SERVICE TERTIARY SECTOR

A market transaction by an enterprise or entrepreneur where the object of the market transaction is other than the transfer of ownership of a tangible commodity. Robert Judd The definition recognised 3 broad areas of services: The right to possess and use a product - (Rented Goods Service) The custom creation, repair, or impairment of a product (Owned Goods Services) No product elements but rather an experience or what might be termed experiential possession (Non-goods services) Classification of Services (as per GATS): Business Services Communication Construction and Engineering Distribution Education Environment Finance Health Tourism Recreation Transport

Distinction between Physical Goods and Services

Sr. No. 1. 2. 3.

Physical Goods Tangible Homogeneous Production and Distribution are separated from consumption A thing Core value produced in factory Customers do not participate in the production process Can be kept in stock Transfer of ownership

Services Intangible Heterogeneous (Variability) Production, Distribution and Consumption are simultaneous processes An activity or process Core value produced in buyer-seller interactions Customers participate in the production Cannot be kept in stock No transfer of ownership

4. 5. 6. 7. 8.

Search Goods v/s Experienced Goods Theodore Levitt

Goods

Search Goods

Experienced Goods

Prior Purchase / Use

Only after buying or after consumption

Tangibles

Intangible

Classification of Services
I. By End User 1. Individual Consumer 2. B2B 3. Industrial II. 1. 2. 3. By Degree of Tangibility Highly Tangible Services Linked to Tangible Goods Highly Intangible Services

Classification of Services
Goods Service Continuum Acc to Levitt: There is no such thing as Service Industries. There are only service industries whose service components are greater or less than those of other industries. Everybody is in service.

Classification of Services
Evaluation Continuum of Goods - Service

Classification of Services
Categories of Service Mix based on the Continuum of Model
Pure tangible good Tangible good with accompanying services Hybrid Major services with accompanying minor goods and services Pure Services Note: Differentiate between Core Offerings and Supplementary Offerings The companies are spinning off their Supplementary Offerings after gaining considerable expertise into stand alone ventures targeting new customers. Eg: IBM offers Strategic Outsourcing, Business Consulting, Integrated Technology Services and Maintenance. Future Group s Future Capital Holdings which started with helping its consumers with various financing options now is a full-fledged entity.

Classification of Services
Observations of the Continuum Model: 1. 2. The offering of a firm ranges from pure goods to pure services Tangible Goods are easy to evaluate and Intangible Goods (Services) are difficult to evaluate by the consumers These range of offers have different qualities that consumers seek: a. Goods Search qualities: these are the physical features of an offering b. Pure Services Credence Qualities: credibility and reputation of the service provider c. Combination of Goods and Services Experience Qualities

3.

Service is Omnipresent

Classification of Services III. People-based Services: It is a way to classify services by the type of contact that
the service providers have with their customers 1. High Contact 2. Low Contact IV. By Expertise 1. High Expertise Services 2. Low Expertise Services

Classification of Services
V. By Orientation towards Profit

1. Commercially Oriented 2. Not for Profit Organisation There are two kinds of market that not-for-profit firms need to conquer: a. The Client Market b. The Donor Market VI. By the Location of Points of Service Delivery 1. 2. 3. Services at the Customer s location Services at the Provider s location Services that can be delivered at both the locations or midway

SERVICE TRIANGLE MARKETING MODEL

Note: The key to achieve sustainable competitive advantage in today s markets is serving customers in excellent fashion (i.e., internal and interactive marketing), rather than merely selling to them (i.e, external marketing).

SERVICE ENCOUNTER AND MOMENTS OF TRUTH (MOT)

Service Encounter: any episode in which the customer comes in contact with any aspect of the organization and gets an impression of the quality of its service MOMENT OF TRUTH Elements of a Service Encounter:
Customer The Service Provider The Delivery System (process and steps of service delivery) The Physical Evidence (conveys image)

Scandinavian Airline System (SAS) case

CHARACTERISTICS OF SERVICES
1. Intangibility unlike products, services cannot be seen, tasted, felt, heard or smelled before they are bought.

