Service marketing capston

UNIVERCITY OF MUMBAI

PROJECT ON
SERVICE MARKETING

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR
MMS COURSE

SEMESTER IV (2013-2014)

UNDER GUIDANCE OF:
PROF. JAPITA BHOWMIK

SUBMITED BY
KSHAMANGI RAUT

YMT COLLEGE OF MANAGEMENT
KHARGHAR, NAVI MUMBAI

Service Marketing Page 1

DECLARATION

I KSHAMANGI B. RAUT OF YMT COLLEGE OF MANAGEMENT OF
MMS SEM IV HERE BY DECLARES THAT I HAVE COMPLETED THE
PROJECTON “SERVICE MARKETING” IN THE ACADMIC YEAR2013-
2014. THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO
THE BEST OF MY KNOWLEDGE.


EXECUTIVE SUMMARY

Service marketing is relatively new for most service providers. few large
manufacturers are aware of it, but this is new territory for most medium-to-smaller
sized manufacturers and independent service providers.

Something that many forget is that, like any other product, service products need
ongoing management. Services and prices need to be adjusted over time to track
customers changing needs, competition, and the effect of new products on aging
products. Costs can go up or down, competitors become weaker or stronger, new
service technologies may be employed. Marketing should be tracking these things,
adjusting for them, and supplying information and training to those who sell services.
When the time comes to sunset a product, marketing should be developing plans to
phase out services on certain products, or handing over support to independents.

It is a rapidly growing specialty, however, with demand for service marketers
outstripping the supply. This indicates the need of study of service marketing and
main motto behind selecting this topic


INDEX

s. Section Pages
no
1. Service marketing 5-19
2. GAP model 20-21
3. Decision making and evaluation of services 22-25
4. Customer expectation of services 26-39
5. Building customer relationship 40
6. Service blue printing 41-42
7. Marketing information system 43-44
8. Employees role in service delivery 45-47
9. Customers role in service delivery 48-49
10. Yield management 50-51
11. Pricing of services 51-52
12. new service development 53-
13. Types of service marketing strategies 53-54
14. Tips for service industry 55-58
15. Bibliography 59


Service marketing

Services marketing typically refer to both business to consumer (B2C) and business to business
(B2B) services, and include marketing of services like telecommunications services, financial
services, all types of hospitality services, car rental services, air travel, health care services and
professional services. The range of approaches and expressions of a marketing idea developed
with the hope that it be effective in conveying the ideas to the diverse population of people who
receive it.
Services are economic activities offered by one party to another. Often time-based,
performances bring about desired results to recipients, objects, or other assets for which
purchasers have responsibility. In exchange for money, time, and effort, service customers
expect value from access to goods, labor, professional skills, facilities, networks, and systems;
but they do not normally take ownership of any of the physical elements involved.
There has been a long academic debate on what makes services different from goods. The
historical perspective in the late-eighteen and early-nineteenth centuries focused on creation
and possession of wealth. Classical economists contended that goods were objects of value
over which ownership rights could be established and exchanged. Ownership implied tangible
possession of an object that had been acquired through purchase, barter or gift from the
producer or previous owner and was legally identifiable as the property of the current owner.
Marketing a service differs from promoting a tangible product because consumers often need to
be educated about a service. Service marketing often requires more explanation as to why the
customer needs the product, how it works and why you are the best entity to deliver the service.
The world economy nowadays is increasingly characterized as a service economy. This is
primarily due to the increasing importance and share of the service sector in the economies of
most developed and developing countries. In fact, the growth of the service sector has long
been considered as indicative of a country‘s economic progress.

Economic history tells us that all developing nations have invariably experienced a shift from
agriculture to industry and then to the service sector as the main stay of the economy.

This shift has also brought about a change in the definition of goods and services themselves.
No longer are goods considered separate from services. Rather, services now increasingly
represent an integral part of the product and this interconnectedness of goods and services is
represented on a goods-services continuum.

The service sector is going through almost revolutionary change, which dramatically affects the
way in which we live and work. New services are continually being launched to satisfy our
existing needs and to meet needs that we did not even know we had. Not even 10 years ago,
few people anticipated a need for email, online banking, Web hosting, and many other new
services. Today, many of us feel we can‘t do without them. Similar transformations are occurring
in business-to-business markets. Service organizations vary widely in size. At one end of the
scale are huge international corporations operating in such industries as airlines, banking,
insurance, telecommunications, and hotels. At the other end of the scale is a vast array of


locally owned and operated small businesses, including restaurants, laundries, optometrists,
beauty parlors, and numerous business-to-business services, to name a few.

. Stated simply, Services Marketing refers to the marketing of services as against tangible
products. As already discussed, services are inherently intangible, are consumed
simultaneously at the time of their production, cannot be stored, saved or resold once they have
been used and service offerings are unique and cannot be exactly repeated even by the same
service provider. Marketing of services is a relatively new phenomenon in the domain of
marketing, having gained in importance as a discipline only towards the end of the 20th century.
Services marketing first came to the fore in the 1980s when the debate started on whether
marketing of services was significantly different from that of products so as to be classified as a
separate discipline. Prior to this, services were considered just an aid to the production and
marketing of goods and hence were not deemed as having separate relevance of their own.
The 1980s however saw a shift in this thinking. As the service sector started to grow in
importance and emerged as a significant employer and contributor to the GDP, academics and
marketing practitioners began to look at the marketing of services in a new light. Empirical
research was conducted which brought to light the specific distinguishing characteristics of
services. By the mid 1990s, Services Marketing was firmly entrenched as a significant sub
discipline of marketing with its own empirical research and data and growing significance in the
increasingly service sector dominated economies of the new millennium. New areas of study
opened up in the field and were the subject of extensive empirical research giving rise to
concepts such as – the product-service spectrum, relationship marketing, franchising of
services, customer retention etc.
Importance of service marketing
Given the intangibility of services, marketing them becomes a particularly challenging and yet
extremely important task. A key differentiator: Due to the increasing homogeneity in product
offerings, the attendant services provided are emerging as a key differentiator in the mind of the
consumers. E.g.: In case of two fast food chains serving a similar product (Pizza Hut and
Domino‘s), more than the product it is the service quality that distinguishes the two brands from
each other. Hence, marketers can leverage on the service offering to differentiate them from the
competition and attract consumers. Importance of relationships: Relationships are a key factor
when it comes to the marketing of services. Since the product is intangible, a large part of the
customers‘ buying decision will depend on the degree to which he trusts the seller. Hence, the
need to listen to the needs of the customer and fulfill them through the appropriate service
offering and build a long lasting relationship which would lead to repeat sales and positive word
of mouth. Customer Retention: Given today‘s highly competitive scenario where multiple
providers are vying for a limited pool of customers, retaining customers is even more important
than attracting new ones. Since services are usually generated and consumed at the same
time, they actually involve the customer in service delivery process by taking into consideration
his requirements and feedback. Thus they offer greater scope for customization according to
customer requirements thus offering increased satisfaction leading to higher customer retention.


Relationships Are Key
In service marketing, because there is no tangible product, relationships are key. Service
marketers must listen to and understand the needs of customers and prospective customers to
build loyalty and trust. Ultimately, effective relationships in service marketing will lead to repeat
sales and positive word of mouth.
Multiple Touch points
Service marketing involves many touchpoints for the consumer. Interactions with multiple
people and experiences that are less tangible than when buying an actual product all impact the
consumer's perspective of the purchase process. These touchpoints work together to establish
a perception in the consumer's mind.

Services Proliferate
Consumers have many service options to choose from, and because the product is intangible,
the challenge for the service marketer is to somehow make her services stand out from the
crowd. Because service marketing is so prolific, marketers must think of ways to communicate
the benefits of the service they offer in language that reflects consumer need and value.

Feedback Improves Service
Unlike the marketing process for a tangible product, service marketing actually involves the
consumer in the marketing process. He is engaged in the process and contributes to a positive
outcome. For this reason, it is important to seek consumer feedback and to use that feedback to
improve service marketing effectiveness.

Technology Impacts
Technology is having a major impact on the service economy. You can use technology to
streamline service activities and provide do-it-yourself options for consumers. Internet-based
services, for instance, allow consumers to participate actively in the service marketing process,
often never involving contact with another human being. Having a website is important, because
people like to get information about service providers before deciding which one to use.

