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Services Marketing

- Rakesh. N
Assistant Professor,
Dept.Of Management Studies,
Don Bosco Institute Of Technology,
Bangalore

Module-III
Understanding customer expectation
through
market
research
:using
marketing research to understand
customer expectation, types of service
research,
Building
customer
relationship
through
retention
strategies,
market
segmentationProcess & targeting in services,
retention
strategies-Monitoring
relationship, 3 levels of retention
strategies, Market segmentation- basis
and targeting in services.

UNDERSTANDING
CUSTOMER
EXPECTATIONS AND
PERCEPTIONS THROUGH
MARKETING RESEARCH

Common Research Objectives


for Services

To identify dissatisfied customers


To discover customer requirements or expectations
To monitor and track service performance
To assess overall company performance compared to
competition
To assess gaps between customer expectations and
perceptions
To gauge effectiveness of changes in service
To appraise service performance of individuals and teams
for rewards
To determine expectations for a new service
To monitor changing expectations in an industry
To forecast future expectations

Criteria for An Effective Services


Research Program
es
d
u
l
ve
Inc litati h
a
c
Qu esear
R
Occurs
with
Appropriate
Frequency

Measures
Priorities
or
Importance

Includes
Quantitative
Research

Research
Objectives

Includes
Perceptions
and
Expectations
of
Customers
Includes
Measures
of
Loyalty or
Behavioral
Intentions

ost
C
es of
c
n
e
la
Ba Valu ion
Includes
Statistical
and ormat
Validity
Inf
When Necessary

Portfolio of Services Research


Research Objective
Identify dissatisfied customers to attempt recovery;
identify most common categories of service failure
for remedial action
Assess companys service performance compared to
competitors; identify service-improvement priorities; track
service improvement over time
Obtain customer feedback while service experience is still
fresh; act on feedback quickly if negative patterns develop
Use as input for quantitative surveys; provide a
forum for customers to suggest service-improvement
ideas
Measure individual employee service behaviors for use in
coaching, training, performance evaluation, recognition and
rewards; identify systemic strengths and weaknesses in
service
Measure internal service quality; identify employeeperceived obstacles to improve service; track
employee morale and attitudes

Type of Research
Customer Complaint
Solicitation
Relationship Surveys
Post-Transaction Surveys
Customer Focus Groups
Mystery Shopping of
Service Providers
Employee Surveys

Determine the reasons why customers defect


To forecast future expectations of customers
To develop and test new service ideas

Lost Customer Research


Future Expectations Research

Stages in the Research Process


Stage 1 :
Stage 2 :
Stage 3 :
Stage 4 :
Stage 5 :
Stage 6 :

Define Problem
Develop Measurement Strategy
Implement Research Program
Collect and Tabulate Data
Interpret and Analyze Findings
Report Findings

Importance/Performance Matrix
HIGH

High
Leverage
Importance

Attributes to Improve

Attributes to Maintain

Low
Leverage

Attributes to Maintain

LOW

Performance

Attributes to De-emphasize

HIGH

BUILDING
CUSTOMER
RELATIONSHIPS

Customer Goals of Relationship Marketing

Relationship Marketing
is a philosophy of doing business that focuses on
keeping and improving current customers
does not necessarily emphasize acquiring new
customers
is usually cheaper (for the firm)--to keep a current
customer costs less than to attract a new one
goal = to build and maintain a base of committed
customers who are profitable for the organization
thus, the focus is on the attraction, retention, and
enhancement of customer relationships

Benefits of Relationship Marketing


Benefits for Customers: Benefits for Firms:
Receipt of greater value
Confidence benefits:
trust
confidence in provider
reduced anxiety

Social benefits:
familiarity
social support
personal relationships

Special treatment
benefits:
special deals
price breaks

Economic benefits:
increased revenues
reduced marketing and administrative
costs
regular revenue stream

Customer behavior benefits:


strong word-of-mouth endorsements
customer voluntary performance
social benefits to other customers
mentors to other customers

Human resource management


benefits:
easier jobs for employees
social benefits for employees
employee retention

Lifetime Value of a Customer


Assumptions
Income
Expected Customer Lifetime
Average Revenue (month/year)
Other Customers convinced via WOM
Employee Loyalty??
Expenses
Costs of Serving Customer Increase??

A Loyal Customer is One Who...


