Services Marketing UNIT III

UNIT-III
Understanding customer expectation through market research

• Key reasons for GAP 1,

• Using marketing research to understand customer expectation,

• Types of service research,

• Building customer relationship through retention strategies

• Relationship marketing,

• Evaluation of customer relationships,

• Benefits of customer relationship,

• levels of retention strategies,

• Market segmentation

• Basis & targeting in services.

Provider Gap 1

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Using marketing research to understand customer expectation,

(In this module the students can study following Information)

• Research objectives for services

• Criteria for an effective services research program

• Includes Qualitative and Quantitative Research

• Includes both perceptions and expectations of customers

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• Balances the cost of the research and the value of the information

• Includes statistical validity when necessary

• Measures priorities or importance

• Occurs with appropriate frequency

• Includes measures of loyalty or behavioural intentions

Research objectives for Services

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Stages in the Research Process

Stages in the (Marketing) Research Process

Criteria for an effective Services research Program

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Services research Program

Defined as the “composite of separate research studies & types needed to address Research
objectives & execute an over all measurement strategy”

1. Includes qualitative & Quantitative research

Qualitative are exploratory & preliminary research to conduct or to clarify problem

definition & prepare for more formal empirical research .

Quantitative research are the research which describe the nature, attitude, or behaviors of
customers empirically & to test specific hypotheses that a service Marketer wants to
examine.

2. Includes both perceptions & expectations of Customers

Quantitatively assess the levels of customer expectations & compare these with perception
levels usually by calculating the gap between expectations & Perceptions.

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3. Balances the cost of research & the value of the information

It is an assessment of the cost of research compared with its benefits or value for the
company.Time cost are also a factor including the length of time between the start of
research study & the time the data are available for use by employees.

4. Includes statistical validity when necessary.

Objective is to allow contact people to identify specific action items that will gain the
maximum return in customer satisfaction for individual customers.

5. Measures priorities or importance

Research must document the priorities of the customers. Prioritization can be Accomplished
in multiple ways.

Direct importance measures – Rank-order service Dimensions or attributes, rate on a

scale from “not at all important”/”Extremely important”.

Indirect importance - using the statistical procedures of correlation & regression

analysis which show the relative contribution of questionnaire items or requirements to over
all service quality.

6.Occurs with appropriate frequency

Customer expectations & perceptions are dynamic, companies need to institute a

service quality research process.for full understanding of market places acceptance of a
company’s service , marketing research must be on going “on going research” mean in
terms of frequency.

7. Includes measures of loyalty or behavioral intentions

Measuring positive & negative consequences of service quality along with over all
Satisfaction or service quality scores.

Ex: Behavioral intentions related to medical care include following instructions from doctor
taking medications & returning for follow up.

Types of research
• Customer Complaint Solicitation – involves in rigorous recording of numbers & &
types of complaints through many channels & then working to eliminate the requent
complaints.

• Critical incident studies – Its an effective alternative to complaint solicitation

involves in identifying the desirable & un desirable employee behaviors in service
encounters.

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can be communicated to contact personnel quite clearly in terms of what behaviors

satisfy customer.

• Requirement research – identifying the benefits & attributes that customers expect
in a service.

• Ex: Structured Brain storming/examine existing research about customer customer

requirement in similar industry. The 5 dimensions of quality service are generalizes
across industries.

• “Relationship” Surveys & SERVQUAL Surveys – poses questions about

elements in the customers relationship with the company(including service,product &

Price)

SERVQUAL Surveys involves a survey containing 21 service attributes grouped in to

5 service quality dimensions. By asking 2 different ratings on each Attribute like level of
service they would expect from excellent companies in a sector& the other reflecting the
perception of the service delivered by a specific company.

With that sector.it is used to gauge the overall relationship with the customer.

Usefulness of SERVQUAL in the areas

1. To determine the average gap score (customer perceptions & Expectations.

2. To assess a company’s service quality along each of the 5 SERVQUAL dimension.

3. To track customer expectations & -perceptions on individual service attributes &/ on

the SERQUAL dimensions –over time.

