International Exchange 2011/2012: Marketing of Services

Lecture XIV - Project Presentation 22.10.11

Cronbach's Alpha – reliability of scale

R-square

How a thesis is being graded?

From Last word of thesis towards the title

What are the recommendations that are derived from my findings?
Are the research findings in the survey present?
Was the analysis done appropriate?
Are they claiming what is measured?
Having a look on questionnaire – Is it related to the research?

Lecture VIIX - Service Recovery and Service guarantee 19.10.11

How does a company respond to service failure?

Customer Responsiveness to Service failures

Service Encounter is Dissatisfactory → 1. public action, 2. private action, 3. no action

→ complain to the service firm, complain to third party, take legal actions to seek

Why do customers complain?

to obtain a compensation
to vent their anger (e.g. to rebuild self-esteem)
to help improve the service (maybe you like the company very much)

What proportion of unhappy customers complain?

only 5% - 10% of customers complain

Why?

not to lose face in front of company
waste time and effort
no point in complaining
where to complain? Poor service provider responsiveness

organization initiated recovery replaced desire to complain

Personality factors of employees

empathy
assertiveness
mood
attitude towards complain

Miscellaneous (sonstiges)

late realization of failure
consumer loyalty
firms quality reputation
internal attributions
social factors

Alternative action, e.g. brand switching and reduced tip/ other compensation

Who is likely to complain?

mostly educated people
in upper socio-economic class
people who have the right connections “I am a powerful person”

Service Recovery

crucial role in achieving customer satisfaction
demonstrates a firm's commitment to satisfaction and quality

Service Recovery paradox

one time service failure → proactive support from company → customer is more happy as a result
if second failure occurs, the paradox disappears
Best strategy: Do it right the first time

Four effective service recovery

be proactive on the spot, before customers complain
plan recovery procedures
teach recovery skill to relevant personnel
empower personnel to use judgement and skills to develop recovery process

Compensation

adequate compensation
who is the affected customer? Long term vs one time customer
how serve was the service failure

Lecture XII - Customer Relationship and Loyalty in Services 17.10.11

Customers become more profitable the longer they remain with a firm because of

increase in purchase
reduced operation costs
referrals to other customers
price premiums

Behaviour loyalty – exhibiting loyalty through purchase

Attitude loyalty – exhibiting loyalty through verbal expression

“whether one is loyal or not depends on inherent personal quality”

Life time Value of Customer

customer equity – lifetime value of all customers of a particular brand
brand equity – present value of future cash flows, customer's opinions (e.g. compare two brands)
measuring loyalty on two dimensions, i.e. repurchase (behaviour loyalty) and attitude loyalty

Customer Equity: Life time value of customer

acquisition revenues less costs
projected annual revenues and costs
value of referrals

Relationship marketing

may make use of CRM, i.e. Customer Relationship Management
Database Marketing first - information of customers collection and sharing
Interaction marketing – a more personal interaction with customer
Network Marketing – add value through networking, support Web

The wheel of loyalty

Building foundation for loyalty
Identify right customers (e.g. heavy users, no discount shoppers)
The customer pyramid

Strategies for developing loyalty bonds

bundling/ cross selling, e.g. phone in connection with a particular provider
reward-based bonds, e.g. incentives, financial bonus, intangible rewards
customization bond, e.g. favourite head massage you like
social bonds
structural bonds

→ flip side: Reward based loyalty programmes are relatively easy to copy

Transform discrete transactions into relationships

discrete transaction – separate purchases by 'anonymous consumer
How do customers perceive reward programmes?
Brand loyalty vs. deal loyalty
Timing – how soon can I get the reward? (sent customer periodic updates on account status)
Understand customer switching behaviour

Analyse customers defections and monitor declining accounts

understand reasons for customer switching
Churn diagnostics common tool in some industries

Addressing key churn drivers

service deliver and quality
minimize inconvenience and non-monetary costs
fair and transparent pricing
industry specific drivers
reactive measures
increase switching
effective complaint handling and service recovery procedures
contractual penalties for switching

SERVQUAL (expected service features – actual service performance) measured in 5 dimensions

SERVPERF (measuring actual performance only)

Lecture XI - Pricing of Services 13.10.11

Pricing

only source of income for companies
use of effective pricing mechanism to transform sales into revenues/ recover costs and create value for owners of businesses
some services do not require customers to pay the full amount of cost (e.g. in TV the advertisement covers

