BEM Semester Test 1 PDF

BEM semester test 1 Chapter 1 Service Marketing in Perspective Consumers will exchange money for services if they believe it represents value for their money. If not, they will take their business to competing organisations 1.1 Ser...

BEM semester test 1 Chapter 1 Service Marketing in Perspective Consumers will exchange money for services if they believe it represents value for their money. If not, they will take their business to competing organisations 1.1 Service marketing as an exchange process Market exchange process: complex process where an organisation identifies expectations of target market and comes up with innovative ways to satisfy the important needs of their customers Constrained to organisations limited resources Changing developments and trends in the larger market environment Rising petrol prices, higher interest rates, lower disposable income, more demand Environmental scanning Micro-environment: organisations mission and vision statements, its abilities, its objectives. Market-environment: organisations customers, competitors, suppliers and intermediaries Macro-environment: shifts in economic, political, legal, social, natural, technological and international environments SWOT Analysis S- Strengths W- Weaknesses O- Opportunities T- Threats Service marketing mix (seven Ps of service marketing) Product: technical outcome of service, can be tangible/intangible Physical evidence: tangible evidence of service People: people form integral part of service delivery, staff act as marketers, customers make up the other half of the people decisions of service delivery. Process: experience of the customer which takes place in real time. How service is provided. Place: distribution decision/strategy Pricing: cover costs, generate profits, strategic and tactical decisions, discount structure, terms of payment Promotion: marketing communications strategy. Communicate benefits of service using appropriate types of communication channels and media Two levels offered 1) Core service/technical service (what do we do?) - depends on technical skills, experience and know how 2) Service delivery (How do we deliver the service?) - depends on nature of human interaction The six E’s of successful service marketing 1) Expectations: align service delivery to what is communicated and promised to customer 2) Education: Educate customers on what their role is 3) Experience: Experiences can emotional, intellectual, behavioural, relational, and sensory 4) Ease of doing business: Minimised customer effort 5) Equilibrium: Balance between supply and demand 6) Exception management:  Identifying service failures and complaints, resolving complaints and fixing root causes of failures Service: act or performance that one party can offer to another that is essentially intangible and does not result in ownership of anything. Deeds, acts and performances provided to customers Can only be experienced, used and consumed Degrees of tangibility: Pure tangible goods: salt, toothpaste, deodorant. Tangible goods with accompanying services: car sold with maintenance plan Hybrid service offers: meal at News café (enjoy food as well as service) Core service with accompanying minor goods and services: airline- core: transport, tangibles: meals, intangibles: luggage service Pure services: medical, accounting and legal services Classification of services: Classification level 1: Means of delivery Equipment-based services: can be divided into automated services and services provided by either unskilled or skilled providers. People-based services: can be performed by unskilled, skilled and professional staff Classification level 2: Degree of dependence on customer presence Medical surgery requires customer presence Car repaired at dealership Classification level 3: Personal versus business use Do they meet personal or business needs? Can be both Distinguishing features of services: Intangibility- impossible to taste, see, feel or hear. (tangible clues)  - inability to store service - cannot be patented - complicates communication process (creative insurance ads) - no physical goods to determine costs from - stressing tangible cues - personal sources of information by stimulating positive word of mouth - encouraging employees to communicate with customers - creating a strong corporate image Inseparability – services are often produced, delivered and consumed all at once - Provider- customer interaction - Customer involved in entire service production process - Banking activities inseparable (customer and employee need to be present) - Service provider become part of tangible cues that influence customer evaluation - Customer presence must be accommodated - Difficulty of managing interactions between customers - Challenge surrounding mass production - Effective selection and training of contact staff - Effective customer management (non-smoking vs smoking areas) - Investigation of mass production - Support for frontline staff Heterogeneity – difficult/impossible to standardise service delivery - Hard to achieve service standardisation - Hard to achieve quality control - Service delivery relies completely on employee and customer - Customisation adapts to customer’s individual needs and instructions (dentist) - Standardisation by training staff to deliver service in consistent, tightly prescribed manner - Standardising service delivery processes and procedures Perishability – inventory-holding like tangible goods is near impossible - Eg. 35 empty seats on airline represent revenue loss that can never be recovered - Higher demand than supply  - Lower demand than available supply - Supply and demand at optimum level (rarely balance) - Differential pricing (peak – off-peak pricing) - Non-peak demand can be cultivated (special promotions during lower demand) Demand - Complementary services (ATM decrease customer reliance on human service