Service and Relationship Marketing Module:1

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Service and Relationship MarketingModule1
Chapter1 Basics of Service Marketing
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Service and Relationship Marketing
Module1Chapter1 Basics of Service Marketing

• What are services?
• The word service originally associated with the
  work performed by servants for their masters.
• the action of serving, helping or benefiting
  conduct tending to the welfare or advantage of
  another
• Services are acts, deeds, performance or
  efforts.
• The aim of service is to provide solution to the
  customers problem.

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• Services is an activity or series of activities
  take place by interaction between customer and
  service employees
• Its an economic activity which is consumed at a
  time it is produced and provide added value in
  forms of Convenience, amusement, timeliness ,
  comfort or health

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Services Defined

• Activities, Benefits or Satisfactions
• which are offered for sale
• or
• provided in connection with the sale of goods
• American Marketing Association

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Services Defined

• Separately identifiable, intangible activities
  which provide want satisfaction
• when marketed to consumers and/or industrial
  users
• and which are not necessarily tied to the sale of
  a product or another service
• William J. Stanton

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Services Defined

• Any activity or benefit that one party can
  offer to another that is essentially intangible
  and does not result in the ownership of anything.
• Its production may or may not be tied to a
  physical product
• Philip Kotler and Bloom

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Goods Vs. Services
Why Services Marketing ???

• Goods are tangible
• Goods are homogeneous
• Goods are produced in the factory
• Production, distribution and consumption are
  separate and independent functions in goods

• Services are intangible
• Services are heterogeneous
• Services are produced in buyer-seller
  interactions
• Production, distribution and consumption take
  place simultaneously in the case of services

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Goods Vs. Services

• Consumers do not generally participate in the
  production of goods
• Goods can be stored
• In sale of goods, transfer of ownership takes
  place

• Consumers are co-producers in services
• Services can not be stored
• In the sale of services, transfer of ownership
  will not take place

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Characteristics of Services

• Intangibility
• Inseparability
• Variability
• Perishability
• Customer participation
• No ownership

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Intangibility

• Challenges
• Cannot be communicated easily
• Consumer suspects due to absence of concrete
  evidences
• Design of total service package not possible
• Comparative presentation is not possible

• Strategic Options
• Making the service process tangible to the
  maximum possible extent
• Managing and promoting word-of-mouth
  communication
• Strengthening internal and external marketing
• Use of Relationship Marketing

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Inseparability

• Challenges
• Problems of market expansion
• Maintenance of service quality
• Compulsory presence of consumer
• Limited production capacity
• Operation at limited capacity

• Strategic Options
• Minimization of customer interactions
• Innovating techniques of indirect interaction
• Standardization to the maximum possible extent
• Developing distribution network with quality
  control mechanisms

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Variability

• Challenges
• Limited scope for standardization
• Not possible to communicate exactly what the
  consumer is going to receive
• Quality can be determined only after the service
  is consumed

• Strategic Options
• More focus on standardization
• Internal marketing and employee training
• Positioning variation as a strength of innovation
• Promote research and innovation

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Perishability

• Challenges
• Storage of service is not possible
• Sales volume continuously in relation to the
  capacity
• Time pressure in sales

• Strategic Options
• Demand management
• Capacity management
• Tactical approaches
• Continuous study on demand patterns and
  competitive parameters

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Customer Participation

• Challenges
• Customers are not controllable
• Production quality also depends upon customers
  knowledge and ability to participate
• Customers are evaluating at every stage of
  service production

• Strategic Options
• Effective external marketing
• Customer education and training
• Effective interactive marketing
• Management of movements of truth
• Effective internal marketing

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No ownership

• Challenges
• Nothing remains after consumption
• Very less time to the consumer to evaluate the
  product
• High consumer dissonance

• Strategic Options
• Making communication tangible
• Customer relationship marketing
• Managing high level of company image

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• Sources for service sector growth
• Innovation
• - Push Theory of Innovation
• - Pull theory of Innovation
• Social Trends

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• Reasons for Growth in Services Sector
• Growth in intermediate demand from firm
• Growth in final demand from customers
• Increase in affluence
• More leisure time
• Working woman
• Growth in population of DINKS
• Greater life expectancy
• Greater complexity of products
• Greater complexity in life
• Greater concern for resource scarcity and ecology
• Increasing number of new products