Alternate view
A recently proposed alternative view is that services involve a form of rental through which
customers can obtain benefits. What customers value and are willing to pay for are desired
experiences and solutions. The term, rent, can be used as a general term to describe payment
made for use of something or access to skills and expertise, facilities or networks (usually for a
defined period of time), instead of buying it outright (which is not even possible in many
instances).
There are five broad categories within the non-ownership framework

1. Rented goods services: These services enable customers to obtain the temporary right
to use a physical good that they prefer not to own (e.g. boats, costumes)
2. Defined space and place rentals: These services obtain use of a defined portion of a
larger space in a building, vehicle or other area which can be an end in its own right


(e.g. storage container in a warehouse) or simply a means to an end (e.g. table in a
restaurant, seat in an aircraft)
3. Labor and expertise rental: People are hired to perform work that customers either
choose not to do for themselves (e.g. cleaning the house) or are unable to do due to the
lack of expertise, tools and skills (e.g. car repairs, surgery)
4. Access to shared physical environments: These environments can be indoors or
outdoors where customers rent the right to share the use of the environment (e.g.
museums, theme parks, gyms, golf courses).
5. Access to and usage of systems and networks: Customers rent the right to participate in
a specified network such as telecommunications, utilities, banking or insurance, with
different fees for varying levels of access
In defining service marketing we can modify the definition of American Marketing Association on
Marketing by adding the following changes. Services marketing are an organizational function
and a set of process for identifying or creating, communicating, and delivering value to
customers and for managing Customer relationship in a way that benefit the organization and
stake holders.

Definition and characteristics of Services
The American Marketing Association defines services as - ―Activities, benefits and satisfactions
which are offered for sale or are provided in connection with the sale of goods.‖

The defining characteristics of a service are:

1. Intangibility: Services are intangible and do not have a physical existence. Hence
services cannot be touched, held, tasted or smelt. This is most defining feature of a
service and that which primarily differentiates it from a product. Also, it poses a unique
challenge to those engaged in marketing a service as they need to attach tangible
attributes to an otherwise intangible offering.

2. Heterogeneity/Variability: Given the very nature of services, each service offering is
unique and cannot be exactly repeated even by the same service provider. While
products can be mass produced and be homogenous the same is not true of services.
eg: All burgers of a particular flavor at McDonalds are almost identical. However, the
same is not true of the service rendered by the same counter staff consecutively to two
customers.

3. Perishability: Services cannot be stored, saved, returned or resold once they have
been used. Once rendered to a customer the service is completely consumed and
cannot be delivered to another customer. eg: A customer dissatisfied with the services of
a barber cannot return the service of the haircut that was rendered to him. At the most
he may decide not to visit that particular barber in the future.

4. Inseparability/Simultaneity of production and consumption: This refers to the fact
that services are generated and consumed within the same time frame. Eg: a haircut is
delivered to and consumed by a customer simultaneously unlike, say, a takeaway burger


which the customer may consume even after a few hours of purchase. Moreover, it is
very difficult to separate a service from the service provider. Eg: the barber is
necessarily a part of the service of a haircut that he is delivering to his customer.

Implications of Intangibility

 Services cannot be inventoried

 Services cannot be patented

 Services cannot be readily displayed or communicated

 Pricing is difficult

Implications of Heterogeneity

 Service delivery and customer satisfaction depend on employee actions

 Service quality depends on many uncontrollable factors

 There is no sure knowledge that the service delivered matches what was planned
and promoted

Implications of Simultaneous Production and Consumption


 Customers participate in and affect the transaction

 Customers affect each other

 Employees affect the service outcome

 Decentralization may be essential

 Mass production is difficult

Implications of Perishability

 It is difficult to synchronize supply and demand with services

 Services cannot be returned or resold

Ex: When Michelle goes to her local restaurant, she sometimes gets her food fast and hot.
Other times her order is slow, and her food arrives at her table cold. If Michelle wants a special
order, like her burger with a baked potato instead of fries, she never knows how long she‘ll have
to wait for her food. Michelle is experiencing the service characteristic of?

Michelle is experiencing the service characteristic of?
� Intangibility
� Inseparability
� Variability
� Autonomy
� perish ability


Traditional Marketing Mix

The first four elements in the services marketing mix are the same as those in the traditional
marketing mix. However, given the unique nature of services, the implications of these are
slightly different in case of services.

1. Product:

In case of services, the ‗product‘ is intangible, heterogeneous and
perishable. Moreover, its production and consumption are inseparable. Hence, there is
scope for customizing the offering as per customer requirements and the actual
customer encounter therefore assumes particular significance. However, too much
customization would compromise the standard delivery of the service and adversely
affect its quality. Hence particular care has to be taken in designing the service offering.

2. Pricing:

Pricing of services is tougher than pricing of goods. While the latter can be
priced easily by taking into account the raw material costs, in case of services attendant
costs - such as labor and overhead costs - also need to be factored in. Thus a restaurant
not only has to charge for the cost of the food served but also has to calculate a price for
the ambience provided. The final price for the service is then arrived at by including a
mark up for an adequate profit margin.

3. Place:

Since service delivery is concurrent with its production and cannot be stored
or transported, the location of the service product assumes importance. Service
providers have to give special thought to where the service would be provided. Thus, a
fine dine restaurant is better located in a busy, upscale market as against on the
outskirts of a city. Similarly, a holiday resort is better situated in the countryside away
from the rush and noise of a city.

4. Promotion:

Since a service offering can be easily replicated promotion becomes
crucial in differentiating a service offering in the mind of the consumer. Thus, service
providers offering identical services such as airlines or banks and insurance companies
invest heavily in advertising their services. This is crucial in attracting customers in a
segment where the services providers have nearly identical offerings.

Expanded Mix for Services the 7 Ps
We now look at the 3 new elements of the services marketing mix - people, process and
physical evidence - which are unique to the marketing of services.

5. People:


People are a defining factor in a service delivery process, since a service is
inseparable from the person providing it. Thus, a restaurant is known as much for its
food as for the service provided by its staff. The same is true of banks and department
stores. Consequently, customer service training for staff has become a top priority for
many organizations today.

6. Process:

The process of service delivery is crucial since it ensures that the same
standard of service is repeatedly delivered to the customers. Therefore, most companies
have a service blue print which provides the details of the service delivery process, often
going down to even defining the service script and the greeting phrases to be used by
the service staff.

7. Physical Evidence:

Since services are intangible in nature most service providers strive to
incorporate certain tangible elements into their offering to enhance customer experience.
Thus, there are hair salons that have well designed waiting areas often with magazines
and plush sofas for patrons to read and relax while they await their turn. Similarly,
restaurants invest heavily in their interior design and decorations to offer a tangible and
unique experience to their guests.

Structure of the Service Sector The services sector is remarkably diverse. It comprises a wide
array of industries that sell to individual consumers and business customers, as well as to
government agencies and nonprofit organizations. Services make up the bulk of today‘s
economy and also account for most of the growth in new jobs. Unless you are already
predestined for a career in family manufacturing or agricultural business, the probability is high
that you will spend your working life in service organizations. The size of service sector is
increasing in almost all economies around the world .As national economy develops, the relative
share of employment among agricultural industry, and services change dramatically. Even in
emerging economies, service output is growing rapidly and often represents at least half of the
GDP.

1. Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order
with the company.
2. Delivery Ease: Delivery refers to how well the product or service is brought to the
customer. It includes speed, accuracy, and care throughout the process.
3. Installation: It refers to the work done to make a product or service operational in its
planned location. Ease of installation becomes a true selling point, especially when the
target market is technology novice.
4. Customer Training: It refers to training the customer's employees to use the vendor's
equipment properly and efficiently.
5. Customer Consulting: It refers to data, information systems, and advice services that the
seller offers to buyers.


6. Maintenance and Repair: It describes the service program for helping customers keep
purchased products in good working order.[5]
Types of Services

1. Core Services: A service that is the primary purpose of the transaction. Eg: a haircut
or the services of lawyer or teacher.
2. Supplementary Services: Services that are rendered as a corollary to the sale of a
tangible product. Eg: Home delivery options offered by restaurants above a minimum
bill value.

