UNIT 4 Service Delivery and Promotion

1

UNIT IVSERVICE DELIVERY AND PROMOTION

Positioning of services Designing service delivery System, Service Channel Pricing of services, methods Service marketing triangle - Integrated Service marketing communication.

4.1 Positioning of services

Positioning is that a brand is valued by the perception it carries in the prospect or customer's mind. Positioning allows a marketer to think about why a customer would want to do business with them. What do you offer that the other producers don't? What does a potential client get by doing business with you, that will serve their needs well? Positioning has three components:

What are your strengths? Your distinctive competencies? What about your offeringsprovide value to your customers?

Who is your target customer? What about them, makes them an ideal fit for the value youoffer?

How are you different from your competitors in ways that your customers and potentialcustomers will value? In other words, what is your unique selling proposition? Yourcompetitive advantage?

Positioning concepts:

More generally, there are three types of positioning concepts:

1. Functional positions

Solve problems

Provide benefits to customers

Get favorable perception by investors (stock profile) and lenders

2. Symbolic positions

Self-image enhancement

Ego identification

Belongingness and social

meaningfulness

Affective fulfillment

3. Experiential positions

Provide sensory stimulation

Provide cognitive stimulation

Developing Positioning Strategies:

Identifying possible competitive advantages

Differentiation can be based on Products,Services,Channels,People,Image

Product Differentiation

Form- size, shape or physical structure.

Features- supplement to basic function. Performance Quality-the level at which the products primary characteristics operates. Conformance Quality- the degree to which all the produced units are identical and meet the promised specifications. Durability- a measure of the products expected operating life under natural or stressful conditions. Reliability- a measure of the probability that a product will not malfunction within a specified time period. Reparability- a measure of the ease of fixing a product when it fails. Style - Quality can be communicated by choosing physical signs.

Services Differentiation

Ordering ease or Delivery

Installation or Customer training

Customer consulting or Maintenance and repair Personnel Differentiation

Competence or Courtesy

Credibility or Reliability

Responsiveness or Communication

Channel Differentiation

Coverage or Expertise

Performance Image Differentiation

Image is the way the public perceives the company or its products.

Identity is the way a company aims to identify or position itself

Symbols, colors, slogans, atmosphere

Events and employee behavior

The term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer?Positioning map:Products or services are 'mapped' together on a 'positioning map'. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy). The marketer would draw out the map and decide upon a label for each axis. They could be price (variable one) and quality (variable two), or Comfort (variable one) and price (variable two). The individual products are then mapped out next to each other Any gaps could be regarded as possible areas for new products.

4.2 Designing service delivery System

The design process is never finished. Modifications or innovation in the service delivery system should be introduced as needed. Service delivery system (SDS) - Where the final assembly of the elements takes place and the product is delivered to the customer. (Christopher Lovelock)All apparatus physical and procedural required by front-line and support staff. A SDS should: Customer friendly Employee friendly and Incorporate a feedback loop Employee friendly Often service failures are caused by delivery systems not supporting, or even making it hard for staff to deliver service. Feedback loop It should be easy to give feedback. Tarp research less than 5% complaints reach head-office Important to close-the-loop. Why design the service delivery system? Designing quality into services: For products >90% quality problems are designed into the systems that make them. (Demming, 1986, Juran, 1992) Similar problem in services c.>80%. (Edvardsson 1993) Large costs of poor quality Risk of service terrorists spreading negative word-of-mouth. Costs of failure compensation, resources (staff time etc.). Recovery is hard and often not effective. Methods of service design: High quality services do not happen by accident. A systematic a approach to design is required. There are two approaches to design that we are going to review:1. Flowcharting / Service blueprinting - Ideas from product design and manufacturing (Shostack, Kingman Brundage) 2. Cycle of Service approach - Ideas based on the differences of products and services

- Blueprinting Front stage Line of interaction staff and customer contact Physical evidence / Servicescape Standards Scripts Customer role Back stage Line of visibility what should the customer see? Line of internal physical interaction staff-to-staff contact. Line of internal IT interaction Service customers often value the process dimensions as much as, if not more than, the outcome dimensions of service.4.3 Service Channels A definition commonly admitted in marketing literature is a set of interdependent institutions and agencies involved with the tasks of moving anything of value from its point of conception, extraction or production to the point of consumption

the interface between a provider/distributor and a consumer, i.e. where the customer interacts with the service firm. The development of new distribution channels, i.e. new interfaces between a service firm and its customers, there are now multiple encounter points. More precisely, in order to get a service, a customer can use one channel or another.

