Marketing ServicesWinning with Quality

By Arun Kottolli

Service Industry

• A guest at Holiday Inn Hotel

• You traveling on a plane

• A credit card customer calling to enquire his balance

• A fortune 10 company building a new IT system

• All these are the examples of various types of services and repeat business depends on the customer satisfaction

Traditional Marketing

• Traditional Marketing emphasized on:– Product, Price, Place & Promotion – 4P’s– A product based marketing strategy

• Marketing of Services emphasize in:– Segmentation, Targeting, Positioning and

Quality – STPQ– Effective services marketing is a strong

service concept delivered well, a desired service performed excellently.

Services Marketing

• Synergy of Strategy and Execution– CNN, FedEx, Domino’s Pizza, EDS, Infosys

• The big idea alone or strategy alone offers only a temporary advantage– Pioneers often see competitors imitate their

strategy– Superior execution is vital to sustaining

success– Quality of service is not easy to copy, unlike

the idea

Quality - A differentiator

• When the end service or products are similar, performance becomes the core product– Customers pay for performance– Quality earns customer’s confidence– Reinforces branding, advertising, selling and

pricing– Quality of service determines brand value

• Quality is the foundation for services marketing

Nature & Roles of Services Marketing

Word of MouthCommunication

Post-Sale Marketing

Con

sum

ptio

n

Production

Pre-Sale Marketing

Create Awareness

Induce Trail

Demonstrate Benefits

Build Brand Preference

Nature of Services Marketing

• Services are consumed as it is produced• Services marketing has limited influence on

customers prior to purchase than goods– Need to experience intangible service to know it

– Experience influences Post-Sale marketing

– Experience influences word-of-mouth communication

• Services marketers can create brand awareness & induce trial

• Experience of benefits builds brand preference and brand value

Nature of Services Marketing

• Services marketing is also done by service providing personnel – How they conduct themselves with customers– What they say, What they don’t say– How they behave, How they act– Overall appearance

• All these influences customer satisfaction and customer retention

• Delivering excellent quality service is the key!!

An Integrative Framework

Turning Marketing intoA Line Function

Identifying the right services

Doing the serviceRight the first time

Doing the serviceRight every time

Managing & Exceeding Customer

Expectations

Marketing toNew customers

Managing Experience Branding the firm

Marketing toExisting Customers

Marketing toEmployees

Maximize market

Potential

Delivering Quality Service

Building aMarketing

Organization

Doing it Right

• Service reliability – performing the service dependably and accurately – is the heart of services marketing excellence– We want pilots to be dependable– Surgeon to know their stuff

• Reliability is of paramount importance to service customers

• Doing it right the First Time sets off customer relations on good footing

Dimensions of Customer Satisfaction

• Reliability: Ability to perform as promised

• Tangibles: Appearance of physical facilities, equipment, personnel, & communications material

• Responsiveness: Willingness to help customers and provide prompt service

• Assurance: Ability to convey trust and confidence

• Empathy: Caring, individualized attention to customers

Foundation for Services Marketing Excellence

ServiceReliability

ServiceMarketing Excellence

QualityService

Benefits of Service Reliability

Improved Service Reliability

HIGHER PROFITS

Higher Retention of current Customers

Positive word of mouth marketing

Opportunity for charging Premium Prices

Reduced cost of redoing service

Higher Employee Morale &Enthusiasm

Lower EmployeeTurnover

Improved Marketing Effectiveness & higher

Sales Revenue

Increased Productivity and

Lower Costs

Delivering Reliable Service

• Building a “Zero Defects” culture is critical in services

• Performing service right the first time requires a greater immediacy & discipline than manufacturing

• Services are less concrete and more subjective – making real time delivery of defect less service difficult

• Leadership will be tested and needed

Service Leadership

• Believe that 100% reliability is feasible and worthwhile goal

• Frequently and effectively communicate their belief company wide

• Reward error-free service

• Empower frontline employees

• Never content with status quo and strive for continuous improvement

Three Pillars of service Reliability

ServiceLeadership

ServiceReliability

Through ServiceTesting

Infrastructure forError-free

Service

Action Checklist for Mangers

• Do we believe in 100% reliability is a worthwhile goal?

• Do we understand the challenges of delivering 100% reliability?

• Do we demonstrate our commitment to service reliability to all our employees?

• Do we rigorously test new services prior to introduction?

• Do we continuously reevaluate our service after introduction?

