service recovery strategies-

Service recovery strategies are crucial for businesses to address and resolve issues
that arise in the delivery of products or services. Effective service recovery can help
retain customer loyalty and mitigate potential damage to the business's reputation.
Here are some common service recovery strategies:
1. Apologize and Acknowledge the Issue:
- Begin by apologizing for the inconvenience caused to the customer.
- Acknowledge the problem and demonstrate empathy to show that you
understand and care about their experience.
2. Act Quickly:
- Respond promptly to customer complaints or issues. Quick action can prevent
further dissatisfaction and demonstrate a commitment to resolving problems
efficiently.
3. Provide a Solution:
- Offer a practical and fair solution to address the customer's concerns. This might
involve a refund, replacement, discount, or another form of compensation,
depending on the nature of the issue.
4. Empower Frontline Staff:
- Ensure that frontline employees have the authority and tools to resolve issues on
the spot. This can expedite the service recovery process and improve customer
satisfaction.
5. Learn from Mistakes:
- Conduct a thorough analysis of the root cause of the issue. Use this information
to implement changes in processes, training, or product/service offerings to prevent
similar problems in the future.
6. Seek Customer Feedback:
- Encourage customers to provide feedback on their experience, both positive and
negative. Use this feedback to continuously improve products and services.
7. Communication:
- Keep the customer informed throughout the service recovery process. Regular
updates help manage expectations and demonstrate transparency.

Remember that every service recovery situation is an opportunity to turn a

dissatisfied customer into a loyal advocate for your business. By implementing
effective service recovery strategies, you can not only resolve current issues but also
build stronger customer relationships in the long run.
impact of service failure
Service failure can have significant and wide-ranging impacts on a business. The
consequences of service failure can affect various aspects of the organization, its
reputation, and its relationship with customers. Here are some of the key impacts of
service failure:
1. Customer Dissatisfaction:
- One of the immediate and direct impacts of service failure is customer
dissatisfaction. When customers do not receive the expected level of service, it can
lead to frustration, disappointment, and a negative perception of the business.
2. Loss of Customer Trust:
- Service failures erode customer trust in the company. Trust is a crucial element in
building long-term relationships, and once it's damaged, it can be challenging to
regain.
3. Negative Word-of-Mouth:
- Dissatisfied customers are likely to share their negative experiences with others.
With the prevalence of social media and online review platforms, negative word-of-
mouth can spread quickly and reach a large audience, potentially harming the
company's reputation.
4. Impact on Brand Image:
- Service failures can tarnish a company's brand image. The way a business
handles service issues is closely tied to its overall reputation, and repeated failures
can lead to a negative perception in the eyes of both existing and potential
customers.
5. Customer Churn:
- Continuous service failures may result in customers choosing to switch to
competitors. Losing customers not only impacts immediate revenue but also reduces
the lifetime value of a customer.
6. Reduced Customer Loyalty:
- Loyalty is built on positive experiences. Service failures can break the loyalty
bond with customers, making them more likely to explore alternatives and less likely
to remain loyal to the brand.
To mitigate these impacts, businesses should proactively address service failures,
implement effective service recovery strategies, and continuously strive to improve
their processes to provide a better customer experience. A focus on customer
satisfaction and service excellence is essential for long-term success and
maintaining a positive brand image.
role of physical evidence in service
 Physical evidence provides a tangible representation of the service's quality
and reliability

➢ Unique and well-designed physical elements can help a service provider create a
distinct and memorable brand identity

➢ The appearance and condition of physical facilities, equipment, and materials can
signal the level of quality in a service

➢ significantly impact the customer's experience

➢ Customers often judge a service based on their sensory perceptions. Cleanliness,

organization, aesthetics, and ambiance all influence how customers perceive the
service

➢ layout, decor, signage across different locations or interactions with the service
provider can provide customers with a sense of predictability and reliability.

➢ Physical evidence serves as a communication tool that conveys information about

the service

➢ Physical evidence can evoke emotional responses from customers.

➢ Engaging physical evidence can encourage customer interaction and participation

