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					                   Unit 3: Marketing Strategies

STRATEGY AND PLANNING:

    Philip Kotler said of planning that it was deciding in the present what to do in the
     future.
    It involves both the determination of a desired future and the steps necessary to bring
     it about.
    Three levels of planning have been identified:

     a) Corporate or visionary planning: Mission and structure for evaluating and
        allocating resources to business
     b) Business planning: Long-range planning for positioning the company and its
        products to best serve its target markets.
     c) Functional planning: Marketing planning which is generally annual planning
        involving specific goals and plans over one year.

     Strategic Planning for Marketing (Adapted from Gilligan & Fifield, 1997)




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Strategy & strategic levels:
In marketing:
     "Strategy" can be used to describe the means of achieving an objective; or
     "Strategy" can be used to describe an approach, stance or long-term plans. So
       "strategic planning" means a higher level of planning.
     Wilson, Gilligan and Pearson in Strategic Marketing Management, readily admit that
       there is no standard definition of "strategy", but highlight three "levels" of strategy:
     Corporate strategy – dealing with the allocation of resources throughout the entire
       organisation, covering all of the various businesses or divisions
     Business strategy – which exists at the individual business or division level and is
       concerned with the question of competitive positioning
     Functional-level strategy – which is limited to the actions of specific functions within
       specific businesses.


                           CORPORATE STRATEGY

Strategies are formulated as a response to the various factors in the company's environment
– and these may come from both external and internal sources.

(a) External

      Nature of the competition and the products which are on offer in the marketplace
      Political, economic, social and technological pressures
      Needs and requirements of the buyers
      Changes which are, or are likely to be, taking place in the environment

(b) Internal

      Corporate objectives
      Size and power of the company
      Availability of resources
      Current and past practices
      Expectations of stakeholders
      Position of the firm in the marketplace
      Nature of the firm's business (leader/follower)
      Managerial stance and attitude (aggressive/or not)

Organisational Stance and Positioning

Managerial stance and attitude can have a big influence on strategy formulation.
Organisations can be categorised as being any one of the following:

Leaders:
    These are innovative companies who are regularly first into the marketplace with new
      products.
    They tend to be powerful companies who will have major market shares and the
      benefit of abundant resources.
   They must adopt strategies which will:
    Protect their current market share by using the mix, or
    Encourage current customers to use more, or

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      Attract and retain new users and/or customers, or
      Redesign the product/service for new and existing users, or
      Introduce new products to new markets.

   Companies can carry out these strategies by adopting a stance of:
    Innovation – always being in front of the competition
    Fortification – activities aimed at keeping the competition down
    Confrontation – aggressive promotion, price wars
    Harassment – pressure on distributors, criticising competition

(b) Followers:
     These are the companies who do not invest heavily in research and development (R
        & D) but "copy" what the leaders do.
     This type of company will never get the initial major market share, but they do not
        have to invest money in development or in making the target market "aware", as the
        leaders will have already done this
     Followers are often referred to as "me-too" marketers in that they do not come up
        with original ideas or practices

(c) Nichers:
     These types of organisation are those that are, to one extent or another, providing a
       "specialised" product offering.
     They will have some kind of USP (unique service proposition) which they can offer to
       their customers.
     Niche marketers are often left alone by the market leaders

Attack Strategies

   (a) Direct Challenge – Differential Advantage:

      This is a high-risk strategy but one with potentially high pay-off.
      Such a policy requires sufficient working capital and management determination to
       last out a long campaign

   (b) Direct Attack – Distinctive Competence:

      Removing the distinctive competence from the market leader by innovation is
       extremely effective providing that the advantages are valued by the target market
       and communicated effectively.
      A classic example is Xerox, who took the copying market away from 3M by
       introducing a better process.

   (c) Direct Attack – Market Share:

      Introducing the smaller firms strongly in the market can build market share very
       quickly – providing that it is possible to retain
       Normally there will be loss of trade as old brands change to the new, but the
       promotional stimulus may well shake a few percentage points from the market leader
       in exchange for what is lost.




