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8/3/2019 Elearning Mos

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PAN African eNetwork

ProjectMBA IB

Marketing of Services

Prof Pradeep Narwal


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Increasing importance of services ineconomies

All principles of marketing apply toservices

The nature and special characteristics

of services

Managing service quality, productivityand personnel


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How to position a service organizationand a brand

The service marketing mix

How businesses should manageservice encounters and service

recovery

Innovations in services


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Difficult to provide a single definition ofservice

Concept of service has to beunderstood either as an exclusiveoffering from a company that is primarily

intangible, or as a part of the service-product mix that a company offers


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SERVICE LEVELS Service is an intangible offering with little or no transfer of

physical products to the customer

Service is one part of product-service mix being offered tocustomers

The main offering is the product but the supplier alsoprovides some services

Every product or service or any combination of a mix ofthe two, ultimately is supposed to provide service forcustomers


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Advances in technology

Growth in per capita income

A trend towards outsourcing

Deregulation

Increasing growth in retailing due toincrease in propensity to consumer


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Services impact customers more directlythan products do

Marketing of services has to be more

deliberate and considered

Service provider has to carefully audithis resources and competencies

Positioning must be razor sharp

Services more intractable than products

All Principles of Marketing Apply to Services (Contd.)


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Service provider must define service

very precisely and also design theappropriate service-product mix

Promotion more challenging due tointangible nature of services

Same basic service can be provided in

vastly different service facilitiesproviding different levels of amenitiesand luxuries



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Same service can be delivered invarious ways

Marketing mix conveys the positioningof a service



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Intangibility

Inseparability

Presence of other consumers

Variability

Perishability


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Managing service quality

Companies rated higher on servicequality perform better in terms of marketshare growth

Big gap exists between theexpectations of the customers and the

level of the service they get Realbarriers while matching expected andperceived service levels of customers


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Does not understand customerrequirements: Misconception barriers arisewhen companies misunderstand customer

expectationsNo resources: A company may

understand customer expectations but isunwilling to provide resources to meet

them

Bad delivery: The company is not able todeliver the expected service


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Managements will: A managementeager to improve quality is able to do

it

Exaggerated expectations:Exaggerated promises may become a

problem


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Meeting customer expectations

Important to understand and meet customerexpectations

Consumers of services value not only theoutcome of the service encounter but alsothe experience of taking part in it

Access: Is the service provided atconvenient locations and at convenienttimes, with little waiting period in availingthe service?


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Reliability: Service provider shouldbe able to deliver the promisedservice each time the customerdecides to avail of it

Credibility: Can customers trust theservice company and its staff?

Security: Can the services be usedwithout risk?

Meeting Customer Expectations (Contd.)


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Understanding customer: If the

company understands theexpectations and also has thecapability to serve them, the

customer is satisfied with the service

outcome

Responsiveness: How quickly doservice staff respond to customerproblems, requests and questions?

Behavior of employees: Do service

staff act in a friendly and polite



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Competence: Performance of the

primary service will depend on theknowledge and competencies of theservice providers

Communication: Is the servicedescribed clearly and accurately?

Physical evidence: The companyshould provide physical evidence tocustomers which will assure customersthat they will be provided a good service



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Managing service productivity

Measure of relationship between thevarious types of inputs that are

required to produce the service andthe service output

Conflict between improving serviceproductivity and raising service

qualityTechnology can be used to improveproductivity and service quality

simultaneously


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Customer involvement in productioncan be increased

Important to balance supply and

demand

By smoothing demand or increasingflexibility of supply, both productivity

and service quality can be achieved

Managing Service Productivity (Contd.)


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Managing service staff

Quality of the service experience isheavily dependent on staff-customer

interpersonal relationshipCompanies need to treat their employeeswell if customers have to be served wellby their employees

Nature of the job needs and appropriatepersonality characteristics to be definedsharply while selecting service staff


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Socialization allows the newly recruited

service professionals to experience theculture and tasks of the organization

Maintaining a motivated workforce

Customer feedback essential tomaintain high standards of service

qualityEmployees of service organizations

must take pride in their jobs

Managing Service Staff (Contd.)


