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Marketing Service Organisations. BM404 – 2006 Lecture 2. Overview. Defining services Understanding the services economy The service sector in Australia Mega-trends and the service sector: Professional services Characteristics of services Marketing implications. Defining services?.

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marketing service organisations

Marketing Service Organisations

BM404 – 2006

Lecture 2

overview
Overview
  • Defining services
  • Understanding the services economy
  • The service sector in Australia
  • Mega-trends and the service sector:
    • Professional services
  • Characteristics of services
  • Marketing implications
defining services
Defining services?
  • Any act, performance or experience that one party can offer another; one 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

Lovelock (2004)

characteristics of services compared to goods
Characteristics of ServicesCompared to Goods

Intangibility

Heterogeneity

Simultaneous

Production

and

Consumption

Perishability

challenges for services
Challenges for Services
  • Defining and improving quality
  • Designing and testing new services
  • Communicating and maintaining a consistent image
  • Accommodating fluctuating demand
  • Ensuring the delivery of consistent quality
challenges for services cont
Challenges for Services (cont.)
  • Motivating and sustaining employee commitment
  • Coordinating marketing, operations, and human resource efforts
  • Setting prices
  • Finding a balance between standardization versus personalization
further challenges for services managers
Further challenges for services managers
  • Differentiation and competitive advantage may be difficult to achieve
  • Marketing orientation is still relatively new to many managers
  • Operations management, rather than marketing, continues to dominate
  • Customer service management and marketing is often in the hands of lower paid subordinates, possibly in multiple locations
  • Limited data on competitive performance is available
  • Problems in determining costs for pricing purposes
slide8

An expanded marketing mix for services

Product (Service)

People

Process

customers

Place, Cyber-space & Time

Place & Time

Customers

Price

Price

Customers

Promotion

PhysicalEvidence

slide9

Organisation

Internal marketing

Traditional marketing

Satisfaction; Quality; Brand Loyalty

Relationship management

Employees

Customers

A framework for analysing servicesmarketing

managing the 7ps requires collaboration between marketing operations and hr functions fig 1 14

Operations

Management

Marketing

Management

Customers

Human Resources

Management

Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions (Fig. 1.14)
gaps model of service quality

Gaps model of service quality

Zeithaml, Bitner and Gremler (2006)

the customer gap difference between customer expectations and perceptions
The Customer GapDifference between customer expectations and perceptions

Expected

service

Customer Gap

Perceived

service

gaps model of service quality14
Gaps Model of Service Quality
  • Provider Gap 1 (The Knowledge Gap):
    • not knowing what customers expect
  • Provider Gap 2 (The Service Design & Standards Gap):
    • not having the right service designs and standards
  • Provider Gap 3 (The Service Performance Gap):
    • not delivering to service standards
  • Provider Gap 4 (The Communication Gap):
    • not matching performance to promises
key factors leading to the customer gap

Customer

Gap

Key Factors Leadingto the Customer Gap

Customer Expectations

Customer

Perceptions

figure 2 2 key factors leading to provider gap 1

Gap

1

Figure 2.2 Key Factors Leading to Provider Gap 1

Customer Expectations

Company Perceptions of Customer Expectations

figure 2 3 key factors leading to provider gap 2

Gap

2

Figure 2.3Key Factors Leading to Provider Gap 2

Customer-Driven Service Designs and Standards

Management Perceptions of Customer Expectations

figure 2 4 key factors leading to provider gap 3

Gap

3

Figure 2.4Key Factors Leading to Provider Gap 3

Customer-Driven Service Designs and Standards

Service Delivery

figure 2 5 key factors leading to provider gap 4

Gap

4

Figure 2.5Key Factors Leading to Provider Gap 4

Service Delivery

External Communications to Customers

figure 2 6 gaps model of service quality
Figure 2.6Gaps Model of Service Quality

Expected Service

CUSTOMER

Customer

Gap

Perceived

Service

External Communications to Customers

COMPANY

Service

Delivery

Gap 4

Gap 3

Customer-Driven Service Designs and Standards

Gap 1

Gap 2

Company Perceptions of Consumer Expectations

consumer behaviour in services
Consumer behaviour in services
  • Examine how consumers choose and evaluate services
  • Identify the elements of consumer behaviour that services marketers must understand:
    • Choice behaviour
    • Consumer experiences
    • Post-purchase evaluation
consumer evaluation processes for services
Consumer Evaluation Processes for Services
  • Search Qualities
    • attributes a consumer can determine prior to purchase of a product
  • Experience Qualities
    • attributes a consumer can determine after purchase (or during consumption) of a product
  • Credence Qualities
    • characteristics that may be impossible to evaluate even after purchase and consumption
figure 3 2 continuum of evaluation for different types of products
Figure 3.2Continuum of Evaluation for Different Types of Products