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Service Sector in Indian Economy
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• Reasons for growth of Services in India
• Economic Affluence
• Changing Role of Women
• Cultural Changes
• IT Revolution
• Development of Markets
• Unbundling Corporations
• Increasing Consciousness of Health Care
• Economic Liberalization
• Migration
• Export Potential
• Service Tax

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• Factors Stimulation the transformation of the
  Service Economy
• Government Policies
• Change in regulation
• Privatization
• New rules to protect customer, employees and the
  environment
• New agreements on trade in services
• Social Changes
• Rising consumer Expectation
• More affluence
• More people short of time
• Increased desire for buying experience vs things
• Rising consumer ownership of computer, cell
  phones, and high tech equipments

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• Rising consumer ownership of computer, cell
  phones, and high tech equipments
• Easier access to more information
• Immigration
• Gewoning but aging population
• Business Trends
• Push to increase shareholders value
• Emphasis on productivity and cost saving
• Manufacturera add value through service service
  and sell services
• More strategic alliances and outsourcing
• Focus on quality and customer satisfaction
• Growth of franchising
• Marketing emphasis by nonprofits

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• Advance in Information Technology
• Growth of Internet
• Greater bandwidth
• Compact Mobile Equipment
• Wireless networking
• Faster, more powerful software
• Digitization of text, graphics, audio and video
• Globalization
• More companies operation on transnational basis
• Increased international Travel
• International merger and acquisitions, JVs
• Off shoring of customer service
• Foreign competitors invade domestic markets

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Role (Type) of Services in Economy

• Value Added Services
• Financing, Leasing, Insurance
• Infrastructure service
• Communications, Transportation, Utilities,
  Banking
• Manufacturing Services inside company
• Finance, Accounting, Legal , RD and design
• Distribution service
• Wholesaling, Retailing, Repairing
• Personal Service
• Health care, Restaurants, Hotels
• Business Service supporting Manufacturing
• Consulting, Auditing, Advertising, Waste
  Disposal
• Governments Service
• Military, Education, Judicial, Police and fire
  protection

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Service Classification Service process Matrix
Degree of Interaction and Customization
LOW
High

• Service factory
• Airlines
• Trucking
• Hotels
• Resorts Recreation

• Service Shop
• Hospitals
• Auto Repair
• Other repair services

LOW
Degree of Labor intensity

• Mass services
• Retailing
• Wholesaling
• School
• Retail aspect of commercial Banking

• Professional Services
• Physicians
• Lawyers
• Accountants
• Architects

High
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How to win customer in Service Business(USPs)

• Availability
• How accessible is the service?
• (ATMs service beyond the traditional bankers
  hours)
• Convenience
• (The location of service where customer must
  travel to that service-Fast food restaurants)
• Dependability
• Hoe reliable is the service?
• (Airlines- on time departure arrival
  performance will build huge trust)
• Personalization
• need for Customization -Are you treated as an
  individual?

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• Price
• The price is viewed as being a surrogate for
  quality.
• Quality
• Quality is judged by both the process of
  services delivery and the put comes of the
  service. It is difference between service
  expectation service experience
• Reputation
• Unlike a product, a poor service experience can
  note exchanged or returned for a different model.
  Positive word-of-mouth is the most effective form
  of advertising.
• Safety
• In air travel and medicine, the customers are
  putting their lives in the hands of the service
  provider
• Speed
• How long must I wait for service? For emergency
  service such as fire or police protection,
  response time is the major criterion of
  performance.

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Technology in Services

• The introduction of technology often empowers
  the customer to perform the service unassisted.
• For, example ,
• the credit card reader at the pump facilitates
  the purchase of a gasoline without help and
• Internet allows customer to book their own
  flights

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• Technology in Service Encounter
• Advances in communication and information
  technology are having profound effect on ways
  customers interface with service providers.
• There are five modes of technologys
  contribution to the service encounter.
• Technology free service encounter
• where the customer is in physical proximity to
  and interacts with a human service provider.
• This mode represents the traditional high-touch
  service in which technology does not pay a direct
  role. Such as Saloon, hair dresser, tailor

TECHNOLOGY
CUSTOMER
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• (B)Technology-assisted service encounter
• Here only the service provider has access to the
  technology to improve the quality of face to face
  service.
• A health care service performed by technology
  which is operated by only professionals

TECHNOLOGY
CUSTOMER
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• (C)Technology- facilitated service encounter
• Here both the customer and service provider have
  access to the same technology.
• For example
• a financial planner in consultation with a
  client can refer to a financial model on a
  personal computer to illustrate projected returns
  for different risk profiles

TECHNOLOGY
SERVER
CUSTOMER
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• (D)Technology-meditated service encounter
• The customer and human service provider are not
  physically together and thus the service
  encounter no longer is the traditional face to
  face contact.
• Its about Getting technical help on a distance
  call .
• Example
• GPS services or services provided by Just dial .

