Using Services Marketing to Develop

and Deliver Integrated Solutions atCaterpillar in Latin America

Section A | Group 5

ISSUES

GAP 1• Service Reliability and responsiveness• Customer Relationships• Huge potential for Improvement • Product Differentiation and Quality• Dealer product support operations• Customer Surveys were Sporadically performed• Inability to deliver and calculate costs and benefits of CSAs

GAP 2• Poor positioning and marketing of CSAs• CSAs were created in an AD HOC manner• Consumers were unaware of what was promised about CSAs• Performance standards were operationally focused and not

consumer driven• Absence of and standards and measures

GAP 3• Inadequate supply of qualified mechanics• Limited number of Technicians were selected and trained• Lack of teamwork and communication among various

departments• Lack of a reliable system for keeping track and monitoring• Complex scheduling process for field technicians• Lack of feedback communication between consumer and

dealers

GAP 4• Improper focus on product features and benefits• No advertising brochures / advertisements• Ability to sell CSAs both externally and internally was limited• Lack of tangible representations or written descriptions• Lack of written communication confused verbal

communication• Absence of clearly defined service features

Caterpillar’s formula for success Find out what products customers want

Design and build them Keep them running

When they wear out, rebuild or recycle Do it better than anybody else

Company Perceptions of Customer Expectations

Customer Expectations

Inadequate service recovery

• Required to be taken care of in case of failed technician appointments, technician shortage, unattractive presentation of inspection reports etc.

Insufficient relationship focus

• Recognising the correct segment

• Focus on costs, revenue and operations, and not customer profitability or customer service quality perception

Upward communication

• Dealers, not employees, were the contact points for end customers

• Non renewal of CSAs, CSAs went unnoticed, resulting in inefficient feedback mechanism

Inadequate customer research orientation

• Customer surveys sporadically performed, catered to only service quality feedback

• Individual interactions, were missing

CATERPILLAR - GAP 1

Question What else did they need to learn in Gap 1 about customer needs and

expectations?

Kano’s Model 1. Basic Expectations: The bad frustrates, yet the good does not impressCaterpillar served high on basic expectations (high customer performance perception of tangibles), but these had low impact on customer satisfaction

2. Performance Payoff: The more organisational investment, the more user satisfactionCaterpillar’s investing in shifting from product focus to services focus (in the form of CSAs)

3. Excitement Generators: Design elements and features that delight the userWhat Caterpillar needed to know: How to work upon achieving potential level of performance in responsiveness, reliability, empathy and assurance areas to address customer gap.

Responsiven

ess

•Standardisation of technicians’ skill set and training to achieve speed in service offered

•Sophisticated processes, tools, feedback mechanisms to register and address customer’s issues

Reliability

•Maximum up time of equipment at minimum cost

•Minimum risk and cost for unplanned machine down time

•Timely services such as oil/ filter change, condition monitoring, visual machine inspection

Assurance

•Knowledge and courtesy of employees to inspire trust from the customer

•Attention to their interaction and communication skills in describing issues to customers and valuable recommendations

Empathy

•Capturing and addressing customer satisfaction with individual interaction

•Addressing individual issues by customized service in terms of duration and cost, relaxing financial burden by having credit policy in place

Different needs for different customers, hence different zones of tolerance

Small customers Mid range customers

Large customers

Segments: “Do it myself” “Work with me” “Do it for me”

Activities: Used internal or competitive resources to satisfy product support needs

Managed day-to-day product support; dealer support for complex repairs

Outsourced majority of their product service activities

Zone of tolerance: Large Medium Small

Expectations: Ways to avoid costly repairs and unplanned downtimes, policy to overcome cash flow limitation

Versatility preferred to productivity

Machine up time most important requirement

Hard Features• Frequency of the services offered -

weekly, monthly or on-call• Standardization of CSAs –

elimination of variance across dealers• Performance measure – Ex:

maximum machine up time • What is the average machine down

time that the customer is comfortable with?

Soft Measures• How important is it to the

customers that the contact employee has good communication skills?• Are the employees responsive,

courteous and possess the required skill set?• Level of customer satisfaction

with customization of service?

Question : What features were expected by customers in CSAs?

SERVQUAL Surveys- Matching expectations statements, referent expectations format, combined expectations/perceptions statements, expectations distinguishing between desired and adequate service- Measuring customer perceptions of service on reliability, responsiveness, assurance, empathy and tangibility dimensions

Capturing customer satisfaction and individual interactions-Relationship Surveys- Post interaction customer surveys- Segment-oriented research

Question : How could they find out the features expected by customers in CSAs?

