Professional Documents
Culture Documents
VASAVA..
The term services cover a heterogeneous range of intangible products and activities
that are difficult to encapsulate within a simple definition.
Services are also often difficult to separate from goods with which they may be
associated in varying degrees.
And about sending them away happy - happy enough to pass positive feedback
about your business along to others, who may then try the product or service you
offer for themselves and in their turn become repeat customers.
By maintaining good customer service, you will be keeping customers - which in the
long run is quicker, easier and cheaper then finding new ones!
A satisfied customer that has purchased a product from you, or used your service
will tell friends and colleagues about their experience. Generally, happy customers
will recommend your business to others.
Good customer service is important as it’s easier and cheaper to keep existing
customers happy than to keep finding new ones.
every member of staff needs to take ownership of customer care and be proactive
when dealing with customers so that problems do not arise.
Marketing brings a customer in, customer service keeps them coming back.
Good customer service can be the difference between being able to compete and
survive and failing.
Providing excellent customer service is one way a small business can distinguish
itself from the competition.
Flexibility
Reliability
What is a service?
n An idea?
n A circumstance?
n A convenience?
n A physical thing?
n Good: tangible physical object; created and transfered; existence over time
n Service: intangible and perishable; created and used simultaneously; only the
effect has an existence over time
» Book, restaurant, TV
Challenge to managers
Service Definition
-- James Fitzsimmons
-- James Fitzsimmons
Taxonomy of services
n Domestic services
GOVERNMENT SERVICES
· Military
· Education
· Judicial
BUSINESS SERVICES
· Consulting
· Auditing
· Advertising
· Waste disposal
MANUFACTURING
· Finance
· Accounting
· Legal
DISTRIBUTION SERVICES
· Wholesaling
· Retailing
· Repairing
PERSONAL SERVICES
· Healthcare
· Restaurants
· Hotels
CONSUMER
(Self-service)
INFRASTRUCTURE SERVICE
· Communications
· Transportation
· Utilities
· Banking
FINANCIAL SERVICES
· Financing
· Leasing
· Insurance
Features
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Power
Authoritative
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nature
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Post- Among Services Artistic Community Quality of Inter-
Information
Education,
Recreation
n Innovation
Push theory (e.g. Post-it)
Pull theory
n Changing Demographics
Aging of the population
Two-income families
Urbanisation
n Entrepreneurial Innovation
n Management Challenges
Economies of Scale (MRI scanner)
Economies of Scope(Convenience store)
Complexity (Yield Management)
Boundary Crossing (Bank vs Brokerage)
International Competitiveness( Cultural Diversity)
Service encounters were viewed as person-to-person interactions. Now, in many contexts, technology
is replacing human providers and either giving customers an option of, or requiring, the use of self-
service technologies. Technology is also being deployed to enhance the performance of the front line
employee in interacting with the customer. In still other cases, technology is allowing introduction of
entirely new service innovations. Across all these situations, the infusion of technology is
dramatically altering the very essence of service encounters formerly anchored in a “low tech, high
touch” paradigm.
The objective of this research is to explore the changing nature of service encounters emanating from
the infusion of technology, with an emphasis on how service encounters can be improved through
technology. We examine the influence of technology on the ability of firms to effectively:
The role of technology infusion is examined as an enabler of both employees and customers in
creating satisfying service encounters across all three of these categories. Examples are featured and
managerial and research implications highlighted.
As companies race to introduce technology that enables customers to get service on their own,
managers often find that it is more difficult than it looks to implement and manage effective self-
service technologies (SSTs). In this research, we present findings from qualitative interviews and
survey research investigating SSTs from the customer’s point of view. Based on this research and our
work with companies, we present and develop insights around important lessons listed below to
guide managers in developing successful SSTs.
Descriptions of technologically based service encounters were collected from over 800 customers.
Results indicate that the determinants of satisfaction or dissatisfaction with SSTs are quite different
from factors that determine satisfaction or dissatisfaction in interpersonal encounters. Satisfactory
encounters result primarily from the customer’s delight at being able to solve an immediate need,
fascination with being able to conduct transactions electronically, or being able to do something more
easily and conveniently. On the other hand, all dissatisfactory encounters resulted from some type of
service failure, either with the technology itself, the design of the technology, the resulting service
process, or occasionally from the customers’ own mistake.
• Employees who have more positive beliefs & feelings about the new SST will be more likely
to recommend it.
• Employees are more motivated when they feel they are competent to recommend the
technology and when they feel free to decide to recommend it.
• Employee competence and freedom of choice, and thereby motivation and ultimate
recommending behaviors, are increased through:
o Creating a sense of the importance of the strategic SST initiative and buy-in
throughout the organization.
o Increasing management and co-worker support of the SST initiative.
o Having managers clearly expect, or even require, that employees recommend the SST
to customers.
o Training and re-training all managers and employees to use the SST themselves.
o Promoting and advertising the SST internally to employees as well as externally to
customers.
An overall conclusion from the study is the need for organizations to implement
an internal marketing and employee roll out plan for new SSTs in addition to the
more common customer advertising and customer roll out plans.
OR
The availability and use of appropriate technologies govern the success of a service
encounter. An examination of the role of OT is therefore essential to the
comprehensive understanding of the service encounter. Recent efforts (e.g., Mills
and Moberg, 1990; Quinn and Paquette, 1990) have provided a first attempt at
understanding the role of OT in service encounters. Findings suggest that the
customer is often not just a passive recipient of the service, but an active
participant in the service production process. In fact, in most service encounters
(from a simple tax return preparation to something as complex as psychoanalytic
therapy), the active participation of the customer is not just helpful, but rather an
essential necessity. In general, as customer involvement increases, so does the
complexity of a given service encounter.
The firm's inability to adequately control the extent of customer participation has
prompted researchers to treat the customer as an uncertainty faced by a firm.
Contemporary investigations have accepted the existence of this uncertainty and
have focused on how firms can best manage and control the encounter
Others have suggested the use of appropriate governance structures that match
the nature of the service (e.g., Jones, 1990). A common thread in these arguments
is the need for the firm to focus on the difficult task of managing the customer. The
active role that the customer plays in service encounters makes this task even more
critical for the firm. Therefore, any attempt at understanding OT in service
encounters must account for the active and often unpredictable involvement of the
customer during the encounter.
The article hopes to make several academic and managerial contributions. First, it
extends the research on the co-alignment of customer and firm in service
encounters. Next, it provides a framework for investigating technologies as they
enter the service encounter. This is particularly relevant since the customer is a
provider of technological inputs. Third, to understand the role of OT in service
encounters researchers need to define the broad constructs at a lower level of
abstraction than the words denoting the construct
The article is organized in three sections. The first section of the article sets the
stage for framework development by describing the two primary constructs (i.e.,
service encounters, and OT). Next, the conceptual framework for viewing OT in
service encounters is developed. The conclusions section of the article includes a
discussion on the implications and usefulness of the proposed model.
PRIMARY CONSTRUCTS
Two streams of research have directly influenced the theory development process proposed in
this article --research on service encounters and that on OT. These two areas offer rich sources of
information for the necessary rationale and support of the framework developed in this paper.
This section contains a brief discussion of the relevant research on service encounters and OT.
There is increasing agreement among researchers on the basic form and definition of a service.
This consensus has stemmed from an agreement on the unique and distinctive characteristics of a
service (e.g., Gronroos, 1983; Lovelock, 1981; Norman, 1984; Uhl and Upah, 1983; Zeithaml et
al., 1985). The unique characteristics of a service dictate the structure and the conduct of the
service encounter. A review of commonly accepted definitions suggests two unique
characteristics of service encounters. First, both the customer and the firm have key roles to play
in the service encounter. Scholars in management and marketing (e.g., Bowen, 1990;Jones, 1990;
Gronroos, 1990) have noted that service encounters call for a high level of coordination between
the customer and the firm. The interaction between the customer and the firm results in the
sharing and/or use of resources held by the firm and by the customer. Since technology is a
resource that the customer can contribute to the service encounter, researchers must study, (1) the
complimentary roles of the firm and the customer as contributors of technology in a service
encounter, and (2) the process of assembling appropriate technological resources.
The second characteristic noted in the literature is the dynamic interaction between the two key
participants (the customer and the firm) in a service encounter. Researchers have consistently
noted that the customer is not a passive participant in the resource transformation process.
Bowen (1986) suggests that the customer should be considered an active participant in the
resource transformation process. Mills, Chase and Margulies (1983) have suggested that the
customer's willingness to participate in the transaction depends on the expected value of that
outcome. Similar sentiments are expressed by Czepiel (1990), and Larsson and Bowen (1989).
Thus, understanding the role of both the customer and the firm in combining technologies during
the transformation process is the second issue that must be explored when developing a
framework for OT in service encounters.
OR
To gain competitive advantage in the market, several retail banks have recently started to deploy
biometric technologies in their service encounters. Biometrics is an emerging technology that
authenticates individuals using their unique physical characteristics. While the application of
biometrics is expected to increase security of a certain physical or logical area, this new
technology seems to engender various consumer concerns.
This study aimed to understand consumers' value perception of using biometric technology, in
particular fingerprint recognition technology at ATMs. Following the utilitarian approach to
define consumers' value, perceived benefit and perceived risk were measured as a "get"
component and a "give" component, respectively. The levels of trust in a bank and personal
innovativeness were also measured as constructs that may influence individuals' value judgment
of using the new technology.
The perceived benefit and the perceived risk were hypothesized as multi-dimensional constructs
and measured by formative indicators. Specific dimensions of those two molar constructs were
determined based on informal personal interviews as well as reviews of extant literature. To
validate the research model of this study, an empirical study was conducted with an Internet
survey. Customers' e-mail addresses were randomly selected from the database of the bank that
deployed fingerprint recognition technology for its ATMs.
Internet services
FEATURES
Internet Services gives users access to the Document Centre 220/230/332/340
printing, faxing and scanning control panel features over the internet.
Additionally, many system administration tasks can be performed without the use
of native network utilities, allowing faster and easier set up of the Document
Centre 220/230/332/340.
The features that are described in this section correspond to the tabs that are
available within the Internet Services interface.
SERVICES FEATURES
There are three primary areas within Services that are available for general users
encompassing Job Submission and Stored Templates selections:
PROPERTIES FEATURES
Many system options can be set using Internet Services. The Properties feature
includes options for system administrators:
• Modify the system default template that defines how to file, fax, or distribute a
scanned document.
• Define job defaults for print, fax, or scan jobs that do not require
customisation.
• Define attributes, such as filing policy and confirmation sheet, for stored
templates.
GENERAL SETUP
General setup consists of configuring your Document Centre with TCP/IP,
configuring your browser to use Internet Services and then accessing a Document
Centre over the internet.
Services and Scanning Services with the DC 220/230/332/340 ST, see the Xerox
Document Centre 220/230/332/340 ST or 230 LP System Administration Guide.
If any problems are encountered using Internet Services, check the following
internet browser settings have been correctly configured.
• Type the Document Centre’s IP address in your browser’s URL location field.
TIP: Once you have accessed the embedded HTTP server, you can designate it as
a bookmark in your browser, then directly access it simply by clicking this bookmark.
On the Services, Job Submission page, printing with Internet Services provides
the following output options:
The table below lists the common buttons that are available on many of the pages
and frames. Some of them match the look of the actual button on the Document
Centre control panel.
SUBMITTING A JOB
Print-ready (PCL, PostScript, or ASCII) files can be submitted for printing or
faxing directly from Internet Services to the Document Centre.
NOTE: Existing preformatted jobs do not take priority over options that are set
on the Job Submission page.
• Select other options, such as finishing options, for your job from the dropdown lists.
4. Type the path and file name or click Browse (if available) to locate the file to process.
5. When finished with your selections, click the submission button to process your job.
NOTE: It is recommended that print files should not be larger than 6 MB.
OR
Basic network types
• 10 Mb/sEthernet
• telephone system
• Global Internet
Internetworking challenges
Challenges:
• heterogeneity
• scale
– how to provide uniques names for potentially billions of
nodes? (naming)
Pros
• Transparency
Cons
• Not scalable
• No heterogeneity
Pros
• Transparency
Cons
• Homogeneity
• Scalability
» increased latency
Building an internet
one network.
Keys to success:
A good is something that you can use or consume, like food or CDs or books or a car or clothes.
You buy a good with the idea that you will use it, either just once or over and over again.
A service is something that someone does for you, like give you a haircut or fix you dinner or
even teach you social studies. You don't really get something solid, like a book or a CD, but you
do get something that you need.
The basic difference is that a good is something you can hold in your hand (unless it's something
big, like a car or a house).
Now, a service can also contain a good. Someone who fixes you dinner gives you food, which
was bought. In this example, the food is the good and the person's fixing it for you is the service.
In the same way, your teacher gives you a service by teaching you social studies. He or she also
gives you a good by giving you a textbook.
Your teacher teaching you social studies is a good example of a service that you personally don't
pay for. (Your family might pay for it, but you don't.)
And not all services are economic, either. A service can be as simple as reading a book to
someone. This kind of activity doesn't cost anything, but it is something that one person did for
another.
A good doesn't have to cost anything, either. If you give your friend a book or a CD, then you
given that friend a good, since we have already defined books and CDs as goods. Your friend
didn't give you any money for the good. But you didn't really do something for your friend,
either; you just gave your friend something he or she could hold or touch.
Remember, the one thing that sets goods and services apart is the ability to touch them. You can
touch a good, but you can't touch a service. You can touch the result of a service but not the
service itself.
OR
1. Goods are tangible, and transferable while the services are intangible and
non transferable.
2. Goods are separable, and non - perishable while services are inseparable.
3. Goods are homogeneous while services are heterogeneous
On the quality front, with goods it is homogeneous, once produced the quality is
uniform across all line of products. They can be separated from the seller/ provider
and not dependant on the source for its delivery to the purchaser. With regard to
service it is inseparable from the service provider and heterogeneous, where each
time the service is offered it may vary in quality, output, and delivery. It cannot be
controlled and is dependant on the human effort in achieving that quality hence is
variable from producer, customer and daily basis.
Seven P's: 4 P's of a tangible good (price, presentation, place, and Promotion) plus 3
P's of an intangible service participants, physical evidence, and process (of service
assembly).
The service marketing mix comprises off the 7’p’s. These include:
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical evidence.
7 Ps of Services Marketing
Marketing services is different from marketing goods, and the marketing tools and practices
developed for goods marketing are often not directly transferable to the marketing of services.
There are several major differences, including:
• Product refers to the creation of a service concept that will offer value to target
customers and satisfy their needs better than competing alternatives. This consists of a
core product that responds to the customer primary need and an array of supplementary
service elements that are mutually reinforcing value-added enhancements that help
customers to use the core product more effectively.
• Place and time may involve physical or electronic channels such as banks now offer
customers a choice of distribution channels including visiting a branch, using a network
of ATMS, doing business by phone or conducting them over the Internet.
• Price and other user outlays are crucial as well. To determine if a particular service is
“worth it”, customers go beyond monetary considerations and assess the outlays of their
time and effort. Thus, service marketers must set prices that target customers are willing
and able to pay and minimize other burdensome outlays that are incurred. These may
include additional monetary expense in traveling, time expenditures, unwanted mental
and physical effort and exposure to negative sensory experiences.