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Differentiate from competition onattributes that target customers highly

value

Entails two decisions:

Choice of target market (where tocompete)

Creation of differential advantage (howto compete)


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Determine important choice criteria ofcustomers carefully

Most important decision of a serviceorganization is selecting the factors on

which it will compete Select a few factors and provide

superlative performances in the chosen

factors

Target marketing

Differential advantage


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The service

Pure services are intangible

Higher perceived risk in decision making

processPeople, physical evidence and processesprovide cues about the quality of the service

Brand name affects perceptions of service

Provide service trials wherever possible


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Promotion

Intangible elements of service may bedifficult to communicate

Sales people should develop lists of

satisfied customers to be used in referenceselling

Word of mouth is critical to success

Acknowledge the dominant role of personalinfluence in the choice process and stimulateword of mouth communication

P ti (C td )


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Persuade satisfied customers to informothers of their satisfaction

Develop materials that customers can passon to others

Target opinion leaders in its advertisingcampaign

Encourage potential customers to talk tocurrent customers

Communication should also be targeted atemployees

Promotion (Contd.)


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PriceAn indicator of perceived quality

Important in matching demand andsupply

Price sensitivity key segmentation

variable


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Setting fees levels:Offset

Inducement

Divisionary

Guarantee

Predatory


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PlaceDistribution channels for services aremore direct

Production and consumption issimultaneous

New technologies permit servicecompanies to provide services withoutcustomers coming to their facility


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People

Service quality is inseparable fromquality of service providers

Set standards to improve quality ofservice provided by employees andmonitor their performance

Training of employees crucial

Adopt a customer-first attitude thanputting own convenience first


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Employees of service organizations

have to be adept in multiple roles

Have empathy to judge the service

requirement and mood of thecustomer

Examine the role played by customers

in service environment

Seek to eliminate harmful interactions

People (Contd.)


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Physical evidence

The environment in which the service isdelivered

Includes any tangible goods that facilitatethe performance and communication of theservice

Strengthen cues that customers search forto judge the quality of services


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Process

Procedures, mechanisms and flow ofactivities by which a service is delivered to

customers

Control variations in services by targetingsmaller segment of customers

Process and its visibility are both important

for customersProcess should be employed only when itis required to provide a service and notbecause customers have come to expect it


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A terrible ending usually dominates apersons recollection of an experience

Customers who are mentally engagedin a task do not notice how long it takes

Customers desperately want to makesense of unexpected events


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Study service encounters from customerspoint of view

Finish strong

Get the bad experience out of the way early

Segment the pleasure, combine the pain

Build commitment through choice

Give people rituals and stick to them

Service Encounters (Contd.)


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Well-intentioned, prompt, and aptrecovery can assuage angry customers

Everyone in the organization must havethe skill, motivation, and authority tomake service recovery an integral part ofservice operations

Production-oriented service-deliverysystems have helped in achievingconsistently high service standards


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Inevitable problems will still arise, by providingfor service recovery

Good service providers cover all the costs thata failure incurs

Customers problem is an opportunity

Companies must be responsive to customercomplaints, and encourage them to complain

Monitor areas of the organization which arelikely to throw up problems more frequently

Service Recovery (Contd.)

Service Recovery (Contd )


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Solve customers problems fast becauseservice problems quickly escalate

Train frontline employees and empower them

Give employees the authority, responsibility,and incentives to help customers in uniqueways

Let customers know about corrective measurestaken and the improvement achieved

Service Recovery (Contd.)


