2013

FedEx

Submitted by: Vadlagatta Sravanthi 11/10/2013

PESIT DEPT OF MBA

Contents

1 Introduction 2 The service triangle 3 Gaps Model 4 Service profit chain model 5 The evolution of customer 6 The Five Dimensions of Service 7 Service recovery

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PESIT DEPT OF MBA

INTRODUCTION
FedEx was founded at Little Rock, Arkansas (1971) as Federal Express Corporation and it was Founded by Frederick W. Smith. FedEx Corporation is a Delaware corporation, incorporated October 2, 1997. FDX Corporation was founded in January 1998 with the acquisition of Caliber System Inc. by Federal Express. In February 2000, FedEx acquired Tower Group International, an international logistics company. FedEx Corp. acquired privately held Kinko's Inc. in February 2004 and rebranded it FedEx Kinko's. Revenue for 2011 was US$39.3bn and net income was US$1.42bn.

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PESIT DEPT OF MBA

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PESIT DEPT OF MBA

The service triangle

The marketing mix allows FedEx to target their audience. FedEx depends on the marketing; management needs market information to create new products or tweak existing products, service location, prices and promotion strategies. These four Ps are the driving force to marketing. FedEx has seven product line and they all employ these Ps in their campaign. Each product line provides different value to FedEx. The marketing department is responsible for marketing and brand recognition for all FedEx entities. Product The product is the good or service (Kotler & Keller, 2009). When FedEx began, they were an express delivery service; however, they have evolved since then to include office locations for customers, providing copying/printing services and creating creative company collateral. The FedEx policy is to retain clients for a variety of services. For corporations, this may mean using them for printing, copying, collation of mailings and shipping. By offering a variety of services, FedEx is able to be a one-stopshop for companies of all sizes. The acquisition of Kinkos was a key component to the success in this area. Also, by providing multiple revenue streams, they are able to keep the packages moving. Place The place is getting the right product to the right market. FedEx has locations all over the globe. They can ship next door or around the globe. The acquisition of Kinkos helped to increase the convenience of FedEx for the average user. FedEx has 1,065 stations and 10 express hubs for their operations. Ground has 32 hubs and over 500 Page | 5

PESIT DEPT OF MBA pickup/delivery terminals. There are 355 service centers and nearly 2,000 office locations. Their air fleet totals 688 planes and service at more than 375 global airports. Their ground fleet is comprised of over 90,000 vehicles. In addition to these facilities, there are 698 FedEx World Service Centers; 1,804 FedEx Office locations, 6,671 FedEx Authorized ShipCenters and Alliance Partners and 43,106 FedEx Drop Boxes (including 4,988 U.S. Postal Service locations) (FedEx, 2011). Promotion Promotion tells the market about the product. FedEx promotions are designed to create brand recognition; they can depend on FedEx for fast service and high quality Federal Express has a clear promotional vision: increase shipping. FedEx has partnerships in place with vendors, governmental agencies, distribution centers and other carriers to serve clients everywhere. Additionally, in the past 10 years, Federal Express created partnership agreements with a number of large merchandising companies like Amazon, Overstock.com, and Home Shopping Network to reduce the cost of shipping and increase the volume of parcel deliveries. Recently, they have been doing mobile advertising and social media outlets. Price Price is what will it cost; this can be a tricky issue. Price can be subjective and emotional-customers may attach a different value on a product besides just the cost. Physical evidence Federal express has following physical evidence it includes product, service, and everything about the company, appears from the outside. Decisions need to be made about the size, shape, color, material, UPC bar code, and label of the packaging. This should be customer tested and updated when needed. Packaging involves the visual layout, practical setup, and when needed for products, clear and precise installation instructions. Product liability insurance is needed in case anyone suffers any harm from your product. Engineering tests are also needed to make sure the package can stand up to abuses. There may also be regulatory issues to consider. Visual packaging of a tangible product can make or break a purchase. Small improvements in the packaging or external appearance of your product or service can lead to completely different reactions from your customers.