• Promotion in services marketing is also educational in nature, especially for new
customers. Suppliers need to teach these customers about the benefits of the service,
where and when to obtain it, and how to participate in service processes to get the best
results. This can be delivered via individuals such as salespeople, at websites, on display
screens in self-service equipment and through a variety of advertising media.
• The process of delivering the service is very often as important as the function of the
service. Operational inputs and outputs can vary widely due to the lack of inventory and
real time interaction involved. Nonetheless, variability can be reduced through careful
design of the customer service process, adopting standardized procedures, implementing
rigorous management of service quality, high standards of training, and automation.
Furthermore, customers are often involved in co-production as partial employees through
self-service, telecommunications and the Internet.
• CHARACTERISTICS OF A SERVICE
• What exactly are the characteristics of a service? How are services different from a
product? In fact many organisations do have service elements to the product they sell, for
example McDonald’s sell physical products i.e. burgers but consumers are also
concerned about the quality and speed of service, are staff cheerful and welcoming and
do they serve with a smile on their face?
• 2. Intangibility
• You cannot hold or touch a service unlike a product. In saying that although services are
intangible the experience consumers obtain from the service has an impact on how they
will perceive it. What do consumers perceive from customer service? the location, and
the inner presentation of where they are purchasing the service?.
• 3. Inseparability
• Services cannot be separated from the service providers. A product when produced can
be taken away from the producer. However a service is produced at or near the point of
purchase. Take visiting a restaurant, you order your meal, the waiting and delivery of the
meal, the service provided by the waiter/ress is all apart of the service production process
and is inseparable, the staff in a restaurant are as apart of the process as well as the
quality of food provided.
• 4. Perishibility
• Services last a specific time and cannot be stored like a product for later use. If travelling
by train, coach or air the service will only last the duration of the journey. The service is
developed and used almost simultaneously. Again because of this time constraint
consumers demand more.
• 5. Heterogeneity
• It is very difficult to make each service experience identical. If travelling by plane the
service quality may differ from the first time you travelled by that airline to the second,
because the airhostess is more or less experienced.
A concert performed by a group on two nights may differ in slight ways because it is very
difficult to standardise every dance move. Generally systems and procedures are put into
place to make sure the service provided is consistent all the time, training in service
organisations is essential for this, however in saying this there will always be subtle
differences.
Examples
• Tutoring children
• Reading to the elderly
• Serving as a mentor or buddy
• Working with animals/shelters
Examples
• River/roadside clean up
• Donation programs for the homeless or poor
• Stocking a food pantry
3.Advocacy Creating awareness or promoting action on an issue
of public interest.
Examples
Examples
People processing
Possession processing
Information processing
Who or What Is the Direct Recipient of the Service?
(services
(services directed at
(services directed at
people’s bodies):
physical possessions):
Barbers
Refueling
Health care
Disposal/recycle
………………………………………………………………………………………………………………………………………
…………………………..................... Intangible Actions
Mental stimulus Information processing
processing
(services directed at
(services directed at
people’s minds):
intangible assets):
Education
Accounting
Advertising/PR
Banking
………………………………………………………………………………………………………………………………………
……………………………………………..
People Processing
Customers must:
Managers should think about process and output from customer’s perspective
Possession Processing
Involvement is limited
Ethical standards required when customers who depend on such services can
potentially be manipulated by suppliers
Physical presence of recipients not required
Can be “inventoried”
Information Processing
1. Prepurchase Stage
3. Post-Encounter Stage
Pre-purchase Stage
Customers seek solutions to aroused needs
Using the Internet to compare service offerings and search for independent reviews
and ratings
Customers evaluate service quality by comparing what they expect against what
they perceive
Expectations of good service vary from one business to another, and among
differently positioned service providers in the same industry
Wished-for level of service quality that customer believes can and should be delivered
Zone of Tolerance:
Range within which customers are willing to accept variations in service delivery
High-Contact Services
Low-Contact Services
Where “final assembly” of service elements takes place and service is delivered to
customers
Includes service delivery (as above) and all other contacts between service firm and
customers
Service Marketing System for a High-Contact Service
Service Delivery
System Other Contact Points
Sales Calls
Core Equipment
Misc. Mail, Phone Calls
Service People
Website
Random Exposure to
Facilities/Vehicles
Word of Mouth
Theater as a Metaphor for Service Delivery
“All the world’s a stage and all the men and women merely players. They have their exits
and their entrances and each man in his time plays many parts”
Like actors, employees have roles, may wear special costumes, speak required
lines, behave in specific ways
An Integrative Perspective
Post-Encounter Stage
Future intentions
Prepurchase stage
Role and script theories help us understand and manage customer behavior
during encounters
Post-encounter stage
Customers evaluate service quality by comparing what they expect against what
they perceive
Expectations of good service vary from one business to another, and among
differently positioned service providers in the same industry
Wished-for level of service quality that customer believes can and should be
delivered
Zone of Tolerance:
………………………………………………………………………………………………………………………………………
…………………………………………………………
Seven P's: 4 P's of a tangible good (price, presentation, place, and Promotion) plus 3
P's of an intangible service participants, physical evidence, and process (of service
assembly).
The service marketing mix comprises off the 7’p’s. These include:
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical evidence.
7 Ps of Services Marketing
Marketing services is different from marketing goods, and the marketing tools and practices
developed for goods marketing are often not directly transferable to the marketing of services.
There are several major differences, including:
• Product refers to the creation of a service concept that will offer value to target
customers and satisfy their needs better than competing alternatives. This consists of a
core product that responds to the customer primary need and an array of supplementary
service elements that are mutually reinforcing value-added enhancements that help
customers to use the core product more effectively.
• Place and time may involve physical or electronic channels such as banks now offer
customers a choice of distribution channels including visiting a branch, using a network
of ATMS, doing business by phone or conducting them over the Internet.
• Price and other user outlays are crucial as well. To determine if a particular service is
“worth it”, customers go beyond monetary considerations and assess the outlays of their
time and effort. Thus, service marketers must set prices that target customers are willing
and able to pay and minimize other burdensome outlays that are incurred. These may
include additional monetary expense in traveling, time expenditures, unwanted mental
and physical effort and exposure to negative sensory experiences.
• The process of delivering the service is very often as important as the function of the
service. Operational inputs and outputs can vary widely due to the lack of inventory and
real time interaction involved. Nonetheless, variability can be reduced through careful
design of the customer service process, adopting standardized procedures, implementing
rigorous management of service quality, high standards of training, and automation.
Furthermore, customers are often involved in co-production as partial employees through
self-service, telecommunications and the Internet.
• Characteristics of a Service
• What exactly are the characteristics of a service? How are services different from a
product? In fact many organisations do have service elements to the product they sell, for
example McDonald’s sell physical products i.e. burgers but consumers are also
concerned about the quality and speed of service, are staff cheerful and welcoming and
do they serve with a smile on their face?
1. Lack of ownership.
• You cannot own and store a service like you can a product. Services are used or hired for
a period of time. For example when buying a ticket to the USA the service lasts maybe 9
hours each way , but consumers want and expect excellent service for that time. Because
you can measure the duration of the service consumers become more demanding of it.
2. Intangibility
• You cannot hold or touch a service unlike a product. In saying that although services are
intangible the experience consumers obtain from the service has an impact on how they
will perceive it. What do consumers perceive from customer service? the location, and
the inner presentation of where they are purchasing the service?.
3. Inseparability
• Services cannot be separated from the service providers. A product when produced can
be taken away from the producer. However a service is produced at or near the point of
purchase. Take visiting a restaurant, you order your meal, the waiting and delivery of the
meal, the service provided by the waiter/ress is all apart of the service production process
and is inseparable, the staff in a restaurant are as apart of the process as well as the
quality of food provided.
4. Perishibility
• Services last a specific time and cannot be stored like a product for later use. If travelling
by train, coach or air the service will only last the duration of the journey. The service is
developed and used almost simultaneously. Again because of this time constraint
consumers demand more.
5. Heterogeneity
• It is very difficult to make each service experience identical. If travelling by plane the
service quality may differ from the first time you travelled by that airline to the second,
because the airhostess is more or less experienced.
A concert performed by a group on two nights may differ in slight ways because it is very
difficult to standardise every dance move. Generally systems and procedures are put into
place to make sure the service provided is consistent all the time, training in service
organisations is essential for this, however in saying this there will always be subtle
differences.
o Information
o Order-taking
o Billing, and
o Payment.
o Consultation
o Hospitality
o Safekeeping
o Dealing with exceptions.
Core Product
Central component that supplies the principal, problem-solving
Benefits customers seek
Supplementary Services
Augment the core product, facilitating its use and enhancing its
Value and appeal
In this chapter, we address the question, what should be the core and
supplementary elements of our service product? The core addresses the customer’s
need for a basic benefit – such as transportation to a desired location, resolution of
a specific health problem, or repair of malfunctioning equipment.
As an industry matures and competition increases, there’s a risk that prospective
customers may view competing core products as commodities that are
indistinguishable from each other.
At the center benefit that addresses the basic customer need, with links to a series
of other service characteristics. Surrounding the molecules is a series of bands
representing price, distribution, and market positioning (communication messages).
The molecule model helps identify the tangible and intangible elements involved
in service delivery.
Identifying and Classifying Supplementary Services
The more we examine different types of core services, the more we find that
most of them have many supplementary series in common. There are dozens of
different supplementary services, but almost all of them can be classified into one
of the following eight clusters.
o Information
o Order taking
o Billing
o Payment
o Consultation
o Hospitality
o Safekeeping
o Exceptions
These eight clusters are displayed as petals surrounding the center of a flower,
which we call the Flower of Service.
Information
To obtain full value from any service experience, customers need relevant
information. New customers and prospects are especially information hungry.
Customers needs may include directions to the physical location where the product
is sold (or details of how to order it by telephone or Website), service hours, prices,
and usage instructions. Some information is required by law like notifications of
changes, reminders, warnings, and conditions of sale and use. Customers may want
documentation of what has already taken place, such as confirmation of
reservations, receipts and tickets, and monthly summaries of account activity.
Companies should make sure the information they provide is both timely and
accurate; if it’s not, customers may be annoyed or inconvenienced.
Order Taking
Once customers are ready to buy, companies must have effective supplementary
service processes in place to handle applications, orders, and reservations. The
process of order taking should be polite, fast, and accurate so that customers do not
waste time and endure unnecessary mental or physical effort.
Certain companies need to receive information about the potential clients, with
that information they can decide to either provide services or not. I.G. would be
universities, banks, insurance companies, and utilities, and other.
Billing
Customers usually expect bills to be clear and informative, and itemized in a way
that makes it clear how the total was computed.
Marketing Research can help companies design user-friendly bills by identifying
what information customers want and how they would like it to be organized.
Busy customers hate to be kept waiting for a bill. Some service providers offer
express checkout options, taking customers’ credit card details in advance and
documenting changes later by mail.
Payment
A bill requires the customer to take action on payment. Bank statements are an
exception, since they detail charges that have already been deducted from the
customer’s account. Ease and convenience is what customers expect.
To ensure that people actually pay what they owe, some services employ control
systems, such as ticket collection before entering a movie theater or boarding a
train. Those collecting those tickets must be trained to be polite and professional, so
that the customer does not feel harassed.
Consultation
Hospitality
Safekeeping
While visiting a service site, customers often want assistance with their personal
possessions.
Additional safekeeping services are directed at physical products that customers
buy or rent.
Exceptions
Exceptions involve supplementary services that fall outside the routine of normal
service delivery. Astute businesses anticipate exceptions and develop contingency
plans and guidelines in advance.
1. Special requests. There are many circumstances when a customer may request
service that requires a departure from normal operating procedures.
2. Problem Solving. Situations arise when normal service delivery fails to run
smoothly as a result of accidents, delays, equipment failures, or customer
experiencing difficulty in using the product.
Order-Taking
Applications
• Memberships in clubs/programs
• Subscription services (e.g., utilities)
• Prerequisite based services (e.g., financial credit, college enrolment)
Order Entry
• Seats/tables/rooms
• Vehicles or equipment rental
• Professional appointments
Billing
• Periodic statements of account activity
• Invoices for individual transactions
• Verbal statements of amount due
• Self-billing (computed by customer)
• Machine display of amount due
Payment
Self-Service
Hospitality
Greeting Food and beverages Toilets and washrooms Waiting facilities and amenities
Safekeeping
Caring for Possessions Customer Bring with Them
• Packaging
• Pickup
• Transportation and delivery
• Installation
• Inspection and diagnosis
• Cleaning
• Refueling
• Preventive maintenance
• Repair and renovation
Exceptions
Special Requests in Advance of Service Delivery
• Children’s needs
• Dietary requirements
• Medical or disability need
• Religious observances
• Complaints
• Compliments
• Suggestions
Problem Solving
Brands Inc. adopts the house of brands strategy, with more than
35,000 restaurants in 110 countries. While we may not have
heard of Yum! Brands, many certainly are familiar with their
restaurant brands—A & W, KFC, Pizza Hut, Taco Bell, and Long
John’s Silver. Each of these brands is actively promoted under
their own brand name.
“Branded House”
e.g., Virgin Group
Subbrands
e.g., Raffl es Class at
Singapore Airlines
Endorsed Brands
e.g., Starwood
Hotels & Resorts
“House of Brands”
e.g., Yum! Brands
What it costs a customer (other than money) to buy aproduct, including the
time spend on shopping and the risk taken in the assumption that the product will
deliver expected or promised benefit.
Non-monetary costs refer to the time spent undertaking the journey. Time is converted to a money value
using a value of time figure, which usually varies according to the traveller's income and the purpose of
the trip.
3. Setting clear boundaries for policy, ownership, regulation, service specification and operational delivery
4. Establishing effective levers to incentivise and influence performance and outcomes, focusing more closely on the
needs of service users
3. PRICING STRATEGY
Price planning that takes into view factors sucha firm'soverall marketing objectives, con
sumer demand, productattributes, competitors' pricingand market and economictrends.
PREMIUM PRICING.
USE A HIGH PRICE WHERE THERE IS A UNIQUENESS ABOUT THE PRODUCT OR SERVICE . THIS APPROACH
IS USED WHERE A A SUBSTANTIAL COMPETITIVE ADVANTAGE EXISTS. SUCH HIGH PRICES ARE CHARGE
FOR LUXURIES SUCH AS CUNARD CRUISES, SAVOY HOTEL ROOMS, AND CONCORDE FLIGHTS .
PENETRATION PRICING.
THE PRICE CHARGED FOR PRODUCTS AND SERVICES IS SET ARTIFICIALLY LOW IN ORDER TO GAIN
MARKET SHARE . ONCE THIS IS ACHIEVED, THE PRICE IS INCREASED. THIS APPROACH WAS USED BY
ECONOMY PRICING.
THIS IS A NO FRILLS LOW PRICE. THE COST OF MARKETING AND MANUFACTURE ARE KEPT AT A
MINIMUM . SUPERMARKETS OFTEN HAVE ECONOMY BRANDS FOR SOUPS, SPAGHETTI, ETC.
PRICE SKIMMING.
