1-2 introduction to services what are services? why services marketing? service and technology ...
TRANSCRIPT
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Introduction to Services
What are services? Why services marketing? Service and Technology Characteristics of Services Compared to Goods Services Marketing Mix Staying Focused on the Customer
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Examples of Service Industries
Health Care hospital, medical practice, dentistry, eye care
Professional Services accounting, legal, architectural
Financial Services banking, investment advising, insurance
Hospitality restaurant, hotel/motel, bed & breakfast ski resort, rafting
Travel airline, travel agency, theme park
Others hair styling, pest control, plumbing, lawn maintenance, counseling services,
health club, interior design
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Tangibility Spectrum
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Why Services Matter?
Services dominate U.S. and worldwide economies and are growing dramatically
Service leads to customer retention and loyalty
Service leads to profitsServices help manufacturing companies
differentiate themselves
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Where Americans Work Today. As of July, 2008
Industry % of Labor ForceGovernment 16Wholesale & Retail Trade 16Education & Health Services 14Professional & Business Services 13Leisure & Hospitality 10Manufacturing 10Financial Activities 6Construction 5Information 2Transportation & Utilities 4Natural Resources & Mining 1Other 4Source: Business Week, 9/8/08, p. 009 (Based on BLS Statistics)
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Why do firms focus on Services?
Services can provide higher profit margins and growth potential than products
Customer satisfaction and loyalty are driven by service excellence
Services can be used as a differentiation strategy in competitive markets
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Why study Services Marketing?
Most advanced economies are service-based
Service as a business imperative in manufacturing and IT
As industries deregulate need for professional services increases
Services marketing is different than product mktg.
Service equals profits
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What is Service? The New View
Service includes every interaction between any customer and anyone representing the company, including:
CustomerCustomerBilling, Billing, AccountingAccounting
Web interactionWeb interaction
DealersDealers
SalespeopleSalespeople
Receptionists,Receptionists,SchedulersSchedulers
ServiceServiceemployeesemployees Managers/ExecutivesManagers/Executives
Service can be product by itself, customer service,Service can be product by itself, customer service, value added for goods, embedded in a tangible product …value added for goods, embedded in a tangible product …
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Characteristics of ServicesCompared to Goods
Intangibility
Perishability
SimultaneousProduction
andConsumption
Heterogeneity
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Implications of Intangibility
Services cannot be inventoried
They cannot be easily patented
They cannot be readily displayed or communicated
Pricing services is difficult
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Implications of Heterogeneity
Service delivery and customer satisfaction depend on employee and customer actions
Service quality depends on many uncontrollable factors
There is no sure knowledge that the service delivered matches what was planned and promoted
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Implications of Simultaneous Production and Consumption
Customers participate in and affect the transaction
Customers affect each other
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult
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Implications of Perishability
It is difficult to synchronize supply and demand with services
Services cannot be returned or resold
Perishability generally results in no residual value
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Challenges for Services
Defining and improving quality Ensuring the delivery of consistent quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Coordinating marketing, operations, and human resource
efforts Setting prices Finding a balance between standardization versus
customization
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Expanded Mix for Services –The 7 Ps
Product Price Place Promotion
People All human actors who play a part in service delivery and thus influence the
buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.
Physical Evidence The environment in which the service is delivered and where the firm and
customer interact, and any tangible components that facilitate performance or communication of the service.
Process The actual procedures, mechanisms, and flow of activities by which the
service is delivered—the service delivery and operating systems.
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Ways to Use the 7 Ps
Overall Strategic Assessment
How effective is a firm’s services marketing mix?
Is the mix well-aligned with overall vision and strategy?
What are the strengths and weaknesses in terms of the 7 Ps?
Specific Service Implementation
Who is the customer? What is the service? How effectively does the
services marketing mix for a service communicate its benefits and quality?
What changes/ improvements are needed?
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Gap Model of Service Quality
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Chapter 2Chapter 2 Chapter 2Chapter 2
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Why Services do not Measure Up?.
