ML0006 FALL 2010 Solutions

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There are exemptions also to the inseparability characteristic. A television coverage, travelagency or stock broker may represent and help marketing the service provided by another servicefirm.Marketing ImplicationsBecause services often are produced and consumed at the same time, mass production is difficult

if not impossible. The quality of service and customer satisfaction will be highly dependent onwhat happens in “real time”, including actions of employees and the interactions betweenemployees and customers.3. HeterogeneityThis characteristic is referred to as variability by Kotler. We have already seen that servicescannot be standardized. They are highly variable depending upon the provider, the time and

place where they are provided. A service provided on a particular occasion is somewhat differentfrom the same service provided on other occasions. Also the standard of quality perceived bydifferent consumers may differ accordingly. For example, the treatments given in a hospital todifferent persons on different occasions cannot similar. Consumers of services are aware of thisvariability and by their interaction with other consumers they also get influenced or influence

others in the selection of service provider.Marketing ImplicationsThe services are heterogeneous across time, organizations, and people ensuring consistentservice is fully controlled by the service supplier; such as the ability of the consumer to articulatehis or her needs, the ability and willingness of personnel to satisfy those needs, the presence (or absence) of other customers, and the level of demand for the services.4. Perishability and Fluctuating DemandPerishability refers to the fact that a seat in an airplane or in a restaurant, an hour of a lawyer’stime, or telephone line capacity not used cannot be reclaimed and used or resold at a later time.This is in contrast to goods that can be in inventory or resold another day, or even returned if theconsumer is unhappy.Marketing ImplicationsA primary issue that marketers face in relation to service perishability is the inability toinventory. Demand forecasting and creative planning for capacity utilization is thereforeimportant in challenging the decision areas. The fact that services cannot typically be returned or resold also implies a need for strong recovery strategies when things do go wrong. For example,while a bad haircut cannot be returned, the hairdresser can and should have strategies for recovering the customer’s goodwill if and when such a problem occurs.

b. Discuss briefly the significance of process and physical evidence in services marketing. (4marks)Sol.ProcessThe process by which the service is created and delivered to the customer is critical to the serviceoperations 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 processmanagement as a separate activity is a must for service quality improvement. Its importance inservice businesses is evident because of the inseparability of production and consumption. The



customer not only thinks about the service product alone but also attaches importance to themanner in which it is delivered. Under these circumstances, a poorly designed service processleads to poor service quality. Banks provide a good example of this. By reconfiguring the waythey deliver service through the introduction of automatic teller machines (ATMs) banks have

been able to free staff to handle more complex customer needs by diverting cash only customers

to the ATMs.Processes are seen as structural elements that can be engineered to help deliver a desiredstrategic positioning. They can be analyzed according to the complexity and divergence.Processes can be changed to reinforce the positioning. A clear understanding of the configuration

processes in terms of this complexity and divergence, on a balance of marketing and operationsactivities are important factors for improving service systems. Processes are thus a marketingmix element which can have a substantial role in reinforcing positioning and in productdevelopment.Physical EvidenceThe environment in which the service is delivered and where the firm and customer interact, andany 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 suchas brochures, letterhead, business cards, report formats, signage, and equipment. In some cases, itincludes the physical facility. Physical evidence cues provide excellent opportunities for the firmto send consistent and strong messages regarding the organization’s purpose, the intended marketsegments and the nature of the service.Developing a Marketing Mix StrategyThese seven elements of the services marketing mix interact with each other. They should bedeveloped in a mutually supportive manner to obtain the best possible match between theinternal and external environments of the organization. In developing a marketing mix strategy,service marketers need to consider the relationship between the elements of the mix.It has been pointed out that there are three degrees of interaction between the marketing mixelements.· Consistency, where there is a logical and useful fit between two or more elements of themarketing mix.· Integration, which involves an active harmonious interaction between the elements of the mix.· Leverage, which involves a more sophisticated approach and is concerned with using eachelement to best advantage in support of the total marketing mix.Thus, effective relationship marketing mix element has an impact on the market segmentselected ensuring that there is a fit between the marketing mix and each target segment; a fit

between the marketing mix and the company’s strategic capabilities, emphasizing its strengthsand minimizing the impact of its weaknesses; and recognition of competitor’s capabilities whichinvolves evading their strengths and capitalizing on their weaknesses. Hence, an effectivemarketing plan outlining the marketing mix strategy has to be developed and implemented.