CHARGE A HIGH PRICE BECAUSE YOU HAVE A SUBSTANTIAL COMPETITIVE ADVANTAGE . HOWEVER, THE
ADVANTAGE IS NOT SUSTAINABLE . THE HIGH PRICE TENDS TO ATTRACT NEW COMPETITORS INTO THE
MARKET , AND THE PRICE INEVITABLY FALLS DUE TO INCREASED SUPPLY . MANUFACTURERS OF DIGITAL
WATCHES USED A SKIMMING APPROACH IN THE 1970S. ONCE OTHER MANUFACTURERS WERE TEMPTED
INTO THE MARKET AND THE WATCHES WERE PRODUCED AT A LOWER UNIT COST , OTHER MARKETING
PREMIUM PRICING, PENETRATION PRICING, ECONOMY PRICING, AND PRICE SKIMMING ARE THE FOUR
MAIN PRICING POLICIES/ STRATEGIES. THEY FORM THE BASES FOR THE EXERCISE . HOWEVER THERE ARE
OTHER IMPORTANT APPROACHES TO PRICING .
PSYCHOLOGICAL PRICING.
THIS APPROACH IS USED WHEN THE MARKETER WANTS THE CONSUMER TO RESPOND ON AN EMOTIONAL ,
RATHER THAN RATIONAL BASIS. FOR EXAMPLE 'PRICE POINT PERSPECTIVE' 99 CENTS NOT ONE DOLLAR.
THE RANGE . FOR EXAMPLE CAR WASHES. BASIC WASH COULD BE $2, WASH AND WAX $4, AND THE
WHOLE PACKAGE $6.
OPTIONAL 'EXTRAS' INCREASE THE OVERALL PRICE OF THE PRODUCT OR SERVICE. FOR EXAMPLE
AIRLINES WILL CHARGE FOR OPTIONAL EXTRAS SUCH AS GUARANTEEING A WINDOW SEAT OR RESERVING
CONSUMER IS CAPTURED . FOR EXAMPLE A RAZOR MANUFACTURER WILL CHARGE A LOW PRICE AND
RECOUP ITS MARGIN ( AND MORE ) FROM THE SALE OF THE ONLY DESIGN OF BLADES WHICH FIT THE
RAZOR .
PROMOTIONAL PRICING.
PRICING TO PROMOTE A PRODUCT IS A VERY COMMON APPLICATION . THERE ARE MANY EXAMPLES OF
PROMOTIONAL PRICING INCLUDING APPROACHES SUCH AS BOGOF (BUY ONE GET ONE FREE).
GEOGRAPHICAL PRICING.
GEOGRAPHICAL PRICING IS EVIDENT WHERE THERE ARE VARIATIONS IN PRICE IN DIFFERENT PARTS OF
THE WORLD . FOR EXAMPLE RARITY VALUE , OR WHERE SHIPPING COSTS INCREASE PRICE .
VALUE PRICING.
THIS APPROACH IS USED WHERE EXTERNAL FACTORS SUCH AS RECESSION OR INCREASED COMPETITION
FORCE COMPANIES TO PROVIDE ' VALUE ' PRODUCTS AND SERVICES TO RETAIN SALES E . G . VALUE MEALS
AT MCDONALDS.
Predatory pricing
(also known as destroyer pricing) is the practice of a firm selling a product at very low price with
the intent of driving competitors out of the market, or create a barrier to entry into the market for
potential new competitors. If the other firms cannot sustain equal or lower prices without losing
money, they go out of business. The predatory pricer then has fewer competitors or even a
monopoly, allowing it to raise prices above what the market would otherwise bear.
In many countries, including the United States, predatory pricing is considered anti-competitive
and is illegal under antitrust laws. However, it is usually difficult to prove that a drop in prices is
due to predatory pricing rather than normal competition, and predatory pricing claims are difficult
to prove due to high legal hurdles designed to protect legitimate price competition.
Limit Pricing
A Limit Price is the price set by a monopolist to discourage economic entry into a market, and is illegal
in many countries. The limit price is the price that the entrant would face upon entering as long as the
incumbent firm did not decrease output. The limit price is often lower than the average cost of
production or just low enough to make entering not profitable.
Loss Leader
In marketing, a loss leader (also called a key value item in the United Kingdom) is a type of pricing
strategy where an item is sold below cost in an effort to stimulate other, profitable sales. It is a kind of
sales promotion.
OR
• 1 Competition-based pricing
• 2 Cost-plus pricing
• 3 Creaming or skimming
• 4 Limit pricing
• 5 Loss leader
• 6 Market-oriented pricing
• 7 Penetration pricing
• 8 Price discrimination
• 9 Premium pricing
• 10 Predatory pricing
• 12 Psychological pricing
• 13 Dynamic pricing
• 14 Price leadership
• 15 Target pricing
• 16 Absorption pricing
• 17 High-low pricing
• 19 Marginal-cost pricing
Introduction
Revenue management (also called yield management) involves managing a
¯rm's
demand-side decisions (e.g. segmentation, pricing and availability) to
maximize rev-
enues. It has gained attention recently as one of the most impactful areas of
operations
management (OM) and operations research (OR). It has grown from its
origins as a
relatively obscure practice among a handful of major airlines in the post-
deregulation
era here in the U.S. (about 1978), to its status today as a mainstream
business prac-
tice, with its own supporting industry of established consulting ¯rms and
range of
industry users from Walt Disney Resorts to National Car Rental. Major airlines
including American, British Air, Continental, Lufthansa, Northwest and SAS
have
large sta®s of developers and OR analysts working on revenue
management. Ma-
jor consulting/software ¯rms such as PROS, Sabre and Tallus (now merged
with
Manugistics) each have over 400 professionals devoted to their revenue
management
practices, working on a range of activities from business consulting to
software devel-
opment to OR methodology.
Objectives
This course provides a comprehensive introduction to both the theory and
the prac-
tice of revenue management and pricing. Fundamentally, revenue
management is an
applied discipline; its value derives from the business results it achieves. At
the same
time, it has strong elements of an applied science and the technical
elements of the
subject deserve rigorous treatment. The plan of this course is to cover both
these
practice and theory elements.
u Prices must be set with barriers such that the segment willing
to pay more is not able to pay the lower price
u The amount of the asset reserved for the higher price segment
is such that the expected marginal revenue from the higher
priced segment equals the price of the lower price segment
u RH(CH) = pL
u O = F-1(s*,m(L+O),s(L+O))
u = NORMINV(s*,m(L+O),s(L+O))
u Given that both the spot market price and the purchaser’s
need for the asset are uncertain, a decision tree approach as
discussed in Chapter 6 should be used to evaluate the amount
of long-term bulk contract to sign
u For the simple case where the spot market price is known but
demand is uncertain, a formula can be used
u cB = bulk rate
u p* = probability that the demand for the asset does not exceed
Q*
u Q* = F-1(p*,m,s) = NORMINV(p*,m,s)
YIELD MANAGEMENT
Yield management is the process of understanding, anticipating and influencing consumer behavior in
order to maximize yield or profits from a fixed, perishable resource (such as airline seats or hotel room
reservations).
2. Commitments need to be made when future demand is uncertain (we must set aside
rooms for business customers – “protect” them from low-priced leisure travelers -
before we know how many business customers will arrive).
3. The firm can discriminate among customer segments, and each segment has different
demand curves (purchase restrictions and refundability requirements help to segment
the market between leisure and business customers. The latter are more indifferent to
the price.).
4. The same unit of capacity can be used to deliver many different products or services
(rooms are essentially the same, whether used by business or leisure travelers).
5. Producers are profit-oriented and have broad freedom of action (in the hotel industry,
withholding rooms from current customers for future profit is not illegal or morally
irresponsible. On the other hand, such practices would be questionable in emergency
wards or with organ transplants).
Complications and Extensions
There are a wide variety of complications we face when implementing a yield
management system. Here we discuss a few of the more significant challenges.
Demand Forecasting
In the examples above, we used historical demand to predict future demand. In an actual
application, we may use more elaborate models to generate demand forecasts that take
into account a variety of predictable events, such as the day of the week, seasonality, and
special events such as holidays. In some industries, such as retail clothing, greater weight is
given to the most recent demand patterns since customer preferences change rapidly.
Another natural problem that arises during demand forecasting is censored data, i.e.,
company often does not record demand from customers who were denied a reservation.
In our example in Sections 3-5 used a discrete, empirical distribution to determine the
protection level. A statistical forecasting model would generate a continuous distribution,
such as a Normal or t distribution. Given a theoretical distribution and its parameters,
such as the mean and variance, we would again place the protection level where the distribution
has a cumulative probability equal to the critical fractile.
Up to now, we have assumed that all units of capacity are the same; in our Hyatt example
we assumed that all 210 hotel rooms were identical. However, rooms often vary in size
and amenities. Airlines usually offer coach and first-classes. Car rental firms offer
subcompact, compact, and luxury cars. In addition, car rental firms have the opportunity
to move capacity among locations to accommodate surges in demand, particularly when a
central office manages the regional allocation of cars. The EMSR framework described
above can sometimes be adapted for these cases, but the calculations are much more
complex. Solving such problems is an area of active research in the operations
community.
While two leisure travelers may be willing to pay the same price for a particular night’s
stay, one may be staying for just one day while the other may occupy the room for a week.
A business traveler on an airplane flight may book a ticket on just one leg or may be
continuing on multiple legs. Not selling a ticket to the latter passenger means that revenue
from all flight legs will be lost.
OR
Yield management is the umbrella term for a set of strategies that enable capacity-constrained service
industries to realize optimum revenue from operations. The core concept of yield management is to
provide the right service to the right customer at the right time for the right price. That concept
involves careful definition of service, customer, time, and price. The service can be defined according
to the dimensions of the service, how and when it is delivered, and how, when, and whether it is
reserved. Timing involves both the timing of the service delivery and the timing of when the customer
makes known the desire for the service, whether by reservation or by walking in to the business. Price
can be set according to the timing of the service, the timing of the reservation, the type of service, or
according to other rules that seem appropriate. Finally, the customer can be defined according to
demand characteristics relating to the service, the timing, and the price. The ideal outcome of a
revenue management strategy is to match customers' time and service characteristics to their
willingness to pay-ensuring that the customer acquires the desired service at the desired time at an
acceptable price, while the organization gains the maximum revenue possible given the customer and
business characteristics.
The strategic levers of yield management can be summarized as four Cs: namely, calendar, clock,
capacity, and cost. They are bound together by a fifth C: the customer. The strategic levers of yield
management are geared to matching service timing and pricing to customers' willingness to pay for
service in relation to its timing. Based on customers' demand levels and characteristics, management
can shift the demand of those customers who are relatively price sensitive but time insensitive to off-
peak times. Shifting that demand clears prime times for customers who are relatively time sensitive
but price insentive.
Channels for services are often direct- from creator of the service directly to the customer
Services cannot be owned, there are no titles or rights to most services that can passed along a delivery channel
Inventories cannot exist, making warehousing a dispensable function
Provide retailing function for customers because they represent multiple service principals.
Benefits
Company has control over the outlets thus owner can maintain consistency in service provision
Control over hiring, firing, and motivating employees
Allow expansion or contraction of sites without being bounded by contractual agreements
Owns the customer relationship
Challenges
Large companies are rarely experts in local market. When adjustments are needed in business formats for
different markets, they may be unaware of what these adjustments should be
Service partnerships – they are very much like company owned channels except that they have multiple
owners. e.g.: Jet & Kingfisher
Leveraged business format for greater expansion and revenues- increased revenues, market share, brand
name recognition and economies of scale for Franchisors
Franchisees must contribute their own capital for equipment and personnel, thereby bearing part of the
financial risk of doing business.
They receive benefit of national or regional brand marketing expertise as well as established reputation
Inconsistent quality that may undermine the company’s image, reputation and brand name
Customer relationships are controlled by the franchisee rather than the franchisor
Encroachment – the opening of new units near existing ones without compensation to the existing
franchisee
High fees
Benefits
Customer choice – agents provide retailing service (assorted services of multiple service providers) for
customers
Challenges
ELECTRONIC CHANNELS
Benefits
Challenges
Control Strategies
create standards both for revenues and service performance, measures results, and compensates or
rewards on basis of performance level
Empowerment Strategies
Partnering with intermediaries to learn together about end customers, set specifications, improve delivery,
and communicate honestly
Alignment of company and intermediary’s goals
Consultation & Cooperation
OR
Product distribution (or place) is one of the four elements of the marketing mix. An organization or set
of organizations (go-betweens) involved in the process of making a product or service available for use or
consumption by a consumer or business user.
The other three parts of the marketing mix are product, pricing, and promotion.
Distribution is also a very important component of Logistics & Supply chain management. Distribution in
supply chain management refers to the distribution of a good from one business to another. It can be
factory to supplier, supplier to retailer, or retailer to end customer. It is defined as a chain of
intermediaries, each passing the product down the chain to the next organization, before it finally reaches
the consumer or end-user. This process is known as the 'distribution chain' or the 'channel.' Each of the
elements in these chains will have their own specific needs, which the producer must take into account,
along with those of the all-important end-user.
Channels
A number of alternate 'channels' of distribution may be available:
Distribution channels may not be restricted to physical products alice from producer to consumer in
certain sectors, since both direct and indirect channels may be used. Hotels, for example, may sell their
services (typically rooms) directly or through travel agents, tour operators, airlines, tourist boards,
centralized reservation systems, etc. process of transfer the products or services from Producer to
Customer or end user.
There have also been some innovations in the distribution of services. For example, there has been an
increase in franchising and in rental services - the latter offering anything from televisions through tools.
There has also been some evidence of service integration, with services linking together, particularly in
the travel and tourism sectors. For example, links now exist between airlines, hotels and car rental
services. In addition, there has been a significant increase in retail outlets for the service sector. Outlets
such as estate agencies and building society offices are crowding out traditional grocers from major
shopping areas.
Channel decisions
Channel Sales is nothing but a chain for to market a product through different sources.
Channel strategy
Gravity & Gravity
Push and Pull strategy
Product (or service)
Cost
Consumer location
1. Intensive distribution - Where the majority of resellers stock the 'product' (with
convenience products, for example, and particularly the brand leaders in
consumer goods markets) price competition may be evident.
2. Selective distribution - This is the normal pattern (in both consumer and industrial
markets) where 'suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized dealers (typically
only one per geographical area) are allowed to sell the 'product'.
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary sales and service support.
Motivating the owners and employees of the independent organizations in a distribution chain requires
even greater effort. There are many devices for achieving such motivation. Perhaps the most usual is
`incentive': the supplier offers a better margin, to tempt the owners in the channel to push the product
rather than its competitors; or a compensation is offered to the distributors' sales personnel, so that they
are tempted to push the product. Julian Dent defines this incentive as a Channel Value Proposition or
business case, with which the supplier sells the channel member on the commercial merits of doing
business together. He describes this as selling business models not products.
In much the same way that the organization's own sales and distribution activities need to be monitored
and managed, so will those of the distribution chain.
In practice, many organizations use a mix of different channels; in particular, they may complement a
direct salesforce, calling on the larger accounts, with agents, covering the smaller customers and
prospects. These channels show marketing strategies of an organization. Effective management of
distribution channel requires making and implementing decision in these areas.