QuestionClosing Gap 1 : To find out the needful to know how to establish

standards for Gap 2

DESIRED RESULTS• Responsive providers and effective services.• Customer feedback continuously linked to service improvements• Empowered customers who expect satisfaction and exercise their

influence and rights• Informed consumers who take action

INFORMED, ENGAGED,EMPOWERED CONSUMERS• Judge service quality• Test local goods and services• Set service standards• Advocate for customer satisfaction

CONSUMER ADVOCACY GROUP• Educate and train neighborhood

consumers• Monitor customer satisfaction• Provide neutral, credible consumer

information• Serve as consumer ombudsman /

advocate• Promote customer satisfaction

strategies and accountability

CUSTOMER FOCUSEDAGENCY/SERVICE PROVIDERS• Work to improve organizational

performance• Strive for 100% customer satisfaction• Treat staff as they want customers to

be treated• Establish continuous improvement• Utilize customer feedback as a

measure of accountability

Customers who care about qualityservices and are continuously informed about actual performance

CSSP FRAMEWORKUsing Customer Satisfaction To Improve Quality and Access

to Goods, Services and Supports In Vulnerable Neighborhoods

Source : CSSP - Center for the Study of Social Policy

CLOSING GAP 1

Source : Report on ‘closing delivery gap’ Bain and Co.

CUSTOMER RELATIONSHIP MATRIX

Word of mouth

Personal needs

Past experience

Expectedservice

Perceivedservice

Perceived Service Quality

Communication

Courtesy

Credibility

Security

Providing customized

solution

Service Quality Dimensions

• Reliability• Responsiveness• Empathy• Assurance• Competence• Access• Tangibles

DETERMINANTS OF PERCEIVED SERVQUAL

VISION 2020

Innovation / TechnologyExtend Customer ExpectationsExtend Global Leadership

THE SOLUTION

STOC

KHOL

DERS

Deliv

er su

perio

r ret

urns

thro

ugh

the

cycle

s

PEOPLE

Attract and develop the best talentCUSTOMERS

Help customers succeed

DEFINE STRETEGIC GOALS

Superior Results | Global Leader | Best Team

STENGTHEN OPERATING PRINCIPLES

Strategic Businesses | Customer Focus |Valued Products/Services |

Supplier Collaboration | Superior Dealer Support |Expertise | Flexible Cost Structure

PUT VALUES IN ACTION

Source : Caterpillar Inc.

OPERATIONAL EXCELLENCE

CUSTOMER INTIMACY

PERFORMANCE SUPERIORITY

Operational competence

Customization, Unique Customer DemandsCustomer Responsiveness

Product Design, StyleProduct differentiation

Cost consideration, Delivery

MARKETING STRATEGY

Short Term Goal

Long Term Goal

Source : Coursera ; Course in strategic marketing, Wharton School of Business

Question 2:A) Should they offer different CSAs to

different segments of General Construction?B) What would that imply for research,

standards, and implementation?

• Lack of consistency across LACD, and inability to deliver and inability to calculate costs and benefits of CSAs (dealers)

• Inconsistent approach towards customer service focus (largely focused on very large mining customers); dealers had different customer service philosophies

• Highly customizable in terms of content, length and cost; sold separately from machines/equipment o Limited marketability and dealers’ operational efficiency

• Sales organizations reluctant to sell CSAs due to concerns regarding delivering on promises, as well as due to intangible nature of CSA, making it hard to explain, sell and differentiate

Issues with Existing CSAs

• Identifying target customers and optimizing service offering, marketing and sales approach • Developing and communicating attractive service packages that cater to needs of the various segments • Developing relationship strategies (financial bonds, social bonds, customization bonds, and structural

bonds) leading to higher customer loyalty and CSA renewal rates

Need for Segment-wise CSAs

Key Variables for CSA Customer Segmentation

Demographic Operating Variables

Purchasing Approaches

Situation Factors

Levels of Segmentation

Criteria for Effective Segmentation

Differentiable

Measurable

Accessible

Substantial

Actionable

Personal Characteristics

Source: Peppers and Rogers Group Website

Need-based Customer Segmentation Model • Requires clustering customers based on qualitative (e.g. FGD, also to be used for hypothesis development to be used in quantitative research) and quantitative research (to find statistically distinct homogeneous needs segments)