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(d) Flank Attack:

   This involves the location of a position which is not open and which it is possible to
    occupy and hold.
   When segmentation analysis reveals a niche that is not being served, it is first
    necessary to ask why. If the answer is not "because it is untenable" then it becomes
    available as an attack base from which to build market presence and share.

(e) Encirclement:

   An encirclement attack endeavours to overwhelm a competitor by simultaneous
    attack on every front: an expensive strategy, but one extremely difficult (and
    expensive) to resist.
   Casio's approach to the calculator market is a typical example of encirclement. They
    overwhelmed the opposition by a constant stream of ever better, ever cheaper
    products until they achieved dominance.

(f) Bypass:

   The most indirect assault involves broadening a resource base over a period whilst
    avoiding confrontation until strategically prepared.
   In 1971 Colgate was underdog to Proctor and Gamble; by 1976 it was well placed in
    75% of its markets, and out of contact with P & G in the remainder.

(g) Guerrilla:

   A relatively small competitor cannot attack aggressively on a broad front but can
    choose where and when to hit in the knowledge that the big competitor is likely to be
    slow in response.
   Profits are therefore taken before response comes – by which time the smaller firm is
    striking elsewhere.
   This is unlikely to defeat the market leader but it can take a substantial amount of
    profits from the market.
   The Hoppa buses introduced in UK cities have become a serious nuisance to the
    established major companies operating traditional buses on fixed routes.

Defence Strategies

    (a) Position Defence:

   Based upon a clear positioning that is established over years of effort (as the Mars
    Bar has been), a position defence consists of flexible consolidation.
   Promotional innovation is needed to keep the product alive, healthy and active in the
    minds of its customers and consumers.
   An innovative leader will usually have massive cost advantages and be able to
    withstand sustained attack

    (b) Pre-emptive Defence

   Nestlé are past masters at this type of market strategy – from comparatively few
    production lines they now produce many branded versions of the same canned milk,
    and not all are intended to be market leaders.



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       (c) Counter-offensive:

      This is an aggressive response to an attack in order to prevent loss of market share.
       Responses involve using mix elements.
      When Cadbury's attacked Mars they were immediately faced with an overwhelming
       counter-offensive. They withdrew from the confrontation.

       (d) Mobile Defence

      This is good marketing policy even without the threat of an attacker on the horizon
       because it involves constant moving, through innovation, market broadening and
       diversification into new territory.
      It requires a willingness to "go where no-one has gone before"
      Richard Branson and his Virgin Empire exemplify the entrepreneurial approach to
       growth through mobility.

       (e) Flanking Defence

      The American car giants exemplify failure in attempts to erect effective flank
       defences.
      Alert to the threat from Japan, which was focused on small cars, they attempted to
       protect their overall position with hastily designed American compacts.
      These were no competition for the very efficient Japanese competition, and the
       flanking defence turned out to be a major distracter

       (f) Contraction Defence

      Pulling back to a position of strength to be better able to mount a counter-attack is
       sometimes a good policy.
      The British motor-cycle industry contracted before each successive wave of
       Japanese imports until there was no effective British motor cycle left.


                            MARKETING STRATEGIES

      The marketing strategy is the means of achieving the corporate objectives.
      It gives messages to the stakeholders, or publics. It says:
                   "This is where we are going", and
                   "When we will get there", and
                   "This is our stance".

Types of Marketing Strategy

      One of the most fundamental issues which a company must decide on is the type of
       marketing strategy, or approach, that they will adopt.
      There are three basic marketing strategies which any company can follow:

                     Undifferentiated marketing
                     Differentiated marketing
                     Concentrated marketing.




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Undifferentiated Marketing:

      Here there is a standard, unchanged product and a standard, unchanged marketing
       effort.
      This strategy can reduce costs (e.g. marketing, production) but will encounter
       wastage in promotional activity and possibly in distribution.

Differentiated Marketing

      Here the company segments its markets and offers modified products to different
       segments.
      The marketing mix elements will also be modified to suit the requirements of the
       chosen segments.

Concentrated Marketing

      Here the total marketing effort is aimed at one market segment.
      This strategy is really aimed at the exploitation of a limited market area and tends to
       be used by those companies who have highly specialised products. It is "niche
       marketing" by another name.

