Introduction to Services Marketing

Why maruti has more sales? 35 km network.

Diffeence in PureIt and Aquaguard?

Case Study? Instead of selling leasing , servicing etc.

Introduction
Service lies at the very HUB of economic activity in

any society. Infrastructure services, such as transportation and communication are the essential links among all sectors of the economy. In an industrialized economy , specialized firm can supply business services to manufacturing firms more cheaply and efficiently than manufacturing firms can supply these services for themselves.

 Government services play a critical role in providing a

stable environment for economic growth. Eg Public education , health care , maintained roads Thus it is imperative to recognize that services are not peripheral activities but rather integral part of the society. They are central to a functioning and healthy economy and lie at the heart of that economy. The service sector not only facilitates but also makes possible the goods producing activities of the manufacturing sectors.

Definition
A Service is any activity or benefit that one party can offer

to another which is essentially intangible and doesnt result in the ownership of anything. Its production may or may not be tied to any physical product.
Definition:- Services are economic activities that create

value and provide benefits for customers at specific times and places, as a result of bringing about a desired change in or on behalf of the recipient of the services. -Christopher Lovelock
An economic activity that does not result in ownership

 The profitability of manufacturers depends on

exploiting value added services.

Eg Bajaj Auto Limited have discovered that financing or Insurance of bikes can achieve significant profits. OTIS Elevators found that revenues from after sales maintenance earns huge profits .

Value Added by Tangible V/S Intangible Elements in Goods and Services

Hi
Salt Soft drinks CD Player New car Tailored clothing Furniture rental Fast food restaurant Plumbing repair Office cleaning Health club Airline flight Retail banking Insurance Weather forecast Intangible Elements

Lo

Hi

Some Service Industries

Hotels- Hospitality Airlines-Transportation Weight Reducing CentersBeauty and Health care Advertising Legal services Hospitals Health care Banking Railway-Public service organization Education Design Services Investment Banking and Securities Dealing

Management Consulting Services

Satellite Telecommunicationstelecom Telemarketing Bureaus Entertainment-Media Tourism

Internal Services
Service elements within an organization that facilitate creation of-or add value to-its final output Includes: accounting and payroll administration recruitment and training legal services transportation catering and food services cleaning and landscaping

Increasingly, these services are being outsourced

Economic Evolution
In 1900 only 3 of every 10 workers were employed in

service sector. In 1950employement in services accounted for 50% of the workforce. Today services employ 8 out of 10 workers.
As nations become industrialized, there is an inevitable

shift of employment from one sector of the economy to another. - Colin Clark

Stages of Economic Development

Preindustrial Society Industrial Society Postindustrial Society

Preindustrial Society Life is characterized as a game against nature. Eg Working with muscle power and labor force engaged in fishing , mining. Life is consolidated by elements such as weather , availability of water , quality of soil. The rhythm of life is shaped by nature . Pace of works varies with seasons. Productivity is low. Little evidence of technology.

Industrial Society Predominant activity is production of goods. The focus is on making more with less. Productivity is defined as = outputs/inputs (within a time period and quality considered) Life is characterized as a game that is played against fabricated nature Eg World of cities and factories. The rhythm of life is machine-paced and rigid working hours. Industrial society is a world of schedule and awareness of value of time. The standard of living becomes measured by quantity of goods.

Postindustrial Society Postindustrial Society is concerned by the quality of life , as measured by services such as health , education and recreation. The central figure is professional person, because rather than energy or physical strength , information is a key resource. Life is a game played among persons. Society becomes aware that the independent actions of individuals can combine to create havoc for everyone. Eg Traffic congestion , Pollution Education becomes the condition for entry into a postindustrial society.

Transformation from Industrial to Postindustrial Society

Transformation from Industrial to Postindustrial Society

It occurs when

1-There is natural development of services , such as transportation and utilities to support industrial development. 2- Labor saving devices are introduced into production process, more workers engage in nonmanufacturing activities. Eg LG, Samsung staff for Maintenance and repair. Bajaj Auto Ltd Special team to educate the dealers to sell bikes. Retail industry requires a lot more people than the manufacturing sector , top sell the final goods to customers.