Challenges for Services
• Defining and improving quality
• Communicating and testing new services
• Communicating and maintaining a consistent image
• Motivating and sustaining employee commitment
• Coordinating marketing, operations and human resource efforts
• Setting price
• Standardization versus personalization

1. Intangible
One of the most obvious challenges in marketing services is that you are selling something
intangible. People can touch and see a product and are exchanging money for something they
need and can take home to use. Conversely, people only see the results of a service, which
may not always be immediate. It requires faith on the customers‘ part that they will get the
desired results for their money. For example, if you own a cleaning service, you have to
convince your customers to trust you that their homes will be cleaned to their satisfaction.
2. Demonstrating Empathy
Convince your customers in your marketing efforts that you understand their problems and are
offering a solution. Do this using people, processes and physical evidence. For example, if you
and your employees have families and work full time, this identifies with working families who
have no time for housecleaning. Before-and-after pictures in your marketing materials, such as
your website, brochures and advertising, are all physical evidence. Finally, you may need to
interact personally with customers multiple times as part of the marketing process to establish a
relationship and convince them you understand their needs.
3. Competitive Pricing
How you price your services is an important marketing element. You need to be competitive, so
research several competitors‘ prices to gauge what your prospective customers expect to pay.
Then assess your costs -- your overhead such as rent, insurance, salaries and supplies -- to
determine if you can meet your costs and make a profit with that pricing. Consider bundling
extra features with your services to differentiate your company and garner a higher price. For
example, you can offer to wax floors as part of your service, or do laundry as part of a bonus
package.
4. People
As a services company, marketing your people, including you, is paramount. A service is
consumed when it‘s purchased or produced -- just the results or effects linger, and sometimes


temporarily. For example, your customer‘s home will get dirty again, so the result of your
cleaning delivery is temporary. The client may or may not call you again based on the overall
experience. How your people performed that service will impact repeat business. The
relationship is also important; follow up with your customer with personalized notes or a
telephone reminder as part of your marketing tactics.

Examples of Service Industries

• Health Care

– hospital, medical practice, dentistry, eye care

Ex:

• Financial Services

– banking, investment advising, insurance

Ex:

• Hospitality

– restaurant, hotel/motel, bed & breakfast,

Ex:


• Travel

– airlines, travel agencies, theme park

– Ex:

–

• Others:

– hair styling, pest control, plumbing, lawn maintenance, counseling

services, health club

Ex:


Service Marketers can influence

• Make realistic accurate promises that reflect the service actually delivered rather than
idealized version of service
• Ask contact people for feedback on the accuracy of promise made in advertising and selling
• Ensure service tangibles accurately reflect the type and level of service provided.
• Use market research to determine sources of derived customer expectation and their
requirement
• Educate customers to understand their role and perform better.
• Identify influencers and opinion leaders for the service and concentrate marketing efforts on
them.

Why study Service marketing???
 Size of Service Sector

I. The Services Sector contributes the most to the Indian GDP. The Sector of Services in
India has the biggest share in the country's GDP, it accounts for more than 50%
contribution
II. The various sectors under the Services Sector in India are construction, trade, hotels,
transport,
Restaurant, communication and storage, social and personal
Services, community, insurance, financing, business services, and real estate.

III Services marketing concepts and strategies have developed in response to the tremendous
growth of service industries

iV. Most new employment is provided by services Strongest growth area for marketing

 Deregulation and Services Marketing
I. Specific demand for services marketing concepts has come from deregulated industries
and professional services
II. Deregulatory moves by governments have affected service industries such as airlines,
banking, and telecommunications. As a result, marketing decisions that used to be
tightly controlled by government are now partially, and sometimes totally, within the
control of individual firms

 Learning Objectives
� Difference between services and consumer marketing


� Consumer Behavior in services
� Customer Expectation & perception of Services
� Building customer relationship
� Service development & design
� Physical Evidence & People in service
� Service Marketing Communication
� Delivering Service
� pricing of services
� Strategies of Services

The Services Marketing Triangle

1. External Marketing
In an external marketing, marketers interact directly to the end users. They try to understand
the need of customers and satisfy them after fulfilling their demands.

In an external marketing, marketers set the pricing policies and create awareness about the
products and design promotional strategies and techniques that help to attract the customers
towards their products and services.

They communicate with their customers directly and convince them to buy their products. They
involve in constructive group of activities that helps to design excellent products that meet the
customer‘s demands efficiently.


Their goal is to create awareness about their products or services among users by
communicating with them directly. They also grab the attention of the market and produce
interest in their services. External marketing is one of the important parts of service marketing
triangle.

2. Internal Marketing
In an internal marketing, marketers try to interact with their employees in order to know about
the strengths and weaknesses of their organization. The owner of the company tries to involve
all of his employees in general discussion, believe on teamwork.

Internal marketing involves general discussions, teamwork, training, motivation and rewards on
best performance. Employees communicate with themselves on specific project. Teamwork
helps to involve employees in their assigned tasks and generate output quickly.

Organizational rewards motivate employees to make their performance effective. All employees
understand the goals and objectives of the company clearly and try to meet organizational
goals. They also know how to grab the attention of their customers.

Customers are highly satisfied with their products or services. They always try to satisfy their
clients at any cost. If employees of the company are satisfied with their job and performance
rewards, they can become an effective asset of any organization.

Executives of the organizations fully understand the service marketing triangle if they want to
gain a competitive advantage in the market.

3. Interactive Marketing
Interactive marketing involves in the delivery of products or service to the customers and front –
office employees of the company. It is the most important part of the service marketing triangle
because it establishes a long term or short term relations with customers.

Customers who are highly satisfied with their products or services can become regular
customers of their brand. Marketers who cannot compromise on quality and deliver high quality
products to their customers have a great community of loyal customers. Their loyal customers
always prefer them to buy products.


Service marketing triangle has great importance and its components are essential in the
success of any business. A well established business always follows the strategies of service
marketing triangle.

Today, marketers who know how to remove the company‘s weaknesses and increase the
strengths and assets are market leaders. They are aware of external threats and opportunities
that boost up their business. They also know how to communicate with their customers, clients
and employees in order to achieve organizational goals.

Tangibility Spectrum

Continuum of Evaluation for Different Types of Products


Gaps Model of Service Quality

Today‘s consumer has become increasingly demanding. They not only want high quality
products but they also expect high quality customer service. Even manufactured products such
as cars, mobile phones and computers cannot gain a strategic competitive advantage through
the physical products alone. From a consumer‘s point of view, customer service is considered
very much part of the product.

Delivering superior value to the customer is an ongoing concern of Product Managers. This not
only includes the actual physical product but customer service as well. Products that do not offer
good quality customer service that meets the expectations of consumers are difficult to sustain
in a competitive market.


Gaps Model of Service Quality
• Customer Gap:

• difference between expectations and perceptions

• Provider Gap 1:

• not knowing what customers expect

• Provider Gap 2:

• not having the right service designs and standards

• Provider Gap 3:

• not delivering to service standards

• Provider Gap 4:

• not matching performance to promises


Decision Making Process

A consumer goes through several stages before purchasing a product or service.
NEED
↓
INFORMATION GATHERING/SEARCH
↓
EVALUATION OF ALTERNATIVES
↓
PURCHASE OF PRODUCT/SERVICE
↓
POST PURCHASE EVALUATION

1. Step 1 - Need is the most important factor which leads to buying of products and
services. Need infact is the catalyst which triggers the buying decision of individuals.

An individual who buys cold drink or a bottle of mineral water identifies his/her need as
thirst. However in such cases steps such as information search and evaluation of
alternatives are generally missing. These two steps are important when an individual
purchases expensive products/services such as laptop, cars, mobile phones and so on.

2. Step 2 - When an individual recognizes his need for a particular product/service he tries
to gather as much information as he can.

