Week 7 MM555

Services Marketing

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Agenda for Week 7

Quick wrap of the week that was Review of Week 6 Services Marketing Break Case analysis:

Marketing plan group time

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This Session
Engage and enjoy! Strategic Customer Management A Quick Dance through a large Minefield! Services & High Performance Organisations Service Culture & Moments of Truth Some Useful Concepts and Tools
Introduce the service marketing triangle Introduce the expanded services marketing mix Introduce the gaps model of service quality

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Review of Week 6- What you should know

Define product and product attributes Outline how an organisation can differentiate its products to obtain a competitive advantage Explain value of branding brand management Describe the product life cycle, new product development and the product adoption process Explain key aspects of product management and positioning through the product life cycle.

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Marketing Management Framework

Customer
Consider factors such as decision making, values, needs & wants

Company
Or organisation. What is our Strategic Purpose? Capabilities? Weaknesses?

Context
Whats going on in the macro environment?

Competitors Collaborators
Who do we work with? Who are our partners? Who are our current and potential competitors? Where are they placed in the market?

Marketing Objectives Segmentation

Based on geographic, demographic, psychographic and/or behavioural factors

Targeting
Consider strategic fit; potential and defensibility against competition

Differentiation
Differentiating the market offering to create superior customer value

Positioning Analysis & Strategy

Create Value
Marketing is about creating customer value and profitable customer relationships
Product / Service People Processes Physical Evidence

Your place in the market space Core benefit proposition Unique selling proposition Positioning Statement

Planning & Implementation

Capture Value

Communicate Value
Integrated Marketing Communications (including Promotion)

Deliver Value

Price

Placement Logistics

The MM555 Marketing Management Framework draws on a number of sources including Iacobucci (2013), Curtin University is a trademark of Curtin University of Technology CRICOS Codeand 00301J Armstrong et Provider al (2012) Gibbs (2009) and includes the key factors which need to be taken into account when developing a comprehensive marketing strategy.

Implementation, Monitoring & Measuring Outcomes

Services Marketing An Overview

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 Reflect on the images of companies recognised for innovation and great service. What comes to mind? What is different about them?

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Tangibility Spectrum
Salt

Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets

Fast-food Outlets

Your Organisation

Intangible Dominant

Tangible Dominant

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Advertising Agencies Airlines Investment Management Consulting

Teaching

Characteristics of Services

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Contribution of Service Industries

Services are responsible for 70% of GDP (CIA, World Factbook, 2010)
Asian economies are clearly following this trend. HK has the most developed sector. Others are catching up This is a feature of most developed countries and is one reason why a GST was introduced in Australia in 2000 As the manufacturing industry has declined in some countries, service sectors (eg communications and energy) have grown often due to outsourcing

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Its in The Way We Do Things Around Here.

and the promises we make.

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The Services Marketing Triangle

Company (Management)
Internal Marketing enabling the promise External Marketing

Technology

setting the promise

Employees

Interactive Marketing
delivering the promise

Customers

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler (Zeitham and Bitner 2006)
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Aim? To Close All of the Gaps

THE INTEGRATED GAPS MODEL OF SERVICE QUALITY

Footer text - slideshow title
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The Gaps Model of Service Quality

CUSTOMER

Expected

Service
Customer Gap

Perceived Service
Service Delivery GAP 4
External Communications to Customers

COMPANY

GAP 1

GAP 3
Customer-Driven Service Designs and Standards

GAP 2
Company Perceptions of Consumer Expectations
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Key Factors Leading to the Customer Gap

Customer Expectations

Customer Gap

Provider Gap 1: Not knowing what customers expect Provider Gap 2: Not selecting the right service designs and standards Provider Gap 3: Not delivering to service standards Provider Gap 4: Not matching performance to promises Customer

Perceptions
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The Customer Gap

Expected Service
GAP

Perceived Service

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Its in The Way We Are Perceived

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Gaps Model of Service Quality

CUSTOMER

Expected

Service
Customer Gap

Perceived Service
Service Delivery GAP 4
External Communications to Customers

COMPANY

GAP 1

GAP 3
Customer-Driven Service Designs and Standards

GAP 2
Company Perceptions of Consumer Expectations
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Customer Satisfaction
A definition..