Implications: Customer cannot see, touch or feel the service before or during its purchase difficult for potential customers / consumers to comprehend the service proposition. No impulse purchase Very difficult to evaluate or measure quality in services The customer cannot stake any claim of ownership or possession of the service proposition; he can only experience the offer

Marketing Strategy: Making marketing programme more strenuous and communication more persuasive aided with demonstration of physical evidence and presentation. Eg:

Tools that can be used

Place People Equipment (state-of-the-art) Communication Material Symbols Price

Palace on Wheels
Started in 1982 Retained the coaches of the original royal saloons owned by the princely states of Gujarat, Rajputana, the Nizam of Hyderabad and the Viceroy of British India. Each coach has 4 twin-bedded chambers decorated in colourful Rajasthani art. The saloons are equipped with world-class facilities such as channel music, intercom, attached toilets, running hot and cold water, shower stalls and wall-to-wall carpeting Personal attendant for each saloon khidmatgar Restaurants, Bar and Library

2.

Inseparability only in case of pure services. A surgeon, a singer, a barber. Both the service provider and the customer need to be present at the time of transaction.

Implication: Opportunity Loss: The earning capacity of the service provider as he can be only in one place at a time even if he works twenty four hours a day. Marketing Strategy: The service provider can learn to work with larger groups The service provider can learn to work faster. The service organization can train more service providers (franchisee route) Video Conferencing by the service expert

3.

Variability / Heterogeneity: service quality varies depending upon: who provides them , when and where and to whom are they provided Eg.:

Note: As service is a transaction, its quality also depends on customer his education, training, attitude, moods and personality greatly affect the transaction. Eg: an illiterate versus literate customer transacting with online banking system. Implication: Confusion in terms of Brand Positioning Marketing Strategy: Invest in good hiring and training procedures Standardise the service-performance process throughout the organization Monitor customer satisfaction General Electric sends out 700000 response cards a year asking households to rate its service people s performance. Automation bringing consistency in the service delivery and transactions. Egs: retail stores using infra-red bar code scanners, bookings through internet, etc.

4.

Perishability: Matching Demand Fluctuation No Delayed Sales Egs.: a theatre cannot increase the number of seats in case of a blockbuster like Tare Zameen Par and neither can it decrease its no. of seats in case of a flop movie like Dhobi Ghat.

Implication: Leads to opportunity Loss or Increase in Costs depending on the situation Marketing Strategy: On the demand side: Differential pricing to shift demand from peak to non-peak hours. Eg.: Happy Hours Pushing Nonpeak demand - eg: McD pushing breakfast services and hotels promoting minivacation weekends Complementary Services providing alternatives to waiting customers such as cocktail lounges/gaming zones at restaurants, ATMs in banks, etc. Reservation System

On the Supply side: Part-time employees Peak-time efficiency employees to perform only essential tasks during peak periods. Eg.: Paramedics assisting physicians during busy periods. Shared Services Free Press Journal gives its printing facility on rental basis to other publishers Facilities for Future Expansion eg: an amusement park buying surrounding land for later development - Implication of this?

Buyer Behaviour
Different people consume different services and the deeper study of these behavioral differences is called Buyer Behavior Other people too influence. 6 Distinct Roles in a Purchase Decision: Initiator: The person who has a specific need and proposes to buy a particular service Influencer: The person or the group of people who the decision maker refers to or who advise Gatekeeper: The person or organization or promotional material which acts as a filter Decider: The person who makes the buying decision. He may or may not execute the purchase transaction. Buyer: The person who makes the actually purchase. User: The person who actually uses or consumes the product No. of Persons is not fixed. Most cases more than one given services intangibility characteristic. Eg: a small boy wanting to buy a candy along with his mother and father. A junior executive ordered by his senior to travel to visit a particular branch office. A bachelor going out for dinner.