An individual can acquire information through any of the following sources:

 Personal Sources - He might discuss his need with his friends, family
members, co workers and other acquaintances.
 Commercial sources - Advertisements, sales people (in Tim‘s case it was the
store manager), Packaging of a particular product in many cases prompt
individuals to buy the same, Displays (Props, Mannequins etc)
 Public sources - Newspaper, Radio, Magazine
 Experiential sources - Individual‘s own experience, prior handling of a
particular product (Tim would definitely purchase a Dell laptop again if he had
already used one)


3. Step 3 - The next step is to evaluate the various alternatives available in the market. An
individual after gathering relevant information tries to choose the best option available as
per his need, taste and pocket.

4. Step 4 - After going through all the above stages, customer finally purchases the
product.

5. Step 5 - The purchase of the product is followed by post purchase evaluation. Post
purchase evaluation refers to a customer‘s analysis whether the product was useful to
him or not, whether the product fulfilled his need or not?

Factors Effecting decision making process
• Culture
• Value Attitude
• Manners and Customs
• Reference Group
• Social class
• Education
• Perception
• Motivation
• Attitude
• Personality


ZONE OF TOLERANCE

The zone of tolerance is usually defined as the range of customer perceptions of a
service between desired and minimum acceptable standards ( Zeithaml, Berry, and
Parasuraman, 1993 ). In essence it is the range of service performance that a customer
considers satisfactory. Performance below the zone is seen as dissatisfying and
performance above the zone is seen as delighting. The importance of this zone of
tolerance is that customers may accept variation within a range of performance, and any
increase or decrease in performance within this area will only have a marginal effect on
perceptions. Only when performance moves outside this range will it have any real effect
on perceived service quality. If a customer's zone of tolerance is narrow, then he or she
may be highly sensitive to the service experience, with a greater likelihood of
dissatisfying or delighting outcomes. Conversely, if a customer has a wide zone of
tolerance, then he or she may be much less sensitive to the service experience, thus
increasing the likelihood of a satisfactory or acceptable outcome. The width of the zone
of tolerance may vary from customer to customer and from situation to situation.
• Services are heterogeneous i.e performance may vary across providers, across employees
of same provider.
• The extent to which customer recognize and are willing to accept this variation is called
Zone of tolerance
• It is the range where customers do not particularly notice service performance

Zone of tolerance vary from first time and service recovery
Here first one is before recovery and second one after recovery

Nature and determinants of customer expectation services


Factors influencing desired services


Customer‘s perception of service and satisfaction

Outcomes of Customer Satisfaction
 Increased customer retention
 Positive word-of-mouth communications
 Increased revenues


The Five Dimensions of Service Quality
Reliability: Ability to perform the promised service dependably and accurately.

Assurance: Knowledge and courtesy of employees and their ability to inspire
trust and confidence.

Tangible: Physical facilities, equipment, and appearance of personnel.

Empathy: Caring, individualized attention the firm provides its customers.

Responsiveness: Willingness to help customers and provide prompt service.


Evidence of Service from the Customer’s Point of View

Examples of how customer judge the five dimension of service


Service encounter or moment of truth

A moment of truth is usually defined as an instance wherein the customer and the organization
come into contact with one another in a manner that gives the customer an opportunity to either
form or change an impression about the firm. Such an interaction could occur through the
product of the firm, its service offering or both. Various instances could constitute a moment of
truth – such as greeting the customer, handling customer queries or complaints, promoting
special offers or giving discounts and the closing of the interaction.

Importance
In today‘s increasingly service driven markets and with the proliferation of multiple providers for
every type of product or service, moments of truth have become an important fact of customer
interaction that marketers need to keep in mind. They are critical as they determine a
customer‘s perception of, and reaction to, a brand. Moments of truth can make or break an
organization‘s relationship with its customers.

This is more so in the case of service providers since they are selling intangibles by creating
customer expectations. Services are often differentiated in the minds of the customer by
promises of what is to come. Managing these expectations constitutes a critical component of
creating favorable moments of truth which in turn are critical for business success.

Service encounter cascade for telephone service

Types of Service Encounters
A service encounter occurs every time a customer interacts with the service organization. There
are three general types of encounters – remote encounters, phone encounters, and face-to-face
encounters. A customer may experience any of these types of encounters, or a combination of
all three in his/her relations with a service firm.


1. Remote Encounter: Encounter can occur without any direct human contact is called as
Remote Encounters. Such as, when a customer interacts with a bank through the ATM system,
or with a mail-order service through automated dial-in ordering. Remote encounters also occur
when the firm sends its billing statements or communicates others types of information to
customers by mail. Although there is no direct human contact in these remote encounters, each
represents an opportunity for a firm to reinforce or establish perceptions in the customer. In
remote encounter the tangible evidence of the service and the quality of the technical process
and system become the primary bases for judging quality. Services are being delivered through
technology, particularly with the advent of Internet applications. Retail purchases, airline
ticketing, repair and maintenance troubleshooting, and package and shipment tracking are just
a few examples of services available via the Internet. All of these types of service encounters
can be considered remote encounters.
2. Phone Encounters:- In many organizations, the most frequent type of encounter between a
customer and the firm occurs over the telephone is called as phone encounter. Almost all firms
(whether goods manufacturers or service businesses) rely on phone encounters in the form of
customer-service, general inquiry, or order-taking functions. The judgment of quality in phone
encounters is different from remote encounters because there is greater potential variability in
the interaction. Tone of voice, employee knowledge, and effectiveness/efficiency in handling
customer issues become important criteria for judging quality in these encounters.
3. Face-to-Face Encounters: A third type of encounter is the one that occurs between an
employee and a customer in direct contact is called as Face-to-Face Encounter. In a hotel,
face–to–face encounters occurs between customers and maintenance personnel, receptionist,
bellboy, food and beverage servers and others. Determining and understanding service equality
issues in face–to–face context is the most complex of all. Both verbal and non-verbal behaviors
are important determinants of quality, as are tangible cues such as employee dress and other
symbols of service (equipments, informational brochures, physical settings). In face–to–face
encounters the customer also play an important role in creating quality service for herself
through his/her own behavior during the interaction. For example, at Disney theme parks, face-
to-face encounters occur between customer and ticket-takers, maintenance personnel, actors in
Disney character costumes, ride personnel, food and beverage servers, and others. For a
company such as, IBM, in a business-to-business setting direct encounters occur between the
business customers and salespeople, delivery personnel, maintenance representatives, and
professional consultants.


Sources of pleasure and displeasure in service encounters:

Critical incidence techniques used to get customers and employees to provide verbatim stories
about satisfying and dissatisfying service encounters they have experienced
With this technique customers asked the following questions.
Think of a time when, as a customer you had a particular satisdfyingor dissatisfying
interaction with
When did the incidence happen
What a specific circumstances led up this situation?
Exactly what did the employee say or do?
What resulted that made you feel

General service behavior do‘s and don‘ts


Relationship marketing

With the growth of the internet and mobile platforms, relationship marketing has
continued to evolve and move forward as technology opens more collaborative and
social communication channels. This includes tools for managing relationships with
customers that goes beyond simple demographic and customer service data.
Relationship marketing extends to include inbound marketing efforts, (a combination of
search optimization and strategic content), PR, social media and application
development. Relationship marketing is a broadly recognized, widely-implemented
strategy for managing and nurturing a company‘s interactions with clients and sales
prospects
It also involves using technology to organize, synchronize business processes,
(principally sales and marketing activities), and most importantly, automate those
marketing and communication activities on concrete marketing sequences that could run
in autopilot, (also known as marketing sequences). The overall goals are to find, attract
and win new clients, nurture and retain those the company already has, entice former
clients back into the fold, and reduce the costs of marketing and client service.

Goals of relationship marketing
Satisfaction
Relationship marketing relies upon the communication and acquisition of consumer
requirements solely from existing customers in a mutually beneficial exchange usually
involving permission for contact by the customer through an "opt-in" system.With
particular relevance to customer satisfaction the relative price and quality of goods and
services produced or sold through a company alongside customer service generally
determine the amount of sales relative to that of competing companies.
Retention
A key principle of relationship marketing is the retention of customers through varying
means and practices to ensure repeated trade from preexisting customers by satisfying
requirements above those of competing companies through a mutually beneficial
relationshipThis technique is now used as a means of counterbalancing new customers
and opportunities with current and existing customers as a means of maximizing profit
and counteracting the "leaky bucket theory of business" in which new customers gained
in older direct marketing oriented businesses were at the expense of or coincided with
the loss of older customers.


