Services Marketing

prepurchase stage
1. awareness of need
2. information search
3. evaluation of alternatives
4. making a purchase decision
service encounter stage
the customer initiates, experiences, and consumes the service
postencounter stage
evaluation of the service performance, which determines future intentions such as wanting to buy again from the same firm and recommending the service
need arousal
the prospective customer’s awareness of a need
what needs are triggered by
unconscious mind
physical conditions
external sources
evoked set
the set of products or brands a customer may consider in the decision making process
search attributes
tangible characteristics customers can evaluate before purchase
ex: color, texture, taste, sound
experience attributes
attributes that can’t be evaluated before purchase.
EX: movie, if you like the food, reliability, medical services
credence attributes
characteristics that customers find hard to evaluate even after consumption
EX: hygiene conditions of the kitchen and healthiness of cooking ingredients
desired service
type of service customers hope to receive
what is wished for
adequate service
minimum level of service customers will accept without being dissatisfied
predicted service
level of service customers actually anticipate receiving
zone of tolerance
the extent to which customers are willing to accept variation
high contact services
interaction throughout service delivery between customers and the organization
-hospital, hotel, airplane
low contact services
little if any physical contact between customers and service providers
-insurance, banking
technical core
where inputs are processed and the elements of the service product are created
-backstage
service delivery system
where the final “assembly” takes place and the product is delivered to the customer
-buildings, equipment and personnel
-front stage
service facilities
the stage on which drama unfolds.
personnel
the front stage people who act like members of a cast, playing specific roles as actors
moment of truth
single service encounter
knowledge gap
the difference between what senior mgmt. believes customers expect and customers actual needs and expectations
policy gap
the difference between mgmt’s understanding of customers expectations and the quality standards established for service delivery.
delivery gap
the difference between specified service delivery standards and the delivery teams’ and service operations’ actual performance on these standards
communications gap
difference between what the company communicates and what it actually delivers to its customers.
perceptions gap
difference between what is, in fact, delivered to the customer and what customers perceive they have received.
soft measures
cannot easily be observed and must be collected by talking to customers, employees, or others
hard measures
characteristics and activities that can be counted, times, or measured through audits
assessment and benchmarking of service quality and performance
How satisfied are our customers? includes learning how well a firm performed in comparison to the previous year, whether investments in certain service aspects have paid off in terms of customer satisfaction, and where the firm wants to be the following year
customer driven learning and improvements
what makes our customers happy or unhappy? what are our strengths we want to cement, and what are our weaknesses we need to improve?
creating a customer oriented service culture
focusing the organization on customer needs and customer satisfaction, and rallying the entire organization toward a service quality culture
fishbone diagram
equipment
manpower
material
procedures
pareto analysis
80/20 rule, 80 percent of the value of one variable is accounted for by only 20 percent of the causal variable
procedural justice
concerns policies and rules that any customer has to go through to seek faireness. customers expect the firms to assume responsibility, which is the key to the start of a fair procedure, followed by a convenient and responsive recovery process.
interactional justice
involves employees of the firm who provide the service recovery and their behavior toward the customer. giving an explanation for the failure and making an effort to resolve the problem are very important. must be perceived as genuine, honest, and polite
outcome justice
concerns compensation a customer receives as a result of the losses and inconveniences incurred because of a service failure. includes compensation for not only the failure but also time, effort, and energy spent during the process of service recovery
service recovery
systemic efforts by a firm to correct a problem following a service failure and to retain a customer’s goodwill
service recovery paradox
the effect that customers who experience a service failure and then have it resolved are sometimes more satisfied than customers who had no problem in the first place
service
-an act or performance offered by one party to another
-an economic activity that does not result in ownership
-performances that create desired results for customers themselves, their physical possessions or intangible assets
internal services
-service elements within an organization that facilitate creation of or add value to its final output
services
1. intangibility
2. inseparability
3. variability
4. perishability
intangibility
-Customers do not obtain ownership of services
-Service products are intangible performances–not objects
-Often difficult for customers to evaluate
inseparability
-Customers often actively involved in production process
-Other people may form part of product experience
-Delivery systems include electronic and physical channels
variability
more variability in operational inputs and outputs- harder to improve productivity, control quality
perishability
-absence of inventories after production
-time factor is more important- speed may be key
intangibility strategy
Stress tangible cues
*Use personal sources more than nonpersonal sources
*Simulate or stimulate word-of-mouth communications
*Create strong organizational image
*Engage in post-purchase communications *Price to signal quality
intangibility problems
-Services cannot be stored
-Cannot be protected through patents
-Cannot readily display or communicate services
inseparability problems
-Customer involved in production
-Other customers involved in production
-Centralized mass production of services can be difficult
inseparability strategies
-Emphasize selection and training of public contact personnel
-Manage customers
-Use multi-site locations
-Encourage client participation
-Level of personalization
variability problems
-standardization
-quality control
variability strategies
-standard versus custom
– GAP model
perishability problems
-services can’t be inventoried
perishability strategies
-Use strategies to cope with fluctuating demand
-Make simultaneous adjustments in demand and capacity to achieve a closer match between the two
7 p’s of integrated service management
1. product
2. place
3. price
4. promotion
5. process
6. people
7. physical evidence
people processing
tangible acts/ directed at people
e.g., airlines, hospitals,
hotels, restaurants, haircutting, fitness centers
possession processing
tangible acts/ directed at possessions
e.g., freight, repair, cleaning, landscaping, retailing, recycling
mental stimulus processing
intangible acts/ directed at people
e.g., broadcasting, consulting,
education, psychotherapy
information processing
intangible acts/ directed at possessions
e.g., accounting, banking,
insurance, legal, research
unfair outcomes
outcome justice
unfair procedures
procedural justice
unfair interactions
interactional justice
customer expectations for service recovery
1.To receive a sincere apology (no form letters).