 3-Growth of the population and mass consumption of

goods increase wholesale and retail trade along with banking, real estate and insurance. 4- As the income increases , the proportion spent on the necessities of food and home decreases, and the remainder creates a demand for durables and then for services. As the income increases the percentage spent on food and durables drops while consumption of services that reflect the desire for a more enriched life increases. Eg Education , Technical skills.

4 categories of Service
Service Industries

Service as Products
Customers Service Derived Service

Service Industries and companies Those companies whose core product is a service. Eg Taj Palace Hotels (Lodging) , Fortis (Health Care) Service as product Represents a wide range of intangible product offering that customers value and pay for in marketplace. Service product are sold by service companies and non service companies. Eg IBM and HP offer IT consulting services, competing with Accenture which is traditional pure service firm.

Customers Service This is a service provided in support of company's core products. Customer service can occur 1-On site In retail mall , an employee helps you to find and desired item. 2-Over phone 3-Via Internet

Derived Service Value derived from physical goods is really the service provided by the good. Eg Razor provides barbering services. Computers provide information and data manipulation services.

Lec 2

Characteristics of Services
Perishability Intangibility Simultaneous Production and Consumption Heterogeneity/Variability-

Characteristics of Services
Perishability Services cant be stored but can be transacted. Eg Sold Air tickets, Railway Tickets, Movie Tickets.
Unused Capacity Is Lost Forever Demand May Be Very Time-Sensitive

How to overcome? # Over marketing #Demand Forecasting # Managing Supply

Service Characteristics

Resulting Marketing Challenges

Intangibility

Difficult for Customer to Evaluate. Customer Does Not Take Physical

Possession. Difficult to Advertise and Display. Difficult to Set and Justify Prices as the actual costs of a unit of service are hard to determine. Service Processes Usually Not Protectable by Patents

Sources: K. Douglas Hoffman and John E. G. Bateson, Essentials of Services Marketing, (Fort Worth: Dryden Press, 1997) pp. 25-38; Valerie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Delivering Quality Service: Balancing Customer Perceptions and Expectations (New York: Free Press, 1990); and Leonard L. Berry and A. Parasuraman, Marketing Services: Competing Through Quality (New York: Free Press, 1991), p. 5.

Simultaneous Production and Consumption Goods are produced first and then sold but, Services are first sold and then produced. Thus customer is present while service is being produced and thus views and may even take part in production process. Service Provider Cannot MassProduce Services. Eg- Hotels, Hospitals. Economies of scale is not possible through centralization.

Production to Consumption The difference between Goods and services

Goods

Production/ Manufacture

Sale/ Transportation

Consumption

Market Communication

Services Marketing Communication

Transaction/Services Delivery + Production of service Consumption/Experience

Heterogeneity/Variability
Variability conveys to the customers an element of

inconsistency and non-standardization in the service. Service offer is never consistent in quality and service.
Heterogeneity results because no 2 customers are precisely

alike., each will have unique demand and experience.

Heterogeneity connected with services is largely the result of

human interaction (between employee and customer). Eg A tax accountant may provide different service experience to 2 different customers, depending on their needs.

The Services Marketing Mix

Elements of The Services Marketing Mix: 8Ps vs. the Traditional 4Ps
Rethinking the original 4Ps Product elements Place and time Promotion and education Price and other user outlays
Adding Four New Elements Physical environment Process People Productivity Quality

Product elements Service products lie at the heart of a firms marketing strategy. If a product is poorly designed, it wont create meaningful value for customers ,even if the rest of the 8 Ps are well executed. Service products consist of a core product that responds to the customers primary need and Eg Making a call from cell phone. an array of supplementary service elements that help customers to use the core product effectively as well as adding value through welcomed enhancements. Eg 3g

Place and time Delivering product elements to customers involves decisions on where and when to deliver the product. Delivery may involve use of physical or electronic channel (or both) , depending on the nature of the service. Firms may deliver service directly to end user or through intermediary organizations, such as retailer outlets that receive fee or commission , to perform certain tasks associated with sales , service and customer contact. Eg Mobile Dealers get Rs 100 for every sim card sold. Speed and convenience of place and time have become important determinants of effective service delivery. Eg Reliance 3G.

Price and Other User Outlays For suppliers pricing strategy is the financial mechanism through which income is generated to offset the costs of providing service and create a surplus of profits. Pricing strategy is often highly dynamic with price levels being adjusted over time according to such factors as Type of customers (Lawyers charge dif fees) Time and Place of delivery (Doctors charge high for home visit) Level of demand. (Air fares shooting up in month of December) Available of capacity.