Clothing

Jewelry

Furniture

Houses

Automobiles

Restaurant meals

Vacations

Haircuts

Child care

Television repair

Legal services

Root canals

Auto repair

Medical diagnosis

Most

Services

Most

Goods

Easy to evaluate

Difficult to evaluate

High in search

qualities

High in experience

qualities

High in credence

qualities

issues to consider in examining the consumer s service experience
Issues to Consider in Examining the Consumer’s Service Experience
  • Services as processes
  • Service provision as drama
  • Service roles and scripts
  • The compatibility of service customers
  • Customer coproduction
  • Emotion and mood
post purchase evaluation
Post purchase evaluation
  • Captured in measures of satisfaction, service quality, loyalty, emotional engagement:
    • Word of mouth communication
    • Attribution of dissatisfaction
    • Positive or negative bias
      • positivity bias for services
    • Brand loyalty
customer expectations of service
Customer expectations of service
  • Identify the different types of expectations customers hold for service performance
  • Sources of customer expectations
figure 4 3 dual customer expectation levels
Figure 4.3Dual Customer Expectation Levels

Desired Service

Adequate Service

figure 4 4 the zone of tolerance
Figure 4.4The Zone of Tolerance

Desired Service

Zone of

Tolerance

Adequate Service

figure 4 5 zones of tolerance for different service dimensions

Zone

of

Tolerance

Adequate Service

Figure 4.5Zones of Tolerance for DifferentService Dimensions

Desired Service

Level

of

Expectation

Desired Service

Zone

of

Tolerance

Adequate Service

Reliability

Tangibles

Source: L. L. Berry, A. Parasuraman, and V. A. Zeithaml, “Ten Lessons for Improving Service Quality,” Marketing Science Institute, Report No. 93-104 (May 1993).

figure 4 6 factors that influence desired service
Figure 4.6Factors That Influence Desired Service

Lasting Service

Intensifiers

Desired Service

Personal Needs

Zone

of

Tolerance

Adequate Service

figure 4 7 factors that influence adequate service
Figure 4.7Factors That Influence Adequate Service

Temporary Service

Intensifiers

Desired Service

Perceived Service

Alternatives

Zone

of

Tolerance

Self-Perceived

Service Role

Predicted

Service

Adequate Service

Situational

Factors

figure 4 8 factors that influence desired and predicted service
Figure 4.8Factors That Influence Desired and Predicted Service

Explicit Service

Promises

Implicit Service

Promises

Word-of-Mouth

Desired Service

Zone

of

Tolerance

Past Experience

Predicted

Service

Adequate Service

frequently asked questions about customer expectations
Frequently Asked QuestionsAbout Customer Expectations
  • What does a service marketer do if customer expectations are “unrealistic”?
  • Should a company try to delight the customer?
  • How does a company exceed customer service expectations?
  • Do customer service expectations continually escalate?
  • How does a service company stay ahead of competition in meeting customer expectations?
customer perceptions
Customer perceptions
  • Identify the factors which influence consumers’ perceptions
  • Examine the factors which influence satisfaction
  • Develop an understanding of the dimensions of service quality
  • Examine the importance of service encounters
factors influencing customer satisfaction
Factors Influencing Customer Satisfaction
  • Product/service quality
  • Specific product or service features
  • Consumer emotions
  • Attributions for service success or failure
factors influencing customer satisfaction39
Factors Influencing Customer Satisfaction
  • Perceptions of equity or fairness
  • Other consumers, family members, and coworkers
  • Price
  • Personal factors
    • the customer’s mood or emotional state
    • situational factors
outcomes of customer satisfaction
Outcomes of Customer Satisfaction
  • Increased customer retention
  • Positive word-of-mouth communications
  • Increased revenues
asci and annual percentage growth in s p 500 earnings
ASCI and Annual Percentage Growthin S&P 500 Earnings

Source: C. Fornell “Customer Satisfaction and Corporate Earnings,“ commentary appearing on ACSI website, May 1, 2001,

http://www.bus.umich.edu/research/nqre/Q1-01c.html.

figure 5 4 relationship between customer satisfaction and loyalty in competitive industries
Figure 5.4 Relationship between Customer Satisfaction and Loyalty in Competitive Industries

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

service quality
Service Quality
  • The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.
  • Service quality assessments are formed on judgments of:
    • outcome quality
    • interaction quality
    • physical environment quality
the evolution of service quality
The evolution ofservice quality
  • Disconfirmation of expectations
  • The Nordic model
  • The three component model
  • The Gaps model of service quality & SERVQUAL
the nordic model gronroos 1990
The Nordic model (Gronroos 1990)
  • Represents the service experience on the basis of functional and technical elements
  • Technical quality refers to what the customer receives from the service
  • Functional quality refers to service delivery
  • Model emphasises companies must be careful what they promise
the three component model rust oliver 1994
The three-component model Rust & Oliver (1994)

Source: Rust & Oliver, 1994. p. 11

the servqual dimensions perceived service quality parasuraman zeithaml berry 1988
The SERVQUAL dimensions – Perceived Service Quality(Parasuraman, Zeithaml & Berry 1988)
  • Reliability (dependability, accurate performance)
  • Assurance (competence, courtesy, credibility & security)
  • Tangibles (appearance of physical elements)
  • Empathy (easy access, good communications & customer understanding)
  • Responsiveness (promptness & helpfulness)
the five dimensions of service quality
Ability to perform the promised service dependably and accurately.