Satisfaction is the consumers fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provided (or is providing) a pleasurable level of consumption-related fulfillment, including levels of under- or over-fulfillment. (Oliver, 1997)

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Oliver, R. 1997. Satisfaction: a behavioral perspective on the consumer. New York, NY: McGraw-Hill.

The Five Dimensions of Service Quality

Reliability Assurance Tangibles
Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to convey trust and confidence. Physical facilities, equipment, and appearance of personnel. Caring, individualized attention the firm provides its customers. Willingness to help customers and provide prompt service.

Empathy
Responsiveness
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eService Quality
eSQ 4 core dimensions: 1. Efficiency 2. Fulfillment 3. Reliability 4. Privacy

Recovery judged on: 1. Responsiveness 2. Compensation 3. Contact

Curtin University is a trademark of Curtin University of Technology CRICOS Provider Code 00301J Zeithaml,V.A. 2002 Service excellence in electronic channels Managing Service Quality 12 (3): 135-138

Service Characteristics and Marketing Challenges

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Outcomes of Customer Satisfaction

Increased customer retention

Positive word-of-mouth communications

Increased revenues

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Stakeholder loyalty
100%
Repurchase probability %

80%

Apostles: unpaid sales people

60%

Zone of indifference

40%
Saboteurs: bad mouth the organisation

20%

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Customer Loyalty Exercise

Think of a service provider you are loyal to. What do you do (your behaviors, actions, feelings) that indicates you are loyal? Why are you loyal to this provider?

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What are the benefits of customer loyalty to an organisation?

Relationship Development Model

Financial bonds Social bonds Customization bonds Structural bonds Confidence benefits Social benefits Special treatment benefits

Customer

Relationship

Bonds

Benefits

Core Service

Strong Customer

Provision
Satisfaction Perceived service quality Perceived value

Switching Barriers

Relationship (Loyalty) Firm Benefits

Economic benefits Customer behavior benefits Human resource management benefits

Customer inertia Switching costs

Curtin University is a trademark of Curtin University of Technology Zeithaml,V.A., Bitner,M.J. and Gremler,D.D. 2006 Services Marketing: Integrating Customer Focus Across the CRICOS Provider Code 00301J Firm, 4th ed McGraw-Hill/Irwin, Boston

Its in What We Do When Things Go Wrong

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Customer Feedback and Word-of-Mouth

The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems. The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers. About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly. A dissatisfied customer will tell between 10 and 25 other people about their problem. A customer who has had a problem resolved by a company will tell about 5 people about their situation.
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Number of People Told Based on Level of Dissatisfaction

Average number of people told
30 25 20 15 10 5

0
Slight dissatisfaction
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Annoyed

Very annoyed

Extremely annoyed

Absolutely furious

Action Taken Based on Level of Dissatisfaction

Percent of customers that take action 100 80 60 40 20 0
Slightly diss Annoyed Very annoyed Ext annoyed Abs furlous Tell friends Complain

Make a fuss Make a fuses

Not use again Dissuade others Complain against

Curtin University is a trademark of Curtin University of Technology CRICOS Provider Code 00301J Source: Stewart 2004 University of Melbourne Presentation

The Service Recovery Paradox

A good recovery can turn angry, frustrated customers into loyal ones. It can, in fact, create more goodwill than if things had gone smoothly in the first place.
(Hart, Heskett & Sasser, 1990: 148)

The benefits of turning around a complaining customer are dramatic. Other research also supports the service recovery argument eg McCollough, Berry & Yadav 2000; Smith & Bolton, 1998; Tax, Brown & Chandrashekaran 1998)
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(Rust, Zahorik & Keningham 1996: 182)

Disgust to Delight:

Do Customers Hold A Grudge?

BUT. Recent research is beginning to challenge this paradox. For example, one recent study found:

..the findings indicate that even with very high scores in satisfaction with service recovery, complaining customers corporate image and future intent never surpass those of ordinary satisfied customers Andreasson, T 2001: 47

In general, youre better off fail safing the service than trying to constantly respond with superior recovery.
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Will it Help if I Scream?

