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Sasank.

Bandarupalli AGBS - Hyderabad

MBA 333: MARKETING OF SERVICES

Module I: Understanding Services and Consumer Behavior Service Sector and its structure. Drivers of service sector growth. Nature of services: Tangibility Spectrum; Defining the service offering; Flower of Service. Goods vs. Services; the service marketing challenges and implications for marketers for each service characteristic. Categorizing Service Processes.Self Service Technologies. Consumer behavior in services; Search, Experience and Credence attributes. Service Encounters and the types; Moments of Truth. The expanded Services Mix. Module II: Focus on Customers Customers expectations of service.Desired and Adequate service, Zone of Tolerance.Managing customer expectations and perceptions in services.Service Quality Dimensions.Customer Satisfaction vs. Service Quality.The impact of service failure and recovery.Types of Customer Complaint Actions and Complainers.Service Guarantees.Service Recovery Strategies. Module III: Aligning Strategy, Design and Delivery Service Blueprinting.Operational service product designing and adding value.Evidence of service and Servicescape.The Service Triangle.BoundarySpanning Roles.Strategies for closing the delivery gap. Module IV: Delivering Services, Managing Demand and Capacity and Pricing Services Role of Distribution in Services. Channel Conflicts and other key problems. Key Intermediaries for Service Delivery.Understanding Demand and Capacity constraints.Strategies for matching Capacity and Demand. Approaches to Pricing Services

Module I: Understanding Services and Consumer Behavior Service Sector and its structure. Drivers of service sector growth. Nature of services: Tangibility Spectrum; Defining the service offering; Flower of Service. Goods vs. Services; the service marketing challenges and implications for marketers for each service characteristic. Categorizing Service Processes.Self Service Technologies. Consumer behavior in services; Search, Experience and Credence attributes. Service Encounters and the types; Moments of Truth. The expanded Services Mix. Service is the part of the product or the full product for which the customer is willing to see value and pay for it.

. Service Sector and its structure The service sector, also called the tertiary sector, is one of the three parts of the economy in the Three-sector hypothesis. This hypothesis breaks the economy into three main areas so it can be better understood. The other two are the primary sector, which covers areas such as farming, mining and fishing; and the secondary sector which covers manufacturing and making things. The service sector provides a service, not an actual product that could be held in your hand. Activities in the service sector include retail, banks, hotels, real estate, education, health, social work, transport, computer services, recreation, media, communications, electricity, gas and water supply. The services sector as defined here covers a wide range of activities that can be broken down into the following subsectors: Electricity, gas, and water supply Wholesale and retail trade Hotels and restaurants

Transport, storage, and communication Financial intermediation Real estate, renting, and business activities Public administration, defense, and compulsory social security Education Health and social work Other community, social, and personal service activities

Drivers of service sector growth ITITES the star performer The rapid expansion of Information TechnologyInformation Technology Enabled Services (IT ITES)has had a significant impact on the broader Indian economy, by generating substantial exportearnings and tax revenue; creating sign -quality jobs; and precipitatingproductivity-enhancing technology diffusion to other industries and the public sector. Despite facingsome challenges, ITITES looks set to remain a key driver of economic development in India, bothas a high-growth and employment-generating sector in its own right, and through its linkages withother sectors. The dramatic growth in ITITES has been driven principally by fast-growing international demandfor Indian IT services and software and by burgeoning business process outsourcing to India. IndiasIT industry took off in the late 1990s, when the global IT industry was unable to meet the exponentialgrowth in demand for IT services precipitated by Y2K compliance

concerns. It has since benefited fromrapid reductions in the cost of digitising, transmitting and processing information (Friedman 2005). Telecommunications a dynamic enabler -over effects in other sectors of an economy. Modern telecommunications networks facilitate efficient information exchange amongeconomic units and rapid two-way communication, thereby lowering search and transaction costs,aiding the coordination of economic activity on a global scale, and enabling the optimal utilisation of available labour, technology, products and services around the world (Nandi 2002). Indias emergenceand ongoing competitive advantage as a global provider of IT ITES was (and will continue to be)dependent on the availability of efficient telecommunications infrastructure for electronically transferringand assessing information. Other commercial services The dynamism in Indias ITITES and telecommunications sectors is widely recognised. Exportsof other commercial services have also grown rapidly, and look set to make an increasingly strongcontribution to economic growth.

Nature of services: Tangibility Spectrum Nature:

Characteristics: Perishability:Perhaps of all the suggested special characteristics of service products, this is one of the most difficult to appreciate. Why? Services are highly perishable compared to physical products. But how could, for example, the services of say, an airline be considered to be more perishable than, say, fresh food and vegetable products?

The reason is that unlike most physical products, many services cannot be stored. For instance, if an airline does not sell all the seats on a particular flight, then those seats or rather the sales revenue of filling of them would have carried, has immediately and irreversibly gone. Intangibility: Physical products in the store are widely displayed for customers to see, feel, touch, weigh or sniff at before deciding whether or not to buy.Comparing this with the choice of the service of say, an insurance policy. You cannot touch, see or smell the products before choosing, although clearly you can make some assessment based on past experience, word of mouth, or even the location and decor of the insurance office. The intangible nature of most services gives rise to special problems both for suppliers and consumers. Variability:In the production and marketing of physical products, companies have increasingly paid special attention to ensuring consistency in quality, feature, packaging, and so on. More often than not all customers can be sure that every bottle of Coke he/she buys, even in a life-time of purchases, will not vary. The provision of services, however, invariably includes a large measure of the human element. Indeed, with many services, we are purchasing nothing else but the skills of the suppliers. Because of this, it is often very difficult for both supplier and consumer to ensure a consistent product or quality of service. Inseparability:A key distinguishing feature of service marketing is that the service provision and provider are inseparable from the service consumption and consumer. For example, we cannot take a hotel room home for consumption; we must consume this service at the point of provision. Similarly, the hairdresser needs to be physically present for this service to be consumed.This has implications both for channels of distribution and scale of operations. Non-ownership:The final distinguishing feature of a service is that, unlike a physical product, the consumer does not secure ownership of the service. Rather the customer pays only to secure access to or use of the service. Again the hotel room is a good example. Similarly, with banking services, although the customer may be given a Cheque book, credit cards, etc, they serve only to allow the customer to make use of what he or she is actually buying, namely, bank services.

