Service and Relationship Marketing Module:1

1. Service and Relationship MarketingModule:1 Chapter:1 – Basics of Service Marketing

2. Service and Relationship MarketingModule:1Chapter:1 – Basics of Service Marketing • What are services? The word service originally associated with the work performed by servants for their masters. “ the action of serving, helping or benefiting; conduct tending to the welfare or advantage of another” Services are acts, deeds, performance or efforts. The aim of service is to provide solution to the customers problem. SRM/M1/SS

3. Services is an activity or series of activities take place by interaction between customer and service employees It’s an economic activity which is consumed at a time it is produced and provide added value in forms of Convenience, amusement, timeliness , comfort or health SRM/M1/SS

4. Services Defined… “Activities, Benefits or Satisfactions which are offered for sale or provided in connection with the sale of goods” American Marketing Association SRM/M1/SS

5. Services Defined… “Separately identifiable, intangible activities which provide want satisfaction when marketed to consumers and/or industrial users and which are not necessarily tied to the sale of a product or another service” William J. Stanton SRM/M1/SS

6. Services Defined… “Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product” Philip Kotler and Bloom SRM/M1/SS

7. Goods Vs. Services Why Services Marketing ??? • Goods are tangible • Goods are homogeneous • Goods are produced in the factory • Production, distribution and consumption are separate and independent functions in goods • Services are intangible • Services are heterogeneous • Services are produced in buyer-seller interactions • Production, distribution and consumption take place simultaneously in the case of services SRM/M1/SS

8. Goods Vs. Services • Consumers do not generally participate in the production of goods • Goods can be stored • In sale of goods, transfer of ownership takes place • Consumers are co-producers in services • Services can not be stored • In the sale of services, transfer of ownership will not take place SRM/M1/SS

9. Characteristics of Services… • Intangibility • Inseparability • Variability • Perishability • Customer participation • No ownership SRM/M1/SS

10. Intangibility… • Challenges : • Cannot be communicated easily • Consumer suspects due to absence of concrete evidences • Design of total service package not possible • Comparative presentation is not possible • Strategic Options : • Making the service process tangible to the maximum possible extent • Managing and promoting word-of-mouth communication • Strengthening internal and external marketing • Use of Relationship Marketing SRM/M1/SS

11. Inseparability… • Challenges : • Problems of market expansion • Maintenance of service quality • Compulsory presence of consumer • Limited production capacity • Operation at limited capacity • Strategic Options : • Minimization of customer interactions • Innovating techniques of indirect interaction • Standardization to the maximum possible extent • Developing distribution network with quality control mechanisms SRM/M1/SS

12. Variability… • Challenges : • Limited scope for standardization • Not possible to communicate exactly what the consumer is going to receive • Quality can be determined only after the service is consumed • Strategic Options : • More focus on standardization • Internal marketing and employee training • Positioning variation as a strength of innovation • Promote research and innovation SRM/M1/SS

13. Perishability… • Challenges : • Storage of service is not possible • Sales volume continuously in relation to the capacity • Time pressure in sales • Strategic Options : • Demand management • Capacity management • Tactical approaches • Continuous study on demand patterns and competitive parameters SRM/M1/SS

14. Customer Participation… • Challenges : • Customers are not controllable • Production quality also depends upon customer’s knowledge and ability to participate • Customers are evaluating at every stage of service production • Strategic Options: • Effective external marketing • Customer education and training • Effective interactive marketing • Management of movements of truth • Effective internal marketing SRM/M1/SS

15. No ownership… • Challenges: • Nothing remains after consumption • Very less time to the consumer to evaluate the product • High consumer dissonance • Strategic Options: • Making communication tangible • Customer relationship marketing • Managing high level of company image SRM/M1/SS

16. Sources for service sector growth • Innovation -: Push Theory of Innovation -: Pull theory of Innovation • Social Trends SRM/M1/SS

17. Reasons for Growth in Services Sector… • Growth in intermediate demand from firm • Growth in final demand from customers • Increase in affluence • More leisure time • Working woman • Growth in population of DINKS • Greater life expectancy • Greater complexity of products • Greater complexity in life • Greater concern for resource scarcity and ecology • Increasing number of new products SRM/M1/SS

18. Service Sector in Indian Economy…

19. SRM/M1/SS

20. Reasons for growth of Services in India… • Economic Affluence • Changing Role of Women • Cultural Changes • IT Revolution • Development of Markets • Unbundling Corporations • Increasing Consciousness of Health Care • Economic Liberalization • Migration • Export Potential • Service Tax SRM/M1/SS

21. Factors Stimulation the transformation of the Service Economy • Government Policies • Change in regulation • Privatization • New rules to protect customer, employees and the environment • New agreements on trade in services • Social Changes • Rising consumer Expectation • More affluence • More people short of time • Increased desire for buying experience vs things • Rising consumer ownership of computer, cell phones, and high tech equipments SRM/M1/SS

