service marketing (3)

8/6/2019 Service Marketing (3)

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SERVICEAccording to Kotler, “ Any activity or benefitthat is essentially intangible & does not

result in the ownership of anything. It’sproduction may or may not be tied tophysical product”

Service clients are paying for expertise,experience, advice, skills, knowledge & thebenefits they bring. The benefits may lastbut service itself is of limited duration.



Core Product – Core Benefit of the ServiceInsurance – piece of mindHairdresser – look & feel goodFootball Team – emotions & enjoymentCar Mechanic – safe, reliable motoring

Transport (Rail, Road, Air, Water)Communication (Telephone, Radio, TV)Public Utilities (Electricity, LPG, Sanitary)Finance, Insurance & Real EstateHospitality, Tourism & RecreationLegal, Education & Health



1. Intangibility - “u can’t touch this”

2. Production (or performing the service) andConsumption (using the service) - happensat the same time – Inseperability

3. Heterogeneity - services are not alwaysdelivered the same way

4. Perishability - cannot be put in inventory or

stored for later use i.e. You can’t buy 2 haircuts

4 Characteristics of Services

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• Services cannot be stored• Services cannot be protected through patents –

therefore a really great travel package and servicecan be copied

• Hard to explain and display Services if you can’tsee them

• Prices are difficult to set - depends on customersexpectations

Characteristics of Services

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Marketing Strategies

•stress tangible cues, eg. Smiling face

• use personal information, sources, references

• use word-of-mouth

• contact customers after they buy to stimulatecontinued enthusiasm and hope they “talk it up”


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2. Inseparability of Production (or performing the service) and Consumption(using the service) - happens at the same

time


• Many people involved in delivering a service

• mass production of services is hard to do

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2. Inseparability of Production (or performing the service) and Consumption(using the service) - happens at the same

time


Marketing Strategies

• Emphasize how much you train your people - sotheir ability to give you good service will be high

• Have many locations so customers can get to youie. Insurance sales come to your home

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It is very difficult to standardize services

eg. A machine can make ice cream cones astandard size 100% of the time

A person filling an ice cream cone with ascoop cannot do it the same amount eachtime, unless you use a machine to dispensethe ice cream


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eg. A Taxi driver cannot drive you to the office

in exactly the same time each day becausethe traffic patterns change

eg. A travel agent can sell you a vacation

package - but cannot guarantee you will likethe trip exactly the same way another touristdid.


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4. Perishability - cannot be put ininventory or stored for later use ie. You can’tbuy 2 haircutsDemand fluctuates and changes, sometimesdepending on the season, or weather

eg. Taxi in the rain, vacation in summer


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Services

Customers do not obtain ownership of servicesService products are ephemeral and cannot be inventoried

Intangible elements dominate value creation

Greater involvement of customers in production process

Other people may form part of product experience

Greater variability in operational inputs and outputs

Many services are difficult for customers to evaluate

Time factor is more important--speed may be keyDelivery systems include electronic and physical channels

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Marketing Implications - 1No ownership

Customers obtain temporary rentals, hiring of personnel, or access to facilities andsystemsPricing often based on time

Customer choice criteria may differ for renting vs. purchase--may includeconvenience, quality of personnel

Can’t own people (no slavery!) but can hire expertise and labor

Services cannot be inventoried after productionService performances are ephemeral—transitory, perishable

Exception : some information-based output can be recorded in electronic/printed form and re-used many times

Balancing demand and supply may be vital marketing strategyKey to profits: target right segments at right times at right price

Need to determine whether benefits are perishable or durable

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Marketing Implications - 2Customers may be involved in production process

Customer involvement includes self-service and cooperation with servicepersonnel

Think of customers in these settings as “partial employees”Customer behavior and competence can help or hinder productivity, somarketers need to educate/train customersChanging the delivery process may affect role played by customersDesign service facilities, equipment, and systems with customers in mind:user-friendly, convenient locations/schedules

