Service Mktg Questions

8/14/2019 Service Mktg Questions

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SERVICES MARKETING

CHAPTER 1

INTRODUCTION TO SERVICES MARKETING

1. What is ambush marketing? Identify instances where it has been used.

Ambush marketing involves the situation where a firm who is not an official sponsor ofan event markets goods or services through reference to the event or through using participants of the event. Although answers will vary, most instances of ambushmarketing involve sporting events. For example, businesses may make reference to alocal college's mascot in their advertisements or point-of-purchase displays. Thesereferences normally increase if the local team becomes involved in an important gamesuch as a state or national title.

2. Cite examples of the differences between marketing products and marketingservices.

Answers will vary, but most will focus on the idea that products can be seen and touchedprior to purchase whereas services cannot. Students may also point out that many servicesrequire the consumer to be present when the service is performed while products can bemanufactured and sold at a later time. To illustrate the differences, you may ask studentsto discuss the process they use in purchasing a pair of shoes compared to purchasingdental services or a haircut.

3. Identify the role of services in the economy in terms of the gross domestic product,number of jobs, and importance to the economy.

In the United States, services account for approximately 79% of the GDP or $6.95trillion. In terms of employment, services account for almost 77 % of the totalemployment. In terms of future impact, services will furnish approximately 12.9 millionnew jobs which will account for 91% of the growth. The largest growth will be thetransportation industry, warehouse and storage industry, communications industry, eatingand drinking establishments and computer and data processing.

4. List the reasons for the growth of the services sector.

The growth in the service sector is primarily due to the shift from a manufacturing-basedeconomy to a service economy and the shift to an information age because of theinvention of computers and telecommunications. Other causes include an agingpopulation, longer life expectancies, increased leisure time, higher per capita income,increased time pressure, more female workers in the workforce, changing social andcultural values, and advances in technology.

Services Marketing Q & A By S.John Manohar1


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5. Identify the unique characteristics of services and give examples of each.

The unique characteristics of services include intangibility, perishability, inseparability,and variability. Although examples will vary, it is important for students to realize thatthese characteristics are on a continuum and not absolute. For example, some services

such as legal services are more intangible than a restaurant. The same is true for perishability. Entertainment services are highly perishable. Performances are held atspecific sites and at specific times, while other services are less perishable because theyinvolve goods with the services. Some services such as entertainment services are highlyinseparable. Production and consumption occur simultaneously. However, video andaudio recording technology has made it possible for consumers to watch or listen tosomeone perform at a point after it is produced. If the service is highly dependent onhumans to perform the service, then it usually contains a high degree of variability.Performers such as the Grateful Dead discussed in the first illustration file would have ahigh degree of variability.

6. What are the marketing implications of the characteristics identified in Question 5?

The unique characteristics of services makes the marketing of them more challenging.Services that are highly intangible will need to make the service more tangible toconsumers. They can do this by stressing tangible cues in their promotions. Serviceorganizations need to realize that consumers will often ask others for recommendations.The image of the firm and word-of-mouth communications become more critical. Interms of perishability, firms will have to carefully plan production to match demand. Ifcustomers are present during the service process, the physical facility and its capacity become an important marketing element as well as the human element. As with perishability, inseparability requires a careful management of supply and demand toensure a profitable operation. From a marketing perspective, this may involvemanipulating demand or supply to ensure peak operating efficiency. For variability,marketers have to be concerned about the operation of the firm and that it providescustomers with a consistent level of service quality. These characteristics of servicesrequires a close working relationship between the marketing department and thoseperforming the service.

7. Identify the six levels of the classification system for services and identify concernsmarketers would have at each classification level.

Level one is the nature of the organization. The purpose, structure, and type oforganization will have a major impact on the promotion strategy. For example, non-profitorganizations may focus its promotional effort on the donors rather than the users of theservices. The strategic approach the firm will use to market itself will vary depending onthe purpose, structure, and type of organization.

Level two is the nature of the service while level three deals with the customerrelationship. The classification at these two levels will impact an organization's operation,efficiency, productivity, distribution, and personnel. For example, if customers must be present for the service, then the efficiency and productivity would be impacted. Theservice operation and personnel have to be planned allowing for the presence of the



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customer. The distribution options would be affected. Managing supply and demand tomatch the firm's physical capacity is critical since work cannot be hatched or performedlater. Managing supply and demand will become more difficult if an informal relationshipis used rather than a formal relationship.