What makes a service pricing complex?

difficult to ascertain financial costs
customers find many services hard to evaluate (What are they getting in return?) assign a value
importance of time factor
delivery through physical or electronic channels leads to differences in perceived value (e.g. book and pdf)

Objective pricing

defining a price range, i.e. floor price and ceiling price
revenue and profit objective
patronage and user-based objectives (e.g. build demand and build a user base)

Foundation of pricing decisions

costs to the company (cost based pricing)
competition (competition based pricing)
value to customers (compare to average customer)

“consumers worry about value to them”

price leader = lowest cost player

Buyer specification/ seller specification

Assessing value

PERVAL (2001) – perceived value scale
Perceived Value of services by James F (March 2002)

Strategy for enhancing net value

reduce uncertainty about value (e.g. guarantee)
relationship pricing (e.g. Incentives for loyal customers, discounts for volume purchase)
low-cost leadership (e.g. price quality schema) → Dick and Basu to classify loyalty levels
managing perception of value through communication

Paying for Services: the customers' perspective involves not only cash, but also time, distance emotional costs, sensory costs

Companies must try to mitigate these costs for consumer → Revenue Management (e.g. airline company)

Price customization = (charge different value segments different prices for same product/ service)

Ethical Concerns in Pricing

mental accounting – use bundling of services; reduce number of losses and increase gains

loosing 5 times 20 rupees is more severe than losing 100 rupees one time
How much to charge? → pricing foundation, cost floor price
What is the unit of pricing? Who should collect payment? Where should payment be made?
When should payment be made? How should payment be made? How communicate prices?

→ Pricing drives perception of cost --- careful consideration when and how to pay!!

amenity – Vorzüge

Lecture X - Communication and Selling Strategies for Services 05.10.11

Role of marketing communication

provide information to prospective consumers about service offering
- service options available
- costs
- specific features
- service benefits
persuade target customers

Challenges and Opportunities

Intangibility – difficult to communicate service benefits to customers
- abstractness (demonstrate service benefit, seeing someone benefit from it)
- generality (show actual delivery take place)
- non search ability implies the need to be experience in order to be evaluated (present testimonials of previous consumers)
- mental impalpability means cannot be mentally grasped (apply portfolio management to grasp benefits...very technical)

Tangibilising the Intangible

using metaphors and slogans, e.g. “Boost for Energy” advertised by celebrities
use writings or clips
ads – catch on performance attributes

Setting communication objective

Who is our target audience?
What do we need to communicated and achieve?
How are we going to spread the word?
Where are we going to advertise?
When are we most likely to reach our target audience?

Target Audience: three broad categories

1. Prospect 2.Users 3.Employees

create memorable images
build awareness/ interest
build preference
reduce perceived risk
provide reassurance
familiarize customers
encourage trial through incentives
teach customers with service processes before use
recognize and reward valued customers and employees

Marketing Communication Mix

Two types of communication

personal communication
impersonal communication

Technology creates grey area for both

Remember. Setting the expectation too high may lead to unsatisfied experience! Service Quality Gap model: Quality is difference of expected service and actual service experience.

How high should the expectation be set?

Lecture IV - Service Distribution 24.09.11

Distribution includes 3 interrelated elements

Information & promotion flow
Negotiation flow – agreement about the service features and pricing)
product flow – physical distribution facilities

Core Product

require physical location for people processing and possession processing
electronic distribution for mental stimulus processing and information processing
How about “Do it yourself” type of service

Supplementary Service

can be both tangible or intangible

Service delivery

Customer goes to service organisation (the location needs to be designed accordingly based on an elaborate analysis)
Service organisation comes to customer (more expensive and time-consuming for service provider)
service organisation transact remotely → achieved with help of logistics and telecommunication

→ depends on the nature of the service and the firm's positioning strategy

Channels preferences vary among customers

for complex and high perceived risk services people rely on personal channels
individuals with greater confidence and knowledge about a service channel tend to use impersonal self-serviced channels
customers with social (instrumental) motives tend to use personal (impersonal) channels

→ convenience is a key driver of channel choice

Places of Service delivery

specialty vs. ordinary services influences travel distance
opening mini stores that are located in multi purpose facilities (shopping mall)

Time of service delivery - Delivering service in Cyberspace

electronic channels offer complementary/ alternatives to traditional physical channels
convenience/ ease of obtaining
broad selection
better prices

Profile of Intermediaries in service delivery

→ cost effective → supplementary services

Franchising

fast growth strategy
when resources are limited
local knowledge is important
fast growth is necessary to preempt consumption

BUT: loss control of actual customer experience/ One third of all systems fall apart after 3 – 4 yrs.