• Integrated segmentation methodology is more adaptive to changing customer preferences, and develop truly targeted services

• Common needs: needs shared among all customers; must be served to survive competition

• Shared and Differentiated needs: must be served to remain competitive for specific customer groups

• Relevance of value proposition increases with enhanced understanding of individual needs

Low Medium High

Level of Engagement

Do

it M

ysel

fW

ork

With

Me

Do

It Fo

r Me

Note: Level of engagement refers to the product support service package being offered. Low refers to simple preventive maintenance kits, while High refers to the total maintenance and repair package, which may include (but is not limited to) multiple machines/equipment, training, spare parts, and regular maintenance audits

Beha

viou

ral (

Nee

ds a

nd B

enefi

ts) C

usto

mer

Seg

men

tsBehavioural Segmentation: CSA

‘Needs and Benefits’ vs. ‘Engagement’Highly

Customized;High customer loyalty can be

expected

Focus on educating the

customer; continue

relationship

Targeting Specific Segments for CSAs for higher customer loyalty

Value is the quality I get from the price I pay Value pricing Market segmentation pricing

Value is all that I get for all that I give Price framing Price bundling Complementary pricing Results-based pricing

Value is everything I want in a Service Prestige pricing Skimming pricing

Value is low price Discounting Odd Pricing Synchro-pricing Penetration pricing

Value-based Pricing – Services Pricing Strategies based on Customer Definition of Value

Pricing Strategies

The company should adopt a perceived value pricing strategy, wherein, it will charge separate prices for the various segments (based on criticality/perceived value of a service to various customers); it may also adopt a tiered service

pricing on similar lines as is done by companies in telecom sector to address CSA pricing at various engagement levels

Implications for Research • Existing research Issues

o Interactions with customers largely through dealers – increased importance of customer research o Customer surveys were sporadically performed and only partially designed for the purpose of service

quality feedback o Inadequate customer value survey measures for capturing and addressing customer satisfaction o Lack of tools to interpret the results of surveys and to translate them into specific strategies o Segmentation issues: overlapping; assumption-based

• Possible Solutions o Conduct customer research to identify customer requirements and service expectations (identify

zones of tolerance for each, mapping various standards against expectations); will also help in identifying more profitable customer segments and new service opportunities Conduct quantitative research (e.g. factor and cluster analysis) to segment customers into

mutually exclusive segments based on their expectations and perceptions o Monitor and track service performance - Post interaction customer surveys and trailer calls; will also

help in performance evaluation of employees and dealers o Competitive benchmarking against competitors o Assess service gaps (expectations vs. perception) o Identify service failures to implement service recovery

Implications for Standards • Existing Issues

o Ad-hoc approach towards CSA design and development; varied widely across dealerships (and often across customers within dealerships)

o Performance standards operationally focused (e.g. cost, revenue, profit) and not customer driven (e.g. reliability, responsiveness, empathy, assurance, and tangibles)

o Customer location varied widely – hard to standardize service promises o Dealerships organized in silos – inconsistent internal interactions o Issues with CSA renewals

• Possible Solutions o Moving to customer-driven performance standards (segment-wise) – hard standards (e.g. response

time when complaint is received and service person arrival on-site, and repair time) and soft standards (empathy and etiquettes, trailer calls)

o Developing service blueprint and adhering to it strictlyo Training salesforce and product support team to ensure consistent service delivery and

communication

Machine/Equipment repair flow chart

Customer arrive at

service center with M/E

Machine/equipment is

inspected

Worksheet is prepared

CSA is checked and BOM is calculated

M/E worksheet and BOM is given to the

customer

Customer leaves

Does customer

agree?

When M/E gets repaired service

center follows up

Customer want to get machine/equipment (M/E) repaired

Wants M/E pick up?

Yes Customer contacts customer support

service

Check customer has CSA for M/E

Field mechanic goes to client site and perform M/E

inspection

Yes

No

No

Does customer

agree?

YesDelivery time is

different ?

Yes

NoM/E is

repairedCustomer pays as

per BOM

NoCustomer pays as

applicable field mechanic leaves

1

2

M/E inspection flow chart

Customer wants to get machine/equipment (M/E) condition monitoring

Customer contacts customer support

service

Check customer has CSA for M/E

Field mechanic goes to client site and perform M/E

inspection

Field mechanic advices customer

for any need additional work

1

Preventive maintenance flow chart

Customer service center informs customer for E/M’s scheduled service

Wants E/M serviced?

