bem-120-summary-marketing-management.pdf

lOMoARcPSD|42165161 BEM 120 - Summary Marketing Management Marketing Management (University of Pretoria) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloa...

lOMoARcPSD|42165161 BEM 120 - Summary Marketing Management Marketing Management (University of Pretoria) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 Chapter 1: Service Marketing in Perspective SERVICE MARKETING AS AN EXCHANGE PROCESS Marketing exchange process: The complex process whereby the organisation identiÞes the expectations of their target market and Þnds innovative ways to satisfy the important needs of their customers. - Marketing is exchange To be successful in competitive markets, service organizations use "environmental scanning" to scrutinize the wider market environment before launching into a new business idea Micro-environment Includes org. Mission and vision statement, its competencies, and capabilities (SWOT analysis) Market environment Emphasis on org. Customers, competitors, suppliers, and intermediaries Macro environment Changes may result from shifts in the economic, political, legal, social, natural, technological and/or international environment. If sufÞcient info has been collected, the service marketer can proceed to the design of the service offering. - Has to be developed within the context Service marketing mix: set of tools available to the organization to help shape the service offering according to the needs of its targeted customers. THE 7 PÕS Product ¥ Technical outcome of the service. ¥ Service product: anything offered by the organization to potential customers (tangible/intangible) o DifÞcult to standardize services Physical Can use tangible evidence of the service such as brochures and documentation of the service offered to decrease the perceived risk of the evidence purchase People ¥ The staff of an org. Form an integral part of the process of service delivery o They all act as marketers ¥ The customer makes up the other half of people decisions in service delivery. Process ¥ Interaction can take place in any environment created ¥ Service process should be viewed as "how" the service is provided to satisfy customer needs. Place Depending on the nature of the service and what customers value, several distribution channels can be utilised to distribute a service to customers Pricing Designed to cover costs and generate proÞts for the org, and include strategic and tactical decisions about the average price to be charged, discount structure and terms of payment Promotion ¥ Communicated with target audience to inßuence knowledge, attitude, and behaviour. ¥ Must active communicate the beneÞts of their service to their target audience by using appropriate types of communication channels and media. SIX EÕS OF SUCCESFUL SERVICE MARKETING Ease of Expection Expectations Education Experience doing Equilibrium management business If all the elements of the service marketing mix are integrated and coordinated in a holistic marketing strategy, it is a powerful framework to create customer satisfaction. DEFINING SERVICES Service failure: Service performance that fails to meet a customerÕs expectations Services: An act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything Its production may or may not be tied to a physical product. ¥ The primary difference between physical goods and services is the element of intangibility Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 DEGREES OF TANGIBILITY PURE TANGIBILE GOODS Such as toothpaste and salt, where the addition of services cannot Enhance customer value HYBRID SERVICE OFFERS Equal parts tangible products and intangible services. Such as a meal at Mugg & Bean and Sterkinekor TANGIBLE GOODS WITH ACCOMPANYING SERVICES Tangible product that is supported by intangible services (products such as a car Sold with a maintenance plan) CORE SERVICES WITH ACCOMPANYING MINOR GOODS AND Airlines where customer purchases transport and gets meals and luggage services or SERVICES storage facilities PURE SERVICES Consists primarily of services and include medical/legal services example ADT. CLASSIFICATION OF SERVICES LEVEL 1: MEANS OF DELIVERY Equipment-based services: ¥ Automated services and services provided by either unskilled/skilled provider. ¥ Quality of equipment & ability of staff to use equipment = crucial in determining quality of org. Service o Automated (ATM) o Operated skilled providers (Airlines) o Monitored unskilled providers Cinemas) People-based services: ¥ Can be performed by unskilled/skilled/professional staff ¥ Quality = determined by the training, knowledge, motivation of staff. o Unskilled labour (Garden services) o Skilled labour (Computer services) o Professional (Lawyers) LEVEL 2: DEGREE OF DEPENDENCE ON CUSTOMER Such as medical surgery (very dependent on customer presence) PRESENCE ¥ Must be a pleasant experience to ensure customers will evaluate quality based on that. Car repairs (not dependent on customer presence) ¥ Services must best suit needs of its employees and operational process. LEVEL 3: PERSONAL VERSUS BUSINESS USE ¥ Hairdressing = personal use for own beneÞt ¥ Goods bought by an org. To produce something else of economic beneÞt = business use DISTINGUISING FEATURES OF SERVICES 1. INTANGIBILITY Services are intangible as they are impossible to taste, smell, feel, hear. PROBLEMS SOLUTIONS ¥ Cannot be stored ¥ Stressing tangible cues ¥ Cannot be patented ¥ Usage of personal sources of info by stimulating positive word of mouth ¥ Complicated the communication process ¥ Encouraging employees to communicate with customers ¥ No physical goods to determine cost from ¥ Creating a strong corporate image 2. INSEPARABILITY Services are often produced, delivered and consumed all at once Provided-customer interaction is crucial PROBLEMS SOLUTIONS ¥ Service providerÕs physical connection to the service offered ¥ Effective selection and training of contact staff ¥ Involvement of the customer ¥ Effective customer management ¥ Interaction amongst customers ¥ Mass production ¥ Challenge surrounding mass production ¥ Support for frontline staff Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 3. HETROGENEITY Often difÞcult, if not impossible, to completely standardize service delivery Main reason: Service is largely delivered and produced by a human being, not a machine PROBLEMS SOLUTIONS ¥ DifÞcult to achieve service standardization and quality control ¥ Customisation (happens when the service offering is adapted according to an individual customerÕs speciÞc needs/instructions) Trade-offs are always associated with this. ¥ Standardization (occurs by training staff to deliver the service in consistent, prescribed manner and by standardizing the service delivery process and procedures. 