Expected Expected ServiceService
Perceived Perceived ServiceService
Customer Gap
Customer Gap: Difference between customer expectations
and perceptions of service received
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Gaps Model of Service Quality
Customer Gap: is caused by: Provider Gap 1 (Knowledge (Listening) Gap):
not knowing what customers expect
Provider Gap 2 (Service Design & Standards Gap): not having the right service designs and standards
Provider Gap 3 (Service Performance Gap): not delivering to service standards
Provider Gap 4 (Communication Gap): not matching performance to promises
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Ways to Use Gap Analysis
Overall Strategic Assessment: How are we doing overall in meeting or
exceeding customer expectations?
How are we doing overall in closing the four company gaps?
Which gaps represent our strengths and where are our weaknesses?
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Ways to Use Gap Analysis
Specific Service Implementation Who is the customer? What is the service?
Are we consistently meeting/exceeding customer expectations with this service?
If not, where are the gaps and what changes are needed?
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Customer Behavior in Services
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Chapter 3Chapter 3 Chapter 3Chapter 3
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Consumer Evaluation Processes for Services
Search Qualities attributes a consumer can determine prior to purchase of
a product
Experience Qualities attributes a consumer can determine after purchase (or
during consumption) of a product
Credence Qualities characteristics that may be impossible to evaluate even
after purchase and consumption
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Issues to Consider in Examining the Consumer’s Service Experience
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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Customer Expectations of Service
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The Zone of Tolerance
Adequate Service
Desired Service
Zone ofTolerance
Delights
Desirables
Musts
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Zones of Tolerance
The range of expectations between desired and adequate… can be wide or narrow
can change over time
can vary among individuals
may vary with the type of product/service
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Frequently Asked Questions About Customer Expectations What does a service marketer do if customer
expectations are “unrealistic”?
Should a company try to delight the customer?
How does a company exceed customer service expectations?
Do customer service expectations continually escalate?
How does a service company stay ahead of competition in meeting customer expectations?
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Customer Perceptions of Service
Customer Perceptions
Customer Satisfaction
Service Quality
Service Encounters: The Building Blocks for Customer Perceptions
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The customer is . . .
Anyone who receives the company’s services, including: external customers (outside the organization,
business customers, suppliers, partners, end consumers)
internal customers (inside the organization, e.g., other departments, fellow employees)
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Customer Perceptions of Quality and Customer Satisfaction
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Factors Influencing Customer Satisfaction
Product quality Service quality Price Specific product or service features Consumer emotions Attributions for service success or failure Perceptions of equity or fairness Other consumers, family members, and coworkers Personal factors Situational factors
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How Customers Judge the Five Dimensions of Service Quality
Car Repair (consumer customers)- Reliability: car fixed first time, on time- Responsiveness: Accessible, no waiting, responds on time - Assurance: knowledgeable mechanics- Empathy: Knows my name, previous problem, my preferences- Tangibles: repair area, uniforms, equipment
Airline (consumer customers)- Reliability: leave/arrive on-time- Responsiveness: systems for speedy ticketing, check-in, etc.- Assurance: trusted brand, safety record, competent staff- Empathy: anticipate/deliver on customer needs/special needs- Tangibles: aircraft, ticket counters, baggage area, uniforms
Medical Care (consumer customers)- Reliability: on-schedule appointments, accurate diagnosis- Responsiveness: accessible, no waiting, willingness to listen- Assurance: knowledge, skills, credentials, reputation- Empathy: patient is a person, remember previous problems, listen, be patient- Tangibles: waiting room, exam room, equipment, written materials
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BOTTOM 3 BOXESNeutral to Very Dissatisfied
(7%)
Overall Satisfaction with XYZ
(% of customers)
=
=
=
TOP BOXVery Satisfied
(64%)
SECOND BOXSomewhat Satisfied
(29%)
Definitely Will Repurchase from
XYZ
96%
52%
7%
All Customers
Top Box Scores – A Higher Standard
44-point drop
=
=
=
Definitely Would Recommend XYZ
91%
36%
4%
55-point drop
Source: Technical Assistance Research Bureau (TARP), 2007.
