WELCOME MODULE – 3

Focus on the Customer-Consumer Behavior in

Services

1
 Synopsis – Module 3
FOCUS ON THE CUSTOMER-CONSUMER BEHAVIOUR IN SERVICE

 Customer expectations of services

 Customer perception of services
 Strategies for influencing customer perceptions
 Understanding customer expectations and perceptions through marketing
research
 Building customer relationship through segmentation and retention
strategies

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3
 Customer expectations of services
 Customer expectation encompasses everything that a customer expects from a
product, service or organisation. Customer expectations are created in the minds
of customers based upon their individual experiences and what they have learned,
combined with their pre-existing experience and knowledge.

Customer Expectations of Service

1. Beliefs about service delivery.

2. Serve as standards or reference points against which performances are judged.

3. Customers compare their perception of performance with these reference points

when evaluating service quality.

4. Thorough knowledge about customer expectations is critical to services

marketers.

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84 4
 Lets imagine your planning to go to a restaurant
• Diagram next shows the different possible types of service expectations can
be arrayed from HIGH to LOW.
• On the left of diagram are different types or levels of expectation and
illustrated what might mean in terms of restaurant.

 Scenario 1 : You went in a restaurant for which you held the minimum
tolerable expectation, paid very littile money, and were served immediately
with good food.
 Scenario 2 : You went in a restaurant for which you had the highest(ideal)
expectations, paid a lot of money, and were served good(But not fantastic)
food.

Which restaurant experience would you judge to be best

Answer is likely to depend a great deal on the reference point

that you brought to the experience

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84 5
 HIGH
“Everyone says this restaurant
Ideal
is as one in France and I want to
Expectation or go somewhere very special for
Desires my anniversary.”

Normative “As expensive as this restaurant

“Should” is, it ought o have excellent
Expectations food and service.”

Experience “Most times this restaurant is

Based very good, but when it gets
Norms busy the service is slow.”

Acceptable “I expect this restaurant to serve

Expectations me in an adequate manner.”

Minimum “I expected terrible service

Tolerable from this restaurant but come
Expectations because the price is low.”

LOW
Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84 6
 Expected Service: Levels of Expectation
POSSIBLE LEVELS OF CUSTOMER EXPECTATION

Ideal Expectation or Desires

Desired Service Quality
Normative “Should” Expectations

Experience Based Norms

Adequate Service Quality Acceptable Expectations

Minimum Tolerable Expectations

We focus on 2 types Desired Service

1. Desired service
2. Adequate service

Adequate Service
Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 85 7
 The Zone of Tolerance
 The extent to which customers recognize and are willing to accept this variation is called the
zone of tolerance
 If service drops below adequate service, the minimum level considered acceptable, customer
will be frustrated and their satisfaction with the company will be undermined.
 If the service performances is higher than the zone of tolerance at the top end, where
performance exceeds desired service, customer will be very pleased and probably quite
surprised as well.
 You might consider the zone of tolerance as the range or window in which customers do not
particularly notice service performance when it falls outside the range(either very low or
very high), the service gets the customers' attention in either a positive or negative way.
Example : Consider the service at a checkout line in a
grocery store. Most customers hold a range of
acceptable times for this service encounter, probably Desired Service
somewhere between 5 and 10 minutes. If service
consumes that period of time, customers probably do not
pay much attention to the wait. If a customer enter the Zone of
line and finds sufficient checkout personnel to serve her
in the first two or three minutes, she may notice the Tolerance
service and judge it as excellent, on the other hand, if a
customer has to wait in line for 15 minutes, he may
begin to grumble and look at his watch. The longer the Adequate Service
wait is below the zone of tolerance, the more frustrated
he becomes. 8
Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84
 Zone of Tolerance Vary for Service Dimensions

Desired Service
Level
Desired Service
of
Expectation Zone of
Tolerance
Zone of
Adequate Service Tolerance

Adequate Service

Reliability Tangibles

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 90 9
 Factors that influence customer expectations of service