2.To be offered a “fair fix” (solution) for the problem – compensation equivalent to the burden the customer has endured.
3.To be treated in a way that shows the company cares about the problem and helping the customer solve it.
4. To receive a timely response.
5. To receive the recovery service promised rather than one that falls short.
the promise
what a company offers its customers in exchange for their money
the payout
what customers get if a company does not deliver on its promise
the recovery/ payout process
the way guarantee payouts are made
criteria for good service guarantees
-Unconditional
-Easy to understand and communicate
-Meaningful to the customer
-Easy to invoke
-Easy to collect on
-Credible
pre purchase stage
1. need
2. info search
3. evaluation of alternative
-search attributes
-experience attributes
-credence attributes
functional risk
unsatisfactory performance outcomes
financial risk
monetary loss, unexpected extra costs
temporal risk
wasted time, delays leading to problems
physical risk
personal injury, damage to possessions
psychological risk
fears and negative emotions
social risk
how others may think and react
sensory risk
unwanted impact of any of the five senses
moment of truth
when the service provider and the service customer confront one another in the arena
service encounter stage
1. moments of truth
2. high contact to low contact encounters
3. theater as metaphor
role theory
set of learned behavior patterns used in certain social interactions (customers and employees)
script theory
a service script specifies behavior sequences of employees and customers during a service encounter
customer delight
going beyond satisfaction
-Unexpectedly high levels of performance
-Arousal (e.g., surprise, excitement)
-Positive affect (e.g., pleasure, joy, or happiness)
perceived service quality
the gap between expected service and perceived service
gap 5
gap between expected service and perceived service
-tangibles
-reliability
– responsiveness
-assurance
-empathy
tangibles
the appearance of physical facilities, equipment, personnel, and communication materials
reliability
Performs 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 inspire trust and confidence.
empathy
Caring, individualized attention the firm provides its customers.
5 dimensions of service quality
1. tangibles
2.reliability
3. responsiveness
4. assurance
5. empathy
gap 1
gap between customer expectations of service and management perceptions of customer expectations
– marketing research orientation
– upward communication
– levels of management
gap 2
gap between perception and translation of perceptions into service quality specifications
– mgmt. commitment to service quality
– goal setting
-task standardization
– perception of feasibility
gap 3
gap between service quality specifications and service delivery
-teamwork
-employee- job fit
-technology- job fit
-perceived control
-supervisory control system
– role conflict
-role ambiguity
gap 4
gap between service delivery and external communications to customers
-horizontal communication
-propensity to overpromise
SERVQUAL
perception score- expectation score
adv. of loyal customers
1. increased purchases
2. expect less of supplier
3. referrals
4. price premium
wheel of loyalty
1. firm needs solid foundation- targeting the right customer segments, attracting the right customers, tiering the service and delivering high levels of satisfaction.
2. develop close bonds and relationships through cross selling and bundling
3. identity and eliminate factors that result in loss of existing customers and the need to replace them for new ones
strategies for loyalty bonds
1. deepening the relationship
2. financial rewards
3. non financial rewards
4. social bonds
5. customization bonds
6.structural bonds
why customers become more profitable the longer they remain with a firm
Increased purchases and/or account balances
– Customers/families purchase in greater quantities as they grow
Reduced operating costs
– Fewer demands from suppliers and operating mistakes as customer becomes experienced
Referrals to other customers
– Positive word-of-mouth saves firm from investing money in sales and advertising
Price premiums
– Long-term customers willing to pay regular price
– Willing to pay higher price during peak periods
costs of loyal customer
Costs
– Not all types of services incur heavy promotional expenditures to attract a new customer
– Walk-in traffic more important at times
Revenue
– Large customers may expect price discounts in return for loyalty
– Revenues don’t necessarily increase with time for all types of customers
3 types of benefits
confidence, social, special treatment
confidence benefits
-Confidence in correct performance
-Ability to trust the provider
-Lower anxiety when purchasing
-Knowing what to expect and receive
social benefits
-mutual recognition and friendship
special treatment
– Better price
– Discounts not available to most customers
– Extra services
– Higher priority when there is a wait
transactional marketing
-One transaction or a series of transactions does not necessarily constitute a relationship
-Requires mutual recognition and knowledge between the parties
relationship marketing
Marketing that creates extended relationships with customers
deepening the relationship
1. Bundling/Cross-selling services makes switching a major effort that customer is unwilling to undertake
2. Customers benefit from consolidating their purchasing of various services from the same provider
reward based bonds
Incentives that offer rewards based on frequency of purchase, value of purchase, or combination of both
financial bonds
Discounts on purchases, loyalty program rewards (e.g., frequent flyer miles), cash-back programs
non financial rewards
– Priority to loyalty program members for waitlists and queues in call centers; higher baggage allowances, priority upgrading
intangible rewards
– Special recognition and appreciation, tiered loyalty programs
social bonds
-Based on personal relationships between providers and customers
-Harder to build and imitate and thus, better chance of retention in the long term
customized bonds
-Customized service for loyal customers
-Customers may find it hard to adjust to another service provider who cannot customize service
structural bonds
-Mostly seen in B2B settings
-Align customers’ way of doing things with supplier’s own processes
– Joint investments in projects and sharing of information, processes and equipment
-Can also be seen in B2C
-Difficult for competition to draw customers away when they have integrated their way of doing things with existing supplier
exit interviews
– Ask a short set of questions when customer cancels account; in-depth interviews of former customers by third party agency
churn alert systems
– Monitor activity in individual customer accounts to predict impending customer switching
– Proactive detention efforts – send voucher, customer service representative calls customer