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Introduction toServices Marketing

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Why maruti has more sales? 35 km network.

Diffeence in PureIt and Aquaguard?

Case Study?

Instead of selling leasing , servicing etc.

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Introduction Service lies at the very HUB of economic activity in

any society.

Infrastructure services, such as transportation and

communication are the essential links among all

sectors of the economy.

In an industrialized economy , specialized firm can

supply business services to manufacturing firms more

cheaply and efficiently than manufacturing firms can

supply these services for themselves.

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Government services play a critical role in providing a

stable environment for economic growth.EgPublic education , health care , maintained roads

Thus it is imperative to recognize that services are not

peripheral activities but rather integral part of the

society.

They are central to a functioning and healthy economy

and lie at the heart of that economy.

The service sector not only facilitates but also makespossible the goods producing activities of the

manufacturing sectors.

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Definition

A Service is any activity or benefit that one party can offerto another which is essentially intangible and doesnt result

in the ownership of anything. Its production may or may

not be tied to any physical product.

Definition:- Services are economic activities that create

value and provide benefits for customers at specific times

and places, as a result of bringing about a desired change in

or on behalf of the recipient of the services.-Christopher Lovelock

An economic activity that does not result in ownership

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The profitability of manufacturers depends on

exploiting valueadded services.

Eg Bajaj Auto Limited have discovered that financing or

Insurance of bikes can achieve significant profits.

OTIS Elevators found that revenues from after sales

maintenance earns huge profits .

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Value Added by Tangible V/SIntangible Elementsin Goods and Services

Fast food restaurantPlumbing repair

Office cleaningHealth club

Airline flight

Retail banking

Insurance

Weather forecast

Salt

Soft drinks

CD Player

New car

Tailored clothing

Furniture rental

Lo Hi

Hi

Intangible Elements

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Some Service Industries

Hotels- Hospitality

Airlines-Transportation

Weight Reducing Centers-

Beauty and Health care

Advertising

Legal services

HospitalsHealth care

Banking

Railway-Public service

organization

Education

Design Services

Investment Banking and Securities

Dealing

Management Consulting Services

Satellite Telecommunications-

telecom

Telemarketing Bureaus

Entertainment-Media

Tourism

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Internal Services

Service elements within an organization that facilitate

creation of-or add value to-its final output

Includes:

accounting and payroll administration

recruitment and training

legal services

transportation

catering and food services

cleaning and landscaping

Increasingly, these services are being outsourced

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Economic Evolution

In 1900 only 3 of every 10 workers were employed inservice sector.

In 1950employement in services accounted for 50% of

the workforce.

Today services employ 8 out of 10 workers.

As nations become industrialized, there is an inevitable

shift of employment from one sector of the economy toanother.

- Colin Clark

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Stages of Economic Development

Preindustrial Society

Industrial Society

Postindustrial Society

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Preindustrial Society

Life is characterized as a game against nature.

EgWorking with muscle power and labor force

engaged in fishing , mining.

Life is consolidated by elements such as weather ,

availability of water , quality of soil. The rhythm of life is shaped by nature .

Pace of works varies with seasons.

Productivity is low.

Little evidence of technology.

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Industrial Society

Predominant activity is production of goods.

The focus is on making more with less.

Productivity is defined as = outputs/inputs (within a timeperiod and quality considered)

Life is characterized as a game that is played againstfabricated nature

EgWorld of cities and factories.

The rhythm of life is machine-paced and rigid workinghours.

Industrial society is a world of schedule and awareness ofvalue of time.

The standard of living becomes measured by quantity ofgoods.

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Postindustrial Society

Postindustrial Society is concerned by the quality of

life , as measured by services such as health ,education and recreation.

The central figure is professional person, becauserather than energy or physical strength , information isa key resource.

Life is a game played among persons.

Society becomes aware that the independent actions ofindividuals can combine to create havoc for everyone.

EgTraffic congestion , Pollution

Education becomes the condition for entry into apostindustrial society.

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Transformation from Industrial toPostindustrial Society

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Transformation from Industrial to PostindustrialSociety

It occurs when1-There is natural development of services , such as

transportation and utilities to support industrial

development.

2- Labor saving devices are introduced into productionprocess, more workers engage in nonmanufacturing

activities.

EgLG, Samsung staff for Maintenance and repair.

Bajaj Auto LtdSpecial team to educate the dealers to sell

bikes.

Retail industry requires a lot more people than the

manufacturing sector , top sell the final goods to customers.