in the service
pricing and promotion of service
Pricing methods-( three basic marketing price structure)
Cost-based pricing: - As costs set the minimum price, a service company should
charge a price which covers the cost of producing, distributing, and selling the
product. However, it’s more difficult to determine costs of creating service
performance than it is to identify costs associated with producing a physical good.
Additionally, many service companies need to develop infrastructure to create
performances, which results in a very high ratio of fixed costs to variable costs.
Value-based pricing:- The customer’s perceived value sets a ceiling on the price that
a company can charge for its products, which means that customers will not pay
more for a service than they believe it is worth. Therefore, the knowledge about
value perception is essential for setting the right price. First, it is important to create
value proposition which is an essential part of marketing strategy. Then, a service
company communicates value to its customers usually by using different tools, such
as advertising, public relations, personal selling, and others. Perceived value is
made up of various elements including the customer’s image of the product
performance, company’s reputation, customer service, ease of delivery, warranties
offered as well as elements of service environment.
Competition-based pricing:- Competitors set prices for services within the floor-to-
ceiling range; however, they use different strategies to achieve their objectives. The
knowledge about competitors’ costs, prices, and market offerings is crucial for a
company when setting its own prices. When competing services are relatively
undifferentiated, the price becomes an important factor influencing buying decisions,
so offering competitive prices makes sense. Similarly, with a large number of
competing services and wide availability of substitutes, price competition usually
intensifies; however, there are several circumstances which might reduce the
tendency to compete on price.
Service pricing strategy-
Service pricing is a critical aspect of a business strategy, and it requires careful
consideration to ensure profitability, competitiveness, and customer satisfaction.
Here are some common service pricing strategies:
1. Penetration Pricing:
- Initially set a lower price for the service to gain market share quickly. This strategy
can be effective for new services entering the market, but businesses must be
prepared to increase prices once a customer base is established.
2. Skimming Pricing:
- Set a high initial price for a unique or innovative service and gradually lower it
over time. This strategy is often used for cutting-edge services to maximize revenue
from early adopters before attracting a broader customer base.
3. Freemium Pricing:
- Offer a basic version of the service for free and charge for premium features or
enhanced functionality. This strategy is common in industries such as software and
online services.
4. Dynamic Pricing:
- Adjust prices based on demand, supply, or other market conditions. This can
involve offering discounts during off-peak times or premium pricing during peak
demand periods.
5. Bundling:
- Bundle multiple services together and offer them at a lower combined price than if
each service were purchased separately. This can encourage customers to buy more
services and increase overall revenue.
6. Subscription Pricing:
- Charge customers a recurring fee for ongoing access to a service. This model is
common for software-as-a-service (SaaS), streaming services, and other
subscription-based businesses.
It's important to note that pricing strategies should align with the overall business
strategy and take into account the target market, competitive landscape, and the
perceived value of the service. Regularly reviewing and adjusting pricing strategies
based on market dynamics and customer feedback is also crucial for long-term
success.

Pricing strategies and four value definition

Pricing strategies are closely tied to the perceived value that customers derive from
a product or service. To effectively implement pricing strategies, businesses often
consider the four value definitions: economic value, functional value, experiential
value, and psychological value. Let's explore each value definition and its connection
to pricing strategies:
1. Economic Value:
- Definition: Economic value is the perceived monetary worth of a product or
service. It's the customer's assessment of the benefit gained compared to the cost
incurred.
- Connection to Pricing Strategies: Pricing strategies based on economic value
involve setting prices that align with what customers are willing to pay for the benefits
received. This can include cost-plus pricing, value-based pricing, and dynamic
pricing. The goal is to ensure that the perceived economic value exceeds the price.
2. Functional Value:
- Definition: Functional value refers to the tangible benefits and features a product
or service provides to the customer. It addresses the question of how well a product
or service performs its intended function.
- Connection to Pricing Strategies: Pricing based on functional value involves
aligning the cost of the product or service with its functional benefits. Businesses
offering high-quality, feature-rich products might implement value-based pricing,
where the price is determined by the functional advantages provided. This strategy
aims to capture the perceived utility and effectiveness of the product.
3. Experiential Value:
- Definition: Experiential value is the emotional or psychological satisfaction a
customer derives from using a product or service. It encompasses the overall
experience, including feelings, enjoyment, and the intangible aspects of the
customer journey.
- Connection to Pricing Strategies: Pricing strategies that consider experiential
value focus on setting prices that reflect the emotional impact and positive
experiences associated with the product or service. Premium pricing, skimming, and
psychological pricing may be used to convey a sense of exclusivity or enhanced
experience, leading to a higher perceived value.
4. Psychological Value:
- Definition: Psychological value is related to the perceived worth of a product or
service influenced by psychological factors, such as brand image, perception of
scarcity, and social influence.
- Connection to Pricing Strategies: Psychological value is often leveraged in pricing
strategies to influence customer perceptions. Tactics like prestige pricing (setting a
high price to create an image of exclusivity), bundling, and discounts can impact the
psychological value. For example, a limited-time discount may create a sense of
urgency and increase perceived value.
In summary, the four value definitions play a crucial role in shaping pricing strategies:
- **Economic value** guides strategies that ensure customers see a clear benefit in
relation to the cost.
- **Functional value** influences strategies that align pricing with the tangible
benefits and features of a product or service.
- **Experiential value** contributes to strategies that emphasize the emotional and
intangible aspects of the customer experience.
- **Psychological value** is harnessed in strategies that leverage customer
perceptions, emotions, and social influences to enhance the perceived value of a
product or service.
customer role in service
Customer as productive resource:

➢ Service customers are referred as partial employees of the organization.