Level four deals with the level of demand. Marketers not only must be concerned about

demand but also about supply and capacity. If demand exceeds supply or capacity, thefirm is adversely affected. Managing these elements become more difficult in situationswhere demand fluctuates widely and the causes of the fluctuation are out of the control ofthe customer. In such situations, marketers can do little to modify the demand pattern.

Level five involves the service package. Classification here impacts a service'sdistribution, differentiation strategies, efficiency, productivity, staffing, promotion, andpricing. If goods are offered as part of the service or through the service, managingproductivity normally is easier. Services that involve a high level of customization will beconcerned about staffing and the impact customization will have on efficiency.

The last level deals with the delivery method. This classification affects the distributionstrategies that can be used. Facility design and operations are also of concern.

8. Classify a tax service that prepares taxes for both individuals and businesses usingthe service classification scheme and identify marketing concerns identified by theclassification.

At level one, the tax service serves both persons and businesses, is a for-profitorganization, and is privately held. By serving both markets, different promotionalappeals will have to be developed. At level two, nature of service, the tax service is apure service, directed at things, and has a high level of merchantability. Since it is a pureservice, issues such as intangibility and perishability will be of concern. Having a highdegree of merchantability allows the firm to enhance its efficiency since the customerdoes not have to be present. In terms of customer relationship, level three, the tax servicehas both an informal and formal relationship and the customer must start and finish theservice. Business customer relationships will tend to be formal and contractual whileindividuals will tend to be informal. Operations are a concern since the tax service willprobably use a different operational process for the two types of customers. Pricing theservice will be of concern since the expectations and the relationships will vary. It mayeven be necessary to have different personnel for the two types of customers sincedifferent expertise may be required.

At the fourth level, demand sometimes exceeds capacity and the degree of fluctuation iswide. During tax season, demand normally exceeds supply while the rest of the year thefirm may have excess capacity. Managing this supply and demand situation is a majorconcern for the marketer. Since demand cannot be shifted to a slower period, themarketer will have to look at ways of either decreasing demand or increasing supply. Atlevel five, the service package, the tax service offers multiple services, is defined by boththe situation and time, has a low degree of equipment base, a medium level ofcustomization, and medium degree of durability. Offering multiple services createsconcerns of efficiency, staffing, and productivity. Corporate customers may havecontracts while individual customers often ask the firm to do a specific transaction, such



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as a tax return. Because of the medium level of customization, operations, efficiency,pricing, and productivity are concerns. The amount of time it will take to do a customer'stax return will vary, yet pricing based on time spent on the return may not be feasible forboth corporations and individuals. The last level of classification involves the deliverymethod. The tax service may be available at only one location, is both a continuous anddiscrete service, is consumed independently, and will probably have an allocation system

of reservation and order-of-arrival. Facility design is important since customers willprobably be present to initiate and conclude the service. Distribution is important. If thefirm has only one location, accessibility is greatly impeded. The nature of delivery andtype of consumption will effect the firm's operation and how the service process isdesigned.

9. Identify the five elements of the services marketing mix and explain how each isdifferent from the marketing of products.

The five elements of the services marketing mix are service outcome, price, promotion,distribution, and firm image. Service outcome includes both the technical and functional

component. How a customer is treated is often as important as the outcome of the serviceitself. Pricing is more difficult for services because of the difficulty in estimating costs.For example, how do entertainers such as the Grateful Dead decide on the price of aconcert? Promotion is different for services because service personnel, the physicalfacility, and the service atmosphere are all part of the promotional package. Themerestaurants such as the Kenny Rogers Roasters described in the second illustration filehighlights how important facility design is in the promotional strategy. Distributioninvolves both accessibility and availability of a service. Most services cannot beproduced and sold separately as a good so distribution becomes a challenge. Because ofthe unique characteristics of services, firm image is a marketing mix element that must bemanaged. The importance of firm image is reinforced by the fact that word-of-mouthcommunications are more important in the selection of a service than they are for a good.

10. Briefly outline the marketing mix for a hotel chain like the Sheraton.

For the Sheraton, both components of the service outcome will be important tocustomers. They will be concerned about how they are treated as well as the amenitiesprovided by the hotel. The Sheraton will have to price their rooms competitively withother hotels. A promotional strategy should stress the firm name, the quality of service,and the availability of Sheraton at many locations. In addition to the many hotel sites, interms of distribution, the Sheraton will want to make it easy for customers to reserverooms. Allowing customers to use the telephone, fax, and the Internet can make theSheraton more accessible. Because of the level of competition in the hotel industry,developing and maintaining a strong firm image is important.