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3-Growth of the population and mass consumption of

goods increase wholesale and retail trade along with

banking, real estate and insurance. 4- As the income increases , the proportion spent on

the necessities of food and home decreases, and the

remainder creates a demand for durables and then for

services. As the income increases the percentage spent on food

and durables drops while consumption of services that

reflect the desire for a more enriched life increases.

EgEducation , Technical skills.

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4 categories of Service

Service Industries

Service as Products

Customers Service

Derived Service

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Service Industries and companies

Those companies whose core product is a service.EgTaj Palace Hotels (Lodging) , Fortis (HealthCare)

Service as product

Represents a wide range of intangible product offeringthat customers value and pay for in marketplace.

Service product are sold by service companies and nonservice companies.

EgIBM and HP offer IT consulting services,competing with Accenture which is traditional pureservice firm.

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Customers Service

This is a service provided in support of company's core

products.

Customer service can occur

1-On siteIn retail mall , an employee helps you to find

and desired item.

2-Over phone

3-Via Internet

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Derived Service -

Value derived from physical goods is really the service

provided by the good.

EgRazor provides barbering services.

Computers provide information and data manipulation

services.

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Lec 2

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Characteristics of Services

Perishability-

Intangibility-

Simultaneous Production and Consumption-

Heterogeneity/Variability-

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Perishability-

Services cant be stored but canbe transacted.

Eg Sold Air tickets, Railway Tickets,Movie Tickets.

Unused Capacity Is Lost Forever

Demand May Be Very Time-Sensitive

How to overcome?

# Over marketing#Demand Forecasting

# Managing Supply

Characteristics of Services

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Intangibility

Service Characteristics

Difficult for Customer to Evaluate.

Customer Does Not Take PhysicalPossession.

Difficult to Advertise and Display.

Difficult to Set and Justify Pricesas

the actual costs of a unit of service arehard to determine.

Service Processes Usually Not

Protectable by Patents

Resulting Marketing Challenges

Sources: K. Douglas Hoffman and John E. G. Bateson, Essentials of Services Marketing, (Fort Worth: DrydenPress, 1997) pp. 25-38; Valerie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Delivering Quality Service:Balancing Customer Perceptions and Expectations(New York: Free Press, 1990); and Leonard L. Berry and A.Parasuraman, Marketing Services: Competing Through Quality(New York: Free Press, 1991), p. 5.

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Simultaneous Production andConsumption

Goods are produced first and thensold but,

Services are first sold and thenproduced.

Thus customer is present while

service is being produced and thusviews and may even take part inproduction process.

Service Provider Cannot Mass-Produce Services.

Eg- Hotels, Hospitals. Economies of scale is not possible

through centralization.

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Production to Consumption -The difference between Goods and services

Goods

Production/Manufacture

Sale/Transportation

Consumption

Market Communication

Marketing Communication

Transaction/Services Delivery

+Consumption/Experience

Services

Production of service

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Heterogeneity/Variability

Variability conveys to the customers an element ofinconsistency and non-standardization in the service. Service

offer is never consistent in quality and service.

Heterogeneity results because no 2 customers are preciselyalike., each will have unique demand and experience.

Heterogeneity connected with services is largely the result of

human interaction (between employee and customer).

EgA tax accountant may provide different service

experience to 2 different customers, depending on their needs.

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The ServicesMarketing Mix

Mi

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Mix:8Ps vs.the Traditional 4Ps

Rethinking the original 4Ps

Product elements

Place and time

Promotion and education

Price and other user outlays

Adding Four New Elements

Physical environment Process

People

Productivity Quality

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Product elements

Service products lie at the heart of a firms marketing

strategy.

If a product is poorly designed, it wont create meaningfulvalue for customers ,even if the rest of the 8 Ps are wellexecuted.

Service products consist of a core product that responds tothe customers primary need and

EgMaking a call from cell phone.

an array of supplementary service elements that help

customers to use the core product effectively as well asadding value through welcomed enhancements.

Eg3g

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Place and time

Delivering product elements to customers involves

decisions on where and when to deliver the product. Delivery may involve use of physical or electronic

channel (or both) , depending on the nature of the service.

Firms may deliver service directly to end user or through

intermediary organizations, such as retailer outlets thatreceive fee or commission , to perform certain tasks

associated with sales , service and customer contact.

EgMobile Dealers get Rs 100 for every sim card sold.

Speed and convenience of place and time have become

important determinants of effective service delivery.

EgReliance 3G.

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Price and Other User Outlays

For suppliers pricing strategy is the financial mechanismthrough which income is generated to offset the costs of

providing service and create a surplus of profits.

