The Principles of Marketing in the Service Sector - Assignment Example

Question To what extent do you consider that the principles of marketing that have been traditionally applied to the goods sector are appropriate for the service sector? In order to differentiate the marketing techniques of the goods sector and the service sector, it is essential to understand the basic differences between the two sectors. Goods sector includes industries that are more traditional like manufacturing, agriculture, construction, etc. Service sector on the other hand includes a wide range of industries like hotels, real estate, consultancy, wholesaling, retailing, telephone and mobile service providers, broadband internet providers, etc. Even though these industries are service oriented, they sometime owe their business to goods sector. However they are not completely dependent on the goods sector. It is evident that both these sectors are different in terms of the product as well as the basic business model involved. The marketing techniques used by these sectors also differ as their processes will have varying objectives and goals. Though there are a number of changes in the marketing techniques applied by the service sector, the traditional marketing techniques cannot be considered as completely obsolete for the service sector. Traditional marketers focus on the main transaction factors, as the sales involve tangible goods and affect the direct revenue to the company. Marketing is considered in isolation, as a means to take the product to the customer, i.e., it does not affect the production strategies and the high level management of the company. Traditional marketing unlike service marketing is transaction focused and product focused. Marketing was considered as a process of decision making involving price, place, promotion and product. These involved segmenting the market and focusing the target markets, developing products based on customer requirements, choosing the appropriate operational logistics, intermediaries and outlets, and also on setting the prices based on the target segment and the price they are willing to pay. Branding was also given great importance (Jobber, 2004). In the service sector, marketing is considered in conjunction with all the other activities, unlike the goods sector. Marketing is given prime importance and the processes are designed with the focus on the end user. The service sector mainly focuses on providing excellent service and satisfaction to the end customer. For a service business, the process, people and physical evidence are also equally important. However, the essential elements such as the price, promotion and place are also given prime importance in the service sector. For customer satisfaction, the service sector has to focus on providing high quality of service at an affordable price. To achieve this, the service provided has to be efficient and quick (Fisk et al, 2000). From these arguments, it is clear that a number of traditional marketing techniques are extended to the service sector. However, the service sector goals and objectives are completely different from that of the goods sector. Hence these traditional marketing techniques have to be modified to meet these goals and objectives. Question 2: Select a service provider of your choice in Bradford and analyse the way in which it seeks to manage quality. Cocina, a restaurant in Bradford, UK has been chosen as an example of a business in the service sector industry. Cocina is a Mexican restaurant situated near Bradford city center. This restaurant has been chosen to understand the strategy followed by them to manage their quality and to analyze the same. Cocina was started in Bradford around twenty - five years ago. This restaurant has proved to be very successful and there are excellent reviews stating: ‘Cocina is a Mexican restaurant with a warm and friendly atmosphere’. The restaurant has a very warm and comfortable ambiance and is very welcoming. They serve a variety of excellent Mexican food. Cocina is the perfect example of the service provider in Bradford. The restaurant has proved to be excellent in all aspects. Even though it was started many years ago, they have kept up with time and are in sync with the current customer requirements. They keep reviewing their menu and ensure that they serve authentic high quality Mexican food. They serve a wide range of both vegetarian and non-vegetarian food. The restaurant gives a lot of importance to the customers. This is evident from the fact that it has managed to adhere to all the quality standards. The restaurant also emphasises on health and safety for the customers, and ensures that all the employees working in the kitchen wear hats to ensure the food is not contaminated in any way. The best feature of Cocina is the way it has kept in pace with the new technology and has developed an excellent website. They have ensured that the customers can book in advance so that the queuing time for the customer is reduced. The system that is followed is very effective, wherein a ledger with appointments is maintained to ensure that there are no double bookings for a particular time and for a particular table. It has also set up a variety of offers and menus for people who do not have too much time to spend over lunch. The restaurant on a whole has ensured complete customer satisfaction and aims at giving the customers a good value for their money. Cocina has gone the extra mile in customer service to ensure that all the customers are well greeted, comfortable and have a wonderful meal (Cocina, 2008). The restaurant on a whole has proved to have good quality processes, which assures the customers of good quality and excellent service. Also with the well developed website and great ambiance shows the commitment to excel and ensure great customer satisfaction. The customers are given prime importance in this restaurant and all efforts have been put in to ensure customer satisfaction. Question 3: Discuss relationship marketing applied in service business of your choice and its correlation with customer loyalty. Telecommunication industry in the UK is one of the service sectors that have a high degree of competition and high number of players in the market. The essential element for the success of a telecom service provider is its customer base and their loyalty to the service provider. Hence the telecom sector has taken a number of steps to retain their customers with their service for a long time. It is very easy for customers to change their networks or service providers. Nowadays, registration is not very complex and customers can buy and start using their phones immediately. This has resulted in a high rate of customer churn in this sector. As this customer churn is a serious issue for both the retailers and the network owned service providers, various measures are taken by them to reduce the churn rate (McCracken, 2002). As a result, the service providers are giving great importance to relationship marketing. Relationship marketing means actively deepening the service provider’s knowledge about the customers so as to meet individual customer needs (Beynon-Davies, 2004). Relationship marketing involves strategies, business functions as well as operational processes with an aim to retain customers and increase profitability and customer loyalty (Pantazopoulos, 2007). Relationship marketing focuses on individualized marketing rather than mass marketing. Relationship marketing involves establishing a one – to – one relationship between the customer and the service provider. The service providers have effectively personalized the services provided to the customer, in an attempt to implement relationship marketing. There has been a great shift in the marketing practice. Relationship marketing focuses on building a small base of high value loyal customers. These firms differentiate individual customers based on need rather than differentiating products based on target groups. Telecom service providers have implemented systems to send personalized messages to the customers, based on their usage pattern and behavior. Network upgrades and value added services are proposed to the customers who actually need them rather than mass marketing to the entire customer base. Each and every interaction of the customer with the service provider is recorded and given due consideration in understanding the customer needs. Also, offers are provided to the customers when their contracts come to an end, based on their usage. This provides a way for the service providers to lock-in the customers for a longer time. Relationship marketing emphasizes on making the right customer as king rather than each and every customer, i.e., the customers with high CLV (Customer Lifetime Value) are focused and value added services and offers are made available to them. These elements of relationship marketing extend the customer life with the service provider and hence increase the loyalty of the customer to the service. The customer stays with the service provider for a long time, as the company has established a good relationship with the customer and understands his/her requirements (Jobber, 2004). Hence the customer does not switch to other networks, though it is easier to do so. This indicates that the relationship marketing does affect customer loyalty in service oriented businesses. Question 4: Discuss how relationship marketing and retention marketing are different from the traditional emphasis on marketing. Traditionally, marketing was completely transaction centered. All the systems in a company were built around transactions. Any transaction with any customer was considered as a one-off agreement and the deal was closed. If the same customer were to opt for another product in the same company, he/she will be treated as a new customer, in theory. Also, the customer base was treated as a whole and was not segmented or precisely targeted. Personalization techniques were not utilized. With the increases competition and customer expectations growing every year, these marketing techniques proved to be obsolete and all the businesses changed their focus to relationship marketing (Evans et al, 2004). All the systems in a company are customer – centric in a relationship marketing oriented company. The customer is given prime importance and all the services are personalized to the individual customer. Relationship marketing emphasizes on establishing a good relationship with the customer by providing high quality personalized service and increasing the loyalty of the customer. This increases the life time value of the customer to the company which has a direct impact on the revenue and performance of the company in the long run. Retention marketing focuses on retaining the existing customers and locking them in with the service provider for longer periods. As traditional marketing is transaction – centric, it concentrates mainly on acquiring new customers for more transactions. Jobber(2004) states that acquiring a new customer is six times costlier than retaining an existing customer. Hence it is very important for a service provider to adopt