Consumer Decision Making Process / Purchase Model for Services

Comprehensive Model by Fisk

Factors Influencing Buyers Behaviour

Consumer Evaluation of Services

Classification of Products / Services while Evaluating Services

High in Search Qualities High in Experience Qualities High in Credence Qualities

10 Qualities Influencing Consumer Evaluation of Services

Consistency reliability of performance and dependability. Right service in first time. Eg.: Insurance companies issuing FPRs and renewal premium receipts regularly without customers reminding them. Concern willingness or responsiveness of employees to provide the service. Timeliness of service or giving Prompt service. Competence having required skills and knowledge to perform the service Contact involves approachability, access and ease of contact Courtesy involves politeness, respect, consideration and friendliness of contact personnel. It also includes consideration for the consumers property, time and clean and neat appearance of public contact personnel. Communication talk to customers in their language. Listening to them. Credibility trustworthiness, believability, honesty Confidentiality the security and the freedom from risk or doubt, involving physical safety, financial security and confidentiality Customer Knowledge understand the customer s needs, providing individualized attention and recognizing the regular customer. Tangibles includes the physical evidence of the service; physical facilities; appearance of personnel; tools or equipment used to provide the service; etc.

MARKETING MIX
1.

Service Product / Service Package:

Service is a bundle of features and benefits having relevance for a specific target market. Five Levels of Product / Service eg.: Hotel Industry Sr. No. 1. 2. 3. 4. Characteristic Core Benefit Basic Product Expected Product Augmented Product Explanation The fundamental benefit or service that the customer is buying Basic, functional attributes Set of attributes/conditions the buyer normally expects That meets the customers desires beyond expectations The possible evolution to distinguish the offer

5.

Potential Product

Note: The core usually remains the same for the industry vertical. However, the rest are brand specific.

MARKETING MIX
2. Price
Pricing is firstly about CUSTOMER PERCEPTION and then about COMPANY POLICY (COST or MARKET based) and COMPETITION Amongst these categories, prices may be: Profit oriented Government controlled Competitive Customer oriented

Guidelines for Service Pricing:

1. Incorporating Demand Fluctuations 2. Incorporate Tangible Clues of Intangible Services 3. Provide Value Addition and Quality Indication to Consumers 4. Incorporate Opportunity Loss 5. Planned Position 6. Life cycle of the Service 7. Competitive Situation 8. Strategic Role of Pricing in overall Marketing Strategy. Eg.: Sales Promotion

MARKETING MIX
2. Price .contd.

Pricing Tactics
Price Tactics Differential or flexible pricing Objectives Build primary demand during nonpeak time Even out fluctuations in demand Forms/Examples a. Price time differentials (eg: cell phone services b. Place differentials (discount at hotels during off-seasons) Cellular companies incentivizing ECS payments by giving freebies, discounts as it ensures regular payments.

a. b.

Discount pricing

a.

Diversionary pricing

To enable service production and consumption to take place b. To encourage actions like early payments, bulk purchase or peak usage To make customer visit office at least once to avail basic service at a discount and with that experience try out others a. To enable high quality operator to compete with others b. To satisfy a customer seeking clear assurance before paying for it To charge a reduced price for the first order with a hope to get further business at better prices

Guarantee pricing

Fitness centers enticing to visit their office with a discount on one service and then trying to sell other augmented services Employment agencies charging both or either parties after the assignment is over Fitness centers offering discount to early birds at the time of launch of a new service

Loss leader pricing

MARKETING MIX
3. Place

Service Location Decisions Degree and type of Contact Flexibility in Consumption The location depends on interaction between provider and the consumer: The customer goes to service provider The service provider goes to the student The service provider and the customer transact from a distance When customer goes to the service provider, the location becomes important. Eg.:

MARKETING MIX
3. Place ..contd.

A Typology of Service Location

[High] How flexible are consumers in their pt. of consumption, eg.: are they able/ willing to travel to receive a service?

Location decisions oriented towards producers access

Trade off between ease of and cost of that access

Can the service actually take place? [Low]

Location decisions oriented towards consumers

[Low]

[High]

Location flexibility in production and consumption of inseparable services

Unique: A Bank s Hub and Spoke system

MARKETING MIX
3. Place ..contd.

Due to intangibility and perishability factors the channel options are very limited for a service provider

ZERO LEVEL

ONE LEVEL

TWO LEVEL Service Provider

ONE LEVEL

Seller s Agent Agent or Broker Buyer s Agent Franchised or contracted service deliverer

Customer

MARKETING MIX
4. Promotion

Promotion originates from Greek word Promovere - shifting of people s attention It is mainly directed at creating Positioning in the minds of the people. It is an important tool as it precedes service production, experience and consumption or transaction.