Customers' emotional responses to service failures are often critical in their evaluation of your organisation It isnt enough to be polite etc but that there must be some distributive justice i.e. concrete outcomes! It would help if you had some training to recognise and respond to emotions caused by service failure You need some freedom to tailor service recovery to fit the emotional state of the customer This means empowering frontline employees

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Smith & Bolton (2002)

Does it Help if they Love Us?

Yes! An existing rapport between the customer and service provider results in: increased postfailure customer satisfaction
increased repatronage intentions

decreased negative word of mouth

BUT rapport does not seem to increase the propensity for customers to complain about poor service
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Service Recovery Strategies

Service Recovery Strategies

Based on Z,B&G 2006
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Its in The Way We Do Things Around Here Service Development and Design

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Gap 2
Expected

CUSTOMER

Service
Customer Gap

Perceived Service

COMPANY

Service Delivery
GAP 4 GAP 3
Customer-Driven Service Designs and Standards

GAP 1

External Communications to Customers

GAP 2
Company Perceptions of Consumer Expectations
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Setting Standards

8
7 9

9
2

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Factors necessary for Service Standards

Standarisation of service behaviours and actions

Formal service targets and goals Customer not company defined standards

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Customer Defined Service Standards

Hard Soft One time fixes Service encounters the Building Blocks for quality

Not everything that counts can be counted, and not everything that can be counted, counts.
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Service Mapping/Blueprinting
A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customers point of view.

Process Service Mapping

Figure 9.5 Z&B, 2006 p267
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Points of Contact Evidence

NSD & Innovation

In 2004 and 2005, 32% of surveyed businesses in the service sector were innovating. Largest proportion of innovating businesses: electricity, gas & water supply industry (49%), wholesale trade (43%) & finance & insurance (38%).
ABS 2008
CRICOS Provider Code 00301J http://portal.water.wa.gov.au/portal/page/portal/WaterInnovationConference (accessed July 2009) Curtin University is a trademark of Curtin University of Technology

Why Bother?

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Portfolio Management

Gate 1

Gate 2

Gate 3

Gate 4

Gate 5

Ideation & Discovery

Crafting the Story (Scoping)

Build Business Case

Detailed Development

Testing and Evaluation

Launch and embed

Reflect & Learn

CIDQ Innovation Framework

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Employees Roles in Service Delivery: The Service Value Chain

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Gap 3
Expected

CUSTOMER

Service
Customer Gap

Perceived Service

COMPANY

Service Delivery
GAP 4

GAP 1

External Communications to Customers

GAP 3
Customer-Driven Service Designs and Standards

GAP 2
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Company Perceptions of Consumer Expectations

Service Culture

A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimately, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.
Christian Gronroos (1990)
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Service Profit Chain

Leadership

Operating Strategy and Service Delivery System

Product/ Service Concept

Employee

INTERFACE

Internal Service Quality

Satisfaction Capability

Loyalty Productivity External Service Quality Value Customer Satisfaction Customer Loyalty

Revenue Growth

Profitability

Source: Heskett, Jones, Loveman, Sasser, & Schlesinger

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The Public Sector Service Value Chain

Heintzman and Marson 2003; 2006

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A Public Sector Example: Canada

Source: Heintzman and Marson 2006 People Service and Trust: Links in a public sector service value chain
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http://publicadmin.uvic.ca/future06/pdfs/marson.pdf

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The Critical Importance of Service Employees

You are the service. You are the organisation in the customers eyes. You are the brand. You are marketers. Your importance is evident in:
the services marketing mix (people) the service-profit chain the services triangle

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Human Resource Strategies for Closing GAP 3

Hire for Service Competencies and Service Inclination

Hire the Right People Develop People to Deliver Service Quality

Empower Employees

Treat Employees as Customers

Retain the Best People

CustomerOriented Service Delivery

Provide Needed Support Systems

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Provide Supportive Technology and Equipment

Its in Our Moments of Truth

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The Moment of Truth

were not referring to every point of customer contact. Its those points of contact where the customer is basically saying, Im in or Im out. . (Ken Wong, 2007) When the moments of truth go unmanaged, the quality of service regresses to mediocrity. (Albrecht & Zemke 1985)

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The Moment of Truth?