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CHAPTER 2

THE PURCHASE PROCESS FOR SERVICES

1. Define the following consumption values and give an example of how each hasinfluenced a recent purchase decision in your life.

a. Functional value is the perceived utility acquired when a particular choiceprovides utilitarian or functional benefits for the consumer.

b. Social value is the perceived utility from making a purchase decision that isassociated with a particular reference group.

c. Emotional value is obtained when the choice stimulates feelings and emotionswithin the consumer.

d. Epistemic value is acquired when a purchase decision is perceived to satisfy adesire for knowledge, novelty, or curiosity.

e. Conditional value is the perceived utility provided when an alternative ischosen because of temporary situational factors that will enhance one of theother consumption values.

Examples will vary.

2. Identify the three phases of the purchase process model. Explain what happensduring each of the stages.

The three phases of the purchase model are the pre-purchase phase, the service encounter,and the post-purchase phase. During the pre-purchase phase, consumers are makingevaluations of service vendors. For high involvement decisions, they may be gatheringadditional information. Consumers will also explore ways of reducing purchase risk.During the service encounter, consumers are making an evaluation of the level of service

quality being received. Both the technical and functional components are beingevaluated. During the post purchase phase, consumers evaluate the level of service theyreceived. If they are satisfied they will be more likely to buy again. If they aredissatisfied, they will search for the cause of the dissatisfaction. Future purchaseintentions will be affected by who or what is attributed to be the cause of the poorservice.

3. Identify the internal, external, and firm-produced factors that impact the purchasedecision during the pre-purchase phase.

Internal factors that influence the purchase process are individual needs and wants, past

experience, expectations, and the level of involvement. External factors affecting the purchase process include competitive options, social context, and word-of-mouthcommunications. Firm-produced factors impacting the purchase process includepromotions, pricing, and distribution.



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4. Define the seven types of risk involved in purchasing a service. For each type of risk,cite an example of a service that would be considered a high risk.

Although answers will vary, listed below in parentheses are some services that would beconsidered to have a high risk to most consumers.

a. Performance riskchance that a service will not perform or provide the benefitfor which it was purchased (tutoring services, financial services).b. Financial riskmonetary loss incurred by the consumer if the service fails

(education, musical concerts).c. Time loss risktime lost by the consumer due to the failure of the service

(entertainment, education, weight loss services).d. Opportunity riskrisk involved when consumers must choose one service over

another (sporting events, recreational services).e. Psychological riskchance that the purchase of a service will not fit into the

individual's self-concept (hair stylist, dating services).f. Social riskprobability that a service will not meet with approval from others

who are significant to the consumer making the purchase (education, nightclubs).g. Physical riskChance that a service will actually cause physical harm to the

customer (medical services, service clubs such as YMCA).

5. Discuss the strategies service firms can use to reduce the uncertainty of each type ofrisk and the consequences of each type of risk.

The uncertainty of performance risk can be reduced through certification of employees,branding the service, and communications with customers. Consequences can be reducedwith warranties and through adhering to quality control standards and procedures. Forfinancial risk, the uncertainty can be reduced through offering customers trial purchases,sampling, or promotional incentives. The consequences can be reduced throughguarantees. The uncertainty of time loss risk can be reduced through branding whilecompensation offers will reduce the consequences component. For opportunity risk,uncertainty is reduced through branding and communications.

Consequences are reduced through quality control standards and procedures, Brandingand communications can be used to reduce the uncertainty of psychological, social, andphysical risk. The consequences of both psychological and social risk can be reduced byusing quality control standards and procedures. To reduce the consequence component ofphysical risk, safety standards can be used.

6. What is meant by a service encounter? What factors influence the service encounter?Explain the impact of each factor.

The service encounter is the point of interaction between the customer and the service provider. The service encounter is affected by role theory, script theory, serviceenvironment, service personnel, and support services. Role theory implies that both thecustomer and service provider have certain roles to play in the service process. It isespecially important that the service providers follow their prescribed roles or the rolesthat customers expect of them. Within the context of role theory, is the concept that



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customers and service providers have prescribed scripts. The quality of interaction will bedependent on how well both parties follow their scripts. The service environment, whichconsists of the tangibles, the atmosphere, and other customers, impacts the quality of theservice process.

Service personnel are an important factor; both how they act and how they look are

important. Although not seen by customers, support services are critical to providing ahigh-level service experience.

7. Define the two components of service quality. Give an example of each.

The two components of service quality are the functional (the how) and technical (thewhat). For a haircut, how your hair looks after the hair stylist is finished is an example ofthe technical. The functional is the quality of interaction the customer has with the hairstylist while he or she is performing the work.