Lasting Service
Intensifiers

Desired Service

Personal
Needs
Zone of
Tolerance

Adequate Service

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84 10
 PERSONAL NEEDS
 Personal needs, those states or conditions essential to the physical or
psychological well being of the customer, are pivotal factors that shape what
customer desire in service. Personal needs can fall into many categories,
including physical, social, psychological, and functional.
EXAMPLE
 Scenario 1 – A fan who regularly goes to baseball games right from work, and is
therefore thirst and hungry, hopes and desires that the food and drink vendors will
pass by his section frequently.
 Scenario 2 – A fan who regularly has dinner elsewhere has a low or zero level of
desired service from the vendors. A customer with high social and dependency
needs may have relatively high expectations for a hotel’s ancillary services.

Desired
Service
Personal
Needs

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84 11
 LONG LASTING SERVICES
 Long lasting services are individual, stable factors that lead the customers to a
heightened sensitivity to service. One of the most important of these factors can
be called derived service expectations, which occur when customer expectations
are driven by another person or group of people.
EXAMPLE
 Scenario 1 – A niece from a big family who is planning a 90th birthday party for a
favorite aunt is representing the entire family in selecting a restaurant for a
successful celebration. Her needs are driven in part by the derived expectations
form the other family members.
 Scenario 2 – A parent choosing a vacation for the family, a spouse selecting a
home cleaning service, an employee choosing an office for the firm – all these
customers individual expectations are intensified because they represent and must
answer to other parties who will receive the service. In the context B2B

Lasting
Service
Intensifiers Desired
Service

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 90 12
 Sources of adequate service expectations

Lasting Service Intensifiers

Personal Needs Desired Service

Zone of
Temporary Service
Tolerance
Intensifiers
Perceived Service Adequate Service Predicted Service
Alternatives
Self-Perceived
Service Role
Situational
Factors

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 91 13
 Temporary service intensifier – Consists of short term, individual factors that make a
customer more aware of the need of service. Personal emergency situations in which
service is urgently needed (such as an accident and the need for automobile insurance
or a breakdown in office equipment during a busy period) raise the level of adequate
service expectation particularly the level of responsiveness required and considered
acceptable.
 Perceived service alternatives – are other providers from whom the customer can
obtain service. If customers have multiple service providers to choose from, or if they
can provide the service for themselves, their levels of adequate service are higher
than those of customers who believe it is possible to get better service elsewhere.
 Example – An airline customer who lives in a small town with a tiny airport, for
example, has a reduced set of options in airline travel. The customer will be more
tolerant of the service more than the customer in a big city who has myriad flights
and airlines to choose from. The customers perception that service alternatives exist
raises the level of adequate service and narrows the zone of tolerance.
Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84 14
 Customer’s self perceived service – We define this as customer
perception of the degree to which customers exert an influence on the
level of service they receive. In other words, customers expectations are
partly shaped by how well they believe they are performing their own
roles in service delivery. Example – A customer though he is close to the
waiter, unless he says his preferred taste, waiter may not get to know and
he may get food cooked as he need or “You cant blame it all on the
insurance agent. You need to be responsible too and let the agent know
what exactly you want.”
 Customer zones of tolerance seem to expand when they sense they are
not fulfilling their roles. When, on the other hand, customer believe they
are doing their part in delivery, their expectations of adequate service are
heightened at zone of tolerance contracts.
Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 84 15
 Situational factors – Defined as service performance conditions that customers
view as beyond the control of the service provider. For example, where personal
emergencies such as serious automobile accidents would likely intensify customer
service expectations of insurance companies (because they are temporary service
intensifiers), catastrophes that affect a large number of people at one time
(tornadoes or earthquakes) may lower service expectations because customer
recognize that insurers are inundated with demands for their services. How ever
customer were forgiving because they understood the source of the problem.
Customers who recognize that situational factors are not the fault of the service
company may accept lower levels of adequate service given the context.
 Predicted service – The level of service that customers believe they are likely to
get. This type of service expectation can be viewed as predictions made by
customers about what is likely to happen during an impending transaction or
exchange. Predicted service performance implies some objective calculation of
the probability of performance or estimate of anticipated service performance
level. If customers predict good services, their levels of adequate service are
likely to be higher than if they predicted poor service. Eg- Full time residents in a
college town usually predict faster restaurant service during summer months
when students are not on campus. This prediction will probably lead them to have
higher standards for adequate service.

