Masters of Business Administration- MBA Semester 4 MK0015 Services Marketing and Customer Relationship Management Each question carries

10 marks 1. Explain the types of new service developments and its stages Answer:-Types of New Service Development and its stages Before discussing about the types of services, let us first learn the meaning of new service development. Products that are not developed within a framework are less likely to succeed when compared to those developed and implemented within a structured planning framework. The new service development system must have four basic characteristics because of the intangible nature of service. The four basic characteristics are: I. Service must not be subjective, it should be objective. II. It should be well defined not vague or ambiguous. III. It must be based on facts rather than opinions. IV. It should be a step wise procedure rather than a philosophical one. Figure 1.1 depicts the stages of new service development

The different development stages involved in front end planning, which include: 1. Business strategy development or review: The new service developed should align itself with the strategic vision and mission of the organisation. The growth efforts of the organisation must also be considered while developing the new service. 2. New service strategy development: A product portfolio strategy and defined organisational structure for a new product or service development is critical for the success of an organisation. The goals, vision, capabilities, and growth plans of the organisation need to be considered while developing new types of services. 3. Idea generation: Generation of new ideas is the next step in the process. The new service strategy screen screens the idea developed at this phase. Brainstorming, ideas from employees and customers, lead user research, learning about competitors are the methods used for idea generation. 4. Service concept development and evaluation: The development phase begins once the idea is regarded to fit both the business and new service strategies. For a tangible product, forming the product description and drawings and presenting it to customers would be the next step. 5. Business analysis: Estimating the economic feasibility and potential profit implications form a part of the next step after development. Demand analysis, revenue projections, cost analyses and operational feasibility are assessed at this stage.

Q.2 Explain the concept of lack of inventory capability in managing supply and demand in service Answer:- Lack of inventory capability in services is the underlying fundamental issue in the management of supply and demand. Service firms face the problem that they cannot store their inventories during a slow moving period for a higher demand period later. Perishability of services is the cause of lack of inventory capability. Services are produced and consumed simultaneously and hence, there is lack in inventory capability. For example, airline seats that are not sold on a particular day cannot be resold on another day. The useful capacity of that seat has perished. The other problems associated with services are that they can not be transported from one place to another nor can they be transferred from one person to another. For example, hotel services cannot be moved to another location during low demand periods. Fluctuating demands and lack of inventory capability combined together result in a number of potential outcomes as shown in figure 1.2 Figure 1.2: Variations in Demand Relative to Capacity

The straight horizontal lines in the figure represent service capacity and the sloping lines indicate customer demand for service. Capacity is generally fixed in many services and hence, designated by a flat horizontal line. The demand fluctuates and hence it is represented by the sloping line. The uppermost horizontal line indicates maximum capacity. For example, the number of rooms in a hotel remains constant but the demand fluctuates. The optimal capacity is represented in between the second and third horizontal line. Optimal capacity is the ideal use of capacity from the company and customers perspective. Excess demand: Maximum capacity is exceeded by the level of demand. In this scenario, business may be lost since some customers are driven away. The quality of service may not match what was promised even though the customer is served. This happens because the employees are overworked and the facilities are also overtaxed. Demand exceeds optimum capacity: The quality of service will suffer, due to crowding, overuse, and pushing staff beyond their abilities to deliver consistent quality. Demand and supply are balanced at the level of optimum capacity: Staff and facilities are kept occupied at an optimal level. Here, employees are not overworked, facilities are maintained and the customers receive prompt quality service. Excess capacity: Optimum capacity is way above demand. It results in low productivity and profits, since the productive resources such as labour, equipment and facilities are underutilised. Cases where the service quality depends on the presence of other customers, customers may feel disappointed thinking that they have chosen an inferior service provider. The challenges faced in managing supply and demand may not be the same for all companies. The extent of demand fluctuations over time and extent to which supply is constrained are the

two main reasons that govern the seriousness of the problem. Examples of firms with narrower fluctuation are insurance, banking, and laundry services. Q 3. What is the integrated marketing process model? Explain in brief. Answer:- Integrated marketing process model is a concept under which a company integrates and coordinates its many communications channels to deliver a clear, consistent, and compelling message about the organisation and its services[2]. Integrated marketing communication for services is considered to be the combination of market communication, planning, and discipline. It is developed to make the maximum market impact. It is also considered to be a part of the marketing communication planning. Integrated Marketing Communications (IMC) is an approach, which coordinates and integrates all sources, places, functions, and marketing communication tools within a company into a flawless process that can maximise the impact on the user, while maintaining the low cost for the company. Marketing mix is a part of the marketing plan and promotion is a part of the marketing mix. Promotional activities include advertising by using different media (for example print media and electronic media), sales promotion, and personal selling activities. It also includes internet marketing, sponsorship marketing, direct marketing, database marketing, and public relations. IMC is the integration of all these different promotional tools along with other components of marketing mix, in order to gain an edge over competitor. IMC uses a data- driven approach to identify the areas of the customer interest and develop a strategy with the right channels (combination of different advertisement media) to create a stronger brandconsumer relationship. This approach involves knowing what to use, when to use, and how to use the different media resources to mark the maximum impact on the consumer and their choice. The starting point of the IMC is the marketing mix (Product, Price, Promotion, and Place) which constitute different styles of marketing, advertising, and sales. The main aim of the organisation is to maintain communication between the customer and the organisation. A comprehensive integrated marketing communication planning is needed to accomplish this task. Customer lifetime value and the regression analysis are the important elements in the IMC approach. The figure 1.3 shows how different processes of the business system interact with each other to develop sales, profit, and brand equity. It is a closed process cycle, in which all the processes are interdependent on each other for proper functioning and achieving the goal setup for them.

