Service Marketing Word File

7/28/2019 Service Marketing Word File

1/31

FISHBONE DIAGRAMS

PURPOSE

The fishbone diagram is a causeandeffect diagram that can be used to identify the potential(or actual) cause(s) for a performance problem. Fishbone diagrams provide a structure for a

groups discussion around the potential causes of the problem.

NEEDSASSESSMENT APPLICATIONS

Fishbone diagrams are often used in needs assessment to assist in illustrating and/orcommunicating the relationships among several potential (or actual) causes of a performance

problem. Likewise, these graphical representations of relationships between needs (i.e.,discrepancies between desired and actual results) offer you a pragmatic tool for building a

system of performance improvement interventions (for instance, a combination of mentoring,

job aids, training, motivation, new expectations) around the often

complex relationships found across potential (or actual) causes.

ADVANTAGES

Fishbone diagrams permit a thoughtful analysis that avoids overlooking any possible root

causes for a need.

The fishbone technique is easy to implement and creates an easytounderstandvisual representation of the causes, categories of causes, and the need.

By using a fishbone diagram, you are able to focus the group on the big picture as topossible causes or factors influencing the problem/need.

Even after the need has been addressed, the fishbone diagram shows areas ofweakness that

once exposed

can be rectified before causing more sustained

difficulties.

DISADVANTAGES

The simplicity of a fishbone diagram can be both its strength and its weakness. As aweakness, the simplicity of the fishbone diagram may make it difficult to represent

the truly interrelated nature of problems and causes in some very complex situations.

Unless you have an extremely large space on which to draw and develop thefishbone diagram, you may find that you are not able to explore the cause and effect

relationships

GENERAL PROCEDURES

1. Identify gaps between the results (i.e., performance) that are required for thesuccessful accomplishment of your programs/projects results chain (i.e., logic frame)

and current achievements todate.


2/31

2. Generate a clear, concise statement of the need(s). Make sure that everyone in the

group agrees with the need as it is stated. For example, Late departure of Flight.

3. Using a long sheet of paper, draw a line horizontally along the page. This line will

be the spineof the fish. Write the need along the spine, on the left hand side.

4. Identify the overarching categories of causes of the need. Brainstorming is often aneffective technique for identifying the categories of causes. For each category of

causes, draw a bone a line at a 45 degree angle from the spine of the fish. Label each

spine

5. Have the group brainstorm to identify the factors that may be affecting the causeand/or the need. For each category of causes, the group should be asking; Why is this

happening? Add each reason why to the diagram, clustered around the major cause

category it influences.

6. Repeat the procedure for asking Why is this happening? for each effect, until the

question yields no more meaningful answers.

7. When the group has come to the consensus that the diagram contains an adequate

amount of information, analyze the diagram. In particular, look for causes that are

appearing in more than one section of the diagram.

8. Circle anything that seems to be a root cause for the need. Prioritize the root causes

and decide to take action. This action may involve further investigating the root

causes.

Productivity in a Service Context

Productivity measures amount of output produced relative to the amount of inputs. Improvement in productivity means an improvement in the ratio of outputs to inputs. Intangible nature of many service elements makes it hard to measure productivity of

service firms, especially for information-based services

Difficult in most services because both input and output are hard to define


3/31

Relatively simpler in possession-processing services, as compared toinformation- and people-processing services

Service Efficiency, Productivity, and Effectiveness

Problem: Focus on inputs rather than outcomes May ignore variations in service quality/value Consistent delivery of outcomes desired by customers should command

higher prices

Cannot divorce productivity from quality and customer satisfactionGeneric Productivity Improvement Strategies

Typical strategies to improve service productivity: Careful control of costs at every step in process Efforts to reduce wasteful use of materials or labor Replacing workers by automated machines Installing expert systems that allow paraprofessionals to take on work

previously performed by professionals who earn higher salaries

Although improving productivity can be approached incrementally, major gains oftenrequire redesigning entire processes

Improving Service Productivity: Operations-driven Strategies

Control costs, reduce waste Set productive capacity to match average demand Automate labor tasks Upgrade equipment and systems Train employees Broadening array of tasks that a service worker can perform Service process redesignDifferent Perspectives of Service Quality


4/31

(1) Tangibles . Physical facilities, equipment and appearance of personnel.