providers) - Part-time employees can be employed during peak times - Peak time efficiency routines can be introduced (breakfast times) Supply - Increased customer participation in service delivery (wakaberry, self-serve) - Shared service (sharing medical equipment among practices) - Facilities for future expansion can be developed (buying surrounding land) Chapter 2 Value: From customer service to satisfaction and loyalty 2.1 Elements in customer satisfaction and loyalty Benefits of providing better service - Improved service levels (differentiation) = competitive edge - Increased market share (entice customer to move over/switch)  - Improved value proposition (superior customer service) - Financial impact (improved financial performance) - Gain marketing benefits (awards or quality accreditation) 2.2 Increasing value Difference between perception of Customers perception of benefits benefits of exchange VALUE= and the perception of the costs of the Customers perception of costs exchange Marketers try maximise value offered to customers Customers will buy service when: - Benefits of exchange > costs of exchange - Service offers superior value compared to alternatives on market Market is competitive and only those organisations offering superior value will attract business Customer satisfaction and creation of value should be high on the priority list! 1 2.2.1 Value levels 1) value customer derives from the service itself (Technical component) 2) value customer derives from quality of supporting service act (Functional component) [Value = Service itself + The customer service act > Customer expectations] Evaluation qualities Search qualities: evaluation prior to purchasing (colour, fit, feel, smell, price) Experience qualities: evaluation only during and after consumption process (catering services, entertainment, cosmetic surgery, gardening services and delivery services) Credence qualities: difficult to evaluate even after consumption (education, legal services) 2.2.2 The role of customer service in value creation Customers cannot always perceive or understand actual difference between offerings of competitors However, they do understand how an organisations employee makes them feel while delivering the service Often the core service is not the primary reason a customer remains loyal to a particular service provider rather it’s the enjoyment of the interaction with the service provider Ask yourself how much the actual interaction influences your purchasing decision? Customers more likely to go to places they feel welcome at Excellent customer service does not have specific structure or process 2.2.2.1 Customer service systems Difference between organisations = ability to design service delivery systems from the customer’s point of view Imagine if service provider asked what, how and when you like your service to be delivered Alaska airlines, Horizon air, Wakaberry, Imperial car rental. Designed to generate satisfaction and create loyalty 2.2.2.2 Customer service commandments The ten service commandments are all about attitude Employees should learn to view their customers as the most important element of their job and should realise their co-workers are internal customer that need to be treated with the same respect as external customers Management must “walk the talk” The presence of good, professional customer service only enhances the customer’s service experience, but does not replace technical performance Success lies in finding the right balance between providing the customer with the actual core service from a technical point of view BUT delivered in a caring and professional way Three considerations of assessment:  Perceived quality of the service delivery Expectations about the characteristics of the service Perceptions of the actual service delivered Expectation: the anticipatory beliefs about the delivery experience of a good or service Perception: the interpretation of the actual service experience 2.2.3 Increasing satisfaction Service quality: ability of organisation to correctly assess customer expectations and to deliver that service at a quality level that will at least equal those expectations Process of satisfaction lies in realm of service quality Organisation needs to understand customers’ expectations and perceptions 2.3.1 Customer expectations Judged Customer expectations: Pre-service encounter beliefs vs actual service performance Five levels of expectation Ideal service: level customers wish for (perfect) Desired service: level customer hopes or wants (realistic) Zone of tolerance: range of service performances (acceptable) Adequate service: level customers will tolerate (minimum) Predicted service: actual service expectation 2.3.2 Customer perceptions Perception: process by which an individual selects, organises and interprets stimuli into a meaningful and coherent picture of the world Purely subjective May fluctuate over time Three quality components: Technical (whether or not core service was performed as expected) Functional (how well service was performed, personal interaction between service provider and customers) Corporate image (surroundings in which service takes place and overall image conveyed) 2.4 The customer satisfaction process Customer satisfaction is created by means of a combination of responses to the customer’s views and needs, continuous improvement of the organisations offerings as well as overall customer relationship Customers mostly rely on how they feel when doing business with a given organisation 2.4.1 Understanding customer dissatisfaction Will be determined by who was responsible for failure or poor service Explained by attribution theory: - Does this type of service failure occur regularly? - Was I (customer) to blame for the failure of someone else? - Was this service failure within the control of the service provider? If customer thinks the delay was caused by factors beyond