Services Marketing
Definition and components of customer delight
"... an emotional response which results from surprising and positive levels of performance." "Features ... to delight are those that are unexpectedly or surprisingly pleasant." "Delight is a positive emotion ... that people experience in response to having their expectations exceeded to an unexpected and surprising degree."
The services marketing triangle consists of.....
1. Company/management ....external marketing 2. Customers .....interactive marketing 3. Employees, partners, suppliers ......internal marketing LOOK AT SLIDE 54
Go through an watch the youtube videos linked to the slides to help get a better grasp on certain things
Good examples, links are pasted in the corner of the slides
Expectations for global FDI activity
Historically this has been primarily confined to manufacturing enterprises Increasingly companies are taking advantage of modern communications technology, and particularly the Internet, to outsource service activities to low-cost producers in other nations
How can brands be seen as trustworthy signal?
Idk google; certificates, awards, ratings, customer references, free test trials
Typical expectations of a digitally driven customer
Individualized - respected - personalized - customized offerings - contact just with permission - "if the news is that important..." Everything - large choice - high quality - low prices -good service Now - immediate contact - rapid transactions - short reaction times Everywhere - independent of time - independent of place - independent of technologies, devices ("seamless integration")
Reasons Why Consumers Shop Online Instead of in Stores
Primarily convenience, price-related, push from offline, and ease of selection
Reasons Why Consumers Shop in Stores Instead of Online
Primarily touch/try product, shipping, or enjoying experience
Net Promoter Score (NPS)
Promoter Percentage as an Indicator for Delighted Customers The Net Promoter Score (NPS) measures, how successful an organization is in retaining its customers, based on the recommendation intentions of its customers. Goes from very unlikely to very likely see slide 103, chapter 1/2 slides
The customer loyalty loop
See slide 104, chapter 1/2 slides Study this graph/loops
Customer journey mapping The example of a car buying process
See slide 141, chapter 3 slides
Secondary Sector
The portion of the economy concerned with manufacturing useful products through processing, transforming, and assembling raw materials.
Importance-performance-analysis of customer satisfaction
To define clear managerial implications and to set priorities, it is useful to conduct the importance of the diverse attributes Attributes such as: - price offerings - timeliness of delivery - delivery condition - information quality - purchase process - return policies - website convenience - order accuracy - service level
Value-based customer segmentation
Tracks revenues and costs of individual customers Categorizes them into tiers based on consumption behavior A customer pyramid typically groups customers into three tiers Example of Congstar on slide 118/119, chapter 1/2 slides
Differences between transactional and relationship marketing
Transactional marketing: - a transaction between a customer and a supplier is anonymous, with no long-term record kept and little or no mutual recognition - the focus is mostly on segmenting the market, matching the customer needs with firm capabilities, and delivering adequate service quality Relationship marketing - the company and the customer have an interest in deeper engagement and higher value-added exchange - required a change from product centricity to customer centricity
What is the difference between customer satisfaction and customer delight?
While satisfaction is about meeting customer expectations, delight involves surpassing it and taking the entire experience to an emotional plane. A delighted customer is less likely to go to a competitor as against a satisfied customer. 2. Loyalty: Delight is an emotion that one would want to experience more than once.
Customer satisfaction has become....
