MK0006 – Services Marketing and Customer Relationship

Management
Assignment Set- 1

1 a. Point out the distinctive characteristics of services with examples.

Ans: The services have unique characteristics which make them different from
that of goods. The most common characteristics of services are:

Intangibility: Services are activities performed by the provider, unlike physical

products they cannot be seen, tasted, felt, heard or smelt before they are
consumed. Since, services are not tangibles, they do not have features that
appeal to the customers senses, their evaluation, unlike goods, is not possible
before actual purchase and consumption. The marketer of service cannot rely on
product-based clues that the buyer generally employs in alternative evaluation
prior to purchase. So, as a result of this, the services are not known to the
customer before they take them. The service provider has to follow certain
things to improve the confidence of the client:

The provider can try to increase the tangibility of services. For example, by
displaying a plastic or a clay model showing patients an expected state after a
plastic surgery.
The provider can emphasize on the benefits of the service rather than just
describing the features. Not all the service product has similar intangibility. Some
services are highly intangible, while the others are low i.e. the goods (or the
tangible component) in the service product may vary from low to high.

For example: Teaching, Consulting, Legal advices are services which have almost
nil tangible components; While restaurants, fast food centres, hotels and
hospitals offer services in which their services are combined with product
(tangible objective) , such as food in restaurants, or medicines in hospitals etc.

Inseparability: Services are typically produced and consumed simultaneously.

In case of physical goods, they are manufactured into products, distributed
through multiple resellers, and consumed later. But, in case of services, it cannot
be separated from the service provider. Thus, the service provider would become
a part of a service.
For example: Taxi operator drives taxi, and the passenger uses it. The presence
of taxi driver is essential to provide the service. The services cannot be produced
now for consumption at a later stage / time. This produces a new dimension to
service marketing. The physical presence of customer is essential in services. For

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example: to use the services of an airline, hotel, doctor, etc a customer must be
physically present.

The service consumer must sit in the hair dresser's shop & chair or in the plane &
seat; correspondingly, the hair dresser or the pilot must be in the same shop or
plane, respectively, for delivering the service.

Inseparability of production and consumption increases the importance of the

quality in services. Therefore, service marketers not only need to develop task-
related, technical competence of service personnel , but also , require a great
input of skilled personnel to improve their marketing and inter personal skills.

Perish ability: Services are deeds, performance or act whose consumption take
place simultaneously; they tend to perish me the absence of consumption.
Hence, services cannot be stored. The services go waste if they are not
consumed simultaneously i.e. value of service exists at the point when it is
required.
The perishable character of services adds to the service to marketer problems.
The inability of service sector to regulate supply with the changes in demand;
poses many quality management problems. Hence, service quality level
deteriorates during peak hours in restaurants, banks, transportation etc. This is a
challenge for a service marketer. Therefore, a marketer should effectively utilize
the capacity without deteriorating the quality to meet the demand.

For example: The hair dresser serves another client when the scheduled starting
time or time slot is over. An empty seat on a plane never can be utilized and
charged after departure.

Variability: Services are highly variable, as they depend on the service

provider, and where and when they are provided. Service marketers face a
problem in standardizing their service, as it varies with experienced hand,
customer, time and firm. Service buyers are aware of this variability. So, the
service firms should make an effort to deliver high and consistent quality in their
service; and this is attained by selecting good and qualified personnel for
rendering the service.

For example: The taxi service which transports the service consumer from his
home to the opera is different from the taxi service which transports the same
service consumer from the opera to his home - another point in time, the other
direction, maybe another route, probably another taxi driver and cab.

b. Discuss briefly the significance of process and physical evidence in

services marketing.

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Ans: The Service marketing mix involves analysing the 7’p of marketing
involving, Product, Price, Place, Promotion, Physical Evidence, Process and
People.

To certain extent managing services are more complicated then managing

products, products can be standardised, to standardise a service is far more
difficult as there are more input factors i.e. people, physical evidence, process to
manage then with a product.

People: An essential ingredient to any service provision is the use of appropriate

staff and people. Recruiting the right staff and training them appropriately in the
delivery of their service is essential if the organisation wants to obtain a form of
competitive advantage. Consumers make judgments and deliver perceptions of
the service based on the employees they interact with. Staff should have the
appropriate interpersonal skills, aptititude, and service knowledge to provide the
service that consumers are paying for. Many British organisations aim to apply
for the Investors In People accreditation, which tells consumers that staff are
taken care off by the company and they are trained to certain standards.

Process: Refers to the systems used to assist the organisation in delivering the
service. Imagine you walk into Burger King and you order a Whopper Meal and
you get it delivered within 2 minutes. What was the process that allowed you to
obtain an efficient service delivery? Banks that send out Credit Cards
automatically when their customers old one has expired again require an
efficient process to identify expiry dates and renewal. An efficient service that
replaces old credit cards will foster consumer loyalty and confidence in the
company.