 Customers see price as a key part of the costs they must

incur to obtain wanted benefits.

To calculate whether a particular service is WORTH IT ,

they may go beyond just money and also assess the outlays of their time and effort.
These outlays may include additional monetary costs

(Such as travel expenses to a service location), time expenditures , physical efforts .

1.

2.
3.

1. 2. 3.

Promotion and Education This component provides 3 vital roles Providing needed information and advice. Persuading target customers, of the merits of a specific brand or service product. Encouraging them to take action at specific times. In service marketing , much communication is educational in nature , especially for new customers. Suppliers need to teach customers about the Benefits of service Where and when to obtain How to participate in service processes to get best results.

 Communication may be delivered by individuals such as salespeople, front line staff , at website, on display screens in self service equipments (Eg ATM) Through wide array of advertising media. Promotional activities which include monetary incentive

are often designed to stimulate immediate trail purchases or to encourage consumption when demand is low.

Process Managers know that , where services are concerned , how a firm does things the underling processes is often as important as what it does , particularly if the product is ordinary one offered by many competitors. Eg What makes Meru Cabs different from other Taxis. So creating and delivering product elements requires design and implementation of effective processes. Customers are often involved in these processes, especially when acting as co producers. Badly designed processes lead to slow , ineffective service delivery and disappointing experience. They also make it difficult for the front line staff to do their jobs well, resulting in low productivity.

Physical Environment The appearance of building , vehicles, interior furnishing , equipments , staff members uniforms, printed materials and other visible cues all provide tangible evidence of a firms quality. Service firms need to manage physical evidence carefully, as it can have a profound impact on customers impressions.

Physical Environment staff members uniforms,

Physical Environment

Physical Environment

People Despite technology advances , many services will always require direct interaction between customers and contact personnel. The nature of these interaction strongly influences how customers perceive service quality. Knowing that (dis)satisfaction with service quality often reflects customers assessments of front line staff, successful service firms devote significant effort to recruit , train and motivate employees. Eg ICICI Bank

Productivity and Quality Though often treated separately , productivity and quality should be seen as 2 sides of same coin.

 Improving productivity

is essential to any strategy for reducing costs, but managers must be ware of making inappropriate cuts in service that will be resented by customers.

 Improving quality

should be defined from customers perspective. Improving quality is essential for productivity differentiation and customer satisfaction.

The Customer Gap

Lec 3

The Customer Gap

The customer Gap is the The Customer Gap
Expected Service Customer Gap

difference between customer expectations and perceptions.

Perceived Service

 Customer expectations are standards or reference points

that the customer bring into the service experience. The sources of customer expectations are marketer controlled factors such as Pricing. Advertising. Sales promotion. Customer perceptions often consists of what a customer believes should or will happen. Eg When you visit an expensive restaurant , you expect a high level of service, one that is considerably superior to the level you would expect in a fast food restaurant.

 Closing the gap between what customers expect and

what they perceive is critical to delivering quality service and it forms the basis for the gap models.
Customer satisfaction and customer focus are critical

to competitiveness of firms, any company interested in delivering quality service must begin with a clear understanding of its customers. Eg Vodafone and SBI credit card has special call centers for priority customers.

1)The sources of customer expectations are marketer controlled factors such as Pricing. Advertising. Sales promotion. 2)Factors that the marketer has limited ability to affect Competitive offerings. Word of mouth communications. Innate(produced by the mind rather than learned through experience) personal needs.

 In perfect world, expectations and perceptions would

be identical : Customers would perceive that they have received what they thought they would and should.
In practice these concepts are often separated by some

distance.
It is a GOAL of service marketing to bridge this

distance.

The Provider Gap

These gaps occur within the organization providing the

service.

This includes Gap 1 The listening Gap Gap 2 The service Design and Standards Gap. Gap 3- The Service Performance Gap. Gap 4 The communication Gap.

Provider Gap The listening Gap

The listening gap , is the difference between customer

expectations of service and company understanding of those expectations.

A primary cause in many firms not meeting customers

expectations is that the firm lacks accurate understanding of what those expectations are.

