Master of Business Administration MBA Semester 4

ML0006 Services Marketing and Customer Relationship Management

Assignment Set 1

Q.1 Mention the different bases for segmentation with appropriate examples. Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts. The people in a given segment are supposed to be similar in terms of criteria by which they are segmented and different from other segments in terms of these criteria. These can broadly be viewed as 'positive' and 'negative' applications of the same idea, splitting up the market into smaller groups. Examples:

Gender Price Interests

While there may be theoretically 'ideal' market segments, in reality every organization engaged in a market will develop different ways of imagining market segments, and create Product differentiation strategies to exploit these segments. The market segmentation and corresponding product differentiation strategy can give a firm a temporary commercial advantage. "Positive" market segmentation Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private. Although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don't always fit into convenient demographic boundaries.

Consumer-based market segmentation can be performed on a product specific basis, to provide a close match between specific products and individuals. However, a number of generic market segment systems also exist, e.g. the system provides a broad segmentation of the population of the United States based on the statistical analysis of household and geodemographic data. The process of segmentation is distinct from positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved. Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness Positioning Once a market segment has been identified (via segmentation), and targeted (in which the viability of servicing the market intended), the segment is then subject to positioning. Positioning involves ascertaining how a product or a company is perceived in the minds of consumers. This part of the segmentation process consists of drawing up a perceptual map, which highlights rival goods within one's industry according to perceived quality and price. After the perceptual map has been devised, a firm would consider the marketing communications mix best suited to the product in question. Using Segmentation in Customer Retention The basic approach to retention-based segmentation is that a company tags each of its active customers with 3 values: 1: Is this customer at high risk of canceling the company's service? One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his or her card. 2: Is this customer worth retaining? This determination boils down to whether the postretention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer. Managing Customers as Investments.

3: What retention tactics should be used to retain this customer? For customers who are deemed save-worthy, its essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing special customer discounts to sending customers communications that reinforce the value proposition of the given service. Process for tagging customers The basic approach to tagging customers is to utilize historical retention data to make predictions about active customers regarding:

Whether they are at high risk of canceling their service Whether they are profitable to retain What retention tactics are likely to be most effective

The idea is to match up active customers with customers from historic retention data who share similar attributes. Using the theory that birds of a feather flock together, the approach is based on the assumption that active customers will have similar retention outcomes as those of their comparable predecessor. Price Discrimination Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behavior is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned. Examples of this exist in the transport industry (a plane or train journey to a particular destination at a particular time is a practical monopoly) where business class customers who can afford to pay may be charged prices many times higher than economy class customers for essentially the same service.

Q.2 Discuss the challenges involved in services marketing.

Those who work in a service business often face greater marketing challenges than those who offer tangible products. The service marketer typically does not have the advantage of demonstrating the physical features of a product, so it may be difficult for the prospect to comprehend the benefits of the service. Additional creativity is often required to market services successfully. 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 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.

Q.3. What do you mean by customers service perception and how to influence customer perceptions? Customers value services in a significantly different manner than traditional software products. Customers judge the value of the service in terms of Service Quality. Traditional service industry, which has been around for quite some time :), can provide valuable insight into customer perception of service quality. In Delivering Quality Service: Balancing Customer Perceptions and Expectations by Valarie A.; Berry, Leonard L.; Parasuraman, A. Zeithaml (Free Press, 1990), the authors present the relative importance of five dimensions of service quality from customer perspective based on service industry research. I think this research, although it predates S+S, is still very much applicable to S+S/SaaS space.

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 inspire trust and confidence Empathy: Caring and individualized attention Tangibles: Physical facilities, equipment and appearance of personnel If you interpret these results in the context of S+S/SaaS, reliability of the service (which reflects technical quality) is most important but can get us only to the one-thirds the way to delivering quality service to customer. Rest two-thirds (which is process quality) journey of delivering quality service to customer is all about supporting the delivery of the service (how to deliver as opposed to what to deliver)!!! This finding matches with another service industry finding that only 30% of incidents that prompt customers to switch service providers are related to core service failure or technical reasons. 70% incidents are related to service encounter failures which are related to how companies interact with the customers. So in S+S/SaaS business model (esp. subscription-based) where you live and die by CLV (Customer Lifetime Value), process quality features of the service play very crucial role in successful service offerings. These process quality features have to be designed from the start (along with the technical features) and not as an afterthought. These findings are of significant importance for any software company that wants to be a service provider as well and be successful in that business.