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PESIT DEPT OF MBA It is also important in selling and marketing services and intangible products that you cant see, but that you can provide the support needed to the customer who can see and feel the physical evidence. Physical Evidence can also refer to the people within company and how they dress and act. It can refer to how your office is set up, the professionalism of your staff, nice brochures, how you interact with your customer base, and every single visual element about your company. Process The process of service delivery is crucial since it ensures that the same standard of service is repeatedly delivered to the customers. Therefore, most companies have a service blueprint which provides the details of the service delivery process, often going down to even defining the service script and the greeting phrases to be used by the service staff. People An extremely important part of any company is having the right people to support the companys products and/or service. Excellent customer service personnel who can provide support with clearly known expectations, such as hours of operation and average response time, is key to maintaining a high level of customer satisfaction. Customer service skills were discussed in lesson 9. Lessons 1 through 4 cover everything from how to lead the people, to hiring, retaining, training, and building teamwork. Knowledgeable staff adds much value to the product offering.

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PESIT DEPT OF MBA GAPS MODEL

Customer Gap
The customer gap is the difference between customer expectations and customer perceptions. Customer expectation is what the customer expects according to available resources and is influenced by cultural background, family lifestyle, personality, demographics, advertising, experience with similar products and information available online. Customer perception is totally subjective and is based on the customers interaction with the product or service. Perception is derived from the customers satisfaction of the specific product or service and the quality of service delivery.

WHAT FEDEX DID TO CLOSE THIS GAP? Know your customer (KYC) whom u target.

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PESIT DEPT OF MBA Gap 1: The listening gap Gap between consumer expectation and management perception: arises when the management or service provider does not correctly perceive what the customers wants or needs. WHAT FEDEX DID TO CLOSE THIS GAP? Only make promises you can keep Never overpromise because you will under deliver FedEx uses PSP philosophyPEOPLE: Customer comes first. SERVICE: Meeting and exceeding PROFIT: Peoples commitment and empowerment.

customer expectations.

GAP 2: The Service Design & Standards Gap Gap between management perception and service quality specification: this is when the management or service provider might correctly perceive what the customer wants, but may not set a performance standard. WHAT FEDEX DID TO CLOSE THIS GAP? Highly controlled distribution system with constant information about the status of the shipment FedEx has its own air service in and out of china

. FedEx is focused on three primary growth strategies. A collaborative sales process that leverages their shared customer relationships, aggressive global marketing of the broad

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PESIT DEPT OF MBA FedEx portfolio to targeted prospective customers, and a strategic application of information systems to reduce costs and improve customer access and connectivity.

GAP 3: The Service Performance Gap:

Gap between service delivery and external communication: consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of service delivery. WHAT FEDEX DID TO CLOSE THIS GAP? The hub-and-spoke distribution network is a system of connections arranged like a chariot wheel, in which all traffic moves along spokes connected to the hub at the center. FedEx is made up of more than 300,000 team members from various walks of life and different cultures FedEx has a very good repo with US Govt. which has achieved it many contracts which makes them best in US where it has major revenues coming from.

GAP 4: The Communication Gap Gap between service delivery and external communication: consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of service delivery. WHAT FEDEX DID TO CLOSE THIS GAP? FedEx Corporation specializes in overnight delivery of high-priority packages, documents, and heavy freight. The company created the overnight air-express industry virtually singlehandedly in the 1970s; its success was such that by the 1990s it faced the sincerest form of flattery: increasing competition from rival carriers However, FedEx's continued mastery of logistics and its ability to track packages during the shipping process has enabled it to retain its leadership role in the express air cargo industry, as well as act as a moving warehouse for numerous corporate and individual customers. It operates in 211 countries, and serves all of the United States, providing 24-to-48-hour delivery of valuable, time-sensitive cargo to any destination worldwide.

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PESIT DEPT OF MBA

THE SERVICE PROFIT CHAIN

Service profit chain shows the relationship between profitability, customer loyalty, employee satisfaction, loyalty, and productivity. Profit and growth are stimulated primarily by customer loyalty where customer loyalty is a direct result of customer satisfaction. Customer satisfaction is influenced by the value of the service that provided to the customer, and the value of the service is created by satisfied, loyal, and productive employee WHAT IS FEDEX SERVICE-PROFIT VALUE CHAIN? FedEx mission is to produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards. FedEx uses PSP philosophyPEOPLE: Customer comes first. SERVICE: Meeting and exceeding PROFIT: Peoples commitment and empowerment. customer expectations.

