Services and Relationship Marketing of Ansoffs - Research Proposal Example

Services and Relationship Marketing Background Context In this paper, for discussion purpose, Ansoff’s (1987) product market growth matrix has been selected as strategic management model while service gaps model has been selected as model from service marketing perspective. Theoretical Model 1: Strategic Management Perspective Description Seminal research work of Zeithaml, Parasuraman and Berry (1985) reveals certain characteristics of service that makes it difficult for strategic management scholars to define a particular strategy, 1-intangibility- one cannot measure quality of service by touching it because there is no tangible part in the service, 2- inseparability- simultaneous delivery and consumption of services makes it difficult for customers to differentiate it from service provider, 3- heterogeneity- service is being delivered by different people with different skill set and engagement level hence high level of variability takes place in final delivery of service and 4- perishability- services cannot be stored rather service providers need to carry forward the service to future point of time therefore service quality varies significantly with variance in time. Due to such characteristics, marketers need to add additional P’s like (physical evidence, people and process) while designing marketing strategy. From strategic management perspective, the researcher has selected growth matrix of Ansoff (1987) that can be applicable in service industry perspective. From strategic management perspective, Ansoff (1987) gave the following model in order to show how companies can achieve business growth. Although Ansoff’s (1987) model is being widely used by product marketers but in context to service industry, the model is equally effective. Figure 1: Ansoff Matrix (Source: Ansoff, 1987) According to the above model, service marketers can achieve business growth by taking four alternatives, Alternative 1- recalibrating or emphasising more on marketing strategies to penetrate more in existing market without diversifying service, Alternative 2- offering new services in existing market in order to attract more customers, Alternative 3- expanding business in new geographic locations without customizing service mix and Alternative 4- expanding into new geographic locations and customizing service mix as par customer requirements, trends, economic condition and market needs in new geography locations. Analysis & Discussion Since the introduction of generic strategy Porter (1980), several strategic management scholars came up with different model and all claiming that their model achieves goodness of fit with strategic model perspectives. Covering the entire strategic model within this essay beyond the scope of this study while other bounding criteria that researcher needs to select a particular strategic model that is applicable to service industry. Significant amount of differences exist between service marketing and product marketing hence product specific strategic model might not be applicable in service industry. Careful consideration of first alternative in Ansoff’s (1987) model reveals the fact that in order to fulfil certain strategic management objectives, intervention of marketing management is needed such as setting advertising strategy, pushing the brand through retail channels expansion, adjusting prices in accordance with disposable income of customers etc. Applicability of Ansoff’s (1987) growth matrix (considered as one of the basic model in strategic management) in service sector can be understood through the example of two services firms such as quick service restaurant and a financial institution. Service firm 1 (the quick service restaurant or QSR) – if the QSR does not have the financial and non-financial resources to compete with global players or expand business internationally, then it can increase its penetration in existing market in two way manner such as, 1- providing additional services like home delivery, variety in food, asking patrons to check the freshness of the item, adding new food items in the menu, lodging facilities etc and 2- it can use advertise its existing service offering through local celebrity endorsement, sales promotional discounts, public relation activities, print advertisements, TV commercials etc. Service firm 2 (financial institution)- if the financial institution has sufficient non-financial and financial resource to compete with global competitors and expand business internationally, then it can achieve business growth in two way manner, 1- the service firm can open new branches in foreign locations and offer same type of services that are being offered in home country and 2- the service firm can lunch some new services like currency trading, low bank deposit to open account, mortgage lending, low interest loan etc in order to expand business in price sensitive market. Whatever the alternate course may be, it is quite evident that service companies need to take help of marketing management principles to support strategic objectives. Viitamo (2007) rightly pointed out that effectiveness of service is being measured by the capability of service firms to decrease unit costs of service delivery. As part of strategic management, companies can deploy technological resources to achieve low unit cost. Theoretical Model 1: Marketing Management Perspective Description From marketing management perspective, gap model of service quality is being widely used in order to guide marketers to improve service quality of services and attract new customers and retain existing ones. The service gaps model can be depicted in the following manner. Figure 2: Service Gaps Model (Source: Blešić et al., 2011, p. 43) The concept of gap model is part of service marketing management in such context; the gap model can be explained in context to hotel service quality. Gap 1- this gap arises when service markets fail to judge expectation of customers. For example, hotel managements are expecting that customer will like food menu variety but customers want quick service rather than food menu variety (Parasuraman, Zeithaml and Berry, 1988). Gap 2- hotel management might be able to predict customer expectations correctly but fails to establish performance standards. For example, staffs are being told that they need to deliver responsive services but they are not being told about time parameter for service delivery. Gap 3- hotel management might be able to set performance standards but fails to provide adequate training to staff to reach the quality standard. For example, hotel has decided to serve food to patrons within 15 minutes but fails to provide training support to staff to meet the deadline. Gap 4- customer expectation might get increased due to advertisement about high service quality statement made by the hotel but gap arises as customers discover poor service quality after entering the hotel. For example, the hotel advertises for air conditioned room facilities but in real case, most of ACs in hotel rooms needs repairing. Gap 5- gap might be created due to wrong interpretation of service quality by patrons. For example, extra care and courtesy of hotel manager might create doubt in the mind wrong intention of hotel managers (Parasuraman, Zeithaml and Berry, 1988). Analysis & Discussion It is very difficult to assess importance of the service gaps model from strategic management perspective because the model does not emphasizes on how it can help long term business position of the company. However, this