    It is common for organisations with a diverse product range to use a combination of
       all three strategies for different parts of their product mix




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                        CORPORATE OBJECTIVES
    Corporate objectives relate to the entire organisation and are essentially longer term
     and broad in their coverage.

   Objectives should be SMART:

    Specific – Measurable – Achievable – Realistic – Timed.

    These overall corporate objectives will represent the expectations of senior
     management and other important stakeholders, and may be expressed in either
     quantitative or qualitative terms.

   (a) Quantitative

    Quantitative objectives (in terms of numbers) can relate to money, percentages,
     periods of time, output figures, etc. Examples are:
    "To achieve 5% year-on-year growth in profit after tax for the next five years."

   (b) Qualitative

    Qualitative objectives (in terms of "ideals") can relate to service levels to be
       achieved, image, position, ethics, etc.
    The following is an excerpt from a statement of objectives published in the annual
       statement of a police force in northern England:
"Within five years, or as soon as is practicable, to have a police force which:
    Is more open, relaxed and honest with ourselves and the public;
    Is more aware of our environment, sensitive to change and positioning ourselves to
       respond to change;
    Is more closely in touch with our customers, puts them first and delivers what they
       want quickly, effectively and courteously;
    Is the envy of all other forces."


                         MARKETING OBJECTIVES

Nature and Purpose of Marketing Objectives

    Marketing objectives, in exactly the same way as corporate objectives, can be
     expressed in either qualitative or quantitative terms, e.g.
    "To increase market share by 5% each year for the next five years."
    "To be recognised as the leading supplier of pre-packed meals to the airline
     industry by the end of 1999."

    The main purpose of marketing objectives is to achieve the corporate objective(s).
    Over and above that prime function, marketing objectives should give direction

Defining Marketing Objectives

Gilligan et al, in Strategic Marketing Management (1992) present two published viewpoints
of researchers who have identified possible marketing objectives:



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(a) McKay (1972)

McKay suggested that there were only three possible marketing objectives:
   To enlarge the market
   To increase market share
   To improve profitability.

(b) Gultinan and Paul (1988)

Gultinan and Paul argued that six objectives should be given consideration:
    Market share growth
    Market share maintenance
    Cash flow maximisation
    Sustaining profitability
    Harvesting
    Establishing an initial market position.

Gilligan et al then go further to suggest that the supportive thinking for both of these
viewpoints can be said to reflect the thinking of Ansoff on marketing objectives.

(c) Ansoff (1968)

Ansoff argued that marketing objectives can only ever be about:
    Products, and
    Markets

   And that products and markets are either

    Existing, or
    New.

This means that, according to Ansoff, marketing objectives should always be expressed in
terms of existing or new products or markets – or a combination of all four factors, as
expressed in the following model.




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       Factors Influencing Marketing Objectives

    The influences on marketing objectives can be related to the external and internal
     forces

The external environment:
    A rapidly changing environment
    Government legislation
    Uncertainty on competitive activity or actions
    Changes taking place in technology, in particular internet based technologies such as
      SMS, downloads, broadband etc
    Different patterns of population or buying behaviour
    Recessionary economics, etc.

The internal environment:
    Unrealistic corporate objectives
    Poor planning skills
    Narrow viewpoint of the planners
    Lack of resources
    Fear of failure to achieve limiting creativity
    Lack of knowledge of the market environment, etc.


       Maintaining the Competitive Edge

    Every company that is in business for a reasonable length of time must do something
     better than its competitors – at least in the opinion of a number of customers.
    That something better may involve various factors, ranging from location and delivery
     to product performance and marketing.
    Service industries need to consider how competitive advantage is gained through the
     delivery of the service and how process improvements can be made to add value

       So what can the marketing manager do to maintain the competitive edge?