Advantages and disadvantages
Customer Value
An advantage of customer relationship marketing is that it tends to identify the customers who
are more likely to be of higher value to a company. This saves the company time and money in
terms of its sales and order-fulfillment efforts. Customer relationship marketing also helps
pinpoint customers who are too costly to maintain relationships with, as well as opportunities for
growing underdeveloped potential. For example, a customer who is unprofitable for the
company might become a long-term account once he is encouraged to buy more of the same
product.
Communication
Communication and customer satisfaction tend to increase when customer relationship
marketing is used, according to Phillip Kotler and Kevin Lane Keller, authors of the book
"Marketing Management." Businesses find it easier and more efficient to obtain and keep their
customers. Databases and customer relationship management software help companies keep
track of who is buying what and how often. There is more of a two-way interaction between the
company and the person who wishes to make a purchase. Promotional incentives such as
loyalty discounts and perks help foster a sense of appreciation and reward for repeat business.
Costs
Direct marketing is typically more expensive per customer than other forms. Because there is a
higher level of personalization, it might be more time-consuming for a small business to
communicate with its customers on an individual basis. It might also be difficult to decide what
type of customer information to capture and store, since only some of it may prove useful. A
small-business owner and his staff might need to receive training on how to interpret customer
data and buying behavior.
Security
The security issues associated with maintaining sensitive data are a major disadvantage of
customer relationship marketing. Personal customer information is often stored on servers and
in computerized databases, which puts the business at risk for liabilities. Some customers will
refuse to share some of their information, making it more difficult to take full advantage of the
concepts behind customer relationship marketing. Protecting personal data is costly for
businesses because electronic security measures must be executed. In addition, companies
need to tell customers how their data is used, when it might be shared and why.

Benefits of relationship marketing to organization

Retaining customers for the long-term offers many benefits. The aim is for the company to
obtain life time custom. Some of the benefits of relationship marketing include:

Loyal customers will recommend your business to others, thus expanding your business for you.

Loyal customers are willing to try some of your new products, because they trust you.

Customers will be willing to pay more for your services/products if there are adjustments in
pricing because they are loyal to you and trust your services/products.


Loyal customers will tell you about problems with your products/services enabling to improve
your products/services.

The ultimate benefit will be an increase sales, market share and dominance.

Service recovery
Service recovery is an umbrella term for systematic efforts by a company to correct a
problem following a service failure and retain a customer's goodwill. Service recovery
plays a crucial role in achieving or restoring customer satisfaction. In every organization
things may occur that have a negative impact on its relationships with customers. The
true test of a firm's commitment to satisfaction and service quality isn't the advertising
promises but in the way it responds when things go wrong for the customer.
Effective service recovery requires thoughtful procedures for resolving problems and
handling disgruntled customers. It is critical for firms to have effective recovery strategies
because under the following conditions even a single service problem can destroy a
customer's confidence in a firm:
· The failure is totally outrageous (blatant dishonesty on the part of an employee)
· The problem fits a pattern of failure rather than being an isolated incident.
· The recovery efforts are weak, serving to compound the original problem rather than
correct it.
· The risk of defection is high, especially when a variety of competing alternatives are
available.

SERVICE RECOVERY STAGES:
Service Recovery in an organization progresses through a series of stages,
shown in the following points:

Stage 1, Expiring:

The service of the consumer in this stage is expire means finished.
There is no complaint handling. Angry customers are ignored. Letters to VIPs
and even the CEO about a damaged shipment go unanswered.

Stage 2: Reactive:

Customer complaints are heard, and a response is made. But it's a careless
process with no defined goals for the response and no one owning this business
process.

Stage 3: Active Listening:

At this stage, the response to issues voiced by customers is structured. Specific
people have the responsibility to respond to complaints and guidelines are in
place for the response. However, it is still reactive.


Stage 4: Attentiveness:

The critical change from Stage 3 to 4 is the move from reactive to proactive
solicitation of customers with issues. The reason this is so important is that most
customers don't bother to complain. They just move on to other suppliers of
products. Haven't we all done this? It's a lot of work to complain!

The solicitous role is accomplished by encouraging customer to voice their
complaints. Event surveys (also known as transactional or transaction-driven
survey) are a commonly used technique to get issues voiced. The survey design
must be such that more than just high level measurement of customer
satisfaction is captured. The design must allow for action to be taken. The desire
for anonymity complicates the task. (Our Survey Workshops help attendees
create such actionable survey instruments.)

Stage 5: Rechecking/ Frequentness:

The pinnacle of Service Recovery Practices is achieved when the complaint
identification merges with business process improvement or six sigma programs
to support root cause identification and resolution. The owners of business
processes that cause customer issues are notified of the occurrences to prompt
reexamination of the process design.

In essence, we see two levels of feedback loops. First, feedback from the
customer to the organization. Second, feedback from the customer-facing groups
to its business partners within the organization.

Complaint handling
Complaint handling needs to be seen as a profit centre and not as a cost centre. With the
departure of a dissatisfied customer the firm loses more than the value of the next transaction. It
may lose a long - term stream of profits and also any prospective customers he complains to.
Hence it pays to invest in service recovery designed to protect to those long - term profits.

Service recovery paradox
It has sometimes been observed that Customers who experience a service failure and then have it
resolved to their full satisfaction are more likely to make future purchases than are customers who
have no problem in the first place. It has sometimes been true of the first service failure, but after the
second customers has been disillusioned. Hence, this has not been not proven universally true.
Components of effective service recovery systems
effective complaint handling
identify service complaints
resolve complaints effectively
learn from the recovery experience


take feedback from the customer

Service recovery paradox
The service recovery paradox is a supposed paradoxical effect where a product failure
ultimately results in increased customer satisfaction, producing a level of satisfaction even greater
than that expected with no product failure. Empirical tests of the effect have had mixed
results. One study concluded that the effect was most likely to occur when a number of conditions
were met, such as the customer considering the failure not to be serious, and to be out of the
company's control.

Customer reaction to service failure


CUSTOMER RESPONSE CATOGORIES TO SERVICE FAILUERS:

When service is faiulre or not satisfied, the customers can take may a kind of public
action or public process or may take some kind of private action or private movement or
they may can not take any kind of action as they are enough of thire findings. If customer
take public action or government action , they can complain directile to the service firm
or to the organization or they can complain to the third party or they may take any kind of
legal action to seek their redress or to get thire right or benefits. If customer take any
kind of private action, they can used to defects or switch directly to the provider or may
be used any kind of negative word of mouth to the organization. And if customer is
comfortable to their recommendations anout their complaints or they get benefits they
can not take any kind of action.

Understanding Customer Responses to Service Failure:

Why do customers complain?
o Obtain compensation
o Release their anger
o Help to improve the service
o Because of concern for others
What proportion of unhappy customers complain?
Generally 9% to 37% of unhappy customers can make complaints to the firms.

Why don‘t unhappy customers complain?
There are three primary reasons why dissatisfied customers don‘t complaint:
1] They think that it is not worth the time or effort.
2] They further think that no one would be concerned about their problem or solving it.
3] They do not know where to go or what to do.
Who is most likely to complain?
Where do customers complain?
What do customers expect once they have made a complaint?
Dealing with Complaining Customers and Recovering from Service Failure:
Take complaints professionally and not personally.
Be prepared to deal with angry customer who may behave in an insulting way to
service personnel who may not be at fault.
Take the perspective that customer complaints allow firm a chance to
o Correct problems,.
o Restore relationships.
o Improve future satisfaction for all.
Develop effective service recovery procedures.

REASONS OF COMPLAINTS:
Restitution:
Restitution means making good a loss. If a customer facing any kind of damage or
dissatisfaction during the working from the organization, they can make complaint to that
institution to take the proper restitution from such firms.
Self-Esteem:
Some customer can make complaint only for their self- esteem. Self- esteem means to


thing yourself highly of or high regard. These people think that we are the best in the
organization and do the complaints only just for satisfying their objective or to collect
some kind of attention or praise from other peoples.