People People is one of the elements of service marketing mix. People define a service. If you have an IT company, your software engineers define you. If you have a restaurant, your chef and

service staff defines you. If you are into banking, employees in your branch and their behaviortowards customers defines you. In case of service marketing, people can make or break an organization. Thus many companies nowadays are involved into specially getting their staff trained in interpersonal skills and customer service with a focus towards customer satisfaction. In fact many companies have to undergo accreditation to show that their staff is better than the rest. Process Service process is the way in which a service is delivered to the end customer. Let s take the example of two very good companies Mcdonalds and Fedex. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes. On top of it, the demand of these services is such that they have to deliver optimally without a loss in quality. Thus the process of a service company in delivering its product is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer. Physical Evidence The last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. Take an example of a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? The one with the nice ambience. Thats physical evidence. Several times, physical evidence is used as a differentiator in service marketing. Imagine a private hospital and a government hospital. A private hospital will have plush offices and well-dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a differentiator.

Defining the service offering Having reached a point where we have a service offering fashioned, to the best of our capability, to satisfy an identified consumer need, our next marketing task is to promote and sustain its sale. Before we attempt to formulate a marketing mix of elements designed to attract customer interest, however, we must try to define what it is we have to offer. We can of course define the features of our service in much the same way as we can define the features of a manufactured product. But features, as we know, are not enough. We need to offer benefits, and here we have a difficulty. When potential customers agree to buy our service, they may not in fact be buying the benefits we have offered. The reason for this apparent contradiction is that a service is mtangible and its benefits are purely concepts, images in the mind. Such is the infinite variety of human imagination, it is true to say that customers will create for themselves at least part of the service by means of benefits conceived by them, individually, of which we, the Providers of the service, may be totally unaware. This is yet another essential difference between services and product marketing. Despite every effort on the part of the provider to provide benefits tailored to coincide with what he perceives to be his customers needs, he will never gain a complete insight into any one

customers conception of those benefits. This means we cannot define a service by means of conceptional benefits alone. To assist the means of definition, we need to consider how the service is to be delivered to the customer. Without a defined delivery system the consumer benefit concept is meaningless. The two things are inseparably linked. Once this link is forged, we possess a service offering that is capable of being conceived intelligibly in more precise terms. For example, if I say to you that I shall provide you with temporary individual transportation, you will have only the vaguest notion of what I am offering. However, if I say that I shall provide you with a self-drive car-hire service, you will immediately grasp the nature of my offer. Your concept of the underlying benefit temporary individual transportation will remain, but now you can visualize how the service will be performed. On the other hand, if I had said that I would provide you with a chauffeur-driven car-hire service, your concept of the underlying benefit of individual transportation of a temporary nature would still remain, but your visualization of the service would be different. While this distinction may seem obvious in terms of car hire, with which we are all likely to be familiar, it may be far less obvious when we are attempting to define a totally new service offering with which we are totally unfamiliar. Hence the importance of a clearly defined delivery system. Flower of service

Supplementary Services: 1 Facilitating: 1) Information: Customers often require information about how to obtainand use a product or service. 2) Order-Taking:Customers need to know what is available and maywant to secure commitment to delivery. The process should be fast andsmooth. 3) Billing: Bills should be clear, accurate and intelligible

4) Payment: Customers may pay faster and more cheerfully if you maketransactions simple and convenient for them. Supplementary services 2 Enhancing: Consultation: Value can be added to goods and services by offeringadvice and consultation tailored to each customers needs and situation. Hospitality:Customers who invest time and effort in visiting a businessand using its services deserve to be treated as welcome guests. Safekeeping:Customers prefer not to worry about looking after thepersonal possessions that they bring with them to a service site. Exceptions:Customers appreciate some flexibility when they makespecial requests and expect responsiveness when things dont goaccording to plan. Goods vs Services

Service Encounters and the types Recovery: Dont

Do

Ignore customer Blame customer Leave customer to fend for himself Downgrade Act as if nothing is wrong pass the buck

Acknowledge problem Explain causes Apologise Compensate/upgrade Lay out options Take responsibility

Adaptability: Dont Do Recognise the seriousness Acknowledge Anticipate Accommodate Adjust Explain rules/policies Promise and fail to keep them Show unwillingness to try Embarrass the customer Laugh at the customer Avoid responsibility

