The document discusses the importance of building customer relationships through service consumption, evaluating service performance, and managing customer complaints. It outlines various consumption values, types of service encounters, and customer complaint behaviors, emphasizing the significance of effective service recovery and relationship marketing strategies. Additionally, it explores service market segmentation and retention strategies to enhance customer loyalty and satisfaction.
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Service Marketing Part 3
The document discusses the importance of building customer relationships through service consumption, evaluating service performance, and managing customer complaints. It outlines various consumption values, types of service encounters, and customer complaint behaviors, emphasizing the significance of effective service recovery and relationship marketing strategies. Additionally, it explores service market segmentation and retention strategies to enhance customer loyalty and satisfaction.
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Cont’d.
Building Customer Relationships
Service Consumption Consumption means the act or process of Using Something Up but physical consumption or deterioration doesn’t apply to most services. Consumption Values The perceived value or utility an individual or business believes special choice will provide. Includes: a. Functional Value: perceived utility acquired when a particular choice provides utilitarian or functional benefits for the consumer. b. Social Value: perceived utility acquired from making a purchase decision associated with a particular reference group. c. Emotional Value: obtained when the choice Stimulates Feelings and emotions within the consumer. D. Epistemic Value: acquainted when a purchase decision is perceived to satisfy a desire for knowledge, provide novelty or arouse curiosity. E. Conditional Value: utility provided when an alternative is chosen because of temporary situational factors. Understanding user cost for service 1. Purchase price and other financial expenditures Financial cost of service Price of the service itself Incidental expense Purchase of facilitative goods Travel cost 2. Nonfinancial Outlays and Burdens a. Time Expenditure: inherent opportunity cost to customers. b. Physical Effort: fatigue, discomfort and injury. c. Psychological Burdens: mental effort, inadequacy, fear d. Sensory Burdens: unpleasant sensation, noise, nasty, physical, psychological and sensory burdens collectively as effort or hassle. How Customers Evaluate Service Performance Continuum Product Attribute The basic differences between goods and services is that services are harder for customers to evaluate. All products can be placed on a continuum ranging from easy to evaluate to difficult to evaluate depending on three attributes: 1. Search Attributes: Evaluated before purchasing 2. Experience Attributes: Evaluated after purchasing 3. Credent Attributes: Impossible to evaluate A. Search Attributes: Attributes that can be evaluated before purchasing a service, based on information that is easily accessible. Physical goods tend to emphasize attributes that allow customers to and evaluate a product before purchasing. Tangible and Intangible features: Physical appearance of the service provider, Location, Hours of operation, color, style, price, fit feel, hardness, and sound allow prospective consumers to try out, taste-test or test drive the product prior to purchase and reduce sense of uncertainty or risk.
Example: clothing, furniture, cars, and electronic equipment
2. Experience Attributes: Attributes that can only be evaluated after purchasing and using a service. Properties can‘t be evaluated prior to purchase. Customers have experience about these features to know what they are getting. Example: live entertainment performances, sporting events, and restaurants • Examples: Quality of service Comfort Convenience Friendliness of staff C. Credent Attributes: Attributes that are difficult or impossible to evaluate, even after purchasing and using a service. Trust and faith in the service provider is required. • Examples: Expertise of a doctor Safety of a financial advisor Effectiveness of a therapy Product characteristics that customers find impossible to evaluate confidently even after purchase and consumption because the customer is forced to trust that certain benefits have been delivered even though it may be hard to document them. Example: Dental Work, Education, Training, Car Repairing Customer Complaint Behavior Customer response to service failures course of actions: A. Do nothing B. Complain in some form to the service firm