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Difficulties in applying traditional methodsof research and development to services

Experiments with new services are mostuseful when they are conducted live ,though cautiously

Improvements should be planned andexperimented incrementally


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Personnel conducting the experimentsmust be motivated

Successful experiment has to be

persisted with Experiment only when it can be finally

implemented

Conducting live experiments risky andcumbersome, but may be inevitable


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Defining services

Understanding the services economy

The service sector in Australia Mega-trends and the service sector:

Professional services

Characteristics of services Marketing implications


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Any act, performance or experience thatone party can offer another; one that is

essentially intangible, and does not resultin the ownership of anything. Itsproduction may or may not be tied to a

physical product Lovelock (2004)


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Intangibility

Perishability

Simultaneous

Productionand

Consumption

Heterogeneity


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Defining and improving quality

Designing and testing new services Communicating and maintaining aconsistent image

Accommodating fluctuating demand

Ensuring the delivery of consistent quality


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Motivating and sustaining employeecommitment

Coordinating marketing, operations, andhuman resource efforts

Setting prices

Finding a balance betweenstandardization versus personalization


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A d d k i i f i


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An expanded marketing mix for services

Customers PricePlace &

Time

Promotion

Product

(Service)People

Process

Physical

Evidence

Custome

rs

Pricecustomers

Place,

Cyber

-

space

&

Time


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Internal

marketi

ng

Traditional

marketing

Organisati

on

Employee

s

Customer

s

Satisfaction;

Quality; Brand

Loyalty

Relationship

management

A framework for analysing servicesmarketing


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Customers

Operations

ManagementMarketing

Management

Human Resources

Management


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Zeithaml, Bitner and Gremler (2006)


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AExpected

service

Perceivedservice

Customer Gap


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Provider Gap 1 (The Knowledge Gap):

not knowing what customers expect

Provider Gap 2 (The Service Design & StandardsGap):

not having the right service designs and standards

Provider Gap 3 (The Service Performance Gap):not delivering to service standards

Provider Gap 4 (The Communication Gap):

not matching performance to promises


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Provider Gap 1: Not knowing what customers expect

Provider Gap 2: Not selecting the right service designs and standards

Provider Gap 3: Not delivering to service standards

Provider Gap 4: Not matching performance to promises

Customer

Expectations

CustomerPerceptions

Customer

Gap


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Customer Expectations

Company Perceptions ofCustomer Expectations

Inadequate marketing research orientationInsufficient marketing researchResearch not focused on service qualityInadequate use of market research

Lack of upward communicationLack of interaction between management and customers

Insufficient communication between contact employees and managersToo many layers between contact personnel and top management

Insufficient relationship focusLack of market segmentationFocus on transactions rather than relationships

Focus on new customers rather than relationship customers Inadequate service recovery

Lack of encouragement to listen to customer complaintsFailure to make amends when things go wrongNo appropriate recovery mechanisms in place for service failures

Gap

1


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Customer-Driven ServiceDesigns and Standards

Management Perceptionsof Customer Expectations

Poor service designUnsystematic new service development processVague, undefined service designs

Failure to connect service design to service positioning Absence of customer-driven standards

Lack of customer-driven service standardsAbsence of process management to focus on customer

requirementsAbsence of formal process for setting service quality goals

Inappropriate physical evidence and servicescapeFailure to develop tangibles in line with customer expectationsServicescape design that does not meet customer and

employee needsInadequate maintenance and updating of the servicescape

Gap

2


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Service Delivery

Customer-DrivenService Designs and

Standards Deficiencies in human resource policies

Ineffective recruitmentRole ambiguity and role conflict

Poor employee-technology job fitInappropriate evaluation and compensation systemsLack of empowerment, perceived control, and teamwork

Customers who do not fulfill rolesCustomers who lack knowledge of their roles and responsibilitiesCustomers who negatively impact each other

Problems with service intermediaries

Channel conflict over objectives and performanceDifficulty controlling quality and consistencyTension between empowerment and control

Failure to match supply and demandFailure to smooth peaks and valleys of demandInappropriate customer mixOverreliance on price to smooth demand

Gap

3


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Service Delivery

Lack of integrated services marketing communicationsTendency to view each external communication as independentNot including interactive marketing in communications planAbsence of strong internal marketing program