The challenge of distribution in large domestic markets

distance
multi culturalism
differences in laws and tax rates → hire local managers

Presentation for Lecture VIII

Client Co-Production in Knowledge-Intensive Business Services on Prezi

Lecture VIII – Supplementary Services and New Services 21.Sept.11

Loyalty – How to measure loyalty of a customer?

Anova → Regression (simple) → scaling ordinal/ nominal etc

core product plus accompanied by supplementary services
in mature industries, core products often become commodities
supplementary services help to differentiate core products and create competitive advantage by:
- facilitating use of core product (a service or a good)
- enhancing the value and appeal of the core product

Designing a Service Concept

Core Product
Supplementary
Process Delivery

Do customers' expectations change during service delivery in light of perceived quality of each sequential encounter?

Flowcharting Service Delivery/ Blueprinting

understand fully the customer experience
useful to distinguish between core products and service elements
shows how nature of customer involvement will service organisation varies by type of service

Defining Core & Supplementary elements of service product

how is our core product defined and what supplementary elements augment (erweitern) it
what product benefits create the most value for customers
is our service package differentiated from competitors?

Flower of Service to use as a framework

Managerial Implications

to develop product policy and pricing strategy → standard packaging (no frills)
offer as options for an extra charge

Product Lines and Brands

Single brand
a separate, stand alone brand for each offering
a combination of both two extremes

A hierarchy of new service categories

major service innovations – new core products for previously undefined markets
major process innovation – using new processes to deliver existing products with added benefit
product line extension - addition to current product lines
process- line extension – alternative delivery procedures
supplementary service innovations – addition of new or improved facilitating or enhancing elements
service improvements – modest changes in the performance of current products
style changes

Success Factors in New Service Development

synergy of new services plus available company
market knowledge and market intelligence/ research
price-quality- schema → play with quality rather than price

Brand Loyalty, Service Augmentation (Steigerung/ Vermehrung)

Lecture VII – Physical Evidence – Servicescapes 16.09.11

What is a servicescape?

The environment in which the service is delivered and in which the firm and the customer interact and any tangible commodities that facilitate performance or communication of the service.

Why physical evidence?

Because services are intangible a customer does rely on tangible cues or physical evidences to evaluate a service before purchase:

Elements of physical evidence

Exterior facilities for example building/ parking/ landscaping

Interior Facilities for example interior design/ layout/ art quality

Other tangibles and Virtual servicescapes

Impact of physical evidence on Customer Experience

has a profound impact

clue management

experience engineering

based heavily on environmental psychology

Types of Servicescapes (“to set servicescapes”)

Lean Services __________________|_____________________|____________________

Elaborate Services | |

Self Service Interpersonal Service Remote Service

Roles of servicescapes

similar to product packaging in goods
convey an image of 'what is inside'
Facilitator – facilitates in aiding the performance of persons in the environment
socializing – facilitates on both employees and customers, so that their expected roles and behaviour can be carried out
Differentiator – differentiate one firm from its competitors through logos for example, also differentiation within a firm of areas

How do servicescapes affect behaviour?

based on stimulus- response theory
assumption – dimensions of servicescapes impact customers e.g. cookieman leaving the smell outside the kitchen

Will it affect individual behaviour?

approach vs. avoidance
duration of stay/ interaction

Internal responses to servicescapes

servicescapes affect our beliefs about service offer and emotional state through colour, sound, music, scent

Internal responses of servicescapes

variation in individual/ type of personality responses
arousal seeking vs. arousal avoiders

Environmental dimensions

ambient conditions

The experience is the marketing! [Imagineering] and Service Design...

