Optional student engagements and discussion points
1. With organizations increasingly outsourcing non-core competencies in
appliance installation to an organization that has poor customer interaction
problem, I am only responsible for …”).
2. Students can identify with the concepts of service marketing if they
advertising, expectations exceeded.
3. Expand on the importance of physical evidence. Use the evidence
for the first time, cleanliness, diplomas (where and when earned, number),
friendliness of staff (anxiety reduction, empathy, assurance).
4. Elaborate on importance of Zone of Tolerance. For example, use a
restaurant example where same time and same level of activity with
respect to number of customers and staff produces different seating times
by a wide margin over multiple visits. Leads to lesser degree of reliability.
II. Background Articles
A. Issue: International Applications of Service Marketing
Source: “Building the Brand,” Computers Today (India), July, 2002, p. 16.
Unlike Microsoft or Oracle, TCS, Infosys, Wipro, and HCL hardly have “tangible”
packages to build their brand upon. Yet, Indian software services companies achieve
ample mindshare among enterprise IT users worldwide. Did they achieve global brand
names by showing their technical competence, customer reference, quality certifications,
or low price tag? Did the IT slowdown bring drastic changes in customer expectations
from bidding IT services companies? A behind-the-facade look into how software
services firms in India market themselves to bag plum projects.
Names like Tata Consultancy Services, Infosys, HCL, Wipro, and Satyam are all big
brands in the world IT marketplace today. Of course, they are not like Microsoft or
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Oracle, which has software products that are used by virtually every person associated
with IT (information technology). But these companies have created a name for
themselves in a different space altogether-IT services.
Achieving the status of a global brand in the services segment is not easy. The
fundamental difference in IT services marketing versus product marketing is lack of
product. While you have something that you can readily exhibit to your customers in the
product space, in the services segment you have to sell the concept based on your
experiences. It is in some ways similar to the business of architects and interior
decorators. There are some who sell pre-fabricated residential apartments and then there
are those who “listen” to you, understand your needs, translate those into a visual creation
and, at the same time, ensure that they build a technically-correct, reliable, robust and
scaleable home.
Marketing an “intangible” thus is a big challenge. The second challenge for IT services
companies is that the “user of the product” is very rarely the “buyer” himself. For
example, the entire utility and scalability of a complex credit card switcher software
program comes under scrutiny when a million customers swipe their card within a span
of two hours on a pre-Diwali shopping spree. That moment of truth actually determines
the “quality” of the software solution delivered. The third challenge, therefore, is the
inability of the solutions provider to provide a coherent and accurate benefit and payoff
definition of the solution delivered, thus leaving a vacuum in the articulation of any
compelling positioning.
How does an IT services company sell itself in the global market? Various factors are
involved that finally lead to service market success and the development of a brand for
the company. These include:
Technological Competence
Bundling technical competencies and selling them to customers are the main trump cards
that Indian software services companies are using to bag projects. For example, both TCS
and Wipro call themselves one-stop shops for all the IT needs of their clients. From
hosting clients’ Websites to Web-enabling their legacy systems, these firms promise to
deliver everything and this, according to them, helps position themselves better in the
market. On the other hand, Infosys, Polaris and i-Flex Solutions call themselves
specialists. Polaris works around the banking, insurance and financial services industry
and targets only these segments. However, it promises to do everything for its customers
in that particular area.
Indian software companies are known to understand technological changes very fast and
are ready to undertake projects in newer areas without any hesitation. For fast change and
being able to prove that they have the skilled manpower for new segments, they claim to
reserve “buffer” employees (also called employees on bench). Says the chairman and
managing director of Polaris Software, “We have around 12 to 20 percent staff as buffer.
They are used as a cushion and are constantly trained in new technologies. As and when
demand arises, we use them in executing projects. By having highly-qualified redundant
staff, we manage to get more projects.” This is a typical Indian advantage; companies in
the United States cannot afford such a luxury.
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Most services giants have also gone in for joint ventures with leading multinational
companies. Infosys has tie-ups with various companies, including Cisco Systems; and
Satyam has a joint venture with General Electric, apart from others. Such partnerships
help establish specific competency centers within the company. These denote that IT
services companies can easily execute projects in related areas. According to an officer
from one of the firms, these tie-ups have helped Indian firms to strategically position
themselves in the market and build relationships with their customers.
