MK0006 – Services Marketing and Customer Relationship Management

Assignment Set- 1

1 a. Point out the distinctive characteristics of services with examples.

Ans: The services have unique characteristics which make them different from

that of goods. The most common characteristics of services are:

Intangibility: Services are activities performed by the provider, unlike physical

products they cannot be seen, tasted, felt, heard or smelt before they are

consumed. Since, services are not tangibles, they do not have features that

appeal to the customers senses, their evaluation, unlike goods, is not possible

before actual purchase and consumption. The marketer of service cannot rely

on product-based clues that the buyer generally employs in alternative

evaluation prior to purchase. So, as a result of this, the services are not known

to the customer before they take them. The service provider has to follow

certain things to improve the confidence of the client:

The provider can try to increase the tangibility of services. For example, by

displaying a plastic or a clay model showing patients an expected state after a

plastic surgery.

The provider can emphasize on the benefits of the service rather than just

describing the features. Not all the service product has similar intangibility.

Some services are highly intangible, while the others are low i.e. the goods (or

the tangible component) in the service product may vary from low to high.

For example: Teaching, Consulting, Legal advices are services which have

almost nil tangible components; While restaurants, fast food centres, hotels and

hospitals offer services in which their services are combined with product

(tangible objective) , such as food in restaurants, or medicines in hospitals etc.

Inseparability: Services are typically produced and consumed simultaneously.

In case of physical goods, they are manufactured into products, distributed

through multiple resellers, and consumed later. But, in case of services, it

cannot be separated from the service provider. Thus, the service provider would

become a part of a service.

For example: Taxi operator drives taxi, and the passenger uses it. The presence

of taxi driver is essential to provide the service. The services cannot be

produced now for consumption at a later stage / time. This produces a new

dimension to service marketing. The physical presence of customer is essential

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in services. For example: to use the services of an airline, hotel, doctor, etc a

customer must be physically present.

The service consumer must sit in the hair dresser's shop & chair or in the plane

& seat; correspondingly, the hair dresser or the pilot must be in the same shop

or plane, respectively, for delivering the service.

Inseparability of production and consumption increases the importance of the

quality in services. Therefore, service marketers not only need to develop task-

related, technical competence of service personnel , but also , require a great

input of skilled personnel to improve their marketing and inter personal skills.

Perish ability: Services are deeds, performance or act whose consumption

take place simultaneously; they tend to perish me the absence of consumption.

Hence, services cannot be stored. The services go waste if they are not

consumed simultaneously i.e. value of service exists at the point when it is

required.

The perishable character of services adds to the service to marketer problems.

The inability of service sector to regulate supply with the changes in demand;

poses many quality management problems. Hence, service quality level

deteriorates during peak hours in restaurants, banks, transportation etc. This is

a challenge for a service marketer. Therefore, a marketer should effectively

utilize the capacity without deteriorating the quality to meet the demand.

For example: The hair dresser serves another client when the scheduled

starting time or time slot is over. An empty seat on a plane never can be utilized

and charged after departure.

Variability: Services are highly variable, as they depend on the service

provider, and where and when they are provided. Service marketers face a

problem in standardizing their service, as it varies with experienced hand,

customer, time and firm. Service buyers are aware of this variability. So, the

service firms should make an effort to deliver high and consistent quality in

their service; and this is attained by selecting good and qualified personnel for

rendering the service.

For example : The taxi service which transports the service consumer from his home to the opera is different from the taxi service which transports the same service consumer from the opera to his home - another point in time, the other direction, maybe another route, probably another taxi driver and cab.

b. Discuss briefly the significance of process and physical evidence in services marketing.

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Ans: The Service marketing mix involves analysing the 7’p of marketing involving, Product, Price, Place, Promotion, Physical Evidence, Process and People.

To certain extent managing services are more complicated then managing products, products can be standardised, to standardise a service is far more difficult as there are more input factors i.e. people, physical evidence, process to manage then with a product.

People: An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organisation wants to obtain a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptititude, and service knowledge to provide the service that consumers are paying for. Many British organisations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards.

Process: Refers to the systems used to assist the organisation in delivering the service. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company.

Physical Evidence: Where is the service being delivered? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organisation. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lie down.