Yes

No

2

Customer can be informed about PM’s benefits

Service center follow up sub-flow chart

Customer service center contacts

customer

E/M is delivered to customerWants M/E

delivered?Yes

NoCustomer picks up

E/M

Customer pays as per BOM

CRM operations

Customer

Customer Customer

CRM operationsCustomer DatabaseMachine/Equipment

ServicingGrievance redressalEducate customer

Equipment/Machine repair

Needs CSA information

Equipment/Machine delivery and trailer calls

New Customer Information

Existing Customer Information

CustomerMachine condition monitoring

Grievance redressal

Preventive maintenance

CRM operations

Physical Evidence

Customer Action

Employee Actions(onstage/visible)

Employee Actions(backstage/Invisible)

Support Processes

Customer calls customer

service center

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of interaction

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of visibility

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of internal interaction

Greets

Customer database

Customer asks for field mechanic

Checks customer information and

mechanic availability

Ask for CSA and book appointment with the customer

Field mechanic visits the customer, inspect M/E

Tells the appointment time to

customer

Field mechanic performs condition

monitoring

CSA, Repair Equipment, forms

Physical Evidence

Customer Action

Employee Actions(onstage/visible)

Employee Actions(backstage/Invisible)

Support Processes

Customer agrees for

repair

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of interaction

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of visibility

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of internal interaction

Field Mechanic suggests

repairs needed and cost

Customer database

Customer waits till M/E date of delivery

M/E gets repaired

Field Mechanic picks up the truck

Customer care informs customer

Customer decides time of delivery

M/E delivered

Customer receives and checks M/E

Worksheet , BOM Worksheet , BOM

Blueprint

Implementation

• Tools for serving customers• High quality support

services and policies• Defined standards• Integrated services

marketing communication

• Reduced repair cost• Reduced unplanned

downtimes

Service designed and delivered to targeted customers

• Repeat business• Word of mouth

publicity

Question

What standards and measures should be set in Gap 2 to deliver to customer expectations?

About CSAs

• Highly customized and complex– content, length, cost• Sold separately and delivered through dealer product support• Large customers – high loyalty• Medium and Small customers – low renewals• Limited the CSA marketability among general construction customers• Preventive Maintenance Agreements (PM CSA) – technician activities

were not build explicitly into contracts

The Loyalty Loop

Source: www.mckinsey.com

Poor Service Design

• Few CSAs• CSAs were not branded• CSAs were created in an ad

hoc manner

Customer Driven

Standards

• Promised but expectations not met

• Operationally focused not customer driven

Inadequate physical

evidence and Servicescape

• Customers interact with sales people

• What to offer and what to deliver

• Cultural differences

GAP 2The

Service Design

and Standards

Gap

Customer Driven Service Designs & Standards

Company perceptions of customer expectation

Standards and measures to be set up in Gap 2

Hard Standards:• Standardized CSAs – Make CSAs part of performance evaluation for

dealerships and their employees.• Focus on response time and service speed – minimize machine

downtime

Soft Standards:• Employees need to be empathetic and responsive• Customer satisfaction through customization and delivery of service

Kotter’s 8-Step Change Model

• Create a Sense of Urgency - Use CSAs as a medium to capture the growing services market• Create a guiding coalition – Meeting with the Dealer Advisory Panel• Create a vision for change – The customers, along with Machine and

Product Support Sales Representatives to be the key stakeholders• Communicate the vision - Performance standards to be customer

centric. Adequate literature for CSAs to be made available. Better relations with “buyers”

Kotter’s 8-Step Change Model

• Remove Obstacles – Dealership departments must work in tandem. Better coordination between sales and service departments.• Create short-term wins – Address each country individually. Create

uniform CSAs.• Consolidate Improvements – Keep on learning. Switch to multiple

CSAs but with consistent options• Anchor the changes – Initiate customer feedbacks on a quarterly

basis to make sure adequate services are delivered to the customer. Once complete, freeze the process but keep enough space for uncertainties.

CSAs for General Construction Customers Large Medium Small

Do it for me

Highly customized with little standard services

Monthly/Yearly subscription

Do it with me

Less customized +

Basic standard services

Cost for the service performed

Do it myself

Less customized with more emphasis on consultation, information dissemination,

diagnosis , a readily available service team. Offer Inspection

CSAs so that clients can compare among services.

Service charge at heavy discount.