4. PERISHABILITY Services can be described as perishable, since inventory-holding in the same manner as tangible goods, is near impossible. PROBLEMS SOLUTIONS ¥ Demand > supply DEMAND SIDE: SUPPLY SIDE: ¥ Demand < supply ¥ Differential pricing ¥ Hire part time employees to increase capacity ¥ Demand = supply ¥ Offering special promotions during lower demand periods ¥ Peak time efÞciency routines ¥ Develop complementary services during peak times ¥ Increased customer participation in service delivery ¥ Develop shared services ¥ Develop facilities for future expansion Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 Chapter 2: Value: From Customer Service to Satisfaction 3 Key principles: Quality, service, value ELEMENTS IN CUSTOMER SATISFACTION AND LOYALTY Total perceived value =The Service Act + The Service Itself Customer satisfaction =Customer Perceptions Ð Customer Expectations BENEFITS OF PROVIDING BETTER SERVICE Problem: A number of organisations offer virtually identical services to the same market INCREASED MARKET SHARE Improved quality can entice customers of competitors to move over thereby increasing the org. Market share. IMPROVED VALUE PROPOSITION Adding superior customer service to a technically superior service increases customer's perceived value TO GAIN MARKETING BENEFITS Quality accreditation/awards are used by many service org to substantiate their marketing communication claims. FINANCIAL IMPACT Improved Þnancial performance is the outcome of higher sales income as well as lower costs due to improved efÞciency Value: The difference between the customer's perception of beneÞts received from purchasing and consuming the service, and the customer's perception of the costs incurred in exchange for the service ¥ VALUE = Service itself + customer service act > customer expectations ¥ Customers will buy a service when: o BeneÞts of exchange > costs of exchange o The service offers superior value compared to other alternatives in the market VALUE LEVELS Described on two levels: 1. Value customer derives from the service itself. 2. Value customer derives from the quality of the supporting service act. ¥ In some cases the technical components (actual service) is more important and in others the functional component (customer service) becomes more important Evaluation qualities: indicate the qualities present in the service that can be evaluated by the customer. SEARCH QUAITIES Attributes that customers can evaluate prior to purchasing a service (colour, price) EXPERIENCE QUALITIES Attributes that customers can only evaluate during and after consumption CREDENCE QUALITIES Attributes that customers Þnd difÞcult to evaluate after consumption (wonÕt know whether the service was of a good/poor quality) THE ROLE OF CUSTOMER SERVICE IN VALUE CREATION Organisations offering better customer services have a competitive advantage over others. ¥ Can use guidelines to develop a customer-centred culture amongst their employees CUSTOMER SERVICE SYSTEMS Most obvious difference between an org. With a customer-centred culture and others is their ability to design service delivery systems from the customer's point of view. CUSTOMER SERVICE COMANNDMENTS (not for exam purposes) All employees must Ask customers what they Have effective systems Under-promise and The awnser is always have the authority to want and give it to them in place over-deliver YES! handle complaints Encourage customers to Incentives staff communicate when Measure everything that Show respect to all Learn from other according to their service delivery goes influences customer times and be polite successful organisations performance wrong Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 ¥ All about attitude ¥ Treat customers and co-workers with respect ¥ Be hygienic ¥ Success lies in Þnding the right balance between providing the customer with the actual core service from a technical point of view and providing the service in a professional manner THREE CONSIDERATIONS Expectations Perceived about the quality of the characteristics of service delivered the service Perceptions of the actual service delivered INCREASING SATISFACTION Service quality: the ability of an organization to correctly assess customer expectations and to deliver the service at a quality level that will at least equal those expectations. Customer expectations: the pre-service encounter beliefs a customer has about the delivery of a service and are used as the standard against which the actual service performance is judged. Adequate level Zone of tolerance Ideal service (they wish (minimum service level (represnets range of for this, a scenario where Desired service that customer will tolerate service performances that everything works out (wants/hopes to receive) and accept without being customer will consider perfectly) dissatisfied) accetable) Predicted service (customer's actual service expectation) Factors that could inßuence customers' expectations levels: ¥ Personal needs ¥ Self-perceived service roles ¥ Implicit service promises ¥ Word-of-mouth communication ¥ Past experiences Keep these aspects in mind: ¥ Identify what is most