marketing of financial products ch 3
TRANSCRIPT
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Chapter III: Service, Satisfaction & Price
Dr. Karim Kobeissi
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Section 1: The Service Encounter
Within the framework of services, the product of the marketin! mi"
#ecomes the service offerin! marked #$ the service encounterwhich was defined as a period of time durin! which a consumerdirect%$ interacts with a service Shostack, 1'()
Product ****************************+ Service ffer
This definition of service encounter inc%udes a%% aspects of the servicefirm with which a consumer ma$ interact, inc%udin! its personne% andph$sica% assets)
The interaction #etween the contact staff, ph$sica% support, and thec%ient is represented #$ the service de%iver$ s$stem which can #edivided into two parts:
1- The visi#%e part .apparent to customers-)
/- The hidden part or the technica% core .the customer ma$ not evenknow of its e"istence-)
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The Service 0e%iver$ S$stem
The service de%iver$ s$stem is a
process which descri#es the
production of a service in a industria%
wa$, that is in a %ar!e num#er)
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The Service 0e%iver$ S$stem .con-
Ever$ e%ementar$ service is made #$ its
own service de%iver$ s$stem) The on%$
e%ement common to a%% service
de%iver$ s$stems of the e%ementar$
services is: the customer)
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Service 0e%iver$ S$stem & %ueprintin!
Shostack has proposed that a service de%iver$s$stem can #e captured in a visua% dia!ram .i)e),
a service #%ueprint-which mi!ht #e used for the
desi!n of services)
The #%ueprintin! e"ercise !ives mana!ers the
opportunit$ to identif$ potentia% fai% points.3- and
to desi!n foo%proof1procedures to avoid their
occurrence, thus ensurin! the de%iver$ of hi!h*
4ua%it$ service)
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Service Blueprinting1(Bank Lending Operation)2
Loan application Branch Officer Pay book
30in!!1hr"
Line of vi#ibility
$eny
1 day 2 day# 3 day#
%ail point &u#toer 'ait ployee deci#ion
* 0 *
+eceivePayent
%inalpayent$ecline ,otify
cu#toer-##uecheck
&onfir
&reditcheck
.cceptPrint
payentbook
$elin/uent&lo#e
account
erifyincoe
data-nitial
#creening
erifypayerployer &redit
bureau Branchrecord#
Bankaccount#
.ccounting
$ata ba#erecord#
%
&onf
ir
''
%
%
%
%
%
%
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1)1 5ana!ement of the Ph$sica% Environment
The mana!ement of the ph$sica%environmentconcerns three cate!ories of
e%ements:
6 The E"terna% E4uipmentsStructure, decoration, si!na%i7ation, parkin!, environment,8
6 The Interna% E4uipmentsInterna% structure, e4uipments used to serve the customer or to
mana!e the #usiness activit$,8
6 ther Tan!i#%e E%ementsPapers, visit cards, #ook%ets, emp%o$ees9 appearance,8
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Inf%uence of the Ph$sica% Environment on Perceived ua%it$
$ nature, a service is difficu%t to eva%uate #ut
potentia% customers can find indications in the
specificities of the service s$stem)
The e4uipments, insta%%ations, and financia%
resources wi%% #e e"amined carefu%%$) In fact #efore
or durin! a consumption of a service, de%i#erate%$
or accidenta%%$, the customer %ocates a%% the
materia% si!ns which inform him on its 4ua%it$)
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Inf%uence of the Ph$sica% Environment on the Service Process
The ph$sica% environment contri#utes to the improvement
of the service process #$ !ivin! to the customer the
necessar$ information on the avai%a#%e services and
their different ac4uirin! modes)
The ph$sica% environment improves the formu%ation of the
re4uest, the conditions of the service, and the
mana!ement of the of waitin! %ines)
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Inf%uence of the Ph$sica% Environment on 0ifferentiation
The ph$sica% environment is a too% of
differentiation for the #ank and its services
with respect to its competitors)
In fact, the appearance of faci%ities often
direct%$ impact how consumers perceive
the wa$ that the firm wi%% hand%e the
service aspects of its #usiness)
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Inf%uence of the Ph$sica% environment on Consumer9s ehavior
The impact of the ph$sica% environment on the consumer9s #ehavior is
represented in the S; mode% : stimu%us < or!anism < response)
Taken from an environmenta% ps$cho%o!$ perspective, this mode%
proposes that stimu%i .S- from the environment wou%d arouse
emotions in the or!anism .- that wi%% conse4uent%$ inf%uence
#ehavior responses .;-) The mode% su!!ests that a%% #ehaviora%
responses toward and within an environment can #e c%assified as
either approach or avoidance .=offman < ateson < 1>-)
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The S**; 5ode%
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1)/ The 5ana!ement of Contact Staff
?ike a%% service activities, #ankin! is characteri7ed #$ the vita%
ro%e p%a$ed #$ direct human re%ations #etween the #ank9s
staff and its customers) The predominant ro%e of persona%
contact is due to the intan!i#%e nature of the activit$) If the
contact staff does not provide to the customer the e"pected
service %eve%, it is the corporate ima!eof the #ank that wi%%
#e deteriorated) In this re!ard, the contact staff form a
stron! cause of differentiation) The$ have to promote
f%e"i#i%it$, adapt to different consumer #ehaviors,
and represent an o#stac%e a!ainst consumers9 dou#ts)
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The 5ana!ement of Contact Staff .con-
@enera%%$, the contact staff is trained accordin! to two
strate!ies :
1- ureaucratic strate!$: accordin! to this strate!$, the prime
responsi#i%it$ of the emp%o$ee is to protect the interests of
the #ank, the customer #ecomes then the enem$ from whom
we protect ourse%ves #$ settin! him the standards to which
he has to approve)
/- ?a"iste strate!$: accordin! to this strate!$, the primeresponsi#i%it$ of the emp%o$ee is to protect the interests of
the customer) The emp%o$ee shou%d do his #est to satisf$ the
customer)
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1)A The 5ana!ement of C%ient Participation
Two 4uestions are usua%%$ raised when discussin!