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 93 16
 Sources of both desired and predicted service expectations
Explicit Service
Promises
Implicit Service
Promises
Lasting Service Intensifiers
Desired Service Word-of -mouth
Personal Needs

Past Experience
Zone of
Temporary Service
Tolerance
Intensifiers
Perceived Service Adequate Service Predicted Service
Alternatives
Self-Perceived
Service Role
Situational
Factors
Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 94 17
 Explicit service promises – Are personal and nonpersonal statements about the
service made by the organization to the customers. The statements are personal
when they are communicated by sales people or service or repair personnel, they
are non personal when they come from advertising, brochures, and other written
publications. Eg- A hotel describes the impact of explicit promises on
expectations: “They get you real pumped up with the beautiful ad. When you go
in you expect the bells and whistles to go off. Usually they don’t.”
 Implicit service promises – Are service related cues other than explicit promises
that lead to inferences about what the service should and will be like. These
quality cues are dominated by price and the tangibles associated with the service.
Eg- In general, the higher the price and the more impressive the tangibles, the
more a customer will expect from the service.
 Word of mouth – The personal and sometimes non personal statements made by
parties other than the organization convey to customer what the service will be
like and influence both predicted and desired service.
 Past experience – The customer’s previous exposure to service that is relevant to
the focal service, is another force in shaping predictions and desires. The service
relevant for prediction can be previous exposure to the focal firm’s service.

Source: Service Marketing Book, Integrating customer focus across the firm-Valarie, Mary, Dwayne, Ajay- PgNo 94 18
 Customer perception of services
 In marketing, 'customer perception' refers to customers' awareness,
their impressions, and their opinions about your business, products, and
brand. Customer perception is shaped by multiple variables, including
direct and indirect interactions with your offerings.
 According to Joseph Reitz, “ Perception includes all those processes by
which an individuals receives information about his environment- seeing,
hearing, feeling, tasting and smelling.”

Source: Service Marketing Book-Valarie, Mary- PgNo 84 19

 Factors Influencing Customer Perception of Service
1. Service Quality
2. Value
3. Customer satisfaction

Primary Factors Influencing Customer Perception of Service

 Service Encounters
 Evidence of service
 Image
 Price

Source: Service Marketing Book-Valarie, Mary- PgNo 84 20

 Factors Influencing customer perception of services

Service Evidence of
Encounters Service

Service
Quality

Perceptions
Of
Service

fa er
on
tis om
Va

c ti
lu

Sa ust
e

Image Price

Source: Service Marketing Book-Valarie, Mary- PgNo 104 21

 SERVICE ENCOUNTERS or “Moments of Truth”
• A service encounter is a period of time of time during which you as a customer
interact directly with service provider.

A service encounter cascade for a hotel visit

Check-In

Bellboy Takes to Room

Restaurant Meal

Request Wake-Up Call

Checkout

Source: Service Marketing Book-Valarie, Mary- PgNo 104 22

 A Service Encounter Cascade for an Industrial Purchase

Sales call

Delivery and installation

Servicing

Ordering supplies

Billing

Source: Service Marketing Book-Valarie, Mary- PgNo 104 23

 3 Types of Encounters

1. Remote Encounters

2. Phone Encounters

3. Face-to-face Encounters

Source: Service Marketing Book-Valarie, Mary- PgNo 104 24

 Sources of pleasure and displeasure in service encounters
 Because of the importance of service encounters in building quality perceptions
and ultimately influencing customer satisfaction with the organization, researches
have extensively analyzed service encounters in many contexts to determine the
sources of customers favorable and unfavorable perceptions. The research uses
the Critical Incident Technique to get customers and employee to provide
verbatim stories about satisfying and dissatisfying service encounters they have
experienced with this technique.
 Now think of a recent time when a customer of your firm had a particularly
satisfying/unsatisfying interaction with you or a fellow employee”. The stories are
then analyzed to determine common themes of satisfaction/dissatisfaction
underlying the events. On the basis of thousands of service encounter stories, four
common themes have been identified, they are:-
1. Recovery
2. Adaptability
3. Spontaneity
4. Coping