Lecture VI – Segmentation, Targeting and Positioning in Services 12. September. 11

Competition in service sector is intensifying

for success in marketing it is crucial to differentiate/ being selective of certain areas, domains

Focus - Rather than serving the entire market, focus on specific segments to serve well

Basic Focus Strategies

Psychographic (behavioral)/ demographic (location, age)

homogenous behavior from heterogeneous market

Targeting ...then positioning

Are we able to target this market in a profitable way?

narrow Bread of Service Offerings wide

Number many service focused unfocused (everything for everyone)

of market

served few fully focused (ser.&mar.) market focused

Pros & Cons of being focused on a particular market

developing recognized expertise in a well defined market may provide protection against competitors
allows firms to charge premium prices
market may be too small to generate enough revenues

Segmentation (perfect combination) Why segmenting markets? To achieve ideal segmentation

a market segment is composed of a group of buyers with same interest

Micro Segmentation

creation of customer databases and sophisticated user profiles

Targeting

Target segment – the segment selected from among those in the broader market
analyze market to determine which segment offers better opportunity

Service Attributes and Levels (See Madhu Viswanathan for literature reference)

use research to identify and prioritize which attributes of a given service are important to specific market segments (our target markets)

→ individuals may set different priorities according to:
- purpose of using service
- timing of use
- whether service is used alone or with a group
- who makes decisions
- composition of that group
- how is a service consumed (public/ private) –> when in public tend for higher-class

Service Levels

Service levels – levels of performance a firm plans to offer on each attribute

Qualified attributes
Qualitative attributes

Service Tiers

→ Service Tiers positioning strategy based on offering several price – based on classed of service

packing a distinctive level of service across many attributes, e.g. hotel, airline, car

Principle of Positioning

must establish position for firms or product in minds of customers

→ Be careful about investing heavily in points of differences that are easily copied by competitors

Positioning...

Mass- Customization – large number of variance (Four faces of Mass Customization)

Lecture V - Design of Service Process for High Quality Service Encounters

Service Process Design, Service Blueprinting (Literature Jakops Outline 5 pages) Service blueprinting – Chase, Aquilano and Jacop book

Developing a blueprint

identify key activities

define “big picture”, before getting into details

identify “front stage” and “backstage” activities

clarify interaction between customer and staff, and support by backstage activities & systems

identify potential fail points, take preventive measures, prepare contingency

develop standards for execution of each activity

develop blueprint for point of view from customer/ service provider

expect mismatch between expected and performance quality

example

stage make reservation valet parking line of interaction

front accept reservation greet customer/ take car key

------------------------------------------------------------------------------------------------------------line of visibility

stage check availability take car to parking lot

back maintain reservation system maintain facilities

Act I. Prologue and Introductory Scenes

Act II. Delivery of Core Product (be aware of potential fail points)

Act III. The Drama Concludes (quick and smooth conclusions when it comes to billing)

Setting Service Standards

Service providers should design standards for each step sufficiently high to satisfy & even delight customers

Standards may include: time parameters, script for a technically correct performance, prescriptions for appropriate style and demeanour

→ must be expressed in ways that permit objective measurement
First impression is important as it affects customer's evaluation of quality during later stages of service delivery (within 10 minutes 4 -5 factors influence positive experience)
customer perceptions of service experiences tend to be cumulative

failure proofing/ Poka Yoka – mistakes proofing in action

Redesigning Services Process: Why?

External factors: technology change, competition, legislation, evolving customer needs

Internal Reasons: obsolete process, spurious, unofficial standards

Service Redesigns based on

eliminating non -value adding steps
shifting to self service
delivering direct service
bundling services
redesigning physical

Customers as co-producers

customer participation levels of customer participation (Low, Medium, High)

Self- Service Technologies (SSTs)

What aspects of SSTs please or annoy customers?

People love SSTs when...

conveniently located and accessible 24/7
processes are faster than face-to-face

Customers as Partial Employees

customers who participate are more likely to be satisfied
Cation: however, customers cause one-third of all service problems

Negative Consumer Behaviour

Jaycustomers: a customer behaves in a thoughtless or abusive fashion, causing problems for the firm, its employees, and other customers

The Thief – firms must take preventive actions against thieves, but not alienate honest customers by degrading their services
The Rulebreaker
The Belligerent (customer rage, physically aggressive)
Family Fenders and Vandals
The Deadbeat

prank call (Streichanruf)

research technique CIT – interview a person involved in an incident

Lecture III/ IV – Nature of Services and Consumer Behaviour in service context 05.09.11