For example, to reserve a vacation, nowadays, a customer may either decide to go to a travel agency, phone a call-centre, use an internet site, or even use an interactive television program.

Service Channel

Service Channel provides facility managers with a single platform to procure manage and pay for facility maintenance services from their own network of contractors. By providing a real time, web-based view of service data across all trades, locations and contractors, facility managers use Service Channel to drive significant ROI for their organizations without relinquishing control to outsourcers or investing in new infrastructure.

Case Analysis:

A Study on retail banking sector, that has undergone a lot of transformations over the last few years, due to the development of these new distribution channels. Actually, the emergence of new channels such as the Internet, most sophisticated call-centres, mobile services, is profoundly changing the French banking industry (and to a larger extent, the world banking industry), making it most interesting to study. Although the branch was the historical point of contact between a bank and its customers, nowadays customers can access many banking products and services through the aforementioned channels, such as bank transfers, checking accounts consultation, or even to take out a loan, For example: Our data, coming from a broader research on innovation in services distribution channels, were collected in a French regional retail bank (that is part of a national one) between August and December 2001. Its customers are small and medium companies, professions and craftsmen, and private individuals. According to the theories we previously resorted to, we naturally focused on the last ones.

According to its marketing director, this bank can be qualified as an effective follower concerning new distribution channels. Although many of its French competitors had initialized the implementation of new distribution channels 2 or 3 years before, this bank has set its outgoing call-centre in 1998, its incoming call-centre in 2000; an earlier version of its Internet website had been launched around 1998, and it had been improved by the time of our study, but its traffic was still limited by then (this was supposed to quickly evolve thanks to a large advertising campaign launched during our study); and, finally, the bank also offers interactive television services, the use of which is very marginal. Therefore our study essentially focused on the interactions between what were then the 3 main distribution channels, i.e. branches, the outgoing call-centre and the incoming call-centre.

Salespeople working on the outgoing call-centre have to call either clients of the bank or prospective buyers, in order to sell them basic products or services (e.g. credit cards, or to convince the customers to increase the amount of their savings accounts), or to get appointments for branch advisers. This latter mission is possible because branch advisers have an electronic timetable shared with the two call-centres. The incoming call-center is called by the customers using a taxed phone number. It issupposed to relieve branch advisers of basic demand from the customers, but very time consuming and not value adding (fund transfers, check books orders, purchases and sales on the Stock Exchange,). Salespeople working on this incoming call-centre may also make appointments on behalf of branch advisers if they detect a potential sale during the discussion with the customer (since they too have an access to branch advisers timetable).

So both call-centres were supposed, according to the area manager, to be complementary to the branches network, and not to replace it, but this is not an easy thing to achieve: The problem is to make sure that these interfaces considered as a whole are complementary, and that they do not cannibalize each other. This is all the more important that branch advisers (one of them being quoted thereafter) are afraid of being cannibalized and to lose a part of their job: The branch adviser fears to be dispossessed, I would say, not of a part of his power, but of a part of his job, you know.The advisers perceive differences in new channels use according to the age of customers. Older people have difficulties regarding the change: I have many old customers. to require them to use the phone, thats not really obvious. But advisers feel future younger customers will change the trend, since they are demanding for new technologies: new accounts are due to young people, most of them, and young people, if you cannot offer them powerful and developed channels of distribution, they will leave.The second criterion which stems from interviews is life style: it seems to be a less powerful criterion, since the older people are more concerned by this segmentation criterion. my customers are rather traditional, therefore they have many difficulties [with new channels], except the young people. This bank has many branches in rural zones, and medium-sized cities, and advisers link that specific profile with their customers reluctance to use new distribution channels.