Physical Evidence: Where is the service being delivered? Physical Evidence is

the element of the service mix which allows the consumer again to make
judgments on the organisation. If you walk into a restaurant your expectations
are of a clean, friendly environment. On an aircraft if you travel first class you
expect enough room to be able to lie down.

Physical evidence is an essential ingredient of the service mix; consumers will

make perceptions based on their sight of the service provision which will have an
impact on the organisations perceptual plan of the service.

2. Briefly explain the gaps model in service marketing.

Ans: The gap model (also known as the "5 gaps model") of service quality is an
important customer-satisfaction framework. In "A conceptual model of service
quality and its implications for future research" (The Journal of Marketing, 1985),
A. Parasuraman, VA Zeitham and LL Berry identify five major gaps that face
organizations seeking to meet customer's expectations of the customer
experience.

The five gaps that organizations should measure, manage and minimize:

• Gap 1 is the distance between what customers expect and what managers
think they expect - Clearly survey research is a key way to narrow this
gap.

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 • Gap 2 is between management perception and the actual specification of
the customer experience - Managers need to make sure the organization
is defining the level of service they believe is needed.
• Gap 3 is from the experience specification to the delivery of the
experience - Managers need to audit the customer experience that their
organization currently delivers in order to make sure it lives up to the
spec.
• Gap 4 is the gap between the delivery of the customer experience and
what is communicated to customers - All too often organizations
exaggerate what will be provided to customers, or discuss the best case
rather than the likely case, raising customer expectations and harming
customer perceptions.
• Finally, Gap 5 is the gap between a customer's perception of the
experience and the customer's expectation of the service - Customers'
expectations have been shaped by word of mouth, their personal needs
and their own past experiences. Routine transactional surveys after
delivering the customer experience are important for an organization to
measure customer perceptions of service.

Each gap in the customer experience can be closed through diligent attention
from management. Survey software can be key to assisting management with
this crucial task.

3. What are the bases for segmenting in services marketing? Explain

with examples.

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Ans: Customer Segmentation: Segmentation models developed to identify
specific attributes of a customer group that are similar and dissimilar to others
within the same group. Going deeper than typical industry or company size in a
business environment and standard age, gender and salary attributes in a
consumer environment, these isolate and identify combinations of attributes that
make markets, prospects and customers unique. Segmentation model output is
used to define and predict the success levels of sales & marketing initiatives,
providing the supporting metrics to ensure the efficiency of each initiative.

Market Analysis: Segmentation models developed to identify and qualify

markets. Markets can be modelled of attributes defined by customer
segmentation models or used to identify completely new market attributes. This
analysis enables a business to develop insight into the geographic and
demographic attributes of their target market, allowing them to implement
strategic sales and marketing initiatives. The models are used successfully in
sales territory planning to identify geographic market densities.

High Value Segmentation Analysis: Segmentation models developed to

identify defined 'high value' attributes and clusters within a customer base.
Modelling transactional information into a segmentation study provides insight
into customer profiles that have higher propensities to generate incremental
revenue than the average. These metrics are then used to target new customers
with similar profiles, providing a higher and quicker ROI. These metrics are also
used to identify existing customers whose profiles are predictive of high value,
but are not demonstrating. Internal account development efforts to this group
often result in highly successful migrations to the high value portfolio
.
Segmentation Metrics: Used to identify and increase the success levels of
sales & marketing programs. Using the demographic information provided in our
prospect databases, sales & marketing campaigns can be monitored and the
metrics analyzed to continually refine and increase the targeting and success
levels.

Testing Metrics: How to test and benchmark your current sales & marketing
initiatives to understand if your efforts are as effective and efficient as
possible...without disrupting business as usual. We can develop, implement and
execute alternative
sales & marketing tests in tandem with and to augment your current efforts.
These tests will benchmark your current sales and marketing response rates and
close rates, providing you with information necessary to make critical business
decisions.

Retention: The cost to acquire a new customer is 5 times greater than the cost
to retain and existing one…Let us work with you to analyze and identify points of
attrition within your customer base. We can develop models which will predict
customer attrition by behavioural fluctuations, providing you with a tool to
identify these customers before you loose them. We can also help develop
programs to fight attrition within your customer base, through customer contact
and management programs. We can develop models for you that identify
customers with a higher propensity to respond to cross-selling opportunities. Use
these models to streamline your sales process and covert a higher percentage of
contacts

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 MK0006 – Services Marketing and Customer Relationship
Management
Assignment Set- 2

1 a. Explain briefly the six categories of service innovation.