Pricing strategy is often highly dynamic with price levels

being adjusted over time according to such factors as

Type of customers (Lawyers charge dif fees)

Time and Place of delivery (Doctors charge high for home

visit) Level of demand. (Air fares shooting up in month of

December)

Available of capacity.

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Customers see price as a key part of the costs they mustincur to obtain wanted benefits.

To calculate whether a particular service is WORTH IT ,

they may go beyond just money and also assess the outlays

of their time and effort.

These outlays may include additional monetary costs(Such as travel expenses to a service location), time

expenditures , physical efforts .

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Promotion and Education

This component provides 3 vital roles

1. Providing needed information and advice.2. Persuading target customers, of the merits of a specific

brand or service product.

3. Encouraging them to take action at specific times.

In service marketing , much communication iseducational in nature , especially for new customers.

Suppliers need to teach customers about the

1. Benefits of service

2. Where and when to obtain

3. How to participate in service processes to get best results.

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Communication may be delivered by individuals such as

salespeople,

front line staff ,

at website,

on display screens in self service equipments (EgATM)

Through wide array of advertising media.

Promotional activities which include monetary incentive

are often designed to stimulate immediate trail purchases

or to encourage consumption when demand is low.

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Process

Managers know that , where services are concerned , how afirm does thingsthe underling processesis often asimportant as what it does , particularly if the product isordinary one offered by many competitors.

EgWhat makes Meru Cabs different from other Taxis.

So creating and delivering product elements requires designand implementation of effective processes.

Customers are often involved in these processes, especiallywhen acting as co producers.

Badly designed processes lead to slow , ineffective servicedelivery and disappointing experience.

They also make it difficult for the front line staff to do theirjobs well, resulting in low productivity.

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Physical Environment

The appearance of building ,

vehicles,

interior furnishing ,

equipments ,

staff members uniforms, printed materials and other visible cues all provide

tangible evidence of a firms quality.

Service firms need to manage physical evidence

carefully, as it can have a profound impact oncustomers impressions.

Physical Environment staff members uniforms

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Physical Environmentstaff members uniforms,

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Physical Environment

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Physical Environment

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People

Despite technology advances , many services willalways require direct interaction between customers

and contact personnel.

The nature of these interaction strongly influences how

customers perceive service quality.

Knowing that (dis)satisfaction with service quality

often reflects customers assessments of front line staff,

successful service firms devote significant effort to

recruit , train and motivate employees.

EgICICI Bank

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Productivity and Quality Though often treated

separately , productivity and

quality should be seen as 2

sides of same coin.

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Improving productivityis essential to any

strategy for reducing

costs, but managers

must be ware of makinginappropriate cuts in

service that will be

resented by customers.

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Improving qualityshould be defined from

customers perspective.

Improving quality is

essential forproductivity

differentiation and

customer satisfaction.

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Lec 3

The Customer Gap

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The Customer Gap

The customer Gap is thedifference between

customer expectations

and perceptions.

The Customer Gap

ExpectedService

PerceivedService

CustomerGap

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Customer expectations are standards or reference pointsthat the customer bring into the service experience.

The sources of customer expectations are marketercontrolled factors such as -

Pricing.

Advertising.

Sales promotion.

Customer perceptions often consists of what a customerbelieves should or will happen.

EgWhen you visit an expensive restaurant , youexpect a high level of service, one that is considerablysuperior to the level you would expect in a fast foodrestaurant.

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Closing the gap between what customers expect andwhat they perceive is critical to delivering quality

service and it forms the basis for the gap models.

Customer satisfaction and customer focus are critical

to competitiveness of firms, any company interested in

delivering quality service must begin with a clear

understanding of its customers.

EgVodafone and SBI credit card has special call

centers for priority customers.

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1)The sources ofcustomer expectations are marketercontrolled factors such as -

Pricing.

Advertising.

Sales promotion.

2)Factors that the marketer has limited ability to affect

Competitive offerings.

Word of mouth communications. Innate(produced by the mind rather than learned through

experience) personal needs.

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In perfect world, expectations and perceptions wouldbe identical : Customers would perceive that they have

received what they thought they would and should.

In practice these concepts are often separated by some

distance.

It is a GOAL of service marketing to bridge thisdistance.

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The Provider Gap

These gaps occur within the organization providing theservice.

This includes

Gap 1The listening Gap

Gap 2The service Design and Standards Gap.

Gap 3- The Service Performance Gap.

Gap 4The communication Gap.

P id G Th li t i G

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Provider Gap The listening Gap

The listening gap , is the difference between customerexpectations of service and company understanding of

those expectations.

A primary cause in many firms not meeting customers

expectations is that the firm lacks accurate

understanding of what those expectations are.