important to customer ¥ Never raise expectation levels to unattainable levels ¥ Generate positive word-of-mouth Customer perceptions: customer's experience of the service offering that shapes his decision to repurchase from the same organisation. Perception: The process, by which an individual selects, organizes and interprets stimuli into a meaningful and coherent picture of the world Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 TECHNICAL QUALITY Whether or nor the core service was performed as expected FUNCTIONAL QUALITY How well the customer thinks the service was performed. (inßuenced by personal interaction) CORPORATE IMAGE Surroundings in which the service takes place and the overall image conveyed by service providers THE CUSTOMER SATISFACTION PROCESS ¥ Created by means of a combination of responses to the customer's views and needs, continuous improvement of the organization's offerings, as well as the overall customer relationship ¥ Depends on the ability of an org to implicitly deliver on those expectations by means of a service delivery process that has been designed to address customer needs. CUSTOMER EXPECTATIONS Future Expectations ÔObjectiveÕ Quality CUSTOMER ConÞrmation Satisfaction PERCETTIONS UNDERSTANDING CUSTOMER DISSATISFACTION ¥ Only 1 out of 26 unhappy customers complain, the other 25 will simply take their business elsewhere (switching behaviour) ¥ 1 unhappy customer tends to tell between 10 and 11 other customers/potential customers about their bad experience (negative word-of-mouth behaviour) ¥ Use the above to calculate the cost of dissatisfaction UNDERSTANDING CUSTOMER SATISFACTION Three future behaviours will occur if a customer is satisÞed: ¥ Repeat purchases as long as positive experience continues ¥ Loyalty towards the organisation ¥ Positive word-of-mouth communication Superior service quality more favourable behavioural intentions Inferior service quality unfavourable behavioural intentions CUSTOMER LOYALTY Loyalty: A commitment to repurchase from the same supplier (or use the service) in the future, and the likelihood to purchase an organisation's products or services at various price. BeneÞts of long-term customer relationships: ¥ Pay premium prices ¥ Try out new services from the org. ¥ Serve themselves and gives referrals Customers can be divided into four groups: Hard-core loyal: Split loyal: Customers buying the same brand all the time Customers who buy two or three brands Shifting loyal: Switchers: Customers who frequently shift from one brand to another Customers who show no loyalty to a brand RELATIONSHIP MARKETING Based on two premises: ¥ It costs more to recruit a new customer than to retain an existing customer. ¥ The longer the relationship between the organisation and a customer lasts, the more proÞtable that relationship becomes for both parties. LOYALTY PROGRAMMES ¥ Rewarding customers and they may be more likely to continue purchasing from the organisation in the future. ¥ Ideal mechanisms to obtain purchase info so that the org. Can tailor their products and services to customer needs. Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 Mechanisms used by loyalty programmes to reward customers: Discount or cash backs: Rewards currency programme: Monetary rewards. (Pick & Pay) Not a reward, but a means to a reward (ebucks) Soft beneÞts: Hybrid rewards: Additional services or exclusive privileges (VIP invites) Offering a combination of all 3 above. (Clicks Clubcard) Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 Chapter 3: Service Marketing Research Technology has had a signiÞcant impact on how modern service organisations are being managed, mainly because of the volume and speed at which information has become available to service organisations. The use of technology can enable the organisation to better understand their customers and to enhance the quality of its service delivery. Neuromarketing uses the tools of neuroscience to determine why consumers prefer certain products or services over others through the measurement of consumers' sensory, cognitive, and affective responses to marketing stimuli. OLD BUSINESS WAY NEW BUSINESS WAY ¥ Organising operations according to the product/ service units sold ¥ Organising operations according to customer segments served ¥ Focusing on proÞtable transactions ¥ Focusing on customer lifetime value ¥ Focusing on Þnancial information only ¥ Focusing on Þnancial and marketing information ¥ Focusing on customer acquisition ¥ Focusing on customer acquisition and retention ¥ Building brands through advertising ¥ Building brands through performance ¥ Marketing people are responsible for marketing ¥ Everyone and all business units are responsible for marketing ¥ Marketers create marketing activities ¥ Marketers and customers co-create marketing activities ¥ Hardly any customer satisfaction measurement ¥ In-depth measurement of customer satisfaction ¥ Over-promise and under-deliver ¥ Under-promise and over-deliver ¥ Theory-driven scientiÞc research ¥ Data-driven scientiÞc research Marketing research is the process followed to collect information about the market to aid managerial decision-making. Marketing research is used to: ¥ Identify and deÞne marketing opportunities and problems ¥ Generate, reÞne, and evaluate marketing actions or ideas ¥ Monitor marketing performance ¥ Enhance the quality of marketing decision-making CRITERIA USED TO ASSESS THE QUALITY OR VALUE OF THE INFORMATION The ACCURACY of the information in terms of its ability to reßect the realities of the situation. (realistic) The TIMELINESS of the information in terms of whether or not the information is available when needed. (Right time) The ADEQUACY of the information in terms of whether the information is sufÞcient to assist management in making better decisions. (enough) The AVAILABILITY of the information at the point when and where it is needed. (access) The RELEVANCE of the information in terms of its suitability