Source: Service Marketing Book-Valarie, Mary- PgNo 108 25

 Common Themes in Critical Service Encounters Research

RECOVERY ADAPTABILITY
employee response employee response
to service delivery to customer needs
system failure and requests

SPONTANEITY
COPING
unprompted and
employee response
unsolicited employee
to problem customers
actions and attitudes

Source: Service Marketing Book-Valarie, Mary- PgNo 108 26

 General service behaviors – Do’s & Don'ts
THEME DO DONT
Recovery Acknowledge problem, Explain Ignore customer, Blame customer,
cause, Apologize, Compensate, Lay Leave customer to “fend for
out options, Take responsibility him/herself”, Downgrade, Act as
if nothing is wrong, “Pass the
buck”

Adaptability Recognize the seriousness of the Ignore, Promise- but fail to follow
need, Acknowledge, Anticipate, through, Show unwillingness to
Attempt to accommodate, Adjust try , Embarrass the customer,
the system, Explain rules/policies, Laugh at the customer, Avoid
Take responsibility responsibility.

Spontaneity Take time, Be attentive, Anticipate Exhibit impatience, Ignore,

needs, Listen, Provide information, Yell/laugh/swear, Steal from
Show empathy customer, Discriminate

Coping Listen, Try to accommodate, Explain, Take customers dissatisfaction

Let go of the customer personally, Let customers
dissatisfaction affect others

Source: Service Marketing Book-Valarie, Mary- PgNo 108 27

 THE EVIDENCE OF SERVICE

• Another major set of factor influencing customer perceptions of service is

referred to as the “evidence of service”, because services are intangible, customer
are searching for evidence of service in every interaction they have with an
organization.

• The three major categories of evidence as experienced by the customer:

1. People

2. Process

3. Physical evidence

Source: Service Marketing Book-Valarie, Mary- PgNo 115 28

 Evidence of service (from the customer point of view)

 Contact employees
 Customer him/herself
 Other customers

People

 Operational flow of activities

 Tangible communication
 Steps in process
 Servicescape
 Flexibility vs. standard
Physical  Guarantees
 Technology vs. human Process
Evidence  Technology
 Website

Source: Service Marketing Book-Valarie, Mary- PgNo 84 29

 IMAGE
 Beyond impressions from the immediate service encounter and evaluations of service
evidence, customer perceptions can be influenced by the image or reputation of the
organization. Here organizational image as perceptions of an organization reflected in the
associations held in consumer memory. These associations can be very concrete, such as
hours of operation, number of flights per day, length of time in business, ease of access. Or
they can be less concrete and even emotional, such as excitement, trustworthiness, tradition,
ingenuity, fun, reliability.
PRICE
 The price of the service can also greatly influence perceptions of quality, satisfaction, and
value. Because services are intangible and often difficult to judge before purchase, price is
frequently relied on as a surrogate indicator that will influence quality expectations and
perceptions. If the price is very high, customers are likely to expect high quality, and their
actual perceptions will be influenced by this expectation. If the price is too high, the
organization may be sending a message of unconcern for customer, or “ripoff”(Fraud).

Source: Service Marketing Book-Valarie, Mary- PgNo 84 30

 Service Quality
 Service quality can be defined as the delivery of excellence or superior service relative
to customer expectation. How customer judge service quality is the focus of this
section – Distinguish b/w Process Vs. Technical outcome quality.