Its attributes:
Promotion blend Sales people (number) Incentives Outlet locations Advertising Targets Media types Types of ads Copy thrust Sales promotion Publicity

MARKETING MIX
4. Promotion contd.

Promotional Tools: a. Advertising: Paid form of Communication

Print Electronic Outdoors Internet BTL activities

b. Public Relations
Strategies of PR: Maintenance PR mailing greeting cards, holding routine conferences Offensive PR - used while reacting to adversaries remarks like during hostile takeovers, or aggressive government interventions Defensive PR being apologetic, mea culpa and trying to explain away glitches in operations.

MARKETING MIX
4. Promotion contd.

c. Sales Promotion: To temporarily boost sales

Trade Promotion for push effect Consumer Promotion for pull effect

d. Personal Selling e. Direct Mail

Pros Cost effective Wider and direct reach Cons Invasion of privacy Quality Database acquisition and management the key

MARKETING MIX
5. People

People are the key to service industry. They in fact turn out to be a differentiating factor

Two types of People / Customers to be managed:

Internal Customers External Customers

Managing Internal Customers:

Narayan Murthy My assets walk away home at the end of the day

a. Employees: their Qualities, Traits and Characteristics

Competence and Skill mutual fund advisor having an AMFI certificate and sound knowledge about MF investments and industry Knowledge about Product / Service Attitude, Moods, Personality, etc. (personal traits) Presence of Mind and Speed of Response

MARKETING MIX
5. People contd.

b. Training c. Recruitment d. HRD e. Creating the Right Firm

Policies, Procedures and Rules Empowerment and Enfranchisement spirit of intrepreneurship

f. Channel Partners, Franchisees, BPOs

Consistency and homogeneity in service deliveries Alignment with organisation s mission and vision Retaining fidelity of know-how of operations Loyalty in partnerships

MARKETING MIX
5. People contd.

Managing External Customers :

Bigger Challenge due to: Education and background Mood, attitude and personality of the customer Customer Management through Training and Educating Customers Choosing the appropriate segment of the customer that is desirable and manageable by the service marketer. Eg.: Citibank

MARKETING MIX
6. Physical Evidence
Physical evidence cannot be imitated. It does not forget. It sits there and waits to e detected, preserved, evaluated and explained. Physical evidence does not get excited, like people do . Herbert Leon MacDonnell Servicescapes / Facility Design Effects of Servicescapes: i. ii. Encourage customers to be deeply involved with the service production system Increase in output of the internal customers

Stationery / Business Cards Employees Dress Reports Signage Equipment Statement

MARKETING MIX
7. Process

Ensures Service availability and Consistent Quality Complexity of Process steps and sequences Divergence variability of steps and sequences High complexity and Low Divergence Standardised Services. Eg.: housing loan Low Complexity and High Divergence Customised Services Strategic Options Reduced Divergence / Increased Complexity Increased Divergence / Reduced Complexity Advantages Reduce cost, improve productivity, distribution easier Uniform service quality, greater service availability Greater customization niche positioning Less dependence on volume More margins Disadvantages Inflexibility in operating procedures Customer rejection due to lower customization Difficult to manage, control and distribute Limited number of customers

a.

a. b.

b. a. b. c.

a. b.

BLUEPRINTING
A Map to systematically analyse the Service Encounter. It is a tool for simultaneously depicting: Service process The points of customer contact and The evidence of service from the customer s point of view

Core Elements of Blueprint

Identification of functions essential to deliver a service Relationship amongst different functions of service components. The relationship is based on time and sequence with each other. Setting up of standards for each function with tolerance levels and variance from standards

Blueprint Components:
Customer Interaction On-stage contact employee actions Backstage contact employee actions Invisible support actions and processes

BLUEPRINTING
Service Blueprint of overnight hotel stay

Physical Evidence Customer

Hotel Exterior, Parking Arrive

Carts for Bags Give Bags Greet Take Bags

Desk Lobby, Key Check In Process Papers

Elevators, Hallways, Room Go to Room

Carts for Bags Receive Bags Deliver Bags

(Line of Interaction) Contact Person (On Stage) (Line of Visibility) (Back Stage)

Take Bags to Room

(Line of Internal Interaction)