Spontaneity: Dont Exhibit impatience

Do

Yell/laugh/swear Steal from customers Discriminate Ignore

Take time Be attentive Anticipate needs Listen Provide information Show empathy

Coping: Dont Do Listen Try to accommodate Explain Let go of the customer The service marketing challenges Marketing Intangibles: Unlike the marketing of products, which allows the prospect to use five senses as part of the evaluation process, selling services requires an explanation of an intangible product. As a result, it may be harder to envision how the service can benefit your potential customer. The prospect also may have difficulty determining if the value of the service is worth the asking price. Developing Trust:Marketers of services may have a more difficult time in developing the trust of the prospect. For example, an insurance agent is essentially marketing a promise that his company will deliver when it comes time to pay a claim. If the agent does not appear trustworthy or if his company has a poor reputation, he will have a hard time convincing the prospect to purchase a policy. Extra Competition: Service companies are not only competing against other companies in the same market, but sometimes against their prospects as well. For example, a company that Take customers dissatisfaction personally Let customers dissatisfaction affect others

markets a bookkeeping service for small businesses may run into a situation where the prospect decides to do the accounting as a way of minimizing expenses. Emphasizing Service Instead of Features: Marketers of services need to focus on the customer service aspect of what they are selling, as opposed to the features. For example, instead of emphasizing a multi-car discount or first accident forgiveness, which are offered by many insurance companies, the agent should make the prospect feel that personal attention will be given in the time of need to ensure that the policy provisions are executed properly. Creating a Need: Service marketers may have more of a challenge in creating a need for what they are selling. While an individual may understand the necessity to purchase a new car, such as when a current vehicle breaks down, the business owner may not understand why the purchase of advertising is necessary. The salesperson must create a need for the service by showing examples of how other businesses increased revenues with an advertising campaign. Implications Going to extremes: Marketing practitioners should market new products on the market at a reasonable pricewhich is neither too low nor too high.This will prevent the product from appearing as an inferior product in the eyes of thecustomers, lowering its market position if the selling price is too low. This will also preventthe service from losing out its competitive edge as a result of a high selling price since it hasyet to establish a stable market share. Over - promising: Marketing practitioners should not raise the expectations of customers beyond what theproduct is able to deliver as this overpromises the customers and customerswillexperience disappointment when the product fails to reach their expectations and ends uplosing its customers. Losing potential customers due to high pricing: Marketing practitioners should market new products at a price that is slightly cheaper than the market price initially so as to attract a larger number of potential customers to try outthe service. After the test trial period, the increase in frequency of prior usage of the productwill dispel the perceived priceecacy beliefs. Remain status quo:Marketing practitioners can draw attention to pricequality beliefs to make customers realizethat the pricequality relationship is not applicable, and thus reduces the strength of response expectancies. This weakens the impact of such beliefs and eliminating theundesirable placebo eect observed in the reducedprice condition.

Inestablished brand: If marketing practitioners intend to position their product as one of superior quality, it isimportant for them to establish a solid and respectable brand name that matches the statusof the customers they are trying to appeal to (Market positioning). Also, they should preventfrom oering price discounts for their product as this is an extrinsic cue that triggers beliefsthat the product quality is inferior, leading to undesirable placebo eects. No proof: Marketing practitioners have to ensure that the ecacy of their service is strongly supportedby evidence, and not just weak claims. Facts and gures have to shown at salespresentations in order to convince customers of the product quality as supporting facts thatthe product quality will not be compromised as a result of the lower price. Leave no room forwild guesses or accusations against product. Categorizing Service Processes

PeopleProcessing: Peoples cooperation Spending time, taking effort; Process and output in terms of what happens to customers to identify what benefits are created To identify some of the non-- financial costs.

Possession processing: Customers involvement is limited. The output in such cases should be satisfactory solution to a stated problem or some physical enchancement of the item.

Mental Stimuli process: Power to shape attitude and influence behavior Investement of time customers Different from people processing Use of modern technology

Information process: Technology Person

Use of reports, letters and books Insurance policy Self Service Technologies

Self-Service Technologies (SSTs) are technological interfaces allowing customers to produce services independent of involvement of direct service employee. Self-Service technologies are replacing many face-to-face service interactions with the intention to make service transactions more accurate, convenient and faster. Example: Automatic Teller machines (ATMs), Self pumping at gas stations, Self-ticket purchasing on the Internet and Self-check-out at hotels Consumer behavior in services

Consumer Evaluation Processes for Services Search Qualities: Attributes a consumer can determine prior to purchase of a product.

Experience Qualities: Attributes a consumer can determine after purchase (or during consumption) of a product. Credence Qualities: Characteristics that may be impossible to evaluate even after purchase and consumption.

Moments 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 todays 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 customers perception of, and reaction to, a brand. Moments of truth can make or break an organizations 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. Moments of Magic and Moments of Misery: Moments of Magic: Favorable moments of truth have been termed as moments of magic. These are instances where the customer has been served in a manner that exceeds his expectations. Eg: An airline passenger being upgraded to from an economy to a business class ticket or the 100th (or 1000th) customer of a new department store being given a special discount on his purchase. Such gestures can go a long way in creating a regular and loyal customer base. However, a moment of magic need not necessarily involve such grand gestures. Even the efficient and timely service consistently provided by the coffee shop assistant can create a moment of magic for the customers. Moment of Misery: These are instances where the customer interaction has a negative outcome. A delayed flight, rude and inattentive shop assistants or poor quality of food served at a restaurant all qualify as moments of misery for the customers. Though lapses in service cannot be totally avoided, how such a lapse is handled can go a long way in converting a moment of misery in to a moment of magic and creating a lasting impact on the customer. Challenges of 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 prices