The third emerging criterion is call frequency. This criterion is linked to emotional and reactions: customers going to or calling daily their branch adviser do not want to change: I call them my old women, its affectionate, they wont change. On the contrary, people coming or calling occasionally, only to get information, are more willing to use new channels. occasional ones [customers], yes, they call me less. Therefore that [the incoming call-centre] is positive.

So, in this context of high customer participation, age seems to be the main criterion of willingness, and then life style for older people; moreover a psychological criterion, closely related to interaction frequency has emerged. Of course, these three criterion could really be validated with a larger, quantitative study.4.4 PRICING OF SERVICES, METHODS: What is pricing?

Pricing is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. Price is the only revenue generating element amongst the 4ps, the rest being cost centers. Pricing Objectives:

When deciding on pricing objectives you must consider: 1) the overall financial, marketing, and strategic objectives of the company; 2) the objectives of your product or brand; 3) consumer price elasticity and price points; and 4) the resources you have available. The pricing Tripod was Costs, competition and value to customer.Influencing factors:

During evaluation the following issues should be considered for pricing evaluation, the steps are Determine solicitation provisions, Determine total price offered, Evaluate award combinations and Make award decision. The final price for a product may be influenced by many factors which can be categorized into two main groups such as internal factors (When setting price, marketers must take into consideration several factors which are the result of company decisions and actions) and External factors (There are a number of influencing factors which are not controlled by the company but will impact pricing decisions).

Pricing methods: Cost-Based Pricing

set prices relative to financial costs (problem: defining costs) Method in which a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price. Competition-Based Pricing

monitor competitors pricing strategy (especially if service lacks differentiation) Products have long distinctiveness from competitor's product. Value-Based - relate price to value perceived by customer

Value based pricing, or Value optimized pricing is a business strategy. It sets selling prices on the perceived value to the customer, rather than on the actual cost of the product, the market price, competitors prices, or the historical price. The goal of value-based pricing is to align price with value delivered. Price for any individual customer can be customized to reflect the specific value delivered. Examples could include metrics such as number of users, number of annual transactions, and size of revenues, cost savings, or other measurements.

Customer-Led

Auctions

Requests for Bids To know your customers attitudes and values toward prices, product quality, value, and prestige. Some customers believe a higher price means higher quality. Bargain hunters are happy with lower prices.

Why Customer-led Services? Growing important of information in products

Response to threats to traditional business from the explosion and prevalence of the Internet

Price transparency

Customer mobility and a lack of loyalty

The Long Tail

An opportunity to create competitive advantage from customer.

Premium Pricing. - Use a high price where there is uniqueness about the product or service. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights.

Penetration Pricing- The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV. Economy Pricing- This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Price Skimming - Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

Psychological Pricing. This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar.Product Line Pricing. Where there is a range of product or services the pricing reflect the benefits of parts of the range.

Optional Product Pricing - Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing- Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Product Bundle Pricing - Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.

Promotional Pricing - Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing - Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Value Pricing- This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

4.5 Service marketing triangleThe Services Marketing Triangle model focuses upon making and keeping promises to customers and suggests three structural relationships as the mode by which this occurs.

Company

Management

Internal Marketing

External Marketing

Enabling the promise setting the promise

Service environment

the service product

Employees Interactive Marketing Customers

Delivering the promise

service delivery

The firm is the management including full-time marketers and salespeople who give promises to the customers and have to enable the promise through continuous development and internal marketing with their employees..

Service marketing involves 3 types of marketing:

1. EXTERNAL MARKETING

2. INTERNAL MARKETING

3. INTERACTIVE MARKETING

1. External Marketing: "Setting the Promise"

Marketing to END-USERS.

Involves pricing strategy, promotional activities, and all communication with customers.

Performed to capture the attention of the market, and arouse interest in the service.

2. Internal Marketing: "Enabling the Promise"

Marketing to EMPLOYEES.

Involves training, motivational, and teamwork programs, and all communication with employees.

Performed to enable employees to perform the service effectively, and keep up the promise made to the customer.

3. Interactive Marketing: (Moment of Truth, Service Encounter)

This refers to the decisive moment of interaction between the front-office employees and customers, i.e. delivery of service.

This step is of utmost importance, because if the employee falters at this level, all prior efforts made towards establishing a relationship with the customer, would be wasted.