Ineffective management of customer expectationsAbsence of customer expectation management through all forms of

communicationLack of adequate education for customers

OverpromisingOverpromising in advertisingOverpromising in personal selling

Overpromising through physical evidence cues Inadequate horizontal communications

Insufficient communication between sales and operationsInsufficient communication between advertising and operationsDifferences in policies and procedures across branches or units

External

Communications to

Gap

4


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Perceived

Service

Expected Service

CUSTOMER

COMPANY

Customer

Gap

Gap 1

Gap 2

Gap 3

ExternalCommunications to

CustomersGap 4Service

Delivery

Customer-DrivenService Designs and

Standards

Company Perceptions ofConsumer Expectations


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Examine how consumers choose andevaluate services

Identify the elements of consumer

behaviour that services marketers mustunderstand:

Choice behaviour

Consumer experiences

Post-purchase evaluation


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Search Qualities

attributes a consumer can determine prior topurchase of a product

Experience Qualities

attributes a consumer can determine afterpurchase (or during consumption) of a product

Credence Qualities

characteristics that may be impossible to

evaluate even after purchase and consumption


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Difficult to evaluateEasy to evaluate

High in search

qualities

High in experience

qualities

High in credence

qualities

Most

Goods

Most

Services


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Services as processes

Service provision as drama

Service roles and scripts

The compatibility of service customers

Customer coproduction

Emotion and mood


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Captured in measures of satisfaction,service quality, loyalty, emotionalengagement:

Word of mouth communication

Attribution of dissatisfaction

Positive or negative bias positivity bias for services

Brand loyalty


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Identify the different types of expectationscustomers hold for service performance

Sources of customer expectations


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Adequate

Service

DesiredService


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Adequate

Service

DesiredService

Zone ofToleran

ce


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Reliability Tangibles

Levelof

Expectation

Source: L. L. Berry, A. Parasuraman, and V. A. Zeithaml, Ten Lessons for Improving Service Quality,

Marketing Science Institute, Report No. 93-104 (May 1993).

Adequate Service

Desired Service

Desired Service

Adequate

Service

Zone

of

Tolerance

Zoneof

Tolerance


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Lasting Service

Intensifiers

Personal Needs Zone

of

Tolerance

Desired Service

Adequate

Service


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Self-Perceived

Service Role

Situational

Factors

Perceived ServiceAlternatives

Temporary Service

Intensifiers

Zone

of

Tolerance

Desired Service

AdequateService

Predicted

Service


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Predicted

Service

Explicit Service

Promises

Implicit Service

Promises

Word-of-Mouth

Past Experience

Zone

of

Tolerance

Desired Service

Adequate

Service


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What does a service marketer do ifcustomer expectations are unrealistic?

Should a company try to delight thecustomer?

How does a company exceed customer

service expectations?

Do customer service expectationscontinually escalate?


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Identify the factors which influenceconsumers perceptions

Examine the factors which influence

satisfaction

Develop an understanding of thedimensions of service quality

Examine the importance of serviceencounters


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Product/service quality

Specific product or service features

Consumer emotions

Attributions for service success or failure


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Perceptions of equity or fairness

Other consumers, family members, andcoworkers

Price

Personal factors

the customers mood or emotional state

situational factors


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Increased customer retention

Positive word-of-mouth communications

Increased revenues


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Source: C. Fornell Customer Satisfaction and Corporate Earnings, commentary appearing on ACSI website, May 1, 2001,

http://www.bus.umich.edu/research/nqre/Q1-01c.html.


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Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.


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The customers judgment of overallexcellence of the service provided inrelation to the quality that was expected.

Service quality assessments are formed onjudgments of:

outcome quality

interaction qualityphysical environment quality


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Disconfirmation of expectations

The Nordic model

The three component model

The Gaps model of service quality &SERVQUAL


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Represents the service experience on thebasis of functional and technical elements

Technical quality refers to what the

customer receives from the service Functional quality refers to service delivery

Model emphasises companies must be

careful what they promise


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Source: Rust & Oliver, 1994. p. 11


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Reliability (dependability, accurate performance)

Assurance (competence, courtesy, credibility &security)

Tangibles (appearance of physical elements)

Empathy (easy access, good communications &customer understanding)

Responsiveness (promptness & helpfulness)


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Ability to perform the promisedservice dependably andaccurately.