Process v/s Technical outcome quality

 Ultimately, customer judge the quality of service on their perceptions of the technical
outcome provided and on how that outcome was delivered.
 For example: A legal service client will judge the quality of the outcome, or how the
court case was resolved, and also the quality of the process. Process quality would
include such things as lawyer’s timeliness, his responsiveness in returning phone calls,
his empathy for the client, his courtesy and listening skills.
 Similarly, a restaurant customer will judge the service on her perceptions of the meal
(technical outcome quality) and on how the meal was served and how the employees
interacted with her (process quality).
Source: Service Marketing Book-Valarie, Mary- PgNo 117 31
 Service quality dimensions
Researches have found that consumers consider five dimensions in their assessment of service quality.
Reliability
Situational
Assurance Factors
Service
Empathy Quality
Tangibles
Responsiveness

Product
Customer
Quality
Satisfaction

FIGURE: Customer Perceptions of

Quality and Customer Satisfaction

Price
Personal
Factors
32
Source: Service Marketing Book-Valarie, Mary- PgNo 123
 The Five Dimensions of Service Quality

Reliability Ability to perform the promised service dependably and

accurately.

Assurance Employees knowledge and courtesy and their ability to

inspire trust and confidence.

Tangibles Appearance of physical facilities, equipment, personnel,

and written materials.

Empathy Caring, individualized attention given to customers

Responsiveness Willingness to help customers and provide prompt service.

Source: Service Marketing Book-Valarie, Mary- PgNo123` 33

 Examples of how customer judge the 5 dimension of service quality

34
Source: Service Marketing Book-Valarie, Mary- PgNo 120
Strategies for influencing customer perception
1. Aim for customer satisfaction in every service encounter (Recovery,
adaptability, spontaneity and coping).
 Plan for effective Recovery.
 Facilitate Adaptability and Flexibility.
 Encourage Spontaneity.

 Help employees Cope with problem customers.

 Manage the dimensions of quality at the encounter level.

2. Manage the evidence of service to reinforce perceptions(3 P’s)

3. Communicate realistically and use customer experiences to reinforce images.

4. Use price to enhance customer perceptions of quality and value.

Source: Service Marketing Book-Valarie, Mary- PgNo 125 35

Understanding customer expectations and perceptions through marketing research

CUSTOMER
Expected
Service

Listening Gap Company

Perception of
COMPANY Consumer
Expectations

Source: Service Marketing Book-Valarie, Mary- PgNo 137 36

 Expected
Service
GAP
1

Key Factors Related to Marketing Research:

 Insufficient market research
 Inadequate use of market research
 Lack of interaction between manager and customer
 Insufficient interaction between contact employees and managers

Company
Perception of
Consumer
Expectations
Source: Service Marketing Book-Valarie, Mary- PgNo 138 37
 Basic Research Process

1 •Defining the problem and Research objectives

2 •Developing the research plan

3 •Collecting the information

4 •Analyzing the information

5 •Presenting the findings

38
Source: Service Marketing Book-Valarie, Mary- PgNo 138
Stages in the marketing research process of service

1 •Defining the problem and Research objectives

2 •Develop services measurement strategy

3 •Implement research program

4 •Collect and tabulate data

5 •Interpret and analyze findings

6 •Report findings

Source: Service Marketing Book-Valarie, Mary- PgNo 138 39

Source: Service Marketing Book-Valarie, Mary- PgNo 139 40
1. Defining the problem and Research objectives
Common Research Objectives for Services
• To identify dissatisfied customers, so that service recovery can be attempted.
• To discover customer requirements or expectations for service.

• To monitor and track service performance.

• To assess overall company performance compared with that of competition.

• To assess gaps between customer expectations and perceptions.

• To gauge effectiveness of changes in service delivery.

• To appraise the service performance of individuals and teams for evaluation, recognition, and
rewards.
• To determine customer expectations for a new service.

• To monitor changing customer expectations in an industry.

• To forecast future expectations of customers.

Source: Service Marketing Book-Valarie, Mary- PgNo 140 41

 2. Develop a service measurement strategy
1. Key predictors of satisfaction, those aspects of service that had the largest impact
on satisfaction.
2. Overall satisfaction, measures and
3. Consequences of satisfaction, positive or negative expected outcomes of
satisfaction.