Module II: Focus on Customers Customers expectations of service.Desired and Adequate service, Zone of Tolerance.Managing customer expectations and perceptions in services.Service Quality Dimensions.Customer Satisfaction vs. Service Quality.The impact of service failure and recovery.Types of Customer Complaint Actions and Complainers.Service Guarantees.Service Recovery Strategies. Customers expectations of service Be a good listener: Take the time to identify customer needs by asking questions and concentrating on what the customer is really saying. Don't make assumptions. Identify and anticipate their needs: Customers don't buy products or services. They buy good feelings and solutions to problems. Make customers feel important and appreciated: Treat them as individuals. Always use their name and find ways to compliment them, but be sincere. Help customers understand your technology in as simple a way as possible: Your company may have the world's best technology, but if customers don't understand it, they may get confused and impatient. Appreciate the power of "Yes": When customers have a (reasonable) request tell them that you can do it. And, always do what you say you are going to do. Know how and when to apologize: When something goes wrong, apologize. It's easy and customers like it. The customer may not always be right, but the customer should always feel like "they won". Give more than expected, and give the unexpected: Think of ways to elevate yourself above the competition. Get regular feedback from your customers: Encourage and welcome suggestions about how you could improve. Never forget that the customer pays our salary and makes your job possible. Treat staff well: Employees are your internal customers and need a regular dose of appreciation. Thank them and find ways to let them know how important they are. Desired and Adequate service , Zone of Tolerance It seems that customers have two levels of expectation:

adequate - what they find acceptable desired - what they hope to receive.

The distance between the adequate and the desired levels is known as the 'zone of tolerance'

The two levels may vary from customer to customer, and from one situation to another for the same customer. You can probably remember situations in which you have accepted services or products that, in other circumstances, you would have refused or been disappointed by.

Managing customer expectations and perceptions in services Fast and efficient service Competitive price Quality products Sufficient stock to meet demand Trained staff Being treated politely and with respect The phone being promptly answered E-mails responded to within a reasonable timescale Promises being kept A clear complaints procedure Clean and well maintained premises

What is Perception? Per-cep-tion is a way of regard-ing, under-stand-ing, or inter-pret-ing some-thing; a men-tal impression.

In todays technological wonderland we subconsciously form expec-ta-tions about com-pa-nies by absorb-ing their multi-channel mar-ket-ing efforts. It is rare to have an inter-ac-tion with a com-pany with-out first see-ing a com-mer-cial on tele-vi-sion, a glossy ad in a mag-a-zine or doing a quick Google search. How you rate the suc-cess of the inter-ac-tion is based on your indi-vid-ual per-cep-tion of what the com-pany has to offer. Factors That Influence Customer Perceptions: Service Encounter Service Evidence Image Price

Strategies For Influencing Customer Perceptions: Enhance Customer Satisfaction through Service Encounters Reflect Evidence of Service Communicate and Create a Realistic Image Enhance Customer Perception of Quality and Value through Pricing Service Quality Dimensions After extensive research, Zeithaml, Parasuraman and Berry found five dimensions customers use when evaluating service quality. They named their survey instrument SERVQUAL. The five SERVQUAL dimensions are TANGIBLES - Appearance of physical facilities, equipment, personnel, and communication materials RELIABILITY - Ability to perform the promised service dependably and accurately RESPONSIVENESS - Willingness to help customers and provide prompt service ASSURANCE - Knowledge and courtesy of employees and their ability to convey trust and confidence EMPATHY - Caring, individualized attention the firm provides its customers

#1 Just Do It RELIABILITY: Do what you say you're going to do when you said you were going to do it. Customers want to count on their providers. They value that reliability. Don't providers yearn to find out what customers value? This is it.It's three times more important to be reliable than have shiny new equipment or flashy uniforms. #2 Do It Now RESPONSIVENESS: Respond quickly, promptly, rapidly, immediately, instantly. Waiting a day to return a call or email doesn't make it. Even if customers are chronically slow in getting back to providers, responsiveness is more than 1/5th of their service quality assessment. Service providers benefit by establishing internal SLAs for things like returning phone calls, emails and responding on-site. Whether it's 30 minutes, 4 hours, or 24 hours, it's important customers feel providers are responsive to their requests. Not just emergencies, but everyday responses too. #3 Know What Your Doing ASSURANCE: Service providers are expected to be the experts of the service they're delivering. It's a given. SERVQUAL research showed it's important to communicate that expertise to customers. If a service provider is highly skilled, but customers don't see that, their confidence in that provider will be lower. And their assessment of that provider's service quality will be lower. #4 Care about Customers as much as the Service EMPATHY: Services can be performed completely to specifications. Yet customers may not feel provider employees care about them during delivery. And this hurts customers' assessments of providers' service quality.

#5 Look Sharp TANGIBLES: Even though this is the least important dimension, appearance matters. Just not as much as the other dimensions. Customer satisfaction and service quality Quality and satisfaction are different things altogether, yet many confuse these basic concepts; contributing to the ever-widening gap between business and IT. The difference between these concepts is that one may be satisfied and still feel that service quality is low. Vice versa, one may be dissatisfied and feel that service is of high quality. Service quality is a complex judgment about the overall superiority of a service whereas satisfaction is related to contentment regarding a specific transaction. Service quality for a service and satisfaction for any service encounter arises from perceptions made by users around one or more of the following five dimensions: Reliability: how closely the level of service provided matches any promises, guarantees, or formal statements made by the provider. Responsiveness: the willingness and readiness to provide prompt service and support to help consumers. Assurance: the level of safety and confidence felt when using the service or working with the service provider. Empathy: the level of caring, individualized attention provided to consumers. Tangibles: how well the physical aspects of the service meet expectations.