a major business goal
Primary Sector
agriculture, mining, fishing, forestry, fields
External Marketing
between company & customers in the services marketing triangle... "making the promise" 1. understanding customer needs 2. managing customer expectations 3. traditional marketing communications 4. internet, apps, and website communication 5. sales and promotion
Interactive Marketing
between customers and employees/partners/suppliers in the services marketing triangle.... "delivering the promise" 1. service quality 2. face-to-face, telephone, and digital interactions 3. design customer experiences 4. "moments of truth"
Internal Marketing
between employees/partners/suppliers and company in the services marketing triangle.... "enabling the promise" 1. hiring the right people 2. training and developing people to deliver good to outstanding service quality 3. employee empowerment 4. rewards and incentives 5. supportive systems 6. appropriate technology
Services are a _______ and _______ mixture of diverse activities
broad, heterogeneous
Affective Computing/Affective AI
clearly identify emotional expressions; emotional contagion
Customer _________ Replaces Customer _________ as a Major Business Goal; it is often part of a business strategy now
delight, satisfaction
FDI stands for
foreign direct investment
Expectations of customers are ___________
growing
Problem: Companies often _______________ their performance towards their customers
overestimate
Output is _______ term trivial results, where outcome is _______ term trivial results
short, long
Definition of physical evidence
the environment, in which the service is delivered (servicescape) and in which the firm and the customer interact, and any tangible commodities that facilitate performance or communication of the service
Tertiary Sector
the part of the economy that involves services rather than goods
Customers have to perceive the ________ of a product or a service
value (watch outfittery video) What kinds of value elements do OUTFITTERY use as bonds? Which value element(s) should they additionally design and offer in the future?
Understanding of customer journey analysis
- Customer journeys represent all interactions a customer has with a company in order to achieve a certain (customer) goal - With the help of a customer journey analysis customer experiences are identified and analyzed - Besides the identification of the particular touch points it is also important to determine their quality, to capture the emotions at each touchpoint, to analyze the customer's perception and to identify problems - Following this up, potentials of improvement can be identified
Advantages of service blueprinting
- Distinguish between "frontstage" and "backstage" - Clarify interactions between customers and staff, and support by backstage activities and systems - Identify potential fail points; take preventive measures; prepare contingency - Develop standards for execution of each activity— times for task completion, maximum wait times, and scripts to guide interactions between employees and customers
Service experience: The moments of truth
- The "moment of truth" is when the customer directly interacts with the service firm. - It involves the skills, motivation and tools employed by the firm to prove to the customer that they are the best alternative for them.
Principles of service design
- customer centered - co-creative - sequencing - holistic - evidencing/visualization
Service design phases
- discover - create and reflect - implement
Factors influencing customer expectations:
1) Personal Need 2) Belief about what is possible 3) Perceived service alterations 4) Situational factors See graph on slide 76, chapter 1/2
The five phases of the customer journey analysis
1) Phase 1 - overview, scope, and delimitation - identification of problem area and affected services - scoping of the service to be investigated 2) Phase 2 - identification of planned customer journeys - investigation and verification of planned customer journeys - process mapping, mystery shopping, interviews, and customer materials 3) Phase 3 - customer recruitment and data collection - empirical study of actual customer journeys - recruitment interview, diary study, tracking from back-end systems, and debriefing interview 4) Phase 4 - analysis of actual customer journeys - data analysis touchpoint mapping, concurrent and retrospect customer experience - reconstruction of actual customer journeys 5) Phase 5 - reporting and handover - systematization of results, recommendations, and handover to the organization - follow-up procedures
Components of service expectations:
1) Predicted service level - service level that customers believe firm will actually deliver 2) Desired service level - wished-for level of service quality that customers believe can and should be delivered 3) Adequate service level - minimum acceptance level of service 4) Zone of tolerance - range within which customers are willing to accept variations in service delivery
Guidelines for physical evidence strategy
1) Recognize the strategic impact of physical evidence 2) Blueprint the physical evidence of service 3) Clarify strategic roles of servicescape 4) Assess and identify physical evidence opportunities 5) Be prepared to update and modernize the physical evidence
Evaluation of alternatives: Three kinds of service attributes
1) Service attributes - help customers evaluating a product before purchase 2) Experience attributes - cannot be evaluated before purchase; customers must "experience" product to know it (i.e. restaurant, hotel, events) 3) Credence attributes - product characteristics that customers find impossible to evaluate confidently even after purchase and consumption (i.e. quality of technical repair, medical services)
The two perspectives on customer value
1) Value for the Customer - This is the value a customer receives from a company 2) Value of the Customer - This is the value a customer has/creates for a company
What are the two most essential objectives of all kinds of (service) companies?
1) growth and profitability 2) new and loyal customers
A service can mean 4 different types of things....