Physical evidence is an essential ingredient of the service mix; consumers will make perceptions based on their sight of the service provision which will have an impact on the organisations perceptual plan of the service.

2. Briefly explain the gaps model in service marketing.

Ans: The gap model (also known as the "5 gaps model") of service quality is an important customer-satisfaction framework.  In "A conceptual model of service quality and its implications for future research" (The Journal of Marketing, 1985), A. Parasuraman, VA Zeitham and LL Berry identify five major gaps that face organizations seeking to meet customer's expectations of the customer experience.

The five gaps that organizations should measure, manage and minimize: Gap 1 is the distance between what customers expect and what managers

think they expect - Clearly survey research is a key way to narrow this gap.

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Gap 2 is between management perception and the actual specification of the customer experience - Managers need to make sure the organization is defining the level of service they believe is needed.

Gap 3 is from the experience specification to the delivery of the experience - Managers need to audit the customer experience that their organization currently delivers in order to make sure it lives up to the spec.

Gap 4 is the gap between the delivery of the customer experience and what is communicated to customers - All too often organizations exaggerate what will be provided to customers, or discuss the best case rather than the likely case, raising customer expectations and harming customer perceptions.

Finally, Gap 5 is the gap between a customer's perception of the experience and the customer's expectation of the service - Customers' expectations have been shaped by word of mouth, their personal needs and their own past experiences. Routine transactional surveys after delivering the customer experience are important for an organization to measure customer perceptions of service.

Each gap in the customer experience can be closed through diligent attention from management. Survey software can be key to assisting management with this crucial task.

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3. What are the bases for segmenting in services marketing? Explain with examples.

Ans: Customer Segmentation: Segmentation models developed to identify specific attributes of a customer group that are similar and dissimilar to others within the same group. Going deeper than typical industry or company size in a business environment and standard age, gender and salary attributes in a consumer environment, these isolate and identify combinations of attributes that make markets, prospects and customers unique. Segmentation model output is used to define and predict the success levels of sales & marketing initiatives, providing the supporting metrics to ensure the efficiency of each initiative.

Market Analysis: Segmentation models developed to identify and qualify markets. Markets can be modelled of attributes defined by customer segmentation models or used to identify completely new market attributes. This analysis enables a business to develop insight into the geographic and demographic attributes of their target market, allowing them to implement strategic sales and marketing initiatives. The models are used successfully in sales territory planning to identify geographic market densities.

High Value Segmentation Analysis: Segmentation models developed to identify defined 'high value' attributes and clusters within a customer base. Modelling transactional information into a segmentation study provides insight into customer profiles that have higher propensities to generate incremental revenue than the average. These metrics are then used to target new customers with similar profiles, providing a higher and quicker ROI. These metrics are also used to identify existing customers whose profiles are predictive of high value, but are not demonstrating. Internal account development efforts to this group often result in highly successful migrations to the high value portfolio.Segmentation Metrics: Used to identify and increase the success levels of sales & marketing programs. Using the demographic information provided in our prospect databases, sales & marketing campaigns can be monitored and the metrics analyzed to continually refine and increase the targeting and success levels.

Testing Metrics: How to test and benchmark your current sales & marketing initiatives to understand if your efforts are as effective and efficient as possible...without disrupting business as usual. We can develop, implement and execute alternativesales & marketing tests in tandem with and to augment your current efforts. These tests will benchmark your current sales and marketing response rates and close rates, providing you with information necessary to make critical business decisions.

Retention: The cost to acquire a new customer is 5 times greater than the cost to retain and existing one…Let us work with you to analyze and identify points of attrition within your customer base. We can develop models which will predict customer attrition by behavioural fluctuations, providing you with a tool to identify these customers before you loose them. We can also help develop programs to fight attrition within your customer base, through customer contact and management programs. We can develop models for you that identify customers with a higher propensity to respond to cross-selling

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opportunities. Use these models to streamline your sales process and covert a higher percentage of contacts

MK0006 – Services Marketing and Customer Relationship Management

Assignment Set- 2

1 a. Explain briefly the six categories of service innovation.