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Reasons for managers not being aware of whatcustomers expect

1. They may not interact directly with customers

2. They may be unwilling to ask about expectations

3. They may be unprepared to address them.

When the people with authority and responsibility forsetting priorities do not fully understand customers

service expectations, they may trigger a chain of baddecisions and suboptimal resource allocations thatresult in perceptions of poor service quality.

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The responsibility for the first provider gap has beenbroaden from managers to employees in organization.

In today's changing organizations , the authority to

make adjustments in service delivery is often delegated

to empowered teams and frontline people.

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Key Factors Leading to Provider Gap 1 :The listening Gap

.

Inadequate marketing researchorientation

Lack of upward communication

Insufficient relationship focus Focus on transactions rather than relationship

Focus on new customers rather thanrelationship customers

Inadequate service recovery

Customer Expectations

Company perceptions of customerexpectations

Gap1

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1)Inadequate marketing research orientation When management or empowered employees do not

acquire accurate information about customers

expectations, this gap is large.

Formal or Informal methods to capture information

about customers expectations must be developed

through marketing research.

Techniques like customer interviews , survey research,

complaint systems and customer panels must be

developed through marketing research.

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2)Lack of upward communicationEgFrontline staff knows great deal about customers,

if management is not in contact with front line

employees , the gap widens.

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3) Insufficient relationship focus

Lack of companies strategies to retain customers andstrengthen relationships with them.

EgCRM has been a practice in IBM , BOEING , that

recognize that clients have potential to spend more with

them if they provide excellent service.

Focus on transactions rather than relationship

When companies focus too much on new customers, they

may fail to understand the changing needs and expectations

of their current customers.

EgICICI Bank facing problem with dormant accounts.

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Technology affords companies the ability to acquire andintegrate vast quantities of data on customer that can be

used to build relationship.

EgFrequent flyer program by airlines, petro miles

program by credit cards

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4)Inadequate service recovery

It is critical for an organization to understand the

importance of service recovery1. Why people complain

2. What they expect when they complain

3.How to develop effective service recovery strategiesfor dealing with inevitable service failures.

Such strategies should involve a well defined

complaint handling procedures

EgLG and Samsung after sales service has 24 hoursTAT time.

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Emphasis on empowering employees to react on spot.,in real time, to fix the failure.

EgAir India ground staff.

Other time involves service guarantees or the ways to

compensate the customer for the unfulfilled promise.

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Gap 2The service Design and Standards Gap.

Accurate perceptions of customers expectations arenecessary , but not sufficient , for delivering superiorquality service.

A recurring theme in service companies is the

difficulty experienced in translating customerexpectations into service quality specifications thatemployee can understand and execute.

The problems reflected in provider gap 2, is thedifference between company understanding of

customer expectations and development of customerdriven service design and standards.

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Key Factors Leading to Provider Gap 2 :The Service Designand Standards Gap

.

Poor service design

Absence of customer driven standards

Inappropriate physical evidencestandards

Failure to develop tangibles in line withcustomer expectations.

Services cape design that does not meetcustomer and employees needs.

Customer driven service design andstandards

Management perceptions of Companyexpectations

Gap2

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Reasons for Gap 2

Poor service design - Those people responsible forsetting standards, sometimes believe that customers

expectations are unreasonable or unrealistic.

They also believe that the degree of variability

inherent in service defies standardization, andtherefore setting of standards will not achieve the

desired goal.

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Absence of customer driven standards - When service

standards are absent, quality of service as perceived bycustomers is likely to suffer.

Eg -Compared to other Airlines, currently Kingfisher is

the only Airlines which issues boarding passes using a

kiosk machine which would save your time. In the machine you need to enter your flight ticket PNR

number along with your Last Name and its instantly

printed, in my case a kiosk operator standing next to it

get the job done.

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Inappropriate physical evidence standards

Physical evidence standards mean everything frombusiness cards to reports , signage , internet presence ,

equipment and facilities used to deliver the service.

Inhotel , restaurant , a theme park , Hospitals, Colleges.

the services cape , the physical facility is critical in these

industries in terms of communicating about the service

and making the entire experience pleasurable.

In these cases services capes plays a variety of roles, from

serving as a visual metaphor of what the company stands

for.

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Eg - If you were to try to describe the differences acustomer encountered when entering a branch of say

like Mc Donald's compared with a small family

restaurant, the concept of services capes may prove

useful experience pleasurable.

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Air India

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Kingfisher

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Physical Evidence

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Ways to avoid Provider- Gap 2

Technology changes and improvements are helpful in closingthis gap.