with regards to the decisions that must be taken. (suitable) Marketing research programs should be: ¥ Varied - a combination of qualitative and quantitative research techniques should be used ¥ Ongoing - due to the constantly changing nature of customer needs, expectations, and perceptions, service organisations need to measure these changes to be able to respond in a timely manner ¥ Undertaken with staff - staff are in direct contact with customers and may have insight into problems and situations that may not be apparent to mangers ¥ Driven by a research committee - involving employees in the research process may incentivise them to implement the changes that the research results call for ¥ Shared with employees - research results should be communicated with employees so that they understand what the customers expect of them and what has been identiÞed as possible problem areas RESEARCH USES IN SERVICE MARKETING 1 Research is used to capture customer data that can later be used to improve the organisation's service delivery performance from a customer's perspective. 2 Research is used to solicit feedback from customers and employees. The constant interaction between the customer and the provider must be evaluated to assess the degree of customer satisfaction. Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 RESEARCH FOCUS AREAS 1. CUSTOMER RESEARCH The purpose of customer research is to tailor the service offering to customer needs. Customer research options: (1) Researching customer needs - marketers Þnd information on consumer needs extremely valuable when planning new service offerings. (2) Researching customer expectations - understanding and knowing what customers expect is the Þrst step in actually meeting and exceeding those expectations. (3) Customer perception studies - this can be conducted during or after the service delivery process and attempt to measure the level of customer satisfaction (4) Customer surveys - customers tend to feel more involved in the design of the service offering when they are given the opportunity to make a contribution and express their opinions and share their customer-related experiences. (5) Key customer studies - certain customers are of particular importance to an organisation, so it is worthwhile to ensure that they are satisÞed with the service being offered. (6) Customer/ consumer panels - consist of individual customers who have agreed to regularly participate in a speciÞc organisation's research projects. (7) Observational monitoring of service delivery - measures the technical aspects of the service delivery process. (8) Mystery shoppers - investigators pose as customers to evaluate the performance of unsuspecting employees in the service encounter. (9) Analysis of complaints - complaints should be seen as a source of primary information and if used correctly can assist management and employees in preventing a repeat of these unfortunate incidents (10) Research among potential customers - can help uncover inhibitors or barriers and help identify ways of making the service more accessible 2. EMPLOYEE RESEARCH Employee research links closely with internal marketing programmes. The importance of employees in service organisations cannot be overestimated, as the interaction between the employee and the customer largely inßuences the ultimate success of the service delivery process 3. ORGANISATION RESEARCH Organisational research options: (1) Similar industry studies/ benchmarking - comparing and identifying best practices and widening their opportunities by studying related and even unrelated industries. (2) Researching service intermediaries - intermediaries are in direct contact with the end customer and provide insight into customer needs and wants. (3) Social media monitoring (SMM) - is a platform for 'listening' to social media users. The primary function of SMM is to track the number of times your brand, product or service has been mentioned, to track observations about competitors and monitor competitor actions, and to identify trends in what consumers are discussing. Proper management and measurement of social media activity allows marketers to be more pro-active, identify opportunities, enables them to leverage success, and deal appropriately and timely with potential threats. E.g. Socialmention.com - a tool that indicates different social media scores of the brand a) Strength - likelihood that the brand is being discussed on social media b) Sentiment - ratio of positive vs negative comments about the brand c) The reach of the brand - quantiÞes the number of people referencing the brand dividend by the total number of times the brand was mentioned d) Passion - likelihood that the people mentioning the brand will do so repeatedly E.g. Howsociable.com - a tool that provides a magnitude score for a brand, which indicates the degree of brand visibility. This score is useful in that brand managers can see which social media platform is used most often by consumers for the discussion of the brand at a given time and marketers are able to join the conversation about their brands or respond quickly to comments if necessary. E.g. Google analytics - a tool used to measure trafÞc to a company website or blog. SERVQUAL is an instrument used to evaluate and measure service quality perceptions of service customers. SERVQUAL offers organisations a fairly simple way of focusing their employees' attention on whatever is important to the customer. This focus on what is important to customers should improve the competitiveness of the service organisation and improve its ability to retain its customers. Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 SERVQUALÕS DIMENSIONS OF SERVICE QUALITY DIMENSIONS DEFINITION QUESTIONS THAT CUSTOMERS MAY RAISE Tangibility Appearance of physical facilities, equipment, ¥ Does the organisation offer tangible evidence of the quality of the personnel, and communication material service provided? ¥ Does the organisation make use of modern equipment? ¥ Are the organisationÕs facilities, personnel, and communication materials attractive to the customer? Reliability The ability to deliver the promised service ¥ How dependable is the organisation? (most important service dependably and accurately ¥ Does the organisation preform its services right the Þrst time? quality) ¥ Does the organisation deliver on time? ¥ Does the organisation maintain accurate records pertaining to its transactions with customers? Responsiveness Willingness to help customers and provide prompt ¥ How responsive is the organisation to customerÕs service requests? service ¥ Does the organisation inform the customer exactly when the service will be performed? ¥ How willing are employees to assist customers? Assurance Knowledge and politeness of employees and their ¥ Does the organisation instil a feeling of conÞdence and security in ability to convey trust and conÞdence customers? ¥ Are the organisationÕs employees courteous, and are they knowledgeable as to the organisationÕs offerings and possible problems? Empathy Caring, individualised attention provided by the ¥ Can the organisation be regarded as sensitive towards the unique organisation to its customers needs of its customers? ¥ Does the organisation service its customerÕs best interests? SERVQUAL MEASURMENT MODEL TANGIBLES 1. The technical equipment is completely up to date 2. The physical facilities are visually appealing 3. The employees are well dressed and appear neat 4. Tools and instruments used to provide the service are attractive RELIABILITY 5. Promises to perform the service within a certain time are always kept 6. Complaints and problems are solved with great concern and sympathy 7. The service is delivered correctly the Þrst-time round 8. The service is delivered at the time agreed upon 9. Record keeping such as orders and accounts are accurate RESPONSIVENESS 10. One cannot expect employees to inform customers as to the exact time of delivery 11. It is not realistic to expect prompt service from the employees 12. Employees are not always willing to help customers 13. It is acceptable that employees are too busy to help customers immediately ASSURANCE 14. The employees can be trusted 15. Feeling safe in transactions with the employees 16. Friendly and courteous employees 17. Employees have the knowledge to answer the customer's questions EMPATHY 18. Employees pay attention to each customer individually 19. Employees pay personal attention to each customer 20. Employees understand the speciÞc needs of the customer 21. Employees have the customer's best interests at heart 22. The organisation has convenient shopping hours The Þrst part of the SERVQUAL questionnaire focusses on the level of service the customer will expect from an ideal service organisation within a speciÞc industry (expectations). The second part of the SERVQUAL questionnaire focusses on the customer's evaluation of the actual service performed by the organisation under evaluation (perceptions) FORMULA ¥ expectations > perception = poor perceived service quality leading to customer dissatisfaction ¥expectations < perception = excellent perceived service quality leading to customer satisfaction and delight ¥expectations = perception = good perceived service quality leading to technical satistaction Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 The SERVQUAL method of measuring service quality is also called 'gaps model' of perceived service quality. To improve the organisation's performance, management can either attempt to improve performance on particular dimension, or they can actually lower the customer's expectation level on this dimension. The organisation should, however, keep in mind that too low customer expectations may be a risky option as it may convince the customer to rather make use of a competitor's services. CRITICISM AGAINST THE SERVQUAL INSTRUMENT ¥ The length of the questionnaire - answering 22 statements can be quite tiring and frustrating to the respondent ¥ The validity of the service quality dimensions - there are many service quality dimensions that are not captured by the SERVQUAL instrument ¥ The predictive power of SERVQUAL - some researchers believe that one only needs to consider the perceptions evaluations of customers and ignore the expectations part Sacsi (South African Customer Satisfaction Index) enables us to measure customer satisfaction of South African consumers by ranking South African household- consumers' satisfaction with products and services provided by South African companies with those of other countries that use the same methodology. The national customer satisfaction score is calculated using the ACSI (American Customer Satisfaction Index) methodology. DRIVERS OF CUSTOMER SATISFACTION CUSTOMER Customer expectations can be deÞned as the pre-service encounter beliefs a customer has about the delivery of a service and are EXPECTATIONS used as the standard or reference against which the actual service performance is judged. Expectations represent both prior consumption experience and some non-experiential information like advertising, word-of-mouth, and the expectation that an organisation will make mistakes in the future PERCEIVED VALUE Perceived value is a measure of quality relative to price paid. Value can be deÞned as the difference between the customer's perception of beneÞts received from purchasing and consuming the service, and the customer's perception of the costs incurred in exchange for the service. PERCEIVED QUALITY Perceived quality is determined by measuring the customer's evaluation of a recent consumption experience of the quality of an organisation's products or services. Quality is measured in terms of both customisation and reliability. Customisation is the degree to which a product or service meets the customer's individual needs. Reliability is the frequency with which things go wrong with the product or