Service Marketing Module 3

Module 3

Marketing of Infrastructure Services and Utilities

Customer Behavior and Customer Relationship Management

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CONSUMER BEHAVIOR IN SERVICES

Learning Objectives

1. Understand the 3 stage model of service consumption

2. Learn how consumers evaluate and choose between alternatives services

offerings and why they have difficulty in making those evaluations

3. Know the perceived risks that customer face in purchasing services and

the strategies firms can use to reduce consumers risks perception

4. Understand how customers form service expectations and the

components of these expectations

5. Contrast how customers experience and evaluate high and low contact

services

6. Be familiar with servuction model and understand the interactions that

together the services experience

7. Obtain insights from viewing service encounter and from of theater

8. Know how role and script theory contribute to a better understanding of

services experiences

9. Know how costumers evaluate services and what determines their

satisfaction

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Consumer Behavior• What consumers buy?

• Where consumers buy?

• When consumers buy?

• How consumers buy?

• What consumers buy?

We study these behaviors

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Consumers buying vegetables

• Most consumers

• Buy ‘fresh’ vegetables

• Roadside vendors

• Freshness concept

• In touch with air

• It might have been washed with dirty water

• Do consumers buy Safal frozen vegetables from Mother Diary? Very few buy. A feeling that is not ‘FRESH’

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COMPARED TO GOODS SERVICES ARE

– More difficult to choose

– More difficult to evaluate

– Intangibility

– Non-standardized

– Production and consumption together

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BENEFITS – UNDERSTANDING CONSUMER

BEHAVIOR

• Low chances of product failure

• Products acceptability higher

• Helps us to make right distribution strategies

• Right promotional strategies

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Consumer decision making process Five steps

• Need recognition

• Information search

• Evaluation of alternatives

• Purchase

• Post purchase evaluation

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The 3 stage model of service composition

• Pre-purchase stage

• Service encounter stage

• Post encounter stage

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Pre Purchase stage

• Need Awareness – Uncurious minds (e.g personal identity and aspiration)– Physical conditions (e.g. if u r hunger drove o to Burger

stall)– External Sources (e.g. a service firm’s marketing

activities)

• Information Search• Evaluation of alternatives

– Service attributes– Perceived Risk– Service expectations

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1. Information Search

– In services

– Rely more on personal resources

Example• Legal services• Not advertised on the mass media• How to choose a lawyer? • Speak to friends, relatives• Word of mouth, relatives

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Evaluation of alternatives: Search attributes

Clo t

hin g

Jew

elry

Furn

iture

Hou

ses

Auto

mob

iles

Rest

aura

nt m

eals

Vaca

tions

Hai

rcut

s

Child

car

e

Tele

visi

on re

pair

Lega

l ser

vice

s

Root

can

als

Auto

repa

ir

Med

ical

dia

gnos

is

Difficult to evaluate

{High in search

qualitiesHigh in experience

qualitiesHigh in credence

qualities

{{Most

GoodsMost

Services

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Evaluation of alternatives: Perceived Risk

Type of Risk Examples of Customer Concern

Functional Risk (Unsatisfactory performance outcome)

• will this training course give me the skill to get better job• will this credit card be accepted wherever I want to make purchase• will the dry cleaner able to remove the stain from this jacket

Financial (monetary loss, unexpected costs)

• will I loose money if I make the investment recommended by the stock broker• could my identify be stolen if I make this purchase on the internet• will I incur a lot of unanticipated expenses if I go on this vacation ?

Temporal (wasting time, consequences delays)

• will I have to wait in queue before getting into the exhibition• will service @ this restaurant will be so slow, that I will be late for my afternoon meeting• will the renovation work of our bathroom be completed before e our friends come stay with us

Physical (personnel injury or damage possession)

• will I get hurt if I go skiing @ this resort• will the contents of this postage get damaged in the mail?• will I fall sick if I travel abroad on vocation

Psychological (Personal Fear & emotions)

• How can I be sure that this aircraft will not crash• will the consultant make me feel stupid?•Will the doctor’s diagnosis upset me?