Companies invest large amounts into customer service and retention, but many initiatives disappoint. e.g. Only 10% of business & IT execs agreed that business results expected from CRM were met or exceeded (Forrester Research, 2005) Whats missing? According to Beaujean, Davidson & Madge (2006) its

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The spark between the customer and front line staff members, the spark that helps transform wary or skeptical people into strong and committed brand followers

The Moment of Truth?

This spark is really about engagement and meaning.

Gone working

Some of the most interesting work in this area comes from researchers such as Mike Csikszentmihalyi (Flow), Martin Seligman (Positive Psychology) and the field of transpersonal psychology
Note: Engagement is not the same as satisfaction
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Story time
Is good service just common sense? In pairs
Share at least one of your stories What were the key 2 or 3 factors in determining whether you were happy or not with the service provided?

At your tables
Share these key factors with the group Identify any common themes Did it matter if it was an internal service provider ? What are the implications?
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Employee Engagement

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Drivers of Employee Engagement

Note: Some of these factors are what would be fundamental or contractual requirements for the organisation (the hygiene factors), such as pay and benefits and health and safety, whereas others are the areas where the organisation must go the extra mile to ensure effective communication, management and cooperation.
Robinson, D., Perryman, S. and Hayday, S. (2004) The drivers of employee engagement. Brighton: Institute for Employment Studies. Curtin University is a trademark of Curtin University of Technology
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Schmidts Model of Organisational Dynamics

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Schmidt, F (2004) Workplace well-being in the public sector a review of the literature and the road ahead for the Public Service Human Resources Management Agency of Canada. Ottawa: PSHRMA. Available online at http://www.hrmaagrh.gc.ca/hr-rh/wlbpseeoppfps/documents/WorkplaceWell-Being.pdf [retrieved on May 25th 2007]

Factors Enhancing Engagement

1.Employee perceptions of job importance. 2.Employee clarity of job expectations. 3.Career advancement/improvement opportunities. 4.Regular feedback and dialogue with superiors. 5.Quality of working relationships with peers, superiors, and subordinates. 6.Perceptions of the ethos and values of the organization. 7.Effective Internal Employee Communications which convey a clear description of "what's going on".
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How Customers Widen Gap 3

Lack of understanding of their roles

Not being willing or able to perform their roles

No rewards for good performance

Interfering with other customers

Incompatible market segments

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Strategies for Enhancing Customer Participation

Effective Customer Participation

Define Customer Jobs

Recruit, Educate, and Reward Customers

Manage the Customer Mix

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Other Key Issues in Service Delivery!

Who Owns the Customer Relationship?
Supply and Demand Management Yield Management

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Its in The Way We Communicate

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Gap 4
CUSTOMER

Expected

Service
Customer Gap

Perceived Service

COMPANY

Service Delivery
GAP 4 GAP 3
Customer-Driven Service Designs and Standards

External Communications to Customers

GAP 1

GAP 2
Company Perceptions of Consumer Expectations
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Internal Communication
Think carwash.

Rather than waterfall

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Communication and the Services Marketing Triangle

Company (Management)
Internal Marketing External Marketing setting the promise Advertising Sales Promotion Public Relations Direct Marketing

enabling the promise Vertical Communications Horizontal Communications

Employees

Customers Interactive Marketing delivering the promise Personal Selling; Customer Service Centre; Service Encounters; Servicescapes

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Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Distribution of Services
Many service providers have changed a high contact service into a low contact one, such as the banking industry moving to ATMs and internet banking Changing the delivery of services has created some problems with customer attitudes and perceptions
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Service promise CBA released their 2010 advertising campaign and promised to call you back when they say they will

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15 min Break

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80

1. What is InterfaceRAISEs value proposition?

Case analysis: InterfaceRAISE Sustainability Consulting

2. InterfaceRAISE has three objectives. Which appears to be driving its strategy? Can all three be achieved simultaneously? 3. What would you recommend to CEO Dan Hendrix with regard to strategy, service offering, pricing and structure/staffing? What would you request from Interface Inc. in terms of time and/or investment? 4. What should InterfaceRAISEs goal be over the next five years? What metrics should they use to assess progress? What targets should they set?

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