Q.2 Briefly explain the gaps model in service marketing. (10 marks)Sol.

Theory Of The Gaps Model In Service Marketing History of the Gaps Model The gaps model of service quality was first developed by a group of authors, Parasuraman,Zeithaml, Berry, at Texas A&M and North Carolina Universities, in 1985 (Parasuraman,Zeithaml & Berry). Based on exploratory studies of service such as executive interviews andfocus groups in four different service businesses the authors proposed a conceptual model of service quality indicating that consumers’ perception toward a service quality depends on thefour gaps existing in organization – consumer environments. They further developed in-depthmeasurement scales for service quality in a later year (Parasuraman, Zeithaml, Berry, 1988).

Theory of the Gaps Model

Perceived service quality can be defined as, according to the model, the difference betweenconsumers’ expectation and perceptions which eventually depends on the size and the directionof the four gaps concerning the delivery of service quality on the company’s side (Fig. 1;Parasuraman, Zeithaml, Berry, 1985).Customer Gap = f (Gap 1, Gap 2, Gap 3, Gap 4)The magnitude and the direction of each gap will affect the service quality. For instance, Gap 3will be favourable if the delivery of a service exceeds the standards of service required by theorganization, and it will be unfavourable when the specifications of the service delivered are notmet. The key points for each gap can be summarized as follows:

· Customer gap: The difference between customer expectations and perceptions – theservice quality gap.

· Gap 1: The difference between what customers expected and what management perceived about the expectation of customers.

· Gap 2: The difference between management’s perceptions of customer expectationsand the translation of those perceptions into service quality specifications anddesigns.

· Gap 3: The difference between specifications or standards of service qualityand theactual service delivered to customers.

· Gap 4: The difference between the service delivered to customers and the promise of the firm to customers about its service quality

Applications of the Gaps Model First of all the model clearly determines the two different types of gaps in service marketing,namely the customer gap and the provider gaps. The latter is considered as internal gaps within aservice firm. This model really views the services as a structured, integrated model whichconnects external customers to internal services between the different functions in a serviceorganization. Important applications of the model are as follows:



Fig: The Integrated Gaps Model of Service Quality

Fig. 2: The 10 determinants of service quality

1. The gaps model of service quality gives insights and propositions regarding customers’ perceptions of service quality.

2. Customers always use 10 dimensions to form the expectation and perceptions of servicequality (Fig. 2).

3. The model helps predict, generate and identify key factors that cause the gap to beunfavourable to the service firm in meeting customer expectations.

The model provides a conceptual framework for academic and business researchers to study theservice quality in marketing.



Q.3 What are the bases for segmenting in services marketing? Explain with examples. (10marks) FALL 2010Sol.Bases for SegmentationMarket segments are formed by grouping customers who share common characteristics that are

in some way meaningful to the design, delivery, promotion, or pricing of the service. Commonsegmentation bases for customer markets are demographic segmentation, geographicsegmentation, psychographic segmentation and behavioural segmentation. Segments may beidentified on the basis of one of these characteristics or a combination.

Figure 3.2Demographics and Socio-economic SegmentationDemographic segmentation includes a number of factors including sex, age, family size etc.Socio-economic variables may also be considered here including income, education, social classand ethnic origins. Many retail stores target different customer groups.An interesting example of market segmentation is seen in the banking patterns of consumers

based on the lifecycle of the household. Whilst other factors such as socio-economic level arealso important, the age and family composition of the lifecycle concept are particularly valuable

predictors of a household’s propensity to either save or borrow.An analysis of the stages within the customer lifecycle determines what kinds of banking

relationship are needed to meet the demands of the household. These needs change significantlyfrom a bachelor who wants easy credit facilities and convenient transactions, young marriedrequiring higher levels of credit facilities, through to older families at the peak of their earningand spending potential, and then older families at the peak of their earning and spending