Paper System

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Strategy for a firm is a POA comprising:
The prerogative of top management Is usually long term, and Comprehensive in concept, affecting the whole organization as well as intending to affect the whole of its market

Need for Service Firms to have Strategy

Direction Focus and Co-ordination Define the service firm Reduce uncertainty Eg.: Dilip Chhabria is successful and highly recognized and reputed person as he has a strategic focus

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Understanding The Competitive Environment
Offer / Need Similar Need Different Need Indirect Competition A mall foodcourt, multiplex, retail stores, entertainment zone, etc. New Entrant

Similar Service Offer Direct Competition SBI vs. ICICI Bank vs. IDBI Bank

Different Service Offer

Substitute Competition Archie s Gallery and Titan can both compete for the gift market

Modus Operandi for New Entrant:

1. Opening new business lines upstream or downstream

2. Vertical Integration

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Five Forces Model of Competition

POTENTIAL NEW ENTRANTS Competitive pressures emanating from the threat of entry of new rivals

SUPPLIERS OF RM, MERCHANDISE OR OTHER SERVICE INPUTS Competitive pressures being exerted in the process of supplierseller collaboration and bargaining

RIVALRY AMONG COMPETITING SELLERS Competitive pressures created by the maneuvers for better market position and competitive advantage

BUYERS Competitive pressures being exerted in the process of buyerseller collaboration and bargaining

FIRMS IN OTHER SERVICE SECTORS OFFERING SUBSTITUTE PRODUCTS Competitive pressures emanating from the market attempts of outsiders to attract buyers to their products

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Fragmentation of Service Industry due to Intangibility, Inseparability and Perishability:
y y No factory for manufacturing Instantaneous production, transaction and consumption no storage or provisions of delayed sales Customer service provider simultaneously present limiting intermediaries and size of operations

Less Capital Extensive more Entrepreneurs more Competition no One Firm in Dominant Position

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE Strategies At Different Levels Of A Service Organisation
Corporate Level Strategic Planning What biz should we be in?

MULTIBUSINESS CORPORATION (Eg.: HDFC Group)

Business Unit Level Strategic Planning How should we compete in each of our biz?

STRATEGIC BIZ UNIT (HDFC LTD.)

STRATEGIC BIZ UNIT (HDFC Std. Life)

STRATEGIC BIZ UNIT (HDFC Bank)

OPERATIONS

Functional Level Strategic Planning How do we support each of our SBUs?

MARKETING FINANCE

HUMAN RESOURCES

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

SBU Level Strategy Miles and Snow s Adaptive Strategy Typology
ANALYSER Cautious firms, tried and tested strategies REACTOR No strategy, on survival mode. Eg.: Indian Airlines DEFENDER Seeking stability. Ltd. offers and product line, specialisation. Eg.: MacD

ENVIRONMEN T

PROSPECTOR Prone to taking risks, seeking newer opportunities. UTV in 1980s first to start cable TV in India - Mumbai

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Michael Porter s Strategies for Competitive Advantage
1. 2. 3. Cost Leadership launch of Air Deccan Differentiation Dilip Chhabria, Hafeez Contractor

Focus Mom and Me, MICA Institute, Cartoon Network

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Crafting A Service Strategy For Sustainable Competitive Advantage
Step 1 : Define Service Firm s Target market 1. 2. Customers (with similar needs) Place of customers Demographics Psychographics Behavior and lifestyle, etc. Competitors Competitor Landscaping in related segment Competitor Landscaping in non-related segment Entry barriers Exit barriers Based on these two variables, the firm segments its market. Eg.: CCD segment people who want to have their cuppa at leisure

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Crafting A Service Strategy For Sustainable Competitive Advantage ..contd. Step 2: Service Concept
Aims at defining the outcomes and benefits for the customers as also the kind of promise y y Not too broad to lose focus and stray into non-core areas. Not too narrow to lose out on opportunities offerings eg.: PSUs suffering due to private banks

Step 3: Operating Systems and Strategy

Is about co-ordination, blueprints, process and execution

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Crafting A Service Strategy For Sustainable Competitive Advantage ..contd. Step 4: Service Delivery System - MOT
y y y y y Facilities and their layout the service arena and its design Processes for delivering the service blueprints Equipments used Technology Roles for customers and service providers in the service encounter

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Elements of Strategic Service Vision they bind the earlier mentioned steps 1. Positioning: conquest of customers MIND SHARE and ATTENTION.