Theoretical Explanation:
These kinds of customers are listening or got any kind of information from some other
source and believe only on that. Theoretical explanation means dealing with theory only.
These people can sort some form of theory about the organization whether it is good or
bad and make a complaint about it.

CUSTOMER COMPLAINT ACTION:

Customer complaint action following service failure. The action can be of various types.
A classified customer can chose to complaint on the spot to the service provider given
by the company, the opportunity to respond immediately. This is often the best- case
scenario for the company. It has the second chance right at that movement, to satisfy
the customer. Keep his or her business in future; he may potentially avoid any negative
word of mouth.

Some customers choose not to complaint directly to the provider but rather spread
negative word of mouth about the company to friends, relatives and co- workers. This
negative word of mouth can be extremely detrimental because it can reinforce the
customer‘s feeling of negativism and spread that negative impression to others as well.
Further the company has no chance to recover unless the negative word of mouth is
accompanied by a complaint, directly to the company.
Many customers are very passive about their dissatisfaction. They are simply saying or
doing nothing, take action or not and at some point of time they will decide weather to
stay with that provider or not.

TYPES OF COMPLAINRES:

Research suggests that people can be grouped into categories based on how they
respond to failures. Four categories of response types were identified in a study that
focused on grocery stores, automotive repair service, medical care and banking and
financial services. These are as follows:

1] Passive: This group of customer is least likely to take any action. They are unlikely to
say anything to the provider, less likely than others to spread negative words of mouth,
and unlikely to complaint to a third parties.

2] Voices: These customers actively complaint to service providers, but they are less
likely to spread negative word of mouth to go to third parties with their complaint. They
tend to believe complaining as a social benefit and therefore don‘t hesitate to voice their
opinion.

3] Irritate: These consumers are more likely to engage in the negative word of mouth to
the friends and relatives to switch provider than the others. They are about average in
their prosperity to complain to the provider. They are unlikely to complain to the third
parties.

4] Activists: These consumers are characterized by above propensity to complain on the


entire dimension. They will complain to the provider, they will tell others, and they are
more likely than any other group to complain to third parties

COMPLAINT HANDLING PROCEDURE:
According to TIO- a telecommunication industry, there is a specific & suitable procedure
of complaint handling which is necessary to be followed in any organization. But you will
need to tailor your own procedures to suit the size of your business and the services you
offer. At a minimum your complaint handling procedure should require the following for
your staff or organization:

1] An acknowledgement of receipt of the complaint:

It is a strong need that you acknowledge the receipt of all complaints, verbal or written. It
is a good idea to allocate a complaint reference number and provides the customer with
a contact point for further correspondence.

2] An accurate and accessible record of complaint information:

Be sure that your recorded version of the complaint matches exactly that of the
customer. Also make sure that the complaint record is accessible by any area of the
organization that the customer may contact.

3] Attachment to timeframes for resolution:

According to TIO, the company or firm should attempt to resolve complaints on first
contact, but if this isn‘t possible, then a complaint should be finalized within 30 days.

4] Customers must be inform about any delays in resolving a complaint:

As soon as the company realizes that they are unable to resolve a complaint in the
timeframes given, contact the customer, advising him or her of the delay and set a new
timeline.

5] Rewarding Attachment amongst Your Staff:

The complaint handling procedures should be a standard component of your employee
induction training and should also be included in Ongoing training as required.

6] Inform Customers Of Complaint Handling Procedures:

A brochure or fact sheet is a great way to make customers aware of your Complaint
handling procedures. You should outline the main components of your procedure and
send it to customers with your first bill and when they lodge a verbal or written complaint
with you. If a brochure is too expensive or not practical, place some information on your
website, or consider sending your customers an email outlining your policies and
procedures. Just make sure that you make it accessible and easy to read and
understand.


Building Customer Relationship:

Enhancing

Retaining

Satisfying

1. The first step in managing a loyalty based business system is finding and
acquiring the right customers.
2. After acquisition of the desirable customers the next step is to build
relationships and turn them into loyal customers who will generate a
growing Revenue stream for the company.
3. A loyal customer is a consistent source of revenue for the organization.
This loyalty has to be Sustained by continuously providing superior quality
and value.

 Customer Lifetime Value
• It is equivalent to life time profitability generated by a loyal customer. It
depends on the average revenue generated over a period of time, referrals
generated by the customer over the period of time and also the costs
incurred to serve the customer.

 Foundations For Relationship Strategies
1. Quality offered in the core service
2. Careful market segmentation & targeting 3. Continuous monitoring of
relationships

 Continuous Monitoring of Relationships.
Annual customer relationship surveys through basic market research help
in monitoring strategy. A well designed customer data base is beneficial to
provide all relevant information.


Service blueprinting:

A service blueprint is a schematic diagram that represents all the details of a service from the
customer and organization‘s perspective. It shows how the different service components link
into each other – showing the different touch points and options customers have to choose from
and how the internal workings support those choices.

Because it maps out chronologically and in sequence all the various interactions and actions
that occur in parallel when customer and company meet, it shows all the interactions by and
with the customer. So it also illustrates the stages and complexity of the encounter and
distinguishes between the customer experiences (and decisions) and the systems, invisible to
the customer, that operate backstage to ensure that these are delivered.

When and why are they useful?
Blueprints are flexible and powerful in that they depict a service at multiple levels of analysis –
they can facilitate the refinement of a single step as well as the creation of an entire service
process. It is a way of ‗seeing‘ the service from the customer focus; the key part of the
compliance outcome. In creating the current and future state blueprints it allows the Team to
articulate and act upon customer insights, and focus on what‘s working, what‘s not working and
what needs to be changed.

For designing:

The development of new services, assessment and improvement of existing services


Capturing how long processes within the service take, and how that equates to cost because
they are presented with a base of time
Comparison of differences in basic services, standards and processes
Capturing of processes, architecture and systems in the context of service, not in isolation or
solely from the internal business perspective
Testing of assumptions on paper to identify fail points and thoroughly work out the bugs
Cuts down time and inefficiency of random service development
For implementing:

Becomes a reference for planning and change
Represents the new or changed service for a staff member to see during integration activity
Forms a common point of reference for all parties (project team, affected staff and
management) concerned with achieving a successful launch – also serves as focal point for
later refinements or last-minute changes
Can be stored electronically for later reference, available for everyone involved
Facilitates comparison of the desired and actual service
As a communication tool:

Provides a focus for conversations
Is more precise than verbal descriptions, and less subject to misinterpretation
Can be a formalised way to inspire corporate-wide change directed at integrating customer
focus across the organisation
Can help convince the organisation that changes are in order and what specifically can be
done
What’s in a service blueprint
The blueprint sets out how the customer and organisation (back-office supporting
people, processes and systems) interact through five components and three lines:

Physical evidence
Customer actions
————————–Line of interaction
Visible contact, employee actions (onstage)
————————–Line of visibility
Invisible contact, employee actions (backstage)
————————–Line of internal interaction
Support processes


Market information system
A marketing information system (MIS) is a set of procedures and methods designed to
generate, analyze, disseminate, and store anticipated marketing decision information on a
regular, continuous basis. An information system can be used operationally, managerially, and
strategically for several aspects of marketing.
A marketing information system can be used operationally, managerially, and strategically for
several aspects of marketing.
We all know that no marketing activity can be carried out in isolation, know when we say it
doesn‘t work in isolation that means there are various forces could be external or internal,
controllable or uncontrollable which are working on it. Thus to know which forces are acting on it
and its impact the marketer needs to gathering the data through its own resources which in
terms of marketing we can say he is trying to gather the market information or form a marketing
information system. This collection of information is a continuous process that gathers data from
a variety of sources synthesizes it and sends it to those responsible for meeting the market
places needs. The effectiveness of marketing decision is proved if it has a strong information
system offering the firm a Competitive advantage. Marketing Information should not be
approached in an infrequent manner. If research is done this way, a firm could face these risks:
1. Opportunities may be missed.
2. There may be a lack of awareness of environmental changes and competitors‘ actions.
3. Data collection may be difficult to analyze over several time periods.
4. Marketing plans and decisions may not be properly reviewed.
5. Data collection may be disjointed.
6. Previous studies may not be stored in an easy to use format.
7. Time lags may result if a new study is required.
8. Actions may be reactionary rather than anticipatory.
The total information needs of the marketing department can be specified and satisfied via a
marketing intelligence network, which contains three components.
1. Continuous monitoring is the procedure by which the changing environment is regularly
viewed.
2. Marketing research is used to obtain information on particular marketing issues.
3. Data warehousing involves the retention of all types of relevant company records, as well as
the information collected through continuous monitoring and marketing research that is kept by
the organization.
Depending on a firm‘s resources and the complexity of its needs, a marketing intelligence
network may or may not be fully computerized. The ingredients for a good MIS are consistency,