TECHNOLOGY
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• (E)Technology-generated service encounter
• Human service provider is replaced entirely with
  technology that allows the customer to
  self-service.
• It reduces the cost of service delivery
• For Example
• bank ATMs, website based information,
  e-commerce

TECHNOLOGY
CUSTOMER
SERVER
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• The Emergence of Self Service
• Elimination of labor costs for nonproductive
  activity is the principle driver for the service
  provider.
• Customer acceptance results from increased
  opportunity for customization, accuracy,
  convenience and speed.
• Cost saving and place Time has lead the
  buisiness to become Self Service by customer
  him/herself.

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• Evolution of Self Service

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• Automation in Services
• Automation means replacing human manual activity
  by the machine.
• for Example-
• -an automatic lawn sprinkler system a hotel
• -automated answering systems that route callers
  by means of Touch -Tone pones like Toll free or
  customer care services of the service provider
• David A Collier has suggested following
  automation categories
• Fixed sequence (F)
• A machine that repetitively performs successive
  steps in a given operation according to a
  predetermined sequence, condition and position
  and whose set information cannot be changed
  easily. E.g. automatic parking lot gate
• 2. Variable sequence(V)
• A machine same as fixed sequence robot but
  whose set information can be changed easily. E.g.
  automated teller machine

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• 3. Playback(P)
• A machine that can produce operation from
  memory that were originally executed under human
  control. E.g. telephone answering machine
• 4. Numerical Controlled(N)
• A machine that can perform task according to
  sequence as command by stored information tat can
  be reprogrammed easily. E.g. animated character
  at an amusement park.
• 5. Intelligent(I)
• A machine with sensory perception devices, such
  as visual or tactile receptors, that
  can detect changes in the work environment or
  task by itself and has its own decision-making
  abilities. E.g. autopilot for a commercial
  airplane

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• 6. Expert system(E)
• A computer program that uses an inference engine
  (e.g. decision rules) and a knowledge base (i.e.
  information on a particular subject) to diagnose
  problem
• ex- maintenance trouble shooting for elevator
  repair
• 7. Totally automated system(T)
• A system of machine and computers that performs
  all the physical and intellectual tasks that are
  required to produce or deliver a service.
• ex- electronic fund transfer

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• Internet Services
• Websites can be used in many different ways
• As a channel to sell a product or service
  (amazone.com, wine.com)
• As a supplemental channel (online booking of
  order)
• For technical support (dell.com, nike.com)
• To Embellish existing service (HBR cases
  Research paper)
• To convey information (Dr. Koop, wikipedia)
• To communicate with Membership
• To play Games
• Internet Models
• Internet Access Provider
• Portal
• Information content
• Online Retailer
• Transaction Enablers
• Market Makers

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• Comparison of Electronic and Traditional Services

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• E-Business Models
• Peter Weill and Michael Vitale have described
  eight generic e-business models.
• Content Provider
• Provides content such as information, digital
  products and services. Ex- Reuters, a British
  news agency
• Direct to customer
• Provides goods services directly to the
  customer, often bypassing traditional retail
  channel memebers. Ex-Dell computer
• Full service Provider
• Provide full range of service in one domain
  directly. E.g. financial, health, indusyrial
  chemicals. Ex General Electric Supply
• I

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• Intermediary
• Brings together buyers and sellers by
  concentrating information. Ex-eBay
• Shared Infrastructure
• Brings together multiple competitors to
  cooperate by sharing common IT infrastructure. An
  example is SABRE reservation system for airlines.
• Value Net Integrator
• Coordinates activities across the value net by
  gathering, synthesizing, and distributing
  information. Ex 7-eleven Japan
• Virtual Community
• Created facilitates online community of people
  with Monster.com, the job-placement service firm.
• Whole-of-Enterprise
• Provides a firm wide single point of contact,
  consolidating all services provides by a large
  multiunit organization. An example is the U S
  federal government

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• Managing the New Technology Adoption Process