(2) Reliability. Ability to perform the promised service dependably and accurately.

(3) Responsiveness . Willingness to help customers and provide prompt service.

(4) Assurance (including competence, courtesy, credibility and security). Knowledge and

courtesy of employees and their ability to inspire trust and confidence.

(5) Empathy (including access, communication, understanding the customer). Caring and

individualized attention that the firm provides to its customers.

The Gaps Model of Service Quality

Introduce a framework, called the gaps model of service quality. Demonstrate that the most critical service quality gap to close is the customer gap, the

difference between customer expectations and perceptions.

Show that four gaps that occur in companies, which we call provider gaps, areresponsible for the customer gap.

Identify the factors responsible for each of the four provider gaps.Gaps Model of Service Quality

Customer Gap: difference between customer expectations and perceptions

Provider Gap 1 (The Knowledge Gap): not knowing what customers expect

Provider Gap 2 (The Service Design & Standards Gap): not having the right service designs and standards

Provider Gap 3 (The Service Performance Gap): not delivering to service standards


5/31

Provider Gap 4 (The Communication Gap): not matching performance to promises

The Customer Gap

Key Factors Leading to the Customer Gap

Key Factors Leading to Provider Gap 1



6/31




7/31

Gaps Model of Service Quality

Pricing and Revenue Management

Effective Pricing Is Central to Financial Success

What Makes Service Pricing Strategy Different and Difficult?

Harder to calculate financial costs of creating a service process or performance than amanufactured good

Variability of inputs and outputshow can firms define a unit of service andestablish basis for pricing?

Customers find many services hard to evaluatewhat are they getting in return fortheir money?

Importance of time factorsame service may have more value to customers whendelivered faster Delivery through physical or electronic channelsmay create differences in

perceived value

Objectives for Pricing

Revenue and profit objectives Seek profit Cover costs

Patronage and user-based objectives Build demand

- Demand maximization- Full-capacity utilization


8/31

Build a user base- Stimulate trial and adoption of new service- Build market share/large user base

Pricing Strategy Stands on Three Legs

The Pricing Tripod

Three Main Approaches to Pricing

Cost-based pricing Set prices relative to financial costs (problem: defining costs) Activity-based costing Pricing implications of cost analysis

Competition-based pricing Monitor competitors pricing strategy (especially if service lacksdifferentiation) Who is the price leader? Does one firm set the pace?

Value-based pricing Relate price to value perceived by customer

Cost-based Pricing: Traditional vs. Activity-based Costing

Traditional costing approach Emphasizes expense categories (arbitrary overhead allocation) May result in reducing value generated for customers

ABC management systems Link resource expenses to variety and complexity of goods/services produced Yields accurate cost information


9/31

When looking at prices, customers care about value to themselves, not what serviceproduction costs the firm

Value-based Pricing Understanding Net Value

Value exchange will not take place unless customer sees positive net value intransaction

Net value = Perceived benefits to customer (gross value) minus all Perceived outlays(Money, Time, Mental/Physical effort)

Monetary price is not only perceived outlay in purchasing, using a service Consumer surplus: difference between price paid and amount customer would have

been willing to pay in absence of other options

Value-based Pricing: Strategies for Enhancing Net Value

Enhance gross valuebenefits delivered

Add benefits to core product Enhance supplementary service Manage perceptions of benefits delivered

Reduce outlayscosts incurred by customers Reduce price and/or other monetary costs of acquisition and usage Cut amount of time required to evaluate, buy, use service Lower physical and mental effort associated with purchase and use Reduce perceptions of amount of cost, time, effort required