Satisfaction and quality are definitely related, but they are not the same. Service quality is an assessment of the quality dimensions made by the service consumer during service consumption over time, spanning multiple transactions and interactions with the service provider and its services. Service quality is based on expectations across the five dimensions of a service. A service quality survey asks the customer about all or most dimensions of service delivery.

The impact of service failure and recovery A service failure, simply defined, is service performance that fails to meets customers expectations. Typically, when a service failure occurs, a customer will expect to be compensated for the inconvenience in the form of any combination of refunds, credits, discounts or apologies. The success of such recovery efforts is determined by the individual customers expectations and perceptions of the organization. Two key elements impact any effort to restore customer satisfaction: the strength of the customer relationship and the severity of the service failure.

The severity of the service failure moderates the relationship between satisfaction and commitment. Even with strong recovery, research indicates that customers may still be upset, engage in negative word-of-mouth, and be less likely to develop trust with and commitment to the organization, if the original service failure was really bad. The data available at the point of any service failure, most notably the information provided by the customer at the time of the complaint, should be viewed as critical marketing research data necessary not only for immediate service recovery but for improvement of future performance. Remember, a service failure is defined as a failure to meet customer expectations and the success of any recovery effort is measured by each individual customer against his/her own expectations. Therefore, managers would be well served to conduct a post-recovery assessment of customer expectations and perceptions of recovery performance against those expectations. Types of Customer Complaint Actions and Complainers

Types of complainers Passives: This group of customers is least likely to take any action They are unlikely to say anything to the provider Less likely than others to spread negative Word of Mouth, unlikely to complain to third party. They often doubt the effectiveness of complaining, thinking the consequences will not merit the time and the effort they will expend

Voicers: These customers actively complain to the service provider. Less likely to spread the negative word of mouth, to switch patronage, or to go to third parties with their complaints. These customers to be viewed as the service providers friend. Actively complain and give company a second chance. They believe complaining has social benefits and therefore dont hesitate to voice their opinion

Irates: These customers are more likely to engage in negative word of mouth to friends and relatives and to switch providers than are others.

They feel alienated from the market place. They are angry with the service provider although they do believe that complaining to the service provider can have a social benefits. They are less likely to give the service provide a second chance

Activists: These consumers are characterized by above average propensity to complain on all dimensions. They will complain to the provider, they will tell others, and they are more likely than any other group to complain to third parties. They have a very optimistic sense of the potential positive consequences of all types of complaining Customer Compliant It pays to resolve customer complaints On an average only 5 % dissatisfied customers complain. Others simply go over to the competitor A satisfied consumer speaks to an average of 3 people on his her experience A dissatisfied consumer gripes to on an average 11 persons about his/her unpleasant experience

Why do/ dont customers complain? The categories just described suggest that some customers are more likely to complain than others. As individuals, these customers believe that positive consequences may occur and that there are social benefits of complaining, and their personal norms support their complaining behavior. They believe they will and should be provided compensation for the service failure in some form. They believe that fair treatment and an good service are their due, and that in case of service failure, someone should make good. In some cases they feel a social obligation to complain to help others avoid similar situations or to punish the service provider. A very small number of consumers have complaining personalities they just like to complain or cause trouble. Those who are unlikely to take any action hold the opposite beliefs. They often see complaining as a waste of their effort . Service Gaurantee A service guarantee is a marketing tool service firms have increasingly been using to reduce consumer risk perceptions, signal quality, differentiate a service offering, and to institutionalize and professionalize their internal management of customer complaint and service recovery.[1] By delivering service guarantees, companies entitle customers with one or more forms of compensation, namely easy-to-claim replacement, refund or credit, under the circumstances of

service delivery failure. Conditions are often put on these compensations; however, some companies provide them unconditionally. Benefits: By delivering service guarantees, firms are forced to focus on customers want and expectation in every aspect of the service. Guarantees establish clear standards which create a common image of what the company stands for in both customers and employees mind. Managers are motivated to seriously concern service guarantees, because they emphasize the financial expenditure of quality failures. With service guarantees, firms are required to build effective systems to generate meaningful customer feedback and develop corresponding courses of action. Guarantees require service organizations to understand reasons of failure and motivate them to identify and manage potential fail points Guarantees help customers to reduce risk in making purchase decisions and to reinforce their long-term loyalty.

Service Recovery Strategies Active listener or reader Be an active listener when you speak to the aggrieved party or read carefully the customers problem. What is it they are unhappy with and what do they want? Make notes and record the time and date in a database designed for this purpose. Respond rapidly. Be respectful Make sure all staff are respectful in their dealings with customers at all times, particularly when someone is expressing concern about a product or service. Your staffs are all brand ambassadors make sure they act like one. Put yourself in the place of the customer When you are engaging the customer, put yourself in their place and understand and appreciate their frustration. Seek ways of solving the problem Ask them what you can do to solve their problem. Make suggestions to resolve the situation. Find all the reasons and ways that you can help rather than the reasons why you cant do anything. Make an offer Make an offer to help resolve the situation. Sincerely Apologize Apologize for the lack of service or the poor quality of the product. Let them know they are important Tell them the company appreciates their patronage and their business is important to the company. Follow-up Make sure the customer is contacted for follow-up and the problem is resolved to the customers satisfaction.

