Services Marketing and Customer Relationships

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Services Marketing andServices Marketing and

Customer RelationshipsCustomer Relationships

Prof. Rushen ChahalProf. Rushen Chahal


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The Nature of ServicesThe Nature of Services

y regardless of the product, there is a servicescomponent to the offerings of all firms

y in some cases, a service is the principal

purpose of the transaction, as in the rental ofa car, a haircut, or legal services -- we refer tothis as the core servicecore service

y in others, service is performed in support of

the sale of a tangible product -- these arereferred to as supplementary servicessupplementary services

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Goods and ServicesGoods and Services

ContinuumContinuum

y There are two classes of services.

Services that are the main purpose of atransaction renting a truck to move.

Services that supplement the sale of a tangiblegood for example, an information hotline forcomputer software.

y The focus here is primarily on identifiable, intangible

services that are the main object of a transactiondesigned to provide want-satisfaction to customers;supplementary services growing in importance,however.

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Canned

foods

Ready-

madeclothes

Auto-

mobiles

Draperies,

Carpets

Rest-

aurantmeals

Repairs:

auto, house,landscaping

Air

travel

Insurance,

Consulting,Teaching

MOSTLY GOODS MOSTLY SERVICES

The Goods-Services

Continuum


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Importance ofImportance of

ServicesServices

y Three-fourths of the Canadian labourforce is employed in service industries.

y

Over 70% of the nations gross nationalproduct is produced by services.

y From 1986 to 2000, virtually all new jobswill be in the service industries.

y Huge growth in personal servicespersonal services as wellas business services.business services.

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5Copyright 1998 by The McGraw-Hill Companies, Inc.


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Characteristics ofCharacteristics of

ServicesServicesyy intangibilityintangibility: difficult to sample and to evaluate

yy inseparabilityinseparability:: difficult to separate services fromthe service provider; mainly direct sales; staff areessential to the delivery of quality services

yy heterogeneityheterogeneity: virtually every service is different;very difficult to standardize quality

yy perishabilityperishability:: those not sold can not be stored

yy fluctuating demandfluctuating demand:: demand for some servicesfluctuates by season, or even by time of day

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Strategic ServicesStrategic Services

ManagementManagement

y intangibility generally makes the marketing ofservices a challenge

y understanding how people buy services and

the segments that exist is just as importanty knowing more about the value of customer

segments is important -- some are morevaluable than others

y

knowing what they value so that servicelevels can be tailored is also important

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Strategic ProductStrategic Product

ImplicationsImplications

y service organizations have to plan theintroduction of new services and themanagement of the life cycle

y the core service can be enhanced through theaddition of supplementary services, therebycreating added value

y the life cycle of services has to be managed

y the branding of a service can be difficult as thecustomer often has nothing tangible to show

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Managing Service QualityManaging Service Quality

y Quality is hard to define, measure, control, andcommunicate

y Quality is defined by the consumer

y Its important to measure customer satisfaction with

an organizations service quality.y Customers see five important components:

Core serviceCore service must measure up.

Quality of serviceQuality of service, meeting expectations.

TechnicalaspectsTechnicalaspects of delivery.

InteractionInteraction with people who deliver service.

Affective dimensions:Affective dimensions: How customers feel.

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Pricing ServicesPricing Services

The characteristics of perishability, inability to

store, and fluctuating demand for services

create pricing challenges.

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Pricing Strategies include:

Discount strategies: Cheaper by the week.

A variable pricing strategy: Kids eat free,movies cheaper on Tuesdays.

Price competition.


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Distribution of ServicesDistribution of Servicesy because most services are tied directly to a

specific service provider, most have beendistributed directly to customers

y with advancing technology, many firms are now

delivering services through machinesy channels of distribution are necessarily short;

some firms use one agent intermediary, such asinsurance, real estate, and travel agents

y some firms use franchisesfranchises to distributeservices

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Promotion of ServicesPromotion of Servicesy customer contact personnel represent the

main channel of customer communicationy service providers must ensure that each

service encounterservice encounteris a positive one ifcustomers are to develop a positive image

y many professional service firms are nowpermitted to advertise

y other elements of the promotional mix areused, including publicity and community affairs

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Four Rs of Service MarketingFour Rs of Service Marketing

y Retention

y

Referralsy Relationships

y Recovery

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The Changing EnvironmentThe Changing Environment

for Servicesfor Services

y The boom in the service economy, reduced regulationhas created an increase in competition.

y Major focus on increased productivity, efficiency

Work on people aspects of business:x Education, training programs

Change technology:x Computer-based technologies used.

Restructure jobs.y Bottom line: People are key to success!

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Other Considerations inOther Considerations in

Marketing ServicesMarketing Services

yy Impact of Technology:Impact of Technology:

Remember, not everyone likes impersonal technology

yy Performance Measurement:Performance Measurement:

L

arger firms can use market share, etc. Customer perceptions are essential.

yy Prospects for Growth:Prospects for Growth:

It is very likely that services will continue to take an

increasing share of the consumer dollar. The use of marketing programs in all services is

expected to increase considerably.

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Future Service ProfitabilityFuture Service Profitability

Impacted by:

1. Focusing on the right priorities

2. Increasing service quality3. Investing in problem solving

4. Being fair to customers

5. Investing in leadership development

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Services Marketing and Customer Relationships

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