Source: Service Marketing Book-Valarie, Mary- PgNo 142 42

 3. Implement the Research Program
 Criteria for an Effective Services Research Program.
 Includes qualitative and quantitative research.
 Includes both perceptions and expectations of customers.
 Balance 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 behavioral intentions.

Source: Service Marketing Book-Valarie, Mary- PgNo 143 43

 Stage 4 : Collect and tabulate the data (Average, std deviations)

 Stage 5 : Analyze and interpret the findings.

 Stage 6 : Report the findings.

Source: Service Marketing Book-Valarie, Mary- PgNo 143 44

 Building customer relationship through segmentation and retention strategies

 Relationship marketing means identifying, establishing, maintaining, and enhancing

relationships with customers and other stake holders at a profit, so that the objectives of all
parties involved are met. This is done by a mutual exchange and fulfillment of promises.
 Relationship marketing(Or relationship management) is a philosophy of doing business, a
strategic orientation, that focuses on Keeping and improving current customers, rather than
on acquiring new customers. This philosophy assumes that consumer prefer to have an
ongoing relationship with one organization than to switch continually among provider in
their search for value. Building on this assumption and the fact that it is usually much
cheaper to keep a current customer than to attract a new one, successful marketers are
working on effective strategies for retaining customers.
 Relationship marketing is the practice of building long-term satisfying relations with key
parties—customers, suppliers, distributors—in order to retain their long-term preference and
business…….. Philip Kotler

Source: Service Marketing Book-Valarie, Mary- PgNo 171 45

 GOALS OF REALTIONSHIP MARKETING
1. To build and maintain a base of committed customers who are profitable for the
organization.
2. To achieve this goal, the firm will focus on the attraction, retention, and enhancement of
customer relationships.

BENEFITS TO CUSTOMER
3. Customer will remain loyal to a firm when they receive greater value relative to what you
expect from competing firms.

4. Service provider will give priority service to the customers.

5. Trustable relationship with the service provider like banks, schools, retailers, doctors and
hairdressers.
6. In some long term customer/firm relationships a service provider may actually become part
of the consumer’s social support system.

Source: Service Marketing Book-Valarie, Mary- PgNo 173 46

BENEFITS FOR THE ORGANIZATION THE CUSTOMER ISN’T ALWAYS
 Increasing purchases RIGHT
 Lower costs  The wrong segment
 Free advertising through word of mouth  Not profitable in the long term
 Employee retention  Difficult customers
 Life time value of a customer

Underlying logic of customer retention benefits to the organization

Customer Satisfaction

Customer Retention Quality

& Increased Profits Service

Employee Loyalty
Source: Service Marketing Book-Valarie, Mary- PgNo 174 47
 The foundation of relationships: Market Segmentation

 Segmentation is a marketing strategy which involve dividing a broad

target market into subset of consumer, business or countries who have
common needs, interests and priorities and then designing and
implementing strategies to target them.
 The foundation of an effective customer relationship strategy is market
segmentation learning and defining who the organization wants to have
relationship with.
 Market segmentation is the process of aggregating customers with similar
wants, needs, preferences, or buying behavior. Market targeting involves
evaluating the attractiveness of the segments and selecting ones the firm
will serve.
 Segmentation is the analysis conducted about customers and targeting is
the managerial decision about whom to serve. Both of these are required
for effective market positioning, which involves establishing the
competitive position for the service in the mind of the customer and
creating or adapting the service mix to fit the position.