       (a) Product/Service Quality
       (b) Availability
       (c) Price
       (d) Promotion
       (e) People
       (f) Processes
       (g) Physical Evidence

Benefits of Marketing Objectives

Providing marketing objectives are defined clearly and communicated correctly, they can
bring many advantages:
     They give a clear direction to the personnel involved
     They can create unity
     They allow for measurement of achievement
     They can reduce risk
     They can improve decision-making




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Problems in Formulating Marketing Objectives

Despite the fact that so many advantages can be gained, it is a sad fact that many
organisations find it almost impossible to define good marketing objectives. There can be
several reasons for this.
    Fear of Failure
    Apathy
    Success
    Organisational Culture
    Lack of Knowledge

 MODELS FOR FORMULATING MARKETING STRATEGIES

Ansoff Model:

    Ansoff claimed that in marketing we can only ever be talking about products and
       markets, and that these can only be old, or existing, and new, or potential.

Thus marketers have:
    Existing products which they can sell to existing markets
    Existing products which they can sell to new markets
    New products which they can sell to existing markets
    New products which they can sell to new markets




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Strategy 1: Market Penetration (same product/same market)

    This strategy will be appropriate when a market is growing and not yet saturated.
Penetration can be achieved by:
    Attracting non-users of a product
    Increasing the usage, or purchasing rate, of existing customers.

Strategy 2: Market Development (same product/new market)

    This strategy is often found when a regional business wishes to expand or if new
       markets are emerging because of changes in consumer habits.
    It can also occur when a new use has been discovered for an existing product.
Strategy 3: Product Development (new product/existing market)

    With this strategy an organisation develops new products or services to appeal to its
     existing markets. It may simply be a product "refinement", e.g. change of packaging
     or taste, etc.
    Product development is most prevalent when branding exists. Promotional aspects
     will emphasise the added qualities of the "new" product and link it specifically to the
     security of, and confidence in, the brand. This strategy builds on customer loyalty and
     the benefits to be gained by purchase.

Strategy 4: Diversification (new products/new market)

    This strategy is sometimes introduced so that a company does not become too
     dependent on its existing SBUs.
    It can be a form of "insurance" against potential disasters that could occur in the
     event of drastic environmental changes.
    Diversification means catering for market sectors which are also new to the firm. If a
     new product is developed for the existing market it is Product Development and not
     Diversification.

(a) Diversification by Integration

Vertical Integration

    This involves the acquisition of some other enterprise in the chain of distribution
       between the manufacturer and the customer. It can be either "forward" or "backward"

Horizontal Integration

    This is the acquisition of another organisation which has a feature that is desired, i.e.
       the acquired organisation may be using similar materials or components for which
       they have a monopoly of supply.

(b) Diversification by Conglomeration

    This strategy moves the firm away from its existing product-market situation into an
     entirely new area in order to satisfy a primary objective.
    Quite often this is done as a short-term activity
    For example, a company that produces garments may reap instant profits if it invests
     oil on the open market.
    This type of activity can also be part of a longer-term strategy to spread risks.

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Ansoff applied:

 Ansoff's model as applied to Coca Cola, who use all four strategies (adapted from Evans
and Berman (Marketing, 1990)).

(a) Market Penetration

      More adults used in commercials – "You can't beat the feeling" theme
      Price discount and promotions (fun caps) to existing customers
      Increasing sales through fast-food outlets
      Strengthened distribution network

(b) Market Development


    Greater emphasis on China, Eastern Europe, South America, Middle East, Africa
    Appeal to men with Diet Coke
    Changing image of soda from children to "family"

(c) Product Development

    New brands/flavours
    New containers.

(d) Diversification


    Manufacturer of water treatment and conditioning equipment
    Acquiring Columbia Pictures, Embassy Communications
    Licensing company name for clothing range

Ansoff's model is not perfect as it does not cover everything.

    It takes no account of any environmental factors
    It does not give any room for judgement on profitability
    It can inhibit the creativity of planners




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Porter's Generic Strategy Model

Michael Porter is a widely quoted authority. This model claims that there are only three
main strategies which a business can follow:
    Cost leadership
    Differentiation
    Focus




Strategy 1: Cost Leadership:

      Company aims to produce in large quantities, at the lowest cost possible and sell at
       lower prices.
      Capitalise on economies of scale and keep prices to a minimum.
      Attract price-sensitive buyers

Strategy 2: Differentiation:

      This strategy involves offering some unique selling (service) proposition (USP)
       that the competition do not have.
      Prices may not be too important to buyers
      Customers become brand or product loyal
      For example smokers preferring specific brands or fashion designer companies etc.
      Another example could be that of a fashion company producing a diverse range of
       clothes to suit different requirements for different target sectors (military uniforms/
       work wear / leisure).

