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SERVICES MARKETING. Text and Cases. Integrated Service Strategy. CHAPTER 9. by. RAJENDRA NARGUNDKAR. Growth Strategies for Service Businesses.
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SERVICES MARKETING Text and Cases Integrated Service Strategy CHAPTER 9 by RAJENDRA NARGUNDKAR
Growth Strategies for Service Businesses The classic framework developed by Ansoff holds good for growth in all industries, including services. The Ansoff grid defines four basic ways to achieve growth. • Same Product / Same Market Growth, also called Growth through Penetration • Same Market / New Product Growth, called New Product Development • Same Product/ New Market Growth, known as New Market Development • New Product / New Market Growth, called Diversification
The Four Options (Ansoff Grid) • SAME PRODUCT/ SAME MARKET (Penetration) • SAME PRODUCT/ NEW MARKET (New Mkt. Development) • NEW PRODUCT/ SAME MARKET (New Service Product Development) • NEW PRODUCT/ NEW MARKET (Diversification)
Penetration Examples of Penetration include • HDFC Bank trying to increase the amount of usage of their bank by existing loan customers, or • LIC trying to market another insurance policy to an existing customer
New Market Development Examples of New Market Development are • HDFC Bank trying to expand into rural areas, after successfully tapping the urban market • Infosys trying to market their software skills in Japan, after tapping the US and European customers
New (Service) Product Development • Examples of New (Service) Product Development are- • Debit cards of UTI bank in which your account gets debited instantly, as an option to customers who do not like credit cards • Tata AIG’s health insurance product which caters to major illnesses, with a lot of flexibility and easy claims procedure
Diversification • Examples of Diversification include- • An airline launching a hotel • A media company launching a real tate brokerage service
New Companies Launching a Completely New Service • Completely New Companies Launching a Completely New Business for the first time • Examples - • Sabeer Bhatia launching Hotmail • Amazon.com launching e-tailing • A Domestic Help providing company
Outsourcing Many currently outsourced services were performed within the corporates. For example, maintenance, catering, accounting, HR and bill processing. Each of these is now a new service business, sometimes attracting former employees of the companies who became entrepreneurs and provided these outsourced services.
Cheers..but no drinking Gulu Assomoll, a Bangalore-based businessman kicked off a new concept in `Cheers: A Library in a Teetotaller's Tavern'. According to the manager, Business Development, Cheers, "We wanted to revive the reading habits of Bangaloreans which seems to have died in recent years. In addition, we wanted to make it a good `hangout' place."
Alternative Growth Strategies There are companies which prefer organic growth, and others which like acquisitions. There are some who like to remain independent, whereas others prefer collaborations. As the following slide illustrates, it is sometimes a matter of the owner’s philosophy.
Taj and Oberoi • Mr. Ratan Tata, while commenting on the tie-up between Oberois and the Hilton chain, confirmed that the Taj group of hotels will compete independently on its own brand name. Only in certain markets outside India, they may go for sales and reservation alliances. • Earlier, Oberois announced a co-branding alliance for their TRIDENT brand of hotels in India. Under this arrangement, existing Trident hotels of the Oberoi group will be re-branded as Trident Hilton. The luxury hotels will use the Oberoi name, however.
IT Products vs. Services • Discuss, with the help of Case 1 from chapter 9, or without it, the relevance of PRODUCTS to India’s I.T. industry. • This can be based on your own research, and views about the valuue-chain adopted by global IT firms
Quality Strategies for Service Players • Some Ways of Ensuring Quality • Service Blueprints • Monitoring customer satisfaction regularly • Good hiring and training procedures • Using employee suggestions
Customer Satisfaction Measures Internal measures of efficiency and operational effectiveness usually present only one side (the provider’s) of the story. What really matters is the effect the service provider’s efforts have on the customer. Therefore, customer satisfaction must be measured.
CSM..contd.. • The Perception-Expectation score, as per the Parasuraman, Zeithaml and Berry model of service quality is one way to measure service satisfaction. • J.D. Power and Associates uses its own scale to measure satisfaction on specific attributes and features of the automobile purchase and maintenance experience.
Scales In general, there are two or three approaches that can be used to measure service quality in any service industry. The most common approach is to use a 5 point, or 7 point scale of customer satisfaction, with 1 indicating a ‘ Very Dissatisfied’ and a 7 indicating a ‘Very Satisfied’ response, with other responses falling in between.