the retention marketing techniques. In relationship and retention marketing, every interaction of the customer with the company is given prime importance and are recorded in the systems along with the details of the customer. However, in the traditional marketing, the customer touch points, i.e., interactions are not given great importance. Relationship marketing focuses mainly on individual customer needs and hence recording all the customer interactions helps the service provider understand the requirements of the individual customer and provide a customized service. Retention techniques include a number of strategies to make the customer stay with the same service provider, such as providing additional service to the existing customer at a lower price, etc.., However, all the customers cannot be given the same type of offers. To determine the worth of a customer to the company, three values, namely, recency (how recently the customer has made a transaction), frequency (how frequently the customer has made transactions) and the value (average monetary value of these transactions). These values give a fair idea about the value of a customer and algorithms can be used to propose value based offers to the existing customers (Brown, 2000). In the case of traditional marketing, the offers are made to the entire customer base as a common marketing campaign and the effects are not measured to verify whether the campaigns were effective. The relationship marketing and retention marketing thus focus on these areas which are not traditionally emphasized by marketing. Question 5: Give an example of a service failure that you have experienced recently. Suggest strategies, which the service provider could employ to recover from service failure most effectively. Mobile phones are very common, almost everyone own a mobile phone. Most of us are very happy with the service providers, since there are high levels of technological developments. However, there are certain issues that still pose a problem with certain mobile providers. I have recently had a problem with my network provider, which seemed to be a big problem with a simple solution. I recently called in to my network provider to change the tariff plan on my mobile phone, the request was logged and I was given a confirmation over the phone that the plan had been changed to my desired plan. However, once I received the bill for the next month, I was still being charged on the basis of my previous plan. I called the customer support for assistance and to find out why my plan had not been changed and why I was still paying my bill based on an old plan. I had to make numerous calls before I could speak to someone who had a solution to my problem. I was told that the system showed the updated plan however the plan change would be reflected only in the next billing cycle and I was still paying the same charges since the request was made after my billing date. Since I had not been intimated about this while I made for the request it I had to make numerous calls before I could understand the reason for the delay. As a customer I would have appreciated being informed about this and would not have expected the change to take place immediately. However, due to lack of information from the company’s end, there were a lot of inconveniences faced. This problem could have been completely avoided if I had been informed about the delay while placing the request. The company can avoid these kinds of issues by explaining the same to the customer while any change request is made. They could also send out personalized booklets to the customers billing address, to ensure that the customer is aware of what plan they are on and are kept in loop if there are any updates of changes from the companies end. The company could alternatively send a text message to the customer immediately once any change is made and include the dates after which the change would reflect on the customer’s bills. Issues of these kinds are a major reason for companies loosing out on customers, hence a little more care and transparency of information would allow the customer to appreciate the service and the company make profits and would help retain the customer. Question 6: What is Service Positioning? Discuss how the dimensions of service quality and evidence can be used for positioning strategies. Positioning can be better explained as how a marketer puts a product or service in the mind of the customer (Berkeley, 2008). Service positioning refers to the strategy used by a company to decide the market segment that it aims to serve, how it would attract the customers’ attention and retain the customer. Positioning a product is relatively easier than positioning a service, since for a product’s usage can be communicated visually, but this cannot be done for a service. It is essential that the company understands the strengths and weakness of its service, its competition, and most importantly what is the customers’ perception of the service. Positioning of a service depends a lot on the brand awareness. It is very essential that customers have heard of the brand before they can buy a service. Positioning begins of when a customer hears the brand name for the first time, thus it is very essential that the marketers are aware of the customers perception of the brand (Kohls, 1998). Marketers need to keep in mind various factors while positioning of a service like the competition the service faces, the merits and demerits of the service, the quality and evidence of the service. Taking the example of the Mexican restaurant Cocina, the