Social ( How others think & react)

• what will my friends think of me if they learnt that I stayed @ this cheap motel• will my relative approve the resonant I have chosen for the family reunion• will my college's disapprove of my selection of an unknown law firm

Sensory (unwanted effects on any of the five senses)

• will I get view of the parking lot rather than beach from my restaurant table• will the hotel bed is uncomfortable • will I be kept awake by noise from the guests in the room next door• will any room smell of state of cigarette smoke• will the coffee @ breakfast taste disgusting

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2. EVALUATION OF SERVICE ALTERNATIVES– Lesser alternatives in services than

goods– For goods, you go to retail shops– All brands are displayed– Choose any one out of competing

brands– In services– Fewer options – Go to one bank at a timeVery little display of simultaneous

brands

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EMOTION AND MOOD

– Customer in “bad mood”

– Enters service establishment

– Service interpretation ‘NEGATIVE’

– Customer in good “mood”

– Service interpretation ‘POSTIVE’

– Behavior of other customers

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Example- AIR – INDIA• Traveling from Delhi to London• Fellow companion passenger• Misbehaving• Though Air India Service is good• What do you feel• Bad experience• A feeling that Air-India cannot control

misbehavior of passengers• May decide not to travel again

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Evaluation of alternatives: Service Expectation

• Desired services

• Adequate services

• Predicted services

• Zone of tolerance

Purchase Decision

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SERVICE PURCHASE• Conformance to “script” important • Script• Logical sequence of events expected by the customer

Example• Meeting reputed cardiologist at Apollo hospital• Patient enters the hospital• Observes other patients are waiting• Cardiologist comes• Talks to you• Examines you• Gives you feedback

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Example• If the above script happens you are

comfortable• But if.

- no patients in hospital- Cardiologist sends his junior to examine you- Refuses to meet you due to lack of time

• You feel that service is not up to the expectations

Don’t change the expected script

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CUSTOMER COMPATIBILITY

• When you are visiting hospital, airlines,

restaurant or a bank

• How do you feel when there is overcrowding

• Misbehavior of neighboring customers

• Dissatisfied

Compatibility of customers is critical

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2. Service Encounter Stage

• Service encounters are “ Moments of Truth”

• Service encounters range from High contact to

Low contact

• The Servuction system

• Theater as Metaphor for services Delivery: An

integrated perspective

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High

Low

Emphasizes encounters with service personnel

Emphasizes encounters with physical service elements

• Nursing Home• Hair Cut

•Four Star Hotel• Good Restaurant

• Airline Travel

• Fast Food• Budget Hotel

• Retail Banking

•Management Consulting

• Telephone Banking

• Car Repair

• Metro

• Dry Cleaning

• Movie Theater • Internet Banking• Mail Based Repairs•Internet Based Services

• Insurance

• Cable TV

Fig : Level of Customer Contact with Service Organizations

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The servuction Model

Customer A

Customer B

Back Stage ( Invisible)

Front Stage ( visible)

Contact Personnel

Inanimate Environment

Technical Core

Service Operations System

Service Delivery System

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Theater as Metaphor for services Delivery: An integrated perspective

• Services Facilities

• Personnel

• Role and script theories

– Role theory

– Script theory

– Role and script theory complements each other

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4. POST-PURCHASE EVALUATION – You go for haircut– Not up to your expectations– Reasons– Poor skills of hairstylist– Blame yourself for choosing wrong hairstylist– Not communicating what you wanted– Quality of services depends on customer feedback– A doctor’s diagnosis depends on customer

feedback

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A. Diffusion of innovation• As services are intangible• Sometimes impossible to test, taste before purchase • Difficult to introduce innovationsExample• Blocked heart arteries• Bypass surgery is the traditional diagnosis • Now Stents• Resist such innovations• Not sure of the outcome• Resist innovation

Consumers adopt innovations in services more slowly than they adopt innovations in goods

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B. BRAND LOYALTY• Brand switching is less frequent in services than goods• When you change brands • Risk, uncertainty• Costs may be associated• It is higher in services ExampleChanging your Family doctor• If you choose a new cardiologist• Insist on new tests• New medical reports

Switching cost are high. If perceived risks are high, consumers are unlikely to change brands.