Market Penetration of CSA

Development of existing CSAs

Market Development Diversification of CSA

Mar

ket

Products

Strategy matrix fitCaterpillar

New

Exis

ting

Existing New

Balanced CSA strategy

Creating new CSAs

Post introduction Evaluation

Commercialization

Market testing

Service prototype development and testing

Business analysis

Service concept and evaluation

Idea Generation

Implementation

Front end Planning

• Separate training for product and service dealers

• ERP, CRM systems implementation

• Employee reward schemes/performance based bonus appraisals.

• Internal audits and checks

• Readily available brochures and informational guides for quick reference.

• Automated reminder about services.

• Manufacturing products with the important attributes as found out in the research.

Objectives for the dealerships

To increase coordination between product support and machine sales department

This can be achieved by common training and development programs where the employees are taught about the company’s service standards and CSAs

Common rewards for both the teams for achieving the desired service quality targets

Set up common employee goals and priorities that are in line with company’s activities

Dynamics within a dealership

How should the dealership overcome all the Gap 3 issues

that they faced to insure consistent delivery?

Issues Identified Supply and

Demand Inadequate supply of qualified mechanics

Boundary SpannersInteraction and

communication skills of technicians

Co ordination Lack of teamwork and communication

System and Processes Lack of a reliable

system for dealers to better manage

customers

Service Culture

Product Focused to Integrated Customer Focused Business Solution

New customer driven goals to be communicated through all verticals.

New benchmarks : Recording and minimization of machine downtime, no. of CSA’s sold and serviced successfully

Customer Centric Culture

MapCustomer Journey and

LifecycleRefine

Operating model to enable customer

centricity

Alignprocesses to support and drive customer

engagement

Engageexecutives and leaders

Focusdevelopment around

target areas and behavior change

IntegrateDisparate business unit

culture

Transformculture top to bottom

Measurechange using key

metrics

Incorporatecustomer feedback

into process and behavior

Customer Oriented Service

Delivery

Retain the best people

Hire the right people

Develop people to

deliver service quality

Provide needed support systems

Compete for the best people

Hire for service completeness and service inclination Be the

preferred employer

Treat employees as customers

Include employees in

the company’s vision

Develop service oriented internal

processesProvide

supportive technology and

equipment

Measure internal service

quality

Measure and reward strong

service performers

Promote Team work

Empower Employees

Train for technical and

interactive skills

Hire the right people : • Hire technicians who are not only technically strong but

also good in customer interaction and communication• Hire sales force oriented towards both product and

service marketing.• Make new dealership ties who are capable of CSA

deploymentDevelop people to deliver service quality : • Communicate and engage people in the new service

oriented business model: Goals• Train dealers and technicians in customer interaction,

competency matching, empower them like other dealers• Sensitization of both sales team and technicians to CSA’sProvide needed support systems :• Carefully designed CSA’s to be given to sales force.• Better CRM software tool, defined processes• Technician to be provided new checklists which target

more customer oriented specifications Retain the best people :• Contracts for technicians• Upgrading PM techs • Incentivize CSA’s sales and good service delivery

performance

Boundary Spanning Roles

Mechanics and TechniciansCompensation and Incentive plans : Contracts

to ensure there is no shortage in supply thus creating a bottleneck

Training : Both technical and non technicalEmotional Labor : Understanding sources of

conflict to improve Interaction and communication skills

Quality Trade off

Sources of conflict1. Person Role Conflict

2. Organization / Client Conflict

3. Inter client Conflict

Boundary Spanning Roles

Dealership Employees (Sales Force: Product and Product Support)Emotional Labor :1. Person Role Conflict: Clearly defined goals for each department2. Organization / Client Conflict: Communicating the importance and effectiveness in

CSA (building confidence)3. Inter client Conflict : Better segmentation, Create bands of customer

Delivering the promise(Interactive Marketing)

Enabling the promise(Internal Marketing)

Making the promise(External Marketing)

OwnersTechnicians and

Dealership Employees

Management

Internal Service Marketing

Coordination• Clear Goals for each Department

• CRM through better CRM software tool enabling formal and transparent way to communicate

• Caterpillar

• Dealers

• Field Technician

• Owner ( may be through a mobile app)

Confidence in CSA• Early adapters, Medium adapters, Late adapters

(Wow, Moment of truth, free pilot, generate word of mouth)

• Best to be put on the job, incentives to be given to high performers

• Service guarantees if service falls below a level (return a %age of price which has already been incorporated in price estimation), offer pilots