Intangible elements dominate value creationUnderstand value added by labor and expertise of personnelEffective HR management is critical to achieve service qualityMake highly intangible services more “concrete” by creating and

communicating physical images or metaphors and tangible clues

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Marketing Implications - 3Other people are often part of the service product

Achieve competitive edge through perceived quality of employeesEnsure job specs and standards for frontline service personnel reflect bothmarketing and operational criteriaRecognize that appearance and behavior of other customers can influenceservice experience positively or negativelyAvoid inappropriate mix of customer segments at same timeManage customer behavior (the customer is not always right!)

Greater variability in operational inputs and outputsMust work hard to control quality and achieve consistencySeek to improve productivity through standardization, and by training bothemployees and customers

Need to have effective service recovery policies in place because it is moredifficult to shield customers from service failures

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Marketing Implications - 4Often difficult for customers to evaluate services

Educate customers to help them make good choices, avoid risk

Tell customers what to expect, what to look forCreate trusted brand with reputation for considerate, ethicalbehaviorEncourage positive word-of-mouth from satisfied customers

Time factor assumes great importanceOffer convenience of extended service hours up to 24/7Understand customers’ time constraints and prioritiesMinimize waiting timeLook for ways to compete on speed

Distribution channels take different forms Tangible activities must be delivered through physical channelsUse electronic channels to deliver intangible, information-basedelements instantly and expand geographic reach

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S.No. Physical Goods Services1. Tangible Intangible2. Homogeneous Heterogeneous3. Product and distribution

separated fromconsumption

Production, distributionand consumption resimultaneous process

4. A thing An activity5. Core value produced in

factoryCore value produced inbuyer-seller interaction

6. Customers do notparticipate in theproduction process

Customers participate inproduction

7. Can be kept in stock Cannot be kept in stock

8. Transfer of ownership No transfer of ownershipwww.a2zmba.com



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People Processing Possession Processing

Mental StimulusProcessing

InformationProcessing

(directed at intangibleassets)

e.g., airlines, hospitals,haircutting, restaurantshotels, fitness centers

e.g., freight, repair,cleaning, landscaping,

retailing, recycling

e.g., broadcasting, consulting,education, psychotherapy

e.g., accounting, banking,insurance, legal, research

TANGIBLEACTS

INTANGIBLEACTS

DIRECTED ATPEOPLE

DIRECTED ATPOSSESSIONS

What is theNature of theService Act?

Who or What is the Direct Recipient of the Service?

El f Th S i M k i



Elements of The Services MarketingMix:“7Ps” vs. the Traditional “4Ps”

Rethinking the original 4PsProduct elements

Place and time

Promotion and education

Price and other user outlays

Adding Three New ElementsPhysical environment

Process

People

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The 7Ps:

(1) Product Elements All Aspects of Service Performance that Create ValueCore product features—both tangible and

intangible elementsBundle of supplementary service elementsPerformance levels relative to competition

Benefits delivered to customers (customersdon’t buy a hotel room, they buy a goodnight’s sleep)Guarantees

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The 7Ps:

(2) Place and TimeDelivery Decisions: Where, When, and How

Geographic locations served

Service schedules

Physical channels

Electronic channels

Customer control and convenienceChannel partners/intermediaries

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The 7Ps:(3) Promotion and EducationInforming, Educating, Persuading, and Reminding Customers

Marketing communication toolsmedia elements (print, broadcast, outdoor, retail, Internet, etc.)

personal selling, customer service

sales promotion

publicity/PR

Imagery and recognitionbranding

corporate design

Contentinformation, advice

persuasive messages

customer education/training

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The 7Ps:

(4) Price and Other User OutlaysMarketers Must Recognize that Customer Outlays InvolveMore than the Price Paid to Seller Traditional Pricing Tasks

Selling price, discounts, premiums

Margins for intermediaries (if any)

Credit terms

Identify and Minimize Other Costs Incurred by Users

Additional monetary costs associated with service usage (e.g., travelto service location, parking, phone, babysitting,etc.)