service OUTCOMES OF CUSTOMER SATISFACTION CUSTOMER Customer complaints are the percentage of respondents who indicate they have complained to an organisation directly about a COMPLAINTS product or service within a speciÞed time frame CUSTOMER Customer loyalty is a combination of the customer's commitment to repurchase from the same supplier or use the service in the future, LOYALTY and the likelihood to purchase an organisation's products or services at various price points. Customer Relationship Management (CRM) can be deÞned as the process behind the identiÞcation and selection of target customers by utilising information technologies to better deliver and extract customer value. The purpose of a CSM programme is to collect information about customers and use the information in innovative ways to best serve the needs of those customers. BENEFITS OF CRM TECHNOLOGIES ¥ Improved proÞts owing to the better utilisation of resources based on real-time market information ¥ Reduced costs owing to decreases in wastage based on better targeted strategies ¥ Access to new customers based on the continuous collection of information and insights on current customers ¥ Development of new business ideas and strategies based on inefÞciencies uncovered in systems or based on new market information that may reveal new business opportunities ¥ Improved customer satisfaction and retention by having a better understanding of individual customer needs and tailoring the customer experience to a larger extent than was possible in the past ¥ Improved employee satisfaction and retention owing to a closer link to employees and better support systems helping employees to realise their own goals as well as those o the organisation Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 TYPES OF CRM TECHNOLOGIES ANALYTICAL CRM Analytical CRM involves collecting information and analysing it to understand all aspects regarding the past, current, and future customer. TOOLS ¥ Data mining and analysis - are a series of tools developed to extract, categorise, link, and analyse information from a broad spectrum of data sources ¥ Data warehousing - enables organisations to not only do data mining, but also to store this information in a 'warehouse' where users can easily access and retrieve the information in a format that is easy to use ¥ Performance measurement systems - enable an organisation to deÞne expected levels of performance and then notify the appropriate parties should performance falls below the speciÞed level ¥ Customer intelligence systems/ expert systems - monitor a broad spectrum of customer information ¥ Competitor intelligence tools - enable the user to collect, analyse, and monitor the competitive horizon. STRATEGIC CRM Strategic CRM is the process of identifying new business opportunities, possible risks, and ways of increasing proÞts, reduce costs, or improve customer satisfaction TOOLS ¥ Modelling and simulation - are expect systems which enable organisations to virtually stimulate real-world situations ¥ Decision support systems - are systems dedicated to enable users to play out 'what if' scenarios when formulating strategies ¥ Customer proÞtability systems - help organisations decide which customers to target and which to retain OPERATIONAL CRM Operational CRM covers a broad spectrum of technologies to secure the company's competitive edge by providing the customer with a differentiated experience. TOOLS ¥ Help-desk systems - are knowledge bases where the contact person can easily Þnd the required information to assist a customer either directly, telephonically, or electronically ¥ Call centres - can be seem as elaborate helpdesks which will not only provide assistance, but also enable customers to place orders, inquire about their account status, or decide for service delivery ¥ Caller identiÞcation technology - a tool that recognises the telephone number from which a customer has dialled and links that number to the customer's information in the database ¥ System integration technologies - enable the organisation to integrate business systems for purposes of validation and seamless information provision ¥ Web casting - is a technology through which millions of customers can be cost-effectively reached to ensure continuous contact and relationship- building ¥ Short messaging services (SMS) - via cellular phone networks can be used to provide customers with information ¥ Mobi-sites - are web sites designed for the small screens of mobile phones Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 Chapter 4: Product THE NATURE OF THE SERVICE PRODUCT: A product can be deÞned as anything that can be offered to a market for attention. Acquisition. Use or consumption and that may satisfy a want or need. It includes physical objects, services, persons. Places, organisations, and ideas. A service product usually forms the heart of the organizations effort to satisfy the needs of its customers - although most of them are usually a combination of both products and services. Service products speciÞcally are bought and used for beneÞts offered and the total satisfaction provided. Besides the beneÞts consumers expect from a service, they also expect a certain service level. SERVICE PRODUCT LEVELS: THE DIFFERENT SERVICE PRODUCT LEVELS ARE INTEGRATED TO FORM ONE TOTAL SERVICE PRODUCT. CORE SERVICE Related to the basic (core) beneÞt the customer expects from the speciÞc service. The core Service is thus the basic service product and is the essential function of a service. The core Service should always be developed with the customers basic needs in mind EXPECTED Consists of the core service altogether with the minimum expectation that needs to be met SERVICE: And involves a combination of tangible and intangible elements DESIRED The expected service plus the additional services and beneÞts. It is the nice to have and it includes elements that the service organisation can SERVICE use to distinguish itself