potential, and then older people without children at home who have a higher propensity to save.A financial institution can therefore, direct various service offerings to individuals based on their stage within the lifecycle model.Psychographic SegmentationThis form of segmentation cannot be explained in clearly defined quantitative measures. It isconcerned with people’s behaviour and ways of living. Psychographic segmentation is concernedwith analyzing lifestyle characteristics, attitudes and personality. Often these elements are

examined in conjunction with demographic variables. Service companies are increasinglystarting to look at Psychographic segmentation.Geographic SegmentationGeographic segmentation divides customers according to where they live or work and correlatesthis with other variables. This is appropriate where customers’ needs vary in different areas, or where local and regional trends favor particular types of services offerings.

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As geographic analysis is a relatively simple means of segmenting a market, it is frequently oneof the first segmentation variables to be considered by a service firm. Geographic segmentationdimensions are typically grouped into market scope factors and geographic market measures.1. Market Scope Factors: include a consideration of where the markets to be served are located:this maybe local, national, regional or global. To be a major player in some service businesses

requires a regional or global presence for example, airlines wishing to be significant players arerecognizing this. Many airlines are seeking increased scale of operations through mergers andstrategic alliances.2. Geographic Market Measures: include examination of population density, climate-relatedfactors, and standardized market areas. Geographic measures are especially important in theselection of specialized mass communications media. Most mass circulation media profilegeographic coverage of standardized market areas in detail as well as providing mediacirculation by type of reader and other variables. Geographic market measures are used todetermine relative sales potential in different geographic areas.Benefit SegmentationThe segmentation variables listed above focus on the personal attribute of the customer.

Segmentation can also be carried out on the basis of the customer’s response.Benefit segmentation assumes that the benefit that people are seeking from a given product or service is the basic reasons why they buy the product. This differs from psychographicsegmentation which focuses on who will buy product. Identifying segments seeking a common

benefit permits the service provider to develop a relevant offering. For example, various benefitsare sought within offer of a full range of service for varying needs. Another segment looks for advantageous loans that can be borrowed easily at low interest. A third segment may seek highsavings interest with quick service and a personal banking relationship. A fourth segment mightseek a one-stop bank with a wide variety of service, convenient hours and quick service. A bank can direct its service to satisfying one or more of these segments and gain a reputation for offering a distinct package.Benefit segmentation is applicable to almost all services as it focuses on the underlying reasonsfor purchasing them. For example, within the education market, consumers can be analyzed

based on the primary benefits they seek from the education experience. An example of benefitsegments used for categorizing prospective MBAs can be identified from a survey of candidates.Usage SegmentationUsage segmentation focuses on the type and usage patterns. Consumers are typically divided intoheavy users, medium users, occasional users or non-users of the service being considered. Manyservices marketers are concerned with focusing on the heavy user segment, who may consumemany times more of the service than occasional user. This is the basis of many fast foodrestaurants which cater for high volume usage by providing speedy, low-cost food.Banks and building societies are concerned with heavy, medium, light and non-users of their services. They wish to understand the nature, behaviour and identity of heavy users and attractthem to their bank.Promotional Response SegmentationPromotional response segmentation considers how customers respond to a particular form of

promotional activity. This may include response to advertising, sales promotions, in-storedisplays and exhibitions. Users of mail order catalogues tend to be good users of credit cards andwill have a higher response rate to other direct mail offerings. This information can be used byservice companies to ensure that this segment receives frequent communication by direct mail,



thus building a relationship with the customer as well as obtaining a high response rate to promotions.With loyalty segmentation, customers are categorized according to the extent of the loyalty theyexhibit to the particular product or service being offered. Customers can be characterizedaccording to their degree of loyalty in the channels of distribution or outlets.