Strategy 3: Focus:

      The company aims at very select market sectors and will be charging higher prices or
       offer special USPs.
      The company can concentrate on its key products for specific targets
      Acquire a reputation for being "specialist"
      They are, to some effect, niche marketers, e.g. Rolex watches, Rolls Royce cars


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                        Portfolio Analysis Models
(a) Boston Consultancy Group Matrix (BCG)

   Using the variables of market share and market growth rates, planners can plot
    their products/SBUs onto a grid which will then suggest certain strategies that can be
    used.
                           Boston Consultancy Group Matrix




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   •   Knowing the age (stage) of the product in the market is not as simple as it sounds.
   •   To analyze this Boston Consulting Group (BCG) from the USA developed a well
       known product portfolio which relates market growth to market share
   •   It is sometimes called Boston Matrix and ties closely with the product life cycle
   •   The matrix places products into four categories

   DOGS

   •   Products with low market share in low growth markets
   •   They do not generate cash; rather they tend to have high cash burn rate
   •   The most common strategy for dogs is to divest-this involves selling of the product or
       ceasing production
   •   The best example is low growth market of video recorders-overtaken in the
       technology and sales stakes by the DVD player

CASH COWS

   •   Products with the high share of a low growth market
   •   These are often mature markets with well established products
   •   At this stage the product needs fresh injections of capital for example advertising and
       promotion
   •   The generated funds are possibly used to support other products

PROBLEM CHILDREN

   • Also known as question mark & wild cats
   • Products with low share of a high growth market
   • They consume marketing resources and generate little income.
   • They may, because the market is growing, become the stars or cash cows of the
     future if they can gain greater market share
   • Increased marketing expenditures and attempting to build product awareness and
     brand image may be needed.
STARS

   •   Products in high growth markets with a relatively high market share
   •   Stars often generate high amounts of income, but may need protecting from
       competitors
   •   Market leadership may not have been established in these markets, and companies
       will be fighting for market share and brand loyalty
   •   Nokia 3210 was a star product during the rapid growth period in the mobile phone
       market

Portfolio Strategies

   •   After positioning all products (SBUs) on the BCG matrix, the company must decide if
       it has a balanced portfolio. (Too many of any one type means it is unbalanced.)
   •   Strategies suggested by the BCG matrix can be one of four:

Build – (for Question Marks) to increase share, even if it means giving up short-term profit
Hold – (for strong Cash Cows) to preserve share
Harvest – (for weak Cash Cows where the future is dim or for Question Marks and Dogs) to
increase short-term cash flow regardless of long-term effects
Divest – (Dogs and Question Marks draining resources) to sell off, liquidate or delete an
SBU or a product.


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BCG Matrix: Cash Position for Products




               16
Changes in Product/SBU Position

      The solid arrow shows the ideal route for any product, or SBU and the dotted line
       shows the possible route a Cash Cow can take.
      Because the BCG plots the current position of an SBU, or product, it can be used
       periodically to assess any changes in position. It can also be used to project future
       positions, either likely or preferred.
      Two products are shown as "planned" and two as "forecast". For "planned" positions,
       strategists will be taking the initiative in one way or another; for "forecast" positions,
       defensive or remedial action may be necessary.
      In either case it will be the marketing mix which is used to achieve the desired
       objectives
       .




                    General Electric Business Matrix (GE)

      The GE matrix is an improvement on the previous models
      It takes into account not only the nature of the market, but also the capabilities of the
       company.
      SBUs are assessed in terms of the Attractiveness of the Industry and the
       Business Strengths of the company.
      Typical aspects which are taken into account are:




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   Planner will give a score to each of the factors under consideration and then the total
    is taken as the point at which the SBU is placed on the grid.

                             General Electric Business Matrix




   Here circles represent the overall market sales whereas BCG circles represent the
    income for the company only.
   The share held by the company is then shown as a proportion of the circle.