4. To compare a company’s SERVQUAL scores against those of compotators.

5. To identify & examine customer segments that differ significantly in their

assessments of a company’s performance.

6. To assess internal service quality- quality of service rendered by one department or

division of a company to others with in the same company.

Trailer Calls/post transaction surveys – The purpose of transaction surveys is to capture

about one or all of the key service encounters with the customer.

in this method customer are asked a short list of questions immediately after a
particular transaction about their satisfaction with the transaction & contact personnel with
whom they interact.

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Service expectation meeting & reviews – a form of customer research that is highly
effective involves eliciting the expectations of the clients at a specified time of the year &
then following up later ( usually after a year) to determine whether the expectations are
fulfilled.

Process checkpoint evaluations- process for delivering the services & then Structures the
feed back around the process, checking in at frequent points to ensure that the clients
expectations are being met.

Market-oriented ethnography – This approaches allows researcher to observe consumption

behavior in natural settings among the techniques used are , observation,interviews,
documents & examination of material possessions such as artifacts

Mystery Shopping - It is a unique form of research where companies hire outside research
organizations to send people in to service establishments & experience the service as if they
were customer. These Mystery shoppers are trained in the criteria important to customers of
the establishment

Customer Panels – panels are an ongoing groups of customers assembled to

Provide attitudes & perceptions about a service overtime. They offer a company regular &
timely customer information.

Lost customer research – This type of research involves deliberately seeking

customers who have dropped the companies service to inquire about their reasons for
leaving. It is similar to “ Exit interviews” with employees (in that asking open ended
questions to expose the reasons for defection & the particular events that led to
dissatisfaction.

Future Expectations Research – Customer expectations are dynamic & can change very
rapidly in markets that are highly competitive & volatile.

With the increase in competition as taste changes & as consumers become more
knowledge. Companies must continue to update their information & strategies. Like –

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Features research,lead user research,& Synectics approach

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Analyzing & interpreting Marketing Research Findings

One of the biggest challenging task in marketing research to convert a
complex data to a form that can be read & understood quickly by executives,
Managers & other employees who will make decisions from the research.

The Goal in this stage of the MR process is to communicate information Clearly to

the right people in a timely fashion.

1. Who gets this information?

2. Why do thy need it?

3. How will they use it?

4. Does it mean the same thing across cultures?.

Depicting MR findings graphically is a powerful way to communicate

research information.

• Tracking of performance, Gap scores, & competition – A simple way of tracking

performance is shown in the fig 5.3. Expectations & perceptions are plotted & the
gap between them shows the service quality short fall. while any attributes/
dimension of service can be tracked.

It allows mangers to have a better grasp of service improvement priorities for their
firm by comparing the firms service strengths & weakness against those of key
Competition.

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Zones of Tolerance Charts -

When companies collect data on the dual expectation levels – Desired Service & adequate
Services – along with performance data, they can convey the information concisely on zones
of tolerance .

Perceptions of company performance are indicated by the circle & the zone of
tolerance box, are bounded on the top by the desired service score & on the bottom by
adequate service.

When the perception scores are with in the boxes, the company is delivering service
that is above customers minimum level of expectation. When the perception scores are
below the boxes the company service performance is lower than the minimum level &
customers are dissatisfied with the company.

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Service Quality Perceptions Relative to Zones of Tolerance (by Dimensions)

Building Customer Relationships through retention strategy

• Relationship Marketing

• Relationship Value of Customers

• Foundations for Relationship Strategies

• The Customer Isn’t Always Right

• Customer Profitability Segments

• Levels of Relationship Strategies

Relationship Marketing
 Relationship marketing - its goals, and the benefits of long-term relationships for
firms and customers

• Relationship Marketing is a philosophy of doing business that focuses on

keeping current customers and improving relationships with them does not
necessarily emphasize acquiring new customers is usually cheaper (for the firm)

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• keeping a current customer costs less than attracting a new one thus, the focus is
less on attraction, and more on retention and enhancement of customer
relationships

• Bucket Theory of Marketing – By L Schorr Has explained the

Relationship marketing as bucket theory.