8. Identify post-purchase behaviors of customers who are satisfied with a service.

The post-purchase behaviors of satisfied customers include repeat purchase behavior,firm loyalty, and positive word-of-mouth communications.

9. Explain the concept of attribution theory. Give an example of how attribution theoryworks in practice.

When services fail or are performed poorly, customers look for causes of the failures.This process of locating a blame or cause for the poor service is called attribution theory.If a customer feels the cause of the poor service was beyond the control of the firm, thenthey tend not to be dissatisfied. However, if they feel the firm was responsible or couldhave prevented the service problem, then the customer will be dissatisfied.

10. Identify post-purchase behaviors of customers who are not satisfied with a service.

Post-purchase behaviors of customers dissatisfied with a service include firm switchingbehavior and negative word-of-mouth communications.



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CHAPTER 3

CONSUMER EXPECTATIONS OF SERVICES

1. Identify the levels of consumer expectations and give examples of each.

The levels of consumer expectations are ideal service level, desired service level,adequate service level, and predicted service level. Examples will vary but can beillustrated by using an example of a business-to-business transportation and warehousingservice. The ideal may be for the transportation company to provide 100% on-time arrivalof shipments with a 100% fill rate. Realizing the ideal will be virtually impossible tomeet, the desired level may be for a 95% on-time delivery rate with a 90% fill rate. Theadequate service level which is the lowest that will be accepted without being dissatisfiedmay be a 90% on-time delivery rate with a 80% fill rate. The predicted is what aconsumer expects. Based on past experience, the predicted may be a 93% on-timedelivery with an 88% fill rate.

2. Identify the personal factors that impact consumer expectations and explain howeach will affect expectations.

The personal factors that impact consumer expectations include individual needs, level ofinvolvement, past experience, and service philosophy. Individual needs influence theconsumption values a consumer will expect from a service. For example, someone who isextremely hungry will expect more in terms of quantity of food, which is the functionalvalue, than someone who is dining with a significant other. In the latter case, quality ofservice and aesthetics will be more important. He or she may be looking for social oreven emotional consumption benefits. Level of involvement will impact consumerexpectations. Normally as the level of involvement increases, the ideal, desired, and

adequate expectation levels all increase. The predicted is effected more by pastexperience with the firm. Past experience may also affect desired, ideal, and adequatelevels of expectations, but normally to a lesser extent. Service philosophy has an impacton all but predicted service level.

3. Explain how situational factors will impact consumer expectations.

Consumer expectations are often modified by situational factors. For example, the reasonfor the purchase will often modify expectations. A business that uses a commercialemployment agency to hire a high level executive will have different expectations than ifthey were hiring a dockworker to load trucks. Their ideal, desired, and adequate service

levels will all be higher. They will expect the firm to spend more time in screeningapplicants in the former case. Consumer mood will affect expectations. Individuals whoare in a joyful, positive mood normally have lower adequate service expectations than anindividual who is in a bad, negative mood. The ideal and desired levels of expectationsare not normally affected. The predicted level may be affected. A person in a bad moodwill often predict they will receive poor service. Weather may be a factor for a couple ofreasons. One reason is that weather affects people's mood, which in turn, will affect whatthey expect. Second, weather itself will modify expectations. In foggy, snowy, or heavyrain, passengers expect airline flights to be delayed. Their adequate, predicted, and



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desired service level expectations will all decline. Time constraints will normally affectexpectations. The impact can go either way. For example, an individual who needs theirhome cleaned for a major event and contacts a cleaning agency at the last minute willnormally lower their predicted level of expectations. In most cases, when a consumerfaces time constraints, they will lower their adequate and desired level of expectations.

4. Briefly outline how service alternatives available to consumers will affect theirexpectations.

The competitive options available to consumers will impact their desired and adequatelevel of consumer expectations. Normally the ideal and predicted levels are not impacted.A business firm that has ten competent accounting firms from which to choose willnormally have higher expectations than a business that has only four from which tochoose. The desired level will change because there are alternatives available that cansupply the service. The minimum level of expectations will increase because there areother competent firms than can perform the service at a higher level. Thus, competitionnormally drives expectations upward.

5. Explain why past experience is the most important factor affecting consumerexpectations. Give illustrations of how it works.

