Services Marketing Christopher Lovelock1

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 1

Facilitating Services - Information (Table 4.1)

Core

Customers often requireinformation about how toobtain and use a product orservice. They may alsoneed reminders anddocumentation


Facilitating Services - Order-Taking(Table 4.2)

Many goods and services must be ordered or reservedin advance. Customers need to know what is available andmay want to secure commitment to delivery

Core


Facilitating Services - Billing(Table 4.3)

“How much do I owe you?”Customers deserve clear, accurate and intelligiblebills and statements

Core


Facilitating Services - Payment(Table 4.4)

Customers may pay faster and more cheerfully if youmake transactions simpleand convenient for them

Core


Enhancing Services - Consultation(Table 4.5)

Value can be added to goods and services byoffering advice andconsultation tailored toeach customer’sneeds and situation

Core


Enhancing Services - Hospitality(Table 4.6)

Customers who invest time and effort in visiting abusiness and using itsservices deserve to betreated as welcome guests (after all, marketing invitedthem there!)

Core


Enhancing Services - Safekeeping(Table 4.7)

Customers prefer not toworry about looking afterthe personal possessions that they bring with themto a service site.

They may also want deliveryand after-sales services forgoods that they purchaseor rent

Core


Enhancing Services - Exceptions(Table 4.8)

Customers appreciate some flexibility in a businesswhen they make special requests. They expect itwhen not everything goesaccording to plan

Core


Managing Relationships

and Building Loyalty


Four Stages of Brand Loyalty in a Consumer

Cognitive loyalty – perception from brand attribute information that one brand is preferable to its alternatives

Affective loyalty – developing a liking for the brand based on cumulatively satisfying usage occasions

Conative loyalty – commitment to rebuying the same brand

Action loyalty – exhibiting consistent repurchase behavior


What Makes Loyal Customers More Profitable?

Tend to spend more as relationship developscustomer’s balances may growmay consolidate purchases to one supplier

Cost less to serve less need for information and assistancemake fewer mistakes

Recommend new customers to firm (act as unpaid sales people)

Trust leads to willingness to pay regular prices vs. shopping for discounts


Customer-Firm Relationship

Database Marketing: Involves the use of technology by delivering differentiated service levels to consumers and subsequently tracking the relationship.

Interaction Marketing: Usually in B2B context where people and the social process also add mutually beneficial value.

Network Marketing: Common in B2B context where companies commit resources to develop positions in a network of relationships with the stakeholders and relevant agencies.

Today’s marketers seek to develop long-term relationships with customers. Relationship marketing includes:


Basic Segmentation Issues: Building an Appropriate Customer Portfolio

Target customers whose needs match firm’s capabilities

Focus on value of prospective customers within each segment, not just numbers

Avoid targeting customers who might abuse:our employees, facilitiesother customers

Create a mix of segments to reduce risks of volatility during swings of economic cycles


Service-Relevant Segmentation Variables

Timing of service use (e.g., by hour, day, season)

Level of skill and experience as co-producer/self-server

Preferred language in face-to-face contact

Access to electronic delivery systems (e.g., Internet)

Attitudes toward use of new service technologies


Identifying and Selecting Target Segments (Mgt Memo 12.2)

User characteristics demographics psychographics geographic location benefits sought

User behavior when, where, how services used quantity/value of purchases frequency of use profitability of relationship sensitivity to marketing variables


The Customer Pyramid (Fig. 12.5)

Lead

Iron

Gold

Which segment sees high value in our offer, spends more with us over time, costs less to maintain, and spreads positive word-of-mouth?

Which segment costs us in time, effort and money, yet does not provide the return we want? Which segment is difficult to do business with?

Platinum

Good Relationship Customers

Poor Relationship Customers


How Customers See Relational Benefits in Service Industries (Research Insights 12.1)

Confidence benefits less risk of something going wrong, less anxiety ability to trust provider know what to expect get firm’s best service level

Social benefits mutual recognition, known by name friendship, enjoyment of social aspects

Special treatment benefits better prices, discounts, special deals unavailable to others extra services higher priority with waits, faster service


The Customer Satisfaction-Loyalty Relationship (Fig. 12.6)

0

20

40

60

80

100

1 2 3 4 5

Lo

yalt

y (R

eten

tio

n)

Verydissatisfied Dissatisfied

Neithersatisfied

nor dissatisfiedSatisfied

VerySatisfied

Satisfaction

Near Apostle

Zone of Defection

Zone of Indifference

Zone of Affection

Terrorist

Apostle


The Wheel of Loyalty (Fig. 12.7)

1. Build aFoundationfor Loyalty

2. Create LoyaltyBonds

3. Reduce Churn Drivers

CustomerLoyalty

Be selective in acquisition

Conduct churn diagnosticSegment the market

Use effective tiering of service.

Deliver quality service.

Deepen the relationship

Give loyalty rewards

Build higher level bonds

Implement complaint handling & service recovery

Address key churn drivers

Increase switching costs

Enabled through: Frontline staff Account

managers Membership

programs CRM Systems


Drivers of Service Switching (Fig. 12.9)

Service Switching

Service Encounter Failures• Uncaring• Impolite• Unresponsive• Unknowledgeable

Response to Service Failure• Negative Response• No Response• Reluctant Response

Pricing• High Price• Price Increases• Unfair Pricing• Deceptive Pricing

Inconvenience• Location/Hours• Wait for Appointment• Wait for Service

Competition• Found Better Service

Ethical Problems• Cheat• Hard Sell

Involuntary Switching• Customer Moved• Provider Closed

Value PropositionValue Proposition

OthersOthers

Service Failure / RecoveryService Failure / Recovery

Core Service Failure• Service Mistakes• Billing Errors• Service Catastrophe

• Unsafe• Conflict of Interest

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Services Marketing Christopher Lovelock1