Time expenditures, especially waiting

Unwanted mental and physical effort

Negative sensory experiences

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The 7Ps:

(5) Physical EnvironmentDesigning the Service scape and providing tangibleevidence of service performances

Create and maintaining physical appearancesbuildings/landscaping

interior design/furnishingsvehicles/equipment

staff grooming/clothing

sounds and smells

other tangibles

Select tangible metaphors for use in marketingcommunications



7Ps:

(6) ProcessMethod and Sequence in Service Creation and Delivery

Design of activity flows

Number and sequence of actions for customers

Providers of value chain components

Nature of customer involvement

Role of contact personnel

Role of technology, degree of automation

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The 7Ps:

(7) PeopleManaging the Human Side of the Enterprise The right customer-contact employees performing tasks well

job design

recruiting/selection

training

motivation

evaluation/rewards

empowerment/teamwork

The right customers for the firm’s missionfit well with product/processes/corporate goals

appreciate benefits and value offered

possess (or can be educated to have) needed skills (co-production)

firm is able to manage customer behavior

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InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

enabling promises

keeping promises

setting promises

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler



Services Marketing

TriangleOverall StrategicAssessment

How is the serviceorganization doingon all three sides of the triangle?Where are theweaknesses?What are thestrengths?

Specific ServiceImplementation

What is being promotedand by whom?

How will it be deliveredand by whom?Are the supportingsystems in place todeliver the promisedservice?

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Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger,“Putting the Service-Profit Chain to Work,” Harvard Business Review , March-April 1994, p. 166.



Service Employees They are the service - provider. They are the organization in the customer’s eyes. They are the brand.

They are marketers. Their importance is evident in:

The Services Marketing Mix (People) The Service-Profit Chain The Services Triangle

Frontline also drives customer loyalty, with employees playingkey role in anticipating customer needs, customizing servicedelivery and building personalizedrelationships

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Service EmployeesWho are they?“boundary spanners” – periphery, link the inside of the

organization to the outside world.Emotional Labour - “The act of expressing socially desired

emotions during service transactions”.

Consider management expectations of restaurant servers:deliver a highly satisfying dining experience to theircustomersbe fast and efficient at executing operational task of servingcustomers

do selling and cross selling, e.g. “We have some nice dessertsto follow your main course”

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Person vs. Roleonflicts between what jobs require and employee’s own personality and beliefs

Organization vs. Clientilemma whether to follow company rules or to satisfy customer demands

Client vs. Clientonflicts between customers that demand service staff intervention

Quality vs. Productivity



Customer-OrientedServiceDelivery

Hire theRight People

ProvideNeeded SupportSystems

Retain theBest

People

DevelopPeople to

Deliver ServiceQuality

C o m p

e t e f o r

t h e B e

s t

P e o p

l e

Hire for Service

Competenciesand ServiceInclination

ProvideSupportiveTechnology

and Equipment

Treat

Employees

as

Customers E

mpower

Employees

B e t h e P r e f e r r e d

E m p l o y e r T r a i n

f o r

T e c h

n i c a l a

n d

I n t e r a c t i v e

S k i l l s

P r o m

o t e

T e a m w

o r k

M e a s u r

e

I n t e r n a

l

S e r v i c e

Q u a l i t y

D e v e l o p S e r v i c e -

o r i e n t e d I n t e r n a l

P r o c e s s e s

M e a s u r e a n d

R e w a r d

S t r o n g

S e r v i c e

P e r f o r m

e r s

I n c l u d e

E m p

l o y e e s i n

t h e

C o m

p a n y ’ s

V i s i o n

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Factors Favoring EmployeeEmpowerment

Firm’s strategy is based on competitive differentiationand on personalized, customized service