Because of the risk involved in purchasing services, consumers tend to patronize thesame firms. Based on past experience, they know what to expect. They have developed aclearly, defined predicted level of service. A new firm is unknown. The ideal, desired, andadequate level of expectations are intact, but with no experience, it is difficult to form apredicted level. A consumer would have to rely on word-of-mouth communications orother information. The examples students will use to illustrate this concept will varywidely. But in most cases, for example, students patronize the same hair stylist becausethey know what to expect. A new hair stylist is seen as more risky.

6. List the informational sources that have an impact on consumer expectations andgive specific examples.

Information sources include word-of-mouth communications and promotions by a serviceorganization. Word-of-mouth communications can be received from three sources: personal sources, expert sources, or derived sources. Personal sources would be aconsumer's friend or relative. Expert sources could be a physician, an attorney, orindividual who works for a carpet cleaning company. Derived sources are receivedsecond hand. It may be a friend saying their mother used a particular dentist. Promotionsare firm-sponsored sources of information. These sources can be advertising, salespromotions, and sales personnel.



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7. Identify the firm-produced factors that affect consumer expectations. Describeexamples of each.

Firm-produced factors include promotions, pricing, distribution, service personnel,

tangible cues, other customers, firm image, and pre-service waiting. Examples will varybut here are the ways that expectations would normally be effected. Promotions by aservice organization will affect the predicted level of expectations. It may have an impacton the desired level, but seldom will it affect the ideal level. Adequate level ofexpectations may be raised if consumers are promised a certain level of service byadvertisements or sales personnel. Pricing normally has a direct impact on expectations.As price increases, expectations increase. Distribution will affect the predicted servicelevel and may impact the adequate, but seldom impact the ideal or desired. Servicepersonnel can affect all four. Promises or communication by the service personnel of theservice can modify any of the expectations either upward or downward. Tangible cuesnormally only affect the predicted level of service. Other customers normally impact only

the predicted although they may have an impact on the other levels of expectationsdepending on what they say or do. Firm image is positively related to expectations. Thehigher the firm image, the more that is expected at all four levels. Pre-service waitingnormally has a dual impact. Predicted service levels decrease, but adequate service levelswill increase. Consumers will feel the firm will not perform as high as they originallyexpected, but the minimum level they are willing to tolerate will increase due to thewaiting.

8. Explain how a consumer's image of a service will affect their expectations.

Firm image is positively related to expectations. As firm image increases, expectationsincrease. Predicted service level is the primary level of expectations affected by firmimage but all the others can also be affected. The adequate service level may be higherfor a firm with a high image than for a firm that has a low image. The same may be truefor the desired level of expectations. The ideal should not be affected as much.

9. Briefly outline the role of consumer expectations during the pre-purchase phase, theservice encounter, and the post-purchase phase.

During the pre-purchase phase, expectations impact the purchase decision. The higher theexpectations, the more likely the consumer will make a purchase. However, due to risk,consumers will tend to patronize the same firms as long as past experience is satisfactory.Consumer expectations will form the basis for service quality evaluations and the level ofcustomer satisfaction. These evaluations begin during the service encounter and are fullyformulated during the post-purchase phase. Word-of-mouth communications and futurepurchase intentions are based on how well the service met the consumer's expectations.



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10. List the strategies service firms can use to manage consumer expectations during thepre-purchase phase, the service encounter, and the post-purchase phase.

During the pre-purchase phase, service organizations should learn what customers expect,tell customers what to expect, and consistently provide the service customers expect.During the service encounter, services should communicate with customers during the

service. If possible, they should modify the service to meet customer expectations. If it isnot possible to modify the service, then they should explain to the customer why it cannot be modified. During the post-purchase phase, services should communicate withcustomers to see if expectations were met, develop a follow-up program, and develop aprocedure for dealing with dissatisfied customers.



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CHAPTER 4

SERVICE QUALITY

1. What are the underlying themes of service quality? Suggest illustrations of each

theme.

The three underlying themes of service quality are that service quality is more difficult toevaluate for services than for goods, service quality is based on consumers' perceptions ofthe outcome of the service and how the service was performed, and service quality perceptions result from a comparison of what was expected to what was received.Illustrations will vary but should be relatively easy for students to develop. For example,most students will readily see that evaluating the quality of medical or legal care is moredifficult than evaluating the quality of a pair of jeans. The fact that thousands ofindividuals can attend a concert and leave with varying levels of service qualityevaluations indicates that service quality is based on individual perceptions. The last

principle can be illustrated by asking students how many were disappointed with a moviethey watched. Often this disappointment occurs because they were lead to have highexpectations.

2. Define the following terms and give examples of each:

A. Search qualities are attributes consumers can evaluate prior to purchase. Texture,color, style of a good such as jeans would be an example. Services tend not to behigh in search qualities unless the service is produced through a good, such as abakery. Cakes and doughnuts would be high in search qualities.