1. A service as the core product (i.e. WHU) 2. Added value to the product (i.e. IBM) 3. Customer Service (just typical customer service) 4. Software as a service (i.e. salesforce)
Key components of a service blueprint
1. Define standards for front-stage activities 2. Specify physical evidence 3. Identify main customer actions 4. Line of interaction (customers and front-stage personnel) 5. Frontstage actions by customer-contact personnel 6. Line of visibility (between front stage and backstage) 7. Backstage actions by customer contact personnel 8. Support processes involving other service personnel 9. Support processes involving IT
The usability of a service is defined by being....
1. Efficient 2. Effective 3. Satisfying
5 Powerful forces transforming service markets
1. Government Policies 2. Social Changes 3. Business Trends 4. Advances in IT 5. Globalization ....lead to: - new markets and product categories, increase in demand for services, and more intense competition - innovation in service products & delivery systems, stimulated by improved technology - customers have more choices and exercise more power
What do the 3 additional P's of services marketing consist of?
1. People - frontline employees, customers 2. Physical evidence - servicescape, equipment, employee dress, etc. 3. Processes - operational flow of activities, steps in process, customer involvement
Customer loyalty consists of 3 things:
1. Repurchase 2. Recommendation 3. Up-selling/buying or cross-selling/buying
Factors affecting decision to purchase (n order of most common to least)
1. Service 2. Product features 3. Price/Cost savings 4. Sales 5. Company's image
Success of services hinges on:
1. Understanding customers and competitors 2. Viable business models 3. Creation of value for customers and firm 4. Increased focus on services marketing and management
Core benefits of industrial service businesses:
1. services are a strong source of revenue also in volatile times 2. high operational margins in the service businesses 3. service offerings are used as a differentiation approach - USP 4. combination of product and service offerings intensifies customer relationships 5. creation of new digital business models which provide increases in efficiency and turnover
Definition of Service
A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.
Big challenge is Silo Mentality within companies when looking at customer journey
A silo mentality is a reluctance to share information with employees of different divisions in the same company. This attitude is seen as reducing the organization's efficiency and, at worst, contributing to a damaged corporate culture
Overview of relevant theories and models
Assimilation theory - If the perceived performance significantly exceeds or falls short of the expected performance (positive or negative disconfirmation), customers will afterwards adapt their expectations towards the performance, such that satisfaction gets back to the confirmation level. Contrast theory - If the perceived performance significantly exceeds or falls short of expected performance (positive or negative disconfirmation), customers exaggerate their expectations or the perceived performance such that disconfirmation is enhanced. Assimilation contrast theory - Depending on the level of the discrepancy of the perceived and the expected performance (i.e. the level of disconfirmation) customers tend to decline (assimilation) or enhance (contrast) the discrepancy. Typology of satisfaction qualities - The interaction between the level of satisfaction and changes in the level of expectations leads to different types of customer satisfaction.
The example of BMW Personas (customer journey mapping)
BMW Motorrad developed a new digital instrument panel with high connectivity capabilities and to create a mobile app companion, improving the riding experience of their riders across 12 countries.