 Reasons for managers not being aware of what

customers expect 1. They may not interact directly with customers 2. They may be unwilling to ask about expectations 3. They may be unprepared to address them.
When the people with authority and responsibility for

setting priorities do not fully understand customers service expectations, they may trigger a chain of bad decisions and suboptimal resource allocations that result in perceptions of poor service quality.

 The responsibility for the first provider gap has been

broaden from managers to employees in organization.

In today's changing organizations , the authority to

make adjustments in service delivery is often delegated to empowered teams and frontline people.

Key Factors Leading to Provider Gap 1 :The listening Gap

Customer Expectations

Inadequate marketing research

Gap 1

orientation Lack of upward communication Insufficient relationship focus

Focus on transactions rather than relationship Focus on new customers rather than

relationship customers

Inadequate service recovery

Company perceptions of customer expectations

1)Inadequate marketing research orientation When management or empowered employees do not acquire accurate information about customers expectations, this gap is large. Formal or Informal methods to capture information about customers expectations must be developed through marketing research. Techniques like customer interviews , survey research, complaint systems and customer panels must be developed through marketing research.

2)Lack of upward communication Eg Frontline staff knows great deal about customers, if management is not in contact with front line employees , the gap widens.

3) Insufficient relationship focus Lack of companies strategies to retain customers and strengthen relationships with them. Eg CRM has been a practice in IBM , BOEING , that recognize that clients have potential to spend more with them if they provide excellent service. Focus on transactions rather than relationship When companies focus too much on new customers, they may fail to understand the changing needs and expectations of their current customers. Eg ICICI Bank facing problem with dormant accounts.

 Technology affords companies the ability to acquire and

integrate vast quantities of data on customer that can be used to build relationship. Eg Frequent flyer program by airlines, petro miles program by credit cards

4)Inadequate service recovery It is critical for an organization to understand the importance of service recovery 1. Why people complain 2. What they expect when they complain 3. How to develop effective service recovery strategies for dealing with inevitable service failures. Such strategies should involve a well defined complaint handling procedures Eg LG and Samsung after sales service has 24 hours TAT time.

 Emphasis on empowering employees to react on spot.,

in real time, to fix the failure. Eg Air India ground staff.

Other time involves service guarantees or the ways to

compensate the customer for the unfulfilled promise.

Gap 2 The service Design and Standards Gap.

Accurate perceptions of customers expectations are

necessary , but not sufficient , for delivering superior quality service. A recurring theme in service companies is the difficulty experienced in translating customer expectations into service quality specifications that employee can understand and execute. The problems reflected in provider gap 2, is the difference between company understanding of customer expectations and development of customer driven service design and standards.

Key Factors Leading to Provider Gap 2 :The Service Design and Standards Gap

Customer driven service design and standards

Poor service design Absence of customer driven standards

Gap 2

Inappropriate physical evidence

standards
Failure to develop tangibles in line with

customer expectations. Services cape design that does not meet customer and employees needs.
Management perceptions of Company expectations

Reasons for Gap 2

Poor service design - Those people responsible for

setting standards, sometimes believe that customers expectations are unreasonable or unrealistic. They also believe that the degree of variability inherent in service defies standardization, and therefore setting of standards will not achieve the desired goal.

 Absence of customer driven standards - When service

standards are absent, quality of service as perceived by customers is likely to suffer. Eg -Compared to other Airlines, currently Kingfisher is the only Airlines which issues boarding passes using a kiosk machine which would save your time. In the machine you need to enter your flight ticket PNR number along with your Last Name and its instantly printed, in my case a kiosk operator standing next to it get the job done.

 Inappropriate physical evidence standards Physical evidence standards mean everything from

business cards to reports , signage , internet presence , equipment and facilities used to deliver the service. In hotel , restaurant , a theme park , Hospitals, Colleges. the services cape , the physical facility is critical in these industries in terms of communicating about the service and making the entire experience pleasurable. In these cases services capes plays a variety of roles, from serving as a visual metaphor of what the company stands for.

 Eg - If you were to try to describe the differences a

customer encountered when entering a branch of say like Mc Donald's compared with a small family restaurant, the concept of services capes may prove useful experience pleasurable.