Knowledge and courtesy ofemployees and their ability toinspire trust and confidence.

Physical facilities, equipment,and appearance of personnel.

Caring, individualized attention

the firm provides its

Tangibles

Reliability

Responsiveness

Assurance

Empathy


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In groups of five, choose a services industry and spend 10 minutes brainstormingspecific requirements of customers in each of the five service quality dimensions.

Be certain the requirements reflect the customers point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

RELIABILITY


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n Providing service as promised

n Dependability in handling customersservice problems

n Performing services right the first time

n Providing services at the promised time

n Maintaining error-free records

n Keeping customers informed as to whenservices will be performed

n Prompt service to customers

n Willingness to help customers

n Readiness to respond to customersrequests

RESPONSIVENESS

n Employees who instill confidence in customers

n Making customers feel safe in their transactions

n Employees who are consistently courteous

n Employees who have the knowledge to answercustomer questions

ASSURANCE

n Giving customers individual attention

n Employees who deal with customers in a caringfashion

n Having the customers best interest at heart

n Employees who understand the needs of theircustomers

n Convenient business hours

EMPATHY

n Modern equipment

n Visually appealing facilities

n Employees who have a neat, professionalappearance

n Visually appealing materials associated withthe service

TANGIBLES


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is the moment of truth occurs any time the customer interacts withthe firm

can potentially be critical in determiningcustomer satisfaction and loyalty

types of encounters:

remote encounters, phone encounters, face-to-face encounters

is an opportunity to:build trust

reinforce ualit


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Check-In

Request Wake-Up Call

Checkout

Bellboy Takes to Room

Restaurant Meal


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Sales Call

Ordering Supplies

Billing

Delivery and Installation

Servicing


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GOAL:understanding actual events and behaviors that

cause customer dis/satisfaction in service

encounters METHOD:

Critical Incident Technique

DATA:stories from customers and employees

OUTPUT:

identification of themes underlying satisfaction


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Think of a time when, as a customer, youhad a particularly satisfying (dissatisfying)interaction with an employee of______________.

When did the incident happen?

What specific circumstances led up to thissituation?

Exactly what was said and done?


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Recovery: Adaptability:

Spontaneity:Coping:

employee responseto service delivery

system failure

employee responseto customer needs

and requests

employee responseto problem customers

unprompted andunsolicited employeeactions and attitudes


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Acknowledge

problem Explain causes

Apologize

Compensate/upgrade

Lay out options

Take responsibility

Ignore customer

Blame customer Leave customer tofend for him/herself

Downgrade Act as if nothing iswrong

Pass the buck

DO DONT


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Recognize the

seriousness of theneed

Acknowledge

Anticipate Attempt toaccommodate

Adjust the system

Ignore

Promise, but fail tofollow through

Show unwillingness to

try Embarrass thecustomer

Laugh at the

DO DONT


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Take time

Be attentive Anticipate needs

Listen

Provide information Show empathy

Exhibit impatience

Ignore Yell/laugh/swear

Steal from customers

Discriminate

DO DONT


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Listen

Try to accommodate Explain

Let go of the

customer

Take customers

dissatisfactionpersonally

Let customers

dissatisfaction affectothers

DO DONT


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People

ProcessPhysical

Evidence

Contact employees

Customer him/herself

Other customersOperational flow of

activities

Steps in process

Flexibility vs.

standard

Technology vs.

human Tangible

communication

Servicescape

Guarantees

Technology

WebsiteSource: From Managing the Evidence of Service by M. J. Bitner from The Service Quality Handbook, eds. E. E.

Scheuing and W. F. Christopher (1993), pp. 358-70.


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