from competitors SEGMENTATION AND TARGETING Market segments are groups of buyers who share common characteristics within the segment but difter between the segments. This approach attempts to bridge the gap between diverse customer needs and limited organisational resources. By encouraging distinct service offerings to be developed to suit the requirements of different customer segments Segmentation can lead to more satisÞed customers because it offers certain beneÞts such as ¥ Deeper understanding of customer needs ¥ Effective resource allocation ¥ Clearer identiÞcation of market opportunities ¥ Products created and priced for the target audience ¥ Easier choice of distribution and communication channels ¥ Better-positioned marketing programmes Once the marketer has segmented the total market. A target segment can be selected. A target market consists of customers who will be satisÞed by the service offering and will be proÞtable to the organization. It is important for all service organizations to consider the following criteria before making a Þnal target market decision. ¥ Sales- and proÞt potential ¥ Growth potential ¥ Organisation's ability to service the segment ¥ Organisation's ability to compete with other organisations' offerings in the same segment Once service organizations have identiÞed their target segments, they should determine how they would prefer customers to perceive their organization and its service products, know as positioning. Positioning is of particular signiÞcance in services sector as it places an intangible service within a more tangible frame of reference. SERVICE POSITIONING Positioning is an activity concerned with the identiÞcation, development, and communication of a differentiated advantage. Which gives the perception of the organisation's products and services as superior to and distinct from those of its competitors in the mind of its target IMPORTANCE OF POSTIONING: Competition is intensifying in the service sector and as a result it is becoming more important for service organizations to differentiate their service products in meaning ways BeneÞts of positioning ¥ Provides an organization target segment with a reason for buying their services ¥ It makes it easier for all customers to see why an organization position by identifying where it wants to be and by specifying what actions are needed to attain such position ¥ It identities market opportunities not addressed by competitors ¥ A clearly deÞned positioning strategy can make market penetration possible ¥ Offers guidelines for the development of a marketing mix, structuring each element of the mix to be consistent with the positioning strategy) Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 Positioning criteria: ¥ It should be meaningful and desirable to the target segment ¥ It must be believable and not make unattainable claims ¥ It must be uniquely differentiated from the competitions ¥ It must be uniquely differentiated from the competition, in a way that is important to customers ¥ It must be sustainable and proÞtable over the long term SERVICE PRODUCT STRATEGIES Most organizations offer not only one service but rather a mix of services know as the service product mix. To understand the nature of the service product mix, the following terms must be clariÞed: ¥ Service item: the individual service item offered to customers ¥ Service line: a group of related service items ¥ Service mix: All of the above and is the combination of service lines service depth: The number different service items in a service line ¥ Service width: The number of service lines in a service mix Sometimes an organization needs to widen or contract the service mix to remain competitive. These decisions are made continuously to provide more effective and efÞcient services. The service life cycle is a strategic tool to indicate changing patterns of services within the organizations service product mix. SERVICE LIFE CYCLE: Services have life cycles that graphically depict the changing patterns of demand for services within the organizations service product mix. The Lifecyle denotes the sales of a service during the lifetime of that service. It further indicates now these sales ßuctuate according to some pattern during the services life. INTRODUCTION During this initial phase of development, sales tend to be slow, and proÞts are either limited or non-existent. This is because the PHASE introduction of new services is costly, especially in terms of the promotional costs involved in raising awareness about the new service. The intangible Nature of a service may cause customer resistance due to the creation of a primary demand for the service. The organization should focus on attracting customers who are prepared to take risks (the innovators). With low initial prices and special offers. GROWTH PHASE During this phase more, customers follow the lead of innovators and sales start increasing rapidly. This sales growth is then seen as an opportunity by others, and it encourages competitors to enter the market. ProÞt margins start to increase as problems are resolved, increasing the production of a service, which in turn leads to reduced unit costs. Promotional expenditures are also spread over larger sales volumes which lower unit costs even further. MATURITY PHASE Most customers at this phase have used the service, and sales growth starts to slow down. ProÞts decline mainly due to increased competition and lower levels of net income due to expenditure such as sales promotion incentives. Owing to the large numbers of Competitors in the market during this phase severely restricts further sales growth. Some organizations stretch the lifecycle by entering new market segments, increased consumption rates due to effective marketing and service innovations DECLINE PHASE Some competitors drop out of the market due to a declining demand, accompanied by technologically advanced substitute services. Declining sales lead to