Understanding of co-creation of services
Co-creation, in the context of a business, refers to a product or service design process in which input from consumers plays a central role from beginning to end.; see slide 59, chapter 1/2 slides
The "rise" of customer experience
Customer experiences are... - **SHORT TERM PERSPECTIVE** the result of the comparison of all functional (transactional) and emotional perceptions, the customer made along the customer touch points regarding the entire customer journey and the expectations he/she had (with regard to the customer journey) - **LONG TERM PERSPECTIVE** the sum of the consciously reflected experiences the customer made with regard to all individual perceptions, interactions and quality of products or services (of the company)
The distinction between customer satisfaction and customer delight
Customer satisfaction - Evaluation of the customer to which degree his/her expectations are fulfilled Customer Delight - Emotions of pleasure and surprise experienced by the customer derived from either an intense feeling of being valued or by expectations being exceeded
Effect chain of customer satisfaction
Customer satisfaction --> customer loyalty --> market success --> economic success
Definition of customer value
Customer value is defined as the ratio between the customer's perceived benefits and the resources used to obtain those benefits Perceived value is relative and subjective Developing a value proposition is crucial for companies
Strategies for developing loyalty bonds with customers (all + descriptions)
Deepening the Relationship: - Bundling/cross-selling services makes switching a major effort that customer is unwilling to undertake unless extremely dissatisfied with service provider - Customers benefit from consolidating their purchasing of various services from the same provider - How do customers see relational benefits? --> one stop shopping, potentially higher service levels, higher service tiers, etc. Reward-based bonds: - Incentives that offer rewards based on frequency of purchase, value of purchase, or combination of both - Can be financial or non-financial bonds or a combination of both - Financial bonds --> discounts on purchases, loyalty program rewards (e.g., frequent flier miles), cash-back programs - Non-financial rewards --> priority to loyalty program members for waitlists and queues in call centers: higher baggage allowances, priority upgrading, access to airport lounges for frequent flyers - Reward-based loyalty programs are relatively easy to copy and rarely provide a sustained competitive advantage Social Bonds: - Based on personal relationships between providers and customers - Harder to and takes a longer time to build, but also harder to imitate and thus, better chance of retention in the long term Customization Bonds: - Customized service for loyal customers, e.g., Starbucks - Customers may find it hard to adjust to another service provider who cannot customize service Structural Bonds: - Mostly seen in B2B settings - Align customers way of doing things with supplier's own processes --> joint investments in projects and sharing of information, processes and equipment - Can be seen in B2C environment too --> airlines—web check-in, e-mail alerts for flight arrival and departure times - Difficult for competition to draw customers away when they have integrated their way of doing things with existing supplier
Explanation of the Kano Model
Do research on the Kano model Good thing to practice: Please choose an example from real life like smartphone, media services (e.g., Netflix) or online retailer like amazon. Please develop a Kano Model for the chosen example. First, brainstorm in your group and create list of all relevant product or service features. Second, categorize them by using the Kano dimensions.
Physical evidence and the cultural fit
Example of Luckin Coffee - youtube video slide 154, ch 3
Fields of application of service design (external and internal perspective)
External Perspective: - developing new services and optimizing existing services - developing new customer experiences and optimizing existing customer experiences Internal Perspective: - promoting service orientation of (frontline) employees - optimizing internal services
Definition of a Service (according to our class discussion)
Intangible, hard to measure/put a value on due to subjectivity, not storable, uno-actu principle (consumption and production happen at the same moment), differentiator, higher variety in results created by service provider, higher range of quality differences/harder to standardize, more relationship/building relationships focused than material goods due to human interaction and trust, customer integration (cannot trade a service without integration of customer) Most important: intangibility and customer integration Intangibility vs. immateriality - immaterial = nonphysical, intangible = includes immateriality, but furthermore it is mental intangibility Mental intangibility = it's hard to assess the quality of the service because you don't have the expertise
Assessing the value of a loyal customer
Measuring Customer Equity: Lifetime Value of Each Customer - Acquisition revenues minus costs - Projected annual revenues and costs Problem: Value of referrals and customer feedback/engagement as non-monetary benefit/revenue - Net Present Value: o Sum anticipated annual values (future profits) o Suitably discounted each year into the future
Customer Empowerment
More choices and more information on diverse product services and competitors Digital world = more information = more influence
expansion of the 4 P's.... (7)