It is a communication based on: y y y y y Intimate understanding of the customer s needs Factors that affect his perception Comprehensive knowledge about the competitors and their products The service firm s capabilities and capacities The service concept s ability to satisfy customer s expectations

2.

Value / Cost Leveraging

Enhancing Value Proposition by customising and adding unique benefits Sticking to standards and consistency, managing quality, managing demand and supply Value over Cost

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Elements of Strategic Service Vision ..contd. 3. Strategy / System Integration:
y y y Consistency between the target segment and the service concept Consistency between service concept and operating strategy Consistency between operating strategy and delivery system

In every large hotel hidden from the eyes and ears of the guest exists an invisible city. Behind doors, below ground, a maze of corridors connects kitchens to loading docks, housekeeping to the laundry, accounting to the communications centre. An around-the-clock army of cooks, housekeepers, engineers, waiters, dishwashers, electricians and other specialists bustle along these hallways, each member responsible for making his or her part of hotel operations run smoothly. The lodging industry has a special term to describe this hiden world. We call it the heart of the house J.W. Bill Marriott, Jr.

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Basis For Developing A Sustainable Competitive Advantage
1. Customer Loyalty a. Positioning

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Basis For Developing A Sustainable Competitive Advantage
1. Customer Loyalty b. Customer Service the DIFFERENTIATING factor in service c. Offer more Value to the Customer d. Consistency

2.

Location of the Service Outlet a. Image b. Accessibility c. Footfall and Traffic : building a service outlet near a tourist attraction d. Exclusivity and Price Advantage e. Choice of Competition as location decides type of competition

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Basis For Developing A Sustainable Competitive Advantage
3. Suppliers and Vendors a. Retailers offer consistency and choice to customers b. Vendors competitive rates c. Competitors cannot temper with long-term relationships with suppliers and retailers

4.

MIS and Distribution System a. Insight on Customer, Competitor and Service Operations b. Quicker Response c. Dedicated distribution system is expensive but pays in long term. Eg.: SBI

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

Basis For Developing A Sustainable Competitive Advantage
5. Low Cost of Operations It gives room to maneuver prices and gain competitive advantage Case Study of Southwest Airlines USA:

In 1971 started operations with 195 employees with 3 planes and 3 routes Low tariff of $20 each way against competitor s $28. Proposition to provide affordable and safe air travel, job security for its employees and make maximum profit Used only Boeing 737, which aided uniform training, record keeping, low maintenance and inventory costs and enabled them to switch crews from one flight to another depending on demand pressure Most flights never exceeded one hour run no meals required only peanuts Concentration on punctuality Ticketing system picture ID used as a boarding pass No seat allocation as per order of boarding no personnel at the gate. In 1998, it was a major airline with no layoffs, employing 26000 people with over a billion turnover and no accidents for 26 years Its cost per available mile per passenger is 7 cents while others ranged from 8.9 cents to 10.8 cents

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

FUNCTIONAL LEVEL STRATEGY - MARKETING
Service Marketing Philosophy 1. Create Customers: Customer Identification Customer Acquisition

2.

Keep Customers

3.

Profitable Customers: Potential to generate revenues more than the business costs. Retain them.

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

FUNCTIONAL LEVEL STRATEGY - MARKETING
Marketing Activities 1. y y y Analysis: Environment Analysis Buyer Analysis Marketing Research Analysis

2. Market Strategy: y Market Segmentation y Market Targeting y Market Positioning 3. y y y y y y y Tactics Marketing Mix Variables: Service Product Pricing Promotion Place People Physical Evidence Processes

SERVICE STRATEGY & DESIGN FOR COMPETITIVE ADVANTAGE

FUNCTIONAL LEVEL STRATEGY - MARKETING
Marketing Activities 4. y y Management: Process of using inputs (both human and non-human) to derive some output of goods and services. Management functions like planning, organizing, staffing, communicating, leading and controlling.