EgMeru cabs using call centers and GPS system.

Compared to other Airlines, currently Kingfisher is the only

Airlines which issues boarding passes using a kiosk machinewhich would save your time.

Design service without bias, subjectivity and incompleteness.

EgIRCTC website is incomplete and bias.

Standards needs to be developed - when standards reflect

what customers expect , perceptions of quality of service they

receive are likely to be enhanced.

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Lec 4

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The Provider Gap

These gaps occur within the organization providing theservice.

This includes

Gap 1The listening Gap

Gap 2The service Design and Standards Gap.

Gap 3- The Service Performance Gap.

Gap 4The communication Gap.

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Key Factors Leading to Provider Gap 1 :The listening Gap

.

Inadequate marketing researchorientation

Lack of upward communication

Insufficient relationship focus Focus on transactions rather than relationship

Focus on new customers rather than

relationship customers

Inadequate service recovery

Customer Expectations

Company perceptions of customerexpectations

Gap1

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Key Factors Leading to Provider Gap 2 :The Service Designand Standards Gap

.

Poor service design

Absence of customer driven standards

Inappropriate physical evidencestandards

Failure to develop tangibles in line withcustomer expectations.

Services cape design that does not meetcustomer and employees needs.

Customer driven service design andstandards

Management perceptions of Companyexpectations

Gap2

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Key Factors Leading to Provider Gap 3 :The ServicePerformance Gap

.

Deficiencies in human resource policies

Failure to match supply and demand

Customer not fulfilling roles

Problems with service intermediaries.

Customer driven service design andstandards

Service Delivery

Gap3

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Gap 3The service Performance Gap.

Once service designs and standards are in place , thefirm must have

Systems,

Processes,

People in place to ensure that service delivery actually

matches the design and standards in place.

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Deficiencies in human resource policies Employees do not clearly understand the roles they

are to play in the company.

Poor employee selection

Inadequate technology

In appropriate compensation and recognition.

Lack of empowerment and team work.

Training Motivation.

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Customer not fulfilling roles Customers do not perform their roles appropriately

EgThey fail to provide all the information.

In OPTUS mobile , customers do not complete the

customer check.

They neglect to read and follow instructions, thus

quality is jeopardized.

Customers also negatively influence the quality ofservice received by others, if they are disruptive or

take more than their share of a service providers time.

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Problems with service intermediaries.

Problems with service intermediaries, as retailers ,

franchisees , agents and brokers.

EgHonda Dealers.

Quality in service occurs in the human interactionbetween customers and service providers, control over

the service encounter by the company is crucial.EgFranchisers of services depend on theirfranchisees to execute service delivery as they havespecified it.

(Mc Donald's, The Shahnaz Husain Franchise )EgThe Engineer briefing you about your vehicle?

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Failure to match supply and demand Service firms needs to synchronize demand and

capacity.

Since the service are perishable and cannot be

inventoried, service firms frequently face situations ofover or under demand.

EgAirlines Companies.

Lacking inventories to handle over demand, companies

lose sales when capacity is inadequate to handle

customers.

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Key Factors Leading to Provider Gap 4 :The CommunicationGap

.

Lack of integrated service marketing

communications

Ineffective management of customers

expectations

Overpromising

Inadequate horizontal communications Inappropriate pricing

Service Delivery

External communications to customers

Gap4

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Gap 4The Communication Gap.

The communication gap , illustrates the difference betweenservice delivery and the service providers external

communication.

Promises made by a service company through its media

advertising , sales force and other communications maypotentially raise customers expectations, the standards

against which customers assess service quality.

EgThe sales rep assures to get the policy issued in 2

days, but the underwriters reject it.

The discrepancy between actual and promised service

therefore can widen the customer gap.

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Lack of integrated service marketing communications

IMC is a management concept that is designed to make

all aspects of marketing communication such as

advertising , sales promotion , public relations and Direct

Marketing work together as a unified force, rather thanpermitting each to work in isolation.

EgDifferent Ads of management college for different

courses offered.

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Ineffective management of customers expectations Companies frequently fail to capitalize on

opportunities to educate customers to use servicesappropriately.

EgHow to use ATM cards , How get boardingpasses using a kiosk machine

Companies also neglect to manage customerexpectations of what will be delivered in servicetransactions and relationships.

EgICICI Bank offers Debit card on the spot ofopening A/C

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Overpromising

Overpromising in advertising.

Eg- Dominos 30 minutes challenge.

Overpromising in personal selling

Overpromising through physical evidence.