Technology opportunity Analysis
Functional specification
Application requirements analysis
Orientation Education
Design specification
Managing the New Technology Adoption
Implementation Planning
Equipment selection and contract commitments
Implementation
Testing of technology
Review of Results
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• 8ps of Services Marketing Mix
• Product elements - the core and periphery
  service elements at the centre of the company's
  marketing strategy
• Place and Time - delivering product elements to
  customers can be done physically and/or
  electronically, depending upon the service. Speed
  and convenience are essential to the customer and
  are important value-adds
• Price and Other User Outlays - pricing is only a
  part of what customers may part with when
  purchasing a service one must also consider time
  and convenience
• Promotion and Education - speaks for itself, but
  the marketer must make sure communications not
  only provide information, but also persuade the
  customer of the service's relevance to the
  customer's particular 'problem'

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• Process - the means by which the firm delivers
  product elements
• People - front-line staff will have a direct
  impact on perceptions and
• Physical Environment - the appearance of the
  place where the services are delivered may have a
  significant impact upon whether the service was
  satisfactoryProductivity and Quality -
  improving productivity is a requisite in cost
  management but quality, as defined by the
  customer, is essential for a service to
  differentiate itself from other providers.

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Service and Relationship Marketing
Module1Chapter2 Customer Behavior in Service
Encounter

• Four Broad Categories of Service- A Process
  Perspective
• In service, people, physical objects, and data
  can be processed , and the nature of the
  processing can be tangible or intangible.
• Tangible actions are performed on peoples
  bodies or to their physical possession.
  Intangible actions are performed on peoples
  minds or to their intangible assets.
• This gives rise to classification of services
  into four broad categories.
• They are
• People processing
• Possession processing
• Mental stimulus processing
• Information processing

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• The Three Stage Model of Service Consumption/
• Customer Decision Making

Pre-purchase Stage
Service Encounter Stage
Post-encounter Stage
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Pre-purchase Stage
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Pre-purchase Stage - Overview

• Customers seek solutions to aroused needs
• Evaluating a service may be difficult
• Uncertainty about outcomes Increases perceived
  risk
• What risk reduction strategies can service
  suppliers develop?
• Understanding customers service expectations
• Components of customer expectations
• Making a service purchase decision

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Need Arousal

• Decision to buy or use a service is triggered by
  need arousal
• Triggers of need
• Unconscious minds (e.g., personal identity and
  aspirations)
• Physical conditions (e.g., hunger )
• External sources (e.g., a service firms
  marketing activities)
• Consumers are then motivated to find a solution
  for their need

Courtesy of Masterfile Corporation
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Information Search

• Need arousal leads to attempts to find a solution
• Evoked set a set of products and brands that a
  consumer considers during the decision-making
  process that is derived from past experiences
  or external sources
• Alternatives then need to be evaluated before a
  final decision is made

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Evaluating Alternatives Service Attributes

• Search attributes help customers evaluate a
  product before purchase
• E.g., type of food, location, type of restaurant
  and price
• Experience attributes cannot be evaluated before
  purchase
• The consumer will not know how much s/he will
  enjoy the food, the service, and the atmosphere
  until the actual experience
• Credence attributes are those that customers find
  impossible to evaluate confidently even after
  purchase and consumption
• E.g., hygiene conditions of the kitchen and the
  healthiness of the cooking ingredients

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How Product Attributes Affect Ease of Evaluation
Source Adapted from Valarie A. Zeithaml , How
Consumer Evaluation Processes Differ Between
Goods Services, in J.H. Donelly and W. R.
George, Marketing of Services (Chicago American
Marketing Association, 1981)
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Perceived Risks of Purchasing and Using Services

• Functional unsatisfactory performance outcomes
• Financial monetary loss, unexpected extra costs
• Temporal wasted time, delays leading to
  problems
• Physical personal injury, damage to possessions
• Psychological fears and negative emotions
• Social how others may think and react
• Sensory unwanted impact on any of five senses

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How Might Consumers Handle Perceived Risk?

