explicit service

promises, implicit service promises, word of mouth

communication & past experience.

SUB CATEGORIES OF SERVICE:

Restaurant-expensive, ethnic, fast food or airport-desired

expectations across categories of service i.e fast food

restaurant-quick convenient tasty food in a clean setting while

in an expensive restaurant-elegant surroundings, gracious

employees, candle light dinner, fine food.

3) Explain zone of tolerance with examples.

ZONE OF TOLERANCE: Range or window in which

customers do not particularly notice service performance.

When it falls out of the range –very high or low; the service

attracts the customer’s attention either in a positive or

negative way. eg: Service at a check –out line in a grocery

store. If service consumes a period of 5 to 10 mins ,he may

grumble & look at the watch. The longer the wait is below the

zone of tolerance[10 min],the more frustrated he becomes.

Performance basically varies across providers, across

employees from the same providers & even with the same

service employee.

The extent to which the customers recognise & are willing to

accept this variation is called as zone of tolerance.

This zone of tolerance can expand or contract for a given

customer. An airline customer’s zone of tolerance will narrow

when she is running late & she has to make the plane while

on the other hand, a customer who arrives at the airport early

may have a longer zone of tolerance, making the wait in line

far less noticeable, then when he is pressed for time.

Different customers possess different zones of tolerance. Very

busy customers are time pressed & desire short waiting time.

eg: when it comes to having repair personnel or guy who

presses clothes, working women in particular have a more

restricted window of acceptable time duration for that

appointment than customers who work from home or the ones

who are homemakers.

An individual customer’s zone of tolerance increase or

decreases depending on a number of factors including

company controlled factors such as price. When there is

increase in price, customers are less tolerant of poor service.

Zone of tolerance vary for service dimensions. Customers’

tolerance zones vary for different service attributes or

dimensions. Customers are likely to be less tolerant about

unreliable services[broken promises or service errors]than

other service deficiencies.

Desired service is relatively idiosyncratic & stable compared

with adequate service which moves up & down in response to

competition & other factors.

4. Which are the factors that influence customer’s

expectations?

Factors that influence customer’s expectations of service

Personal needs

Lasting service intensifiers

1. Personal needs are those states or conditions

essential to the physical or psychological wellbeing of

the customer. They are pivotal factors that decide what

the customers decide in service.

Personal needs can be categorised into four divisions:

o Physical

o Social

o Psychological

o Functional

A person who goes to a café right after work expects

quick & efficient service as he is hungry & tired, while a

person who goes to chat with friends would wait longer

to get served as he comes there for entertainment

purpose.

2. Lasting service intensifiers: They are individual

stable factors that lead the customer that lead the

customer to a heightened sensitivity to service. One of

the most important of these factors is1. Desired service

expectations ,which occur when customer expectations

are driven by another person or group of people. eg: A

parent choosing a vacation for the family-customer’s

individual expectation is intensified because they

represent & must answer to other parties who derive

the service.

3. Personal service philosophy: the customer’s

underlying generic attitude about the meaning of

service & the proper conduct of service providers.

Customers who are themselves into service business

have strong service philosophies. eg:An air hostess

who is trained for ettiquecy will be well mannered &

courteous. She would expect similar treatment from

another person of the same job profile & her

expectations from the service providers will be

intensified.

5. Which are the factors that influence adequate service?

Sources of adequate service expectations;

1. Adequate service-is the level of service the customer

finds acceptable. These influences are short term &

tend to fluctuate more compared to desired service

expectations.

Factors that influence adequate service:

Temporary service intensifiers

Perceived service alternatives

Customer self perceived service role

Situational factors

Predicted service

Temporary service intensifiers: Personal emergency

situations where there is an urgent need for service eg:

accidents-need for automobile insurance

Perceived service alternatives: Other service providers

Customer’s self perceived service role: they specify the level

of service expected. eg:I want my dosa piping hot, nicely

roasted & golden in color

2) PERCEIVED SERVICE ALTERNATIVES: Other

providers from whom customers can obtain service. If

customers believe that they have multiple service

providers to choose from or if they can provide the

service for themselves, their levels of adequate service

are higher than those of customers who believe that it is

not possible to get better service anywhere.