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Inadequate horizontal communications When employees who promote the service do not fully

understand the reality of service delivery, they are

likely to make exaggerated promises.

EgICICI Pru sales rep promising to get the policyissued in 48 hrs.

IDEA promising the activation instant of pre paid sim

cards.

Communication to consumers involves issues that

cross organizational boundaries.

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Inappropriate pricing In packaged goods and durable goods, customers

possess enough knowledge before purchase to be ableto judge whether price is fair or in line withcompetition.

With services , customers often have no internalreference points for prices before purchase andconsumption.

Techniques for developing prices for services are morecomplicated than those for pricing tangible goods.

EgPrice of flights change every second.

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Consumer Behaviour In Services

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Why Consumer Behavior?

Since, customer is the heart of effective servicemarketing , The primary objectives of services

producers and marketers are to develop and provide

offerings that satisfy consumer needs and expectations,

thereby ensuring their own economic survival. To achieve these objectives, service providers need to

understand How consumers seek, choose , purchase ,

experience and evaluate services.

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Introduction

Consumer behavior in service is How consumers seek, choose , purchase , experience

and evaluate services.

Many influences affect this process i.e.

Consumers Life Stage

Generation into which consumer was born.

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EgIn US , thetraditionalists (born between 1900and 1945) were dramatically influenced by 2 majorworld wars and great depression , thus they arecharacterized by labels such as loyalty, hard work andpatriotism.

Currently , thebaby boomers (born between 19461964) ,

The largest demographic group in US, is characterizedby optimism resulting from the focus on their post

world war II birth, they are labeled with competition ,idealism ,civil rights.

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Generation Y or Millenials (born between 1981 and1999) ,

This group is characterized is differently from theirparents and have labels like,

They are technology savvy , technology independent ,including round the clock connection , technologyintegrated life style has resulted in a certain impatienceand 24/7 culture, where things are available at alltimes.

EgInteractive games , 24/7 gym, You Tube, BlackBerries.

Continuum of Evaluation for Different Types of

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Search Qualitiesattributes that a consumer candetermine before purchasing a product.

Search qualities include color, style, price , feel.

Experience Qualitiesattributes that can be discerned

only after purchase or during consumption. Experience qualities include taste , wearability.

Credence Qualityincludes characteristics that the

consumer may find impossible to evaluate even after

purchase and consumption, because consumers may beunaware of or may lack sufficient knowledge to appraise

whether the offerings satisfy given wants or needs.

Continuum of Evaluation for Different Types ofProducts

Continuum of Evaluation for Different Types of

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Copyright 2009 PearsonEducation, Inc. Publishing

as Prentice Hall 13-99

Continuum of Evaluation for Different Types ofProducts

Stages in Consumer Decision Making and

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Stages in Consumer Decision Making andEvaluation of Services.

1. Consumer Choice1. Need Recognition

2. Information Search

3. Evaluation of Alternatives

4. Purchase.2. Consumer Experience

3. Post experience Evaluation

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Consumer Choice

The 1st important area of consumer behavior that

marketers are concerned with is how customers choose

and make decisions and the step that lead to the

purchase of a particular service.

Customers follow a logical sequence -1. Need Recognition

2. Information Search

3. Evaluation of Alternatives

4. Purchase.

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A-Need Recognition The process of buying a service begins with the recognition

that a need or a want exists.

Maslow's Hierarchy is most widely used to recognise

needs. Services can fill all these needs, and they become

increasingly important for higherlevel social, Esteem

Needs , Self Actualisation needs.

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Maslow's Hierarchy of Needs.

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y

Physiological needs - Food, shelter, i.e., those needs needed

for basic survival. Safety needs - The need to feel safe within your

environment. Also refers to emotional and physical safety.

Eg- Job security, Health Insurance.

Social Needs - The need for love, friendship andbelongingness.

Esteem NeedsThe need for self respect, status and

recognition from others.

Self ActualisationThe point of reaching ones fullpotential. Are you capable at excelling yourself.

People are self aware , concerned with personal growth.

Ph i l i l d Food shelter i e those needs needed

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Physiological needs - Food, shelter, i.e., those needs needed

for basic survival.

Eg- Coffee shops, restaurants , and other serviceestablishment that provided food and water.

EgIn Tokyo , every 2nd street has large vending machine

with ice cold drinks to quench the thirst .

Safety needs - The need to feel safe within your

environment and included Job security, Health Insurance.

EgAfter terrorist attacks, consumers began to recognize

their vulnerability and sought ways to increase their safetyand security, thus consumers switched to movie rentals,

insurance and other services to satisfy their safety needs.

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Social Needs - The need for love, friendship andbelongingness.