the control of the organisation the dissatisfaction level will not be severe BUT If customer thinks the delay was caused by factors in the organisations control the dissatisfaction level will be severe Controllable and uncontrollable factors Recovery policy of organisation (compensation) 1 out of 26 unhappy customers complain, the other 25 will simply take their business elsewhere 1 unhappy customer tends to ell 10-11 other customers about their bad experience Statistics can be used to calculate cost of dissatisfaction 2.4.2 Understanding customer satisfaction Three future behaviours: Repeat purchases from same organisation as long as positive experience continues Loyalty to organisation Positive word-of-mouth communication 2.5 Customer loyalty The satisfaction that stems from delivering the right levels of service quality on the right aspects to value-seeking customers and sets the scene for long-term customer relationship. Benefits include loyal customers willing to: Pay premium prices Try out new services Serve themselves and do not expect to be pampered Give referrals Suggest service improvements Loyalty: commitment to repurchase from the same supplier in the future and the likelihood of purchasing the organisations products at various prices (price tolerance). 4 Customer loyalty groups: Hard-core (buy one brand all the time) Split (buy two or three brands) Shifting (shift from one brand to another) (price) Switchers (no loyalty to any brand) 2.5.1 Relationship marketing Two premises: It costs more to recruit a new customer than to retain an existing one Longer relationship between customer and organisation = more profitable relationship becomes for both parties 2.5.1.1 Loyalty Programmes Reward customers for dealing with the organisation and they will be more likely to re-purchase from the same organisation in the future. Focused on understanding consumers behaviour Mechanisms to reward members: Discounts or cashbacks (monetary reward) (Pick n Pay smart shopper) Rewards currency programme (means to reward) (e-bucks) Soft benefits (additional services/exclusive privileges) (VIP invites) Hybrid rewards (combination of all three/multiple benefits) (Clubcard benefits)  Chapter 3 Service marketing research This chapter will explore marketing research as a means to collect relevant information to enhance the quality of marketing decision-making. Changing from the old business way to the new business way Overview of research and technology 3.1 Marketing research Primary distinction between service and product-oriented research = intangibility of services  It is the impact of the intangibility of services that magnifies the importance of marketing research in successful service marketing Marketing research: process followed to collect information about the market to aid managerial decision-making and is used to: Identify and define marketing opportunities and problems Generate, refine and evaluate marketing actions or ideas Monitor marketing performance Enhance quality of decision-making Specifies the info required to address these issues Designs method for collecting information Manages and implements data collection process Analyses the results Communicates findings Communication is preceded by research Criteria to assess the quality or value of the information: 1. Accuracy (reflection of realities of the situation) 2. Timeliness (is info available in time) 3. Adequacy (sufficient to assist decision making) 4. Availability (when and where needed) 5. Relevance (suitability to decisions) Market research programmes should be: ❖ Varied ❖ Ongoing ❖ Undertaken with staff ❖ Driven by research committee ❖ Shared with employees 3.1.1 Two uses of research: 1. Capture customer data that can be later used to improve organisations service delivery performance from a customer’s perspective 2. Solicit feedback from customers and employees 3.1.2 Research focus areas 1. Customer research: tailor the service offering to customer needs Researching customer needs Researching customer expectations Customer perception studies Customer surveys Key customer studies Customer panels Observational monitoring of service delivery Mystery shoppers Analysis of complaints Research among potential customers  2. Employee research: links closely with internal marketing programmes Maximising staff participation Project awareness Clear and regular communication 3. Organisational research Similar industry studies Researching service intermediaries Social media monitoring (SMM)(Socialmention.com, Howsociable.com, google analytics) 3.2 Evaluating and measuring service quality SERVQUAL (gaps model) – an instrument that was fundamental in introducing, measuring and evaluating service quality perceptions of service customers Dimensions of service quality: Tangibility Reliability Responsiveness Assurance Empathy 1. Tangibility: appearance of physical facilities, equipment, personnel, communication material 2. Reliability: ability to deliver the promised service dependably and accurately 3. Responsiveness: willingness to help customers and provide prompt service 4. Assurance: knowledge and courtesy of employees and their ability to convey trust/confidence 5. Empathy: caring, individualised attention provided by the organisation to its customers Two sets of questions: level of service the customer will expect evaluation of the actual service performed Criticism against SERVQUAL instrument: lengthy questionnaires validity of service quality dimensions predictive power (only focus on perceptions evaluation) Formula Expectations > perception = poor perceived service quality leading to customer dissatisfaction Expectations < perception = excellent perceived service quality leading to customer satisfaction Expectations = perception = good perceived service quality leading to technical satisfaction 3.2.3 The SAcsi measurement instrument South African Customer Satisfaction