Objectives
o Productive resources
o Competitors
• Explain strategies for involving service customers effectively to increase both quality and
productivity
disruptive behaviors
causing delay
excessive crowding
incompatible needs
mere presence
socialization/friendships
(1) Productive Resources (2) Contributors to Quality and Satisfaction (3) Competitors
• key issue:
CUSTOMERS AS COMPETITORS
• customers may “compete” with the service provider
o expertise
o resources
o time
o economic rewards
o psychic rewards
o trust
o control
Technology Spotlight
4. Attendant pumps gas and customer pays at the pump with automation
6. Attendant pumps gas and attendant takes payment at the pump Customer Production Joint Production Firm
Production
Define customers’ jobs - helping himself - helping others - promoting the company 2. Individual differences: not
everyone wants to participate
4. Avoid negative outcomes of inappropriate customer participation Manage the Customer Mix
o low -
o moderate -
inputs:
o high -
customer
SELF-SERVICE TECHNOLOGIES
Self-Service Technologies (SSTs) are technological interfaces allowing customers to produce services
independent of involvement of direct service employee. Self-Service technologies are replacing many
face-to-face service interactions with the intention to make service transactions more accurate,
convenient and faster.
Examples of SSTs
Automatic Teller machines (ATMs), Self pumping at gas stations, Self-ticket purchasing on
the Internet and Self-check-out at hotels
4.P ROMOTION
Promotion is one of the four elements of marketing mix (product, price, promotion, distribution). It is the
communication link between sellers and buyers for the purpose of influencing, informing, or persuading a
potential buyer's purchasing decision.
The specification of five elements creates a promotional mix or promotional plan. These elements are
personal selling, advertising, sales promotion, direct marketing, and publicity. A promotional mix specifies
how much attention to pay to each of the five subcategories, and how much money to budget for each. A
promotional plan can have a wide range of objectives, including: sales increases, new product
acceptance, creation of brand equity, positioning, competitive retaliations, or creation of a corporate
image. Fundamentally, however there are three basic objectives of promotion. These are:
Marketing is the process of strategizing and implementing the ideology, pricing, promotion and
distribution of a product or service and even ideas in order to cater to the needs, wants and
objectives of the customer as well as the enterprise to which the specific product, service or idea
belongs.
Basically marketing has four aspects, the sound combination of which is termed as the marketing
mix or more precisely the four elements of the marketing mix are called the 4 P's of marketing that
consist of product, pricing, place (channels of distribution) and promotion. The last element of the
marketing mix that is promotion is also termed as marketing communications. It is the element that
actually becomes the source of introducing the product to the final consumer that intrigues the
consumer towards the product and motivates him to enquire furthermore about its price and other
vital feature. The role of marketing communications is very important as it is the basic source that
edifies the consumer about the existence of the product on a general basis
OR
MARKETING COMMUNICATION
Marketing communication is a strategic part of the marketing process and not merely a single part
thereof. Communication is the message that is relayed to the customer rather than the nuts and bolts
of the technology that delivers it. Communicating with your customers enables you to deliver your
message to them so that they will react to it.
Communications Reaches the Consumer
Consumers are affected by the communication a brand has with them. This communication as well as
the experience they have adds to the brand's value in the mind of the consumer and builds on their
cognitive and emotional ties to a brand.
Think of it this way: communication is the message that is delivered to the client; marketing is the
means of getting it there. Therefore, communication is not just a part of the marketing mix but also
should be integrated into your customer service process -- from the accounts payable department all
the way through to your sales staff and even the CEO of your company. It is your message to the
customer. The message you wish to communicate with them, your ethos and way of thinking.
Knowing that communication is part of the marketing mix but also your entire company message, you
need to think about what that madjadajkhaessage will be and think about it seriously. As an
organization you should all be delivering the same message and the same ethos. There is little point
being customer friendly and bending over backwards for them on the advertising if the salesperson is
harsh and unmovable. There is no point giving guarantees as a salesperson that your customer
service team is unable to deliver on
A marketing communications mix is the same as a promotion mix and is just another term for
promotion mix. There are five marketing communications to put into the mix: Advertising, Sales
Promotion, Public Relations, Personal Selling, and Direct Marketing. This basically all boils down to a
mix of promotional efforts to bring in sales and increase brand equity.
The elements of the marketing communications mix
Definitions:
When deciding upon your unique marketing communications mix, you should
also consider the Product Life Cycle. Here are some general guideline as to
how and when to emphasize different parts of the mix according to the stages
of a typical product life cycle:
Next let's briefly walk through each of the various parts of the marketing
communications mix
• Personal Selling.
• Sales Promotion.
• Public Relations (and publicity).
• Direct Marketing.
• Trade Fairs and Exhibitions.
• Packaging.
Components
IMPORTANCE OF IMC
Several shifts in the advertising and media industry have caused IMC to develop into a primary
strategy for marketers:
OR
The evolution of this new perspective has two origins. Marketers began to realize that
advertising, public relations, and sales were often at odds regarding responsibilities,
budgets, management input and myriad other decisions affecting the successful
marketing of a brand. Executives in each area competed with the others for resources
and a voice in decision making. The outcome was inconsistent promotional efforts,
wasted money, counterproductive management decisions, and, perhaps worst of all,
confusion among consumers.
Secondly, the marketing perspective itself began to shift from being market oriented to
market driven. Marketing communication was traditionally viewed as an inside-out way
of presenting the company's messages. Advertising was the dominant element in the
promotional mix because the mass media could effectively deliver a sales message to a
mass audience. But then the mass market began to fragment. Consumers became better
educated and more skeptical about advertising. A variety of sources, both controlled by
the marketer and uncontrolled, became important to consumers. News reports, word-
of-mouth, experts' opinions, and financial reports were just some of the "brand
contacts" consumers began to use to learn about and form attitudes and opinions about
a brand or company, or make purchase decisions. Advertising began to lose some of its
luster in terms of its ability to deliver huge homogeneous audiences. Companies began
to seek new ways to coordinate the multiplicity of product and company messages being
issued and used by consumers and others.
ADVERTISING
Through the use of symbols and images advertising can help differentiate products and
services that are otherwise similar. Advertising also helps create and maintain brand
equity. Brand equity is an intangible asset that results from a favorable image,
impressions of differentiation, or consumer attachment to the company, brand, or
trademark. This equity translates into greater sales volume, and/or higher margins, thus
greater competitive advantage. Brand equity is established and maintained through
advertising that focuses on image, product attributes, service, or other features of the
company and its products or services.
Cost is the greatest disadvantage of advertising. The average cost for a 30-second spot
on network television increased fivefold between 1980 and 2005. Plus, the average cost
of producing a 30-second ad for network television is quite expensive. It is not
uncommon for a national advertiser to spend in the millions of dollars for one 30-
second commercial to be produced. Add more millions on top of that if celebrity talent is
utilized.
Credibility and clutter are other disadvantages. Consumers have become increasingly
skeptical about advertising messages and tend to resent advertisers' attempt to
persuade. Advertising is everywhere, from network television, to daily newspapers, to
roadside billboards, to golf course signs, to stickers on fruit in grocery stores. Clutter
encourages consumers to ignore many advertising messages. New media are emerging,
such as DVRs (digital video recorders) which allow consumers to record programs and
then skip commercials, and satellite radio which provides a majority of its channels
advertising free.
PUBLIC RELATIONS
Public relations' role in the promotional mix is becoming more important because of
what Philip Kotler describes as an "over communicated society." Consumers develop
"communication-avoidance routines" where they are likely to tune out commercial
messages. As advertising loses some of its cost-effectiveness, marketers are turning to
news coverage, events, and community programs to help disseminate their product and
company messages. Some consumers may also base their purchase decisions on the
image of the company, for example, how environmentally responsible the company is.
In this regard, public relations plays an important role in presenting, through news
reports, sponsorships, "advertorials" (a form of advertising that instead of selling a
product or service promotes the company's views regarding current issues), and other
forms of communication, what the company stands for.
Direct marketing, the oldest form of marketing, is the process of communicating directly
with target customers to encourage response by telephone, mail, electronic means, or
personal visit. Users of direct marketing include retailers, wholesalers, manufacturers,
and service providers, and they use a variety of methods including direct mail,
telemarketing, direct-response advertising, and online computer shopping services,
cable shopping networks, and infomercials. Traditionally not viewed as an element in
the promotional mix, direct marketing represents one of the most profound changes in
marketing and promotion in the last 25 years. Aspects of direct marketing, which
includes direct response advertising and direct mail advertising as well as the various
research and support activities necessary for their implementation, have been adopted
by virtually all companies engaged in marketing products, services, ideas, or persons.
Direct marketing has become an important part of many marketing communication
programs for three reasons. First, the number of two-income households has increased
dramatically. About six in every ten women in the United States work outside the home.
This has reduced the amount of time families have for shopping trips. Secondly, more
shoppers than ever before rely on credit cards for payment of goods and services. These
cashless transactions make products easier and faster to purchase. Finally, technological
advances in telecommunications and computers allow consumers to make purchases
from their homes via telephone, television, or computer with ease and safety. These
three factors have dramatically altered the purchasing habits of American consumers
and made direct marketing a growing field worldwide.
Direct marketing allows a company to target more precisely a segment of customers and
prospects with a sales message tailored to their specific needs and characteristics.
Unlike advertising and public relations, whose connections to actual sales are tenuous or
nebulous at best, direct marketing offers accountability by providing tangible results.
The economics of direct marketing have also improved over the years as more
information is gathered about customers and prospects. By identifying those consumers
they can serve more effectively and profitably, companies may be more efficient in their
marketing efforts. Whereas network television in the past offered opportunities to reach
huge groups of consumers at a low cost per thousand, direct marketing can reach
individual consumers and develop a relationship with each of them.
Research indicates that brands with strong brand equity are more successful in direct
marketing efforts than little-known brands. Direct marketing, then, works best when
other marketing communication such as traditional media advertising supports the
direct marketing effort.
Direct marketing has its drawbacks also. Just as consumers built resistance to the
persuasive nature of advertising, so have they with direct marketing efforts. Direct
marketers have responded by being less sales oriented and more relationship oriented.
Also, just as consumers grew weary of advertising clutter, so have they with the direct
marketing efforts. Consumers are bombarded with mail, infomercials, and
telemarketing pitches daily. Some direct marketers have responded by regarding privacy
as a customer service benefit. Direct marketers must also overcome consumer mistrust
of direct marketing efforts due to incidents of illegal behavior by companies and
individuals using direct marketing. The U.S. Postal Service, the Federal Trade
Commission, and other federal and state agencies may prosecute criminal acts. The
industry then risks legislation regulating the behavior of direct marketers if it is not
successful in self-regulation. The Direct Marketing Association, the leading trade
organization for direct marketing, works with companies and government agencies to
initiate self-regulation. In March of 2003 the National Do Not Call Registry went into
affect whereby consumers added their names to a list that telemarketers had to
eliminate from their out-bound call database.
DATABASE MARKETING.
Database marketing is a form of direct marketing that attempts to gain and reinforce
sales transactions while at the same time being customer driven. Successful database
marketing continually updates lists of prospects and customers by identifying who they
are, what they are like, and what they are purchasing now or may be purchasing in the
future. By using database marketing, marketers can develop products and/or product
packages to meet their customers' needs or develop creative and media strategies that
match their tastes, values, and lifestyles. Like IMC, database marketing is viewed by
many marketers as supplanting traditional marketing strategies and is a major
component of most IMC programs.
At the core of database marketing is the idea that market segments are constantly
shifting and changing. People who may be considered current customers, potential
customers, and former customers and people who are likely never to be customers are
constantly changing. By identifying these various segments and developing a working
knowledge of their wants, needs, and characteristics, marketers can reduce the cost of
reaching non-prospects and build customer loyalty. Perhaps the most important role of
database marketing is its ability to retain customers. The cumulative profit for a five-
year loyal customer is between seven and eight times the first-year profit.
Sales promotions are direct inducements that offer extra incentives to enhance or
accelerate the product's movement from producer to consumer. Sales promotions may
be directed at the consumer or the trade. Consumer promotions such as coupons,
sampling, premiums, sweepstakes, price packs (packs that offer greater quantity or
lower cost than normal), low-cost financing deals, and rebates are purchase incentives
in that they induce product trial and encourage repurchase. Consumer promotions may
also include incentives to visit a retail establishment or request additional information.
Trade promotions include slotting allowances ("buying" shelf space in retail stores),
allowances for featuring the brand in retail advertising, display and merchandising
allowances, buying allowances (volume discounts and other volume-oriented
incentives), bill back allowances (pay-for-performance incentives), incentives to
salespeople, and other tactics to encourage retailers to carry the item and to push the
brand.
Two perspectives may be found among marketers regarding sales promotion. First, sales
promotion is supplemental to advertising in that it binds the role of advertising with
personal selling. This view regards sales promotion as a minor player in the marketing
communication program. A second view regards sales promotion and advertising as
distinct functions with objectives and strategies very different from each other. Sales
promotion in this sense is equal to or even more important than advertising. Some
companies allocate as much as 75 percent of their advertising/promotion dollars to sales
promotion and just 25 percent to advertising. Finding the right balance is often a
difficult task. The main purpose of sales promotion is to spur action. Advertising sets up
the deal by developing a brand reputation and building market value. Sales promotion
helps close the deal by providing incentives that build market volume.
Sales promotions can motivate customers to select a particular brand, especially when
brands appear to be equal, and they can produce more immediate and measurable
results than advertising. However, too heavy a reliance on sales promotions results in
"deal-prone" consumers with little brand loyalty and too much price sensitivity. Sales
promotions can also force competitors to offer similar inducements, with sales and
profits suffering for everyone.
SPONSORSHIPS.
EXHIBITS.
Personal selling includes all person-to-person contact with customers with the purpose
of introducing the product to the customer, convincing him or her of the product's value,
and closing the sale. The role of personal selling varies from organization to
organization, depending on the nature and size of the company, the industry, and the
products or services it is marketing. Many marketing executives realize that both sales
and non-sales employees act as salespeople for their organization in one way or another.
One study that perhaps supports this contention found that marketing executives
predicted greater emphasis being placed on sales management and personal selling in
their organization than on any other promotional mix element. These organizations
have launched training sessions that show employees how they act as salespeople for the
organization and how they can improve their interpersonal skills with clients,
customers, and prospects. Employee reward programs now reward employees for their
efforts in this regard.
Personal selling is the most effective way to make a sale because of the interpersonal
communication between the salesperson and the prospect. Messages can be tailored to
particular situations, immediate feedback can be processed, and message strategies can
be changed to accommodate the feedback. However, personal selling is the most
expensive way to make a sale, with the average cost per sales call ranging from $235 to
$332 and the average number of sales calls needed to close a deal being between three
and six personal calls.
Sales and marketing management classifies salespersons into one of three groups:
creative selling, order taking, and missionary sales reps. Creative selling jobs require the
most skills and preparation. They are the "point person" for the sales function. They
prospect for customers, analyze situations, determine how their company can satisfy
wants and needs of prospects, and, most importantly, get an order. Order takers take
over after the initial order is received. They handle repeat purchases (straight rebuys)
and modified rebuys. Missionary sales reps service accounts by introducing new
products, promotions, and other programs. Orders are taken by order takers or by
distributors.
INTERNET MARKETING
Just as direct marketing has become a prominent player in the promotional mix, so too
has the Internet. Virtually unheard of in the 1980s, the 1990s saw this new medium
explode onto the scene, being adopted by families, businesses and other organizations
more quickly than any other medium in history. Web sites provide a new way of
transmitting information, entertainment, and advertising, and have generated a new
dimension in marketing: electronic commerce. E-commerce is the term used to describe
the act of selling goods and services over the Internet. In other words, the Internet has
become more that a communication channel; it is a marketing channel itself with
companies such as Amazon.com, CDNow, eBay, and others selling goods via the
Internet to individuals around the globe. In less than 10 years advertising expenditures
on the Internet will rival those for radio and outdoor. Public relations practitioners
realize the value that web sites offer in establishing and maintaining relationships with
important publics. For example, company and product information can be posted on the
company's site for news reporters researching stories and for current and potential
customers seeking information. Political candidates have web sites that provide
information about their background and their political experience.
