Do you know your customer? That is the question that every business owner should ask themselves. If your response is something along the lines of “sort of” or “not really,” then now is the time to change that. With companies struggling to find new ways to attract customers, most businesses are missing an essential aspect to it all. Without fully understanding one’s customer, developing new products and marketing campaigns are futile. One cannot expect to be successful without being able to understand their target market.
While companies invest millions into their advertising and marketing campaigns, the biggest area that fails to receive appropriate attention is services marketing. Services marketing examines the relationship between the company and its customer as well as the quality and value that the customer experiences. While many may believe that this is just a small part of a larger picture, evidence shows that services marketing is playing a much larger role in the success and failure of companies.
Why Services Matter
As of 2006, the service sector represented nearly 82% of total employment in the United States. From hospitality to health care, the service industry spans many different fields. With nearly 8 out of 10 Americans being part of the service sector, services marketing is not just beneficial, it’s essential. Not only does the service sector account for nearly 82% of the total employment, but it also accounted for nearly 80% of the U.S. GDP.
Even with the current state of the economy, the service sector is a huge part of our economy as well as globally with 91% of Hong Kong’s GDP coming from the service sector. For many business minded individuals, the 4 P’s of marketing (Product, Place, Promotion, and Price) are thought of as the basic keys to success. Traditionally, it’s believed that if you can follow through with these four, you would be in good shape. For services marketing though, 3 additional P’s are introduced: People, Physical Evidence, and Process. With the introduction of the 3 additional P’s, a business owner can use these to effectively asses their businesses performance.
Breaking It All Down
In a business, anyone who plays a part in the service delivery has an influence on the customers experience. This is one of the most important areas that should be examined as people have a direct influence on whether a customer has a positive or negative experience.
Your business doesn’t start when a customer exchanges payment, but rather way before that when the customer first comes upon your store. A businesses servicescape has a huge impact on the service process as well as the customers experience.
Process refers to the actual flow of activities by which a service is delivered. One way to think of it is as a flow chart. If you are a restaurant for example, creating a flow chart that outlines from the moment a customer walks in to the moment they leave is important to ensure that your business is running at maximum efficiency. Businesses like P.F. Chang’s enable these flow charts which allow them to serve their customers in a timely manner.
How To Apply It To Your Business
One of the most effective ways that a business can begin to look at services marketing is to ask these four basic questions:
Who is your customer?
What is the service you provide?
How effectively does your service communicate its benefits and quality?
What improvements need to be made?
Using the 3 additional P’s as mentioned earlier, one should be able to increase efficiency as well as increase customer satisfaction. Increasing customer satisfaction should be of the utmost importance to a business. For every good experience that a customer has, they will tell on average about 5-6 people about it. When a customer has a negative experience, that number doubles to around 12-13 people.
By having positive customer satisfaction, businesses will see an increased customer retention, a positive word of mouth communication as well as most importantly, increased revenue.
Companies That Got It Right
When you look at companies like The Ritz Carlton and Southwest, one of the biggest keys to their success is their ability to satisfy their customer. They know what their customers want and they find a way to give it to them. The Ritz Carlton understands that guests staying at their properties demand luxury, while Southwest understands that their passengers want affordability without having to give up quality. The Ritz Carlton has built itself upon the reputation of providing its guests with luxury while Southwest is known for its affordable rates and quality service.
To get to these levels of customer satisfaction, companies like The Ritz Carlton and Southwest have devoted millions toward their service marketing efforts. From the questionnaires you find in the hotel rooms to the careful attention to customer service, although the average consumer may feel like their opinion is insignificant, it is in fact quite the opposite.
The importance of services marketing is further supported by a recent article by Fast Company where they took a closer look at how CEO Clarence Otis and his team at Darden (parent company) turned Olive Garden into one of the top food chains in the United States. Prompted by declining sales, Otis turned toward research to ‘rescue’ Olive Garden. Specifically, Otis wanted to target its’ customers to find out what they wanted and what they thought of Olive Garden.
From their research, then COO Drew Madsen, stated that “people come to a restaurant for both physical and emotional nourishment. The physical is the food; and the emotional is how you feel when you leave.” The problem was that Olive Garden wasn’t doing that for their customers. In response to this Otis gave Olive Garden a makeover. From changing the tables to larger Italian family style tables to CIT (Culinary Institute of Tuscany) inspired dishes, Olive Garden addressed their customers emotional and physical needs. As a result, Darden is now the country’s largest full-service restaurant operation with nearly half of its $6 billion dollar revenue coming from Olive Garden.
Don’t Assume, Be Sure
As discussed, knowing your customers expectations can not only help improve your brand, but can also be beneficial financially. The biggest mistake that a business can do is to assume that they know what their customers want. The best example is what happened with the Big 3 automakers. For years they had heard consumers demand greener, more efficient cars, yet they chose to ignore it. As they continued to pump out the gas guzzlers that focused more on power rather than efficiency, their sales went down to which they responded by pouring more money into their marketing and advertising campaigns. Today we see where that has taken them. Companies that take the time to research and interact with their customers will be able to provide better service and also yield greater results. While it is not fair to say that all businesses will end up the way the Big 3 have if they don’t pay attention to their customers, the popular cliche “the customer is always right” isn’t far from the truth.
Photo by June1777