Shows Behavioral Commitment
buys from only one supplier, even though other options
exist
increasingly buys more and more from a particular supplier
provides constructive feedback/suggestions

Exhibits Psychological Commitment


wouldnt consider terminating the relationship-psychological commitment
has a positive attitude about the supplier
says good things about the supplier

Benefits to the Organization of Customer


Loyalty
loyal customers tend to spend more with the
organization over time
on average costs of relationship maintenance
are lower than new customer costs
employee retention is more likely with a
stable customer base
lifetime value of a customer can be very high

Benefits to the Customer


inherent benefits in getting good value
economic, social, and continuity benefits
contribution to sense of well-being and quality
of life and other psychological benefits
avoidance of change
simplified decision making
social support and friendships
special deals

The Customer Isnt Always Right

Not all customers are good relationship


customers:
wrong segment
not profitable in the long term
difficult customers

Strategies for Building Relationships


Foundations:
Excellent Quality/Value
Careful Segmentation
Bonding Strategies:
Financial Bonds
Social & Psychological Bonds
Structural Bonds
Customization Bonds
Relationship Strategies Wheel

Customer Goals of
Relationship Marketing

Enhancing
Retaining

Satisfying

Getting

Underlying Logic of Customer Retention


Benefits to the Organization
Customer Satisfaction

Customer Retention &


Increased Profits

Employee Loyalty

Quality
Service

Steps in Market Segmentation and


Targeting for Services

STEP 1:

STEP 2:

Develop
Identify
Profiles of
Bases for
Segmenting Resulting
the Market Segments

STEP
3:
Develop

Measures
of Segment
Attractiveness

STEP4:
Select the
Target
Segments

STEP
5:
Ensure that
Segments
Are
Compatible

Levels of Retention Strategies


Volume and
Frequency
Rewards

Stable
Pricing

Bundling and
Cross Selling
Continuous
Relationships

I. Financial
Bonds

Integrated
Information
Systems

IV.
Joint
Structural
Investments
Bonds
Shared
Processes
and
Equipment

Excellent
Quality
and
Value

II.
Social
Bonds

III. Customization
Bonds

Anticipation
/ Innovation

Mass
Customization

Personal
Relationships

Social Bonds
Among
Customers

Customer
Intimacy

SERVICE RECOVERY

Unhappy Customers
Repurchase Intentions
Unhappy Customers Who Dont Complain

9%

37%

Unhappy Customers Who Do Complain

Complaints Not Resolved

19%

46%
54%

Complaints Resolved

70%
82%

Complaints Resolved Quickly

Percent of Customers Who Will Buy Again


Minor complaints ($1-$5 losses)

Major complaints (over $100 losses)

Source: Adapted from data reported by the Technical Assistance Research Program.

95%

Customer Response Following


Service Failure
Service Failure

Take Action

Do Nothing

Switch Providers
Complain to
Provider

Complain to Family
& Friends

Switch Providers

Complain to Third
Party

Stay with Provider

Stay with Provider

Service Recovery Strategies

il
Fa

fe
Sa

e
th

c
vi
r
Se

We
En lcom
co
ura e an
ge d
Co
m

pla
i

nts

Act Quickly

Learn from
ers
Lost Custom

Service
Recovery
Strategies

Le
Re arn f
co rom
ve
ry
Ex
pe
ri

en
ce
s

ea
Tr

om
t
s
Cu

er

i
Fa

rl y

Pricing

High Price
Price Increases
Unfair Pricing
Deceptive Pricing

Inconvenience

Location/Hours
Wait for Appointment
Wait for Service

Core Service Failure

Figure 7-6

Causes Behind Service


Switching

Service Mistakes
Billing Errors
Service Catastrophe

Service Encounter Failures

Uncaring
Impolite
Unresponsive
Unknowledgeable

Response to Service Failure

Negative Response
No Response
Reluctant Response

Service
Switching
Behavior

Competition
Found Better Service

Ethical Problems

Cheat
Hard Sell
Unsafe
Conflict of Interest

Involuntary Switching
Customer Moved
Provider Closed

Source: Sue Keaveney

Service Guarantees
guarantee = an assurance of the fulfillment of a
condition (Websters Dictionary)
for products, guarantee often done in the form of a
warranty
services are often not guaranteed
cannot return the service
service experience is intangible
(so what do you guarantee?)

Characteristics of an Effective Service


Guarantee
Unconditional
The guarantee should make its promise unconditionally no strings attached.

Meaningful
It should guarantee elements of the service that are
important to the customer.
The payout should cover fully the customer's
dissatisfaction.

Easy to Understand and Communicate


For customers - they need to understand what to expect.
For employees - they need to understand what to do.

Easy to Invoke and Collect


There should not be a lot of hoops or red tape in the way
of accessing or collecting on the guarantee.
Source: Christopher W.L. Hart, The Power of Unconditional Guarantees, Harvard Business Review, July-August, 1988, pp. 54-62.

Why a Good Guarantee Works

forces company to focus on customers


sets clear standards
generates feedback
forces company to understand why it failed
builds marketing muscle

Service Guarantees
Does everyone need a guarantee?
Reasons companies do NOT offer
guarantees:
guarantee would be at odds with companys image
too many uncontrollable external variables
fears of cheating by customers
costs of the guarantee are too high

Service Guarantees
service guarantees work for companies who are
already customer-focused
effective guarantees can be BIG deals - they put
the company at risk in the eyes of the customer
customers should be involved in the design of
service guarantees
the guarantee should be so stunning that it comes
as a surprise -- a WOW!! factor
its the icing on the cake, not the cake

Thank you