B. Experience qualities are attributes that consumers can evaluate only during or

after the consumption process. Most services fit into this quality. Evaluating theservice quality of restaurants, airline travel, recreational theme parks, andplumbing would be some examples.

C. Credence qualities are attributes that consumers have difficulty evaluating evenafter the consumption is complete. Professional and business-to-businessservices often fall into this category. Examples would be medical services, legalservices, consulting services, and accounting services. Because of the lack ofexpertise of the consumer, it is difficult to evaluate the level of service received.

3. Define the five dimensions of service quality. Give an example of each dimension.

The five dimensions of service quality are tangibles,

reliability,

responsiveness,

assurance, and

empathy.Tangibles would be physical elements such as the firm's furniture, equipment, andappearance of their employees. An example of reliability would be an accounting servicepreparing a tax return accurately and on the date promised. Responsiveness would be a



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service employee at a dry cleaners helping a customer get their garments cleaned quicklybecause of a special event. It is responding to a customer in a timely and proficientmanner. Assurance is conveyed by the pest control technician when he or she explainshow the chemical being used will rid a house of certain insects or pests. Empathy is thedisplay of caring, individualized attention to a customer. It can be illustrated by a waitertaking food that is not prepared to the customer's taste back to the kitchen and having a

new plate prepared.

4. Explain the SERVQUAL model. How is it used by service marketers?

SERVQUAL is an instrument that was developed to measure service quality. It consistsof 22 items. The first part of the questionnaire measures consumer's ideal level of servicewhile the second part measures a consumer's evaluation of the service provided by aparticular firm. Service quality is evaluated by subtracting the perceived level of servicereceived from the consumer's expectations. It is used by service marketers to evaluate thequality of service being provided by their firm. Based on the results, weak areas of theservice process can be located, and then corrected. It may also point out strong areas that

can be promoted as competitive advantages.

5. Identify the potential problems with SERVQUAL and the use of the gap theorymethodology for measuring service quality. Discuss the precautions that should be takento reduce these problems.

SERVQUAL has three potential problems. First, SERVQUAL measures expectations ofthe ideal firm in an industry, not the firm under consideration. Second, SERVQUAL isgeneric and therefore will not measure dimensions specific to an industry. Third,SERVQUAL is based on Gap Theory, which can lead to biased results. Since bothexpectations and service evaluation are measured after the service experience,measurement of the expectations component will be biased. To reduce these problems,services should modify SERVQUAL to fit the specific industry being used. Consumerexpectations should be measured prior to the service while the experience evaluationshould be measured after the service.

6. Identify the two types of performance measures that can be used to measure servicequality. Cite examples of each type.

The two types of performance measures are internal measures and customer measures.Internal measures could be the number of customer complaints received, the amount oftime it takes to perform a service, or the time it takes to respond to a customer inquiry.Customer measures may include surveying customers about the way they were treated byservice personnel or the opinion of certain aspects of the service.



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7. Explain the weaknesses of internal measures of service quality. Discuss theadvantages of using internal measures of service quality.

The weaknesses of internal measures include the fact that it is from the service firm's

viewpoint, the service variables being monitored may not be important to customers, andthe behavioral side of the service is not evaluated. The advantages of internal measuresare that they are objective measures of service quality and they provide valuable data onstrengths and weaknesses of the service process.

8. Explain the weaknesses of customer measures of service quality. Discuss theadvantages of using customer measures of service quality.

The weaknesses of customer measures are that they do not reflect the opinions of non-customers, they do not provide any comparative information, and it is difficult to getunbiased information. The primary advantage of customer measures is that they provide

valuable information about how customers feel. This information can be used to improveservice efforts.

9. Identify the gaps in the evaluation of service quality. Identify the causes of each gapand the marketing strategies firms can use to reduce the size of each gap.

Gap One is the difference between what customers expect and what managementperceives customers expect. The cause of Gap One is the failure of management tocorrectly identify consumer expectations. Strategies for reducing Gap One includecommunicating with customers, conducting market research, encouraging upwardcommunication, and decreasing layers of management.Gap Two is the difference between management's perception of consumer expectationsand service quality specifications. Causes of Gap Two include resource constraints,market conditions, and management indifference. Strategies for reducing Gap Twoinclude top management commitment, development of service quality goals,standardization of tasks, and addressing feasibility of customer expectations.