C. Abandon supplier and discourage other people from using the service: negative word of mouth Course of action open to a dissatisfied customer General types of Service Encounters: A. Remote encounters: Encounters can occur without any direct human contact such as when a customer interacts with a bank through the ATM system, with a retailer through its website, or with a mail-order service through automated touchtone phone ordering. B. Technology mediated encounters: encounter between an end-customer and the firm occurs over the telephone or via simultaneous texting, live chats, or other platforms that allow technology- based communication with a real person in real time C. Face-to-face encounters: encounters occur between patients and reception staff, nurses, doctors, lab technicians, food service workers, pharmacy staff, and others. Complaint as Market Research Data Responsive service organizations look at complaints as a stream of information that can be used to help monitor productivity and quality and highlight improvements needed to improve service design and execution. Coordinating such activities is not a simple matter because there are many different entry points, including: A. The firm‘s own employees at the front line B. Intermediary organizations acting on behalf of the original supplier C. Managers who normally work backstage but contacted by a customer seeking higher authority D. Suggestion or complaint cards mailed or placed or placed in a special box E. Complaints to third parties: consumer advocate groups, legislative agencies, trade organizations and other customers The most useful roles for centralized complaint logs/record are: a) To provide a basis for follow-up and to see that they have in fact been resolved, b) To serve as an early warning indicator of perceived deterioration c) To indicate topics and issues that may require more detailed research. Types of Complainers 1. Passives: This group of customers is least likely to take any action. – Less Vs. Less They are unlikely to say anything to the provider, less likely than others to spread negative word of mouth, and unlikely to complain to a third party. They often doubt the effectiveness of complaining, thinking that the consequences will not merit the time and effort they will expend. Sometimes their personal values or norms argue against complaining. Passive: Unlikely to say anything to the provider, Less likely than others to spread negative word of mouth 2.Voicers: These customers actively complain to the service provider, but they are less likely to spread negative word of mouth, switch patronage, or go to third parties with their complaints. --- High Vs. Less These customers should be viewed as the service provider’s best friends. They actively complain and, by doing so, give the company a second chance. They tend to believe complaining has social benefits and therefore do not hesitate to voice their opinions. They believe that the consequences of complaining to the provider can be very positive, and they believe less in other types of complaining such as spreading negative word of mouth or talking to third parties. Their personal norms are consistent with complaining. Voicers Actively complain to the service provider, but they are less likely to spread negative word of mouth, switch patronage, or go to third parties with their complaints 3. Irates: These customers are more likely than others to engage in negative word-of- mouth communication with friends and relatives and to switch providers. –Less Vs. High They are about average in their propensity to complain to the provider and are unlikely to complain to third parties. As their label suggests, they are quite angry with the provider, although they do believe that complaining to the provider can have social benefits. They are less likely to give the service provider a second chance and instead will switch to a competitor, spreading the word to friends and relatives along the way. Such customers are more likely than the other types to go to the trouble of creating websites, blogs, or YouTube videos to share their frustrations with others. Irates Customers are more likely to engage in negative word-of- mouth communication Likely to give the service provider a second chance 4. Activists: These customers are characterized by above-average propensity to complain on all dimensions: they will complain to the provider, they will tell others, and they are more likely than any other group to complain to third parties or express their opinions via social media (such as Twitter). Complaining fits with their personal norms. They have a very optimistic sense of the potential positive consequences of all types of complaining.