the mana!ement of c%ient9s participation:
a- Which theor$ shou%d we adapt to mana!e the c%ientswaitin! periodsB
Two conf%ictin! theoretica% mode%s are proposed:
1- 3ie%d Theor$: predicts that perceived waitin! time shou%d#e %on!er, and affective response shou%d #e more ne!ativedurin! the pre*process and post*process rather than in*
process de%a$)/- E"pectanc$ Theor$: su!!ests that a de%a$ that happened
durin! an in*process sta!e shou%d #e more irritatin! than ade%a$ in pre*process or post*process sta!e)
Whatever is the adapted mode%, it appears that the time is
perceived as %on!er and the de%a$ as more important in aninactivate de%a$ than in an occupied de%a$)
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The 5ana!ement of C%ient Participation .con-
#- What is the #est %eve% of c%ient9s participation .%ow, avera!e,
or hi!h- in co*production of the service B
dvanta!es of the customer9s participation in service production:
< The service is #etter adapted to the customer9s e"pectations
< The service is o#tained faster< The service is de%ivered at a %ower cost for the #ank
0isadvanta!es of the customer9s participation in service production:
* ?oss of contro% on the 4ua%it$ of the service #$ the #ank
* ?oss of contro% on the cost of the service #$ the #ank * @ettin! far from the c%ients9 views and e"periences)
6 IT IS ETTE; T P;E*;EST;ICT T=E ?EDE? 3 C?IETS9P;TICIPTI I T=E SE;DICE P;0FCTI)
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Section /: Customer SatisfactionSection /: Customer Satisfaction
0efinition of the concept
0espite man$ attempts to measure and e"p%ain
customer satisfaction, t eresti%% does notappear
to #e a consensusre!ardin! its definition.@iese
and Cote, /GG/-)
;eferrin! to Dan amme./GGA-, customer
satisfactionis definedas a ps$cho%o!ica% state,
which resu%ts from a #u$in! or a consumption
e"perience)
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/)1 The Importance of Customer Satisfaction
There is on%$ one va%id definition of #usiness purpose * to
create a customerH) =avin! created customers, the ne"t step
is to satisf$ them .Peter 0rucker, 1(-
Studies conducted #$ #anks showed that customer %o$a%t$ is
tri!!ered on%$ a#ove a ver$ hi!h %eve% of satisfaction) This
%eve% of satisfaction is dou#%$ intensified when it is remote
operations such as on%ine #ankin!) It is in this perspectivethat we must therefore capita%i7e on the new market of the
Internet, mana!e risks that new drains, raise the profi%e of
the user and !uide trade po%ic$ first to satisfaction, not
direct%$ to profita#i%it$)
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The E"pectation 0isconfirmation Paradi!m: 5ode% of Consumer ehaviorThe E"pectation 0isconfirmation Paradi!m: 5ode% of Consumer ehavior
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Perceived ua%it$ & Satisfaction
The o#Lective of mana!ement is to up!rade
perceived 4ua%it$ and conse4uent%$ increase
customers9 satisfaction) In this perspective two
components of 4ua%it$ can #e ana%$7ed:
1-Technica% 4ua%it$ which concerns the technica%
properties of the product that the consumer
receives as resu%t of the interaction #u$er * se%%er)
/-3unctiona% 4ua%it$ which is re%ated to the wa$
#u$er and se%%er interact durin! the transaction)
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Section A: Pricin! of 3inancia% Services
Throu!hout the service industr$, pricin! methods are increasin!%$
avoidin! the c%assica% computin! approach price M cost N
mar!inO .0esmet and Ko%%in!er, 1>-)
The reasons for this trend inc%ude #oth #ehaviors of the customer
and the supp%ier) The customer perceives the price #ased on
the e"istence of a norma% price, which serves as a reference,
and often interprets the price %eve% as a !uarantee of
4ua%it$) 3or the supp%ier, the 4ua%it$ of service and cost depend
on the rate of use of its e4uipments, as we%% as the num#er of
products so%d to the same customer)
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A)1 3oundations of Pricin! Strate!$
The foundations
under%$in! pricin!
