Caterpillar PPT
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Using Services Marketing to Develop
and Deliver Integrated Solutions atCaterpillar in Latin America
Section A | Group 5
ISSUES
GAP 1• Service Reliability and responsiveness• Customer Relationships• Huge potential for Improvement • Product Differentiation and Quality• Dealer product support operations• Customer Surveys were Sporadically performed• Inability to deliver and calculate costs and benefits of CSAs
GAP 2• Poor positioning and marketing of CSAs• CSAs were created in an AD HOC manner• Consumers were unaware of what was promised about CSAs• Performance standards were operationally focused and not
consumer driven• Absence of and standards and measures
GAP 3• Inadequate supply of qualified mechanics• Limited number of Technicians were selected and trained• Lack of teamwork and communication among various
departments• Lack of a reliable system for keeping track and monitoring• Complex scheduling process for field technicians• Lack of feedback communication between consumer and
dealers
GAP 4• Improper focus on product features and benefits• No advertising brochures / advertisements• Ability to sell CSAs both externally and internally was limited• Lack of tangible representations or written descriptions• Lack of written communication confused verbal
communication• Absence of clearly defined service features
Caterpillar’s formula for success Find out what products customers want
Design and build them Keep them running
When they wear out, rebuild or recycle Do it better than anybody else
Company Perceptions of Customer Expectations
Customer Expectations
Inadequate service recovery
• Required to be taken care of in case of failed technician appointments, technician shortage, unattractive presentation of inspection reports etc.
Insufficient relationship focus
• Recognising the correct segment
• Focus on costs, revenue and operations, and not customer profitability or customer service quality perception
Upward communication
• Dealers, not employees, were the contact points for end customers
• Non renewal of CSAs, CSAs went unnoticed, resulting in inefficient feedback mechanism
Inadequate customer research orientation
• Customer surveys sporadically performed, catered to only service quality feedback
• Individual interactions, were missing
CATERPILLAR - GAP 1
Question What else did they need to learn in Gap 1 about customer needs and
expectations?
Kano’s Model 1. Basic Expectations: The bad frustrates, yet the good does not impressCaterpillar served high on basic expectations (high customer performance perception of tangibles), but these had low impact on customer satisfaction
2. Performance Payoff: The more organisational investment, the more user satisfactionCaterpillar’s investing in shifting from product focus to services focus (in the form of CSAs)
3. Excitement Generators: Design elements and features that delight the userWhat Caterpillar needed to know: How to work upon achieving potential level of performance in responsiveness, reliability, empathy and assurance areas to address customer gap.
Responsiven
ess
•Standardisation of technicians’ skill set and training to achieve speed in service offered
•Sophisticated processes, tools, feedback mechanisms to register and address customer’s issues
Reliability
•Maximum up time of equipment at minimum cost
•Minimum risk and cost for unplanned machine down time
•Timely services such as oil/ filter change, condition monitoring, visual machine inspection
Assurance
•Knowledge and courtesy of employees to inspire trust from the customer
•Attention to their interaction and communication skills in describing issues to customers and valuable recommendations
Empathy
•Capturing and addressing customer satisfaction with individual interaction
•Addressing individual issues by customized service in terms of duration and cost, relaxing financial burden by having credit policy in place
Different needs for different customers, hence different zones of tolerance
Small customers Mid range customers
Large customers
Segments: “Do it myself” “Work with me” “Do it for me”
Activities: Used internal or competitive resources to satisfy product support needs
Managed day-to-day product support; dealer support for complex repairs
Outsourced majority of their product service activities
Zone of tolerance: Large Medium Small
Expectations: Ways to avoid costly repairs and unplanned downtimes, policy to overcome cash flow limitation
Versatility preferred to productivity
Machine up time most important requirement
Hard Features• Frequency of the services offered -
weekly, monthly or on-call• Standardization of CSAs –
elimination of variance across dealers• Performance measure – Ex:
maximum machine up time • What is the average machine down
time that the customer is comfortable with?
Soft Measures• How important is it to the
customers that the contact employee has good communication skills?• Are the employees responsive,
courteous and possess the required skill set?• Level of customer satisfaction
with customization of service?
Question : What features were expected by customers in CSAs?
SERVQUAL Surveys- Matching expectations statements, referent expectations format, combined expectations/perceptions statements, expectations distinguishing between desired and adequate service- Measuring customer perceptions of service on reliability, responsiveness, assurance, empathy and tangibility dimensions
Capturing customer satisfaction and individual interactions-Relationship Surveys- Post interaction customer surveys- Segment-oriented research
Question : How could they find out the features expected by customers in CSAs?