High Vs. High
Activists above-average propensity to complain on all dimensions Managing service failure and recovery Service Failure A service is either not performed or performed poorly. Customers leave a service angry or dissatisfied. Service performance below adequate expectation level of a customer. Service Recovery A general term for systematic efforts by a firm to correct a problem following a service failure and retain a customer goodwill. Service Failure is generally described as service performance that falls below a customer’s expectations in such a way that leads to customer dissatisfaction. Service Recovery refers to the actions taken by an organization in response to a service failure to improve the situation for the customer. Successful service will diminish the negative impact of the original poor or failed service for thee reasons: 1. Through post-service communications with the firm, customers become to believe that service provider is fair because who admitted mistakes or restitutions. 2. A good service recovery process takes away all of the negative consequences of a service failure. 3. A service recovery process will cause consumers to alter their attributions as to the cause of service fail. Guidelines for Effective Service Recovery Act fast Admit mistake but don’t be defensive Show that you understand the problem from each customer’s point of view Don’t argue with customers Acknowledge the customer’s feelings, either tacitly or explicitly Give customers the benefit of the doubt Clarify the steps needed to solve the problem Keep customers informed of progress Consider compensation Persevering/continue to region customer goodwill Service Recovery Steps 1st: develop service recovery program 2nd: encourage customers to complain 3rd: data from causes of service recovery 4th: allocate sufficient resources Reasons for Service Communication Problems Discrepancies between: What is communicated about a service and What a customer receives— or perceives that she receives—can powerfully affect consumer evaluations of service quality. The factors that contribute to these communication challenges include Service Intangibility Management of Service Promises Management of Customer Expectations Customer Education Internal Marketing Communication Incorporeal Existence. The service product neither is made out of physical matter nor occupies physical space. Although the delivery mechanism may occupy space, the service itself (car servicing and oil change) does not. The implication is that showing the service is difficult, if not impossible. Abstractness. Service benefits such as financial security, fun, and health do not correspond directly with objects, making them difficult to visualize and understand. When businesses need consulting, for example, they often do not know where to begin because the concept is so vague that they do not understand the specific goals, processes, or deliverables they are seeking. Generality: Generality refers to a Class of things, persons, events, or properties whereas: Specificity refers to Particular objects, people, or events
Many services and service promises are described in
This making them difficult to differentiate from those of
competitors. Non-searchability: Because service is a performance, it often cannot be previewed, or inspected in advance of purchase. If we are interested in finding a doctor, an air- conditioning repair firm, a personal trainer, or virtually any service, we cannot search with certainty the options as easily as we can search the shelves in a grocery store. Considerably more effort must be expended, and what we find may not be useful.
For example, if a customer needs a plumber, the information
contained in a source such as the Internet may not adequately discriminate among the choices. Mental Impalpability: Services are often complex, multidimensional, and difficult to grasp mentally.
When customers have not prior exposure, familiarity, or
knowledge, services are difficult to interpret.
You may have experienced this when buying automobile
insurance for the first time. Service Guarantees: - Promise to compensate A promise firms offer to compensate customers if service delivery fails to meet predefined service standards. Compensation such as refund, credit, replacement,… A powerful tools for both promoting and achieving service quality for the following reasons: A. Focus on customers want and expect in each element of the service. B. Set clear standards C. Develop systems for generating meaningful customer feedback D. Understand why they fail and encourage them E. Build marketing muscle: long-term loyalty Therefore, guarantees can be given: A. To measure customers about the quality of the service they are receiving. B. To differentiate the service provided by one firm from another. C. To more tangible elements of the service. Condition of effective guarantee Service guarantee will be highest when one or more of the following conditions exist: A. The price of service is high or perceived to be high by customers. B. The negative consequence of service failure are high. C. The success of a company depends on frequent customers repurchase. D. Company’s business is affected deeply by word of mouth E. Customers don’t really understand whether the service has been carried out properly or not. F. Customer’s personnel reputation could be affected if the service goes wrong. Qualities of the ideal guarantees Easy to understand and communicate Unconditional Easy to invoke Meaningful with penalties or payouts Focused on customer needs Relationship Marketing Attracting, maintaining enhancing customer relationships and as the development and enhancement of internal and other external relationships. The development of database marketing, interactive marketing and network marketing. Retaining customers using defensive strategies: minimizing customers turn over and maximizing customer retention. Transactional Marketing Attracting customers using offensive strategies: encouraging, brand switching and recruiting competitors dissatisfied clients. Steps to develop Relationship marketing programs 1st: locating prospects 2nd: turning customers into clients 3rd: turning clients into an advocate of a firm Function of Relationship Marketing Program Provide social reinforcement Provide reassurance Solve customers problem Provide customization of service Provide service enhancement Evolution of Customer Relationships Customers as Strangers Customers as Acquaintances Customers as Friends Customers as Partners Goal of Relationship Marketing Service Market Segmentation Unfocused: it is when a service provider company provides with many services for many types of customers. – All In One
For example: assume a hotel that provides with
restaurants, room accommodations, spa services, gym services, swimming pool services and theatres.