Gap Three is the difference between service quality specifications and delivery of thosespecifications. Causes of Gap Three include employees are unaware of specifications, donot have the skills to perform the specifications, or are unwilling to perform thespecifications. Strategies for reducing Gap Three include enhancing teamwork, ensuringemployee-job fit, ensuring technology-job fit, providing employees with perceivedcontrol, developing a supervisory control system, reducing role conflict, and reducingrole ambiguity.

Gap Four is the difference between the service delivered and external communicationsabout the firm. Causes of Gap Four include poor or lack of communication and over- promising. Strategies for reducing Gap Four include increasing horizontalcommunication and avoiding the propensity to over promise.



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10. What is ROQ analysis? Discuss how service firms can use this methodology todetermine which quality initiatives to develop.

ROQ analysis is a method firms can use to evaluate current or proposed service qualityprograms. ROQ analysis compares benefits to cost. Service firms can use ROQ analysis

to evaluate current service quality programs. It can also be used to evaluate proposedservice quality modifications.



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CHAPTER 5

PROCESS

1. Discuss the benefits of industrialization in manufacturing. Explain why thesebenefits are difficult to achieve in services.

The primary benefits of industrialization to consumers include lower prices and universalavailability of goods. These benefits are difficult to achieve in services because of theservice characteristics of intangibility, perishability, inseparability, and variability. Goodscannot be produced in advance and stored in inventory until customers want to buy them.

2. Identify the operational positions available to services. Define each operationalposition and cite examples of services using each position.

The three operational positions are cost efficiency, customization, and service quality.Cost efficiency emphasizes industrialization procedures to reduce capital investments,labor, and operating costs. Customization approach involves designing the service tomeet the needs of individual customers. Service quality emphasizes a superior level ofeither technical or function service to customers. Cost efficiency firms include firms suchas Taco Bell, McDonald's, Southwest Airlines, and H& R Block. Customization firmswould be Arthur Andersen Consulting and the general practitioner physician. Firmsemphasizing service quality would be ServiceMaster, Marriott Hotels, and Chili's.

3. Discuss the concepts of divergence and complexity. Cite examples of each.

Complexity refers to the number of steps and sequences in a service process. Divergenceis the variability and latitude in those steps and sequences. Performing a medicaloperation is complex because it involves a large number of steps and sequences. Thesame would be true for programming a computer system to run an automated assemblyline. Medical services tend to be high in divergence because the physician has a widelatitude in treatments he or she can use as well as tests that can be conducted. Fast-foodrestaurants are low in divergence because customers have few choices while a formaldine-in restaurant is high in divergence because customers have many choices.

4. What is meant by position mapping? Explain how position mapping can benefitfirms in the hotel industry.

Position mapping is the process of placing each firm in an industry on a triangular shapedmap. Firms in the hotel industry can benefit from developing a position map. Theposition map will identify the strategies being used by their competitors. It will alsoidentify who are their primary competitors, which are those firms that compete mostdirectly in the sector of the market. The position map may also identify areas thatcompetition is low.



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5. Explain blueprinting. Define each element used in blueprinting.

Blueprinting is the process of diagramming a service operation. A box identifies actionsto be taken by service personnel. A fan attached to a box indicates a potential range of

decisions customers make. A fan attached to a circle indicates potential events that canoccur or directions the company can take.

6. Define complexity and divergence. Give examples of services in each of the fourquadrants of the divergence/complexity matrix and identify which operationalpositioning strategy should be used.

Complexity refers to the number of steps and sequences in a service process. Divergenceis the variability and latitude in those steps and sequences. Services such as fast-foodrestaurants are low in both complexity and divergence and should therefore use the costefficiency operational position. Most educational institutions are low in complexity but

high in divergence and should use the functional service quality approach. Services suchas hotels are high in complexity but low in divergence and should use the technicalservice quality operational position. Most professional services are high in bothcomplexity and divergence and should use the customization approach.

7. Identify strategies a firm can use in the cost efficiency operational approach. Discussa service that has used these strategies.

The operational goal of services in the cost efficiency sector is to maximize productivity.Strategies that can be used include locating the customer contact component of thefacility near customers and the support component in low cost areas. The facility layoutshould maximize the speed and efficiency of operation. Job design strategies includeminimization of the customer contact component, maximization of the supportcomponent, standardization of service process procedures, division of labor, jobspecialization, cross-training of employees, computerization, automation, batching ofwork, component purchasing, and self-service by customers. Firms using these strategiesinclude Taco Bell, McDonald's, Southwest Airlines, and H&R Block.

8. Outline strategies a firm can use in the customization operational approach. Describea service that has used these strategies.