Customer References
Success breeds success. Indian IT services companies are using customer reference sites
to bid for newer projects. Observes Ranga Dorai, a Bangalore-based IT consultant, Indian
firms first look for a breakthrough based on the price and manpower factors. Once they
execute it properly, they make it the customer reference point and ask for better prices
and more time to do the next project. This practice seems to be working fine.
Today, more than anything else, understanding customers’ requirements has become the
most vital thing for IT services companies. A relatively unknown Hyderabad-based
company, Sark Systems, managed to land an Israeli bank contract against several larger
firms. This, the company claims, was because it could understand its client’s
requirements better. Also, it did not try to impose its ideas over its client’s.
By focusing on customers’ needs, successful firms have created a unique brand
experiences for clients, some of which have led to clinching crucial deals. For example,
we have a no-commitment event called “explore India, explore entity,” where the firm
provides customers a hands-on experience of the Indian IT services industry, while
showcasing its own capabilities and experiences. “Through this event, the rate of
conversion of prospects into customers has been exceptionally high,” says an official
from the company.
IT Infrastructure
Having proved that they have the technical expertise and the ability to meet their clients’
needs, IT services companies realized the need to ramp-up their IT infrastructure. Unless
they exhibit that the best of infrastructure is available with them, no customer will take
them seriously, was the common refrain. Thus, all major players have built their own
state-of-the-art equipment and connectivity facilities.
Also, for services companies, it is not just the facility, hardware, and connectivity that
matter. They need to prove also their software development track records. This basically
means that these companies should have developed and are developing intellectual
properties.
Take, for example, the case of Mumbai-based Geometric Software Solutions Co. Ltd. It
created an intellectual property long back, and today it claims to be generating a large
chunk of revenues by licensing its intellectual property to other companies. This is one of
the ways for a firm to market itself successfully.
Intellectual property is clearly a valuable asset in a knowledge-driven industry and can
prove to be a competitive advantage for any company. However, mere innovation in an
industry, which is as dynamic as the IT services sector (with an average life span of
technology of 18 months) itself, can be very difficult to render and sustain.
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Another way of using intellectual property by IT services firms is to identify a “winning”
person within their premises, help him present papers at global conferences and forums,
and write articles for various journals. Most Indian firms are into using intellectual
property in this fashion to market themselves. But the vice president, Strategic
Marketing, at Wipro Technologies, says, “We display our re-usable templates and
intellectual properties that can be plugged into a project, leading to a time-to-market
advantage.”
Quality Processes
A tool used often by services firms in India to market themselves as competent enough to
handle complex projects is to flaunt their ISO (International Organization for
Standardization) or SEI-CMM (the Software Engineering Institute Capability Maturity
Model) quality certifications. Today, India claims to have the highest number of
SEI-CMM Level 5-certified IT firms in the world. And all these happened because of
customers’ demands, says an official from Intelligroup. Firms wanted to assure their
clients that they would follow certain standards in executing projects. But with a large
number of firms obtaining the certifications, their importance seems to have eroded.
Certificates do help in creating a level of comfort in the minds of our prospective
customers, especially those who are considering offshore projects for the first time. For
us, it has turned out to be doubly beneficial, as we have now started offering quality
consulting to external clients, thus directly contributing to our bottom lines.
Quality initiatives like ISO, CMM, and Six Sigma have helped create benchmarks for the
industry to follow. Through a combination of all of these and processes like DMADV
(defines, measure, analyze, design, verify) and DMAIC (defines, measure, analyze,
improve, control), we have been able to show measurable cost benefits to clients. These
have improved client profitability. That is the biggest measurement of success.
The final word appears to be: “Certificates play different roles in different places.” It
clearly exhibits the ability to do quality work. But now everyone has got it and it virtually
doesn’t make much difference. Adaptability and responsiveness to the customer needs
play a more crucial role in winning the job.
Managing Costs
Since the beginning of the IT services era, the argument about marketing of Indian
companies started and ended at the price factor. Today, however, with countries like
China, the Philippines, Ireland, and Israel posing to be equally cost-competitive, pricing
is no longer the predominant factor. Industry analysts now term customer focus, proven
track record of executing projects, ability to grab new technology and quality of services
as main factors for Indian software developers to make a global impact.
The cost factor, however, hasn’t totally lost its relevance. The offshore and onsite
combination model has proved to be a major advantage for Indian companies. And as the
global economic recession brings the billing rates down drastically, the price factor plays
a bigger role in getting projects. Indian firms are talking about factors like customer focus
and quality, but costs remain the biggest differentiator.