Gap 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

Module III: Aligning Strategy, Design and Delivery Service Blueprinting.Operational service product designing and adding value.Evidence of service and Servicescape.The Service Triangle.BoundarySpanning Roles.Strategies for closing the delivery gap. Service Blueprinting A service blueprint is a schematic diagram that represents all the details of a service from the customer and organisations perspective. It shows how the different service components link into each other showing the different touchpoints and options customers have to choose from and how the internal workings support those choices. 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 whats working, whats 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

Customer Actions This component contains all of the steps that customers take as part of the service delivery process. This element is always on top of the service blueprint. Onstage / Visible Contact Employee Actions This element is separated from the customer actions by a line of interaction. These actions are face-to-face actions between employees and customers. Backstage / Invisible Contact Employee Actions The line of visibility separates the Onstage from the Backstage actions. Everything that appears above the line of visibility can be seen by the customers, while everything under the line of visibility is invisible for the customers. A very good example of an action in this element, is a telephone call; this is an action between an employee and a customer, but they dont see each other. Support Processes The internal line of interaction separates the contact employees from the support processes. These are all the activities carried out by individuals and units within the company who are not contact employees. These activities need to happen in order for the service to be delivered. Physical Evidence For each customer action, and every moment of truth, the physical evidence that customers come in contact with is described at the very top of the service blueprint. These are all the tangibles that customers are exposed to that can influence their quality perceptions Building a blueprint The process of structuring a blueprint involves six steps The identification of the service process, that is supposed to be blueprinted The identification of the customer segment or the customers that are supposed to experience the service Picturing the service from the customers perspective

Picturing the actions of the contact employee (onstage and backstage), and/or technology actions Linking the contact activities to the needed support functions Adding the evidence of service for every customer action step Operational service product designing and adding value

Service design is the activity of planning and organizing people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between service provider and customers. The purpose of service design methodologies is to design according to the needs of customers or participants, so that the service is user-friendly, competitive and relevant to the customers. The backbone of this process is to understand the behavior of the customers, their needs and motivations. It's a fact, adding value to products and services makes businesses more successful. The more value that businesses add to their core products and services, the better they do. But when they use design to add value, they do even better in a whole range of ways, including bigger profit, and market share. The perceived emotional and/or functional benefits of a product are, obviously, a major factor, which influences a buying decision. At the most basic level a product acquires value in the fulfillment of its required functions, e.g. a hotel room must be an effective place to sleep but the more effective it is in terms of peacefulness, cleanliness, safety, and comfort, the greater will be its perceived value. Thus, the functional requirement dimension of product value extends to other capabilities which are not deemed imperative to the basic product performance but which are seen as welcome additions, e.g. Flat screen televisions and in-room dining. Material value is a second dimension of product value relating to visible or tangible value. the term Added-Value Design, but have we actually seen it at work, saving money while at the same time increasing the actual quality of our experience? I'll assume that right off the top of your head you're unable to pinpoint an actual instance where Added-Value design has affected you, but take a deeper look. Imagine with me for a moment a time in history when motels and hotels were in the business of providing rooms for the purpose of overnight stays only... Luxury hotels existed for the rich and privileged and had attendants to care for any and all of the guests needs, but the working man got none of that - until of course the introduction of the in room mini-bar .Added-Value? As time progressed people found it easier to afford to stay in a hotel while on a trip and families were visiting cities all over, but in many cases the only resource for locating a specific attraction was a busy front desk attendant or a rack of pamphlets on a wall until... the concierge...Added-Value? Lets not forget Room service. This Added-Value service and many others have become industry standard expectations in most hotels throughout the world, but there was a time when weary innovators cowered at the initial cost of committing to such luxuries.

Evidence of service and Servicescape Evidence of Service: Services as we know are largely intangible when marketing. However customers tend to rely on physical cues to help them evaluate the product before they buy it. Therefore marketers develop what we call physical evidence to replace these physical cues in a service. The role of the marketer is to design and implement such tangible evidence. Physical evidence is the material part of a service.

Servicescape:Servicescape is a concept that was developed by Booms and Bitner to emphasize the impact of the physical environment in which a service process takes place. The concept of servicescape can help assess the difference in customer experience between a fast-food franchise restaurant and a small, family-run restaurant. Whereas the quality of the food may be the same, the customer may perceive higher quality in the latter over the former based on the environment in which the service is provided. Booms and Bitner defined a servicescape as "the environment in which the service is assembled and in which the seller and customer interact, combined with tangible commodities that facilitate performance or communication of the service".

The servicescape includes the facility's exterior (landscape, exterior design, signage, parking, surrounding environment) and interior (interior design and decor, equipment, signage, layout, air quality, temperature and ambiance). The servicescape concept, once introduced, became a key factor in many marketing studies.

Service triangle The service triangle enables an organization's leaders to bring together the critical truths of its business strategy, the needs of its culture, and the design of its infrastructure into a unified concept for competitive success.By placing the customer at the center of the triangle, they are declaring that the customer value model (thatis, the set of critical attributes of the service experience that drive the customer's buying behavior) will guidethe decisions about how the organization operates. The business strategy, at the top of the triangle, spells out the organization's unique way of winning and keepingthe customer's business, with its particular customer value package (that is, the combination of things andexperiences it offers the customer). This customer value package is based on a carefully chosen value proposition (that is, the fundamental benefit premise that gives the organization's offering its competitive appeal). The people part of the service triangle refers to the entire culture of the organization, not just to the front-lineservice delivery people. In a service culture, people think of their personal success as connected to thesuccess of the enterprise, and they treat one another with the same respect, cooperation, and added-valuespirit they offer to the paying customers. The various departments in the organization treat one another as customers as well - concentrating more on contribution than competition. An organization's culture can be oneof its best competitive

weapons, or it can be a competitive handicap. Ultimately, the way your employees feelis the way your customers will feel. The systems part of the triangle refers to the entire infrastructure of the organization. All organizational structures, functional relationships, physical facilities, information systems, procedures, rules, and regulationsshould be customer friendly in their design. They should make it as easy as possible for the people in theorganization to implement the strategic customer focus and deliver an outstanding experience to the customersat the many moments of truth, (that is, the individual episodes or points of perception at which the customerscome into contact with various aspects of the organization and make judgments about the value it offers).