The interactivity of the Internet is perhaps its greatest asset. By communicating with
customers, prospects, and others one-on-one, firms can build databases that help them
meet specific needs of individuals, thus building a loyal customer base. Because the cost
of entry is negligible, the Internet is cluttered with web sites. However, this clutter does
not present the same kind of problem that advertising clutter does. Advertising and
most other forms of promotion assume a passive audience that will be exposed to
marketing communication messages via the mass media or mail regardless of their
receptivity. Web sites require audiences who are active in the information-seeking
process to purposely visit the site. Therefore, the quality and freshness of content is vital
for the success of the web site.
Marketing communication has become an integral part of the social and economic
system in the United States. Consumers rely on the information from marketing
communication to make wise purchase decisions. Businesses, ranging from
multinational corporations to small retailers, depend on marketing communication to
sell their goods and services. Marketing communication has also become an important
player in the life of a business. Marketing communication helps move products, services,
and ideas from manufacturers to end users and builds and maintains relationships with
customers, prospects, and other important stakeholders in the company. Advertising
and sales promotion will continue to play important roles in marketing communication
mix. However, marketing strategies that stress relationship building in addition to
producing sales will force marketers to consider all the elements in the marketing
communication mix. In the future new information gathering techniques will help
marketers target more precisely customers and prospects using direct marketing
strategies. New media technologies will provide businesses and consumers new ways to
establish and reinforce relationships that are important for the success of the firm and
important for consumers as they make purchase decisions. The Internet will become a
major force in how organizations communicate with a variety of constituents,
customers, clients, and other interested parties.
Integrated Marketing Communication means different things depending on who you ask.
Marketing guru Philip Kotler defined IMC as, "the concept under which a company
carefully integrates and coordinates its many communications channels to deliver
a clear, consistent message".
This concept is expanded on in the 4Cs of IMC which define how various Marketing
Communication Mix tools should be coordinated in the following ways:
Coherence
Do your various marketing communications make sense together as a whole? Each message
within your Marketing Communication Mix should be part of the "bigger picture" in how it
relates to other messages and your core sales and marketing theme.
Consistency
Are your various marketing communications saying the same thing? The messages your
customers receive through your various promotional efforts should not be contradictory and
should all repeat your core sales and marketing theme.
Continuity
How does your marketing message change over time? As well as coordinating
communication tools and messages to be consistent, thought must be given to how the
message you convey evolves through various stages in the sales cycle.
Complementary
How do the sum of the parts of your communication effort come together? The beauty of a
well-managed Integrated Marketing Communication effort is when the complementary
synergy you create overall exceeds any one effort.
OR
Integrated Services Marketing Communications
One major reason that customers may perceive service poorly is the
difference between what a firm promises and what it actually delivers.
The services marketing triangle emphasizes how the customer is the target of
two types of communications:
This involves ensuring that the information sent from the company to
its employees is accurate, complete, and consistent with the messages
presented to customers.
Where service firms are involved, both external communications and interactive
communication channels must be integrated in order to create consistent service
promises.
One main reason for this discrepancy is that the company lacks the
integration needed to make promises that can be fulfilled.
For example, due to demand and supply fluctuations the service may
be possible at one time, but cannot be completed at another time.
When customers are disappointed, they will likely blame the service
provider rather than themselves.
Because service advertising and personal selling promises what people do,
horizontal communication (communication across functions) is critical.
1. Offer Choices
1. Teach Customers to Avoid Peak Demand Periods and Seek Slow Periods
Internet
other forms of tangible communication including the servicescape
advertising
sales presentations
public relations
pricing
service guarantees
customer education
Offer choices
………………………………………………………………………………………………………………
……………………………………………….
Interactive Marketing: it’s the real time marketing were promises are
kept
Internal Marketing: management aids the providers in their ability to
deliver the service promise- recruiting, training, motivating, rewarding, and providing
equipment & technology
Objectives
This chapter’s objectives are to:
Service Culture
It has been suggested that a customer-oriented, service-oriented
organization will have at its heart a service culture. A service culture exists
when:
Front-line employees and those supporting them are critical to the success of
any service organization because:
The triangle shows three interlinked groups that work together to develop,
promote and deliver services. These key players are labelled on the points of
the triangle:
The customers
The service profit chain suggests that there are critical linkages among internal
service quality; employee satisfaction/productivity; the value of services provided to
the customer; and ultimately customer satisfaction, retention and profits
Boundary-Spanning Roles
They provide a link between the external customer and the internal
operations of the organization.
Emotional labour
Emotional Labour
Emotional labour refers to “the labour that goes beyond the physical or
mental skills needed to deliver quality service.”
Sources of Conflict
Quality/Productivity Tradeoffs
Front-line service workers must be both effective and efficient – they are
expected to deliver satisfying service to customers and at the same time be
both cost-effective and productive.
An organization must identify the right people and compete with other
organizations to hire them.
When firms act as marketers in their pursuit of the best employees, they are
better able to attract potential valuable, long-term employees.
One way to attract the best people is to be known as the preferred employer
in a particular industry or location.
• Extensive training
• Attractive incentives
2. Empowering Employees
Promoting Teamwork
Empower Employees
Benefits
Costs
Service Culture
Service blueprinting
• A special kind of flow-chart is called service blueprint, which also includes the line of
visibility, between customers and service provider. In other words, in service
blueprinting, the line of visibility separates activities of the front office, where customers
obtain tangible evidence of the service, from those of the back office, which is out of the
customers’ view.
• The high and low contact parts of the service delivery process are kept physically
separate, but they remain linked by communications. This separation highlights the need
to give special attention to operations above the line of visibility, where customer
perceptions of the service’s effectiveness are formed. Designing an efficient process is
the goal of the back office, but the back office operations have an indirect effect on the
customer because of delays and errors. The blueprinting exercise also gives managers the
opportunity to identify potential fail points and to design foolproof (Poka-Yoke is the
term borrowed from Japan) procedures to avoid their occurrence, thus ensuring the
delivery of high quality service (Fitzsimmons and Fitzsimmons, 1999).
• A process chart gives a more detailed breakdown of the process into tasks, and it
classifies each activity as being either a processing operation, a movement, an inspection,
a delay, or a storage. All those charts can be based on an existing process for a redesign
or a tentative design for a new process (Martinich, 1997). Service blueprinting is chosen
as the most popular and useful tool for service operations analysis. This type of analysis
not only can lead to the elimination of tasks, reduction movements, and simplification of
work, but it can also help to identify opportunities to create work cells or to use more
efficient flow processing for some set of activities. This tool also provides an excellent
communication device for visualizing and understanding the service operation. Shostack
(1984; 1987) was the one who first suggested service blue printing for service process
analysis. He showed how the service process could be modified by using service
blueprinting for a typical shoe repair service and a discount brokerage service. He
proposed a four steps approach for designing a blueprint as:
(1) Identifying processes of service delivery and present them in a diagrammatic form. The
level of details will depend on the complexity and nature of the service.
(2) Identify the fail points. These are stages where things might go wrong. The actions
necessary to correct these must be determined, and systems and procedures developed to
reduce the likelihood of them occurring in the first instance.
(3) Establishing time frame. Set standards against which the performance of the various
steps might be measured. Frequently, this is the time taken.
(4) Analyzing the profitability of the service delivered, in terms of the number of customers
served during a period of time.
• (1) The visual representation makes it easier to determine which activities are truly
necessary,which can be deleted, and which can be modified.
• (2) Customer contact points are clearly identified. This helps to point out activities that
can be performed separately and where opportunities for co processing of activities exist.
• (3) Likely service failure points are identified. This is helpful in developing plans to
minimize the chance of a failure and in identifying possible corrective actions, if failure
does occur.
• (4) The service blueprint is an excellent tool for training workers. They can see what
activities must be performed and how; where failures are most likely to occur and how to
prevent and correct them.
• (5) The blueprint is useful for identifying the equipment and materials needed and how
the service facilities should be spatially arranged to facilitate the services.
• (6) Service blueprints can be reconstructed regularly and used to evaluate and improve
the service system over time, especially as new technologies become available and the
services provided by the system change or expand.
Service blueprinting shares similarities with other process modeling approaches in that it
1) is a visual notation for depicting business processes via symbols that represent actors and
activities,
3) will accommodate links to parallel and sub-process documents and diagrams via other more
internally-focused process modeling tools and languages such as BPMN (Business Process
Modeling Notation) and UML (Unified Modeling Language). However, service blueprinting is
not as complex or as formal as some business process modeling tools such as UML (Siau and
Loo, 2006).
In today's booming service economy, providing customers with high-quality and quick services has been
widely recognised as an essential means of achieving business excellence. To attain a higher quality
level of service than the competitor in the market, Design for Six Sigma (DFSS) has been developed as a
breakthrough strategy for service process design and/or redesign, which is fundamental to the delivery of
service quality to the customer. Meanwhile, a faster time-to-market capability of service can be obtained
through utilising the speed advantage of Lean. Therefore, it is the motivation of this paper for researching
that DFSS when combined with Lean can be synergistic in the upfront design phases of the service
development process
Dell Services’ Process Redesign Service provides value in the following ways:
• Identify process barriers and issues, areas of rework and risk in current environment, and
opportunities for improvement
• Improve operational efficiencies through the redesign of patient care processes, patient care
forms, and nursing documentation tools
• Integrate performance improvement principles with care process redesign activities
1.Task
.Elimination
Resequencing 3.Case Manager
4.Numerical
Involvement
5.Integration
Case Type
Task
Composition
2.Knockout Case
Case Assignment
Extra Resource
Resource
Outsourcing Technology
Task Automation
Control Relocation
Customer
Assignment
Specialist-
Generalist
Interfacing Exception
Parallelism
Flexible
Assignment
Empower
Contract
Reduction
Case-based
Work
Triage
Centralization
Buffering
Split
Responsibility
Trusted
Party
PHYSICAL EVIDENCE MARKETING MIX
There are many examples of physical evidence, including some of the following:
• Packaging.
• Internet/web pages.
• Brochures.
• Furnishings.
• Uniforms.
• Business cards.
• The evidence that is presented during a trial usually plays a major role in the outcome. There are
several types of evidence that can be used. One type, physical evidence, refers to items that can
be brought into a courtroom for observation. Examples of physical evidence include a bloody
shirt, the mold of a foot print, and a bullet casing.
• In many instances, law officials are the first to discover and handle physical evidence. This is
because such items are often obtained from crime scenes, meaning that suspects have not been
named, and therefore no lawyers are involved at that point. The manner in which this type of
evidence is collected and maintained is important because such items can be crucial in winning a
case. If it is not obtained according to procedure or it is damaged, it may be deemed inadmissible
or useless.
• Physical evidence often supersedes other types of evidence because it is commonly less
problematic. For example, testimonial evidence refers to things people say regarding some
aspect of a court case. This type of evidence can be riddled with problems such as false
statements, faulty memory, or hidden agendas.
• The reliability of such evidence can, however, have drastically differing effects. In some
instances, such items can be used to confirm what someone has asserted. In other instances,
they can disprove or cast doubt upon the things that have been said or alleged. For example, a
fingerprint lifted from the crime scene can prove that an individual has indeed visited a place that
he has claimed he never visited. Likewise, a photo of the individual at a certain event can prove
that at the time of a crime he was not at the crime scene.
Servicescape is a concept that was developed by Booms and Bitner to emphasize the impact of the
physical environment in which a service process takes place. If you were to try to describe the differences
a customer encountered when entering a branch of say like McDonald'scompared with a small family
restaurant, the concept of servicescapes may prove useful. Booms and Bitner defined a servicescape as
"the environment in which the service is assembled and in which the seller and customer interact,
combined with tangible commodities that facilitate performance or communication of the service" (Booms
and Bitner, 1981, p. 36).
Physical evidence may be likened to 'landscape'. It includes facilities exterior (landscape, exterior design,
signage, parking, surrounding environment) and facilities interior (interior design & decor, equipment,
signage, layout, air quality, temperature and ambiance). Servicescape along with other tangibles like
business cards, stationery, billing statements, reports, employee dress, uniforms, brochures, web pages
and virtual servicescape forms the 'Physical Evidence' in marketing of services.
Servicescape is not defined as above. The definition above is the definition for physical evidence.
Physical evidence consist of servicescape combined with the tangible elements, so servicescape is a part
of physical evidence.
Service Environments
With the rapid deployment of wireless LAN connectivity in the private and public sectors,
opportunities for businesses to offer services to users moving within their physical
premises with portable computers (including PDAs and smart phones) are increasing. At
the same time, emerging sensing and semantic interpretation technologies enable the
implementation of presence, identity and localization services that are key enablers for the
types of pervasive, context-aware services we envision. Also, a variety of low cost sensors
can easily be embedded in the environment and in user devices.
Possible service providers include companies owning (or operating their business
within) conference / training centers, shopping centers, airports or stations. In the public
sector, government agencies and hospitals provide additional examples of environments
that may provide contextualized services to visitors.
Service users operating in physical service environments may include, members of the
organization owning the environment, who can use the service infrastructure to perform
management tasks, surveillance, and other activities, as well as visitors from outside.
The major classes of services that a physical service environment can deliver include:
• Remote work support: access to personal data stores and services for users visiting
the environment
• Sharing or leasing of networked devices and appliances, e.g. printers, fax machines,
etc.
Personal Device: The user is equipped with a portable personal device (e.g. PDA,
smartphone, wearable computer, or - more generally - a set of interconnected wireless
devices forming a Body Area Network). The device or devices adapt dynamically to
different radio protocols.
Network Architecture: The user moves within a space where heterogeneous wireless
communications islands form an extension of the wired network. User devices interconnect
using ad hoc or infrastructure-based wireless networks. They may also connect to devices,
sensors and services present in the environment.
Service Provisioning: In the envisioned service model, the user moves through
‘environments’ within which she can use local services provided by the environment and
by wireless connectivity resources. These services are delivered by devices embedded
within the environment and by application servers accessible over a network infrastructure.
Another group of potential service providers are other mobile users with whom the user
comes into contact in the environments visited, either in ad hoc mode or via the
environment’s network infrastructure. Applications and services may belong to a
‘personal’ zone (e.g. sharing of data on one’s own PDA). More often they are
environmental (e.g. local information services delivered by an environment). These
services may include both paying services and services that are available free of charge
Modes of Interaction between the User and the Services: The user interacts with
services through a multimodal user interface, which uses the personal device’s resources to
communicate with the user. Alternatively the interface may use I/O devices embedded
within the environment. Communication between the user and services (or other users)
may be mediated by a ‘Personal Agent’ belonging to the user. This is an application with
reasoning capabilities. The task of the Personal Agent is to filter information and provide
intelligent support for the management of interpersonal communications.
OR Service Blueprinting.
• A picture map that visually portrays the service system –
process of delivery
• Breaks down a service into logical components & easily definable tasks &
steps
• Support Processes
Process
Evidence =
• 3. A tool for simultaneously depicting the service process, the points of
customer contact, and the evidence of the service from the customers point
of view
( Service blueprint )
Application…..a few
1. Restaurant service
2. Hotel Stays
Check–in procedures
Room services
Housekeeping
Laundry
Benefits of Blueprinting
Overview
Demonstrate the benefits and risks of yield management strategies in forging
a balance among capacity utilization, pricing, market segmentation, and
financial return.