reduced proÞt margins and price cutting becomes the norm. Too many competitors Þght for the remaining market while marginal competitors continue to drop out of the market. Some organizations modify the service to initiate a new life cycle. NEW SERVICE PRODUCT DEVELOPMENT: Includes: ¥ Major service innovation: a new core service product with new service characteristics and processes for the markets that have not been previously targeted ¥ Major process innovation: This change consists of delivering existing core service products in new was and with new processes ¥ Product line extensions: this 1s when an existing organization adds a new service product to its current product service product line. This is to offer a wider variety of services ¥ Process line extensions: Represent a new way to deliver existing service products. The objective can be to offer customers greater convenience, a different experience or to attract new customers ¥ Supplementary service innovations: new facilitating or enhancing service elements are added to existing core services. This innovation can also be when existing supplementary services are signiÞcantly improved ¥ Service improvements: this is the most common type of innovation and often takes the form of modest changes in the performance of current products. This can include improvement to the core service product or the supplementary service. ¥ Style changes: These changes represent the most basic types of innovation and typically involve no changes in either processes or performance. However. The changes are very often visible, create excitement and may serve to motivate employees SERVICE ELIMNATION: When a particular service product is no longer proÞtable, the service should be eliminated. The following can be signs of a service in need of elimination: ¥ Irregular demand for the service and decreased proÞtability ¥ A disproportionate amount or management time spent or the service ¥ When frequent price adjustments are needed Downloaded by Wayne Redmond ([email protected])  lOMoARcPSD|42165161 Options to eliminate a service: ¥ Immediate eliminator ¥ Price increase ¥ Reduce promotion ¥ Inform customers ¥ Reassign resources ¥ Legal implications SERVICE PRODUCT/MARKET STRATEGIES MARKET The purpose of this strategy is to increase sales from existing customer segments with their existing services. This penetration can be PENETRATION: achieved by an increased consumption rate amongst existing customers. An increased consumption late is often made possible by encouraging customers to use available services more frequently. MARKET A service organization can extend its market attracting new types of customers for its current services. The market has thus widened to EXTENSION: include other customers together with current customers. This strategy may require in-depth market research to ensure that the needs of new customers are understood and meet completely SERVICE The organization develops new or modiÞed service products for the current market. This strategy is risky as the organization dealing with DEVELOPMENT: a new service product may lack the capabilities or resources to produce this new service product DIVERSIFICATION: With this strategy new markets are catered for by offering new service products. This strategy holds the greatest risk since the new organization becomes involved with new services and new markets simultaneously and there may be no existing resources available to execute such a strategy. The strategy is most typically adopted within a mature service industry where growth cannot be realised in any other way BRANDING STRATEGIES: Choosing a speciÞc brand is a strategic matter. The purpose of branding is to identify services as belonging to a particular organization. DIFFERENT APPROACHES ARE AVAILABLE TO VALUE A BRAND: ¥ Market comparative approach is used when the value estimate is based on prices from market transactions involving the sale of similar or comparable assets ¥ A cost approach is used when the value estimate is based on reproduction/replacement cost of the brand - adjusted for depreciation and obsolescence ¥ An economic income approach is used when anticipated economic beneÞts are converted into a present single amount FUNCTIONS OF BRANDING COMMUNICATION Brands have a communication function for the service provider FUNCTION REDUCTION FUNCTION Customers often prefer well-known brands to reduce search costs and to reduce the risk of buying an ineffective service. Brands are frequently used by organizations to provide evidence of consistent service standards. FACILITATION FUNCTION Service providers also use branding to facilitate new service introductions, promotions. Segmentation and premium pricing. Familiarity with a well-Known brand name diminishes the risk customers may associate with services and makes it easier for the organization to introduce new services DIFFERENTIATION Branding can differentiate a speciÞc service from other similar services. Branding can thus assist the organization in avoiding FUNCTION price competition and even enable them to charge premium prices in particular market segments EXPRESSIVE OR SOCIAL- When a customer makes use of a speciÞc brand, he or she expresses a particular lifestyle or status. Customers of a particular ADAPTIVE FUNCTION brand often imitate a particular lifestyle or want to identify themselves with a particular subgroup in society SECURITY FUNCTION Due to the risk associated with buying services, emotional factors can play a decisive role in consumer buying decisions. Familiar brand names provide trust and security concerning the quality of the service to the customer. It further conveys reliability and consistency, which contribute to the perceived beneÞts ASSOCIATIVE FUNCTION: The combination of various signals and symbols attached to the brand, results in associations customerÕs mind. Brand associations can de com positive ana negative Downloaded by Wayne Redmond ([email protected])