Emphasis on long-term relationships vs. one-timetransactions

Use of complex and non-routine technologies

Environment is unpredictable, contains surprises

Managers are comfortable letting employees work

independently for benefit of firm and customersEmployees seek to deepen skills, like working withothers, and are good at group processes

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EmpowermentBenefits:quicker responsesemployees feel moreresponsible

employees tend to interactwith warmth/enthusiasmempowered employees area great source of ideaspositive word-of-mouth

from customers

Drawbacks:greater investments inselection and traininghigher labor costs

slower and/or inconsistentdeliverymay violate customerperceptions of fair play“giving away the store”

(making bad decisions)

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Service Culture“A culture where an appreciation for goodservice exists, and where giving good serviceto internal as well as ultimate, externalcustomers, is considered a natural way of lifeand one of the most important norms byeveryone in the organization.”

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Relationship Marketingis a philosophy of doing business that focuses onkeeping current customers and improvingrelationships with themdoes not necessarily emphasize acquiring newcustomersis usually cheaper (for the firm)

keeping a current customer costs less than attracting anew one

thus, the focus is less on attraction, and more onretention and enhancement of customerrelationships

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Customer Retention &Increased Profits

Employee Loyalty

QualityService

Customer Satisfaction

fi h O i i f C



Benefits to the Organization of CustomerLoyalty

loyal customers tend to spend more with theorganization over timeon average costs of relationship maintenance arelower than new customer costs: less need forinformation and assistance & make fewer

mistakesemployee retention is more likely with a stablecustomer baseRecommend new customers to firm (act as unpaidsales people)

Trust leads to willingness to pay regular prices vs.shopping for discountslifetime value of a customer can be very high

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How Customers See Relational Benefits inService Industries

Confidence benefitsless risk of something going wrong, less anxietyability to trust providerknow what to expectget firm’s best service level

Social benefitsmutual recognition, known by namefriendship, enjoyment of social aspects

Special treatment benefitsbetter prices, discounts, special deals unavailable to othersextra serviceshigher priority with waits, faster service

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“The Customer Isn’t

Always Right”Not all customers are good relationshipcustomers:

wrong segmentnot profitable in the long termdifficult customersAvoid inappropriate mix of customer segments

at same timeSolution: Proper Segmenting OR Manage

customer behavior

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Measuring Customer Equity:Calculating Life Time Value of Each Customer

Value at Acquisitionrevenues (application fee + initial purchase)Less costs (marketing +credit check + account set up)

Annual Value (project for each year of relationship)revenues (annual fee + sales + service fees + value of referrals)Less costs (account management + cost of sales + write-offs)

Net Present ValueDetermine anticipated customer relationship lifetimeSelect appropriate discount figureSum anticipated annual values (future profits) at chosen discount rate

Customer Equity is total sum of NPVs of all current customers

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Strategies for Building

RelationshipsFoundations:Excellent Quality/ValueCareful Segmentation

Bonding Strategies:Financial BondsSocial & Psychological Bonds

Structural BondsCustomization Bonds

Relationship Strategies Wheel – slide 37

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ExcellentQuality

andValue

I. FinancialBonds

II.SocialBonds

IV.Structural

Bonds

III. CustomizationBonds

Volume andFrequencyRewards

Bundling andCross Selling

Stable

Pricing

Social Bonds

AmongCustomers

PersonalRelationships

ContinuousRelationships

Customer Intimacy

MassCustomization

Anticipation/Innovation

SharedProcessesandEquipment

JointInvestments

IntegratedInformationSystems

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Service Quality The customer’s judgment of overallexcellence of the service provided in relationto the quality that was expected.Service quality assessments are formed on

judgments of:Outcome quality eg: I’net connectivity

Process quality eg: support eqpmts usedPhysical environment quality eg: infra

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Ability to perform the promisedservice dependably and accurately.

