marketing of financial products ch 3

7/27/2019 Marketing of Financial Products Ch 3

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Chapter III: Service, Satisfaction & Price

Dr. Karim Kobeissi


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Section 1: The Service Encounter

Within the framework of services, the product of the marketin! mi"

#ecomes the service offerin! marked #$ the service encounterwhich was defined as a period of time durin! which a consumerdirect%$ interacts with a service Shostack, 1'()

Product ****************************+ Service ffer

This definition of service encounter inc%udes a%% aspects of the servicefirm with which a consumer ma$ interact, inc%udin! its personne% andph$sica% assets)

The interaction #etween the contact staff, ph$sica% support, and thec%ient is represented #$ the service de%iver$ s$stem which can #edivided into two parts:

1- The visi#%e part .apparent to customers-)

/- The hidden part or the technica% core .the customer ma$ not evenknow of its e"istence-)


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The Service 0e%iver$ S$stem

The service de%iver$ s$stem is a

process which descri#es the

production of a service in a industria%

wa$, that is in a %ar!e num#er)


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The Service 0e%iver$ S$stem .con-

Ever$ e%ementar$ service is made #$ its

own service de%iver$ s$stem) The on%$

e%ement common to a%% service

de%iver$ s$stems of the e%ementar$

services is: the customer)


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Service 0e%iver$ S$stem & %ueprintin!

Shostack has proposed that a service de%iver$s$stem can #e captured in a visua% dia!ram .i)e),

a service #%ueprint-which mi!ht #e used for the

desi!n of services)

The #%ueprintin! e"ercise !ives mana!ers the

opportunit$ to identif$ potentia% fai% points.3- and

to desi!n foo%proof1procedures to avoid their

occurrence, thus ensurin! the de%iver$ of hi!h*

4ua%it$ service)


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Service Blueprinting1(Bank Lending Operation)2

Loan application Branch Officer Pay book

30in!!1hr"

Line of vi#ibility

$eny

1 day 2 day# 3 day#

%ail point &u#toer 'ait ployee deci#ion

* 0 *

+eceivePayent

%inalpayent$ecline ,otify

cu#toer-##uecheck

&onfir

&reditcheck

.cceptPrint

payentbook

$elin/uent&lo#e

account

erifyincoe

data-nitial

#creening

erifypayerployer &redit

bureau Branchrecord#

Bankaccount#

.ccounting

$ata ba#erecord#

%

&onf

ir

''

%

%

%

%

%

%


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1)1 5ana!ement of the Ph$sica% Environment

The mana!ement of the ph$sica%environmentconcerns three cate!ories of

e%ements:

6 The E"terna% E4uipmentsStructure, decoration, si!na%i7ation, parkin!, environment,8

6 The Interna% E4uipmentsInterna% structure, e4uipments used to serve the customer or to

mana!e the #usiness activit$,8

6 ther Tan!i#%e E%ementsPapers, visit cards, #ook%ets, emp%o$ees9 appearance,8


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Inf%uence of the Ph$sica% Environment on Perceived ua%it$

$ nature, a service is difficu%t to eva%uate #ut

potentia% customers can find indications in the

specificities of the service s$stem)

The e4uipments, insta%%ations, and financia%

resources wi%% #e e"amined carefu%%$) In fact #efore

or durin! a consumption of a service, de%i#erate%$

or accidenta%%$, the customer %ocates a%% the

materia% si!ns which inform him on its 4ua%it$)


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Inf%uence of the Ph$sica% Environment on the Service Process

The ph$sica% environment contri#utes to the improvement

of the service process #$ !ivin! to the customer the

necessar$ information on the avai%a#%e services and

their different ac4uirin! modes)

The ph$sica% environment improves the formu%ation of the

re4uest, the conditions of the service, and the

mana!ement of the of waitin! %ines)


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Inf%uence of the Ph$sica% Environment on 0ifferentiation

The ph$sica% environment is a too% of

differentiation for the #ank and its services

with respect to its competitors)

In fact, the appearance of faci%ities often

direct%$ impact how consumers perceive

the wa$ that the firm wi%% hand%e the

service aspects of its #usiness)


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Inf%uence of the Ph$sica% environment on Consumer9s ehavior

The impact of the ph$sica% environment on the consumer9s #ehavior is

represented in the S; mode% : stimu%us < or!anism < response)

Taken from an environmenta% ps$cho%o!$ perspective, this mode%

proposes that stimu%i .S- from the environment wou%d arouse

emotions in the or!anism .- that wi%% conse4uent%$ inf%uence

#ehavior responses .;-) The mode% su!!ests that a%% #ehaviora%

responses toward and within an environment can #e c%assified as

either approach or avoidance .=offman < ateson < 1>-)


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The S**; 5ode%


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1)/ The 5ana!ement of Contact Staff