problem can be addressed while viewing the model as marketing support to service companies to identify gaps in customer value creation and decrease the magnitude of service gaps in order to in order improve customer satisfaction. In such context, service gap model can be identified as long term customer value creator for service companies and from strategic management perspective; customer value creation can help companies to achieve competitive advantage. From service gaps model, relationship between marketing management and strategic management can be explained by using resource based view (RBV) concept of strategic management. According to David (2009), resources can help companies to achieve competitive advantage if it satisfies the VRIN criteria such as; Valuable- importance of the resource is being accepted by all industry members, Rare- the resource should be scarce with respect to demand, Inimitable- it is very difficult to imitate the resource and Non-substitutable- it is very difficult to find substitute of the resource. Now, applying VRIN concept (part of strategic management) to service gaps model (part of marketing management model) reveals an interesting relationship. Service companies depend heavily on its staff and skilled employees to deliver services to customers. Therefore, from strategic management perspective, talented and responsive human resource pool can be considered as VRIN resource for service companies. From marketing management perspective, applying VRIN resources in efficient manner can help service markets to reduce magnitude of service gaps and consequently, scope of creating sustainable customer value gets created. In such context, strategic resource is directing long term marketing success of service companies. From relationship marketing perspective, service companies can also use its responsive and talented human resource pool to deliver quality services that can positively impact customer satisfaction and customer loyalty. Relationship between Strategic and Marketing Management Consideration of seminal research works of Porter (1980) reveals the fact that companies need to deploy certain strategies in order to move ahead in the competition and in similar context, successful deployment of resource driven strategy can help companies to achieve a sustainable competitive advantage (SCA). Porter (1980) pointed out that sustainability of competitive advantage can be predicted by understanding robustness of the strategic model. The eminent scholar identified cost advantage or product differentiation as two key parameters for achieving sustainable competitive advantage. Not only Porter (1980) but also strategic management scholars put more importance on strategic management as sole contributor for achievement of sustainable competitive advantage. Varadarajan (2010) conjecturally stated this situation as “paradox” in literature regarding strategic management and other management concepts like marketing management, human resource management etc. Varadarajan (2010) argued that strategic management and marketing management has asymmetric relationship and modern day companies’ use marketing management techniques to provide support to strategic management objectives. Merwe et al. (2007) also supported the fact that both marketing management and strategic management are complementary to each other. However, there are research scholars who still believe that marketing management and strategic management do not work in intertwined manner. Presence of such controversies and arguments regarding relationship between marketing management and strategic management has influenced the researcher to take up this study and analyze the topic in the backdrop of service marketing concepts. Varadarajan (2010, p. 120) defined marketing as, “Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” Based on the definition, it can be said that marketing management not only about adjusting 4P’s (product, price, place and promotion) in order to influence customers to make purchase decision but fair bit of strategy is also being incorporated by marketers to deliver value to customers. According to Gundlach (2007), strategic marketing involves market segmentation, targeting and positioning the brand while tactical marketing involves operations such as setting pricing strategy, setting communication strategy, setting distribution channel etc to achieve strategic marketing objectives. On contrary, strategic management is being defined as long term planning for organizations. According to David (2009), strategic management is combination of both art and science in order to formulate, implement and evaluate cross function decisions so that the organization can achieve long term objectives. David (2009) suggested that while doing strategic management planning, managers need to evaluate cross functional perspectives such as marketing management, operation management, financial management etc in order to become flexible to adopt changes in internal and external environment. In such context, the researchers will describe one model for strategic management that fits well in service context while another will from marketing management perspective that fits well with service context. It is evident from the above discussion that strategic management and marketing management have complementary relationship. Deploying two models from strategic management and marketing management reveals the fact that strategic management is being used for long term planning while marketing management deals with operational part. It has been found by the researcher that intangibility of service quality makes it difficult for marketers to deliver value in sustainable manner. In such context, markets use strategic resources to address intangibility and quality gaps aspects of service environment. Therefore, it can be said that not marketing management is being used to fulfil strategic management objectives but also there are situations where concept of strategic management is being deployed in order to direct success of marketing management. Reference List Ansoff, H. I., 1987. Corporate strategy. 2nd ed. London: Penguin. Blešić, I., Džigurski, A. I., Dragin, A., Ivanović, L. and Pantelić, M., 2011. Application of Gap Model in the Researches of Hotel Services Quality. TURIZAM, 15(1), pp. 40-52. David, F. R., 2009. Strategic managment concepts and cases. 12th ed. New Jersey: Pearson Prentice Hall. Gundlach, G. T., 2007. The American Marketing Association’s 2004 definition of marketing: Perspectives on its implications for scholarship and the role and responsibility of marketing in society. Journal of Public Policy and Marketing, 26, pp. 243–250. Merwe, R. V., Berthon, P., Pitt, L. and Barnes, B., 2007. Identifying ‘theory networks’: identifying pivotal theories in marketing and their characteristics. Journal of Marketing Management, 23(3–4), pp. 181–206. Parasuraman, A., Zeithaml, V. A. and Berry, L. L., 1988. SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64(1), pp. 12-40. Porter, M. E., 1980. Competitive strategy. New York: Free Press. Varadarajan, R., 2010. Strategic marketing and marketing strategy: Domain, definition, fundamental issues and foundational premises. J. of the Acad. Mark. Sci, 38, pp. 119–140. Viitamo, E., 2007. Productivity of business services – towards a new taxonomy. Lappeenranta University of Technology, Lappeenranta (Finland): Department of Industrial Management. Zeithaml, V. A., Parasuraman A. and Berry L. L., 1985. Problems and Strategies in Services Marketing. Journal of Marketing, 49, pp. 33 – 46. Read More