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Tough Times
IT companies in India have started looking at branding today when there’s an economic
downturn. But the time to build a brand is when the going is good. Companies that spend
money, time, and resources to build a brand when the going is good are the ones to
weather the storm smoothly. Those firms that failed to build brands for themselves are
facing a rough weather now.
III.Case
Four Seasons Hotels and Resorts
HBS Case: 800-385 TN: 801-048
Teaching Perspectives
The case portrays the love-hate relationship with technology that a high-touch/high-tech firm
often experiences, as exemplified by Four Seasons Hotels and Resorts, the global luxury
hotel/resort chain. Although the company distinguished itself in the marketplace by superb
personal service and luxurious physical settings, it also used information technology
effectively. For example, it had one of the most attractive and sophisticated Web sites among
hotel chains on the Internet.
At Four Seasons’ core, however, remained a person-to-person service business that depended
on individuals to deliver the extremely high quality for which it was known. The company’s
credo, the Golden Rule (“Do unto others as you would have them do unto you”), influenced
human resources practices, operations, design and purchasing, marketing, and corporate
management. Most important, the Golden Rule influenced the way managers and employees
treated one another and, in turn, the way they treated guests.
The question of how best to use IT, without damaging guests’ sense of personal service (high
touch), worried executives. While they appreciated the power of technology, and especially the
Internet, they wondered how their particular organization could best harness it to enhance
growth and profitability, or to reduce costs, or both. They also wondered whether focusing
significant management attention on the Internet made sense for a luxury hotel and resort
chain. As Katie Taylor, president of worldwide business operations for the organization puts it:
“After all, you can’t have a good night’s sleep on the Wb.” Participants concur after discussing
the case that Four Seasons’ approach to IT, using it as a tool to leverage the firm’s human
resource (versus replacing them or controlling them), is optimal given the firm’s situation.
The case also presents opportunities for discussion of centralization/decentralization issues as
they apply to a truly global service firm, operating in twenty different countries around the
world. With 50 properties in 22 countries, Four Seasons Hotels and Resorts was a worldwide
hotel chain that offered complete design and management services to owners of luxury real
estate. The company’s financial success comes largely from the ability to deliver “REVPAR”
(revenue per available room) 39 percent higher than that of its nearest competitor
(Ritz-Carlton).
The case summarizes the company’s history and describes its successful practice of managing
(rather than owning) mid-sized luxury properties fitted with top-quality materials, offering
superlative personal service, and charging top rates.
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Marketing and organizational practices contributing to this company’s success noted in the case
include: (1) progressive human resource policies (selection, training, measurement,
development, rewards, and recognition); (2) continuous process improvement; (3) determining
what decisions would be centralized vs. decentralized; (4) a love/hate relationship with
technology, including the use of highly robust information technology to ensure that front-line
employees could focus on guests, rather than computers; and (5) innovative uses of the
Internet.
The Internet allowed the company to reduce marketing costs and enhance revenues by
delivering tremendous amounts of relevant information to customers to help them make a
purchase decision at a cost considerably lower than possible without it. In addition, the Internet
site provided information to guests already booked at a property in a cost-effective and more
accessible fashion than, for example, a full-color, 96-page Four Seasons Directory, which the
firm previously published and distributed for free. (Information about the directory is not
mentioned in the case.)
The case concludes with concerns about what role technology should play in satisfying the
chairman, founder, CEO, and chief shareholder’s wish to make Four Seasons “one of this
decade’s great growth stocks.” There are three ideas/considerations here: should the Internet be
used to increase revenues; should it be used to cut costs; or is it, perhaps, a waste of resources
and effort for a company like Four Seasons?
Below is an outline for developing the case:
Delineate the service offering, including its intangible elements. “What is a Four
Seasons property like? What is it like to stay at one?”
How does the company deliver this service offering with consistency at 50
properties in 22 countries?
What is centralized and what is decentralized? Why?
What is the role of technology in this organization?
How should Four Seasons view opportunities presented by the Internet?
Questions
1. What distinguishes the Four Seasons Hotels and Resorts chain in the marketplace?
2. How does Four Seasons deliver service in their properties around the world?
be decentralized?
5. What role do you see for the Four Seasons’ Internet site? Should it be used to lower
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