Air India

Kingfisher

Physical Evidence

Ways to avoid Provider- Gap 2

Technology changes and improvements are helpful in closing

this gap. Eg Meru cabs using call centers and GPS system. Compared to other Airlines, currently Kingfisher is the only Airlines which issues boarding passes using a kiosk machine which would save your time.
Design service without bias, subjectivity and incompleteness.

Eg IRCTC website is incomplete and bias. Standards needs to be developed - when standards reflect what customers expect , perceptions of quality of service they receive are likely to be enhanced.

Lec 4

The Provider Gap

These gaps occur within the organization providing the

service.

This includes Gap 1 The listening Gap Gap 2 The service Design and Standards Gap. Gap 3- The Service Performance Gap. Gap 4 The communication Gap.

Key Factors Leading to Provider Gap 1 :The listening Gap

Customer Expectations

Inadequate marketing research

Gap 1

orientation Lack of upward communication Insufficient relationship focus

Focus on transactions rather than relationship Focus on new customers rather than

relationship customers

Inadequate service recovery

Company perceptions of customer expectations

Key Factors Leading to Provider Gap 2 :The Service Design and Standards Gap

Customer driven service design and standards

Poor service design Absence of customer driven standards

Gap 2

Inappropriate physical evidence

standards
Failure to develop tangibles in line with

customer expectations. Services cape design that does not meet customer and employees needs.
Management perceptions of Company expectations

Key Factors Leading to Provider Gap 3 :The Service Performance Gap

Customer driven service design and standards

Deficiencies in human resource policies Failure to match supply and demand

Gap 3

Customer not fulfilling roles Problems with service intermediaries.

Service Delivery

Gap 3 The service Performance Gap.

Once service designs and standards are in place , the

firm must have Systems, Processes, People in place to ensure that service delivery actually matches the design and standards in place.

 Deficiencies in human resource policies

Employees do not clearly understand the roles they

are to play in the company. Poor employee selection Inadequate technology In appropriate compensation and recognition. Lack of empowerment and team work. Training Motivation.

Customer not fulfilling roles Customers do not perform their roles appropriately Eg They fail to provide all the information. In OPTUS mobile , customers do not complete the customer check. They neglect to read and follow instructions, thus quality is jeopardized. Customers also negatively influence the quality of service received by others, if they are disruptive or take more than their share of a service providers time.

Problems with service intermediaries. Problems with service intermediaries, as retailers , franchisees , agents and brokers. Eg Honda Dealers. Quality in service occurs in the human interaction between customers and service providers, control over the service encounter by the company is crucial. Eg Franchisers of services depend on their franchisees to execute service delivery as they have specified it. (Mc Donald's, The Shahnaz Husain Franchise ) Eg The Engineer briefing you about your vehicle?

Failure to match supply and demand Service firms needs to synchronize demand and capacity. Since the service are perishable and cannot be inventoried, service firms frequently face situations of over or under demand. Eg Airlines Companies. Lacking inventories to handle over demand, companies lose sales when capacity is inadequate to handle customers.

Key Factors Leading to Provider Gap 4 :The Communication Gap

Service Delivery

Lack of integrated service marketing

Gap 4

communications Ineffective management of customers expectations Overpromising Inadequate horizontal communications Inappropriate pricing
External communications to customers

Gap 4 The Communication Gap.

The communication gap , illustrates the difference between

service delivery and the service providers external communication. Promises made by a service company through its media advertising , sales force and other communications may potentially raise customers expectations, the standards against which customers assess service quality. Eg The sales rep assures to get the policy issued in 2 days, but the underwriters reject it. The discrepancy between actual and promised service therefore can widen the customer gap.

 Lack of integrated service marketing communications

IMC is a management concept that is designed to make

all aspects of marketing communication such as advertising , sales promotion , public relations and Direct Marketing work together as a unified force, rather than permitting each to work in isolation. Eg Different Ads of management college for different courses offered.

 Ineffective management of customers expectations Companies frequently fail to capitalize on

opportunities to educate customers to use services appropriately. Eg How to use ATM cards , How get boarding passes using a kiosk machine Companies also neglect to manage customer expectations of what will be delivered in service transactions and relationships. Eg ICICI Bank offers Debit card on the spot of opening A/C

 Overpromising

Overpromising in advertising.

Eg- Dominos 30 minutes challenge.

Overpromising in personal selling Overpromising through physical evidence.