• Are we doing enough to keep employees motivated for 100% reliability

• Do we encourage, facilities & require teamwork and communication across all units

Service Recovery

• Even the best service company can’t avoid snafus

• Mistakes are a critical part of every service especially when services are performed in customer’s presence

• Inevitability of service errors motivates firm to improve service reliability

• Service recovery is critical for a quality based services firm

Resolve Problems Effectively

• Prepare employees for Recovery– Communication skills– Creativity– Competence– Understanding Customer’s Expectations

• Empower Employees

• Facilitate Employees

• Reward Employees for service recovery

Make Amends for Hassle Factor

• Service problem is at best an inconvenience to customer, at worst it can be a major problem

• Customer incurs some cost even when the problem is resolved

• Make amends for customer’s hassle – A suggestion box– On-the-spot mitigations ( a reward or gift)– Try to exceed customer’s expectations

Learn from Service Recovery

• Conduct Root-Cause Analysis– To prevent recurrent problems or defects from

reaching the customer– Blame systems & not people

• Modify Service-Process Monitoring– Monitoring service process is a strategy for proactive

identification of service problems

• Set up problem Tracking System– Nature of customer problem– An ongoing system to capture information pertaining

to service recovery– Nature of problem, Actions taken in response

Service Recovery & Customer

• Even companies with excellent reputation will experience service failures

• A strong recovery effort can restore customer confidence & gain customer loyalty

• Yet, Many firms respond reluctantly which often reinforces customers’ negative feelings

• Customers are more emotionally involved & more attentive observers of recovery service than routine service

• Service recovery excellence with a reputation for service reliability is a powerful, profitable strategy for gaining & retaining customers

Managing and Exceeding Customers’ Expectations

• Customers’ expectations play a pivotal role in judging a company’s service

• Firms earn reputation for quality service by surpassing customer expectations

• Customers are the sole judges of service quality

• Customer expectations has two parts:– What customers want to occur?– What customers believe will occur?

Structure of Customers Expectations

• Two Levels of Expectations– A Desired Level: What a customer hopes to

receive.– An Adequate Level: What the customer

believes “can be” or “should be”

• A zone of tolerance separates the desired level and what is deemed adequate

• Performance level above the tolerance zone will surprise customers & increase loyalty

Two Levels of Expectations

Desired Level of Service

Zone of

Tolerance

Adequate Service

Zone of Tolerance

• Consider a bank customer who wishes to cash a check in 3 minutes ( desired level)

• In the past, customers have waited for up to 10 minutes ( adequate level)

• The range between 3 minutes to 10 minutes is Range of Tolerance

• Service time below3 minutes will thrill customers

• Service time above 10 minutes will annoy customers

Changes in Expectation Levels

• Customers’ expectation levels are dynamic & fluctuate in response to a variety of factors

• Desired level of service tends to change more slowly and in smaller amounts

• Adequate service level appears to move readily up and down – into zone to tolerance

Changing Expectation Levels

Exp

ecta

tion

Leve

ls

Desired Service

Desired Service

Adequate Service

Adequate Service

Tolerance Zone

Tolerance Zone

Outcome Dimension

ProcessDimension

Influencing Expectation Levels

• Factors that influence customers’ expectation levels:– Enduring Service Intensifiers

– Personal Needs

– Transitory Service Intensifiers

– Perceived Service Alternatives

– Self-perceived Service Role

– Explicit Service Promises

– Implicit Service Promises

– Past Experiences

– Word of Mouth Communications

Establishing Customer Franchise

Ensure PromisesReflect Reality

Establish Customer Franchise

Communicate With Customers

Capitalize onService Recovery

Place a premiumOn Reliability

Excel inService Delivery

ManageExpectations

ExceedExpectations

Expectation levels & Service Recovery

OutcomeDimension

Exp

ecta

tion

Leve

ls

ProcessDimension

OutcomeDimension

ProcessDimension

First Time Service Recovery Service

DesiredService

DesiredService

DesiredService Desired

Service

AdequateService

AdequateService

AdequateService

AdequateService

= Zone of Tolerance

Establish Customer Franchise

• There is a gap between customer perceptions and customer expectations

• Two potential service gaps must be assessed:– Gap between perceived & adequate service -

called Measure of Service Adequacy(MSA)– Gap between perceived & desired service –

called Measure of Service superiority (MSS)

• MSA & MSS score will determine a firm’s competitive position from a service standpoint

MSS, MSA &Competitive Status Customer

Perceptions/Expectation levels

MSSMSA Competitive Status

Customer Franchise

CompetitiveAdvantage

CompetitiveDisadvantage

MSS = Negative

MSA = Positive

MSA = Positive

MSS = Positive

MSS = Negative

MSA = Negative

Adequate Service

Perceived Service

Perceived Service

Perceived Service

Desired Service

Competitive Advantage

• Companies must perform above the adequate service level to gain competitive advantage

• This however is a temporary advantage• Customers’ adequate service levels will

raise rapidly when competitors deliver higher level of service

• Companies performing in the region of competitive advantage can ill-afford complacency

Customer Franchise

• Develop true customer franchise i.e,. Unwavering customer loyalty by:

• Exceeding the desired service level

• Exceptional service will build strong customer loyalty

• Constantly monitor customer expectations

• Understand factors driving customer expectations

• Continuously strive for service superiority

Manager’s Action Checklist

• Do we strive to present a realistic picture of our service to customers?

• Is performing the service right the first time a top priority in our company?

• Do we communicate effectively with customers?• Do we surprise customers during the service

process?• Do our employees regard service problems as

opportunities to impress customers?• Do we continuously evaluate & improve our

performance against customers’ expectations?

Thank You!!

Email comments or suggestions to:

kvarun@hotmail.com