QuestionClosing Gap 1 : To find out the needful to know how to establish
standards for Gap 2
DESIRED RESULTS• Responsive providers and effective services.• Customer feedback continuously linked to service improvements• Empowered customers who expect satisfaction and exercise their
influence and rights• Informed consumers who take action
INFORMED, ENGAGED,EMPOWERED CONSUMERS• Judge service quality• Test local goods and services• Set service standards• Advocate for customer satisfaction
CONSUMER ADVOCACY GROUP• Educate and train neighborhood
consumers• Monitor customer satisfaction• Provide neutral, credible consumer
information• Serve as consumer ombudsman /
advocate• Promote customer satisfaction
strategies and accountability
CUSTOMER FOCUSEDAGENCY/SERVICE PROVIDERS• Work to improve organizational
performance• Strive for 100% customer satisfaction• Treat staff as they want customers to
be treated• Establish continuous improvement• Utilize customer feedback as a
measure of accountability
Customers who care about qualityservices and are continuously informed about actual performance
CSSP FRAMEWORKUsing Customer Satisfaction To Improve Quality and Access
to Goods, Services and Supports In Vulnerable Neighborhoods
Source : CSSP - Center for the Study of Social Policy
CLOSING GAP 1
Source : Report on ‘closing delivery gap’ Bain and Co.
CUSTOMER RELATIONSHIP MATRIX
Word of mouth
Personal needs
Past experience
Expectedservice
Perceivedservice
Perceived Service Quality
Communication
Courtesy
Credibility
Security
Providing customized
solution
Service Quality Dimensions
• Reliability• Responsiveness• Empathy• Assurance• Competence• Access• Tangibles
DETERMINANTS OF PERCEIVED SERVQUAL
VISION 2020
Innovation / TechnologyExtend Customer ExpectationsExtend Global Leadership
THE SOLUTION
STOC
KHOL
DERS
Deliv
er su
perio
r ret
urns
thro
ugh
the
cycle
s
PEOPLE
Attract and develop the best talentCUSTOMERS
Help customers succeed
DEFINE STRETEGIC GOALS
Superior Results | Global Leader | Best Team
STENGTHEN OPERATING PRINCIPLES
Strategic Businesses | Customer Focus |Valued Products/Services |
Supplier Collaboration | Superior Dealer Support |Expertise | Flexible Cost Structure
PUT VALUES IN ACTION
Source : Caterpillar Inc.
OPERATIONAL EXCELLENCE
CUSTOMER INTIMACY
PERFORMANCE SUPERIORITY
Operational competence
Customization, Unique Customer DemandsCustomer Responsiveness
Product Design, StyleProduct differentiation
Cost consideration, Delivery
MARKETING STRATEGY
Short Term Goal
Long Term Goal
Source : Coursera ; Course in strategic marketing, Wharton School of Business
Question 2:A) Should they offer different CSAs to
different segments of General Construction?B) What would that imply for research,
standards, and implementation?
• Lack of consistency across LACD, and inability to deliver and inability to calculate costs and benefits of CSAs (dealers)
• Inconsistent approach towards customer service focus (largely focused on very large mining customers); dealers had different customer service philosophies
• Highly customizable in terms of content, length and cost; sold separately from machines/equipment o Limited marketability and dealers’ operational efficiency
• Sales organizations reluctant to sell CSAs due to concerns regarding delivering on promises, as well as due to intangible nature of CSA, making it hard to explain, sell and differentiate
Issues with Existing CSAs
• Identifying target customers and optimizing service offering, marketing and sales approach • Developing and communicating attractive service packages that cater to needs of the various segments • Developing relationship strategies (financial bonds, social bonds, customization bonds, and structural
bonds) leading to higher customer loyalty and CSA renewal rates
Need for Segment-wise CSAs
Key Variables for CSA Customer Segmentation
Demographic Operating Variables
Purchasing Approaches
Situation Factors
Levels of Segmentation
Criteria for Effective Segmentation
Differentiable
Measurable
Accessible
Substantial
Actionable
Personal Characteristics
Source: Peppers and Rogers Group Website
Need-based Customer Segmentation Model • Requires clustering customers based on qualitative (e.g. FGD, also to be used for hypothesis development to be used in quantitative research) and quantitative research (to find statistically distinct homogeneous needs segments)
• Integrated segmentation methodology is more adaptive to changing customer preferences, and develop truly targeted services
• Common needs: needs shared among all customers; must be served to survive competition
• Shared and Differentiated needs: must be served to remain competitive for specific customer groups
• Relevance of value proposition increases with enhanced understanding of individual needs
Low Medium High
Level of Engagement