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PESIT DEPT OF MBA

The evolution of customer relationship

1. Customers as strangers. The firm makes communication with the potential customers in order to attract them and acquire their business. The marketing efforts towards could familiar those potential customers with the firms offering, and encourage them to make the firm have a try.

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2. Customer as acquaintances. When the customers awareness and attempt are

achieved, the firm and the customer could become acquaintances by the familiarity. At this period, the firm should build the relationship to satisfy the customers. An acquaintance is effective as long as the customer is relatively satisfied and what is being received in the exchange is perceived as fair value.

3. Customer as friends. When the customers continue to create and achieve the value
with the firm in the exchange relationship, the firm should begin to collect specific knowledge of the customers needs. The firm needs to build the relationship to achieve the customer retention at this period.

4.CUSOMER AS PARTNER:

The creation of trust lead to the creation of commitment and that is the condition necessary for customer to extend relationship therefore, if the firm wants to build A partner relationship with the customer, the firm wants to build a partner relationship with the customers, the firm must use customer knowledge and information systems to deliver highly personalized and customized offerings.

FEDEXS STRATEGY

Build Customer Loyalty by Investing in Customer Service

DO keep your work To ensure customer trust and loyalty, stay true to your company's promises. With more competition and fewer buyers, the caliber of customers' experience is critical. So continue providing them the quality products and top-notch service they're used to.

DO boost value with little cost By making just a few simple changes, customers get more for the same investment, customer affinity grows and your revenue improves. Some ideas: Include low book-valued items from inventory at no charge. Offer discounts on future purchases. Add features and functions already available with some of your other products. Bundle products and services. Let customers know when you provide increased value without a corresponding increase in price. Retain traditional sales deals. Canceling them turns off loyal customers, and they'll go elsewhere.

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PESIT DEPT OF MBA DO empathize with customers Show clients you understand that everyone is under pressure. But don't throw caution to the wind. Some customers will ask for special pricing and terms and, if possible, accommodate their needs. Before accepting such requests, consider asking for longerterm agreements to lock in future business. Yet when requests outweigh the value, it's time to say "no." It's critical to cut costs during a recession, and customers understand that.

DO exude confidence through quality Down times are the perfect times to demonstrate your competitive edge. While others cut back on people, marketing and service, you can step in and create confidence and certainty in your brand. Your integrity and image will directly affect your success, now and in the future.

DO communicate constantly Keeping customers happy by staying in tune with their needs will not only build loyalty but also allow you to capture more market share as less savvy competitors stumble. So inform customers when their products ship and provide advance notice of delays. Send updates and respond quickly to requests. Clearly communicate return and refund information. Follow up to ensure satisfaction, and don't forget to send a heartfelt thank-you. It really goes a long way. Free or discounted item or service. Any business that offers a product or service can take advantage of this type of reward system. A coffee shop or bakery patron can get their card punched for the first four lattes or pastries purchased, and then get the fifth one free. Price cards. Create a punch card with a dollar amount thats appropriate for your type of business. If you own a bookstore, the card might have $5 punches with the reward of a free or discounted item once the customer spends $25. Charitable donation. Either as an ongoing practice or promotional event, make a charitable donation for every purchase over a certain amount. Make it a contest your customers can take part in by creating a sign with your logo that shows your progress toward a set goal. Prepaid discount cards. If your store or shop offers a regularly used service oil changes, dry cleaning or dog grooming, for instance customers can purchase a prepaid card at a discount. The customer benefits are two-fold: By purchasing the service in advance, they can get an accumulative discount, plus they dont have to have cash on hand every time they visit your store. You benefit by knowing the customers are more likely to return to cash in on their prepaid savings. Page | 14

PESIT DEPT OF MBA Discount from a partnering business. Consider combining marketing efforts with a nearby business to increase your customer base. If you sell exercise apparel, for instance, the reward on your loyalty punch card could be a two-week membership at a local health club. In turn, the health club could offer new clients a $10 coupon for apparel from your store. Customer-selected merchandise. Some gas station owners use punch cards to offer returning customers free or discounted in-store items of their choice when they fill up their tank a certain number of times. Raffle opportunity. Planning a special promotion or event? Build the excitement leading up to the event by using the loyalty cards as a raffle opportunity for a big item or special service. For every five punches, your loyal customer can be entered five times into the drawing during the event. This is perfect for restaurants or entertainment venues.