45-point drop 32-point drop
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Service Quality
The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.
Service quality assessments are formed on judgments of: outcome quality interaction quality Customer Gap physical environment quality
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The Five Dimensions of Service QualityRATER scale
Ability to perform the promised service dependably and accurately.
Knowledge and courtesy of employees and their ability to inspire trust and confidence.
Physical facilities, equipment, and appearance of personnel.
Caring, individualized attention the firm provides its customers.
Willingness to help customers and provide prompt service.
Tangibles
Reliability
Responsiveness
Assurance
Empathy
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RATER Attributes
Reliability Providing service as promised Dependability in handling customers’
service problems Performing services right the first time Providing services at the promised time Maintaining error-free records
Assurance Employees who instill confidence in customers Making customers feel safe in their
transactions Employees who are consistently courteous Employees who have the knowledge to answer
customer questions
Tangibles Modern equipment Visually appealing facilities Employees who have a neat,
professional appearance
Visually appealing materials associated with the service
Empathy Giving customers individual attention Employees who deal with customers in a caring
fashion Having the customer’s best interest at heart Employees who understand the needs of their
customers Convenient business hours
Responsiveness Keeping customers informed as to when
services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’
requests
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The Service Encounter…
is the “moment of truth” occurs any time the customer interacts with the firm can potentially be critical in determining customer
satisfaction and loyalty types of encounters:
remote encounters, phone encounters, face-to-face encounters is an opportunity to:
build trust reinforce quality build brand identity increase loyalty
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Build Customer Relationships
Relationship Marketing
Relationship Value of Customers
Customer Profitability Segments
Relationship Development Strategies
Relationship Challenges
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Relationship Marketing…
is a philosophy of doing business, a strategic orientation that focuses on keeping current customers and improving relationships with them
does not necessarily emphasize acquiring new customers
is usually cheaper for the firm because keeping a current customer costs less than attracting a new one
thus, the focus is less on attraction, and more on retention and enhancement of customer relationships
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Customer Goals of Relationship Marketing
Move customers up the ladder from acquiring to enhancing:
AcquiringAcquiring
SatisfyingSatisfying
RetainingRetaining
Enhancing Enhancing
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Benefits of Relationship Marketing
Benefits for Customers: Receipt of greater value Confidence benefits:
trust confidence in provider reduced anxiety
Social benefits: familiarity social support personal relationships
Special treatment benefits: special deals price breaks
Benefits for Firms: Economic benefits:
increased revenues reduced marketing and administrative
costs regular revenue stream
Customer behavior benefits: strong word-of-mouth endorsements customer voluntary performance social benefits to other customers mentors to other customers
Human resource management benefits: easier jobs for employees social benefits for employees employee retention
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Profit Impact of 5 Percent Increase in Retention Rate
Source: F. F. Reichheld, “Loyalty and the Renaissance of Marketing,” Marketing Management, vol. 2, no. 4 (1994), p. 15.
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The Customer Pyramid
Platinum Tier
Company’s most profitable customers, typically heavy users of the product, not overly price sensitive, willing to invest in and try new offerings, and committed customers of the firm
Gold TierProfitability levels are not as high, perhaps because customers want price discounts that limit margins or are simply not as loyal. May be heavy users who minimize risk by working with multiple vendors.
Iron TierEssential customers that provide the volume needed to utilize the firm'’ capacity but their spending levels, loyalty, and profitability are not substantial enough for special treatment
Lead Tier
Customers who are costing the firm money. They demand more attention than they are due given their spending and profitability and are sometimes problem customers—complaining about the firm to others and tying up firm resources.