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IMPLICATIONS FOR SERVICE MARKETERS• StanChart Credit card division • Convincing Citibank credit card customers to switch to

Stanchart credit cards.• How?• Membership fees waived off• Lower interest rate on outstanding/overdue payments• Free saving bank account in StanChart Bank• Stan Chart trying to making switching cost lower

Marketers need to lower switching costs to shift brand loyalty

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CUSTOMER COMPATIBILITY CRITICAL : Singapore Airlines

– Seating plan

– Vegetarian customers

– Sit together

– Smokers sit together

– Customers with similar taste and preferences are

made to sit together

Affects customer satisfaction

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RELATIONSHIP MARKETING IN SERVICES

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Learning Objectives

1. Recognize the important role of customer loyalty plays in driving a service forms profitability.

2. Calculate the life time value (LTV) of a loyal customer3. Understand why customers are loyal to a particular service firm4. Explain the different types of marketing relationship to the customer firm

relationship and understand how membership can be created5. Know the core strategies of the Wheel of loyalty that explain how to

develop a loyal customer base6. Appreciate why it is so important for service firms to target the “right”

customers7. Use service tiering to manage the customer base and build loyalty8. Understand the relationship between customer satisfaction and loyalty9. Know how to deepen the relationship though cross selling and budlning 10. Understand the role of financial and non financial rewards in enhancing

customer loyalty.11. Appreciate the power of social, customization, and structural bonds in

enhancing loyalty12. Understand what factors cause customers to switch to a competitors and

how to reduce such switching13. Understand the part played by customer relationship management (CRM)

systems in delivering customized service and building loyalty.

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The Search for Customer loyalty

• Why is customer loyalty important to a firms

profitability?

• Assessing the value to the loyal Customer

• The Gap between Actual and Potential Customer

Value

• Why are the customer loyal?

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Understanding the Customer – Firm Relationship

• Transactional Marketing

• Relationship Marketing

• DATABASE marketing

• Interaction marketing

• Network Marketing

• Creating “ Membership” Relationships

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The Wheel Of loyalty

2. Create Loyalty Bonds

• Building higher-level bonds:Social CustomizationStructural

• Give Loyalty rewards• financial •Non financial• Higher tier service levels• Recognition and appreciation

• Deepen the relationship Via :• Cross Selling• Bundling

3. Reduce Churn Drivers

• Conduct Churn diagnostic and monitor declining / churning customers

• Address key churn drivers: -Proactive retention measures- Reactive retention measures (e.g. save teams)

• Put effective complaint handling and service recovery process in place

• Increase switching costs

1. Build a Foundation for loyalty

* Segment the market to match customer needs and firm capabilities.

* Be selective: Acquire only customers who fit the core value proposition

* Manage t customer base via effective tiering of service.

* Deliver quality service

Customer Loyalty

Enabled through:

• Frontline staff• Account managers• Loyalty programs• CRM Systems

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Building a foundation for Loyalty

• Targeting the right Customers

• Searching for value, not just volume

• Managing the customer base though effective

tiering of service

• Customer satisfaction and service quality are

prerequisites for loyalty

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Strategies for developing loyalty bonds with customers

• Deeping the Relationship

• Encouraging loyalty though financial and non

financial rewards

– Financial rewards

– Non financial rewards

• Building higher – Level Bonds

– Social Bonds

– Customization Bonds

– Structural Bonds

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Strategies for reducing Customer Defections

• Analyze customer defections and monitor

declining accounts

• Address key churn drivers

• Implement effective complaint handling and

service recovery procedures

• Increase switching costs

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CRM : Customer Relationship Management

• Common objective of CRM systems

• Common CRM applications

– Data Collection

– Data analysis

– Sales force automation

– Marketing automation

– Call center automation

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What doest a Comprehensive CRM strategy Encompass?

1. Strategy Development

2. Value creation

3. Multichannel integration

4. Information Management

5. Performance assessment

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Common Failures in CRM Implementation

• Viewing CRM as a technology initiative

• Lack of customer focus

• Insufficient appreciation of customer lifetime value (LTV)

• Inadequate support from top management

• Failing to re-engineer business process

• Underestimating the challenges in data integration

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How to get CRM implementation Right

Service Marketing Module 3

Education

Transcript of Service Marketing Module 3