The evolution of customer relationships

• Customer as strangers

• Customer as Acquaintances

• Customer as a friend

• Customer as partner

Customer Goals of Relationship

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Benefits to the Customer

• inherent benefits in getting good value

• economic, social, and continuity benefits

– contribution to sense of well-being and quality of life and other psychological

benefits

– avoidance of change

– simplified decision making

– social support and friendships

– special deals

Long term service relationships including Confidence benefits,Social benefits, &

special benefits.

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Benefit for firm

• Economic Benefits: willing to pay more

• Customer behavior benefit

• Human Resource management benefit

Benefits to the Organization of Customer Loyalty

• loyal customers tend to spend more with the organization over time

• on average costs of relationship maintenance are lower than new customer costs.

• employee retention is more likely with a stable customer base.

• lifetime value of a customer can be very high.

• Increased purchase overtime.

• Free Advertising through word-of-Mouth.

• Employee retention – (indirect benefit).

• Reduced marketing & administrative cost.

A Loyal Customer is One Who...

• Shows Behavioral Commitment

– buys from only one supplier, even though other options exist

– increasingly buys more and more from a particular supplier

– provides constructive feedback/suggestions

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• Exhibits Psychological Commitment

– wouldn’t consider terminating the relationship--psychological commitment

– has a positive attitude about the provider

– says good things about the provider.

Foundation for Relationship strategies.

• Quality offered in the core services – need to provide convincing support for the
argument that excellence in the core service/product Offered is essential to a
Successful relationship strategy.

• Market Segmentation & Targeting – Treat customers as individuals & develop

individual marketing plans for each customer.

• Continuous monitoring of relationship – basic market research in the form of annual

customer relationship surveys can be the foundation for such a monitoring strategy.

Steps in Market Segmentation and Targeting for Services

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Step 1: Identify Bases for Segmenting the Market - Segmenting the marketing by grouping
customers who share common characteristics (Design,delivery,promotion or pricing of the
service).

Step2:Develop Profiles of Resulting Segments – understanding how & whether the

segments differ from each other in terms of their profile (Demographic characteristics or
psychographics or usage segment.

Step3:Develop Measures of Segment Attractive-ness – the size & purchasing power of the
segments must be measurable to know the feasibility for investment & expansion.

Step4:Select the Target Segments – based on the size, growth potentiality, competitive
analysis, substitute services & relative power of buyers & suppliers market is selected.

Step5:Ensure that Segments Are Compatible – Services are performed in the presence of the
customer provider must be certain that the customers are compatible with each other.

Customer Isn’t Always Right

• Not all customers are good relationship customers:

– wrong segment

– not profitable in the long term

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– difficult customers.

The “80/20” Customer Pyramid

The Expanded Customer Pyramid

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Strategies for Building Relationships

• Foundations:

– Excellent Quality/Value

– Careful Segmentation

• Bonding Strategies:
– Financial Bonds

– Social & Psychological Bonds

– Structural Bonds

– Customization Bonds

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Levels of Retention Strategies

Portfolio of Services Research: Research Is NOT Just Surveys!

• Customer Complaint Solicitation

• “Relationship” Surveys

• Post-Transaction Surveys

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• Customer Focus Groups

• “Mystery Shopping” of Service Providers

• Employee Surveys

• Lost Customer Research

• Critical Service Encounters Research

Common means for answering questions

• Ask customers directly

– mail, phone, face-to-face, online

– one-on-one, in groups, formal/informal

• Observing customers

– anthropological tools, qualitative depth

• Get information from employees and front line service providers

• Database marketing research

– use customer information files

– “capture” behavior through data analysis

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