RELATIONSHIP MARKETING IN SERVICES Six market model

1. Customer Markets 2. Referral Markets 3. Influence Markets: Government, Consumer Group, Business Press and Financial Analysts, Lobbying 4. Recruitment Market 5. Supplier Market: Eg.: AT & T supply ATM machines to ICICI Bank. Any breakdown in machine will reflect badly on the bank and not on AT & T. 6. Internal Markets

RELATIONSHIP MARKETING IN SERVICES

TRANSACTION MARKETING Focus on single sale Orientation on Product Features Short Timescale No emphasis on customer service Limited customer commitment Moderate Customer Contact Quality is primarily a concern of production and not marketing

RELATIONSHIP MARKETING Focus on Customer Retention Orientation on Product Benefits Long Timescale High customer service emphasis High customer commitment High Customer Contact Quality is the concern of all

RELATIONSHIP MARKETING IN SERVICES

The Relationship Marketing Ladder of Customer Loyalty

RELATIONSHIP MARKETING IN SERVICES

Service Profit Chain Model Based on seven theorems: 1. Profit and growth are linked to customer loyalty 2. Customer loyalty is linked to customer satisfaction 3. Customer satisfaction is linked to service value 4. Service value is linked to employee productivity 5. Employee productivity is linked to employee loyalty 6. Employee loyalty is linked to employee satisfaction 7. Employee satisfaction is linked to internal quality of work life (internalizing the firm s brand)

RELATIONSHIP MARKETING IN SERVICES

Relationship depends on Type of Industry
1. High Choices: Stronger Relationship 2. Monopolistic Competition: Weak Relationship

Benefits of Customer Retention

1. 2. 3. 4. 5. 6. Cheaper than customer acquisition Reduces communication costs for customer acquisition Repeat purchase - reduce marketing costs and increase revenues Avoid substitutes and other competition Unpaid salesmen Repeat customers are less expensive to serve

RELATIONSHIP MARKETING IN SERVICES

Customer Loyalty
Customer Satisfaction is worthless, customer loyalty is priceless

Features of a loyalty programme:

1. 2. 3. Customers must perceive added value It must be mutually beneficial Reward increased spending Eg.: BA s Executive Club more spending more privileges Database of names and addresses of the customers Cost to be borne by the organization and not by customer. However, entry barriers like initial purchase necessary Multi-site Multi organization Eg.: British Airport Authority s loyalty scheme Ease of redemption

4. 5.

6. 7.

8.

MEASUREMENT OF SERVICE QUALITY

Measurement of Expected Service vis-a-vis Perceived Service 5 Dimensions of Measuring Service Quality
1. 2. 3. 4. 5. Reliability Tangibles Responsiveness Assurance Empathy

MEASUREMENT OF SERVICE QUALITY

Service Quality Gap Model Parsuraman et al

MEASUREMENT OF SERVICE QUALITY

Service Quality Gap Model Parsuraman et al Organisational Gaps: Marketing Information (Knowledge) Gap Standards Gap Service Performance (Delivery) Gap Communication Gap

MEASUREMENT OF SERVICE QUALITY

Service Quality Gap Model Parsuraman et al

Bridging the Knowledge Gap

Comprehensive Studies: Eg.: Westside Customer Panels and Interviews Interacting with Customers: Kishore Biyani interacting with his customers Customer Complaints Feedback from Employees

MEASUREMENT OF SERVICE QUALITY

Service Quality Gap Model Parsuraman et al

Bridging the Standards Gap

y y Commitment to TQM from Top Management Develop Innovative Solutions to Service Problems: Eg.: Marriot Hotels Express Checkout a solution to checkout delays Set Service Goals: Eg.: SBI in mid-eighties set guidelines for maximum time to be taken for an activity like: Bank Draft 20 mins Intra-Branch Cheque to be encashed Opening of an Account 20 mins

15 mins

MEASUREMENT OF SERVICE QUALITY

Service Quality Gap Model Parsuraman et al

Bridging the Delivery Gap

y y Through a motivated and competent team of service providers with positive attitude A service provider should be enabled by the service firm in skills and knowledge about service offers, interpersonal skills and communications, as also in attitudes and behavior to excel in customer service. Employee satisfaction HRD

y y

Bridging the Communication Gap

y y y Overstating the Service Promise Poor Communication with Customers Poor Communication between different Departments: Eg.: an ad by communication department may not match with the service operations