Inadequate horizontal communications When employees who promote the service do not fully understand the reality of service delivery, they are likely to make exaggerated promises. Eg ICICI Pru sales rep promising to get the policy issued in 48 hrs. IDEA promising the activation instant of pre paid sim cards. Communication to consumers involves issues that cross organizational boundaries.

Inappropriate pricing In packaged goods and durable goods, customers possess enough knowledge before purchase to be able to judge whether price is fair or in line with competition. With services , customers often have no internal reference points for prices before purchase and consumption. Techniques for developing prices for services are more complicated than those for pricing tangible goods. Eg Price of flights change every second.

Consumer Behaviour In Services

Why Consumer Behavior?

Since, customer is the heart of effective service

marketing , The primary objectives of services producers and marketers are to develop and provide offerings that satisfy consumer needs and expectations, thereby ensuring their own economic survival. To achieve these objectives, service providers need to understand How consumers seek, choose , purchase , experience and evaluate services.

Introduction
Consumer behavior in service is

How consumers seek, choose , purchase , experience

and evaluate services. Many influences affect this process i.e. Consumers Life Stage Generation into which consumer was born.

 Consumers Life Stage As consumers pass through life stages from childhood to

retirement , their needs and preferences for service changes. Generation into which consumer was born. Different generations of consumers have personalities shaped by events , history and people that to some extent , drive their needs for different types of services as well as how they want to live and be treated at work. Eg Children's born after 1981 are more keen to do a Post Graduation course.

 Eg In US , the traditionalists (born between 1900

and 1945) were dramatically influenced by 2 major world wars and great depression , thus they are characterized by labels such as loyalty, hard work and patriotism. Currently , the baby boomers (born between 1946 1964) , The largest demographic group in US, is characterized by optimism resulting from the focus on their post world war II birth, they are labeled with competition , idealism ,civil rights.

 Generation Y or Millenials (born between 1981 and

1999) , This group is characterized is differently from their parents and have labels like, They are technology savvy , technology independent , including round the clock connection , technology integrated life style has resulted in a certain impatience and 24/7 culture, where things are available at all times. Eg Interactive games , 24/7 gym, You Tube, Black Berries.

Continuum of Evaluation for Different Types of Products

Search Qualities attributes that a consumer can

determine before purchasing a product. Search qualities include color, style, price , feel. Experience Qualities attributes that can be discerned only after purchase or during consumption. Experience qualities include taste , wearability. Credence Quality includes characteristics that the consumer may find impossible to evaluate even after purchase and consumption, because consumers may be unaware of or may lack sufficient knowledge to appraise whether the offerings satisfy given wants or needs.

Continuum of Evaluation for Different Types of Products

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 13-99

Stages in Consumer Decision Making and Evaluation of Services.

1.

2.
3.

Consumer Choice 1. Need Recognition 2. Information Search 3. Evaluation of Alternatives 4. Purchase. Consumer Experience Post experience Evaluation

 Consumer Choice
The 1st important area of consumer behavior that

marketers are concerned with is how customers choose and make decisions and the step that lead to the purchase of a particular service. Customers follow a logical sequence 1.
2. 3. 4.

Need Recognition Information Search Evaluation of Alternatives Purchase.

A-Need Recognition The process of buying a service begins with the recognition that a need or a want exists. Maslow's Hierarchy is most widely used to recognise needs. Services can fill all these needs, and they become increasingly important for higher level social, Esteem Needs , Self Actualisation needs.

Maslow's Hierarchy of Needs.

Physiological needs - Food, shelter, i.e., those needs needed

for basic survival. Safety needs - The need to feel safe within your environment. Also refers to emotional and physical safety. Eg- Job security, Health Insurance. Social Needs - The need for love, friendship and belongingness. Esteem Needs The need for self respect, status and recognition from others. Self Actualisation The point of reaching ones full potential. Are you capable at excelling yourself. People are self aware , concerned with personal growth.

 Physiological needs - Food, shelter, i.e., those needs needed

for basic survival. Eg- Coffee shops, restaurants , and other service establishment that provided food and water. Eg In Tokyo , every 2nd street has large vending machine with ice cold drinks to quench the thirst .
Safety needs - The need to feel safe within your

environment and included Job security, Health Insurance. Eg After terrorist attacks, consumers began to recognize their vulnerability and sought ways to increase their safety and security, thus consumers switched to movie rentals, insurance and other services to satisfy their safety needs.