?ike a%% service activities, #ankin! is characteri7ed #$ the vita%

ro%e p%a$ed #$ direct human re%ations #etween the #ank9s

staff and its customers) The predominant ro%e of persona%

contact is due to the intan!i#%e nature of the activit$) If the

contact staff does not provide to the customer the e"pected

service %eve%, it is the corporate ima!eof the #ank that wi%%

#e deteriorated) In this re!ard, the contact staff form a

stron! cause of differentiation) The$ have to promote

f%e"i#i%it$, adapt to different consumer #ehaviors,

and represent an o#stac%e a!ainst consumers9 dou#ts)


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The 5ana!ement of Contact Staff .con-

@enera%%$, the contact staff is trained accordin! to two

strate!ies :

1- ureaucratic strate!$: accordin! to this strate!$, the prime

responsi#i%it$ of the emp%o$ee is to protect the interests of

the #ank, the customer #ecomes then the enem$ from whom

we protect ourse%ves #$ settin! him the standards to which

he has to approve)

/- ?a"iste strate!$: accordin! to this strate!$, the primeresponsi#i%it$ of the emp%o$ee is to protect the interests of

the customer) The emp%o$ee shou%d do his #est to satisf$ the

customer)


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1)A The 5ana!ement of C%ient Participation

Two 4uestions are usua%%$ raised when discussin!

the mana!ement of c%ient9s participation:

a- Which theor$ shou%d we adapt to mana!e the c%ientswaitin! periodsB

Two conf%ictin! theoretica% mode%s are proposed:

1- 3ie%d Theor$: predicts that perceived waitin! time shou%d#e %on!er, and affective response shou%d #e more ne!ativedurin! the pre*process and post*process rather than in*

process de%a$)/- E"pectanc$ Theor$: su!!ests that a de%a$ that happened

durin! an in*process sta!e shou%d #e more irritatin! than ade%a$ in pre*process or post*process sta!e)

Whatever is the adapted mode%, it appears that the time is

perceived as %on!er and the de%a$ as more important in aninactivate de%a$ than in an occupied de%a$)


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The 5ana!ement of C%ient Participation .con-

#- What is the #est %eve% of c%ient9s participation .%ow, avera!e,

or hi!h- in co*production of the service B

dvanta!es of the customer9s participation in service production:

< The service is #etter adapted to the customer9s e"pectations

< The service is o#tained faster< The service is de%ivered at a %ower cost for the #ank

0isadvanta!es of the customer9s participation in service production:

* ?oss of contro% on the 4ua%it$ of the service #$ the #ank

* ?oss of contro% on the cost of the service #$ the #ank * @ettin! far from the c%ients9 views and e"periences)

6 IT IS ETTE; T P;E*;EST;ICT T=E ?EDE? 3 C?IETS9P;TICIPTI I T=E SE;DICE P;0FCTI)


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Section /: Customer SatisfactionSection /: Customer Satisfaction

0efinition of the concept

0espite man$ attempts to measure and e"p%ain

customer satisfaction, t eresti%% does notappear

to #e a consensusre!ardin! its definition.@iese

and Cote, /GG/-)

;eferrin! to Dan amme./GGA-, customer

satisfactionis definedas a ps$cho%o!ica% state,

which resu%ts from a #u$in! or a consumption

e"perience)


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/)1 The Importance of Customer Satisfaction

There is on%$ one va%id definition of #usiness purpose * to

create a customerH) =avin! created customers, the ne"t step

is to satisf$ them .Peter 0rucker, 1(-

Studies conducted #$ #anks showed that customer %o$a%t$ is

tri!!ered on%$ a#ove a ver$ hi!h %eve% of satisfaction) This

%eve% of satisfaction is dou#%$ intensified when it is remote

operations such as on%ine #ankin!) It is in this perspectivethat we must therefore capita%i7e on the new market of the

Internet, mana!e risks that new drains, raise the profi%e of

the user and !uide trade po%ic$ first to satisfaction, not

direct%$ to profita#i%it$)


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The E"pectation 0isconfirmation Paradi!m: 5ode% of Consumer ehaviorThe E"pectation 0isconfirmation Paradi!m: 5ode% of Consumer ehavior


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Perceived ua%it$ & Satisfaction

The o#Lective of mana!ement is to up!rade

perceived 4ua%it$ and conse4uent%$ increase

customers9 satisfaction) In this perspective two

components of 4ua%it$ can #e ana%$7ed:

1-Technica% 4ua%it$ which concerns the technica%

properties of the product that the consumer

receives as resu%t of the interaction #u$er * se%%er)

/-3unctiona% 4ua%it$ which is re%ated to the wa$

#u$er and se%%er interact durin! the transaction)


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Section A: Pricin! of 3inancia% Services

Throu!hout the service industr$, pricin! methods are increasin!%$

avoidin! the c%assica% computin! approach price M cost N

mar!inO .0esmet and Ko%%in!er, 1>-)