Master of Business Administration MBA Semester 4

ML0006 Services Marketing and Customer Relationship Management

Assignment Set 2

Q1. Create an appropriate marketing mix for telecommunications Organization. The Internet has changed the way business is done in the current world. The variables of segmentation, targeting and positioning are addressed differently. The way new products and services are marketed have changed even though the aim of business in bringing economic and social values remain unchanged. Indeed, the bottom line of increasing revenue and profit are still the same. Marketing has evolved to more of connectedness, due to the new characteristics brought in by the Internet. Marketing was once seen as a one way, with firms broadcasting their offerings and value proposition. Now it is seen more and more as a conversation between marketers and customers Marketing efforts incorporate the "marketing mix". Promotion is one element of marketing mix. Promotional activities include advertising (by using different media), sales promotion (sales and trades promotion), and personal selling activities. It also includes Internet marketing, sponsorship marketing, direct marketing, database marketing and public relations. Integration of all these promotional tools, along with other components of marketing mix, is a way to gain an edge over a competitor. The starting point of the IMC process is the marketing mix that includes different types of marketing, advertising, and sales efforts. Without a complete IMC plan there is no integration or harmony between client and customers. The goal of an organization is to create and maintain communication throughout its own employees and throughout its customers. Integrated marketing is based on a master marketing plan. This plan should coordinate efforts in all components of the marketing mix. A marketing plan consists on the following steps: 1. Situation analysis 2. Marketing objectives 3. Marketing budget Integrated marketing communications aims to ensure consistency of message and the complementary use of media. The concept includes online and offline marketing channels. Online marketing channels include any e-marketing campaigns or programs, from search engine optimization (SEO), pay-per-click, affiliate, email, banner to latest web related channels for webinar, blog, micro-blogging, RSS, podcast, Internet Radio, and Internet TV. Offline marketing channels are traditional print (newspaper, magazine), mail order, public relations, industry relations, billboard, traditional radio, and television. A company develops its integrated marketing communication program using all the elements of the marketing mix (product, price, place, and promotion). Integrated marketing communications plans are vital to achieving success. The reasons for their importance begin with the explosion of information technologies. Channel power has shifted from manufacturers to retailers to consumers.

Using outside-in thinking, Integrated Marketing Communications is a data-driven approach that focuses on identifying consumer insights and developing a strategy with the right (online and offline combination) channels to forge a stronger brand-consumer relationship. This involves knowing the right touch points to use to reach consumers and understanding how and where they consume different types of media. Regression analysis and customer lifetime value are key data elements in this approach. Q2. What is CRM? Explain the emerging concepts in CRM. CRM is a term that is often referred to in marketing. However, there is no complete agreement upon a single definition. This is because CRM can be considered from a number of perspectives. In summary, the three perspectives are:

Information Technology (IT) perspective The Customer Life Cycle (CLC) perspective Business Strategy perspective

1. CRM from the Information Technology Perspective.

From the technology perspective, companies often buy into software that will help to achieve their business goals. For many, CRM is far more than a new software package, the renaming of traditional customer services, or an IT-based customer management system to support sales people. However, IT is vital since it underpins CRM, and has the payoffs associated with modern technology, such as speed, ease of use, power and memory, and so on.

2. CRM from the Customer Life Cycle (CLC) Perspective.

The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However, CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at the products of services that customers need throughout their lives. It is marketing orientated rather than product orientated. Essentially, CLC is a summary of the key stages in a customer's relationship with an organization.

3. CRM from the Business Strategy Perspective.

The Business Strategy perspective has most in common with many of the lessons and topics contained on this website, and indeed within the field of marketing itself. The diagram below shows the Marketing Teacher Model of CRM and Business Strategy. Our model contains three key phases - customer acquisition, customer retention and customer extension, and three contextual factors - marketing orientation, value creation and innovative IT.

A commonly cited definition of CRM is that of CRM (UK) Ltd (2002), as follows: Customer Relationship Management is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between consumers and organizations. Q3.How to formulate and implement effective CRM Strategies? Customer relationship management is high on the corporate agenda. Recent research carried out by Business Intelligence reveals that six out of ten companies have already started out on the CRM journey, and a further quarter are planning to do so. Improved customer profitability, life-time value and increased sales are just some of the benefits. But CRM is more than customer satisfaction or a new SFA system, more than developing a new website or call centre. Being customer-centric is a whole new way of doing business. It could completely transform the way your company operates and will have major implications for people, processes and technology. Planning for and managing change in these three key areas is crucial - neglect any of them and your CRM programme will hardly get off the ground. This major new report gives step-by-step guidance on how to succeed in each of these areas, providing an integrated and powerful base for implementing a CRM strategy tailored to meet the needs of your organization and its customers. Drawing on the experiences of companies which have already found solutions to the CRM problems and challenges you are bound to face, Developing and Implementing a CRM Strategy reveals how to adopt the CRM programme which will enable your organization to achieve its goals. There are no quick-fix solutions or one-size-fits-all approaches when it comes to CRM. This report

explains how to plan and implement an integrated, end-to-end CRM strategy which will work for you.

Proven approaches and practices from international organizations In-depth case studies of organizations which have already begun to transform themselves through CRM A unique CRM Strategy Planner takes you step-by-step through all the development and implementation stages Benchmark your own progress against the CRM leaders Develop an effective CRM measurement strategy Make the right IT choices for your organization Critical success factors help you develop your strategy and track progress How to avoid 'easy solutions' which do not deliver Exclusive research reveals insights into the CRM plans and strategies of over 100 leading organizations