Ans: Service innovation is a new or significantly improved service concept that

is taken into practice. It can be for example a new customer interaction channel,
a distribution system or a technological concept or a combination of them. A
service innovation always includes replicable elements that can be identified and
systematically reproduced in other cases or environments. The replicable
element can be the service outcome or the service process as such or a part of
them. A service innovation benefits both the service producer and customers and
it improves its developer’s competitive edge. A service innovation is a service
product or service process that is based on some technology or systematic
method. In services however, the innovation does not necessarily relate to the
novelty of the technology itself but the innovation often lies in the non-
technological areas. Service innovations can for instance be new solutions in the
customer interface, new distribution methods, novel application of technology in
the service process, new forms of operation with the supply chain or new ways to
organize and manage services.

Innovation is not just about brand new products. There are many places where
you can be innovative and often the context helps define innovation.

The six focus areas for innovation are:

• Product — what we produce and sell

• Service — exceeding customer expectations
• Process — continuous improvement of how we do things
• Management — business strategies, systems and structures
• Open — working beyond boundaries and collaborating globally
• Value — creating unique value that eliminates the cost to compete

b. What is relationship marketing?

Ans: Relationship Marketing was first defined as a form of marketing

developed from direct response marketing campaigns which emphasizes
customer retention and satisfaction, rather than a dominant focus on sales
transactions.

As a practice, Relationship Marketing differs from other forms of marketing in

that it recognizes the long term value of customer relationships and extends
communication beyond intrusive advertising and sales promotional messages.

With the growth of the internet and mobile platforms, Relationship Marketing has
continued to evolve and move forward as technology opens more collaborative
and social communication channels. This includes tools for managing

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relationships with customers that go beyond simple demographic and customer
service data. Relationship Marketing extends to include Inbound marketing
efforts (a combination of search optimization and Strategic Content), PR, Social
Media and Application Development.

Just like Customer relationship management (CRM), Relationship Marketing is a

broadly recognized, widely-implemented strategy for managing and nurturing a
company’s interactions with clients and sales prospects. It also involves using
technology to, organize, synchronize business processes (principally sales and
marketing activities) and most importantly, automate those marketing and
communication activities on concrete marketing sequences that could run in
autopilot (also known as marketing sequences). The overall goals are to find,
attract, and win new clients, nurture and retain those the company already has,
entice former clients back into the fold, and reduce the costs of marketing and
client service. [1] Once simply a label for a category of software tools, today, it
generally denotes a company-wide business strategy embracing all client-facing
departments and even beyond. When an implementation is effective, people,
processes, and technology work in synergy to increase profitability, and reduce
operational costs.

2. Give a detail note on customer relationship management.

Ans: Customer relationship management (CRM) is a broadly recognized,

widely-implemented strategy for managing and nurturing a company’s
interactions with customers, clients and sales prospects. It involves using
technology to organize, automate, and synchronize business processes—
principally sales activities, but also those for marketing, customer service,
and technical support. The overall goals are to find, attract, and win new clients,
nurture and retain those the company already has, entice former clients back
into the fold, and reduce the costs of marketing and client service. Customer
relationship management denotes a company-wide business strategy embracing
all client-facing departments and even beyond. When an implementation is
effective, people, processes, and technology work in synergy to increase
profitability, and reduce operational costs

Phases of CRM

The three phases in which CRM can help to support the relationship between a
business and its customers are, to:

Acquire: a CRM can help a business in acquiring new customers through

excellent contact management, direct marketing, selling and fulfilment.

Enhance: a web-enabled CRM combined with customer service tools offers

customers excellent service from a team of trained and skilled sales and service
specialists, which offers customers the convenience of one-stop shopping.

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Retain: CRM software and databases enable a business to identify and reward
its loyal customers and further develop its targeted marketing and relationship
marketing initiatives

Challenges

Despite the benefits, many companies are still not fully leveraging these tools
and services to align marketing, sales, and service to best serve the enterprise.

Tools and workflows can be complex to implement, especially for large

enterprises. Previously these tools were generally limited to contact
management: monitoring and recording interactions and communications.
Software solutions then expanded to embrace deal tracking, territories,
opportunities, and at the sales pipeline itself. Next came the advent of tools for
other client-facing business functions, as described below. These technologies
have been, and still are, offered as on-premises software that companies
purchase and run on their own IT infrastructure.

Often, implementations are fragmented; isolated initiatives by individual

departments to address their own needs. Systems that start disunited usually
stay that way soiled and decision processes frequently lead to separate and
incompatible systems, and dysfunctional processes

3. Advise a newly started tourism agency to expand its business at the

same time develop its service marketing expertise.