Do
it M
ysel
fW
ork
With
Me
Do
It Fo
r Me
Note: Level of engagement refers to the product support service package being offered. Low refers to simple preventive maintenance kits, while High refers to the total maintenance and repair package, which may include (but is not limited to) multiple machines/equipment, training, spare parts, and regular maintenance audits
Beha
viou
ral (
Nee
ds a
nd B
enefi
ts) C
usto
mer
Seg
men
tsBehavioural Segmentation: CSA
‘Needs and Benefits’ vs. ‘Engagement’Highly
Customized;High customer loyalty can be
expected
Focus on educating the
customer; continue
relationship
Targeting Specific Segments for CSAs for higher customer loyalty
Value is the quality I get from the price I pay Value pricing Market segmentation pricing
Value is all that I get for all that I give Price framing Price bundling Complementary pricing Results-based pricing
Value is everything I want in a Service Prestige pricing Skimming pricing
Value is low price Discounting Odd Pricing Synchro-pricing Penetration pricing
Value-based Pricing – Services Pricing Strategies based on Customer Definition of Value
Pricing Strategies
The company should adopt a perceived value pricing strategy, wherein, it will charge separate prices for the various segments (based on criticality/perceived value of a service to various customers); it may also adopt a tiered service
pricing on similar lines as is done by companies in telecom sector to address CSA pricing at various engagement levels
Implications for Research • Existing research Issues
o Interactions with customers largely through dealers – increased importance of customer research o Customer surveys were sporadically performed and only partially designed for the purpose of service
quality feedback o Inadequate customer value survey measures for capturing and addressing customer satisfaction o Lack of tools to interpret the results of surveys and to translate them into specific strategies o Segmentation issues: overlapping; assumption-based
• Possible Solutions o Conduct customer research to identify customer requirements and service expectations (identify
zones of tolerance for each, mapping various standards against expectations); will also help in identifying more profitable customer segments and new service opportunities Conduct quantitative research (e.g. factor and cluster analysis) to segment customers into
mutually exclusive segments based on their expectations and perceptions o Monitor and track service performance - Post interaction customer surveys and trailer calls; will also
help in performance evaluation of employees and dealers o Competitive benchmarking against competitors o Assess service gaps (expectations vs. perception) o Identify service failures to implement service recovery
Implications for Standards • Existing Issues
o Ad-hoc approach towards CSA design and development; varied widely across dealerships (and often across customers within dealerships)
o Performance standards operationally focused (e.g. cost, revenue, profit) and not customer driven (e.g. reliability, responsiveness, empathy, assurance, and tangibles)
o Customer location varied widely – hard to standardize service promises o Dealerships organized in silos – inconsistent internal interactions o Issues with CSA renewals
• Possible Solutions o Moving to customer-driven performance standards (segment-wise) – hard standards (e.g. response
time when complaint is received and service person arrival on-site, and repair time) and soft standards (empathy and etiquettes, trailer calls)
o Developing service blueprint and adhering to it strictlyo Training salesforce and product support team to ensure consistent service delivery and
communication
Machine/Equipment repair flow chart
Customer arrive at
service center with M/E
Machine/equipment is
inspected
Worksheet is prepared
CSA is checked and BOM is calculated
M/E worksheet and BOM is given to the
customer
Customer leaves
Does customer
agree?
When M/E gets repaired service
center follows up
Customer want to get machine/equipment (M/E) repaired
Wants M/E pick up?
Yes Customer contacts customer support
service
Check customer has CSA for M/E
Field mechanic goes to client site and perform M/E
inspection
Yes
No
No
Does customer
agree?
YesDelivery time is
different ?
Yes
NoM/E is
repairedCustomer pays as
per BOM
NoCustomer pays as
applicable field mechanic leaves
1
2
M/E inspection flow chart
Customer wants to get machine/equipment (M/E) condition monitoring
Customer contacts customer support
service
Check customer has CSA for M/E
Field mechanic goes to client site and perform M/E
inspection
Field mechanic advices customer
for any need additional work
1
Preventive maintenance flow chart
Customer service center informs customer for E/M’s scheduled service
Wants E/M serviced?