Value-based Pricing:

Reduce uncertainty Service guarantees Benefit-drivenpricing aspect(s) of service that create value Flat rate (quoting a fixed price in advance)

Relationship pricing Nonprice incentives Discounts for volume purchases Discounts for purchasing multiple services


10/31

Low-cost leadership Convince customers not to equate price with quality Keep economic costs low to ensure profitability at low price

Paying for Service: The Customers Perspective

Customer expenditures on service comprise both financial and nonfinancial outlays Incremental financial outlays

Price of purchasing service Expenses associated with search, purchase activity, usage

Nonmonetary costs Time costs Physical costs Psychological (mental) costs Sensory costs (unpleasant sights, sounds, feel, tastes, smells)

Determining Total Costs of a Service to Customer

Increasing Net Value by Reducing Nonmonetary Costs of Service.

Reduce time costs of service at each stage Minimize unwanted psychological costs of service

Eliminate/redesign unpleasant/inconvenient procedures Eliminate unwanted physical costs of service Decrease unpleasant sensory costs of service

Unpleasant sights, sounds, smells, feel, tastes


11/31

Pricing Issues: Putting Strategy into Practice

How much to charge? What basis for pricing? Who should collect payment? Where should payment be made? When should payment be made? How should payment be made? How to communicate prices?

Putting Service Pricing into Practice

How much to charge? The pricing tripod model provides a useful departure point A specific figure must be set for the price Need to consider the pros and cons, the ethical issues

What basis for pricing? (How define unit of service?) Completing a task Admission to a service performance Time based Monetary value of service delivered (e.g., commission) Consumption of physical resources (e.g., food and beverages)


Who should collect payment? Service provider or specialist intermediaries Direct or nondirect channels

Where should payment be made? Conveniently located intermediaries Mail/bank transfer

When should payment be made?


12/31

In advance Once service delivery has been completed


How should payment be made? Cash Token Stored value card Electronic fund transfer Charge card (debit/credit) Vouchers Third-party payment

How to communicate prices? Relate the price to that of competing products Ensure price is accurate and intelligible.

Balancing Demand and Productive Capacity

Fluctuations in Demand Threaten Service Productivity

From Excess Demand to Excess Capacity

Four conditions potentially faced by fixed-capacity services:

Excess demand Too much demand relative to capacity at a given time

Demand exceeds optimum capacity Upper limit to a firms ability to meet demand at a given time

Optimum capacity Point beyond which service quality declines as more customers are serviced

Excess capacity Too much capacity relative to demand at a given time

Addressing Problem of Fluctuating Demand


13/31

Two basic approaches:

Adjust level of capacity to meet demand Need to understand productive capacity and how it varies on an incremental

basis

Manage level of demandVariations in Demand Relative to Capacity

Many Service Organizations Are Capacity Constrained

Forms of Productive Capacity in Services

Physical facilities to contain customers Physical facilities to store or process goods Physical equipment to process people, possessions, or information Labor used for physical or mental work Public/private infrastructure

Alternative Capacity Management Strategies

Level capacity (fixed level at all times) Stretch and shrink

Offer inferior extra capacity at peaks (e.g., bus/train standees) Vary seated space per customer Extend/cut hours of service

Chase demand (adjust capacity to match demand) Flexible capacity (vary mix by segment)


14/31

Adjusting Capacity to Match Demand

Schedule downtime during periods of low demand Use part-time employees Rent or share extra facilities and equipment Ask customers to share Invite customers to perform self-service Cross-train employees

Patterns and Determinants of Demand

Predictable Demand Patterns and Their Underlying Causes

Causes of Seemingly Random Changes in Demand Levels

Weather

Health problems Accidents, Fires, Crime Natural disastersQuestion: Which of these events can be predicted?