Knowledge and courtesy of employees and their ability toconvey trust and confidence.Physical facilities, equipment, andappearance of personnel.

Caring, individualized attention thefirm provides its customers.Willingness to help customers and

provide prompt service.

Tangibles

Reliability

Responsiveness

Assurance

Empathy



s Providing service as promiseds Dependability in handling customers’

service problemss Performing services right the first times Providing services at the promised times Maintaining error-free records

s Keeping customers informed as towhen services will be performed

s Prompt service to customerss Willingness to help customerss Readiness to respond to customers’

requests

RELIABILITY

RESPONSIVENESS

s Employees who instill confidence incustomers

s Making customers feel safe in their transactions

s Employees who are consistently courteouss Employees who have the knowledge to

answer customer questions

ASSURANCE

s Giving customers individual attentions Employees who deal with customers in a

caring fashions Having the customer’s best interest at hearts Employees who understand the needs of

their customerss

Convenient business hours

EMPATHY

s Modern equipments Visually appealing facilitiess Employees who have a

neat, professionalappearance

s Visually appealing materialsassociated with the service

TANGIBLES

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Perceived

Service

ExpectedService

CUSTOMER

COMPANY

Customer Gap

GAP 1

GAP 2

GAP 3

ExternalCommunications

to CustomersGAP 4ServiceDelivery

Customer-DrivenService Designs and

Standards

Company Perceptionsof Consumer

Expectationswww.a2zmba.com



Provider Gap 1: Not knowing what customers expect

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

Provider Gap 3: Not delivering to service standards

Provider Gap 4: Not matching performance to promises

Customer Expectations

Customer Perceptions

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Customer GAP



Customer Expectations

Company Perceptions of Customer Expectations

Inadequate Marketing Research OrientationInsufficient marketing researchResearch not focused on service qualityInadequate use of market research

Lack of Upward CommunicationLack of interaction between management and customersInsufficient communication between contact employeesand managersToo many layers between contact personnel and topmanagement

Insufficient Relationship FocusLack of market segmentationFocus on transactions rather than relationshipsFocus on new customers rather than relationshipcustomers

Inadequate Service Recovery

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GAP1



Customer-Driven ServiceDesigns and Standards

Management Perceptions of Customer Expectations

Poor Service Design Unsystematic new service development process

Vague, undefined service designs

Failure ot connect service design to servicepositioning Absence of Customer-Driven Standards

Lack of customer-driven service standardsAbsence of process management to focus oncustomer requirementsAbsence of formal process for setting servicequality goals

Inappropriate Physical Evidence and Servicescape

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GAP2



Service Delivery

Customer-Driven ServiceDesigns and Standards

Deficiencies in Human Resource PoliciesIneffective recruitmentRole ambiguity and role conflictPoor employee-technology job fitInappropriate evaluation and compensation systemsLack of empowerment, perceived control and teamwork

Failure to Match Supply and Demand Failure to smooth peaks and valleys of demandInappropriate customer mixOver-reliance on price to smooth demand

Customers Not Fulfilling RolesCustomers lack knowledge of their roles and responsibilitiesCustomers negatively impact each other

Problems with Service IntermediariesChannel conflict over objectives and performanceChannel conflict over costs and rewardsDifficulty controlling quality and consistencyTension between empowerment and control

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GAP3



Service Delivery

Lack of Integrated Services Marketing Communications Tendency to view each external communication as

independentNot including interactive marketing in communications planAbsence of strong internal marketing program

Ineffective Management of Customer ExpectationsNot managing customer expectations through all forms of communicationNot adequately educating customers

Overpromising Overpromising in advertisingOverpromising in personal selling

Overpromising through physical evidence cues Inadequate Horizontal CommunicationsInsufficient communication between sales and operationsInsufficient communication between advertising and operationsDifferences in policies and procedures across branches or unit