Yes
No
2
Customer can be informed about PM’s benefits
Service center follow up sub-flow chart
Customer service center contacts
customer
E/M is delivered to customerWants M/E
delivered?Yes
NoCustomer picks up
E/M
Customer pays as per BOM
CRM operations
Customer
Customer Customer
CRM operationsCustomer DatabaseMachine/Equipment
ServicingGrievance redressalEducate customer
Equipment/Machine repair
Needs CSA information
Equipment/Machine delivery and trailer calls
New Customer Information
Existing Customer Information
CustomerMachine condition monitoring
Grievance redressal
Preventive maintenance
CRM operations
Physical Evidence
Customer Action
Employee Actions(onstage/visible)
Employee Actions(backstage/Invisible)
Support Processes
Customer calls customer
service center
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of interaction
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of visibility
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of internal interaction
Greets
Customer database
Customer asks for field mechanic
Checks customer information and
mechanic availability
Ask for CSA and book appointment with the customer
Field mechanic visits the customer, inspect M/E
Tells the appointment time to
customer
Field mechanic performs condition
monitoring
CSA, Repair Equipment, forms
Physical Evidence
Customer Action
Employee Actions(onstage/visible)
Employee Actions(backstage/Invisible)
Support Processes
Customer agrees for
repair
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of interaction
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of visibility
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Line of internal interaction
Field Mechanic suggests
repairs needed and cost
Customer database
Customer waits till M/E date of delivery
M/E gets repaired
Field Mechanic picks up the truck
Customer care informs customer
Customer decides time of delivery
M/E delivered
Customer receives and checks M/E
Worksheet , BOM Worksheet , BOM
Blueprint
Implementation
• Tools for serving customers• High quality support
services and policies• Defined standards• Integrated services
marketing communication
• Reduced repair cost• Reduced unplanned
downtimes
Service designed and delivered to targeted customers
• Repeat business• Word of mouth
publicity
Question
What standards and measures should be set in Gap 2 to deliver to customer expectations?
About CSAs
• Highly customized and complex– content, length, cost• Sold separately and delivered through dealer product support• Large customers – high loyalty• Medium and Small customers – low renewals• Limited the CSA marketability among general construction customers• Preventive Maintenance Agreements (PM CSA) – technician activities
were not build explicitly into contracts
The Loyalty Loop
Source: www.mckinsey.com
Poor Service Design
• Few CSAs• CSAs were not branded• CSAs were created in an ad
hoc manner
Customer Driven
Standards
• Promised but expectations not met
• Operationally focused not customer driven
Inadequate physical
evidence and Servicescape
• Customers interact with sales people
• What to offer and what to deliver
• Cultural differences
GAP 2The
Service Design
and Standards
Gap
Customer Driven Service Designs & Standards
Company perceptions of customer expectation
Standards and measures to be set up in Gap 2
Hard Standards:• Standardized CSAs – Make CSAs part of performance evaluation for
dealerships and their employees.• Focus on response time and service speed – minimize machine
downtime
Soft Standards:• Employees need to be empathetic and responsive• Customer satisfaction through customization and delivery of service
Kotter’s 8-Step Change Model
• Create a Sense of Urgency - Use CSAs as a medium to capture the growing services market• Create a guiding coalition – Meeting with the Dealer Advisory Panel• Create a vision for change – The customers, along with Machine and
Product Support Sales Representatives to be the key stakeholders• Communicate the vision - Performance standards to be customer
centric. Adequate literature for CSAs to be made available. Better relations with “buyers”
Kotter’s 8-Step Change Model
• Remove Obstacles – Dealership departments must work in tandem. Better coordination between sales and service departments.• Create short-term wins – Address each country individually. Create
uniform CSAs.• Consolidate Improvements – Keep on learning. Switch to multiple
CSAs but with consistent options• Anchor the changes – Initiate customer feedbacks on a quarterly
basis to make sure adequate services are delivered to the customer. Once complete, freeze the process but keep enough space for uncertainties.
CSAs for General Construction Customers Large Medium Small
Do it for me
Highly customized with little standard services
Monthly/Yearly subscription
Do it with me
Less customized +
Basic standard services
Cost for the service performed
Do it myself
Less customized with more emphasis on consultation, information dissemination,
diagnosis , a readily available service team. Offer Inspection
CSAs so that clients can compare among services.
Service charge at heavy discount.