strate!$ can #e
descri#ed as a tripod,with costs to the
provider, competition,
and va%ue1
to thecustomer as the three
%e!s)
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A)/ Traditiona% Pricin! pproach
The pricin! of #ankin! services isparticu%ar%$ important in a conte"t ofincreased competition %eadin!institutions to review their pricin!
po%ic$ and to redefine their o#Lectivesin one of the four maLor pathwa$s:
* Penetration of one or more se!ments) * Sa%es vo%ume ma"imi7ation)
* Profit ma"imi7ation)
* 0omination #$ the 4ua%it$)
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Traditiona% Pricin! pproach .con-
a- Penetration of ne or 5ore Se!ments
Penetration pricin! inc%udes settin! the price
%ow with the !oa%s of attractin! the
%ar!est num#er of consumers in the
tar!eted se!ment.s- and !ainin! market
share) The price wi%% #e raised %ater once
this market share is !ained)
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Traditiona% Pricin! pproach .con-
#- 0omination #$ the ua%it$
In some cases, the practice of a %ow price ma$ #e adverse%$
affected if the customer is concerned a#out the 4ua%it$ of the
product) If a #ankin! product has a hi!h perceived 4ua%it$,
the consumer is wi%%in! to accept a hi!h price and his
demand can #e affected #$ a %ow price %eve%)Thus a #ank can
increase its prices despite intense competition)
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Traditiona% Pricin! pproach .con-
c- Sa%es Do%ume 5a"imi7ation
The o#Lective is to use pricin! to stimu%ate the demand, accordin! to theo#served price e%asticit$ of demand)
Percenta!e chan!e in 4uantit$ demanded
Price E%asticit$ of 0emand M *************************************************************Percenta!e chan!e in price
We have an e%astic demand when the percenta!e chan!e in the 4uantit$ of
demanded service is !reater than the percenta!e chan!e in price) This
makes the ratio more than one)
We have an ine%astic demand when the percenta!e chan!e in the 4uantit$ of
demanded service is %ower than the percenta!e chan!e in price) This makes
the ratio %ess than one)
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Traditiona% Pricin! pproach .con-
ccordin!%$, If the market demand for a #ankin! service or
product is e%astic a price decrease #$ Q wi%% cause an
increase of RQ in the demand .R+-) %ternative%$, If the
market demand is ine%astic a price decrease #$ Q wi%%
cause an increase of RQ in the demanded .R-)
anks tr$ to ma"imi7e their revenues #$ reducin!
the prices of e%astic demand and increasin! prices
to ine%astic demand)
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Traditiona% Pricin! pproach .con-
d- Profit 5a"imi7ation
It is often sou!ht in a short*term perspective
and %eads to adoptin! the hi!hest price that
the market wi%% #ear, re!ard%ess of the cost
or of %on!*term conse4uences)
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Traditiona% Pricin! pproach .con-
d- Profit 5a"imi7ation
It is often %ooked for in a short*term perspective and %eads to
practise the hi!hest price which the market can to%erate,
without takin! into account costs or %on!*term
conse4uences) =owever, profit ma"imi7ation can a%so #e
app%ied in the %on!*term perspective) 3or instance, some
#ankin! services are offered free of char!e or to %ow price
whereas other re%ated services are hi!h%$ char!ed to
compensate for the %ow profits of the first ones)
Whatever the perspective, short*term or %on!*term, profit
ma"imi7ation does not necessari%$ app%$ to a sin!%e product
or service #ut rather a set of interre%ated products)
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A)A Emer!in! Pricin! pproach
mon! the recent deve%opments and prospects for deve%opin!
new pricin! methods in the services sector, two methods are
of particu%ar interest in the #ankin! sector:
1- ;e%ationa% Pricin!
It can #e defined as a strate!$ that encoura!es the c%ient to
deve%op its contacts with the service provider, itHs main
o#Lective is to stren!then and retain re%ationships) This
method of pricin! can take two forms:
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Emer!in! Pricin! pproach .con-
a- ?on! term supp%$
In this conte"t, new customers are offered price and non*price
incentives to maintain a %on!*term re%ationship with the same
service provider) continuous f%ow of transactions with the
same customer wi%% reduce mana!ement costs and therefore
improved profita#i%it$ for the supp%ier)
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Emer!in! Pricin! pproach .con-
#- Packa!es
0esi!ned as a #und%e comprisin! at %east two products or
services, it %eads to a reduction in the mar!ina% cost of each
product or service and deve%opment of shared costs) Some
services and products firms !ive consumers a choice
#etween #u$in! services separate%$ and #u$in! #und%e for a
discount .mi"ed #und%in!* Comp%ementar$ Products-)
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