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TRUE FRIENDS• Good fit of company offering and customer needs• Highest profit potential• Actions:
–Consistent intermittently spaced communication–Achieve attitudinal and behavioural loyalty–Invest to nurture/defend/retain
CL
V(B
eh
avi
ora
l Lo
yalty
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Low High
Low
High
BUTTERFLIES• Good fit of company offering and customer needs• High profit potential• Action:
–Aim to achieve transactional satisfaction, not attitudinal loyalty –Milk the accounts as long as they are active–Key challenge: cease investment once inflection point is reached
STRANGERS• Little fit of company offering and customer needs• Lowest profit potential• Action:
–No relationship investment –Profitize every transaction
BARNACLES• Limited fit of company offering and customer needs• Low profit potential• Action:
–Measure size and share-of-wallet–If share-of-wallet is low, specific up and cross-selling–If size of wallet is small, strict cost control
Segmenting Customers Based on Commitment and Profitability
Relationship Commitment(Attitudinal Loyalty)
W. Reinhartz & V. Kumar, "The Mismanagement of Customer Loyalty," Harvard Business Review 80 (July 2002), pp. 86-94.
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Relationship Development Model
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Strategies for Building Relationships
Core Service Provision: service foundations built upon delivery of excellent
service: satisfaction, perceived service quality, perceived value
Switching Barriers: customer inertia switching costs:
set up costs, search costs, learning costs, contractual costs Relationship Bonds:
financial bonds social bonds customization bonds structural bonds
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“The Customer Is NOT Always Right”
Not all customers are good relationship customers:
wrong segment
not profitable in the long term
difficult customers
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Service Recovery
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Reliability is Critical in Service but…
In all service contexts, service failure is inevitable.
Service failure occurs when service performance falls below a customer’s expectations and leads to customer dissatisfaction.
Service recovery: the actions taken by a firm in response to service failure.
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Eight Most Common Remedies Customers Seek with Serious Problems
1.Have the product repaired or service fixed2. Be reimbursed for the hassle of having
experienced a problem3. Receive a free product or service in the future4. Explanation by the firm as to what happened5. Assurance that the problem will not be repeated6. A thank you for the customer’s business7. An apology from the firm8. An opportunity for the customer to vent his or her
frustrations to the firm
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Service Recovery Paradox
The service recovery paradox is more likely to occur when: the failure is not considered by the customer to be
severe the customer has not experienced prior failures with the
firm the cause of the failure is viewed as unstable by the
customer the customer perceives that the company had little
control over the cause of the failure
Conditions must be just right in order for the recovery paradox to be present!
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Service Recovery Strategies
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Service Guarantees
guarantee is an assurance of the fulfillment of a condition (Webster’s Dictionary)
in a business context, a guarantee is a pledge or assurance that a product offered by a firm will perform as promised and, if not, then some form of reparation will be undertaken by the firm
for tangible products, a guarantee is often done in the form of a warranty
services are often not guaranteed cannot return the service service experience is intangible (so what do you guarantee?)
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Characteristics of an EffectiveService Guarantee
Unconditional the guarantee should make its promise unconditionally – no strings
attached Meaningful
the firm should guarantee elements of the service that are important to the customer
the payout should cover fully the customer’s dissatisfaction Easy to Understand and Communicate
customers need to understand what to expect employees need to understand what to do
Easy to Invoke and Collect the firm should eliminate hoops or red tape in the way of accessing
or collecting on the guarantee
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Benefits of Service Guarantees
A good guarantee forces the company to focus on its customers.
It sets clear standards for the organization. Generates immediate and relevant feedback from customers. When invoked there is an instant opportunity to recover, thus
satisfying the customer and helping retain loyalty. Information generated through the guarantee can be tracked
and integrated into continuous improvement efforts. Employee morale and loyalty can be enhanced as a result of
having a service guarantee in place. A service guarantee reduces customers’ sense of risk and
builds confidence in the organization.
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Does everyone need a service guarantee?
Reasons companies might NOT want to offer a service guarantee: existing service quality is poor guarantee does not fit the company’s image too many uncontrollable external variables fears of cheating or abuse by customers costs of the guarantee outweigh the benefits customers perceive little risk in the service customers perceive little variability in service
quality among competitors