service marketing

4 processing categories of services

1. people processing

2. possession processing

3. mental stimulus processing

4. information processing

components of the extended marketing mix

process: customers often involved/co producers

physical environment: design servicescape and provide tangible evidence of service performance

people: interactions between customers and contact personnel strongly influence customer perceptions of service quality

3 stage model of service consumption

1. pre purchase stage: awareness of need, info search

2. service encounter stage: request service from chosen supplier

3. post encounter stage: evaluation of service performance and future behaviours

perceived risks customers face

1. functional: unsatisfactory performance

2. financial: monetary loss

3. temporal: wasted time

4. physical: physical injury

5. psychological: fears and negative emotions

6. social: how others react

7. sensory

components of customer expectations

1. desired service level: wished level of service that should be delivered

2. adequate service level: min acceptable service

   1. predicted service level: service level customers believe the firm will deliver

   2. zone of tolerance: the range within customers are willing to accept

moment of truth metaphor

when the customer directly interacts with service firm and involves the skills, motivation and tools employed by the firm to prove to the customer that they are the best choice

Role, script and perceived control theories

Role: employees have roles to play and behave specifically

scripts: specifies the sequences of behaviour for customers and employees

behavioural control: allows customers to change the service situation by asking the firm to customise typical offerings

decisional control: customer can choose between 2+ options

cognitive control: why something is happening and what will happen next

dimensions of service quality

1. tangibles

2. reliability

3. responsiveness

4. assurance

   1. credibility

   2. security

   3. competence

   4. courtesy

Understand how customer, competitor, and company analyses (i.e., the 3 Cs) help to develop a customer-driven services marketing strategy.

Customer Analysis	Overall examination of market characteristics. Customer needs and related characteristics and behaviours
Competitor analysis	Current positioning Strengths and weaknesses
Company analysis	Current brand positioning and image Resources limitations and restraints

key elements of positioning strategy

1. segmentation: dividing population into groups with common characteristics

2. targeting: choose segments to focus on

3. positioning: differentiation forms first step to create unique positioning

how positioning maps analyse and develop competitive strategy

represents consumer perceptions of alternative products graphically. This info can be obtained from market data

• attributes employed in maps are important to target segments

• performance of individual firms on each attribute accurately reflect perceptions of customers in target segments

Developing an effective positioning strategy

1. segmentation, targeting

2. target audience

3. frame of reference: category the brand is competing in

4. point of difference: benefit offered by brand

5. reason to believe: proof that brand can deliver the benefits

components of a service product

1. core product: principal benefits and solutions eg. hotel room to provide sleep

2. supplementary service: facilitate and enhance product eg. hotel offering wifi

   1. delivery process: how those services are being delivered eg. hotel using online booking

Flower service model ( 2 supplementary services)

facilitating: needed for service delivery or help in use of core product

Enhancing: add extra value for the customer

How facilitating supplementary services relate to core product

information: how to obtain product/service

order taking: what is available and how to secure irem

bulling: clear and accurate

payment

how enhancing supplementary services relate to the core product

consultation: tailoring customer needs in situations

hospitality

safekeeping: prefer not to worry about looking after possessions when on service sight

exception: flexibility when making requests

4 brand architecture options

1. branded house: company that applies its brand name to multiple unrelated fields

2. sub brands: master brand is the main reference but each product has a distinctive name

3. endorsed brand: product brand dominates but the corporate name is still featured

4. house of brands: each brand owned by corporation is promoted under its own name

requirements to deliver a branded service experience

1. having great processes in place

2. the servicescape

3. investing in good employees

categories of new service development

style changes

service improvements

supplementary service innovations

process line extensions

how does design thinking apply to new service design

1. product line extensions: addition to current product lines

2. major process innovations: new processes to deliver existing products with additional benefits

3. major service innovations: new core products for previously undefined markets

4 questions that form foundation of distribution strategy

What is being distributed?

how should the service be distributed?

where should a service facility be located?

when should service be delviered?

describe 3 interrelated flows

1. information and promotion flow: movie trailers

2. negotiation flow: service provider/customers agree on pricing and condition

3. product flow: actual service being delivered

determinants of customers channel preferences

• complex and high perceived risk service - rely on personnel channels

• greater confidence about channel tend to use impersonal and self service channels

• customers who are more technology savvy prefer remote channels

• customers with social motives use personal channels

• convenience drives channel choice

importance of channel integration

service delivered requires seamless and consistent experience

new delivery channels are inconsistent and disjointed experience for customers

service providers need effective pricing strategies to deliver value

tactical location considerations

1.     Ministered:

  Creating small service factories to maximise geographic coverage

Separating the front and back stages of operation

  Purchasing space from another provider in complimentary field

Proximity to where customers live and work

2.     Location constraints:

Operational requirements- airports

Geographic factors – ski resorts

Need for economies of scale – hospitals

Difference between flowcharting, blueprinting and customer journey mapping

1. flowchart: displays nature and sequence of the different steps involved when a customer flows through service process