completeness, and orderliness. Marketing plans should be implemented on the basis of
information obtained from the intelligence network.
An Marketing Information time and labor costs and the complexity of setting up an information
system. Marketers often complain that they lack enough marketing information or the right kind,
or have too much of the wrong kind. The solution is an effective marketing information
system.
The information needed by marketing managers comes from three main sources:
1) Internal company information – E.g. sales, orders, customer profiles, stocks, customer
service reports etc
2) Marketing intelligence – This can be information gathered from many sources, including
suppliers, customers, and distributors. Marketing intelligence is a catchall term to include all the
everyday information about developments in the market that helps a business prepare and
adjust its marketing plans. It is possible to buy intelligence information from outside suppliers
(e.g. IDC, ORG, MARG) who set up data gathering systems to support commercial intelligence
products that can be profitably sold to all players in a market.
(3) Market research – Management cannot always wait for information to arrive in bits and
pieces from internal sources. Also, sources of market intelligence cannot always be relied upon
to provide relevant or up-to-date information (particularly for smaller or niche market segments).
In such circumstances, businesses often need to undertake specific studies to support their
marketing strategy – this is market research.


Employees role in service delivery

People are a defining factor in a service delivery process, since a service is inseparable
from the person providing it. Thus, a restaurant is known as much for its food as for the
service provided by its staff. The same is true of banks and department stores.
Consequently, customer service training for staff has become a top priority for many
organizations today.


Boundary spanning roles:

Boundary Spanning is concerned with the detection of information. It has two primary
roles 1) to detect information and bring it into the organisation. 2) Send information into
the environment presenting the company in a favourable light. There are two main
sources of information 1) business intelligence which is information about the general
environment. 2) Competitive Information which is information about an organizations
competitors. An example of boundary spanning can be seen in the teen fashion
company Genesco Inc who hire people of the same age as the target market to provide
first hand intelligence of what the consumer wants.

Background
The post-WWII years saw the burgeoning of the American corporation and in particular
major R&D labs, for example, Tushman examined the "communication activity of all the


professionals (N=345) in the R&D facility of large mid-Western U.S Corporation. The
laboratory is isolated from the rest of the corporation and is divided into seven
departments (divisional laboratories). The departments are, in turn, organized into
separate project areas. The projects were stable over the course of the research and
each respondent was a member of only one project." With this increase in spending on
R&D, there was increased interest in the effectiveness of that spending and how to
improve the efficiency of commercial research. Of course, all the academic research
presented anonymous data from the firms with which they had been working so it is hard
to know who the participating laboratories were.
Boundary spanning jobs are high-stress jobs
These positions require:
Mental labor
Physical laobour
Emotional labour

Sources of conflict

Front line employees often face interpersonal and interorganisational
conflict on the job their frustrationand confiusion canif left unattended,
lead to stress, job dissatisfaction, a diminished abilityto serve
customers.
As these employees represent customer to the organistion and often
need to manage a number of customers simultaneously front liners
inevitably have to deal with conflicts. These conflicts can be:
Personal conflict: in some situation front line employees face
conflictbetween what what they are asked to do and their own
personalities,orientation,values.
Organizational conflict: a more common conflict among
employees and two bosses. The organization and individual
customer


Customer participation:

The Problem of Customer Misbehavior
Customers form an important element in many services‘ encounters. Firms that fail to deal
effectively with customer misbehaviors, risks damaging their relationships with all the other
customers that they would like to keep. Following are the problems (P) & solutions (S)
P—the thief ( Shop lifter, Towel, Linen theft, ―E‘ crime )S---a) Find the route of theft and try to
plug it, and if necessary prosecute. b) But take care that honest customers do not suffer.
Genuine mistakes are to be ignored. c) be sensitive and handle carefully.

P) ---the rule breaker (Carrying gun in airlines, No shoe, No shirt in clubs etc. Jump the ‗Q‖ ) S)--
-Rules should be properly conveyed, may be on a billboard.---Take help of other customers.---
Too many rules and control reduces the pleasure of service.---The fewer the rules, the
more explicit, the important ones can be. P) ---the vandals (Breaking of Nursing Homes, Burning
of buses etc.)S) The best cure for vandalism is prevention. --- Improved security, better lighting,
design with grills etc

Customer Expectations
Customer is defined as anyone who receives that which is produced by the individual or
organization that has value. Customer expectations are continuously increasing. Brand loyalty
is a thing of the past. Customers seek out products and producers that are best able to satisfy


their requirements. A product does not need to be rated highest by customers on all
dimensions, only on those they think are important.
Measuring Customer Satisfaction
To execute a successful client satisfaction survey, build one that your customers have the time
and inclination to respond to, and that delves into the types of information that will truly help
enhance your performance. By carefully constructing a brief, yet strong, survey, you can
discover what your customers believe your strengths and weaknesses are and what makes
your customers loyal to your company.

Managing Demand and Capacity:

• The Underlying Issue: Lack of Inventory Capability
• Understanding Capacity Constraints
• Understanding Demand Patterns
• Strategies for Matching Capacity and Demand
• Yield Management
• Waiting Line Strategies

Variations in demand relative to capacity


Yield management

Yield management is the process of understanding, anticipating and
influencing consumer behavior in order to maximize yield or profits from a fixed, perishable
resource (such as airline seats or hotel room reservations or advertising inventory). As a
specific, inventory-focused branch of revenue management, yield management involves
strategic control of inventory to sell it to the right customer at the right time for the right price.
This process can result in price discrimination, where a firm charges customers consuming
otherwise identical goods or services a different price for doing so. Yield management is a large
revenue generator for several major industries; Robert Crandall, former Chairman and CEO
of American Airlines, gave Yield Management its name and has called it "the single most
important technical development in transportation management since we entered deregulation.

Yield management has become part of mainstream business theory and practice over the last
fifteen to twenty years. Whether an emerging discipline or a new management science (it has
been called both), yield management is a set of yield maximization strategies and tactics meant
to improve the profitability of certain businesses that focus on yield. It is complex because it
involves several aspects of management control, including rate management, revenue streams
management, and distribution channel management, just to name a few of them. Yield
management is multidisciplinary because it blends elements of marketing, operations, and
financial management into a highly successful new approach. Yield management strategists
frequently must work with one or more other departments when designing and implementing
yield management strategies

EX:
Airlines
In the passenger airline case, capacity is regarded as fixed because changing what aircraft flies
a certain service based on the demand is the exception rather than the rule. When the aircraft
departs, the unsold seats cannot generate any revenue and thus can be said to have perished,
or have spoiled. Airlines use special software to monitor how seats are being reserved and react
accordingly. There are various inventory controls such as a nested inventory system. For
example, airlines can offer discounts on low demand flights, where the flight will likely not sell
out. The converse, selling more expensive seats when there is excess demand, managing off
demand.
Another way of capturing varying willingness to pay is to attempt market segmentation. A firm
may repackage its basic inventory into different products to this end. In the passenger airline
case this means implementing purchase restrictions, length of stay requirements and requiring
fees for changing or canceling tickets.
Hotels
Hotels use this system in largely the same way, to calculate the rates, rooms and restrictions on
sales in order to best maximize their return. These systems measure constrained and
unconstrained demand along with pace to gauge which restrictions to implement, e.g. length of
stay, non-refundable rate, or close to arrival. Yield management teams in the hotel industry
have evolved tremendously over the last 10 years and in this global economy targeting the right
distribution channels, controlling costs, and having the right market mix plays an important role
in yield management. Yield management in hotels is selling rooms and services at the right
price, at the right time, to the right people.