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GAP4



The Service Encounteris the “moment of truth”

occurs any time the customer interacts with the firmcan potentially be critical in determining customersatisfaction and loyaltytypes of encounters:

remote encounters, phone encounters, face-to-faceencounters

is an opportunity to:build trustreinforce quality

build brand identityincrease loyalty

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Recovery: Adaptability:

Spontaneity:Coping:

Employee Responseto Service Delivery

System Failure

Employee Responseto Customer Needs

and Requests

Employee Responseto Problem Customers

Unprompted andUnsolicited EmployeeActions and Attitudes



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Listen Try to accommodateExplainLet go of thecustomer

Take customer’sdissatisfactionpersonallyLet customer’s

dissatisfaction affectothers

DO DON’T



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Recognize theseriousness of the needAcknowledgeAnticipateAttempt toaccommodateExplain rules/policiesTake responsibilityExert effort toaccommodate

Promise, then fail tofollow throughIgnoreShow unwillingness totry

Embarrass thecustomerLaugh at thecustomer

Avoid responsibility

DO DON’T



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Acknowledge

problemExplain causesApologizeCompensate/upgradeLay out options

Take responsibility

Ignore customer

Blame customerLeave customer tofend for him/herself DowngradeAct as if nothing iswrong

DO DON’T



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Take time

Be attentiveAnticipate needsListenProvide information

(even if not asked)Treat customers fairlyShow empathyAcknowledge by name

Exhibit impatience

Ignore Yell/laugh/swearSteal from or cheata customer

DiscriminateTreat impersonally

DO DON’T



The Purchase Process for Services

Prepurchase StageAwareness of needInformation searchEvaluation of alternative service suppliers

Service Encounter StageRequest service from chosen supplierService delivery

Postpurchase StageEvaluation of service performanceFuture intentions

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Components of Customer

ExpectationsDesired Service Level: wished-for level of service quality that customer believes canand should be delivered

Adequate Service Level: minimum acceptablelevel of servicePredicted Service Level: service level thatcustomer believes firm will actually deliver Zone of Tolerance: range within whichcustomers are willing to accept variationsin service delivery

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• Desired Service:- Personal Needs & Philosophies- Enduring Service Intensifiers ( Belief about what is possible &

Derived )

• Adequate Service:- Transitory Service Intensifiers ( urgent need-ATM )

- Perceived Service Alternative ( multiple or self service )- Self Perceived Service Role ( how well they are performing:

How well they specify the level of service expected & Complain )- Situational Factors ( not in control )

P di t d i



Predicted service- Explicit Service Promise- Implicit Service Promise- Word of Mouth- Past Experiences

Service Encounter Expectation vs OverallService ExpectationEncounter expectation are more specific

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Control Problems Make Services Hard to



Evaluate

Search attributes – Tangible characteristics thatallow customers to evaluate a product beforepurchaseExperience attributes – Characteristics that canbe experienced when actually using the serviceCredence attributes – Characteristics that aredifficult to evaluate confidently even afterconsumptionGoods tend to be higher in search attributes,

services tend to be higher in experience andcredence attributesCredence attributes force customers to trust thatdesired benefits have been delivered

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www.a2zmba.comSource: Adapted from Zeithaml

Most Goods

High in searchattributes

High in experienceattributes

High in credence attributes

Difficult to evaluate

Easyto evaluate

Most Services

Clothing

Chair

Motorve hicle

Foods

Restaurantmeals

Lawnfertilizer

Haircut

Entertain ment

Compute rrepair

Legalservices

Complex surgery

E d u c a t i o n

Customer Satisfaction is Central to



the Marketing ConceptSatisfaction defined as attitude-like judgment following aservice purchase or series of service interactionsCustomers have expectations prior to consumption, observeservice performance, compare it to expectationsSatisfaction judgments are based on this comparison

Positive disconfirmation if better than expectedConfirmation if same as expectedNegative disconfirmation if worse than expected

Satisfaction reflects perceived service quality, price/qualitytradeoffs, personal and situational factorsResearch shows links between customer satisfaction and afirm’s financial performance

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Customer Delight:



gGoing Beyond Satisfaction

Research shows that delight is a function of 3components

Unexpectedly high levels of performanceArousal (e.g., surprise, excitement)

Positive affect (e.g., pleasure, joy, or happiness)

Is it possible for customers to be delighted by very mundane services?