3) Customer’s self perceived service role: Customer’s

perceptions of the degree to which customers exert an

influence on the level of service they receive.

4) SITUATIONAL FACTORS: Service performance that

many people conditions that customers view as beyond

the control of service provider. eg: catastrophes like

earthquakes which affect a large no of people-for

insurance companies ,customers service expectations

will reduce because people recognize that there are

inundated demands for their service.

6. Which sources hold good for both desired & predictable

services?

SOURCES:

1) EXPLICIT SERVICE PROMISES-They are personal &

non-personal statements about service made by the

organization to the customer. Statements are personal

when they are communicated by sales people or repair

personnel; they are non-personal when they come from

web pages ,advertising, brochures & other written

publications.

2) IMPLICIT SERVICE PROVIDERS-service related cues

that lead to inferences about what these service should

& would be like. These quality cues are dominated by

price & tangibles associated with service.

3) WORD –OF –THE-MOUTH COMMUNICATION-It is

unbiased. Influences both desired & predicted service.

4) PAST EXPERIENCE-Customer’s previous exposure to

service that is relevant to the focal service, is another

force in shaping predictions & desires.

6. How do we measure the quality of service in marketing?

Outline the importance of service quality in marketing

with relevant illustrations.

Quality in service is defined by the degree of compliance

between stated goals & achieved targets. It is easy to conform

to a standard. Because of intangibility factor, it is difficult to

understand service & comprehend it.

Perception of service quality is felt by all parties involved in a

service delivery process: service providers, customers &

suppliers. Quality can be viewed from multiple perspectives:

Product-based: Based on measurable parameters.

It is suitable for goods but is a challenge for services. The

number of times the telephone rings before the receiver is

picked up by a service provider can be a basis of measuring

service quality.

IMPORTANCE OF QUALITY IN SERVICE:

Lower costs-Quality control processes lower cost &

increase productivity.

Immune or less vulnerable to price wars: High

quality services have higher price. eg: Bose music

systems.

Higher customer loyalty: SQ ensures customer

satisfaction that drives customer loyalty & enhanced

profits.

Higher market share: loyal customers contribute to

positive word –of-mouth publicity.

Higher ROI-High quality service contributes to higher

profitability. eg: Apple

QUALITY IN SERVICE :

The measurement & assessment of service quality is

very challenging owing to the intangibility factor.

Quality can be viewed on following basis:

Product based-The no of times a phone rings before its

attended by service provider can be a basis of

measuring responsiveness.

User based: Quality is in the eyes of the beholder.

TYPES OF SERVICE QUALITY:

MANUFACTURING BASED

Conformance based

Output is considered to be of high quality if it conforms

to design specifications.

VALUE BASED: Service provider must strike a balance

between conformance & performance.

Transcendental: Quality can only be experienced;

cannot be described or documented. eg: tourism

Sub categories:

Internal service quality: conformance & compliance to

design standards.

External quality: it is customer’s perception

7. Service dimensions are determinants of service quality &

performance. Justify.

The various service dimensions are:

Eight dimensions were identified by David. A. Garvin.

PERFORMANCE

FEATURES

RELIABILITY

CONFORMANCE-Delivery quality meeting design

standards.

SERVICABILITY-behavioral dimension; politeness

AESTHETICS-external appearance

PERCEIVED QUALITY

Eg: When we consider the case of ‘The Mumbai

dabbawalahs’,we understand their commitment towards

their work which was 99.99% accurate. Their work

culture is amazing where they give importance to

delivering quality products that are inexpensive that’s

affordable by the common man & are punctual, reliable

& conform with quality standards (six sigma)qualifying

all the service dimensions, thus set an example that

working in teams is effective to implement their action

plan.

8. What are the challenges posed by service

industry?

Main challenges are:

Intangibility factor.

Service marketers are faced with the need to provide

value to consumers based on intangibles that can be

difficult to quantify and deliver. Increasingly,

consumers are requiring higher and higher levels of

service and more convenient access to information.

With tangible products, consistency can be maintained

more readily and quality can be monitored and

impacted.