2. blueprint: specifies in detail how a service process is constructed

3. customer journey map: shows every step a customer takes when interacting with brand

Advantages of blueprint

distinguish between frontstage and backstage

clarify interactions between customers and staff

identify fail points

pinpoint stages in process where customers have to wait

components of service blueprint

define standards for front stage activities

specify physical evidence

line of interaction

line of visibility

support process involves service personnel

support process involve IT

how service process redesign can improve service quality and productivity

Redesign efforts focus on:

-       Reduced number of service failures

-       Reduced cycle time for customer initiation of a service process to its completion

-       Enhanced productivity

-       Increased customer satisfaction

 

Service process redesign often involves:

-       Examining the service blueprint with key stakeholders

-       Eliminating non-value adding steps

-       Addressing bottlenecks in the process

-       Shifting to self service

 

steps to reduce customer reluctance to change

develop customer trust

understand customer habits and expectations

pre-test new procedures and equipment

publicise the benefits of changes

teach customers to use innovations and promote trial

monitor performance and continue to seek improvements

differences between service robots and SST

uses of blueprint

provide platform for innovation

recognise roles and dependencies

facilitate strategic and tactical innovations

transfer and store knowledge

design moments of truth

clarify competitive positioning

steps for developing a blueprint

1.     Identify company service

2.     Identify customer segments

3.     Map the process form customers POV

4.     Map contact employee actions or technology actions

5.     Link contact activities to needed support functions

6.     Add evidence of service at each customer action step

3 broad target audiences

1.     Prospects: employ traditional communication mix because prospects are not known in advance

2.     Users: more cost-effective channels

3.     Employees: building a service brand and positioning it against competition, persuade target customers, attract new users and maintaining contact with existing customers

roles that service marketing communciations assume

1.     Promote tangible cues to communicate quality (using modern, clean areas)

2.     Add value through communication content (healthcare providing free online care)

3.     Facilitate customer involvement in service production (fitness apps allowing customisation plans)

4.     Promote the contribution of service personnel and backstage operations (Behind the scenes videos)

problems of intangibility

1.     Generality: items that comprise a class of objects, persons or events

2.     Non-searchability: cannot be searched or inspected before purchase

3.     Abstractness: no one to one correspondence with physical objects

4.     Mental impalpability: customers find it hard to grasp benefits of complex, new offerings

overcome problems of intangibility

1.     Abstractness: service consumption episodes

2.     Generality: system documentation for objective claims, service performance episodes for subjective claims

3.     Non search ability: consumption documentation, reputation documentation

4.     Impalpability: service process episodes, case history episodes

5.     Use tangible cues in advertising

6.     Use metaphors to communicate benefits of service offerings

3 foundations of pricing strategy

Cost based: calculate the minimum viable price based on fixed and variable costs

Competition based: research or assume competitor prices and determine positioning

Value based: assess customer perceptions, willingness to pay and price discrimination options

revenue management and how it works

Maximising revenue from available capacity at a given time

Revenue management is price customisation

Uses mathematical models to examine historical data and real time information to determine – what prices to change within price bucket, how many service units to allocate

Most effective when:

-       Relatively high fixed capacity                          - high fixed cost structure

-       Perishable inventory                                       - variable and uncertain demand

-       Varying customer price sensitivity

 

6 questions marketers answer to design strategy

1. how much to charge

2. what basis for pricing

3. who should collect payment

4. where should payment be made

5. how should payment be made

6. how to communicate prices

4 purposes service environments fulfil

• shape customer service experiences and behaviours

• signal quality and position, differentiate and strengthen the brand

• core component of the value proposition

• facilitate the service encounter and enhance productivity

Mehrabian-Russell Stimulus-response model:

feelings are a key driver of customer responses to service environments

shows how people respond to environments

Environment: conscious and unconscious perceptions and interpretation influence how people feel that in environment

Feelings rather than perceptions drive behaviour

integrative servicescape model

identifies main dimensions in a service and key to effective design is how well each dimension fits together

• ambient conditions

• space/functionality

• signs, symbols and artifacts

main dimensions of service environment

exterior facilitates - architecture

general interior - cleanliness

store layout -traffic flow

interior displays - price display

social dimensions - employee uniforms

ambient conditions and effect on customers

Music: effect on perceptions and behaviours (fast tempo = increase arousal level)

Scents: pervades an environment and can obtain emotional, physiological and behavioural responses

Colour: impact peoples feelings (hue (pigment), value (lightness/darkness) and chroma (saturation), warm colour encourages fast decision making and impulse boys, low colour is high involvement decisions

 

roles of signs, symbols and artifact

-       Communicates the firms image

-       Helps customer find their way

-       Lets customer know the service script

-       Draw meaning from signs and symbols

-       Unclear signals can result in anxiety and uncertainty about how to proceed and obtain the desired service

why designing an effective servicescape has to be done holistically and from the customer’s perspective.