Social needs are critical to all cultures. EgIn Japan people spend more time with their

families and work colleagues , thus Japanese spendmore annually per capita in restaurants , than any other

country Esteem NeedsThe need for self respect, status and

recognition from others.

EgNeeds to improve oneself and achieve success are

responsible for the growth of education, training andother services that increase the skills and prestige ofconsumers.

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Self ActualisationThe point of reaching ones fullpotential, enriching experiences.

EgConsumers purchase experience such as

skydiving , jungle safaris, bungee jumping for the pure

thrill of experience.

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1. Consumer Choice

1. Need Recognition

2. Purchase.

2. Consumer Experience

3. Post experience Evaluation

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B- Information SearchPerceived Risk. Since services are non standardized , the consumer will

feel some uncertainty about the outcome and

consequences each time a service is purchased.

Service purchases involve more risk , than otherpurchases because services are often not accompanied

by warranties or guarantees.

Dissatisfied customer can rarely return a service, they

have already consumed it by the time they realize theirdissatisfaction.

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B- Information Search Seeking information is a way of reducing risk, helping

consumers feel more confident about their choices.

Customers use both personal sources and non personal

sources. Seeking information is an extensive formalized process

if the service is important to customers or it represents

major investment.

EgHealth Care, Education.

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Evaluation of Alternatives

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Amarpriet Singh

Building Customer Relationship

??????????

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??????????

Why is there a need for CRM? There are fewer or no incentives for retaining existing

accounts?

Can a firms relationships with their customers like ,

other social relationships , tend to evolve over time. What is the role of marketing today?

Marketing transforms the strangers to

acquaintances tofriends topartners.

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The traditional view of marketing was

1. Firms frequently focus on attracting customers.

2. Then pay little attention to what they should do to

keep them.

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James L.Schorr

Executive President of Marketing Holiday

Inns.

Bucket Theory of Marketing

B k t Th f M k ti

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Bucket Theory of Marketing

By this he meant that marketing can be thought of as abig bucket.

It is what the sales , advertising and promotion

programs do that pours business into the top of the

bucket. As long as these programs are effective , the bucket

stays full.

There is one problem?

Th P bl ??

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The Problem??

That there is a whole inthe bucket.

When the business is

running well and

delivering on itspromises, the hole is

small and few customers

are leaving.

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When the business isrunning well anddelivering on its promises,the hole is small and fewcustomers are leaving.

When the operations is

weak and customers arenot satisfied with whatthey get - the relationshipweakens?

People start falling out of

bucket through the holesfaster, than they can bepoured in through the top.

Th b k h ill

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The bucket theory illustrates -

Relationship strategy that focuses on plugging theholes in the buckets makes much sense because

Historically , marketers have been more concerned in

acquisition of customers,

So a shift to a relationship strategy often representschanges in mind set , organizational culture and

employee reward systems.

EgThere are sales incentives systems in companies.

There are fewer or no incentives for retaining current

accounts.

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Relationship marketing essentially represents aparadigm shift within marketing away from an

acquisitions?

There has been a shift from transactions to arelationship focus in marketing.

CRM philosophy assumes that

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1. Many consumers and business customers prefer tohave an ongoing relationship with one organization

than to switch continually.

2. It is usually cheaper to keep current customers thanto attract new customers.

Th E l ti f C t R l ti hi

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The Evolution of Customer Relationships.

Firms relationships with their customers like othersocial relationships , tend to evolve over time.

It is Marketing that exchanges relationships between

providers and customers.

Marketing transforms thestrangers to

acquaintances tofriends topartners.

C t St

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Customers as Strangers.

Strangers are those customers who have not yet had any

transactions (interaction) with a firm

They may not be even aware of the firm.

At INDUSTRY level, strangers are the customers who

have not entered the market. At FIRM level, they may include customers of

competitors.

Firm has no relationship with the customers at this point.

us omers asStrangers.

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Initiate communication, with potential customers(STRANGERS) in order to acquire business.

The primary marketing efforts directed toward such

customers deal with1. Familiarizing those potential customers with the

firms offerings and subsequently , encouraging them

to give the firm a try.

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Customers as Acquaintances -

Once customer awareness and trail are achieved,familiarity is established and the customer and the firm

become acquaintances.

This is the basis for an exchange relationship.

For a customer , an acquaintanceship is effective as

long as the customers is satisfied and what is being

received in exchange is perceived as fair value.

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With the repetitive interactions , the customers gainsexperience and becomes more familiar with the firms

offerings.

Repetitive interactions improves the firms knowledge

of the customer, helping to facilitate marketing, salesand service efforts.