Figure 1.3 Brief discussions of the main processes are as follows: Cross functional monitoring: All parts of the organisation should be monitored for the performance while delivering quality service and should be evaluated for maintaining the brand relationship.

 SWOT analysis: SWOT stands for strengths, weakness, opportunity and threats. It is a method for evaluating strategic planning and can be built into the strategic planning model of the organisation. Database and information technology: This enables the organisation to take the decision faster by conducting research and implementing new technologies, which meet the requirement of customers. Brand messages: It involves the strategic consistency of brand positioning using big creative ideas and mass media for spreading those messages to the masses. Brand relationship: Building the brand relationship with the customer requires a continuous interaction between the organisation and the customer. It will help in building up the brand equity and maintaining a healthy customer relationship.

Q 4.

Define service sector in India and classify the major service sectors. Answer:- The definition of service sector in the Indian context is provided by section 2 (r) of the Monopolies and Restrictive Trade Practices Act, 1969. Under the said statute a service means service which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, chit fund, real estate, transport, processing, supply of electrical or other energy, board or loading or both, entertainment, amusement or the purveying of news or other information. The American Marketing Association defines services as activities, benefits or satisfactions, which are offered for sale and are provided with the sale of goods. This definition is considered to be too broad as products also offer benefits and satisfaction to customers. So, there were attempts to differentiate physical products from services by defining characteristics, which are present in service but are not found in case of products. Activities comprising the service sector in India 1. Trade 2. Hotels and restaurants 3. Transport including tourist assistance activities as well as activities of travel agencies and tour operators 4. Storage and communication 5. Banking and insurance 6. Real estate and ownership of dwellings 7. Business services including accounting; software development; data processing services; business and management consultancy; architectural, engineering and other technical consultancy; advertisement and other business services 8. Public administration and defence. 9. Other services including education, medical and health, religious and other community services, legal services, recreation and entertainment services. 10. Personal services and activities of extra-territorial organisations and bodies. Although the Services Sector has a very pivotal role in the countrys economic development, the database in this Sector is highly disorganised. A major limitation of the existing statistical system in this respect is the absence of a well-organised mechanism for maintaining a regular and proper database for this Sector. Like the Annual Survey of Industries (ASI) that is devoted to collection of data from manufacturing and few other categories of units included in the lists maintained by the Chief Inspectors of Factories, there is no such scheme in the Services Sector

for annual collection of data from the units either having a large number of workers or contributing significantly in terms of annual turnover. The main difficulty in this regard is the non-availability of an up-to-date frame of such units. The problem of data collection from this Sector through the Follow-up Enterprise Surveys of Economic Census is compounded by the fact that the Sector is dominated by a large number of unorganised units. Further, the composition of units in the domain undergoes changes at a rapid pace because new units or newer service areas come into existence and others disappear with alarming frequency. Thus, a sound official statistical system should endeavour to address all these methodological issues for properly estimating the size and contribution of the Services Sector marked by a rapid change in its composition

Q 5. Mention the technical options in the service marketing. Answer:Technical options in the service marketing. Use of technology has always been a part of the strategy of every organisation. It always makes an impact on the strategy making process. Lets discuss the new approaches of service marketing, which uses the technological advancements for their marketing purpose. e-Commerce and e-marketing are the new concepts that make use of the information technology for the marketing of the services. Lets discuss them in brief. e-Commerce Kalakota and Whinston (1997)[3] refer to a range of different perspectives for e-commerce that highlight the type of communications involved. Let us discuss these perspectives, which involve: A communications perspective: this is the delivery of information, products/services or payment is done by electronic means. For example, ordering and delivery of magazines or newspapers. Even the door to door services provided by restaurants come under this perspective. A business process perspective: this involves the application of technology towards the automation of business transactions and workflows. For example, almost all the major banks today issue credit and debit cards to its customers. This technology has revolutionised the way in which the money transaction takes place in our day to day activities. When we make transactions using these cards, the amount of money used for the transactions will be automatically deducted from our bank account. A service perspective: this involves enabling cost cutting at the same time as increasing the speed and quality of service delivery. For example, when you call a mobile service provider for queries, an automated voice response system responds to your call. This system provides you with number of options such as call charges, new tariffs, and so on; from which you can select by pressing respective key on your handset. An on-line perspective: this involves buying and selling of products/services and information on-line. Similarly, Zwass (1998) uses a broad definition of e-commerce. For example e-bay. This is a website where you can buy and sell any product of your choice. Suppose you want to sell your motor cycle. You can upload the details of your bike in this website. The person interested to purchase your bike can quote a price; the website also allows