Index Used to measure South African consumers’ customer satisfaction Enables ranking of satisfaction with goods & services nationally & internationally Customer expectations Pre-service encounter beliefs  Used as standard or reference against which actual service is judged Perceived quality Determine customer expectations Deliver the service = expectations Evaluation of recent consumption experience Perceived value Difference between customer perception of benefits and customer perception of costs Measure of quality relative to price paid Customer complaints Percentage of respondents who have complained to an organisation directly about a product service within a specified time frame Customer loyalty Customers commitment to repurchase a product from the same supplier in the future Sets scene for long-term customer relationship 3.3 Technology and CRM Technology enables organisations to “know more and know faster” CRM process behind identification and selection of target customers, utilising information technologies, includes data warehousing to better deliver and extract customer value Benefits of CRM technology Improved profits (utilisation of resources, real-time market information) Reduced costs (better targeted strategies) Access to new customers (continuous collection of info) Development of new business ideas and strategies (new market info) Improved customer satisfaction and retention (tailoring) Improved employee satisfaction and retention (support systems) Referred to as a supportive and enabling technology Types of CRM technologies 1. Analytical 2. Strategic 3. Operational Analytical: information is collected and analysed to understand all aspects regarding the past, current and future customer Study customer buying behaviour, needs and preferences Every data source that might provide relevant information regarding customers and competitors will be utilised  When implementing a CRM approach, the entire organisations activities now become input to better targeting customers Host of operational tools that can assist organisation in daily operations to improve efficiency 5 Practical tools to implement Analytical CRM: Data mining and analysis - Extract - Categorise - Link - Analyse - Broad spectrum of data sources Data warehousing - Store information in warehouse - Easily access - Easily retrieve information - Easily understandable format Performance measurement systems - Define expected levels of performance - Notify appropriate parties if performance falls below specified level - Early warning system Customer intelligence tools - Collect, Analyse, Monitor competitive horizon - Ensures service organisation can respond to changes in competitive environment Strategic: process of identifying new business opportunities, possible risks and ways of increasing profits, reduce costs or improve customer satisfaction Focuses on innovation processes surrounding customer Management of newly-developed strategies and plans Systems supporting strategic CRM is limited 3 tools that help the execution of strategic CRM 1. Modelling and simulation - Virtually simulate real-world situations - What service levels might be accomplished given a certain infrastructure and at different levels of demand 2. Decision support systems  - used to play out ‘what if’ scenarios - change some variables in the service delivery process - examines what impact changes may have on customer and profitability 3. Customer profitability systems - which new customers to target and which to retain - want to target the right profile customer who can be profitably served over the long- term Operational CRM: technologies to secure the company’s competitive edge by providing the customer with differentiated experience 7 tools used in Operational CRM 1. Help-desk systems - Knowledge bases - Telephonically or electronically 2. Call centres - Elaborate help-desks - Provide assistance - Enable customers to place orders - Inquire about account status - Make arrangements 3. Caller identification technology - recognises the telephone number from which a customer has dialled - links number to customer information database - information retrieved and displayed before telephone is answered - used to personalise customer experience 4. System integration technologies - Enables technologies to talk to one another - Purposes of validation and seamless information provision 5. Web casting - Allows millions of customers can be cost-effectively - Ensure continuous contact and relationship-building - E-mail used to send notifications - Customer experience again enhanced by stimulating very personal relationship 6. SMS - Short messaging services  - Via cellular phone networks 7. Mobi-sites - web sites designed for small screens of mobile phones - narrow columns - subset of regular web sites DMA: Direct marketing association - national opt-out database - will not be contacted by organisations that are members of the DMA Chapter 4 Service product 4.1 Nature of service product Service product: core service offered by a service organisation forms heart of organisations effort to satisfy the needs of its customers service products are bought and used for the benefits offered and total satisfaction customers expect certain service level three service product levels  3 Service product levels 3 Desired service de 2 DE Expected service 1 Core service 1) Core service Basic benefit customer expects Essential function of a service Core service developed with customer’s basic needs in mind E.g. Traveller expects a good night’s rest at hotel 2) Expected service core service + minimum expectation + tangible + intangible elements Includes basic attributes and conditions customers normally expect when making use of such a service E.g. comfortable, quiet, clean room with desk, air-conditioner and a TV 3) Desired service Expected service + additional services and benefits Nice-to-haves Element that organisations