Progressive Insurance has found ways to positively surprise customers with customer-friendly innovationsand extraordinary customer service

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CUSTOMER SATISFACTION SURVEYRelationship SurveyQuestions about customer relationship withthe company including service, product andprice.Helps a company diagnose its relationshipstrengths and weaknesses.Monitor & Track service performance.Benchmarking with best competitors.Performance Improvements.On the basis of SERVQUAL and provider Gaps.

Trailer Calls -

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Di i fi d



to a Dissatisfied

Customer

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Service Encounter is Dissatisfactory

Service Encounter is Dissatisfactory

Take some formof public action

Take some formof public action

Take some formof private action

Take some formof private action

Take no actionTake no action

Complain to theservice firm

Complain to theservice firm

Complain to athird party

Complain to athird party

Take legal actionto seek redress

Take legal actionto seek redress

Defect (switchprovider)

Defect (switchprovider)

Negative word-of-mouth

Negative word-of-

mouth

Any one or a combination of these responses is possible

Any one or a combination of these responses is possible



Types of ComplainersPassive – no complain, stay or exit/switchVoicers – complain to provider, stayActivitist – complain to provider, negativeword of mouth, complaint to third partyIrates – negative word of mouth, switch toother providers but don’t complaint to third

parties

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Complaint Barriers for

Dissatisfied CustomersInconvenience

Difficult to find the right complaint procedure.Effort, e.g., writing a letter .

Doubtful Pay Off Uncertain whether any action, and what action will betaken by the firm to address the issue the customer isunhappy with.

UnpleasantnessComplaining customers fear that they may be treatedrudely,may have to hassle, ormay feel embarrassed to complain .

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L e a r n f r o m R e c o v e r y E x p e r i e n c

e s

T r e a t

C u s t o

m e r s

F a i r l y

L e a r n f r o m

L o s t C u s t o m e r s

W e l c o m e a n d

E n c o u r a g e C o m p l a i n t s

F a i l S

a f e t h

e S e r v i c

e

A

c t Q u i c k l y

ServiceRecoveryStrategies

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H E bl Eff i



How to Enable Effective

Service RecoveryBe proactive—on the spot, before customerscomplain

Plan recovery procedures Teach recovery skills to relevant personnel

Empower personnel to use judgment and

skills to develop recovery solutions

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Service Guaranteesguarantee = an assurance of the fulfillmentof a condition (Webster’s Dictionary)

for products, guarantee often done in theform of a warranty

services are often not guaranteedcannot return the serviceservice experience is intangible

(so what do you guarantee?)

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T f S i



Types of Service

GuaranteesSingle attribute-specific guarantee – one key serviceattribute is covered

Multiattribute-specific guarantee – a few importantservice attributes are covered

Full-satisfaction guarantee – all service aspects coveredwith no exceptions

Combined guarantee – like the full-satisfaction, addingexplicit minimum performance standards on importantattributes

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Eff ti S i



Effective Service

GuaranteeUnconditional The guarantee should make its promise unconditionally - nostrings attached.

MeaningfulIt should guarantee elements of the service that areimportant to the customer.

The payout should cover fully the customer's dissatisfaction.

Easy to Understand and CommunicateFor customers - they need to understand what to expect.For employees - they need to understand what to do.

Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way of accessing or collecting on the guarantee.