many personnel to quote a price for the same product. This gives you an opportunity to sell the bike to the person who has quoted the highest price. However eBay charges the customers for providing such services. Kalakota and Whinston refer to e-commerce as a way of maintaining business associations, contribution of business information, and conducting business communication by means of telecommunications networks, especially internet. e-Business in a broader term refers to both buy side and sell-side e-commerce and the internal use of network technologies through a local and modernised business processes. e-Commerce should emphasize on three points, namely: Business environment as it is a business model. Internet characteristics as it are mostly based on internet to realise business activities. Digital characteristics because information in the e-commerce is transmitted in digital form.

Q 6. What are the key benefits of CRM? What are the main difficulties involved in CRM? Answer:Benefits of CRM CRM is implemented by the company to provide more velocity to their effort in maintaining lifetime customer and customer loyalty. CRM can benefit both the company and the customers. The information stored in CRM helps the company to get more information about the customers. The customers get the benefit of the desired quality of services. Let us now discuss the benefits CRM provides to customer and the company.

Benefits for customers Customer can get the following benefits from relationship marketing: Confidence benefit: The customers are confident about the quality of service and the service provider itself. This is one of the benefit that the customers enjoy when they are involved in a long term relationship with the company. The company knows what the customer expects and the customer knows what kind of service they can expect from the service provider. Moving from one service provider to another service provider generally involves more investment of money and time. Social benefit: With the long term relationship with a company or firm, customer can get a social support benefit. Over the time, customer develops a feeling of familiarity with the company and the service being provided. For example, long term customer of a telecom company gets more attention and help from the staff of the company. The local staff might be more familiar with the customer. Special treatment benefit: With the long term relationship, customer can get the benefit of special treatment like benefit of doubt, special discounts, preferential treatments, special offers and special services. These services can help the companies to maintain their relationship with the customer and enhance them. On the other hand, customer feels more familiar in the environment of the company. For example, a customer can get special calling rates or can get special discounts while paying his monthly telephone bills. Benefits for company

Companies can get the following benefits from relationship marketing: Economic benefit: The overall returns come from reduced marketing cost, reduction in administrative cost, increase in the expense by customer, good margin in profit without reduction in price of the services. As the satisfaction of the customer increases with the service provider, service provider keeps getting more of the business from the satisfied customers.

Customer behaviour benefit: The best benefit that a service provider company can get from the satisfied and long term customer is the free mouth-to-mouth publicity. The second benefit that the company can get from the loyal customer is that they try to help the company to provide quality services and also help the company to perform better. Human resource management benefit: Loyal customers can help in making the job of the staff much easier with the previous experience with the company. It is easy to train new staff by allowing them to deal with the loyal customers as the behaviour of the customer is known. Working is easy with the long term customers and also staffs like to work for the company which has a stable customer base.

Difficulties Involved in CRM In the previous section, we have discussed the benefits of CRM. Although CRM provides many benefits, it also has some difficulties involved with its implementation. Let us now discuss about these difficulties in this section. Like in any management approach, CRM also has some difficulties involved in its planning and implementation. CRM checks for the following: The main problems involved in the CRM are as follows: 1. Excessive cost: The implementation and development of CRM requires huge investment of resources. It also requires time investment. Investment is required in training man power, developing customer relationship, and in creating effective policies. 2. Insufficient focus on main objectives: The development of a good CRM requires effective implementation of the company policies, the policies need to be clearly defined. The implementation of the CRM should focus more on the primary objectives than on the secondary objectives. 3. Lacking resources: CRM development and implementation is a resource hungry process. Sometimes it may lack the resources while in the development or implementation phase. There is always a need for large number of resources in the CRM, even while it is in the operational stage also. 4. Complex system: CRM is a complex system. It interrelates with almost all the departments of the company. It also has to store the information of the customers and has to analyse the stored information. The complexity of the CRM often misleads the developmental and implementation process into different direction, far away from the framed policies. 5. Wrong need selection: While developing the CRM system, there is a need for the proper selection of the requirements. The CRM is generally built around these needs provided by the company. If wrong selections are provided, it will affect the effective performance of the CRM system. The requirements must be clearly defined and implemented. 6. Not customer centric: The most important aspect in the CRM is that it has to be customer centric. If the CRM tends to be more company defined, it will lack the ability to capture all the aspects of the customer and may miss out in collecting some important information from the customer that might be crucial for analysis and framing out the policy.

7. Slow returns: The returns from the CRM are generally slow. There is a huge investment cost of the CRM and CRM will take time to return this cost back to the company. The return also depends upon the effective use of the CRM and effective policies being developed on its basis. Also, effective and efficient implementation of those policies.