Scales…contd. The same 5 point or 7 point scale as shown above can be modified and used with the following wording, to include comparison against expectations- • Much better than expected • Somewhat better than expected • Exactly as expected • Somewhat worse than expected • Much worse than expected
If we are interested in what was the expectation of each individual, we could split the question into two, asking first for an expectation rating and then the Performance rating. That is the approach used in the SERVQUAL questionnaire developed by Parasuraman et. al. The disadvantage may be that the number of questions increases. For example, 20 questions with both expectations and performance perceptions would lead to 40 questions in all, creating some problems for researchers collecting the data.
Scales…contd. • Comparison with other competitors is also possible, by including ‘other providers’ in general, or a specific competitor by name in the above question. For instance, in the statement, one could ask • “Please rate the service in comparison with other service providers you have recently used”, and then asking for a rating on a suitably worded 5 point scale such as
Contd…. • Much better than other providers • Somewhat better than other providers • Same as other providers • Somewhat worse than other providers • Much worse than other providers
Scales…Other Questions Apart from satisfaction, you can also ask other questions like intention to re-use the service provider, reasons why if there is an indication of possible defection, ranking of service features provided, importance ranking of the features or benefits to gauge their priorities etc.
The Service Profit Chain Service Profit Chain (Heskett, Jones, Loveman, Sasser and Schlesinger) directly links employee satisfaction and customer satisfaction to profitability. The major propositions of the service-profit chain are the following-
Contd…. • Customer loyalty drives profitability and growth. • Customer satisfaction drives customer loyalty • Value drives customer satisfaction • Employee productivity drives value • Employee Loyalty drives productivity • Employee satisfaction drives loyalty • Internal Quality drives employee satisfaction In summary, the major issues related to profitability- the satisfaction of customers and employees, are explored under one umbrella.
Strategies for market leaders Their first priority is to maintain their leadership position in terms of market share and sales. If there are aggressive challengers, keeping up growth rates, aggressively promoting your services, or investing in technology are options. The leader usually also is a price leader, a barometer for deciding on prices which other players tend to follow.
Strategies for Challengers Challengers are usually the number two or three players in a given industry. Strategies for this group of players in any industry include direct and indirect ways to topple the leader and become a leader themselves. One common way is to attempt to take away the leader’s customers through offers of better price, service, or some other benefits. Eg: Indian credit card companies
Challenger Strategies (contd.) But there are other ways in which you can attempt becoming a leader. It could be by employing new technology, for example. For example, in the early days of the ATM in India, ICICI Bank gained a lot of visibility by aggressively advertising its technology edge, and succeeded in taking away a lot of customers from the staid public sector banks, some of whom were leaders in the personal banking field.
Strategies for Followers • Followers in an industry are smaller players. They may be number 5-10 in market share . They are content to be followers, somewhat like the smaller kings in olden times, who were happy to let the bigger kings fight it out for dominance of the country among themselves, while maintaining a reasonably good relationship with whoever was the victor. • For companies which are followers, like the eighth ranked company in MBA coaching classes, it may be a good idea to simply defend their existing segments, and try to consolidate without attracting too much attention. Usually, these companies do not have the wherewithal in terms of the resources needed, to challenge the leader in the industry
Strategies for Niche Marketers A niche marketer follows a strategy of finding a well-defined niche in terms of geography or product-market and remaining in it. At one level, this is the equivalent of a focus strategy advocated by Porter, and in a broad sense, it also implies a focus on areas of core competence. For example, if a company is good at mass distributed, high volume, low margin services, it probably has a core competence in that type of services, and may not do well in other types. Eg: RelQ in IT verification and validation
Service Performance Metrics Measurements in a service organization need to be multidimensional. These measurements can be of three types- • Effectiveness Metrics-for example, Number of error-free orders or bills processed, • Capability Metrics- for example, mean ratings of attributes of services like server’s knowledge about service features, etc. • Efficiency Metrics-for example, average utilization of manpower
Innovation, the Last Frontier ? • Innovators worldwide • Wal-Mart, the biggest branded retailer, McDonald’s, the legendary restaurant, Disney, the theme park operator, or Federal Express, the overnight courier service
Innovation Indian service innovators include • Apollo hospitals, Food World, NIIT, IMS and TIME coaching centres, SOTC travel and tours, Oberoi and Taj hotels, ICICI Bank, the original housing finance company HDFC, media brands Malayala Manorama and Times of India, Zee TV, soap opera producer Balaji Telefilms, news channel Aaj Tak, Air Sahara and Jet Airways, and a host of education brands like the ICFAI business school.
Scalability An important issue along with innovation, if you want to grow into a world class brand, is that you need to replicate your success and scale up the service delivery to a much larger audience. The slow growth of some world class service brands in India suggests that they have faced some roadblocks here. These could be infrastructural or procedural in nature. But they have to be overcome if high growth is an objective.