Market Penetration of CSA
Development of existing CSAs
Market Development Diversification of CSA
Mar
ket
Products
Strategy matrix fitCaterpillar
New
Exis
ting
Existing New
Balanced CSA strategy
Creating new CSAs
Post introduction Evaluation
Commercialization
Market testing
Service prototype development and testing
Business analysis
Service concept and evaluation
Idea Generation
Implementation
Front end Planning
• Separate training for product and service dealers
• ERP, CRM systems implementation
• Employee reward schemes/performance based bonus appraisals.
• Internal audits and checks
• Readily available brochures and informational guides for quick reference.
• Automated reminder about services.
• Manufacturing products with the important attributes as found out in the research.
Objectives for the dealerships
To increase coordination between product support and machine sales department
This can be achieved by common training and development programs where the employees are taught about the company’s service standards and CSAs
Common rewards for both the teams for achieving the desired service quality targets
Set up common employee goals and priorities that are in line with company’s activities
Dynamics within a dealership
How should the dealership overcome all the Gap 3 issues
that they faced to insure consistent delivery?
Issues Identified Supply and
Demand Inadequate supply of qualified mechanics
Boundary SpannersInteraction and
communication skills of technicians
Co ordination Lack of teamwork and communication
System and Processes Lack of a reliable
system for dealers to better manage
customers
Service Culture
Product Focused to Integrated Customer Focused Business Solution
New customer driven goals to be communicated through all verticals.
New benchmarks : Recording and minimization of machine downtime, no. of CSA’s sold and serviced successfully
Customer Centric Culture
MapCustomer Journey and
LifecycleRefine
Operating model to enable customer
centricity
Alignprocesses to support and drive customer
engagement
Engageexecutives and leaders
Focusdevelopment around
target areas and behavior change
IntegrateDisparate business unit
culture
Transformculture top to bottom
Measurechange using key
metrics
Incorporatecustomer feedback
into process and behavior
Customer Oriented Service
Delivery
Retain the best people
Hire the right people
Develop people to
deliver service quality
Provide needed support systems
Compete for the best people
Hire for service completeness and service inclination Be the
preferred employer
Treat employees as customers
Include employees in
the company’s vision
Develop service oriented internal
processesProvide
supportive technology and
equipment
Measure internal service
quality
Measure and reward strong
service performers
Promote Team work
Empower Employees
Train for technical and
interactive skills
Hire the right people : • Hire technicians who are not only technically strong but
also good in customer interaction and communication• Hire sales force oriented towards both product and
service marketing.• Make new dealership ties who are capable of CSA
deploymentDevelop people to deliver service quality : • Communicate and engage people in the new service
oriented business model: Goals• Train dealers and technicians in customer interaction,
competency matching, empower them like other dealers• Sensitization of both sales team and technicians to CSA’sProvide needed support systems :• Carefully designed CSA’s to be given to sales force.• Better CRM software tool, defined processes• Technician to be provided new checklists which target
more customer oriented specifications Retain the best people :• Contracts for technicians• Upgrading PM techs • Incentivize CSA’s sales and good service delivery
performance
Boundary Spanning Roles
Mechanics and TechniciansCompensation and Incentive plans : Contracts
to ensure there is no shortage in supply thus creating a bottleneck
Training : Both technical and non technicalEmotional Labor : Understanding sources of
conflict to improve Interaction and communication skills
Quality Trade off
Sources of conflict1. Person Role Conflict
2. Organization / Client Conflict
3. Inter client Conflict
Boundary Spanning Roles
Dealership Employees (Sales Force: Product and Product Support)Emotional Labor :1. Person Role Conflict: Clearly defined goals for each department2. Organization / Client Conflict: Communicating the importance and effectiveness in
CSA (building confidence)3. Inter client Conflict : Better segmentation, Create bands of customer
Delivering the promise(Interactive Marketing)
Enabling the promise(Internal Marketing)
Making the promise(External Marketing)
OwnersTechnicians and
Dealership Employees
Management
Internal Service Marketing
Coordination• Clear Goals for each Department
• CRM through better CRM software tool enabling formal and transparent way to communicate
• Caterpillar
• Dealers
• Field Technician
• Owner ( may be through a mobile app)
Confidence in CSA• Early adapters, Medium adapters, Late adapters
(Wow, Moment of truth, free pilot, generate word of mouth)
• Best to be put on the job, incentives to be given to high performers
• Service guarantees if service falls below a level (return a %age of price which has already been incorporated in price estimation), offer pilots