Boundary Spanning Roles

Strategies for closing the delivery gap In pursuing their distinctive goal, the Achieverstake an unusually broad view of the deliveryof value to customers. Unlike most companies, which instinctively turn to product orservice design to improve customer satisfaction, the Achievers pursue three imperativessimultaneously. We call

them the ThreeDs: They design the right propositions for the right customers. They deliver those propositions at the lowest possible systemcost. And they develop the institutional capabilities required to do it again and again. Eachof these Three Ds draws on and reinforcesthe others. Together, they transform the company into one that is continually led and informed by the voices of its customers. Designing the right propositions:Most large companies are adept at traditionalmarket research, segmentation and productdesign. But many fail to connect the dotsbetween what they learn about customers andwhat they offer to customers. They lack theprocesses to ensure that customer researchincludes real customer interaction focusgroups, interviews and observation of purchasing and other behaviors that actually leadsto insight on the essential question Whatdo our most important customers really want?They fail to convert the insights they gleaninto truly differentiated propositions, whichtake into account the product features, thebrand and a customers experience with thecompany. Finally, they fail to make sure theorganization understands who each propositionis for and how it will be delivered to them. Delivering propositions:To the customerWhen customers turn against companies, thefault lies as often in the delivery of offeringsas in their design. Firms fail to realize thatpropositions presented in the boardroom toorarely are delivered to customers. They forget that the promises you keep, not the onesyou make, determine growth. Worse, whileorganizations may understand that they areaccountable for the full customer experience,they often fail to recognize that the frontlineemployees who deliver it may be the leastrespected and empowered group in the company. As one frustrated call center managerreported to us: As long as we are treated assecond-class citizens in charge of protectingmanagement from pesky customers, ourcompan y will fail to keep our promises. Developing the capabilities to do it again and again:Finally, Achievers recognize that understandingwhat their customers really want and delivering it to them is not a discrete exercise itsfundamental to the way they do businesseach and every day. The leaders of thesecompanies recognize therefore that in addition to designing and delivering the rightpropositions, they must also develop thecapabilities to do it again and again. To dothat, they invest heavily to build processes to maintain a real dialogue with their mostimportant customers. That doesnt mean collecting mounds of data which can be blinding. Rather, its about gaining realcustomer insight and timely feedback.

Module IV: Delivering Services, Managing Demand and Capacity and Pricing Services Role of Distribution in Services. Channel Conflicts and other key problems. Key Intermediaries for Service Delivery.Understanding Demand and Capacity constraints.Strategies for matching Capacity and Demand. Approaches to Pricing Services Role of Distribution in Services Distribution is one of the four elements of the marketing mix, the other three being product, pricing and promotion. This marketing mix is also referred to as the four Ps of marketing; distribution is here called physical distribution or place. Simply put, distribution is the process of delivering the products manufactured or service provided by a firm to the end user. Various intermediaries are involved in this process. This chain of intermediaries which helps in transferring the product from one intermediary to the next before it reaches the end user is called the Distribution Chain or Distribution Channel. Each intermediary has a specific role and need which the marketer caters to. Distribution channels are not limited to products only even the services provided by a producer may pass through this channel and reach the customer. Both direct and indirect channels come into use in this case. For instance, the hotel industry provides facility for lodging to its customers, which is a non-physical commodity or a service. The hotel may provide rooms on direct booking as well as through indirect channels like tour operators, travel agents, airlines etc. Distribution chain has seen several improvements in the form of franchising. Also there has been link ups between two service sectors like travel and tourism which has made services available more accessible to the customer. For instance hotels also provide cars on rent. Functions of a Distribution Channel: The primary function of a distribution channel is to bridge the gap between production and consumption. A close study of the market is extremely essential. A sound marketing plan depends upon thorough market study. The distribution channel is also responsible for promoting the product. Awareness regarding products and other offers should be created among the consumers. Creating contacts or prospective buyers and maintaining liaison with existing ones. Understanding the customer's needs and adjusting the offer accordingly. Negotiate price and other offers related to the product as per the customer demand. Storage and distribution of goods Catering to the financial requirements for the smooth working of the distribution chain. Risk taking for example by stock holding

Three Levels of the Distribution Channel

In level (1) there are no intermediaries involved, the manufacturer is selling directly to the customer. This is called the'direct-marketing' channel. Examples of direct marketing channel can be seen at factory outlet stores. Various hotels prefer direct-marketing, they market their services directly to their customers without taking the help of any retail intermediary (travel agent). Levels (2) and (3) are examples of 'indirect-marketing' channels. In level (2) one intermediary or retailer is used. A Retailer sells goods/services directly to the end users. Retailer buys products from manufacturers or wholesalers. In level (3) along with retailer a second member is added to the distribution chain. He is the wholesaler. A wholesaler buys and stores products in bulk from manufacturers. He sells these products in smaller quantities to retailers. Channel Conflicts and other key problems Channel conflict concerns the relationships between production and sales. The Internet has made it possible for firms to sell to customers directly, thereby cutting out retail. For this reason, another word for channel conflict is disintermediation. Ultimately, the Internet is closing the gap between buyer and seller. The primary feature of channel conflict is the existence of the Internet and email. Adding to this the highly professional and prompt delivery systems of UPS or Federal Express, the world of retail seems to be dying. Channel conflict is of three types. Vertical channel conflicts, Horizontal channel conflicts, Multilevel channel conflicts