➢ They are the human resource who contribute to the organization’s productive
capacity

➢ if the customer contributes effort time or other resources to the service production
process they should be considered as the part of the organization

➢ customer’s input can affect the organization's productivity through both the quality
of what the contribute and the resulting quality and quantity of output generated

➢ Customers can influence both the quality and quantity of production.

Customers - contributor to quality & satisfaction:-

➢ Customers are the major contributors to service quality and satisfaction

➢ Customers play a significant role in increasing the quality of the service when they
ask questions, ➢ complaint when there is service failure.

➢ if the organization includes the customer also partner in identifying and satisfying
need , can achieve higher level of service quality.

➢ Many research revealed that customer who believe they have done they are part
properly to be effective in service interaction are more satisfied with the service.
Customer as the competitor:-
Due to the advancement of Technology, nowadays many services are performed
solely or partially performed by the customers , mainly Self Service Technologies like
ATM, online banking, online insurance buying, online recharge, tax preparation and
payment interphases etc. Here the customers are also becoming the competitor.
zone of tolerance-
The "Zone of Tolerance" is a concept in service marketing that refers to the range of
acceptable service delivery variations that customers are willing to tolerate. It
represents the difference between customer expectations and their perception of the
actual service received. Understanding and managing the zone of tolerance is
crucial for service providers to meet or exceed customer expectations and deliver a
positive service experience.
Here's how the concept of the Zone of Tolerance works:
1. Customer Expectations:
- Customers enter a service encounter with certain expectations regarding the
service quality. These expectations are influenced by factors such as past
experiences, word-of-mouth, advertising, and personal needs.
2. Perceived Service:
- After experiencing the service, customers form perceptions of the actual service
received. This perception is based on the tangible and intangible aspects of the
service encounter, including the quality of interactions, responsiveness, reliability,
and other service dimensions.
3. Zone of Tolerance:
- The Zone of Tolerance is the range or gap between customer expectations and
their perceptions of the service. It consists of two components:
- Zone of Adequacy: The range within which service delivery is deemed
satisfactory, and customers feel that their expectations have been met.
- Zone of Unacceptability: The range beyond which service delivery falls short of
expectations, leading to dissatisfaction.
4. Service Quality Outcomes:
- Depending on where the perceived service quality falls within the Zone of
Tolerance, different outcomes may occur:
- Satisfaction: When perceived service quality is within the Zone of Adequacy,
customers are satisfied, and their expectations are met or exceeded.
- Dissatisfaction: When perceived service quality falls within the Zone of
Unacceptability, customers are dissatisfied as the service does not meet their
expectations.
5. Managing the Zone of Tolerance:
- Successful service providers actively manage the Zone of Tolerance by:
- Continuously monitoring customer expectations.
- Improving service delivery to narrow the gap between expectations and
perceptions.
Leading Factors for GAP-I
1. Inadequate Marketing Research Orientation
2. Lack of Upward Communication
3. Insufficient Relationship Focus
4. Inadequate Service Recovery
Leading Factors for GAP 2
1. Poor Service Design
2. Absence of Customer Driven Standard
3. Inappropriate Physical Evidence & Servicescape
Leading factors for GAP 3
1. Deficiencies in HR policies
2. Failure to match supply & demand
3. Customers not fulfilling roles
4. Problem with service intermediaries
Leading Factors for GAP 4
1. Lack of integrated Service Marketing Communication
2. Ineffective management of customer expectations
3. Overpromising
4. Inadequate Horizontal Communication
5. Inappropriate Pricing
service quality

Tangibles:
1. Tangibles refer to the physical and visible aspects of the service, such as
facilities, equipment, appearance of personnel, and communication materials.
Cleanliness, modern equipment, and professional appearance contribute to
positive perceptions of service quality.
2. Reliability:
Reliability is the ability of the service provider to consistently deliver accurate,
dependable, and promised services. It involves delivering the service as agreed
upon, meeting deadlines, and maintaining consistency over time.
3. Responsiveness:
Responsiveness relates to the promptness and willingness of service providers to
help customers and provide timely service. It involves attentiveness, quick problem
resolution, and a customer-focused approach.
4. Assurance:
Assurance reflects the competence, courtesy, credibility, and the ability of service
providers to instill confidence in customers. This dimension includes the knowledge
and courtesy of employees, their ability to convey trust, and the overall
professionalism of the service encounter.
5. Empathy:
Empathy refers to the ability of service providers to understand and address
customers' individual needs and concerns. It involves showing care, concern, and a
willingness to listen, creating a personalized and customer-centric experience.