Three marketing functions are internal marketing, interactive marketing and external marketing. According to Grnroos the internal marketing has to be managed by the companys leadership, the interactive marketing happens between the employees and the clients and the external marketing is what takes place between the companys management and the clients. For the service marketing in knowledge-intensive companies, parts of some other theories, which are related to service marketing theory, are also important: relationship marketing18 and corporate culture.

Internal Marketing in the Service Marketing Triangle:

The internal marketing function is the basic prerequisite that the project workers should fulfill in order to be effective in their work. According to Grnroos the meaning of internal marketing is that the management in a hierarchical organization has to develop, from the top, motivated and customer-conscious employee. It refers to all those planned and unplanned activities the firm carries out to train, motivate and reward its employees so that they are able and willing to deliver the promise which the external marketing function communicates to the customers.Another aspect for the internal marketing function to work is that effective internal communication is needed. () A major cause of poor perceived service is the gap between what a firm promises about a service and what it actually delivers. ()

I understand this in such a way that coordination and internal communication between the several employees or partners is required, which often takes place in form of several meetings and project newsletters.

Interactive marketing in the service marketing triangle:

The Interactive marketing divided into three phases, which merge into one another. The first phase begins with a first contact, goes over to the project-phase and ends in after-sales, which hopefully leads to new first contacts. This division is the basis for the analysis of the interactive marketing. In the second phase the actual service delivery takes place, this is where the project is conducted and the project worker is in contact with the client all the time. In order to strengthen the relation to the client after the delivery, relationship marketing is needed.

Word-of-mouth is comments or recommendations that former clients make about their service experiences to others95. This is a powerful tool of indirect marketing, much more effective than advertising and promotion, which is direct marketing96. Closing the circle again, this implies that word-of-mouth results often from loyal clients who make recommendations which triggers new first contacts and maybe also new projects with existing clients.

External marketing in the service marketing triangle:

Marketing communication happens between the firm and its customers. Tools of this external marketing are mass communication, brochures, sales and web sites.Anything that communicates to the customer before service delivery can be viewed as part of this external marketing function.Traditional marketing is originally based on the idea that the seller is not the marketer. It considers market research and product development for an effective strategy making. The classical role of the marketer is to analyze the market and provide supporting documents for the decision takers and strategy makers in the organization.

4.6 Integrated Service marketing communicationA strategy that carefully integrates all external and internal communication channels to present a consistent message to customersService encounters are transactional interactions in which one person (e.g., a vendor, office clerk, travel agent) provides a service or good (e.g., a product, an appointment, airline tickets) to another person.Servicescape: emphasize the impact of the physical environment in which a service process takes place. The servicescape includes the facility's exterior (landscape, exterior design, signage, parking, surrounding environment) and interior (interior design and decor, equipment, signage, layout, air quality, temperature and ambiance).It is when the customer interacts with the service or product for the first time. This means coordination across: sales and service people print Internet other forms of tangible communication including the servicescape How is this done in services? Advertising & sales presentations service encounters with employees servicescape and other tangibles Internet and web presence public relations & pricing service guarantees & customer education

Managing Internal Marketing Communication: Create effective vertical communications Sell the brand inside the company Create effective upward communication Create effective horizontal communications Align back-office and support personnel with external customers through interaction or measurement Create cross-functional teams of sales, service, and operations people when developing new services or engaging in service improvements Maintain a customer focus throughout all functionsBest Practices for Closing the Communication Gap (Gap 4):

Employing integrated services marketing communication strategies around everything and everyone that sends a message or signal. Manage customer expectations effectively throughout the experience. Develop mechanisms for internal communication to avoid over-promising and ensure successful delivery.Integrated marketing communications campaign involves TV, print, and radio ads. customer surveys and focus groups about brand awareness number of telephone inquiries number of website hits and click-throughs number of shipments by customer segment growth in sales since campaign inception.Communications and the Services Marketing Triangle

Internal Marketing Vertical Communications Horizontal Communications

Interactive Marketing Personal Selling Customer Service Center Service Encounters Servicescapes

External Marketing Communication Advertising Sales Promotion Public Relations Direct Marketing

Company

Customers

Employees

Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

McGraw-Hill

2000 The McGraw-Hill Companies

#

S

M