Horizontal Channel Conflict: In this type of channel conflict, a manufacturer not using thirdparty retailers faces a struggle between two of its own sales divisions, such as its online and offline departments. Usually one division starts to cut into the sales and profit of the other division, devaluing the latter. Horizontal channel conflicts occur between two departments on the same level of importance. Vertical Channel Conflict: Vertical channel conflict arises when manufacturer tries to sell on their own while still maintaining working relationships with third-party retailers and distributors.

This leads to competition for sales where retailers and distributors often get lower profits for selling the same product or service as the manufacturer is selling. Since it is primarily the retailers and distributors role to build awareness of the product, this can lead to an overall decrease in sales. This situation is called a vertical channel conflict because it affects two different levels of business, third-party sales and bottom-line sales. Multilevel Channel Conflict:Multilevel channel conflicts arise when a manufacturer creates competition between its own sales and promotion arms, while also having business relationships with third-party retailers and distributors. The reason for this approach may be to aggressively and more quickly expand its sales and promotion network, but it can create both internal and external discord between the various divisions and third-parties. Dangers of Channel Conflict: Although the ultimate aim of any business is to avoid the creation of channel conflicts, sometimes they do occur. The practice of conflict regulation and control is known as channel conflict resolution, and is considered to be a branch of strategic business management. If manufacturer's do not recognize channel conflicts quickly, the sales bottom-line will be adversely affected. To resolve a channel conflict, manufacturer's may need to temporarily change their approach to create a more level playing field for all parties involved. Without expedient resolution of channel conflicts, dissatisfaction in the internal workforce and third-party disloyalty may arise. Key Intermediaries for Service Delivery Franchisees: Service outlets licensed by a principal to deliver a unique service concept it has created. e.g., Jiffy Lube, Blockbuster, McDonalds Benefits: Leverages the business format to gain expansion andrevenues Maintains consistencyin outlets Gains knowledge of local markets Shares financial riskand frees up capital Obtaining an established business format on which to base a business Receiving national or regional brand marketing Minimizing the risks of starting a business

Challenges: Difficulty in maintaining and motivating franchisees Highly publicized disputesand conflict Possibility of inconsistentquality that can underminethe company name

Control of customer relationship by intermediary Disappointing profits andrevenues Encroachment and franchisesaturation High failure rates and unfair terminations Lack of perceived control High fees and rigid contracts Unrealistic expectations

Agents and Brokers: Representatives who distribute and sell the services of one or more service suppliers Benefits: Reduced selling and distribution costs Intermediarys possession of special skills and knowledge Wide representation Knowledge of localmarkets Customer choice

e.g., travel agents, independent insurance agents Challenges: Loss of control over pricing and other aspects of marketing Representation of multiple service principals

Electronic Channels: All forms of service provision through electronic means. Benefits: Consistent delivery for standardized services Low cost Customer convenience Wide distribution Customer choice and a bility to customize Quick customer feedback

e.g., ATMs, university video courses, TaxCut software Challenges: Customers are active, not passive Lack of control of electronicenvironment Price competition

Inability to customize withstandardized services Lack of consistency withcustomer involvement Security concerns Competition from wideninggeographies Understanding Demand and Capacity constraints

Many service providers face challenges of demandand capacity management For example, hotels have a fixed number of rooms, and must employ strategies to fill these rooms even when demand is low.

Overuse or underuse of a service can directlycontribute to Gap 3 failure to deliver what was designed and specified. For example, when demand exceeds maximum capacityservice quality may drop. During periods of slow demand, service providers may be forced to reduceprices or cut out certain services. Capacity Constraints Time, Labour, Equipment, Facilities For some service businesses, the primaryconstraint on service production time. If time is not used productively and effectively, profits are lost. If there is excess demand, time cannot be created to make use of it.

If a firm employs a large number of serviceproviders, the primary capacity constraint may belabouror staffing levels. If staff is already operating at peak capacity, there may be times when demand for an organizations services cannot be met.

In some cases, equipment may be the mostimportant constraint. For services such as trucking or airline delivery, the trucks or airplanes needed to service demand may be the capacity limitation.

Finally, some firms face restrictions due to their limitedfacilities. Hotels have a fixed number of rooms, and airlines have a limited number of seats to sell. Demand In order to manage fluctuating demand in a service business, the firm must have a clear understanding of demand patterns, why demand patterns vary, and the market segments that comprise demand at different points in time.

This understanding can be gained by: The Charting of Demand Cycles Identifying Predictable Cycles Identifying Random Demand Fluctuations Identifying Demand Patterns by Market Segment Strategies for matching Capacity and Demand Once an organization fully understand itscapacity constraints and demand patterns,it is in the position to develop strategies for matching supply and demand.. There are two general approaches used toaccomplish this: 1. Smooth demand fluctuations by shiftingdemand to match existing supply. 2. Adjust capacity to match fluctuations demand. Shifting Demand to Match Capacity With this strategy, the organization aims to shiftcustomers away from periods in which demand exceedscapacity. The organization may attempt to convincecustomers to use the service during periods of slowdemand.

Approaches to Pricing Services

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