Demand Levels Can Be Managed

Alternative Demand Management Strategies

Take no action Let customers sort it out

Reduce demand Higher prices


15/31

Communication promoting alternative times Increase demand

Lower prices Communication, including promotional incentives Vary product features to increase desirability More convenient delivery times and places

Inventory demand by reservation system Inventory demand by formalized queuing

Marketing Strategies Can Reshape Some Demand Patterns

Use price and other costs to manage demand Change product elements Modify place and time of delivery

No change Vary times when service is available Offer service to customers at a new location

Promotion and educationInventory Demand through Waiting Lines and Reservations

Waiting Is a Universal Phenomenon!

An average person may spend up to 30 minutes/day waiting in lineequivalent toover a week per year!

Almost nobody likes to wait It's boring, time-wasting, and sometimes physically uncomfortable

Why Do Waiting Lines Occur?


16/31

Saving Customers from Burdensome Waits

Add extra capacity so that demand can be met at most times (problem: may increasecosts too much)

Rethink design of queuing system to give priority to certain customers or transactions Redesign processes to shorten transaction time Manage customer behavior and perceptions of wait Install a reservations system

Alternative Queuing Configurations

Criteria for Allocating Different Market Segments to Designated Lines

Urgency of job Emergencies versus non-emergencies

Duration of service transaction Complexity of task

Payment of premium price First class versus economy

Importance of customer Frequent users/high volume purchasers versus others

Minimize Perceptions of Waiting Time

Ten Propositions on Psychology of Waiting Lines

1. Unoccupied time feels longer than occupied time2. Pre- and post-process waits feel longer than in-process waits3. Anxiety makes waits seem longer


17/31

4. Uncertain waits are longer than known, finite waits5. Unexplained waits are longer than explained waits6. Unfair waits are longer than equitable waiting7. People will wait longer for more valuable services8. Waiting alone feels longer than waiting in groups9. Physically uncomfortable waits feel longer10.Waits seem longer to new or occasional users

Create An Effective Reservation System

Benefits of Reservations

Controls and smoothes demand Pre-sells service Informs and educates customers in advance of arrival Saves customers from having to wait in line for service (if reservation times are

honored)

Data captured helps organizations Prepare financial projections Plan operations and staffing levels

Characteristics of Well-Designed Reservations System

Fast and user-friendly for customers and staff Answers customer questions Offers options for self service (e.g., the Web) Accommodates preferences (e.g., room with view) Deflects demand from unavailable first choices to alternative times and locations Includes strategies for no-shows and overbooking

Requiring deposits to discourage no-shows Canceling unpaid bookings after designated time Compensating victims of over-booking

Developing Service Concepts: Core and Supplementary Elements


18/31

Planning and Creating Services

A service product comprises all elements of service performance, both tangible andintangible, that create value for customers

The service concept is represented by: A core product Accompanied by supplementary services

a) Designing a Service Concept Core Product

Central component that supplies the principal, problem-solving benefitscustomers seek

Supplementary Services

Augment the core product, facilitating its use and enhancing its value andappeal

Delivery Processes Used to deliver both the core product and each of the supplementary services.

Issues-

How the different service components are delivered to the customer The nature of the customers role in those processes How long delivery lasts The prescribed level and style of service to be offered

Core and Supplementary Product Design: An Integrated Perspective


19/31

Core and Supplementary Services at Luxury Hotel

Defining Core and Supplementary Elements of Our Service Product

How is our core product defined and what supplementary elements augment it? What product benefits create most value for customers? What are current levels of service on core product and each supplementary element? Can we charge more for higher service levels? For example: Alternatively, should we cut service levels and charge less?b) Documenting Delivery Sequence Over Time

o Must address sequence in which customers will use each core andsupplementary service

o Determine length of time for each stepo Information should reflect good understanding of customers, especially their:o Needso Habitso Expectations

Question: Do customers expectations change during service delivery in light ofperceived quality of each sequential encounter?