Some customers are very loyal to the services organization.They are currently with the service provider even if they are not happy with the service they arereceiving. Customers are sometimes divided into four categories according to consumer loyalty

patterns, ‘hard-core loyals’ (consumers who buy their brand all the time); ‘soft-core loyals’ (whoare loyal to two or three brands); ‘shifting loyals’ (who shift from favouring one brand toanother); and ‘switchers’ (who show little sustainable loyalty to one brand). The underlyingreasons for these different behaviour patterns need further analysis.Segmentation by ServiceOne area which has received relatively little attention is the consideration of how customersrespond to varying service offerings. This may be considered a subset of benefit segmentation,

but it is of sufficient importance to be addressed separately. The various elements of customer

service that can be offered, and possible differentiation in terms of service levels within theseelements, represent a considerable opportunity to design service packages appropriate todifferent market segments.Segmenting markets by service involves addressing the following issues:· Can groupings of customers be identified with similar service requirements?· Can we differentiate our service offering?· Do all our products require the same level of service?The types of segmentation outlined above are illustrative of the main forms of segmentation used

by services companies. They are, however, by no means exhaustive. To a large extent theidentification of segmentation bases involves the element of creativity and those marketingservices should constantly be considering alternative ways of segmenting the market and seekingways in which they can alternative advantage over their competitors. This stage of thesegmentation process should result in the selection of the best bases(s) for segmentation.The segmentation process should result in one of the four basis decisions being reached:1. The service firm may decide to target one segment of the market.2. The service firm may decide to target several segments and so will develop differentmarketing mix plans for each segment.3. Management may decide not to segment the market but to offer the service to the massmarket. This may be appropriate if the market is very small and single portion would not be

profitable.4. Analysis may show that there is no viable market niche for the service offering.The relevance of market segmentation is now being increasingly recognized in the service sector.A number of studies have pointed to the importance of market segmentation. One study ranked‘problems in recognizing, defining, understanding and segmenting markets’ as the mostimportant problem facing the senior executives surveyed. Another survey ranked thesegmentation as the third most important marketing tool. However, despite the recognition of theimportance of market segmentation methodology, some service firms are still basing their marketing strategies methodology, some service firms are still basing their marketing strategiesand tactics on either aboard approach to the market, or a relatively unsophisticated approach to



segmentation. Many service firms need to be more disciplined in their focus on their marketplace.Segmentation is at the heart of marketing strategy and is concerned with the development of amarket position that minimizes competitor’s strengths and maximizes the strength of the service

provide. Segmentation and the associated steps of positioning provide the opportunity to tailor

the service offered to better meet the needs of specific segments.



Master Of Business Administration-MBA Semester 4ML0006 – Services Marketing and Customer Relationship

ManagementAssignment Set- 2



Note: Each question carries 10 Marks. Answer all the questions.Q.1 a. Explain briefly the six categories of service innovation. (8 marks)Sol. Christopher Lovelock has suggested six categories of service innovation including thefollowing.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 thecustomer base to the best advantage and cross-sell other products. For example, the AutomobileAssociation 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, travelinsurance 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 technologicaldevelopment and crated consumer demands which previously did not exist.4. Product Line Extensions: These offer customers greater variety of choices within existingservice lines. This is typical of a business in maturity, which already has a core market segmentwhich the service provider seeks to maintain.5. Product Improvements: This usually consists of altering or improving the features of existingservice 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 uniformsfor bank counter staffs is examples of style changes.

b. What is relationship marketing? (2 marks)Sol.Relationship Marketing ProgrammeGiven the many benefits of long term customer relationships, it would seem that a companywould not want to refuse or terminate a relationship with any customer. In some cases, it may be

preferably for the firm and the customer not to continue their relationship.



Q.2 Give a detail note on customer relationship marketing. (10 marks)Sol.CRM (Customer relationship management) which means “The relationship management of acustomer by an organization”CRM means “The Goal of keeping the customers for the long term benefit of an organization”

CRM means “Acquiring, Developing and retaining satisfied royal customer, achieving profitablegrowth and creating economic value in company’s brand”.Finally CRM means “the establishing, the developing, the strengthening, and the trusting of goodvalues among the customer for company’s brand.CRM is not a new concept but an age old practice, which is on the rise because of the benefits itoffers, especially in the present market scenario.So, CRM today is a discipline as well as set of discreet software and technologies which focuseson automating and improving business process associated with managing Customer Relationshipin the areas of sales, marketing, customer service and support. It helps the companies understand,establish and nurture long term relationships with clients as well as help in retaining currentcustomers.