Customers’ Roles in Service Delivery
Six key elements of a customer-centric strategy by PWC
Using customer insight to inform effective customer
segmentation
Creating multiple delivery Channel
Aligning service delivery to customer journeys
Setting service standards
Creating and empowering customer champions
Continuous improvement through customer feedback
Effective Customer ParticipationDefine Customer’s Roles
• Clarify level of participation on the basis of segmentation• Identify specific jobs and tasks• Understand implications for productivity, quality and satisfaction
Educate and Reward Customers• Educate customers for their roles• Provide reasons to participate• Reward customer performance
Manage the customer mix• Assess compatibility of segments• Isolate incompatible segments• Enhance segment compatibility
Dealers’ Roles in Service Delivery
They are the Service Providers They are the Organization in the customer’s eyes They represent the Brand They are the Marketers
Assurance: Communicating their credibility to inspire trustReliability: Delivering the service as promisedResponsiveness: The promptness in serving customersRelationship: Flexibility in delivering the servicesTangibles: The after effects of service (on machine parts)
Perceived Expectations
Perceived Quality
Perceived ValueCustomer Satisfaction
Customer Loyalty
Customer Retention
Managing Demand & Capacity
Capacity is limited & cannot be easily changed
Product demand
Timing of demand is not correlated to whether the customer is paying more or less Product demand may
sometimes be satisfied early
PredictablePeak construction season
UnpredictableShort notice or after business hours
Managing Demand & Capacity
Try to predict the demand
Managing Demand & CapacityShift Demand
Demand Too High
Demand Too Low
(Reduce Demand during Peak Times)
• Communicate busy days & times to customers• Offer incentives for nonpeak usage• Set priorities by taking care of loyal or high-need customers first• Charge full price
(Increase Demand to Match Capacity)
• Educate customers about peak time
Customer Profitability Map
Platinum Gold
Iron Lead
Price
Cost to Serve
The Customer Pyramid
Platinum
Gold
Iron
Lead
Managing Demand & Capacity
Platinum • Communicate with customers Top priority – high lifetime value
Iron• Educate Customers
Lead• Provide Discount in Nonpeak times
Gold• Offer incentives for Nonpeak UsageTry to lock-in
Managing Demand & CapacityAdjust Capacity
Demand Too High
Demand Too Low
(Reduce Demand during Peak Times)
• Cross-train employees• Use part-time employees• Stretch people, facilities
(Increase Demand to Match Capacity)
• Schedule vacations & employees training strategically
What internal and external materials were necessary to communicate the CSAs to salespeople and customers?
Internal MaterialsGAPSNo brochures or advertisements describing CSAsAbsence of clearly defined service featuresLack of written communicationNo consistent selling process or message explaining the differentiated individual CSA offerings
External MaterialsGAPSNo brochures or advertisementsNo tangible representationsNo differentiation among CSAs not explaining the difference in value
COMPANY
CUSTOMERPROVIDERS
SERVICES MARKETING TRIANGLE
Interactive Marketing
Internal MarketingCommunications
External MarketingCommunications
Approaches to Overcome Service Communication Channels
Address service intangibility
Manage service promises
Manage customer
expectations
Manage customer education
Manage internal marketing
communication Goal= servicedelivery greater than or equal topromises
Address Service IntangibilityUse narrative to demonstrate the service experience - story-based appealsPresent vivid information- evoke strong emotionsFeature service employees and satisfied customers in communication Aim messages to influencersGenerate word of mouth through Employee Relationship
Manage Service PromisesCreate a Strong Service Brand- brand becomes the company’s method of integrating marketing
communicationCoordinate External Communication
Manage Customer ExpectationsMake realistic promisesOffer service guaranteesOffer choicesCreate tiered-value service offerings
Manage Customer EducationPrepare customers for the Service ProcessConfirm performance to Standards and ExpectationsClarify expectations after the sale
Manage Internal Marketing CommunicationCreate effective vertical communicationsCreate effective horizontal communicationsSell the brand inside the companyCreate effective upward communicationCreate cross-functional teams
Closing the gapsInternal Downward communication - Newsletters and magazines, internal promotional campaignsFamiliarize employees with external marketing communication before it is airedHorizontal communication – Coordination between marketing and operations (reducing the gap
between customer expectation and service delivery)Hold GAP workshopsEffective upward communication – Know when the service breakdowns are occurring and whyCreate cross functional teams
Closing the gapsExternalEducate the customersCommunicate to the customer what has been accomplishedGenerate word of mouth through Employee RelationshipsAdvertising testimonials featuring actual customers
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