What Happens, When, in What Sequence? Time Dimension in Augmented Product


20/31

Flow charting

A technique for displaying the nature and sequence of the different steps involved in

delivering service to customers, offers a way to understand the totality of the customers

service experience.

c) Flowcharting Service DeliveryUseful for distinguishing between core product itself and service elements that

supplement core

a. Restaurants: Food and beverage (core)b. Reservations (supplementary services)

Shows how nature of customer involvement with service organizations varies by type

of service:

c.

People processing -Possession processing

d. Mental Stimulus processing -Information processing.Simple Flowchart for Delivery of a People-Processing Service

Simple Flowchart for Delivery of a Possession-Processing Service

Simple Flowchart for Delivery of Mental Stimulus-Processing Service


21/31

Simple Flowchart for Delivery of An Information-Processing Service

2. The Flower of Service


22/31

The Flower of Service: Facilitating ServicesInformation

The Flower of Service: Facilitating ServicesOrder Taking

The Flower of Service: Facilitating ServicesBilling

The Flower of Service: Facilitating ServicesPayment


23/31

The Flower of Service: Enhancing ServicesConsultation

The Flower of Service: Enhancing ServicesHospitality

The Flower of Service: Enhancing ServicesSafekeeping

The Flower of Service: Enhancing ServicesExceptions

How to Determine What Supplementary Services Should Be Offered

Nature of product helps to determine: Which supplementary services must be offered


24/31

Which might usefully be added to enhance value People-processing and high-contact services tend to have more supplementary

services

Market positioning strategy helps to determine which supplementary services shouldbe included.

3. Planning and Branding Service Products

Service Products

A service product: A defined and consistent bundle of output Service firms can differentiate their products in similar fashion to various models

offered by manufacturers

Providers of more intangible services Represent an assembly of elements that are built around the core product May include certain value-added supplementary services

Product Lines and Brands

Most service organizations offer a line of products rather than just a single product They may choose among three broad alternatives:

Single brand to cover all products and services A separate, stand-alone brand for each offering Some combination of these two extremes

Spectrum of Branding Alternatives

Example: British Airways Sub-brands

British Airways offers six distinct air travel products Four intercontinental offerings:


25/31

First (deluxe service) Club World (business class) World Traveller Plus (premier economy class) World Traveller (economy class)

Two intra-European offerings: Club Europe Euro-Traveller

Offering a Branded Experience

Branding can be employed at both corporate andproductlevels Corporate brand:

Easily recognized Holds meaning to customers Stands for a particular way of doing business

Product brand: Helps firm communicate distinctive experiences and benefits associated with

a specific service concept

Moving toward branded customer experience includes:

Create brand promise Shape truly differentiated customer experience Give employees skills, tools, and supporting processes to deliver promise Measure and monitor

4. Developing New Services

A Hierarchy of New Service Categories

1. Major service innovations New core products for previously undefined markets

2. Major process innovations Using new processes to deliver existing products with added benefits


26/31

3. Product-line extensions Additions to current product lines

4. Process-line extensions Alternative delivery procedures

5. Supplementary service innovations Addition of new or improved facilitating or enhancing elements

6. Service improvements Modest changes in the performance of current products

7. Style changes Visible changes in service design or scripts

Reengineering Service Processes

involves analyzing and redesigning processes to achieve faster and betterperformance

Running tasks in parallel instead of sequence can reduce/eliminate dead time Examination of processes can lead to creation of alternative delivery methods

Add/eliminate supplementary services Resequence delivery of service elements Offer self-service options

Physical Goods as a Source Of New Service Ideas

Services can be built around rentals: Alternatives to owning a physical good and/ordoing work oneself

Customers can rentgoodsuse and return for a feeinstead of purchasingthem

Customers can hire personnel to operate own or rented equipment

Any new durable good may create need for after-sales services now and in futurepossession processing