Thus an acquaintance relationship facilitates

transactions primarily through the reduction of

customers perceived risk and the providers costs?

Firms Strategies forCustomers asA i t

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Acquaintances

Primary goal for the firm at this stage is satisfying thecustomer.

Firms try to provide value proposition at this stage.

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Eg Amazon.com has created value for itsacquaintances through a highly developed order

processing system.

By processing and organizing historical transactiondata from a customer and comparing it with data from

other customer demonstrating similar purchase

behaviors, the system is able to identify additional

products of potential interest to the acquaintancecustomer and to generate cross selling opportunities.

Customers as Friends-

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As a customers continues to make purchases from a

firm and to receive value in the exchange relationship,the firm begins to acquire specific knowledge of the

customers.

This allows the companies to create an offerings that

directly address the customers situation. The provision of a unique offering , and differential

value , transforms the relationship from acquaintance

to friendship.

As customers become friends they come to trust that

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y

company provides superior value.

Due to past satisfying experiences, these customers are

more likely to appreciate the firms products offerings and

are more open to other related services.

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Firms Strategies for Customers as Friends

A primary goal for firm at this stage is CustomerRetention.

A firm can easily develop a sustainable competitive

advantage through friends as the offerings is moreunique and difficult for competitors to imitate.

EgDifferent rate plans offered by Telcos,

Tata Sky offering special rates for existing customers.

Customers as Partners-

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As customer continues to interact with a firm , the level

of trust often deepens, This leads to customer receiving more customized

offerings and interactions.

Trust developed in the friendship stage is a necessary but

not sufficient condition for a consumerfirm partnershipto develop.

When creation of trust leads to the creation of

commitment this is the condition for a consumer firm

partnership to develop.

Customer knowledge and information systems is used by the

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Customer knowledge and information systems is used by the

firm to deliver highly personalised and customized offerings.

Overtime the customersfirm relationship evolves into arelationship where the parties become increasingly

interdependent.

At the partnership stage , the firm is concerned with enhancing

the relationship. Customers are more likely to stay in the relationship if they

feel the company understands their changing needs and is

ready to invest in the relationship by evolving product and

service mix. By enhancing the relationships, the firm expects such

customers to be less likely to be lured away by competitors.

Firms Strategies for Customers as Partners

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Firms Strategies for Customers as Partners

The key to the success in the partnership stage is thefirms ability to organize and use information about

individual customers more effectively than

competitors.

Customers benefit from and therefore desire to committo relationship with firms.

Eg Hertz Gold customers receive a guaranteed

availability of a car, separate counter.

PMC bank ltd cheque clearing.

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Benefits for customers Benefits For Firms

1. Confidence Benefits.

2. Social Benefits .

3. Special TreatmentBenefit .

1. Economic Benefits.

2. Customer Behavior

Benefits.3. Human Resource

Management Benefits.

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Benefits for customers Customers receive greater value relative to what they

expect from competing firms.

Confidence Benefits

This comprise of trust or confidence.

When customers develop confidence in and can

maintain a relationship with a service provider , they

free up time for other concerns and priorities.

EgLawyers, Doctors etc.

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Social Benefits In long term customer firm relationships , a service

provider may actually become part of the customers

social support systems.

EgHairdressers. Mom and Pop stores owners,

health club or restaurant manager who knows the

customer personally.

A school principal who knows an entire family and its

special needs.

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Special Treatment Benefit - This includes getting benefit of doubt, being given a

special deal or price or getting preferential treatment.

Eg Delay in payment to f Visa bill once, can get abenefit of doubt.

Benefits For Firms

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1.Economic Benefits.

2. Customer Behavior Benefits.

3. Human Resource Management Benefits.

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Economic Benefits-

Relationship oriented firms achieve Higher over all

returns on their investments than do transaction

oriented firms.

These benefits come from variety of source1. Reduced marketing costs

2. Reduced administrative costs

3. Ability to maintain margins without reducing prices

4. Satisfied customers are willing to pay more for a

provider services.

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Customer Behavior Benefits-

Free advertising provided through word of mouth

communication.

Customer voluntary performance

EgIn restaurant customers reporting the messyrestrooms to an employee, this helps s firm to develop

quality services.

Social benefits

EgA person becoming a mentor in the hospital

where he recovered from.

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Human Resource Management Benefits-

Assisting in service delivery

EgMore experienced customers can make the new

service employees job easy.

A regular patient of a medical service provider islikely to know how the systems work.

Employee Retention

Eg -People like to work for companies whose

customer are happy and loyal.