Source: Service Marketing Book-Valarie, Mary- PgNo 180 48

 Process of market segmentation and Targeting in services

STEP – 3
STEP – 1 STEP – 2 STEP – 4 STEP – 5
Develop
Identify Developing Ensure that
Measures of
Bases for Profiles of Select the Segments
Segment
Segmenting Resulting Target are
Attractivene
the Market Segments Segments Compatible
ss

Source: Service Marketing Book-Valarie, Mary- PgNo 183 49

STEP – 1 Identify Bases for Segmenting the Market
Bases for market segmentation
 Geographic segmentation – Nation, Country or States.
 Demographic segmentation – Age, sex, family size, income, occupation, religion.
 Psychographic segmentation – Social class, life style, personality characteristics.
 Behavioral segmentation- Knowledge, attitude, uses or responses.
Requirement for effective segmentation
 Measurability-The degree to which the size and purchasing power of the segment can be
measured.
 Accessibility-The degree to which the segments can be reached & served.
 Sustainability- The degree to which the segment are large or profitable enough.
 Actionability- The degree to which effective programs can be designed for attracting and
servicing of the segments.
Criteria for evaluating market segments for market targeting
 Segment size and growth-Includes information on current dollar sales, projected growth
rates, and expected profit margins.
 Segment structural attractiveness-Includes current and potential competitors, substitute
products and services, relative power of buyers, and relative power of suppliers.
 Company objectives and resources-Involves whether the segment fits the company’s
objectives.

Source: Service Marketing Book-Valarie, Mary- PgNo 182 50

STEP – 2 Develop profiles of resulting segments
 Scripps memorial hospitals, San Diego – Consulting on development of 80-bed
hospital in Aguascalientes sate. Training Mexican nurses and medical technicians.
Seminars for Mexican physicians.
 Texas medical center, Houston – Continuing education for Mexican physicians.
Physician exchanges. Travel and translation services. Foreign newspapers for
patients.

STEP – 3 Develop measure of segment attractiveness

 Segments must be evaluated in terms of their attractiveness. The size and
purchasing power of the segments must be measurable so that the company can
determine if the segments are worth the investment in marketing and relationship
costs associated with the group.
 Segment must be profitable in the long term in terms of revenues generated, and
they also should not place a disproportionate drain on the firm’s time and/or
human energy.
 The segment chosen also must be accessible, meaning that advertising or
marketing vehicles must exist to allow the company to reach the customers in the
segment.

Source: Service Marketing Book-Valarie, Mary- PgNo 184 51

STEP – 4 Select the target segments
 Based in part on the evaluation criteria in step 3, the services marketer will select
the target segment or segments for the service.
 The service firm must decide if the segment is large enough and trending toward
growth. Market size will be estimated and demand forecasts completed to
determine whether the segment provides strong potential.
 Competitive analysis, including an evaluation of current and potential
competitors, substitute products and services, and relative power of buyers and
relative power of suppliers, will also help in the final selection of target segments.
 Finally the firm must decide whether serving the segment is consistent with
company objectives and resources.
STEP – 5 Ensuring that the targets segments are compatible
 It is arguably more critical for service companies than for goods companies.
 Services are often performed in the presence of the customer, the services
marketer must be certain that the customers are compatible with each other.
 During a non peak season, a hotel chose to serve two segments that are
incompatible with each other – Eg: Family who are attracted by discount prices &
college students on their spring break, two groups do not merge well. They may
negatively influence each other experience, it may hurt hotels future business.

Source: Service Marketing Book-Valarie, Mary- PgNo 187 52

 Retention strategies
THREE LEVELS OF RETENTION STRATEGIES

1. Level 1 – The customer is tied to the firm primarily through financial incentives,
lower prices for greater volume purchase or lower prices for customers who have
been with the firm a lone time. Phone pay Discount on petrol.

2. Level 2 – Services are customized to fit individual needs, and marketers find
ways of staying in touch with their customers, there by developing social bonds
with them. Insurance agent – cards, gifts, birthday.

3. Level 3 – Structural bonds often are created by providing customized service to

the client that are technology based and serve to make the customer more
productive. Swiggy tape tag.

Source: Service Marketing Book-Valarie, Mary- PgNo 190 53

 Retention customer when things go wrong

 Track and anticipate recovery opportunities.

 Take care of customer problems on the front lines.

 Solve problems quickly.

 Empower the front line to solve problems.

 Learn from recovery experiences.

Source: Service Marketing Book-Valarie, Mary- PgNo 193 54

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