Servicescapes must be seen holistically: no dimension of design can be optimised in isolation because everything depends on everything else

Design should be from a customers perspective

Environment aspects that irritate shoppers

-       Ambient conditions

-       Environmental design variables

why are employees important for the success of the firm

• core part of product

• service firm

• the brand

• affect sales

• key driver of customer loyalty

• determine productivity

factors that make staff demanding

1.     Organisation vs client: dilemma whether to follow company rules or to satisfy customer demands – ACUTE IN ORGANISATIONS THAT AREN’T CUSTOMER ORIENTED

2.     Person vs role: conflicts between what jobs require and employees own personality and beliefs

3.     Client vs client: conflicts between customers that demand service staff intervention

4. emotional labour

cycle of failure

The employee cycle of failure:

-       Narrow job design for low skill levels

-       Emphasis on rules rather than service

-       Use of technology to control quality

-       Bored employees who lack ability to respond to customer problems

-       Dissatisfied with poor service attitude

-       Low service quality

-       High employee turnover

 

The customer cycle of failure:

-       Repeated emphasis on attracting new customers

-       Customers dissatisfied with employee performance

-       Customers always served by new faces

-       Fast customer turnover

Ongoing search for new customers to maintain sales volume

cycle of mediocrity

-       Service delivery is oriented towards:

-       - standardised services

-       Operational efficiencies

-       Promotional based on long service

-       Successful performance measured by absence of mistakes

-       Rule based training

-       Little freedom in narrow and repetitive jobs

 

-       Customers find organisations frustrating to dela with

-       Little incentive for customers to cooperate with organisations

-       Complaints made to unhappy employees

cycle of success

-       Longer term view of financial performance; seeks too prosper investing in people

-       Attractive pay and benefits attract better job applicants

-       More focused recruitment, intensive training and higher wages make it more likely that employees are:

o   Happier in work

o   Provide higher quality, customer pleasing service

levels of employee involvement

1.     Suggestion involvement

  Employee make recommendations through programs

2.     Job involvement

  Job redesigned

Employees retrained, supervisors reoriented to facilitate performance

3.     High involvement

  Information is shared

Employees skilled in teamwork

Participate in management decisions

  Profit sharing and stock ownership

importance of customer loyalty

Increase purchases and account balances

Reduced operating costs

Referrals to other customers

Price premiums

measuring customer equity

1.     Acquisition revenue less cost:

a.     Revue (application fee + initial purchase)

b.     Costs (marketing + credit check + account set up)

2.     Projected annual revenue and costs

a.     Revenues (annual fee + sales + service fees + value of referrals)

b.     Costs (account management + cost of sales + write offs)

3.     Value of referrals

a.     % of customers influenced by others

why customers are loyal to service firms

Confidence benefits

Confidence in correct performance

Ability to trust the provider

Lower anxiety when purchasing

Knowing what to expect and receive

cross selling

makes switching a major effort that the customer is unwilling to go through unless extremely unsatisfied with service provider (one-stop shop = high service level, high service tier)

Bundling

Can be financial (discount and loyalty program) /non financial (priority waitlist and queues)

Social bonds: personal relationship between provider and customer

Structural bonds: seen in B2B settings – aligns customer way of doing things and suppliers own processes

difference between financial and non financial rewards

Financial: customer incentives that have financial value

-       Brand loyalty vs deal loyalty

Non-financial: benefits that cant be translated directly into monetary terms

-       Special recognition and appreciation

what factors cause customers to switch to competitor/how to avoid

Reduce customer defections:

-       Deliver quality service

-       Reduce inconvenience and non-monetary costs

-       Have fait and transparent pricing

-       Industry specific drivers

-       Take active steps to retain customers

o   Save teams: staff who deal with customers who want to cancel accounts

o   How save teams are rewarded

-       Implement effective complain handling

transactional vs relationship marketing

Transactional marketing: transaction between a customer and a supplier is anonymous, no long term record kept – focus on segmenting the market, matching customer needs

Relationship marketing: firm and customer have interest in deeper engagement and higher value added exchange