 Social Needs - The need for love, friendship and

belongingness. Social needs are critical to all cultures. Eg In Japan people spend more time with their families and work colleagues , thus Japanese spend more annually per capita in restaurants , than any other country Esteem Needs The need for self respect, status and recognition from others. Eg Needs to improve oneself and achieve success are responsible for the growth of education, training and other services that increase the skills and prestige of consumers.

 Self Actualisation The point of reaching ones full

potential, enriching experiences. Eg Consumers purchase experience such as skydiving , jungle safaris, bungee jumping for the pure thrill of experience.

1. Consumer Choice 1. Need Recognition 2. Purchase. 2. Consumer Experience 3. Post experience Evaluation

B- Information Search Perceived Risk.

Since services are non standardized , the consumer will

feel some uncertainty about the outcome and consequences each time a service is purchased. Service purchases involve more risk , than other purchases because services are often not accompanied by warranties or guarantees. Dissatisfied customer can rarely return a service, they have already consumed it by the time they realize their dissatisfaction.

 B- Information Search

Seeking information is a way of reducing risk, helping

consumers feel more confident about their choices. Customers use both personal sources and non personal sources. Seeking information is an extensive formalized process if the service is important to customers or it represents major investment. Eg Health Care, Education.

 Evaluation of Alternatives

Building Customer Relationship

Amarpriet Singh

??????????
Why is there a need for CRM?

There are fewer or no incentives for retaining existing

accounts? Can a firms relationships with their customers like , other social relationships , tend to evolve over time. What is the role of marketing today? Marketing transforms the strangers to acquaintances to friends to partners.

 The traditional view of marketing was 1. 2.

Firms frequently focus on attracting customers. Then pay little attention to what they should do to keep them.

Bucket Theory of Marketing

James L.Schorr Executive President of Marketing Holiday Inns.

Bucket Theory of Marketing

By this he meant that marketing can be thought of as a

big bucket. It is what the sales , advertising and promotion programs do that pours business into the top of the bucket. As long as these programs are effective , the bucket stays full.
There is one problem?

The Problem??
That there is a whole in

the bucket. When the business is running well and delivering on its promises, the hole is small and few customers are leaving.

 When

business is running well and delivering on its promises, the hole is small and few customers are leaving. When the operations is weak and customers are not satisfied with what they get - the relationship weakens? People start falling out of bucket through the holes faster, than they can be poured in through the top.

the

The bucket theory illustrates Relationship strategy that focuses on plugging the

holes in the buckets makes much sense because Historically , marketers have been more concerned in acquisition of customers, So a shift to a relationship strategy often represents changes in mind set , organizational culture and employee reward systems. Eg There are sales incentives systems in companies. There are fewer or no incentives for retaining current accounts.

 Relationship

marketing essentially represents a paradigm shift within marketing away from an acquisitions?

There has been a shift from transactions to a

relationship focus in marketing.

CRM philosophy assumes that

1.

Many consumers and business customers prefer to have an ongoing relationship with one organization than to switch continually. It is usually cheaper to keep current customers than to attract new customers.

2.

The Evolution of Customer Relationships.

Firms relationships with their customers like other

social relationships , tend to evolve over time.

It is Marketing that exchanges relationships between

providers and customers.

Marketing transforms the strangers to

acquaintances to friends to partners.

Customers as Strangers. Strangers are those customers who have not yet had any transactions (interaction) with a firm They may not be even aware of the firm. At INDUSTRY level, strangers are the customers who have not entered the market. At FIRM level, they may include customers of competitors. Firm has no relationship with the customers at this point.

Firms Strategies for Customers as Strangers.

Initiate communication, with potential customers

(STRANGERS) in order to acquire business.

The primary marketing efforts directed toward such

customers deal with 1. Familiarizing those potential customers with the firms offerings and subsequently , encouraging them to give the firm a try.

Customers as Acquaintances Once customer awareness and trail are achieved, familiarity is established and the customer and the firm become acquaintances.
This is the basis for an exchange relationship. For a customer , an acquaintanceship is effective as

long as the customers is satisfied and what is being received in exchange is perceived as fair value.