22. Rising consumer ownership of computer, cell phones, and high tech equipments • Easier access to more information • Immigration • Gewoning but aging population • Business Trends • Push to increase shareholders value • Emphasis on productivity and cost saving • Manufacturera add value through service service and sell services • More strategic alliances and outsourcing • Focus on quality and customer satisfaction • Growth of franchising • Marketing emphasis by nonprofits SRM/M1/SS

23. Advance in Information Technology • Growth of Internet • Greater bandwidth • Compact Mobile Equipment • Wireless networking • Faster, more powerful software • Digitization of text, graphics, audio and video • Globalization • More companies operation on transnational basis • Increased international Travel • International merger and acquisitions, JV’s • ‘Off shoring’ of customer service • Foreign competitors invade domestic markets SRM/M1/SS

24. Role (Type) of Services in Economy • Value Added Services Financing, Leasing, Insurance • Infrastructure service Communications, Transportation, Utilities, Banking • Manufacturing Services inside company Finance, Accounting, Legal , R&D and design • Distribution service Wholesaling, Retailing, Repairing • Personal Service Health care, Restaurants, Hotels • Business Service supporting Manufacturing Consulting, Auditing, Advertising, Waste Disposal • Governments Service Military, Education, Judicial, Police and fire protection SRM/M1/SS

25. Service Classification :Service process Matrix Degree of Interaction and Customization LOW High • Service factory • Airlines • Trucking • Hotels • Resorts & Recreation • Service Shop • Hospitals • Auto Repair • Other repair services LOW Degree of Labor intensity • Mass services • Retailing • Wholesaling • School • Retail aspect of commercial Banking • Professional Services • Physicians • Lawyers • Accountants • Architects High SRM/M1/SS

26. How to win customer in Service Business(USP’s) • Availability How accessible is the service? (ATM’s – service beyond the traditional banker’s hours) • Convenience (The location of service where customer must travel to that service-Fast food restaurants) • Dependability Hoe reliable is the service? (Airlines- on time departure & arrival performance will build huge trust) • Personalization need for Customization -Are you treated as an individual? SRM/M1/SS

27. Price The price is viewed as being a surrogate for quality. • Quality Quality is judged by both the process of services delivery and the put comes of the service. It is difference between serviceexpectation & service experience • Reputation Unlike a product, a poor service experience can note exchanged or returned for a different model. Positive word-of-mouth is the most effective form of advertising. • Safety In air travel and medicine, the customers are putting their lives in the hands of the service provider • Speed How long must I wait for service? For emergency service such as fire or police protection, response time is the major criterion of performance. SRM/M1/SS

28. Technology in Services The introduction of technology often empowers the customer to perform the service unassisted. For, example , the credit card reader at the pump facilitates the purchase of a gasoline without help and Internet allows customer to book their own flights SRM/M1/SS

29. Technology in Service Encounter Advances in communication and information technology are having profound effect on ways customers interface with service providers. There are five modes of technology’s contribution to the service encounter. • Technology free service encounter where the customer is in physical proximity to and interacts with a human service provider. This mode represents the traditional high-touch service in which technology does not pay a direct role. Such as Saloon, hair dresser, tailor TECHNOLOGY CUSTOMER SERVER SRM/M1/SS

30. (B)Technology-assisted service encounter Here only the service provider has access to the technology to improve the quality of face to face service. A health care service performed by technology which is operated by only professionals TECHNOLOGY CUSTOMER SERVER SRM/M1/SS

31. (C)Technology- facilitated service encounter Here both the customer and service provider have access to the same technology. For example a financial planner in consultation with a client can refer to a financial model on a personal computer to illustrate projected returns for different risk profiles TECHNOLOGY SERVER CUSTOMER SRM/M1/SS

32. (D)Technology-meditated service encounter The customer and human service provider are not physically together and thus the service encounter no longer is the traditional face to face contact. Its about Getting technical help on a distance call . Example GPS services or services provided by Just dial . TECHNOLOGY CUSTOMER SERVER SRM/M1/SS

33. (E)Technology-generated service encounter Human service provider is replaced entirely with technology that allows the customer to self-service. It reduces the cost of service delivery For Example bank ATM’s, website based information, e-commerce TECHNOLOGY CUSTOMER SERVER SRM/M1/SS

34. The Emergence of Self Service Elimination of labor costs for nonproductive activity is the principle driver for the service provider. Customer acceptance results from increased opportunity for customization, accuracy, convenience and speed. Cost saving and place & Time has lead the buisiness to become Self Service by customer him/herself. SRM/M1/SS

35. Evolution of Self Service SRM/M1/SS

36. Automation in Services Automation means replacing human manual activity by the machine. for Example:- -an automatic lawn sprinkler system a hotel -automated answering systems that route callers by means of Touch -Tone pones like Toll free or customer care services of the service provider David A Collier has suggested following automation categories • Fixed sequence (F) A machine that repetitively performs successive steps in a given operation according to a predetermined sequence, condition and position and whose set information cannot be changed easily. E.g. automatic parking lot gate 2. Variable sequence(V) A machine same as fixed sequence robot but whose set information can be changed easily. E.g. automated teller machine SRM/M1/SS