In service industries, the number of people or touch-

points involved in the delivery process and the

inconsistencies in human behaviors and actions make

maintaining quality and brand consistency an ongoing

challenge.

Ultimately past experience given by the service provider plays

a vital role in making future decisions regarding consumption

of the service repeatedly from the same service provider.

Innovation in service is also expected by youth centric

customers that poses a challenge in services

marketing. The profit a customer is expected to

generate while he maintains a relationship with the

company.

CUSTOMER RELATIONSHIP MANAGEMENT:

1) Why marketing concepts & philosophies are premises for

developing a CRM system?

CRM consists of three components; customer, relationship & management.

Customer: The customer is the only source of company’s

present profit & future growth. A good customer who provides

more profit with less resource is scarce because customers are

knowledgeable & the competition is fierce. CRM can be thought

as a marketing approach that is based on customer information.

Relationship: The relationship between a company & its

customers involves continuous bidirectional communication &

interaction. The relationship can be short term or long term

continuous or discrete, repeating or one-time. It can be attitudinal

or behavioural. Customers may have positive attitude towards

the company & its products but their buying behaviour is highly

situational.

Management: It is not only a marketing activity but also involves

continuous corporate change in culture & processes. CRM

requires a comprehensive change in the organisation & its

people.

CRM extends itself from customer acquisition to customer

retention to customer delight. The important steps are:

1) Identifying the right customer:

Right customer segmentation. The segmentation criteria

must change needs to changer from conventional

demographic/psychographic segmentation to need based

behavioural segmentation. This will need to right definition

of the right target customer. Consumer behavioural

variables are more relevant & actionable & can help in

right targeting. Hence marketers can develop sustainable

business models & can differentiate themselves from

others by using high-level consumer behavioural

variables.

2) Retaining the right customer:

It is v. important to measure customer profitability.

ROC (return on customers) should be calculated on three

dimensions that are Frequency of customer purchase,

Value per transaction, Profitability. The customers who

are low on all these dimensions need least focus. The

customers scoring high on all these three need maximum

focus. The customers lying between these two extremes

need to be carefully analyzed to decide the degree of

focus required for each of the segments.

Marketers need to lay down systems & processes to keep

track of these dimensions. Identification & sizing of these

clusters can help develop right strategies of each

customer group.

3) Delighting the customer:

Marketers need to develop strong value prepositions in

terms of better products & better services so that

strategies are not only consumer-centric but also lead to

high profitability. Pleasing the customers should not be at

the cost of hurting the company.

The CRM BUSINESS CYCLE:

Acquire & retain

Understand & differentiate

Develop & customize

Interact & deliver

1) Acquisition & retaining: Acquisition is a vital stage in

building customer relationship. For the purpose of

customer acquisition, an organization is likely to focus its

attention on prospects, enquiries, lapsed customers,

former customers, competitor’s customers’ referrals & the

existing buyers.

2) Understand & differentiate: Organizations cannot have

a relationship with customers unless they understand

them, find out what they value, what type of services are

important to them, how & when they like to interact & what

they want to buy. They should involve in these activities.

3) Develop & customize: Service provider should also cater

to the nische segment by customizing service to their

requirements.

eg:. Dell has a service philosophy wherein the customer

specifies his configuration to the service provider & the

same is delivered in 21 days.

4) Interact & deliver: Sales personnel must be pleasant with customers & offer them information relevant to the product or service provided; deliver desired service on time avoiding delays & deficiencies in service performance.

PRINCIPLES OF CRM:

Treat customers individually.

Acquire & retain customer loyalty through personal

relationship.

Select “Good” customers instead of Bad customers based

on life time value

EVOLUTION OF CRM:

Customers as strangers

Customers as acquaintances

Customers as friends

Customers as partners.

RELATIONSHIP CHALLENGES:

The customer is not always right.

The wrong segment

Not profitable in the long run

Difficult customers-dysfunctional customers

Ending business relationships

SHOULD FIRMS FIRE THEIR CUSTOMERS?

LIFETIME VALUE OF A CUSTOMER: The profit a customer is expected to generate while he maintains a relationship with the company.