In this case the hotel provides a wider range of
services in which each service could be separately sold for customers. In this case the hotel is not focused in one or two service with this its customers varies too. Service Focused: in this category a company specializes at one or few service provisions. -- Specialize Service
For example, assume an auto repair service provider. It
only sales a service in repairing automobiles and sale nothing else. In this case the company is specialized and focused only on provides one type of service which cannot be separately provided for customers. Market Focused: a company designs a wider range of services but for specific types of customers. Wider Service with -- Specific Types of Customers For example, assume a company that provides auto repair, car décor, training, and car wash but these services are provided targeting only high-income customers.
Fully Focused: in this category a company provides
narrower range of services for targeted few customers. Narrow Service for Targeted Few Customers For example, assume a company that provides only car wash services for only high-income customers. Retention Strategies Financial Bonds: Offering Financial Inceptives Social Bonds: Relationship Customization Bonds: Personalized recommendations Material (Structural) Bonds: Creating Contractual 1. Financial Bonds: Offering financial incentives to customers to encourage them to continue doing business with the company. Examples: Loyalty programs, discounts, coupons, rebates 2. Social Bond: Building relationships with customers based on shared values, interests, and experiences. Examples: Community involvement, social media engagement, customer appreciation events 3. Customization Bond: Tailoring products and services to meet the individual needs and preferences of customers. Examples: Personalized recommendations, customized products, subscription boxes 4. Structured (Material) Bond: Creating physical or contractual barriers to prevent customers from switching to competitors. Examples: Contracts, warranties, high switching costs Service Blueprint is an operational planning tool that provides guidance on how a service will be provided, specifying the physical evidence, staff actions, and support systems / infrastructure needed to deliver the service across its different channels.
For example, to plan how you will loan devices to users,
a service blueprint would help determine how this would happen at a service desk, what kinds of maintenance and support activities were needed behind the scenes, how users would learn about what’s available, how it would be checked in and out, and by what means users would be trained on how to use the device. Service Design and Deployment According to Professor G. L. Shostack (1984), services are intangible so New Service Development System should have the following four characteristics:
It must be objective, not subjective
It must be precise, not vague It must be fact driven, not opinion driven It must be methodological, not philosophical Types of New Services 1. Major Service Innovations A new service that is significantly different from existing services and creates a new market. EG: NEW 2. Major Process Innovations: A new way of delivering an existing service that significantly improves efficiency or effectiveness. Examples: Self-checkout kiosks at grocery stores Online banking Automated customer service chat-bots 3. Product Line Extensions A new service that is added to an existing product line and targets the same customer base. Examples: A restaurant adding a New Menu Item A hotel chain adding a New Type of Room A software company adding a New Feature to its Existing Software 4. Process Line Extensions: A new way of delivering an existing service that targets a new customer base. • Examples: A hospital offering a new type of surgery A university offering a new degree program A consulting firm offering a new type of consulting service 5. Supplementary Service Innovations: A new service that complements an existing service and enhances the customer experience. • Examples: A restaurant offering a loyalty program A hotel offering a free shuttle service to the airport A software company offering a free training course for its customers 6. Style Changes: A change in the appearance or design of an existing service. • Examples: A restaurant remodeling its dining room A hotel renovating its guest rooms A software company updating the user interface of its software 7. Service Improvements: An improvement to an existing service that enhances its quality or value. • Examples: A restaurant improving the quality of its food A hotel adding more amenities to its guest rooms A software company adding new features to its software Thank You!!!