37. 3. Playback(P) A machine that can produce operation from memory that were originally executed under human control. E.g. telephone answering machine 4. Numerical Controlled(N) A machine that can perform task according to sequence as command by stored information tat can be reprogrammed easily. E.g. animated character at an amusement park. 5. Intelligent(I) A machine with sensory perception devices, such as visual or tactile receptors, that can detect changes in the work environment or task by itself and has its own decision-making abilities. E.g. autopilot for a commercial airplane SRM/M1/SS

38. 6. Expert system(E) A computer program that uses an inference engine (e.g. decision rules) and a knowledge base (i.e. information on a particular subject) to diagnose problem ex- maintenance trouble shooting for elevator repair 7. Totally automated system(T) A system of machine and computers that performs all the physical and intellectual tasks that are required to produce or deliver a service. ex- electronic fund transfer SRM/M1/SS

39. Internet Services Websites can be used in many different ways • As a channel to sell a product or service (amazone.com, wine.com) • As a supplemental channel (online booking of order) • For technical support (dell.com, nike.com) • To Embellish existing service (HBR cases & Research paper) • To convey information (Dr. Koop, wikipedia) • To communicate with Membership • To play Games Internet Models • Internet Access Provider • Portal • Information content • Online Retailer • Transaction Enablers • Market Makers SRM/M1/SS

40. Comparison of Electronic and Traditional Services SRM/M1/SS

41. E-Business Models Peter Weill and Michael Vitale have described eight generic e-business models. Content Provider Provides content such as information, digital products and services. Ex- Reuters, a British news agency Direct to customer Provides goods & services directly to the customer, often bypassing traditional retail channel memebers. Ex-Dell computer Full service Provider Provide full range of service in one domain directly. E.g. financial, health, indusyrial chemicals. Ex – General Electric Supply I SRM/M1/SS

42. Intermediary Brings together buyers and sellers by concentrating information. Ex-eBay Shared Infrastructure Brings together multiple competitors to cooperate by sharing common IT infrastructure. An example is SABRE reservation system for airlines. Value Net Integrator Coordinates activities across the value net by gathering, synthesizing, and distributing information. Ex 7-eleven Japan Virtual Community Created & facilitates online community of people with Monster.com, the job-placement service firm. Whole-of-Enterprise Provides a firm wide single point of contact, consolidating all services provides by a large multiunit organization. An example is the U S federal government SRM/M1/SS

43. Technology opportunity Analysis Application requirements analysis Functional specification Orientation & Education Managing the New Technology Adoption Process Managing the New Technology Adoption Design specification Implementation Planning Equipment selection and contract commitments Implementation Review of Results Testing of technology SRM/M1/SS

44. 8p’s of Services Marketing Mix Product elements - the core and periphery service elements at the centre of the company's marketing strategy; Place and Time - delivering product elements to customers can be done physically and/or electronically, depending upon the service. Speed and convenience are essential to the customer and are important value-adds; Price and Other User Outlays - pricing is only a part of what customers may part with when purchasing a service; one must also consider time and convenience; Promotion and Education - speaks for itself, but the marketer must make sure communications not only provide information, but also persuade the customer of the service's relevance to the customer's particular 'problem'; SRM/M1/SS

45. Process - the means by which the firm delivers product elements; People - front-line staff will have a direct impact on perceptions; and Physical Environment - the appearance of the place where the services are delivered may have a significant impact upon whether the service was satisfactory;Productivity and Quality - improving productivity is a requisite in cost management; but quality, as defined by the customer, is essential for a service to differentiate itself from other providers. SRM/M1/SS

46. Service and Relationship MarketingModule:1Chapter:2 – Customer Behavior in Service Encounter Four Broad Categories of Service- A Process Perspective In service, people, physical objects, and data can be processed , and the nature of the processing can be tangible or intangible. Tangible actions are performed on people’s bodies or to their physical possession. Intangible actions are performed on people’s minds or to their intangible assets. This gives rise to classification of services into four broad categories. They are People processing Possession processing Mental stimulus processing Information processing SRM/M1/SS

47. SRM/M1/SS

48. Pre-purchase Stage The Three Stage Model of Service Consumption/ Customer Decision Making Service Encounter Stage Post-encounter Stage SRM/M1/SS

49. Pre-purchase Stage

50. Pre-purchase Stage - Overview Customers seek solutions to aroused needs Evaluating a service may be difficult Uncertainty about outcomes Increases perceived risk What risk reduction strategies can service suppliers develop? Understanding customers’ service expectations Components of customer expectations Making a service purchase decision Pre-purchase Stage Service Encounter Stage Post-encounter Stage