Rental
In the rental car industry, yield management deals with the sale of optional insurance, damage
waivers and vehicle upgrades. It accounts for a major portion of the rental company's
profitability, and is monitored on a daily basis. In the equipment rental industry, yield
management is a method to manage rental rates against capacity (available fleet) and demand

Pricing of services


Service Pricing Strategies

Factors Contributing to Incremental profits in a Business
Profit derived from increased purchases.
Profit from reduced operating costs.
Profits from referrals to other customers.
Profit from Price premium.


New Service Development

Service Innovation Process

• Service innovation process consists of five phases (designed for new Innovations where
success is less certain)

(Thomke, 2003)

(1) Evaluate ideas – Conceive, assess, and prioritize ideas from internal and external sources

(2) Plan and design – Assign design needs, complete design, build rollout plan

(3) Implement – Develop test plan, implement idea

(4) Test – Monitor performance of idea, report results of fast feedback by market, improve
process in a stable operating environment

(5) Recommend – Complete, review and approve, communicate recommendation


Types of Service Marketing Strategies

Referrals
One of the best ways to market an intangible is through word of mouth. A happy customer will
not wait to be asked about a service from friends and will often want to share her experience
and tell people why she likes the service. Some service providers use referral programs as an
integral part of their marketing. You can offer clients a cash bonus for each referral they send to
you, offer them a free service for each lead or offer their friends a reduced rate on service if they
mention the customer.

Education
Another way to market a service is to provide customer education. You can do this by offering
free seminars, lunch-and-learns or other educational meetings. You can write articles for
magazines and newspapers and give talks at trade shows and conferences. With an
educational marketing strategy, you do not emphasize your product features or prices, but the
benefits of using the service. For example, if you own a dog grooming business, you might write
articles for local newspapers discussing the effects of pet ticks and fleas on a family‘s health
and a pet‘s well-being, showing how regular grooming can alleviate these problems.

Demonstrations
Customers might be gun shy about trying a service if they aren‘t sure what they are getting.
Offering free demonstrations helps ease their concerns and can result in immediate sales. For
example, if you offer personal training, you might contact a large company with a wellness
program and offer to give an employee talk and free exercise class. If you offer public relations
services, you might offer meet with a business owner, discuss his current marketing strategy
and suggest PR initiatives he could try and outline the cost to do so.

Social Media
Social media are hard to escape, with millions of people sending texts and emails to friends
when they see interesting items they want to share. They can also be an inexpensive way for
smaller businesses with few advertising dollars to make an impact. A social media marketing
strategy lets service providers take advantage of free tools such as Facebook and Twitter to
educate consumers and get them to spread the word to their network of contacts. With
Facebook, for example, you can create a free business page that lets you detail your service.
Put customer testimonials and case histories on your page or run contests offering a cash prize
or a free session or visit. Place place Facebook "Like" buttons on your website pages to
encourage visitors to share what they find with friends. Send Twitter messages that give
customers free tips. For example, a landscaper might tweet, "Watering your lawn more than
once per week isn't necessary. Once a week for 30 minutes is all you need."


Relationship Management
One key factor in service businesses is the relationships made with clients. Keeping in
touch with them through newsletters, mailings, follow-up phone calls helps to keep a
business top of mind. Additionally, providing them with free information can help to
establish credibility. For example, a lawyer specializing in start-up incorporation can
provide clients with relevant small business legal news. Maintaining consistent
correspondences with clients will increase the chances or frequency of them using the
services. Furthermore, with Internet social media applications, online newsletters and
blogs can be a less expensive way to maintain client relations.

Providing Incentives
Incentives can be the deciding factor in choosing one service-oriented company over
another. It can be linked to the business's services, like a bank offering discounted life
insurance to its checking account holders. Or it can be discounts in conjunction with a
partnered, non-competitive, service provider that can end up benefiting both parties and
the client. For instance, a wedding planner can have an agreement with a local
photographer to provide cheaper packages to her clients, in exchange for referrals. This
arrangement provides an incentive to the client, resulting in cheaper photos of her
wedding day.

Promotion
The strategy used when promoting a service typically focuses on awareness, recall and
retention. The first step is to inform the potential client of the company and service's
existence, which can be as costly as a national print and TV advertisement campaign or
as cheap as small ads in the local paper. Providing promotional items, such as pens,
brochures, magnets and t-shirts, can help the customer recall the company when its
services are needed. Once the customer has been served, discounts and value customer
incentives can be used to retain them.

Establishing the Brand
Branding a company gives credibility to its services. It is the only representation of the
company--since there is no physical product--so the imagery should be consistent in
every aspect of the marketing campaign. Inconsistencies in brand visuals can lead to
confusion, and even lack of trust. For example, if a customer receives a business card,
and finds the website has a completely different look, he might assume that it is for a
different company. The same corporate palette, fonts, logos and photography should all
be integrated into everything from brochures to social media applications.


The Top Eight Marketing Tips for the Service Industry

Developing a marketing strategy

Growth has nothing to do with the size of your business. It‘s about how many customers and
prospects you can market to you need to be aware that marketing efforts require careful
planning and, in order to you assess your return on investment and effectively plan future
marketing; you must keep a record of the sales generated as a result of your campaigns. Try
and set some time aside each week for brainstorming new ideas or calculating your business
growth.

TIP: There are, however, ways to market more cost effectively, perhaps by reducing your ad
space or by sending out promotional SMS messages which reach customers cheaply, directly
and quickly.

Data Capture

Build a mailing list. This will enable you to target your campaigns more effectively. Collecting the
names is the hard part, so give your prospects a reason for them to provide you with their name
and address – competitions, discounts, maybe even a loyalty card. Work at keeping your list
accurate and up to date. Try to get hold of email addresses as well as (or even in preference to)
contact details: email is cheaper and more versatile than postage. It is vital to monitor your
customer‘s purchase history. This will indicate whether they are cutting back.

TIP: You can use purchase history information to target those who have reduced the frequency
of their visit. This will encourage them to revisit your business.

The power of the Internet

Many businesses still do not collect the email addresses of everyone who contacts them. Every
time a business fails to capture someone‘s email address they‘re turning down the opportunity
to contact them for FREE, for weeks, months and years ahead. Once you have Email
Addresses – use them!
TIP: You can use email to thank people for their business, make them a special offer, give them
a free article or report, send a newsletter, and recommend a product or service they may be
interested in or ask for referrals.

Utilizing technology


Technology helps to simplify working life, yet many businesses are reluctant to adopt new forms
of communication. Consider the impact of a website showing photos of all your best work,
compared to a simple price list or leaflet. Similarly, SMS text appointment reminders can be a
worthwhile investment as they reduce no-shows and wasted staff time.

Advertising

It is essential that you measure the response to all of your advertising in order to evaluate
whether or not it represented a viable investment and to shape your future investment
decisions. It is worth asking how many people responded to your ad, how many of those were
converted to a sale, what‘s that worth to you? Some practical advice: an attention grabbing
headline is essential, one change in headline can produce a 50-100% increase in response, the
ad itself needs to appeal directly to the interests of your target audience. People don‘t buy your
product or service. They buy the benefits that your product or service offers them. So spend
some time getting clear on what exactly your benefits are – and then make sure that you
articulate them precisely in all of your communications.

TIP: Research has shown that the effects of advertising are short lived. Therefore, in order to
optimize your budget, it makes sense to spend smaller amounts very regularly. This will ensure
that your business is consistently at the forefront of customer‘s minds.

Promotions

Customers will be shopping around for the best deals. You do not necessarily have to cut list
prices but you may need to offer more temporary price promotions. Targeted and personalized
promotions are more cost efficient than just sending out one generic campaign. Customers are
naturally skeptical of promotions so make sure you frame them appropriately, for example, ‗New
Years Detox Offer‘.

TIP: It is worth noting that discounts below 15% are often ineffective

Rewarding loyalty

Start a loyalty programmed. The customer gets a good deal, you get a keen customer. A simple
approach is to give clients a free treatment after they purchase a set number of treatments.
Invite your regulars to trial new products and treatments at a reduced cost, you could target this
promotion based on client‘s purchase history. TIP: Customers are naturally dubious of sales
offers so frame the offer as a ―thank you‖ for their loyalty.


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