• Seek information from respected personal sources
• Compare service offerings and search for
  independent reviews and ratings via the Internet
• Relying on a firm with good reputation
• Looking for guarantees and warranties
• Visiting service facilities or going for trials
  before purchase and examining tangible cues or
  other physical evidence
• Asking knowledgeable employees about competing
  services

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Strategic Responses to Managing Customer
Perceptions of Risk
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Understanding Customers Service Expectations

• Customers evaluate service quality by comparing
  what they expect against what they perceive
• Situational and personal factors also considered
• Expectations of good service vary from one
  business to another, and differently positioned
  service providers in same industry
• Expectations change over time

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Factors Influencing Customer Expectations of
Service
Source Adapted from Valarie A. Zeithaml, Leonard
A. Berry, and A. Parasuraman, The Nature and
Determinants of Customer Expectations of
Service, Journal of the Academy of Marketing
Science 21, no. 1 (1993) 1-12
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Components of Customer Expectations
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Purchase Decision

• Purchase Decision Possible alternatives are
  compared and evaluated, whereby the best option
  is selected
• Simple if perceived risks are low and
  alternatives are clear
• Complex when trade-offs increase
• Trade-offs are often involved
• After making a decision, the consumer moves into
  the service encounter stage

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Service Encounter Stage
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Service Encounter Stage - Overview
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Service Encounter Stage

• Service encounter a period of time during which
  a customer interacts directly with the service
  provider
• Might be brief or extend over a period of time
  (e.g., a phone call or visit to the hospital)
• Models and frameworks
• Moments of Truth importance of managing
  touchpoints
• High/low contact model extent and nature of
  contact points
• Servuction model variations of interactions
• Theater metaphor staging service performances

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Moments of Truth
We could say that the perceived quality is
realized at the moment of truth, when the service
provider and the service customer confront one
another in the arena. At that moment they are
very much on their own It is the skill, the
motivation, and the tools employed by the firms
representative and the expectations and behavior
of the client which together will create the
service delivery process.
Richard Normann
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Service Encounters Range from High-Contact to
Low-Contact
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Distinctions between High-Contact and Low-Contact
Services

• High-Contact Services
• Customers visit service facility and remain
  throughout service delivery
• Active contact
• Includes most people-processing services
• Low-Contact Services
• Little or no physical contact
• Contact usually at arms length through
  electronic or physical distribution channels
• Facilitated by new technologies

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The Servuction System
Source Adapted and expanded from an original
concept by Eric Langeard and Pierre Eiglier
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The Servuction SystemService Production and
Delivery

• Servuction System visible front stage and
  invisible backstage
• Service Operations
• Technical core where inputs are processed and
  service elements created
• Contact people
• Inanimate environment
• Service Delivery
• Where final assembly of service elements takes
  place and service is delivered
• Includes customer interactions with operations
  and other customers

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Theater as a Metaphor for Service Delivery
William Shakespeare As You Like It
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Theatrical Metaphor an Integrative Perspective

• Good metaphor as service delivery is a series of
  events that customers experience as a performance

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Implications of Customer Participation in Service
Delivery

• Greater need for information/training
• Help customers to perform well, get desired
  results
• Customers should be given a realistic service
  preview in advance of service delivery
• This allows them to have a clear idea of their
  expected role and their script in this whole
  experience
• Manages expectations and emotions

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Post-Encounter Stage
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Post-purchase Stage - Overview
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Customer Satisfaction with Service Experience

• Satisfaction attitude-like judgment following a
  service purchase or series of service
  interactions
• Whereby customers have expectations prior to
  consumption, observe service performance, compare
  it to expectations
• Satisfaction judgments are based on this
  comparison
• Positive disconfirmation (better)
• Confirmation (same)
• Negative disconfirmation (worse)

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Customer DelightGoing Beyond Satisfaction

• Research shows that delight is a function of
  three components
• Unexpectedly high levels of performance
• Arousal (e.g., surprise, excitement)
• Positive affect (e.g., pleasure, joy, or
  happiness)
• Strategic links exist between customer
  satisfaction and corporate performance
• By creating more value for customers (increased
  satisfaction), the firm creates more value for
  the owners

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Customer DelightGoing Beyond Satisfaction

• Best Practice in Action 2.1 Progressive
  Insurance Delights Its Customers
• Provided excellent customer service which allowed
  them to lower costs and also increase customer
  satisfaction and retention

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Summary

• Key Steps
• Need arousal
• Information search
• Evaluation of alternative solutions
• Purchase decision
• Customers face perceived risks which marketers
  should reduce with some strategic responses
• Zone of tolerance Adequate to desired.
  Dissatisfaction if service level falls below
  adequate level.

• Moments of Truth importance of effectively
  managing touchpoints
• High/low contact service model understanding
  the extent and nature of contact points
  
• 
  
• Servuction model variations of interactions
• Theater metaphor staging service performances