Ans: Service innovation is a new or significantly improved service concept that is taken into practice. It can be for example a new customer interaction channel, a distribution system or a technological concept or a combination of them. A service innovation always includes replicable elements that can be identified and systematically reproduced in other cases or environments. The replicable element can be the service outcome or the service process as such or a part of them. A service innovation benefits both the service producer and customers and it improves its developer’s competitive edge. A service innovation is a service product or service process that is based on some technology or systematic method. In services however, the innovation does not necessarily relate to the novelty of the technology itself but the innovation often lies in the non-technological areas. Service innovations can for instance be new solutions in the customer interface, new distribution methods, novel application of technology in the service process, new forms of operation with the supply chain or new ways to organize and manage services.

Innovation is not just about brand new products. There are many places where you can be innovative and often the context helps define innovation.

The six focus areas for innovation are:

Product — what we produce and sell Service — exceeding customer expectations

Process — continuous improvement of how we do things

Management — business strategies, systems and structures

Open — working beyond boundaries and collaborating globally

Value —  creating unique value that eliminates the cost to compete

b. What is relationship marketing?

Ans: Relationship Marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions.

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As a practice, Relationship Marketing differs from other forms of marketing in that it recognizes the long term value of customer relationships and extends communication beyond intrusive advertising and sales promotional messages.

With the growth of the internet and mobile platforms, Relationship Marketing has continued to evolve and move forward as technology opens more collaborative and social communication channels. This includes tools for managing relationships with customers that go beyond simple demographic and customer service data. Relationship Marketing extends to include Inbound marketing efforts (a combination of search optimization and Strategic Content), PR, Social Media and Application Development.

Just like Customer relationship management (CRM), Relationship Marketing is a broadly recognized, widely-implemented strategy for managing and nurturing a company’s interactions with clients and sales prospects. It also involves using technology to, organize, synchronize business processes (principally sales and marketing activities) and most importantly, automate those marketing and communication activities on concrete marketing sequences that could run in autopilot (also known as marketing sequences). The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. [1] Once simply a label for a category of software tools, today, it generally denotes a company-wide business strategy embracing all client-facing departments and even beyond. When an implementation is effective, people, processes, and technology work in synergy to increase profitability, and reduce operational costs.

2. Give a detail note on customer relationship management.

Ans: Customer relationship management (CRM) is a broadly recognized, widely-implemented strategy for managing and nurturing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management denotes a company-wide business strategy embracing all client-facing departments and even beyond. When an implementation is effective, people, processes, and technology work in synergy to increase profitability, and reduce operational costs

Phases of CRM

The three phases in which CRM can help to support the relationship between a

business and its customers are, to:

Acquire: a CRM can help a business in acquiring new customers through

excellent contact management, direct marketing, selling and fulfilment.

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Enhance: a web-enabled CRM combined with customer service tools offers

customers excellent service from a team of trained and skilled sales and service

specialists, which offers customers the convenience of one-stop shopping.

Retain: CRM software and databases enable a business to identify and reward

its loyal customers and further develop its targeted marketing and relationship

marketing initiatives

Challenges

Despite the benefits, many companies are still not fully leveraging these tools

and services to align marketing, sales, and service to best serve the enterprise.

Tools and workflows can be complex to implement, especially for large

enterprises. Previously these tools were generally limited to contact

management: monitoring and recording interactions and communications.

Software solutions then expanded to embrace deal tracking, territories,

opportunities, and at the sales pipeline itself. Next came the advent of tools for

other client-facing business functions, as described below. These technologies

have been, and still are, offered as on-premises software that companies

purchase and run on their own IT infrastructure.

Often, implementations are fragmented; isolated initiatives by individual

departments to address their own needs. Systems that start disunited usually

stay that way soiled and decision processes frequently lead to separate and

incompatible systems, and dysfunctional processes

3. Advise a newly started tourism agency to expand its business at the same time develop its service marketing expertise.

Ans: Many service organizations like to offer a range of services. Decisions on this have to be considered with a view on the company’s positioning strategy and the competitor’s service offerings. Any new service that might be offered should be within the competency of the company to deliver it. When considering service product decisions, many strategic growth options are available to a service company. For this, there is a useful framework, proposed by Igor Ansoff. The framework is called a product/market expansion grid or Ansoff matrix. Ansoff matrix is used to consider four strategies which are fundamental to the service provider i.e to review whether more market share could be gained for existing service products in their current market; to consider whether it can find or develop new market opportunities for its existing products; to its current markets; and then to review opportunities for diversification by developing new services for new products.