Ans: Many service organizations like to offer a range of services. Decisions on

this have to be considered with a view on the company’s positioning strategy
and the competitor’s service offerings. Any new service that might be offered
should be within the competency of the company to deliver it. When considering
service product decisions, many strategic growth options are available to a
service company. For this, there is a useful framework, proposed by Igor Ansoff.
The framework is called a product/market expansion grid or Ansoff matrix. Ansoff
matrix is used to consider four strategies which are fundamental to the service
provider i.e to review whether more market share could be gained for existing
service products in their current market; to consider whether it can find or
develop new market opportunities for its existing products; to its current
markets; and then to review opportunities for diversification by developing new
services for new products.

Product or Service Development: The next strategy is to new product

possibilities. New product development is a comparatively new for researchers.
Service products with need features and different quality levels or an alternative
service itself could be developed.
Christopher Lovelock has suggested six categories of service innovation
including the following.

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1. Major Innovations: These innovations represent major new marketing
Examples: Cellular telephones and Open University (Distance education). The
risk and reward profile of such major innovations is typically large.
2. Startup Businesses: There are new and innovative ways of addressing
current needs of customers and increasing the range of choices available to
them. Examples: Video Cassette hires. Some innovations could fit into either of
the above two categories.
3. New Products for the Market Currently Served: This allows the service
provider to use the customer base to the best advantage and cross-sell other
products. For example, the Automobile Association established a core range of
products related to car breakdown services. The customer base is now offered to
a range of other car-related services, including car insurance, travel insurance
and map books. The technological change has increased the range of
opportunities for innovation and creativity, and is also responsible for creating a
market for products and service which consumers may not have considered that
they require. For example, automated teller machines, electronic mail and desk-
top publishing have each resulted from technological development and crated
consumer demands which previously did not exist.
4. Product Line Extensions: These offer customers greater variety of choices
within existing service lines. This is typical of a business in maturity, which
already has a core market segment which the service provider seeks to
maintain.
5. Product Improvements: This usually consists of altering or improving the
features of existing service products.
6. Style Changes: These involve cosmetic alternations or enhancement of
tangible elements of the service product. The development of a new corporate
image or the introduction of uniforms for bank counter staffs is examples of style
changes.

Pricing: Until recently, two board strategic approaches to prices were in vogue.
They are (i) Skimming and (ii) Penetration. Skimming strategy is based on the
perceived need of the users which tend to affect their sensitivity to the prices.
When they are insensitive to the prices it could be exploited by setting a very
high price to skim the cream off market. Whereas, a penetration strategy
assumes that by producing a product similar to that of a competitor and then
under pricing it and thereby some or all its market share can be taken away. The
recent trend is an alternative value-based strategy based on the belief that the
appropriate concept is the perceived value held by the customer.

Promotion and Communication: Promotion is a set of activities designed to

increase by consumers and is the through which the service provider
communicates with his target markets. The promotion of services covers a
number of areas or promotional tools which form the communications mix or
promotions mix. These include:
· Advertising
· Personal selling
· Sales promotion
· Public relationship
· Word of mouth, and
· Direct mail.
The use of promotional tools in service sector is a comparatively recent aspect.
Now, the fiercely competitive environment has made the service marketers use
promotional tools actively. But promotional exercise as it is done in consumer
goods companies is not the same for service industry. A communication

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programme for a service organization may consist of a wide variety of alternative
communications and promotion. To communicate the target markets, the various
elements of the communication mix must be integrated within the promotion
and communication programme. This process involves many tasks among which
the following are considered important.
Place
The location and channels used to supply services to target customers are two
key decision areas. Location and channel decisions are essential to consider how
and at which place the services can be delivered to the customer. They become
more relevant to service as they cannot be stored and mostly are produced and
consumed at the same point. The environment in which the delivery of service
takes place and the manner of its delivery is important attributes of the service
when its value is perceived.

People: The success of marketing a service is tied closely to the selection,

training, motivation and management of people. There are many examples of
services failing or succeeding as a consequence of the ineffective or effective
management of people.
All the people participating in the delivery of service provide cues to the
customer regarding the nature of the service itself. How these people are
dressed up, their personal appearance and their attitudes and behaviours
influence the customer’s perceptions of the service.

Process: The process by which the service is created and delivered to the
customer is critical to the service operations as customer often perceive the
service delivery system as part of the service itself.
Process means all work activities. Process involve the procedures, tasks
schedules, mechanisms, activities and routines by which a product or service is
delivered to the customer. It involves policy decisions about customer
involvement and employee discretion. Identification of process management as a
separate activity is a must for service quality improvement. Its importance in
service businesses is evident because of the inseparability of production and
consumption.

Physical Evidence: The environment in which the service is delivered and

where the firm and customer interact, and any tangible components that
facilitate performance or communication of the service is known as physical
evidence in service.
The physical evidence of service includes all of the tangible representations of
the service such as brochures, letterhead, business cards, report formats,
signage, and equipment.

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