 With the repetitive interactions , the customers gains

experience and becomes more familiar with the firms offerings. Repetitive interactions improves the firms knowledge of the customer, helping to facilitate marketing, sales and service efforts. Thus an acquaintance relationship facilitates transactions primarily through the reduction of customers perceived risk and the providers costs?

Firms Strategies for Customers as Acquaintances

Primary goal for the firm at this stage is satisfying the

customer.
Firms try to provide value proposition at this stage.

 Eg

Amazon.com has created value for its acquaintances through a highly developed order processing system.

By processing and organizing historical transaction

data from a customer and comparing it with data from other customer demonstrating similar purchase behaviors, the system is able to identify additional products of potential interest to the acquaintance customer and to generate cross selling opportunities.

Customers as Friends As a customers continues to make purchases from a firm and to receive value in the exchange relationship, the firm begins to acquire specific knowledge of the customers. This allows the companies to create an offerings that directly address the customers situation. The provision of a unique offering , and differential value , transforms the relationship from acquaintance to friendship.

 As customers become friends they come to trust that

company provides superior value.

Due to past satisfying experiences, these customers are

more likely to appreciate the firms products offerings and are more open to other related services.

Firms Strategies for Customers as Friends

A primary goal for firm at this stage is Customer

Retention.
A firm can easily develop a sustainable competitive

advantage through friends as the offerings is more unique and difficult for competitors to imitate.
Eg Different rate plans offered by Telcos,

Tata Sky offering special rates for existing customers.

Customers as PartnersAs customer continues to interact with a firm , the level of trust often deepens, This leads to customer receiving more customized offerings and interactions. Trust developed in the friendship stage is a necessary but not sufficient condition for a consumer firm partnership to develop. When creation of trust leads to the creation of commitment this is the condition for a consumer firm partnership to develop.

 Customer knowledge and information systems is used by the

firm to deliver highly personalised and customized offerings. Overtime the customers firm relationship evolves into a relationship where the parties become increasingly interdependent. At the partnership stage , the firm is concerned with enhancing the relationship. Customers are more likely to stay in the relationship if they feel the company understands their changing needs and is ready to invest in the relationship by evolving product and service mix. By enhancing the relationships, the firm expects such customers to be less likely to be lured away by competitors.

Firms Strategies for Customers as Partners

The key to the success in the partnership stage is the

firms ability to organize and use information about individual customers more effectively than competitors. Customers benefit from and therefore desire to commit to relationship with firms. Eg Hertz Gold customers receive a guaranteed availability of a car, separate counter. PMC bank ltd cheque clearing.

Benefits for customers

Benefits For Firms

Confidence Benefits. 2. Social Benefits . 3. Special Treatment Benefit .

1.

Economic Benefits. 2. Customer Behavior Benefits. 3. Human Resource Management Benefits.

1.

Benefits for customers Customers receive greater value relative to what they expect from competing firms. Confidence Benefits This comprise of trust or confidence. When customers develop confidence in and can maintain a relationship with a service provider , they free up time for other concerns and priorities. Eg Lawyers, Doctors etc.

Social Benefits In long term customer firm relationships , a service provider may actually become part of the customers social support systems. Eg Hairdressers. Mom and Pop stores owners, health club or restaurant manager who knows the customer personally. A school principal who knows an entire family and its special needs.

Special Treatment Benefit This includes getting benefit of doubt, being given a special deal or price or getting preferential treatment. Eg Delay in payment to f Visa bill once, can get a benefit of doubt.

Benefits For Firms

1. 2. 3.

Economic Benefits. Customer Behavior Benefits. Human Resource Management Benefits.

Economic Benefits Relationship oriented firms achieve Higher over all returns on their investments than do transaction oriented firms. These benefits come from variety of source 1. Reduced marketing costs 2. Reduced administrative costs 3. Ability to maintain margins without reducing prices 4. Satisfied customers are willing to pay more for a provider services.

Customer Behavior BenefitsFree advertising provided through word of mouth communication. Customer voluntary performance Eg In restaurant customers reporting the messy restrooms to an employee, this helps s firm to develop quality services. Social benefits Eg A person becoming a mentor in the hospital where he recovered from.

Human Resource Management Benefits Assisting in service delivery Eg More experienced customers can make the new service employees job easy. A regular patient of a medical service provider is likely to know how the systems work. Employee Retention Eg -People like to work for companies whose customer are happy and loyal.