Product or Service Development: The next strategy is to new product possibilities. New product development is a comparatively new for researchers.

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Service products with need features and different quality levels or an alternative service itself could be developed. Christopher Lovelock has suggested six categories of service innovation including the following.1. Major Innovations: These innovations represent major new marketing Examples: Cellular telephones and Open University (Distance education). The risk and reward profile of such major innovations is typically large.2. Startup Businesses: There are new and innovative ways of addressing current needs of customers and increasing the range of choices available to them. Examples: Video Cassette hires. Some innovations could fit into either of the above two categories.3. New Products for the Market Currently Served: This allows the service provider to use the customer base to the best advantage and cross-sell other products. For example, the Automobile Association established a core range of products related to car breakdown services. The customer base is now offered to a range of other car-related services, including car insurance, travel insurance and map books. The technological change has increased the range of opportunities for innovation and creativity, and is also responsible for creating a market for products and service which consumers may not have considered that they require. For example, automated teller machines, electronic mail and desk-top publishing have each resulted from technological development and crated consumer demands which previously did not exist.4. Product Line Extensions: These offer customers greater variety of choices within existing service lines. This is typical of a business in maturity, which already has a core market segment which the service provider seeks to maintain.5. Product Improvements: This usually consists of altering or improving the features of existing service products.6. Style Changes: These involve cosmetic alternations or enhancement of tangible elements of the service product. The development of a new corporate image or the introduction of uniforms for bank counter staffs is examples of style changes.

Pricing: Until recently, two board strategic approaches to prices were in vogue. They are (i) Skimming and (ii) Penetration. Skimming strategy is based on the perceived need of the users which tend to affect their sensitivity to the prices. When they are insensitive to the prices it could be exploited by setting a very high price to skim the cream off market. Whereas, a penetration strategy assumes that by producing a product similar to that of a competitor and then under pricing it and thereby some or all its market share can be taken away. The recent trend is an alternative value-based strategy based on the belief that the appropriate concept is the perceived value held by the customer.

Promotion and Communication: Promotion is a set of activities designed to increase by consumers and is the through which the service provider communicates with his target markets. The promotion of services covers a number of areas or promotional tools which form the communications mix or promotions mix. These include:· Advertising · Personal selling· Sales promotion · Public relationship · Word of mouth, and· Direct mail.

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The use of promotional tools in service sector is a comparatively recent aspect. Now, the fiercely competitive environment has made the service marketers use promotional tools actively. But promotional exercise as it is done in consumer goods companies is not the same for service industry. A communication programme for a service organization may consist of a wide variety of alternative communications and promotion. To communicate the target markets, the various elements of the communication mix must be integrated within the promotion and communication programme. This process involves many tasks among which the following are considered important. PlaceThe location and channels used to supply services to target customers are two key decision areas. Location and channel decisions are essential to consider how and at which place the services can be delivered to the customer. They become more relevant to service as they cannot be stored and mostly are produced and consumed at the same point. The environment in which the delivery of service takes place and the manner of its delivery is important attributes of the service when its value is perceived.

People: The success of marketing a service is tied closely to the selection, training, motivation and management of people. There are many examples of services failing or succeeding as a consequence of the ineffective or effective management of people.All the people participating in the delivery of service provide cues to the customer regarding the nature of the service itself. How these people are dressed up, their personal appearance and their attitudes and behaviours influence the customer’s perceptions of the service.

Process: The process by which the service is created and delivered to the customer is critical to the service operations as customer often perceive the service delivery system as part of the service itself.Process means all work activities. Process involve the procedures, tasks schedules, mechanisms, activities and routines by which a product or service is delivered to the customer. It involves policy decisions about customer involvement and employee discretion. Identification of process management as a separate activity is a must for service quality improvement. Its importance in service businesses is evident because of the inseparability of production and consumption.

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 is known as physical evidence in service. The physical evidence of service includes all of the tangible representations of the service such as brochures, letterhead, business cards, report formats, signage, and equipment.

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