The reasons for this trend inc%ude #oth #ehaviors of the customer

and the supp%ier) The customer perceives the price #ased on

the e"istence of a norma% price, which serves as a reference,

and often interprets the price %eve% as a !uarantee of

4ua%it$) 3or the supp%ier, the 4ua%it$ of service and cost depend

on the rate of use of its e4uipments, as we%% as the num#er of

products so%d to the same customer)


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A)1 3oundations of Pricin! Strate!$

The foundations

under%$in! pricin!

strate!$ can #e

descri#ed as a tripod,with costs to the

provider, competition,

and va%ue1

to thecustomer as the three

%e!s)


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A)/ Traditiona% Pricin! pproach

The pricin! of #ankin! services isparticu%ar%$ important in a conte"t ofincreased competition %eadin!institutions to review their pricin!

po%ic$ and to redefine their o#Lectivesin one of the four maLor pathwa$s:

* Penetration of one or more se!ments) * Sa%es vo%ume ma"imi7ation)

* Profit ma"imi7ation)

* 0omination #$ the 4ua%it$)


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Traditiona% Pricin! pproach .con-

a- Penetration of ne or 5ore Se!ments

Penetration pricin! inc%udes settin! the price

%ow with the !oa%s of attractin! the

%ar!est num#er of consumers in the

tar!eted se!ment.s- and !ainin! market

share) The price wi%% #e raised %ater once

this market share is !ained)


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#- 0omination #$ the ua%it$

In some cases, the practice of a %ow price ma$ #e adverse%$

affected if the customer is concerned a#out the 4ua%it$ of the

product) If a #ankin! product has a hi!h perceived 4ua%it$,

the consumer is wi%%in! to accept a hi!h price and his

demand can #e affected #$ a %ow price %eve%)Thus a #ank can

increase its prices despite intense competition)


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c- Sa%es Do%ume 5a"imi7ation

The o#Lective is to use pricin! to stimu%ate the demand, accordin! to theo#served price e%asticit$ of demand)

Percenta!e chan!e in 4uantit$ demanded

Price E%asticit$ of 0emand M *************************************************************Percenta!e chan!e in price

We have an e%astic demand when the percenta!e chan!e in the 4uantit$ of

demanded service is !reater than the percenta!e chan!e in price) This

makes the ratio more than one)

We have an ine%astic demand when the percenta!e chan!e in the 4uantit$ of

demanded service is %ower than the percenta!e chan!e in price) This makes

the ratio %ess than one)


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ccordin!%$, If the market demand for a #ankin! service or

product is e%astic a price decrease #$ Q wi%% cause an

increase of RQ in the demand .R+-) %ternative%$, If the

market demand is ine%astic a price decrease #$ Q wi%%

cause an increase of RQ in the demanded .R-)

anks tr$ to ma"imi7e their revenues #$ reducin!

the prices of e%astic demand and increasin! prices

to ine%astic demand)


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d- Profit 5a"imi7ation

It is often sou!ht in a short*term perspective

and %eads to adoptin! the hi!hest price that

the market wi%% #ear, re!ard%ess of the cost

or of %on!*term conse4uences)


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d- Profit 5a"imi7ation

It is often %ooked for in a short*term perspective and %eads to

practise the hi!hest price which the market can to%erate,

without takin! into account costs or %on!*term

conse4uences) =owever, profit ma"imi7ation can a%so #e

app%ied in the %on!*term perspective) 3or instance, some

#ankin! services are offered free of char!e or to %ow price

whereas other re%ated services are hi!h%$ char!ed to

compensate for the %ow profits of the first ones)

Whatever the perspective, short*term or %on!*term, profit

ma"imi7ation does not necessari%$ app%$ to a sin!%e product

or service #ut rather a set of interre%ated products)


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A)A Emer!in! Pricin! pproach

mon! the recent deve%opments and prospects for deve%opin!

new pricin! methods in the services sector, two methods are

of particu%ar interest in the #ankin! sector:

1- ;e%ationa% Pricin!

It can #e defined as a strate!$ that encoura!es the c%ient to

deve%op its contacts with the service provider, itHs main

o#Lective is to stren!then and retain re%ationships) This

method of pricin! can take two forms:


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Emer!in! Pricin! pproach .con-

a- ?on! term supp%$

In this conte"t, new customers are offered price and non*price

incentives to maintain a %on!*term re%ationship with the same

service provider) continuous f%ow of transactions with the

same customer wi%% reduce mana!ement costs and therefore

improved profita#i%it$ for the supp%ier)


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Emer!in! Pricin! pproach .con-

#- Packa!es

0esi!ned as a #und%e comprisin! at %east two products or

services, it %eads to a reduction in the mar!ina% cost of each

product or service and deve%opment of shared costs) Some

services and products firms !ive consumers a choice

#etween #u$in! services separate%$ and #u$in! #und%e for a

discount .mi"ed #und%in!* Comp%ementar$ Products-)


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marketing of financial products ch 3

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