The Five Dimensions of Service Quality

Every company owner wants to get loyal customers which add to repeating purchases and of cause increasing their maximum revenue. But to get there they need to know about the 5 Service Quality Dimensions. Many actually think that service is just a little part of the marketing mix, but it is actually a very important part of both the 4 and 7 P's Each of the 5 Service Quality Dimensions makes an extra addition to the level and quality of service which the company offers their customers. It also makes the service far more unique and satisfying. Dimension 1 - tangibles; The tangible Service Quality Dimension refers to the appearance of the physical surroundings and facilities, equipment, personnel and the way of communication. In other words, the tangible dimension is about creating first hand impressions. A company should want all their customers to get a unique positive and never forgetting first hand impression, this would make them more likely to return in the future. Dimension 2 - reliability; The reliability Service Quality Dimension refers to how the company are performing and completing their promised service, quality and accuracy within the given set requirements between the company and the customer. Reliability is just as important as a goof first hand impression, because every customer want to know if their supplier is reliable and fulfill the set requirements with satisfaction. Dimension 3 - responsiveness; Page | 15

PESIT DEPT OF MBA The responsiveness Service Quality Dimension refers to the willingness of the company to help its customers in providing them with a good, quality and fast service. This is also a very important dimension, because every customer feels more valued if they get the best possible quality in the service. Dimension 4 - assurance; The assurance Service Quality Dimension refers to the company's employees. Are the employees skilled workers which are able to gain the trust and confidence of the customers? If the customers are not comfortable with the employees, there are a rather large chance that the customers will not return to do further business with the company. Dimension 5 - empathy; The empathy Service Quality Dimension refers to how the company cares and gives individualized attention to their customers, to make the customers feeling extra valued and special. The fifth dimension are actually combining the second, third and fourth dimension to a higher level, even though the really cannot be compared as individuals. If the customers feel they get individualized and quality attention there is a very big chance that they will return to the company and do business there again. Tangibles in FedEx are: FedEx packaging , employee, branding, the infrastructure of FedEx, the aircraft owned by FedEx and Federal express has following physical evidence it includes product, service, and everything about the company, appears from the outside. Decisions need to be made about the size, shape, color, material, UPC bar code, and label of the packaging. This should be customer tested and updated when needed. Packaging involves the visual layout, practical setup, and when needed for products, clear and precise installation instructions. Reliability in FedEx are: FedEx offer a Money-Back Guarantee for FedExs China domestic Priority Delivery Service, and China domestic General Delivery Service. This guarantee can be suspended or revoked at our sole discretion without prior notice to you. Responsiveness in FedEx are: FedEx Corporation specializes in overnight delivery of high-priority packages, documents, and heavy freight. The company created the overnight air-express industry virtually singlehandedly in the 1970s; its success was such that by the 1990s it faced the sincerest form of flattery Page | 16

PESIT DEPT OF MBA

Empathy What is Emotional Branding? FedExs emotional branding strategy is all about the powerful feeling of frustration. FedEx mercilessly pokes fun at the office politics freak show, and shows us that they understand our pain.

SERVICE RECOVERY
Service recovery means doing whatever it takes to solve a customers problemand doing it quickly. WHAT DOES FedEx do ? 1. Act quickly. If you can solve a customers problem quickly, in 60 seconds or less, you not only maintain that customers loyalty, you save your organization money. How? The cost to move a complaint up the ladder takes more time and increases the cost of resolving the situation by getting others involved. The real magic happens when a frontline employee handles the situation. 2. Take responsibility. Most employees, when faced with a complaining customer, take the attitude, I didnt cause the problem, so why should I apologize? They take complaints personally rather than merely apologizing for the situation and then work quickly to resolve it. Instead of running for cover, you should simply say, Im so sorry for the problem; let me take care of this for you. 3. Be empowered. In order to put service recovery into practice, its imperative that managers and supervisors empower their employees. That means giving them the authority to do whatever is necessary to take care of the customer. 4. Compensate the customer. Every organization has something of low cost but high value that it can give a customer as compensation for a problem. A hotel can upgrade a guests room to a suite, a cell phone company can give a client 1,000 free minutes, and a computer company can extend a warranty for a year. In each of these cases, the cost to the company is virtually zero.

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