Knowledge and courtesy of employees and their ability to inspire trust and confidence.

Physical facilities, equipment, and appearance of personnel.

Caring, individualized attention the firm provides its customers.

Willingness to help customers and provide prompt service.

The Five Dimensions of Service Quality

Reliability

Assurance

Tangibles

Empathy

Responsiveness

exercise to identify service attributes
Exercise to Identify Service Attributes

In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

servqual attributes
SERVQUAL Attributes

RELIABILITY

  • Providing service as promised
  • Dependability in handling customers’ service problems
  • Performing services right the first time
  • Providing services at the promised time
  • Maintaining error-free records

EMPATHY

  • Giving customers individual attention
  • Employees who deal with customers in a caring fashion
  • Having the customer’s best interest at heart
  • Employees who understand the needs of their customers
  • Convenient business hours

RESPONSIVENESS

  • Keeping customers informed as to when services will be performed
  • Prompt service to customers
  • Willingness to help customers
  • Readiness to respond to customers’ requests

TANGIBLES

  • Modern equipment
  • Visually appealing facilities
  • Employees who have a neat, professional appearance
  • Visually appealing materials associated with the service

ASSURANCE

  • Employees who instill confidence in customers
  • Making customers feel safe in their transactions
  • Employees who are consistently courteous
  • Employees who have the knowledge to answer customer questions
the service encounter
The Service Encounter
  • is the “moment of truth”
  • occurs any time the customer interacts with the firm
  • can potentially be critical in determining customer satisfaction and loyalty
  • types of encounters:
    • remote encounters, phone encounters, face-to-face encounters
  • is an opportunity to:
    • build trust
    • reinforce quality
    • build brand identity
    • increase loyalty
figure 5 5 a service encounter cascade for a hotel visit
Figure 5.5A Service Encounter Cascadefor a Hotel Visit

Check-In

Bellboy Takes to Room

Restaurant Meal

Request Wake-Up Call

Checkout

a service encounter cascade for an industrial purchase
A Service Encounter Cascade for an Industrial Purchase

Sales Call

Delivery and Installation

Servicing

Ordering Supplies

Billing

critical service encounters research
Critical Service Encounters Research
  • GOAL:
    • understanding actual events and behaviors that cause customer dis/satisfaction in service encounters
  • METHOD:
    • Critical Incident Technique
  • DATA:
    • stories from customers and employees
  • OUTPUT:
    • identification of themes underlying satisfaction and dissatisfaction with service encounters
sample questions for critical incidents technique study
Sample Questions for Critical Incidents Technique Study
  • Think of a time when, as a customer, you had a particularly satisfying (dissatisfying) interaction with an employee of ______________.
  • When did the incident happen?
  • What specific circumstances led up to this situation?
  • Exactly what was said and done?
  • What resulted that made you feel the interaction was satisfying (dissatisfying)?
common themes in critical service encounters research
Common Themes in CriticalService Encounters Research

Recovery:

Adaptability:

employee response

to service delivery

system failure

employee response

to customer needs

and requests

Coping:

Spontaneity:

unprompted and

unsolicited employee

actions and attitudes

employee response

to problem customers

recovery
Acknowledge problem

Explain causes

Apologize

Compensate/upgrade

Lay out options

Take responsibility

Ignore customer

Blame customer

Leave customer to fend for him/herself

Downgrade

Act as if nothing is wrong

“Pass the buck”

Recovery

DO

DON’T

adaptability
Recognize the seriousness of the need

Acknowledge

Anticipate

Attempt to accommodate

Adjust the system

Explain rules/policies

Take responsibility

Ignore

Promise, but fail to follow through

Show unwillingness to try

Embarrass the customer

Laugh at the customer

Avoid responsibility

“Pass the buck”

Adaptability

DO

DON’T

spontaneity
Take time

Be attentive

Anticipate needs

Listen

Provide information

Show empathy

Exhibit impatience

Ignore

Yell/laugh/swear

Steal from customers

Discriminate

Spontaneity

DO

DON’T

coping
Listen

Try to accommodate

Explain

Let go of the customer

Take customer’s dissatisfaction personally

Let customer’s dissatisfaction affect others

Coping

DO

DON’T

figure 5 7 evidence of service from the customer s point of view
Figure 5.7 Evidence of Service from theCustomer’s Point of View
  • Contact employees
  • Customer him/herself
  • Other customers
  • Operational flow of activities
  • Steps in process
  • Flexibility vs. standard
  • Technology vs. human

People

Physical

Evidence

  • Tangible communication
  • Servicescape
  • Guarantees
  • Technology
  • Website

Process

Source: From “Managing the Evidence of Service” by M. J. Bitner from The Service Quality Handbook, eds. E. E. Scheuing and W. F. Christopher (1993), pp. 358-70.

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