The most important step that an organization has to take in the direction of CRM is to create aninterdisciplinary team to review how the organization interacts with each customer anddetermines how to extend and improve the relationship.

Emerging concepts in CRM· Increase in customer partnering· Expansion of customer base· Reduction in advertisement and other sales promotion expenses· Generation of more and more loyal customers· Easy introduction of new products· Reduction in customer recruitment cost· Increase in customer partnering· Increase in the number of profitable customer Another emerging concept in CRM is maintaining and creating a relationship with the existingcustomers and new customers.Customer problems solving and timely attention of their grievances and the politeness for theacceptance of the mistakes are caused by the company. Many managers believe that customersare the key to profitability considering the traditional organization. Moreover the customer’stimely help in their problems and product based descriptions will be present trend in thecustomers. The customers are the main focal point for the organizations to sort out the problemsof the products, its growth, and its competition and so on. Hence the customer is the deciders of the growth of the company.

Benefits of CRM to firm and customerBenefits to firm1. The firm takes a chance of retaining the value for the products2. They do get a chance of retaining the value among the customers.3. Firm plays role on the development of themselves4. Firm takes an opportunity to bring the best products and competitiveness among them.5. Firm stands as whole when the customer values are maintained well.



6. Firm provides a wide scope for the customers in this regard.Benefits to Customers1. Customers have variety of choices of the company based on the best play made by a firmregard to CRM.2. Customers have a lot of companies to choose among themselves.

3. Customer get a large amount of products list from the renowned firms4. Firms are very much keen on customers, so customers are highly valued.5. Companies have choices of products to be displayed for the customer’s knowledge, socustomers have own preferences.6. Products shall be negotiated at the large price deductions on the products.



Q.3 Advise a newly started tourism agency to expand its business at the same time developits service marketing expertise. (10 marks)Sol.Whenever a newly started tourism agency wants to grow, there are a lot of things to consider which are all as listed below:

The following points emerge regarding tourism marketing:· Tourism marketing is a process of creating a product or providing a service.· Tourism marketing comprises fact finding, data gathering, analyzing (marketing research),communication to inform and promote (promotion), ensuring and facilitating sales, selection of marketing planning ( distribution), coordination, control and evaluation (marketing planning andauditing), developing professionally sound personnel (people).· Tourism marketing is an integral effort to satisfy tourist and more so, it is a device to transformthe potential tourists into the actual tourists.· Tourism marketing is the safest way to generate demand, expand market and increase themarket share.· Tourism marketing is a managerial process to promote business.

Through market planning, segmentation and marketing research, a tourism marketing mix can bedeveloped to achieve the tourism origination goals through strategic marketing.This apart a tourism agency also has to take care of the price mix, promotion mix.In the promotion mix, one can bring the attention of the customers by means of advertisementsand by improving public relations.Sales promotions through brochures, point of sale displays and videos play an important role. Ina tourism industry one can offer their clients some compliments in the form of bags, and othersthat will surely increase the public interest in our agency.The hotels offer a number of facilities like shoe shine clothes, first aid sewing kits and shampoo,further, the clients also get fruits and flowers in their rooms. There is no double that almost allthe promotional measures generates goodwill and add value to the product.Personal selling: The travel and hotel business depend considerably on the personal selling. Thedeveloping of travel and tourism has been possible due to well educated and trained sales

personnel.People: The tourism industry depends substantially on the management of human resources. Thetravel agents and travel guides plays an important role and therefore the management of peoplehelps in developing their credentials to deliver goods to the tourist organizations.Tactical pricing is found instrumental in promoting the hotel business. There are number of waysfor practicing this tool:i) Seasonal discounts: to charge lower prices, especially during off season.ii) Trade discounts: This is offered to tour operators and travel agents.iii) Special discounts: special function room rates for overnight conventions.This apart there are lots of other strategies one can use to develop a tourism company.

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ML0006 FALL 2010 Solutions