restaurant has positioned itself as a good quality, clean Mexican food specialists. The restaurant’s website creates the brand awareness by highlighting the point that they have been in the market for over 25 years and they specialize in Northern Mexico style of food. Also the restaurant has proved its good quality service by creating a warm, friendly, attentive, clean environment and ensuring the food served is of high quality with the appropriate drinks to complement. Thus when a person in Bradford was to think of Mexican food, Cocina would be the first on their mind, since it is positioned in the customer’s mind as the best for good quality Mexican food in a clean and friendly environment. Thus positioning of a service plays a very big role in the successfulness of the business. Thus it is evident that service quality and evidence contribute to a great extent to successfully position the service in the minds of the customer. Question 7: Define the term ‘value’ from the customer’s point of view. Using GAPs model briefly explain which of the service provider gaps do you believe is the most difficult to close? Why? In simple terms, ‘value’ from the customer’s point of view can be explained as the requirements or expectations from the service provided. The customer is satisfied when the service provided meets his/her expectations. In order to excel at a service, many players tend to provide added services to the customer at no extra cost. In this ever changing competitive environment, these added services have evolved to become inherent expected services. Hence, a service provider has to understand these expected benefits in addition to the basic requirements of the customer. Obviously, the basic service is of great importance, without which there is no meaning in providing value added services to the end customer. When a customer considers a service as worthwhile or ‘value’ to him, it indicates that the service provided has met all his requirements and has provided excellent value for his money (Jobber, 2004). When there is a gap in the service, then the customer is not satisfied and the relationship with the customer and the service provider is affected. The Gaps model indicates that there are 4 possible service provider gaps, namely, The Knowledge Gap The Service Design and Standards Gap The Service Performance Gap The Communication Gap The knowledge gap indicates the gap that arises due to not properly understanding the customer expectations, whereas the service design and standards gap arises due to improper selection of service designs and quality standards. The service performance gap arises as a result of not delivering to the service standards. The most difficult service provider gap to close is the fourth gap, i.e., the communication gap arises when the service provided does not meet the ‘promises’ given to the customer (Jobber, 2004 and Luk and Layton, 2002). The communication gap, unlike the other three, depends largely on factors which are very difficult for the service provider to control. The marketing and operations have different modus operandi and usually, the sales department tends to close a deal as early as possible. However, they do not have the expertise to estimate the costs involved in the customization for providing a differentiated service to the customer. Hence the sales department tend to make ‘promises’ which are either not technically possible or would incur tremendous additional costs for the technical and operations team to incorporate. Initially, the point of contact for a customer is the business development team. When a customer signs a contract for a service, his point of contact then becomes a technical support or operations person. This gives rise to a number of conflicts in communication as the technical support person is unaware of the communication between the customer and the sales team, or the costs of providing the solution to the customer might be higher than allowed by the company policy. This generally results in customer paying more for the service or being unsatisfied with the solution provided. Hence this is the most difficult service provider gap to be closed. References Berkeley Consulting Group, 2008, Strategy is About Service Positioning in a Changing Environment, Accessed on 12 August 2008, Retrieved from http://www.berkeleyconsulting.com/strategic/Strategy%20is%20About%20Service%20Positioning%20in%20a%20Changing%20Environment.PDF Beynon-Davies, P., 2004, E-Business, Palgrave Macmillan, New York Brown, S.A., 2000, Customer Relationship Management: A Strategic Imperative in the World of E-Business, John Wiley and Sons, New York Cocina, 2008, Available at http://www.cocina.co.uk, Accessed on 1st August 2008 Evans, M., O’Maley, L. and Patterson, M., 2004, Exploring Direct and Customer Relationship Marketing, 2nd Edition, Thomson Learning, London Fisk, R.P., Grove, S.J. and John, J., 2000, Interactive Services Marketing, Houghton Mifflin, New York Jobber, D., 2004, Principles and Practice of Marketing, 4th Edition, McGraw – Hill, Berkshire Kohls, R., 1998, Positioning: Marketing’s 5th ‘P’, 16 March 1998, Marketing News Vol. 32 Issue 6 Page 6 Luk, Sh.T.K. and Layton, R., 2002, "Perception Gaps in customer expectations: Managers versus service providers and customers", The Service Industries Journal, Vol.22, No.2, April, page 109-128 McCracken, C., 2002, ‘Making Connections: CRM in Telecoms’, Knowledge Management, February 2002, p13-14 Pantazopoulous, A., 2007, ‘What’s Really CRM?’, available at http://www.crm2day.com/what_is_crm/ (accessed on 01rd Aug, 2008) Read More