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D e m a n d - B a s e d

C o s t - B a s e d

C o m p

e t i t i o n -

B a s

e d

PROBLEMS:1. Costs difficult to trace2. Labor more difficult to

price than materials3. Costs may not equal value

PROBLEMS:1. Small firms may charge too

little to be viable2. Heterogeneity of services

limits comparability3. Prices may not

reflect customer value

PROBLEMS:1. Monetary price must be adjusted to reflect

the value of non-monetary costs2. Information on service costs less available to

customers, hence price may not be a central factor



Value is low price. Value is everything I want in a service.

Value is the quality

I get for the price I pay.

Value is all that I get

for all that I give.

• Discounting• Odd pricing - Psycho• Synchro-pricing

• Penetration Pricing

• Prestige pricing –Premium

• Skimming pricing

• Value pricing• Market segmentationpricing

• Price framing• Price bundling• Complementary pricing• Results-based pricing

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Odd pricing- Strategy in which price is set just below the exactrupee amount.



Synchro-pricing- Strategy in which price is differentiated basedon Time, Place, Quantity, IncentivePrestige pricing- Strategy in which service provider offer high-quality servicesValue pricing- “giving more for less”. Low cost for a bundle of desirable service attributesMarket segmentation pricing- Based on the different segmentsshow different quality level. Market segmentation by client category ( Ex.: night-worker, day-worker)Price framing- Strategy in which the service could be framed inan appropriate pricePrice bundling- Strategy in which interrelated services arepackagedComplementary pricing- Captive pricing, two-part pricing, lossleadership (Ex.: mobile-phone service, Internet service) Pricingthe base good at a relatively low price to the complementary

good - this approach allows easy entry by consumers (e.g.consumer printer vs ink jet cartridge) OR Pricing the base goodat a relatively high price to the complementary good - thisapproach creates a barrier to entry and exit (e.g. golf clubmembership vs green fees)Result-based pricing- Based on the result of the service(Contingency pricing, Money back guarantees, Commission)

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Challenges in Service

MarketingGiving a feel for the “product”Managing Demand FluctuationsMaintaining QualityCost ContainmentAttitudinal block in using provenmarketing principles in service

marketing

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Some Impacts of Technological



Change

Radically alter ways in which service firms do business:with customers (new services, more convenience)

behind the scenes (reengineering, new value chains)

Create relational databases about customer needs and

behavior, mine databanks for insightsLeverage employee capabilities and enhance mobility

Centralize customer service—faster and more responsive

Develop national/global delivery systems

Create new, Internet-based business models

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Services Intermediariesfranchiseese.g., Jiffy Lube, H&R Block, McDonald’s

agents and brokerse.g., travel agents, independent insuranceagents

electronic channelse.g., ATMs, university video courses, TaxCutsoftware

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Leveraged businessformat for greaterexpansion andrevenuesConsistency in outletsKnowledge of localmarketsShared financial riskand more workingcapital

• Difficulty in maintaining andmotivating franchisees

• Highly publicized disputesand conflict

• Inconsistent quality

• Control of customer relationship by intermediary

Benefits Challenges



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An establishedbusiness formatNational or regionalbrand marketingMinimized risk of

starting a business

• Encroachment

• Disappointing profits andrevenues• Lack of perceived control

over operations

• High fees

Benefits Challenges



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Consistent delivery forstandardized servicesLow cost

Customer convenienceWide distributionCustomer choice andability to customizeQuick customer feedback

• Customers are active, not passive• Lack of control of electronic

environment• Price competition• Inability to customize with highly

standardized services• Lack of consistency with customer

involvement• Requires changes in consumer behavior • Security concerns• Competition from widening geographies

Benefits Challenges



MeasurementReview

Control Strategies

• Alignment of goals

• Consultation andcooperation

• Help the intermediarydevelop customer-oriented service

processes• Provide needed support

systems•

Develop intermediariesto deliver service quality• Change to a cooperative

management structure

Empowerment Strategies

Partnering Strategies

service marketing (3)

Documents