How differences among Services Affect Customer Behaviour

consumer often participate in service creation and delivery

Four Categories of Services

Tangible Actions People Possessions

people processing possession processing

e.g. barber, health care e.g. refueling, disposal, recycling

Intangible Actions mental stimulus processing information processing

education, advertisement accounting banking

customers are less physically involved compared to people processing services

physical presence of recipients may not be required

Customer Decision Making: The three stage model of Service Consumption

I. Pre-purchase stage

II. Service Encounter Stage

III. Post-encounter stage

customers seek solution 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

making a service purchase decision

Search attributes

help customer evaluate a product before purchase through style, colour, texture, taste, sound
e.g. movie trailor,

Experience Attributes

cannot be evaluated before purchase – must experience to know
vacation, sporting events, medical procedures
brochures, websites, testimonials

Credence attributes

customers find impossible to evaluate confidently even after purchase or consumption

Perceived Risk in Purchasing and Using Services

functional risk - failing to perform the very function it was designed for
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 on any of five senses

How customers handle perceived risk?

seeking information from respected personal sources
relying on a firm that has a good reputation (brands)
looking for guarantees and warranties
visiting service facilities or trying aspects of service before purchasing
asking knowledgeable employees about competing services
examining tangible cues or other physical evidence
using the internet to compare service offering and search for independent reviews and rating

Service Provider's responses to customers perception of risk

e.g. offering performance warranties/ guarantees

Service – encounters range from high – to low contact

role and script theory
theater as a metaphor for service delivery: an integrated perspective
implications for customer participation in service creation and delivery
Theatric metaphor: an integrative perspective
it's being scripted – service drama unfolds on a “stage”

Customer Delight – Super Satisfaction

→ emotion arousal, excitement due to surprise

Lecture I/II - Service of Marketing an introduction 02/09/11

Assignment 1 (individual)

- Service Diary with minimum 10 entries + two pages conclusion

- factual information (where, when, nature of transaction) + my perception of the experience

- "Lessons from my Service Diary" - most important insights I gained about services from my experience keeping a service diary

Assignment 2 (group)

- Service blueprint document of a service organization of their activities

- 10 minutes presentation --> how does the service work

- e.g. hotel, Ayurveda Spa Resort, hospital...

Assignment 3 (group)

- Field Project and research paper

- e.g. customer satisfaction based on customer survey, influence on music in retail store, (What is the problem?)

02.09.11 Lecture notes

What are services? Why services marketing? Service and technology. Differences Goods vs. Service Marketing. Service Marketing Mix

Service called in literature "unproductive" labor in the sense that nothing is being produced

Medical tourism in India is an evolving business

according to statistics hotel market is supposed to double in size by 2018

4 main differences: product vs. service

1. Intangibility

- it cannot be inventoried nor patented

- it is not readily displayed or communicated

- pricing is difficult

physical intangibility - cannot be touched

mental intangibility - cannot be grasped mentally

pre-purchase intangibility

pre-purchase tangibility for services - e.g. seeing a hotel room before renting it

2. Heterogeneity

Implications of Heterogeneity

- service delivery and customer satisfaction depend on employee action AND many uncontrollable factors

- no sure knowledge that the service delivered matches what was planned

- performance - expectations = service quality

3. Simultaneous Production and Consumption

Implications of Simultaneous Production and Consumption

- customer participate in and affect the transaction

- customers affect each other

- employees affect the service outcome

- decentralization may be essential

- mass production is difficult

4. Perishability

Implications of Perishability

- difficult synchronize supply/ demand

- once consumed it cannot be returned

Service Marketing Mix - extended 7 Ps for Services

- traditional marketing mix + people/ process/ physical evidence

Challenges for Services

- define/ improve quality

- communication and testing new services

- motivation and sustaining employee commitment

- coordinating marketing, operations and human resource efforts

- setting price

- standardization vs. personalization

- communicating and maintaining a consistent image

Course Overview and Objectives

This course is designed to familiarize students with service marketing concepts. Class meetings for the early part of the course will review overall marketing concepts as well as services concepts. Subsequent classes will stress the application of these concepts through discussion of chapter content, case analysis, guest speakers, examinations and projects. Students will meet these course objectives through attending lectures, mastery of textbook readings, class projects and assignments and class participation.

By this course, students would become more knowledgeable about

• The nature and characteristics of services

• The marketing implications of product intangibility

• The improvement of service quality

• The drivers of sustainable success in service businesses.

And thereby will develop an integrative view of services marketing.

Seiten

Marketing of Services