Customers’ Roles in Service Delivery

Six key elements of a customer-centric strategy by PWC

Using customer insight to inform effective customer

segmentation

Creating multiple delivery Channel

Aligning service delivery to customer journeys

Setting service standards

Creating and empowering customer champions

Continuous improvement through customer feedback

Effective Customer ParticipationDefine Customer’s Roles

• Clarify level of participation on the basis of segmentation• Identify specific jobs and tasks• Understand implications for productivity, quality and satisfaction

Educate and Reward Customers• Educate customers for their roles• Provide reasons to participate• Reward customer performance

Manage the customer mix• Assess compatibility of segments• Isolate incompatible segments• Enhance segment compatibility

Dealers’ Roles in Service Delivery

They are the Service Providers They are the Organization in the customer’s eyes They represent the Brand They are the Marketers

Assurance: Communicating their credibility to inspire trustReliability: Delivering the service as promisedResponsiveness: The promptness in serving customersRelationship: Flexibility in delivering the servicesTangibles: The after effects of service (on machine parts)

Perceived Expectations

Perceived Quality

Perceived ValueCustomer Satisfaction

Customer Loyalty

Customer Retention

Managing Demand & Capacity

Capacity is limited & cannot be easily changed

Product demand

Timing of demand is not correlated to whether the customer is paying more or less Product demand may

sometimes be satisfied early

PredictablePeak construction season

UnpredictableShort notice or after business hours

Managing Demand & Capacity

Try to predict the demand

Managing Demand & CapacityShift Demand

Demand Too High

Demand Too Low

(Reduce Demand during Peak Times)

• Communicate busy days & times to customers• Offer incentives for nonpeak usage• Set priorities by taking care of loyal or high-need customers first• Charge full price

(Increase Demand to Match Capacity)

• Educate customers about peak time

Customer Profitability Map

Platinum Gold

Iron Lead

Price

Cost to Serve

The Customer Pyramid

Platinum

Gold

Iron

Lead

Managing Demand & Capacity

Platinum • Communicate with customers Top priority – high lifetime value

Iron• Educate Customers

Lead• Provide Discount in Nonpeak times

Gold• Offer incentives for Nonpeak UsageTry to lock-in

Managing Demand & CapacityAdjust Capacity

Demand Too High

Demand Too Low

(Reduce Demand during Peak Times)

• Cross-train employees• Use part-time employees• Stretch people, facilities

(Increase Demand to Match Capacity)

• Schedule vacations & employees training strategically

What internal and external materials were necessary to communicate the CSAs to salespeople and customers?

Internal MaterialsGAPSNo brochures or advertisements describing CSAsAbsence of clearly defined service featuresLack of written communicationNo consistent selling process or message explaining the differentiated individual CSA offerings

External MaterialsGAPSNo brochures or advertisementsNo tangible representationsNo differentiation among CSAs not explaining the difference in value

COMPANY

CUSTOMERPROVIDERS

SERVICES MARKETING TRIANGLE

Interactive Marketing

Internal MarketingCommunications

External MarketingCommunications

Approaches to Overcome Service Communication Channels

Address service intangibility

Manage service promises

Manage customer

expectations

Manage customer education

Manage internal marketing

communication Goal= servicedelivery greater than or equal topromises

Address Service IntangibilityUse narrative to demonstrate the service experience - story-based appealsPresent vivid information- evoke strong emotionsFeature service employees and satisfied customers in communication Aim messages to influencersGenerate word of mouth through Employee Relationship

Manage Service PromisesCreate a Strong Service Brand- brand becomes the company’s method of integrating marketing

communicationCoordinate External Communication

Manage Customer ExpectationsMake realistic promisesOffer service guaranteesOffer choicesCreate tiered-value service offerings

Manage Customer EducationPrepare customers for the Service ProcessConfirm performance to Standards and ExpectationsClarify expectations after the sale

Manage Internal Marketing CommunicationCreate effective vertical communicationsCreate effective horizontal communicationsSell the brand inside the companyCreate effective upward communicationCreate cross-functional teams

Closing the gapsInternal Downward communication - Newsletters and magazines, internal promotional campaignsFamiliarize employees with external marketing communication before it is airedHorizontal communication – Coordination between marketing and operations (reducing the gap

between customer expectation and service delivery)Hold GAP workshopsEffective upward communication – Know when the service breakdowns are occurring and whyCreate cross functional teams

Closing the gapsExternalEducate the customersCommunicate to the customer what has been accomplishedGenerate word of mouth through Employee RelationshipsAdvertising testimonials featuring actual customers