1.Capacity Constraints
2. Demand Patterns
Predictable cycles
-
• Cross-train employees.
• Schedule vacations.
Service Quality
Service quality involves a comparison of expectations with performance. According to Lewis
and Booms (1983) service quality is a measure of how well a delivered service matches the
customer’s expectations.
Generally the customer is requesting a service at the service interface where the service
encounter is being realized, then the service is being provided by the provider and in the same
time delivered to or consumed by the customer.
The main reason to focus on quality is to meet customer needs while remaining economically
competitive in the same time. This means satisfying customer needs is very important for the
enterprises survive.
Definition
Service quality is a business administration's term and describes the degree of achievement of
an ordered service.
Objective service quality is the concrete measurable conformity of a working result with
the previous defined benefit; since the measurability is remarkable dependent on the
definition's accuracy, a measurable quality criterion easily can turn out as a subjective one.
Subjective service quality is the customers perceived conformity of the working result
with the expected benefit; this perception is overlayed with the customers original
imagination of the service and the service providers talent to present his performance as a
good one.
Parasuraman, Zeithaml and Berry (1985) identified ten determinants of service quality that may
relate to any service:
Competence (Possession of the required skills and knowledge to perform the service:
knowledge and skill of the contact personnel, knowledge and skill of the operational support
personnel, research capability of the organization)
Courtesy (Politeness, respect, consideration and friendliness of the contact personnel:
consideration for the customer's property, clean and neat appearance of public contact
personnel)
Credibility (Trustworthiness, believability and honesty. It involves having the customer's
best interest at heart: company name, company reputation, personal characteristics of the
contact personnel)
Security (Freedom from danger, risk or doubt: physical safety, financial security,
confidentiality)
Access (Approachability and ease of contact: Service is easily accessible, waiting time
to receive service is not extensive, convenient hours of operation, convenient location of
service facility)
Communication (Informing the customers in a language they can understand and
listening to them. It may mean that the company has to adjust its language for different
consumers: explaining the service itself, explaining how much the service will cost,
explaining the tradeoffs between service and cost, assuring the consumer that the problem
will be handled)
Understanding/ knowing the customer (Making the effort to understand the
customer's needs: understanding customer's specific needs, providing individualized
attention, recognizing the customer)
Tangibles (Physical evidence of the service: appearance of physical facilities, tools and
equipments used to provide the service, appearance of personnel and communication
materials, other customers in the service facility)
Reliability (The ability to perform the promised service dependably and accurately:
service is performed right at the first time, the company keeps its promises in accuracy in
billing, in keeping records correctly and in performing the services at the designated time)
Responsiveness (The willingness and/ or readiness of employees to help customers
and to provide prompt service, timeliness of service: mailing a transaction slip immediately,
setting up appointments quickly)
Later they were reduced to five by Parasuraman, Zeithaml and Berry (1988):
Tangibles (Physical evidence of the service: appearance of physical facilities, tools and
equipments used to provide the service, appearance of personnel and communication
materials)
Reliability (The ability to perform the promised service dependably and accurately:
consistency of performance and dependability, service is performed right at the first time,
the company keeps it's promises in accuracy in billing and keeping records correctly,
performing the services at the designated time)
Assurance (The knowledge and courtesy of employees and their ability to convey trust
and confidence: competence (possession of the required skills and knowledge to perform
the service), courtesy (consideration for the customer's property, clean and neat appearance
of public contact personnel), trustworthiness, security (safety and confidentiality))
Service Quality Model of Grönroos Grönroos says that the expectations of the
customer depend on the 5 determinants market communication, image, word of mouth,
customer needs and customer learning. Experiences depends on the techniqal quality
(what/ outcome) and the functional quality (how/process), which are filtered through the
image (who). Both expectations and experiences can create a perception gap.
GAP Model of Parasuraman, Zeithaml and Berry The model says that the expected
service is influenced by the word-of-mouth, the personal needs , past experience and also
by the external communication to customers. A perception gap can appear between the
expected service and the perceived service. This gap is called the GAP 5 (also called the
service quality gap), it occurs if the customer is not satisfied and depends on the other 4
gaps.
The perceived quality depends on the external communication to customers and the service
delivery. The GAP 4 (also called the communication gap) is appearing between the external
communication to customers and the service delivery. It appears when promises do not match
the delivery.
The service delivery depends on the service quality specifications. If they are not match each
other the GAP 3 (also called the service performance gap) appears.
Quality measurement is separated in subjective and objective processes, at which mostly the
customers satisfaction is being measured. Measuring the customers satisfaction is an indirect
way to measure quality.
Objective processes are being subdivided into primary and secondary processes:
During primary processes, test buyings from silent shoppers are being made or normal
customers are being watched.
During secondary processes quantifiable enterprise numbers like amount of complaints
or the amount of given back goods are being analyzed, and with this information
conclusions to quality can be drawn.
Subjective processes are being subdivided into characteristic orientated, incident orientated and
problem orientated processes.
Generally the service design or the service delivery can be improved to achieve a high quality
service.
In order to ensure and increase the conformance quality of services, i.e. the service delivery
happens as designed, various methods are available. Some of these are listed below:
Guaranteeing
Mystery Shopping
Recovering
Setting standards and measuring
Statistical process control
Customer involvement
The figure below shows the "GAP" model of service quality from Parasuraman et al. (Zithaml &
Bitner 1996). This model offers an integrated view of the consumer-company relationship. It is
based on substantial research amongst a number of service providers. In common with the
Grönroos model it shows the perception gap (Gap 5) and outlines contributory factors. In this
case expected service is a function of word of mouth communication, personal need and past
experience, and perceived service is a product of service delivery and external communications
to consumers.
Gap 2
Gap 3
Gap 4
Overpromising
Application:-
This level of detail allows powerful analysis of the contributory factors to a perception
gap at a practical level. The model shows the importance of marketing, business
leadership quality and HR systems in the management of the expectation gap.
MEASURING AND IMPROVING SERVICE QUALITY
• It will enable you to provide services that are more closely aligned with the
expectations of your users.
It will allow you to compare your service quality with peer institutions in an effort to
develop benchmarks (more on benchmarking on Days 13 and 14!) and understand
best practice.
• You first need to decide if you want to measure a specific aspect of your
library and information service (e.g. the provision of information skills
training) or the service as a whole?
• If you are measuring the whole service, you will need indicators from each
aspect of the service: e.g. inter-library loans, literature searching, enquiry
handling, training etc.
• There are also specific tools that can be used to measure service quality in
organisations. For example:
• ISO Standards
• SERVQUAL
• RATER scale.
Examples
8. Security - ensuring service meets health and safety requirements, for staff
and users.
o Mystery shopping
Ongoing surveys of account holders to determine satisfaction in terms of broader relationship issues
RELATIONSHIP MANAGEMENT
Customer Relationships
Defination:-The ways in which your company communicates and deals with existing
customers
When it comes in increasing profits, it's tempting to concentrate on making new sales or
pursuing bigger accounts. But attention to your existing customers, no matter how small
they are, is essential to keeping your business thriving. The secret to repeat business is
following up in a way that has a positive effect on the customer.
Effective follow-up begins immediately after a sale, when you call the customer to say
"Thank you" and find out if he or she is pleased with your product or service. Beyond this,
there are several effective ways to follow up that ensure your business is always in the
customer's mind.
Let customers know what you are doing for them. This can be in the form of a
newsletter mailed to existing customers, or it can be more informal, such as a phone call.
Whichever method you use, the key is to dramatically point out to customers what excellent
service you're giving them. If you never mention all the things you're doing for them,
customers may not notice. You're not being cocky when you talk to customers about all the
work you've done to please them. Just make a phone call and let them know they don't
have to worry because you handled the paperwork, called the attorney or double-checked
on the shipment--one less thing they have to do.
Write old customers personal, handwritten notes frequently. "I was just sitting at my
desk, and your name popped into my head. Are you still having a great time flying all over
the country? Let me know if you need another set of luggage. I can stop by with our latest
models anytime." Or, if you run into an old customer at an event, follow up with a note: "It
was great seeing you at the CDC Christmas party. I'll call you early in the new year to
schedule a lunch."
Keep it personal. Voice mail and e-mail make it easy to communicate, but the personal
touch is lost. Don't count these as a legitimate follow-up. If you're having trouble getting
through, leave a voice-mail message that you want to talk to the person directly or will stop
by his or her office at a designated time.
Remember special occasions. Send regular customers birthday cards, anniversary cards,
holiday cards...you name it. Gifts are excellent follow-up tools, too. You don't have to spend
a fortune to show you care; use your creativity to come up with interesting gift ideas that tie
into your business, the customer's business or his or her recent purchase.
Pass on information. If you read an article, see a new book or hear about an organization
a customer might be interested in, drop a note or make a quick call to let them know.
Consider follow-up calls business development calls. When you talk to or visit old
clients or customers, you'll often find they have referrals to give you, which can lead to new
business.
With all that your existing customers can do for you, there's simply no reason not to stay in
regular contact with them. Use your imagination, and you'll think of plenty of other ideas that
can help you develop a lasting relationship.
OR
Customer relationships are at the heart of every business: how the people who keep your
company afloat are treated.
But too often we see customers as a nuisance, as difficult, even as incidental to the
business.
We all go back to the people and places who make an effort, extend themselves and create
some kind of connection with us.
Because loyalty and trust are built, dealing with those who treat us well is something we
look forward to and appreciate.
In turn, when you manage your customers well they will want to come back; they will want
to deal with you or your company.
They will know that if they present you with a difficulty they're not going to get a blank
stare, you won't get defensive or respond with, "Well, it's not really my problem."
Actually, we believe that if you create good, healthy customer relationships, people will
even forgive you your mistakes (as long as mistakes aren't the norm!).
If you don't have an answer to a complaint, tell the customer you don't have one yet, but
you'll get one.
Of course, there will always be unreasonable customers, but there's no point in assuming
everyone's going to be difficult.
This seems so obvious and simple that it gets overlooked surprisingly often.
To compound things, we often give people what we want to give them (or think they should
want), rather than what they actually need.
By finding out what it is that will support them, you are demonstrating concern and
attentiveness.
If you're able to give your customers what they want, all the better.
When that isn't possible, it's still better to ask and make the try than to stick with your
assumptions, which may or may not be accurate.
But keeping your relationships with other people dynamic means noticing what's going on
with them and offering insight, ideas and support (if needed).
In other words, by adding something they aren't expecting, you create or reinforce a
positive impact.
1. Build your network--it's your sales lifeline. Your network includes business
colleagues, professional acquaintances, prospective and existing customers, partners,
suppliers, contractors and association members, as well as family, friends and people you
meet at school, church and in your community.
Contacts are potential customers waiting for you to connect with their needs. How do you
turn networks of contacts into customers? Not by hoping they'll remember meeting you six
months ago at that networking event. Networking is a long-term investment. Do it right by
adding value to the relationship, and that contact you just made can really pay off.
Communicate like your business's life depends on it. (Hint: And it does! Read on.)
You rarely meet people at the exact moment when they need what you offer. When they're
ready, will they think of you? Only if you stay on their minds. It's easier to keep a connection
warm than to warm it up again once the trail goes cold. So take the time to turn your
network of connections into educated customers.
4. Reward loyal customers, and they'll reward you. According to global management
consulting firm Bain and Co., a 5 percent increase in retention yields profit increases of 25
to 100 percent. And on average, repeat customers spend 67 percent more than new
customers. So your most profitable customers are repeat customers. Are you doing enough
to encourage them to work with you again? Stay in touch, and give them something of value
in exchange for their time, attention and business. It doesn't need to be too much; a coupon,
notice of a special event, helpful insights and advice, or news they can use are all effective.
Just remember: If you don't keep in touch with your customers, your competitors will.
5. Loyal customers are your best salespeople. So spend the time to build your network
and do the follow-up. Today there are cost effective tools, like e-mail marketing, that make
this easy. You can e-mail a simple newsletter, an offer or an update message of interest to
your network (make sure it's of interest to them, not just to you). Then they'll remember you
and what you do and deliver value back to you with referrals. They'll hear about
opportunities you'll never hear about. The only way they can say, "Wow, I met somebody
who's really good at XYZ. You should give her a call," is if they remember you. Then your
customers become your sales force.
OR
With a recognition that existing customers are the source of most companies' profits,
there has been an explosion of interest in understanding customers from a long-term,
relationship view.
Frequently though this "relationship" view just means trying to sell more things to more
customers. If companies are really going to embrace the concept of relationships they
have to understand more about what their customers need and want to build a "shared
future" with their customers.
When we describe customer relationships we have to reflect the fact that is is time
based. It has a past, a present and a future. And going forwards, customers rely on
trust based on past performance. We use the description "shared future" to describe
these type of long-term on-going relationships.
A shared future is a challenging concept since it means that both parties have to
understand how the other will help them get to where they want to go and what has
happened in the past. To commit to one supplier means a customer risks missing out
on a better deal or a better product elsewhere.
And relationships are not always wanted or desirable. In many situations purchasers
would choose to reduce the relationship-overhead to focus on pure cost and value.
Building customer knowledge to understand where and when a relationship approach
adds value is essential in defining the product/service mix. Removing relationship costs,
as discount stores and "DIY sheds" have found, may be more successful than layering
on marginally valued service.
EXTERNAL RELATIONSHIPS
WHY ARE EXTERNAL RELATIONSHIPS NEEDED?
Key external relationships exist with all three tiers of government, industry, clients, all
participants in the education sector, both public and private
and the general community.
Enrich and broaden the organization by keeping it ‘in touch’ with issues and needs in the
broader community.
effectively promote the organization in the market place, to the public and to specific,
identified stakeholders.
Facilitate strategic alliances for mutual advantage both domestically and internationally.
Ensure the organization remains sensitive to the need for a culture that balances internal and
external factors.
Mutual advantage: to conduct our business on a long-term and sustainable basis, founded on
relationships that are mutually advantageous and capable of enduring beyond a single transaction.
Social impact: to respect the quality of life and the economic and social progress of the communities in
which the group operates and, in the context of the board goals, to give support to their advancement.
Human rights: to support the Voluntary Principles on Security and Human Rights. Understanding that
governments have the primary responsibility to promote and protect human rights, the group shares the
common goal of promoting respect for human rights, particularly those set forth in the Universal
Declaration of Human Rights.
Transparency: to deal openly and transparently with shareholders and third parties. The group will set
appropriate external targets in line with its internal targets and report against them periodically. The group
will also act in accordance with the principles of the Extractive Industries Transparency Initiative (EITI).
Government relations and influence: always to conduct business in a manner that does not abuse the
influence that may exist (or be perceived to exist) by virtue of the scope and scale of the group. The group
will engage honourably with all governments in whose jurisdictions it operates but will take no part in
partisan politics.
INTERNAL RELATIONSHIP
There are several drivers for this increased emphasis on internal relationship
management:
• Increased focus on external relationship management has demanded that all the efforts of the
organisation are aligned to meeting the needs of customers in the most effective ways.
• Post merger/acquisition integration has led to more rigorous examination of support services.
• The trend towards outsourcing has prompted debate about the best ways of supporting the
organisation.
• The growing emphasis on customer service and the “internal customer” has raised the stakes.