Achieving Success in Developing New Services

In developing new services


27/31

Core product is of secondary importance Ability to maintain quality of the total service offering is key Accompanying marketing support activities are vital Market knowledge is of utmost importance

Success Factors in New Service Development

Market synergy Good fit between new product and firms image/resources Advantage versus competition in meeting customers needs Strong support from firm during/after launch

Firm understands customer purchase decision behavior

Organizational factors Strong inter functional cooperation and coordination Internal marketing to educate staff on new product and its competition Employees understand importance of new services to firm

Market research factors Scientific studies conducted early in development process Product concept well defined before undertaking field studies

All steps of service development starts from Idea generation to commercialization.

Distributing Services

Distribution embraces three interrelated elements:

Information and promotion flow To get customer interested in buying the service

Negotiation flow To sell the right to use a service

Product flow To develop a network of local sites

Distribution relates to both core services and supplementary services


28/31

Core services for people processing and possession processing services requirephysical locations

Core services for mental stimulus processing and information processing can bedistributed electronically

Supplementary services can be tangible or intangible in nature; latter can bedistributed widely and cost-effectively via nonphysical channels

Telephone Internet

Using Websites for Service Delivery

Distribution Options for Serving Customers

Customers visit service site Convenience of service factory locations and operational schedules important

when customer has to be physically present

Service providers go to customers Unavoidable when object of service is immovable More expensive and time-consuming for service provider

Service transaction is conducted remotely Achieved with help of logistics and telecommunications

Six Options for Service Delivery


29/31

Channel Preferences Vary among Customers

For complex and high-perceived risk services, people tend to rely on personalchannels

Individuals with greater confidence and knowledge about a service/channel tend touse impersonal and self-service channels

Customers with social motives tend to use personal channels Convenience is a key driver of channel choice

Places of Service Delivery

Cost, productivity, and access to labor are key determinants to locating a servicefacility

Locational constraints

Operational requirements- Airports

Geographic factors- resorts

Need for economies of scale- Hospitals

Places of Service Delivery

Ministores Creating many small service factories to maximize geographic coverage

- Automated kiosks


30/31

Locating in multipurpose facilities Proximity to where customers live or work

- Service stationsTime of Service Delivery

Traditionally, schedules were restricted Service availability limited to daytime, 40 to 50 hours a week Sunday historically considered as a rest day tradition,

Saturday in Jewish tradition, and Friday in Muslim tradition

Today For flexible, responsive service operations:

- 24/7 service24 hours a day, 7 days a week, around the world(Service Perspectives 4.3)

Some organizations still avoid 7-day operationsService Delivery Innovations Facilitated by Technology

Technological Innovations Development of smart mobile telephones and Wi-Fi high-speed Internet

technology that links users to Internet from almost anywhere

Websites Smart cards

- Store detailed information about customer- Act as electronic purse containing digital money

Increase accessibility of services Deliver right information or interaction at right time Create and maintain up-to-date real-time information

E-Commerce:

Internet facilitates 5 categories offlow Information Negotiation


31/31

Service Transactions Promotion

Electronic channels offer alternative to traditional physical channels Convenience (24-hour availability, save time, effort) Ease of obtaining information online and searching for desired items

Franchising

Popular way to expand delivery of effective service concept Franchising is a fast growth strategy, when

Resources are limited Long-term commitment of store managers is crucial Local knowledge is important Fast growth is necessary to preempt competition

Disadvantages of franchising

Some loss of control over delivery system and, thereby, over how customersexperience actual service

Effective quality control is important yet difficult Conflict between franchisees may arise especially as they gain experience

The Challenge of Distribution In Markets

Marketing services face challenges due to: Distances involved (geographic areas) Existence of multiple time zones Differences in laws and tax rates

companies counter this by: Targeting specific market segments Seeking out narrow market niches

Serving multiple segments across a huge geographic area is biggest marketingchallenge.

Documents

Service Marketing Word File