We can see the characteristics of various products in a company's portfolio. The
company has major shares in three markets:
i) A highly attractive market, with a large overall market potential revenue; the company
       has high business strengths. The company is in a very strong position with this
       SBU.



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  ii) A market which is viewed as being mid position in attractiveness but the company
          has high business strengths. The overall market income is not major, in terms of
          the other SBUs, but activity could generate further interest which could increase
          the attractiveness of the market. Given the share held, this SBU could potentially
          be a future high earner for the company.
  iii) A market which is not seen as being highly attractive coupled with the fact that the
          company does not have any high degree of business strength in that field. The
          fact that the company has such a major share of the overall market may indicate
          that the competition has withdrawn because of costs incurred, or some other
          reason, and the company has acquired share by default rather than activity. The
          market may be lucrative in terms of potential earnings but not attractive in terms
          of size – hence the classification as a "medium – attractive market".

Strategic Options

      Strategic options for SBUs placed on the GE matrix cover three types of marketing
       management activity. Each strategy covers three of the nine cells as shown in Figure

                                 General Electric Matrix Strategies




  i)   Investment for Growth
      This is a strategy for use with strong products in markets with high or medium
       attractiveness (similar to BCG Stars), where the company also has high or medium
       business strengths.
      Full resources should be used: innovations, product-line extensions, product/brand
       advertising, intensive distribution, good price margins, etc.
      Profitability expectations would be high.

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   ii) Manage Selectively for Earnings
    Strong position in weak market (like BCG Cash Cow); company uses marketing to
       retain loyalty.
    Moderate position in moderate market; company can identify underserved segments
       and invest on a selective basis.
    Weak position in attractive market (like BCG Question Mark); company must decide
       whether to increase investment, concentrate on the niche(s), acquire another
       business or trim off activities.

   iii) Harvest/Divest
    Here the SBUs are similar to BCG Dogs. The strategy can be to minimise marketing
        activities and concentrate on selected products rather than the whole range.
    They can divest products from the range, closing down or deleting an SBU which is
        seen as non productive or to have little future. Profits are "harvested" because
        investments are minimal.

Gap Analysis

      The idea of gap analysis links up with portfolio analysis, which asks if you are offering
       the right products to the specific market segment.
      Markets change and it is usually necessary to change with them.
      For example the home music industry, this has gone from records to tapes and then
       to compact discs in a fairly short time.
      If you run a company that is still making records there is going to be a big gap to fill!

             New Product Development
             New Market Development
             Evaluating Services

      However, in order to develop marketing strategy, it is important for marketers to
       evaluate the quality of services and a tool for doing this is call 'GAP'.

The GAP model identifies four levels of potential differences in expectations versus
perception
GAP 1 Difference between Customer Expectations and Managements Perception of
Customer Expectations
GAP 2 Difference between management's perception of customer expectations and the
service specification
GAP 3 Difference between the service specification and the delivered service
GAP 4 Difference between what is the communicated to customers and what is delivered to
customers


Measuring Customer Expectations

      One of the difficulties with measuring customer expectations and perception of a
       service is that the customers may value different aspects of a service
    For example, of an airline customers may value the friendliness of the staff, the
       punctuality of the flight or the ease of check-in etc.
The SERVQUAL model, therefore, provides us with a model for evaluating customer
expectations. SERVQUAL assesses five dimensions of a service:



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(a) Reliability
        (i) Providing services as communicated
        (ii) Customer complaint handling
        (iii) Punctuality
        (iv) Getting things right first time
        (v) Keeping accurate records.
(b) Responsiveness
        (i) Customer communication about delivery
        (ii) Promptness of response
        (iii) Willingness to assist customers
        (iv) Readiness to respond to requests from customers.
(c) Assurance
        (i) Employees who instil confidence with customers
        (ii) Customers feeling safe during the transaction
        (iii) Courteousness of employees
        (iv) Knowledge of employees
(d) Empathy
        (i) Individual attention to customers
        (ii) Caring attitude of employees
        (iii) Understanding needs of customers
        (iv) Acting in best interests of customers
        (v) Convenience of delivery.
(e) Tangibles
        (i) Standard of equipment
        (ii) Standard of facilities
        (iii) Appearance of employees
        (iv) Standard of materials




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