Normal 4: 1. product 2. price 3. place 4. promotion Extra 3: 5. processes 6. physical evidence 7. people these are service characteristics
Typology of customer satisfaction qualities
Not really sure how to understand the graph - study slide 86, chapter 1/2
Direct measurement of customer satisfaction
One component approach and two component approach
Purpose of the servicescape
Physical surroundings help shape appropriate feelings and reactions in customers and set service expectations as guests arrive Signal quality and position, differentiate, and strengthen the brand - "Wrap" the service and convey an image of what is "inside" - Differentiate from competitors - Signal market segment - Differentiate within the service itself Servicescapes form a core part of the value proposition Facilitate the service encounter and enhance productivity (youtube video, slide 150)
The three-stages model of service management and marketing (the customer's perspective)
Pre-service phase --> service phase --> after service phase (and repeat)
The integrative servicescape model - A framework for understanding environment-user relationships in service organizations
See slide 151 and memorize its basics Identifies the main dimensions in a service environment (servicescape): ambient conditions, space/functionality, signs, symbols and artifacts - People perceive them as a whole - Key to effective design is how well each individual dimension fits together with everything else - Internal customer and employee responses can be categorized into cognitive, emotional and physiological responses, which lead to observable behavioral responses towards the environment
Understanding of service blueprinting
Service blueprinting is a methodology for planning and controlling processes by visualizing them - from customer and company points of view - the service blueprint is an applied process chart which shows the service delivery process from the customer's perspective and combines it with the internal processes of a company Two steps: 1) collecting all touchpoints that are perceived by the customer (line of visibility) 2) extension of the line of visibility adding internal processes (so called "back office activities")
Categorization of service levels based on customer value (Lufthansa example)
Service categories provided to customers: simplicity as luxury (automated services), real premium is human (assistance and hospitality), own your time (self service)
The three-stages model of service management and marketing (the company's perspective)
Service design --> service delivery --> service outcomes (and repeat)
Definition of service design
Service design is the activity of planning and organizing people, infrastructure, communication, and material components of a service in order to improve its quality and the interaction between service provider and customers
Characteristics of services and marketing challenges
Slide 28 & 29 in CH 1/2 slides
From product centricity to customer centricity
Study graph on slide 66, chapter 1/2
How product attributes affect ease of evaluation
Study graph on slide 69, chapter 1/2
Reducing uncertainty by providing confidence-building signals
Study graph on slide 70, chapter 1/2
Service blueprint - The example of a conference setting
Study slide 160, chapter 3
Theories and models explaining customer satisfaction based on the CD-paradigm
Study slide 84, chapter 1/2
Marketing, Customer Value and Firm Value
Study the graph on slide 115, chapter 1/2 slides
Definition of (dis)satisfaction
Study the graph on slide 81, ch 1/2
The 30 elements of the value pyramid (only know the 4 main sections, not all 30 components within them)
Study this - it is important From bottom of pyramid to top: Functional (what does it do?), Emotional (how does it feel?), Life Changing (how does it change my life?), and Social Impact (what value to society?) 1. Greater customer loyalty: Companies with high scores (defined as an 8 or above) on four or more elements from at least 50% of respondents—such as Apple, Samsung, and Amazon—had, on average, three times the NPS of companies with just one high score, and 20 times the NPS of companies with none. 2. Higher revenue growth: Companies that scored high on four or more elements had recent revenue growth four times greater than that of companies with only one high score
Customer delight is _________ effective than customer satisfaction
more see slides 95 and 96, chapter 1/2
Companies achieving outstanding customer experiences are....
more successful
Service design is for....
organizational change, enhanced value creation and better customer experience See slide 132, chapter 3 slides
Servicescape: An opportunity to create.....
positive customer experiences
The importance of customer loyalty/Why customers become more profitable over time
profits from price premium, references, reduced operating costs, increased usage, and base profit (stays the same)
Customer delight is highly ________ for companies
relevant
Why is customer loyalty important to a firm's profitability?
• Customer loyalty is essential in saturated markets characterized by a high competition intensity • Advantages of Customer Loyalty: - Costs of customer retention are estimated to be ~ 15-20 % of costs of new customer acquisitions - Profit of customer increases over time (increase purchases and/or account balances - customers/families purchase in greater quantities as they grow) (reduced operating costs - Fewer demands from suppliers and operating mistakes as customer becomes experienced) (referrals to other customers - positive word-of-mouth saves firm from investing money in sales and advertising) (price premiums - long-term customers willing to pay regular price & willing to pay higher price during peak periods)