As Jan Carlson, then the CEO of SAS put it: “If you’re not serving the customer, you better be
serving someone who is”. The heightened expectation of customer service that we have all
experienced as consumers has percolated through into corporate life.
The best internal relationship managers will have invested time to really understand their clients.
They will be able to provide heir own departments not only with accurate information but with
useful insights that can confirm or challenge intended strategies. They will often hear the words
“You seem to understand us better than we understand ourselves!” This understanding will be
demonstrated on three levels:
• The world in which the relationship operates - the big picture
• The client as a business, its goals, its markets, its financial drivers, above all its critically
important issues
• The way it takes decisions - the people, the politics and the procedures
Our most important clients will expect us to invest time in understanding them - and this
investment will produce a substantial return.
Understanding the internal client’s requirements and the ability of the department’s
offer to meet these needs
Understanding the client’s key issues is only part of the challenge. This understanding needs to
be translated into a grasp of how those issues correlate with one’s own department’s core
competence and an analysis of its strengths and weaknesses. The relationship manager needs
to lead a vigorous appraisal of how the current offering stacks up and how it could be improved
or extended to ensure that the solutions remain effective.
Understanding the way the relationship is being managed today; the people, the
processes
All too often the current way of working is unclear. One of the greatest challenges to
relationship management is to make the whole approach transparent and accessible. This is
why over half of our KAM Survey respondents felt the single biggest improvement they could
make in relationship management would be in improved planning and the realisation of plans.
This is mirrored in internal relationship management.
Creating motivating visions and achievable objectives for the relationship and
forming an overall relationship strategy
It is in the nature of business relationships that they have unfulfilled potential for development.
That potential can sometimes be substantial. This can be of benefit to both the department and
its clients. Decisions can be made more quickly. Resources can be allocated appropriately.
Above all individuals see the purpose and end result of their actions and motivation is
significantly improved.
By investing time talking and thinking about the services we offer, we can make a major
contribution to the value we provide our internal customers. In particular service providers are
often unaware of the peripheral aspects of their service that they take for granted but which are
actually seen as hugely valuable by the “customer”. By the same token there may be small
changes in the offering which can make a big difference to provider and customer alike.
The relationship manager needs to exercise leadership but not in the same way as a line
manager. Particularly when working with complex customers they will need to be a highly
effective influencer, persuading those involved in the relationship to stick to the plan. They will
also have to be an astute politician, arguing for resource, trading favours and convincing unit
managers to behave in the interests of the client and the group. They may need to forge a group
of individuals from different departments into a cohesive team with a common purpose and a
consistent way of working. Again this means that the relationship manager needs to be flexible
with strongly developed and transferable people skills.
We have already noted that one of the areas providers highlight is the forming and
implementing of relationship plans. Some of the first real relationship plans we saw in the late
Eighties were so big and unwieldy they must have needed to be delivered to relationship
meetings by truck! However relationship plans often are (at best) written on the back of an
envelope and even more often held in the head of the relationship manager. While there will be
some components common to every relationship plan (vision, objectives, contact matrix, some
form of measurement), the plan should draw on a “box of tools” to create a plan that is
appropriate for the business. These tools might include selection criteria, service analyses, team
role descriptions, processes, relationship protocols and stability indicators, to name just a few)2.
The challenge is to balance the creativity that each relationship manager will want to bring to
their “unique” situation and to have a consistency that allows senior management to interpret a
range of relationships efficiently and usefully.
Finally, there is a compelling need to measure these key relationships better. It is crucial that we
measure more and measure better. One member of Mercuri’s international relationship project
team, Uffe Tollet, put it compellingly: “How many instruments do you have on a bike? Usually
none, perhaps a speedometer. How many on your car? Perhaps ten. How many on a
passenger jet? Hundreds. Tollet goes on to argue the reasons for this: “The faster you go, the
further you travel, the more people involved, the more complex the machinery, the greater the
risk, then the more you need to have a clear picture. This is just as true of relationship
management. We need to measure effectively and clearly, interpreting complex information and
presenting in an understandable way.”
SUPPLIER RELATIONS;
SUPPLIER RELATIONS
Good purchasing practices are integral to small business success,
and few factors are as vital in ensuring sound purchasing
methodologies as the selection of quality suppliers. Indeed,
finding good suppliers and maintaining solid relations with
them can be an invaluable tool in the quest for business
success and expansion. As James Morgan observed
in Purchasing, "for a surprisingly large number of
procurement organizations, suppliers have become an
important factor in their planning. In fact, for many
procurement organizations, suppliers have become their
secret competitive weapon, their hidden resource, their
competitive edge." These competitive gains can manifest
themselves in a wide range of areas, from better prices and
delivery times to increased opportunities to consider and
implement innovative practices. But management consultant
Paul Inglis noted in Purchasing that such improvements will
not be realized without meaningful leadership from business
owners and executives. "Leading companies develop tailored
supply strategies that are directly linked to their corporate
strategies," he said. These leaders emphasize shareholder-
value creation, revenue growth, and cost competitiveness, and
establish specific programs with their key suppliers in order to
ensure that these priorities are addressed. Smart business
leaders, he added, "use suppliers to maximize their own
product competitiveness, going beyond the narrow focus of
cost reduction. Leaders exceed traditional sourcing practices,
adopt new models to fully leverage supplier capabilities, and
further their own position in the marketplace."
SUPPLY CHAINS AND PARTNERSHIPS
In recent years, countless management experts and analysts have touted the
benefits that businesses of all sizes can realize by establishing "partnerships"
with their suppliers. Under such a plan, which is also sometimes referred to as
"supply chain management," distribution channels are set up across
organizations so that all the members of the channel, from suppliers to end
users, coordinate their business activities and processes to minimize their
total costs and maximize their effectiveness in the marketplace. But while this
trend has become more prevalent in today's business environment, it is still
practiced in only spotty fashion in many industries. According to a 1997 A.T.
Kearney survey of business executives, common impediments to establishing
true business partnerships with suppliers include: attachment of greater
importance to other initiatives; comfortable relationships with existing
suppliers; dearth of cross-business unit cooperation; doubts about the benefits
of instituting such practices; lack of cross-functional cooperation; poor
monitoring and control systems; inexperience at managing improvement
programs; and distrust of suppliers. Companies that feature many of these
characteristics typically cling to old competitive bidding practices that center
on perfectly legitimate concerns about price, but at the exclusion of all else.
As a result, these businesses miss out on the many benefits that can accrue
when effective partnering initiatives are established with suppliers. As Morgan
indicated, suppliers can be an important source of information on ways in
which both small and large businesses can improve performance and
productivity. After studying a major mid-1990s buyer survey, he cited five
general categories in which supplier involvement can help buyers compete in
the marketplace:
1. Improvement of products through contributions to product design,
technology, or ideas for producing new products. In most such
instances, suppliers help buyers by pointing out ways in which designs
can be improved or more desirable materials can be used.
2. Improvements in product quality. In addition to providing design
recommendations that result in improved products, suppliers are often
sources of suggestions that allow buyers to hold consistent tolerances in
production.
3. Improvements in "speed to market." "Some of the most significant
contributions in this area came from suppliers to OEM [original
equipment manufacturer] manufacturers," said Morgan. "Typical is the
instance of an equipment maker whose supplier helped cut 30 months
from the design to market schedule."
4. Reductions in total product cost, either through streamlining of work
processes (inventory management, new product design, scheduling, etc.)
or replacement of costly components with less expensive—but still
effective—ones.
5. Improvements in customer satisfaction.
Companies that do not do the necessary legwork, on the other hand, may find
themselves linked to a poor or untrustworthy supplier that can erode a
business's financial fortunes and industry/community reputation in a
remarkably short span of time. "Poor supplier performance is not the only risk
a purchaser faces" in situations where it has linked with a bad supplier,
noted The Economist. "It must also worry about the possibility of a supplier
passing trade secrets to competitors, or, with its newfound abilities, venturing
out on its own. A company that abdicates too many things [to suppliers] may
'hollow' itself out. All of these risks are especially great in fast-moving,
knowledge-intensive industries, which are precisely those for which integrated
supply chains otherwise make the most sense." Given these potential pitfalls,
businesses seeking to establish partnerships with suppliers are urged to
proceed with caution.
EVALUATING SUPPLIERS
A common lament of suppliers is that buyer organizations all too often have
unrealistic expectations about the supplier's ability to anticipate buyer needs.
As one purchasing executive admitted to Purchasing, "In new technology
areas we have great difficulty getting the users in our own company to define
what they want. Most have an attitude of 'I'll know it when I see it.' And many
of these users keep changing their minds."
• end-customer driven
• long-term
• opportunity maximization
• strategic
• both supplier and buyer on both sides share short- and long-term plans
• standardization
• joint ventures
• share data
Partner Selection
• cost
• safety
• quality
• delivery
• environment
• financial stability
• management stability
• continuing improvement
• technological accomplishment
• employee involvement
• supplier relationships
Supplier Development
• purchaser is aware of benefits to both parties that the supplier may not be aware
of
1.CUSTOMER RETENTION
• Inconvenience
• Pricing
• Competition
• Ethical concerns
• Involuntary switching
• Other factors
• Satisfied Customers
• Exploring
• Evaluating
• Establishing Strategies
• Examining feedback
• Decrease in enquiries
• CR tactics are short term in nature while CR strategies create lasting value for
customers
• ■ Competitive advantage
• ■ Ease of implementation
• ■ Projected profitability
• Share-of-customer
• Innovative customer value managers should consider the measures below to gain
additional insight on retention:
• Anticipated regret
• Intent to switch
OR
Customer Retention is the activity that a selling organisation undertakes in order to reduce
customer defections. Successful customer retention starts with the first contact an organisation
has with a customer and continues throughout the entire lifetime of a relationship. A company’s
ability to attract and retain new customers, is not only related to its product or services, but
strongly related to the way it services its existing customers and the reputation it creates within
and across the marketplace.
Customer retention is more than giving the customer what they expect, it’s about exceeding
their expectations so that they become loyal advocates for your brand. Creating customer
loyalty puts ‘customer value rather than maximizing profits and shareholder value at the center
of business strategy’[1]. The key differentiator in a competitive environment is more often than
not the delivery of a consistently high standard of customer service.
Customer retention has a direct impact on profitability. Research by John Fleming and Jim
Asplund indicates that engaged customers generate 1.7 times more revenue than normal
customers, while having engaged employees and engaged customers returns a revenue gain of
3.4 times the norm.
repeat customers or people who buy from you again and again. remember: you
can sell anybody anything once but can you do it again and again? make them
happy and they will return. good luck.
The art of implementing business strategies to an effect that will make clients and
customers keep on patronizing what you have to offer be it a product or your own
services.
On the other hand, to retain customers, you have to employ methods that were
found to be an effective way to do just that for your business. One way of doing
that as a tip is to use promotional items or corporate gifts and distribute them to
all your clients on a level per level basis like from a regular customer to a a
prospect customer. This way, your promotional item or corporate gift helps you
retain customers and at the same time grow them for business profits and higher
return on investment.
CUSTOMER RETENTION
We are talking about actual behavior here, not implied behavior. Being a
35-year-old woman is not a behavior; it’s a demographic characteristic.
Take these two groups of potential buyers who surf the ‘Net:
• People who are a perfect demographic match for your site, but have
never made a purchase online anywhere
• People who are outside the core demographics for your site, but
have purchased repeatedly online at many different web sites
If you sent a 20% off promotion to each group, asking them to visit and
make a first purchase, response would be higher from the buyers (second
bullet above) than the demographically targeted group (first bullet
above). This effect has been demonstrated for years with many types of
Direct Marketing. It works because actual behavior is better at predicting
future behavior than demographic characteristics are. You can tell
whether a customer is about to defect or not by watching their behavior;
once you can predict defection, you have a shot at retaining the customer
by taking action.
Retaining customers means keeping them active with you. If you don't,
they will slip away and eventually no longer be customers. Promotions
encourage this interaction of customers with your company, even if you
are just sending out a newsletter or birthday card.
The truth is, almost all customers will leave you eventually. The trick is
to keep them active and happy as long as possible, and to make money
doing it.
For example, let's say you look at some average customer behavior. You
look at every customer who has made at least 2 purchases, and you
calculate the number of days between the first and second purchases.
This number is called "latency" - the number of days between two
customer events. Perhaps you find it to be 30 days.
This site and the Drilling Down book are all about how to discover,
manage, and listen to customer data. The data is speaking for the
customer, telling you by its very existence (or non-existence) there has
been an action (or non-action) waiting for a reaction.
4. Retention Marketing requires allocating marketing resources.
You have to realize some marketing activities and customers will
generate higher profits than others. You can keep your budget flat or
shrink it while increasing sales and profits if you continuously allocate
more of the budget to highly profitable activities and away from lower
profit activities. This doesn't mean you should "get rid" of some
customers or treat them poorly.
2.CUSTOMER LOYALTY
You build loyalty buy treating your team well so they treat your customers
well. You build it by showing that you care and remembering what they like
and don’t like. You build it by rewarding them for choosing you over your
competitors. You build it by truly giving a damn about them and figuring out
how to make them more success, happy and joyful.
Increased loyalty can bring cost savings to a company in at least six areas:
Five reasons for making a first time customer a life time buyer:
5. Finally, a happy customer s likely to sample your other product lines thus helping you
Each time a customer buys, he progresses through a buying cycle. A first time buyer
goes through five steps:
Stage Two: A prospect is someone who has a need for your product or service and is
able to buy. Although a prospect has not yet purchased from you, he may have heard
about you, read about you, or had someone recommend you to him.
Stage Three: Disqualified Prospect. These are those who don’t need, or do not have the
ability to buy your products
Stage Four: First time customer is one who has purchased from you one time. This
person can be a customer of yours and a customer of your competitor as well.
Stage Five: Repeat customers are people who have purchased from you two or more
times.
Stage Six: A client buys everything you have to sell that he can possibly use. This
person purchases regularly. You have a strong, on going relationship that makes him
immune to the pull of the competition.
Stage Seven: Like a client, an Advocate encourages others to buy from you. He talks
about you and does marketing for you.
OR
The term customer loyalty is used to describe the behavior of repeat customers, as well as
those that offer good ratings, reviews, or testimonials. Some customers do a particular company
a great service by offering favorable word of mouth publicity regarding a product, telling friends
and family, thus adding them to the number of loyal customers. However, customer includes
much more. It is a process, a program, or a group of programs geared toward keeping a client
happy so he or she will provide more business.
Customer loyalty can be achieved in some cases by offering a quality product with a firm
guarantee. Customer loyalty is also achieved through free offers, coupons, low interest rates on
financing, high value trade-ins, extended warranties, rebates, and other rewards and incentive
programs. The ultimate goal of customer loyalty programs is happy customers who will return to
purchase again and persuade others to use that company's products or services. This equates
to profitability, as well as happy stakeholders.
OR
Customer Loyalty has become a catch-all term for the end result of many
marketing approaches where customer data is used. You can
say Relationship Marketing or Database Marketing or Permission
Marketing or CRM, and what you are really talking about is trying to
increase customer loyalty - getting customers to choose to buy or visit
more. Increased customer loyalty is the end result, the desired benefit of
these programs. All of the above approaches have two elements in
common - they increase both customer retention and the LifeTime
Value of customers.
Customer data and models based on this data can tell you which
customers are most likely to respond and become loyal, no matter what
kind of front-end marketing program you are running or how you "wrap it
up" and present it to the customer. The data will tell you who to
promote to, and how to save precious marketing dollars in the process of
creating customers who are loyal to you longer.