use to distinguish themselves from competitors E.g. room service or a gymnasium at a hotel 4.2 Segmentation and targeting Service marketers define their markets as all the actual and potential buyers of their particular core service they are offering Market segments: groups of buyers who share common characteristics within the segment but differ between segments Bridges gap between diverse customer needs and limited organisational resources Encourages distinct service offerings Can lead to more satisfied customers Homogeneous: Refers to a group that is uniform or similar in characteristics. In marketing, it means that within a segment, the individuals share similar traits, needs, or behaviours. Heterogeneous: Refers to a group that is diverse or different in characteristics. In marketing, it means that between different segments, the individuals have distinct traits, needs, or behaviours. 4 Factors: Demographic Segmentation: Dividing the market based on variables like age, gender, income, education, and occupation. Psychographic Segmentation: Segmenting the market based on lifestyle, personality traits, values, and interests. Geographic Segmentation: Splitting the market by geographic areas such as country, region, city, or climate. Behavioural Segmentation: Categorizing consumers based on their behaviours, such as purchase habits, brand loyalty, and benefits sought. Benefits: Deeper understanding of customer needs Effective resource allocation Clear identification of market opportunities Products or services created + priced for target audiences Easier choice of distribution Easier communication channels Better positioned marketing programmes Target market: customers who will be satisfied by the service offering and will be profitable to the organisation Criteria for making final target market decisions Segments sales Segments growth potential Organisations ability to service segment Ability to compete with other organisations 4.3 Service positioning Positioning is the process of identifying, developing, and communicating a differentiated advantage to create a customer perception that an organization's products or services are superior and distinct from those of competitors. This involves crafting a unique image or identity in the minds of the target market to stand out in a competitive landscape. Benefits: Provides target segment with a reason for buying service Makes it easier why services are different from others Marketing tool Identifies marketing opportunities Makes marketing penetration possible Guidelines for marketing mix Positioning criteria: Should be meaningful and desirable to target segment Must be believable and attainable Must be uniquely differentiated from competitors Must be sustainable and profitable over long term 4.4 Service product strategies Service marketing mix strategy: Service item: individual service item Service line: a group of related service items Service mix: combination of all items and service lines Service depth: number of different service items in service line Service width: number of service lines in a service mix 4.4.1 Service life cycle Life cycle: denotes the sales of a service during the lifetime of that particular service  Introduction phase: sales slow, profits limited/non-existent, promotional costs high, creation of primary demand. Growth phase: sales start increasing rapidly, encourages competitors to enter market, profit margins increase, increased production = reduced unit costs Maturity phase: sales growth starts to slow down, profits decline due to increased competition, lower levels of net income due to expenditure (promotional incentives) Decline phase: competitors drop out market, declining demand, reduced profit margins, price cutting becomes the norm Difficulties: 1. Different services move at different paces (vary in shape and duration) 2. Difficulty in accurately identifying where service is at in the life cycle process 3. 17 different life cycle patterns 4. Customer equity more accurate alternative New service product development: Major service innovation: new core services, new process, new market Major process innovation: existing service, new process and new ways Product line extensions: new service added to current service product line, same market Process line extension: new service, existing customers Supplementary service innovations: enhanced service elements, existing service Style changes: Modest changes to Existing service/Supplementary (rebranding) 4.4.1.3 Service elimination When a particular service is no longer profitable, the service should be eliminated Signs that a service is in need of elimination: Irregular demand and decreased profitability Disproportionate amount of management time When frequent price changes are needed Options of elimination: 1. Immediate elimination 2. Price increase  3. Reduce promotion 4. Inform customers 5. Reassign resources 6. Legal implications (contract obligations) 4.4.2 Service product/market strategies 1. Market penetration: increase sales + consumption with better marketing 2. Market extension: extend market, requires in-depth market research 3. Service development: develops new or modified products for the current market 4. Diversification: new markets are catered for by offering new service products 4.4.3 Branding strategies Purpose of branding is to identify services as belonging to a particular organisation Differentiate Strong brand names Adding value to core service product Focuses on provider’s corporate image and reputation Functions of branding: 1. Communication function 2. Reduction function (reduce search costs and reduce risk) 3. Facilitation function (new service intro, promotions, segmentation) 4. Differentiation function 5. Expressive or social-adaptive function (particular lifestyle or status) 6. Security function (emotional factors) 7. Associative function (signals and symbols = association)