For example, let's say you look at your most loyal customers and find on
average they buy or visit at least once every 30 days. So you begin
tracking these customers, and discover 20% of them "skip" their 30 day
activity. In addition, 90% of the 20% who skip never come back. You
are watching the erosion of customer loyalty right before your eyes.
And it's too late to do anything about it, because they're already
gone. You will waste a tremendous amount of money trying to get them
back. You have to develop a way to identify high loyalty customers who
are at risk, and take action before they leave you.
Literally, this includes all those customer needs and wants that are basic to fulfilling the
contract between you and them. For example, customers expect to be treated with courtesy
and respect, and would probably be puzzled (and maybe even insulted) if you asked them if
this was a need. It of course is, and if you don't meet this need, you will cause
DISSATISFACTION. If you meet this basic and obvious need, the best you can hope for is
INDIFFERENCE.
This is where your customer HOPES for something, ASKS for it, but really does not expect
you to provide it. This is your opportunity to provide something beyond their expectations
and by so doing will create DELIGHT. For example, a customer might ask for something that
is usually available only in a premium priced product. Not providing it will unlikely cause
dissatisfaction. Therefore this is an area for particular attention in building a LOYAL
customer base.
This is an area where your expertise in whatever product or service you provide and the
customer's lack of expertise can really pay off! Providing benefits above and beyond what
the customer is even aware of can create a LOYAL customer. This requires you to be really
proactive in suggesting to customers new innovations that they can really benefit from.
Many customers will be even willing to pay extra for this. For example, airbags in
automobiles when first introduced were an innovation that saved lives, but customers had
no way of asking for this innovation, or expecting it, before it became known to them.
To get to the Zone of Loyalty, you must first conquer the other zones...there are no short-
cuts. If your organization is really good at innovations (the key factor in creating Loyalty),
but struggles at reliability (the key factor in creating Satisfaction), then it will end up
struggling in all four zones.
There are five main steps a company can take to reduce the defection rate.
First, the company must define and measure its retention rate. For a
magazine, the renewal rate is a good measure of retention. For a college, it
could be the first-to second –year retention rate, or the class graduation
rate.
Second, the company must distinguish the causes of customer attrition and
identify those that can be managed better. The Forum Corporation analyzed
the customers lost by 14 major companies for reasons other than leaving the
region or going out of business: 15 percent switched because they found
better product; another 15 percent found a cheaper product; and 70 percent
left because of poor or little attention from the supplier. Not much can be done
about customers who leave the region or go out of business, but much can be
done about those who leave because of poor service, shoddy products, or
high prices.
Third, the company needs to estimate how much profit it loses when it loses
customers. In the case of an individual customer, the lost profit is equal to the
customer’s lifetime value—that is, the present value of the profit stream
that the company would have realized if the customer had not defected
prematurely—through some of the calculations outlined above.
Fourth, the company needs to figure out how much it would cost to reduce
the defection rate. As long as the cost is less than the lost profit, the company
should spend the money.
OR
In today’s hyper competitive markets, companies are taking critical steps to reduce defection rates of
customers. First, the company needs to determine and measure its current retention rate, or the rate of
which customers remain as loyal customers. A good example of retention is the renewal of a club
membership at a wholesale store such as Sam’s or BJ’s.
However, companies must be careful in defining the retention rate. For example, measuring the number
of returning college students in their senior year may not be a good indication or accurate measurement
of retention. By the senior year, it is unlikely that a student will transfer schools and risk loosing hard
earnedcredits. Such a measurement may result in a skewed higher retention rate. A more accurate and
reflective retention measurement would be to capture the number of returning sophomores, who have
less to risk in transferring schools at an earlier stage in the educational process.
Accurately measuring retention rates will help evaluate customer satisfaction. If a company experiences
high retention rates, then it appears that they are performing well and have satisfied customers. As a
result, they can increase their focus on acquiring new customers for growth. However, if the retention rate
is low and the defection rate is high, the company should place their main focus on satisfying
customers. The main focus should be reverted to implementing changes to fix the problem in an effort to
satisfy customers through strong customerrelations management.
Once you determine that your retention rate has decreased, the company must act to avoid further
customer defections. A company must, “distinguish the cause of customer attrition and identify those that
can be managed better.” (Kotler and Keller. 2009. pg. 137) A company must determine what they are
doing wrong to cause customers to defect. They must also determine how to make improvements to
avoid further defection and to retain customers on the verge of defection. It is important to realize that
defection isn’t always the result of poor service or inadequate quality. The competition may have
developed a new product or service that your company currently does not offer. If you do not fill this need,
the opportunity to defect will increase as the need and/or desire for this product or service grows in the
mind of the customer.
Whatever the case for defection, a company must act quickly and determine what factors need to be
changed, added, eliminated or adjusted to provide the best possible customer experience. “Listening to
customers is crucial to customer relationship management.” (Kotler and Keller. 2009. pg. 138) Find out
what they want and deliver.
Another important thing that companies must realize is that customer defection is not always a bad
situation. There is a cost associated with servicing customers. Depending on the amount of money spent
within a company, some customers can actually cost the company money to make a sale. Companies
view customers in relations to profitable stature based on purchasing history and the level of attention
required to service. Marketers understand that there are profitable customers and unprofitable
customers. This can be determined by the customers lifetime value (CLV). “In marketing, customer
lifetime value (CLV), a new concept of ‘customer life cycle management’ is the present value of the
future cash flows attributed to the customer relationship. Use of customer lifetime value as a marketing
metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather
than on maximizing short-term sales.”
Understanding the customer lifetime value can better explain why losing some customers is not the end of
the world. The key factor related to defection is to, “compare the lost profit equal to the customer’s lifetime
value from a lost customer to the costs to reduce the defection rate. As long as the cost to discourage
defection is lower than the lost profit, the company should spend the money to try to retain the
customer.” (Kotler and Keller. 2009. pg. 137) In the case where the cost to discourage defection is higher
than the lost profit, the company should accept and allow the loss of the customer.
A company should do everything possible to keep profitable customers. This goal should be expressed as
the key to sales since the cost of finding new customers is far more expensive than retaining current
ones. Progressive companies will adjust sales commissions to include compensation for both new sales
as well as customer retention rates achieved through strong customer relations management by the sales
person. If a company experiences high retention rates, they can adjust their focus on acquiring new
customers in an effort to increase profits and growth. In addition, companies should not overlook the
possibility of new profit growth potential within the current customers. It’s typically easier to cross sell
additional products and services to a current customer than to generate a new sale customer.
By measuring retention rates, making necessary adjustments and evaluating the cost of retention efforts
to profit, a company can increase its chances for profitable operations.
Customer delight
It is very difficult to build long-term relationships with customers if their needs and
expectations are not understood and well met. It is a fundamental precept of modern
customer management that companies should understand customers, and then acquire and
deploy resources to ensure their satisfaction and retention. This is why CRM is grounded on
detailed customer-related knowledge. Customers that you are not able to serve well may be
better served by your competitors.
Customer delight occurs when the customer's perception of their experience of doing
business with you exceeds their expectation.
The second major positive customer retention strategy is to add customer-perceived value.
Companies can explore ways to create additional value for customers. The ideal is to add
value for customers without creating additional costs for the company. If costs are incurred
then the value-adds may be expected to recover those costs. For example, a customer club
may be expected to generate a revenue stream from its membership.
There are three common forms of value-adding programme: loyalty schemes, customer
clubs and sales promotions.
Loyalty schemes
Loyalty schemes reward customers for their patronage. Loyalty schemes or programmes can
be defined as follows:
Customer clubs
Customer clubs have been established by many organizations. A customer club can be defi
ned as follows:
To become a member and obtain benefits, clubs require customers to register. With these
personal details, the company is able to begin and services for them. Clubs can only
succeed if members experience benefi ts they value. Club managers can assemble and offer
a range of value-adding services and products that, given the availability of customer data,
can be personalized to segment or individual level. Among the more common benefi ts of
club membership are access to memberonly products and services, alerts about upcoming
new and improved products, discounts, magazines and special offers.
Sales promotions
Whereas loyalty schemes and clubs are relatively durable, sales promotions offer only
temporary enhancements to customer value. Sales promotions, as we saw in the last
chapter can also be used for customer acquisition. Retention-oriented sales promotions
encourage the customer to repeat purchase, so the form they take is different.
Bonding
The next positive customer retention strategy is customer bonding. B2B researchers have
identified many different forms of bond between customers and suppliers. These include
interpersonal bonds, technology bonds (as in EDI), legal bonds and process bonds. These
different forms can be split into two major categories: social and structural.
The final positive strategy for building customer retention is to build customer engagement.
Various studies have indicated that customer satisfaction is not enough to ensure customer
longevity. For example, Reichheld reports that 65 to 85 percent of recently defected
customers claimed to be satisfi ed with their previous suppliers. Another study reports that
one in ten customers who said they were completely satisfied, scoring ten out of ten on a
customer satisfaction scale, defected to a rival brand the following year. Having satisfi ed
customers is, increasingly, no more than a basic requirement of being in the game.
Challenges
Tools and workflows can be complex, especially for large businesses. Previously these tools
were generally limited to contact management: monitoring and recording interactions and
communications. Software solutions then expanded to embrace deal tracking, territories,
opportunities, and at the sales pipeline itself. Next came the advent of tools for other client-
interface business functions, as described below. These tools have been, and still are, offered
as on-premises software that companies purchase and run on their own IT infrastructure.
Business reputation has become a growing challenge. The outcome of internal fragmentation
that is observed and commented upon by customers is now visible to the rest of the world in the
era of the social customer, where in the past, only employees or partners were aware of it.
Addressing the fragmentation requires a shift in philosophy and mindset within an organization
so that everyone considers the impact to the customer of policy, decisions and actions. Human
response at all levels of the organization can affect the customer experience for good or ill.
Even one unhappy customer can deliver a body blow to a business.
Types/variations
Sales force automation
Sales force automation (SFA) involves using software to streamline all phases of the sales
process, minimizing the time that sales representatives need to spend on each phase. This
allows sales representatives to pursue more clients in a shorter amount of time than would
otherwise be possible. At the heart of SFA is a contact management system for tracking and
recording every stage in the sales process for each prospective client, from initial contact to final
disposition. Many SFA applications also include insights into opportunities, territories, sales
forecasts and workflow automation, quote generation, and product knowledge. Modules for Web
2.0 e-commerce and pricing are new, emerging interests in SFA
Marketing
CRM systems for marketing help the enterprise identify and target potential clients and generate
leads for the sales team. A key marketing capability is tracking and measuring multichannel
campaigns, including email, search, social media, telephone and direct mail. Metrics monitored
include clicks, responses, leads, deals, and revenue. Alternatively, Prospect Relationship
Management (PRM) solutions offer to track customer behavior and nurture them from first
contact to sale, often cutting out the active sales process altogether.
In a web-focused marketing CRM solution, organizations create and track specific web activities
that help develop the client relationship. These activities may include such activities as free
downloads, online video content, and online web presentations.
Appointment
Creating and scheduling appointments with customers is a central activity of most customer
oriented businesses. Sales, customer support, and service personnel regularly spend a portion
of their time getting in touch with customers and prospects through a variety of means to agree
on a time and place for meeting for a sales conversation or to deliver customer service.
Appointment CRM is a relatively new CRM platform category in which an automated system is
used to offer a suite of suitable appointment times to a customer via e-mail or through a web
site. An automated process is used to schedule and confirm the appointment, and place it on
the appropriate person's calendar. Appointment CRM systems can be an origination point for a
sales lead and are generally integrated with sales and marketing CRM systems to capture and
store the interaction.
Integrated/Collaborative
Departments within enterprises — especially large enterprises — tend to function with little
collaboration. More recently, the development and adoption of these tools and services have
fostered greater fluidity and cooperation among sales, service, and marketing. This finds
expression in the concept of collaborative systems that use technology to build bridges between
departments. For example, feedback from a technical support center can enlighten marketers
about specific services and product features clients are asking for. Reps, in their turn, want to
be able to pursue these opportunities without the burden of re-entering records and contact data
into a separate SFA system.
Small business
For small business, basic client service can be accomplished by a contact manager system: an
integrated solution that lets organizations and individuals efficiently track and record
interactions, including emails, documents, jobs, faxes, scheduling, and more. These tools
usually focus on accounts rather than on individual contacts. They also generally include
opportunity insight for tracking sales pipelines plus added functionality for marketing and
service. As with larger enterprises, small businesses are finding value in online solutions,
especially for mobile and telecommuting workers,
Social media
Social media sites like Twitter, LinkedIn and Facebook are amplifying the voice of people in the
marketplace and are having profound and far-reaching effects on the ways in which people buy.
Customers can now research companies online and then ask for recommendations through
social media channels, making their buying decision without contacting the company.
People also use social media to share opinions and experiences on companies, products and
services. As social media is not as widely moderated or censored as mainstream media,
individuals can say anything they want about a company or brand, positive or negative.
Increasingly, companies are looking to gain access to these conversations and take part in the
dialogue. More than a few systems are now integrating to social networking sites. Social media
promoters cite a number of business advantages, such as using online communities as a
source of high-quality leads and a vehicle for crowd sourcing solutions to client-support
problems. Companies can also leverage client stated habits and preferences to "hyper-target"
their sales and marketing communications.
Some analysts take the view that business-to-business marketers should proceed cautiously
when weaving social media into their business processes. These observers recommend careful
market research to determine if and where the phenomenon can provide measurable benefits
for client interactions, sales and support. It is stated that people feel their interactions are peer-
to-peer between them and their contacts, and resent company involvement, sometimes
responding with negatives about that company.
Many include tools for identifying potential donors based on previous donations and
participation. In light of the growth of social networking tools, there may be some overlap
between social/community driven tools and non-profit/membership tools.
Customer Relationship Management
Bottom-line:
– Refers to the net present value of the potential revenue stream for any
particular customer over a # of years
• Customer Ownership
Is CRM New?
No!
Yes!
– Customer Segmentation
– Trend Analysis
• Operational CRM
– Campaign Management
– Tele-Marketing/Tele-Sales
– Remote Access
• Collaborative CRM
– Enterprise Portals
– Customer Access
– Supplier Access
– Personalization
• Help Desk
• Field Service
• Marketing Automation
• Ex. Staples used SFA to integrate catalog, online, in-store sales efforts
directed at its best customers
• 20-25% of CRM
• Gleans customer data from those interactions and records it in SFA for later
use
3. Help Desk
• Mobile service technicians can log information about work orders and service
calls, as well as access information from the remote site.
• Can feed information from customer problems into SFA for salesperson leads.
5. Marketing Automation
• Interfaces with data warehouses and data mining activities to tailor page
views, products, and promotions, so that the right offer goes to the right
person at the right time.
• Commercial E-Communities
– What are people loyal to?
• Families
• Football teams
• Schools
• Clubs
• Cultures
• Countries
• Customerization
Mass Customerization
Marketing
Relationship Customer is Customer is
with customers passive active co-
participant in producer,
process
Customer Researched May not be
needs and articulated
articulated
Product and Marketing Customized
service offering and R&D based on
drive offering customer
interactions
Price Fixed prices Value based
with pricing; customer
discounting determined
Communication Advertising Integrated,
and PR interactive
Distribution Mix of direct Direct (online)
and indirect
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