The operational goals of services using the customization approach are to maximize thepersonalization of the service and customer contact component of the service. The facilityshould be located in a high image area that enhances their reputation. The facility layoutshould emphasize the importance of the client or customer. Job design strategies includeenhancing the customer contact component, standardization of the support component,division of labor, job specialization, computerization, and automation. Firms using thecustomization approach include Arthur Andersen Consulting and most professionalservices such as medical, dental, and legal services.



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9. What strategies can a firm use in the service quality operational approach? Discuss aservice that has used these strategies.

The operational goal of services using the technical service quality approach is tomaximize the service outcome while the goal of services using the functional service

quality approach is to maximize the service process. The facility location strategy is tolocate the customer contact component in a high image area while the support componentis located in a low cost area. The facility layout should emphasize the importance of thecustomer contact component and to maximize the efficiency of the support component. Interms of job design, the techniques used by the technical quality services includeminimization of the customer contact component, maximization of the supportcomponent, standardization of service process procedures, division of labor, jobspecialization, cross-training of employees, computerization, automation, batching ofwork, and component purchasing. Services using the technical service quality approachinclude ServiceMaster and Orkin. Firms using the functional service quality approachinclude Disneyland and sports teams.

10. Identify the principles of managing customer waiting and queues. Explain how aservice can effectively manage each of the principles.

The principles of managing customer waiting and queues include unoccupied timeappearing to be longer than occupied time; pre-service waiting seems longer than waitingduring a service encounter; customer anxiety makes waiting appear to be longer; waitingseems longer if customers do not know how long they will be waiting; waiting that is notexplained appears to be longer; if customers feel their waiting is unfair, it will seemlonger; the more expensive the service, the longer the wait appears to be; and customerswaiting by themselves perceive the wait to be longer than if other customers are alsowaiting. Waiting and queues can be managed through operation management andperception management techniques. Operational management techniques reduce theactual waiting time. Some operation management techniques would include gettingcustomers out of queues; encouraging customers to use other methods of transacting business; adding additional service personnel; using reservation systems, andencouraging customers to use the service at non-peak times. Perception managementtechniques include: keeping customers occupied; breaking the waiting up into smallerintervals; informing customers about the length and reason for their wait; and reducingany anxiety that may exist through providing information.



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CHAPTER 6

PEOPLE

1. Compare and contrast the role of customer contact personnel and support personnel.

Customer contact personnel are the interface between the service and its customers. Theyare primarily responsible for the functional component of service quality while supportpersonnel are primarily responsible for the technical component. The customer contact personnel is responsible for communicating with the customer while the supportpersonnel is responsible for performing the service. The support personnel will seldominteract or communicate with customers.

2. Discuss the motivational job characteristics in terms of both customer contact andsupport job design.

Because of interaction with customers, customer contact personnel normally need a widervariety of job skills than do support personnel. Customer contact personnel need to beempathetic, have the ability to listen, and interact with people. Most customer contactpersonnel have high task identity. They see the outcome of the service. However, a fewcustomer contact individuals such as a telephone receptionist seldom see or know aboutthe outcome of the service. Because of division of labor and specialization, supportpersonnel often have distinct units of work, but seldom see the outcome of their work. Asimilar difference exists in terms of task significance. Customer contact individuals seethe impact their work has on the company and on customers. Since support personnel areremoved from customers, often they view their job as having little task significance. Inmost cases, customer contact personnel have more autonomy than do support personnel.

In terms of feedback, customer contact personnel often receive immediate feedback fromcustomers. Support personnel normally only get feedback if customers are dissatisfiedand want something re-done. Managers also tend to provide more feedback to customercontact personnel than support personnel.

3. Discuss the issue of control during the service encounter. Identify methods firms andservice personnel can use to increase their control.

A struggle for control exists in the service encounter among customers, serviceemployees, and the service organization. Customers like to have control so they can getthe service they want. Service employees want control so they have the freedom to

provide the service properly. Service firms want to control the service encounter so theycan control costs, productivity, and efficiency. Service firms and service personnel usephysical control, leadership, rewards, and education to increase their control.



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4. Identify methods firms can use to give customers greater control during the serviceencounter.

The process of giving customers more control of a service experience is called behavioral

control. The process of giving customers more perceived control is called cognitivecontrol.

5. Identify the conflicts faced by employees of a service firm. Discuss why theseconflicts occur.

Employees face conflicts with their role, the organization, other employees, andcustomers. Employee-role conflicts occur because of a perceived inequality dilemma ordress codes established by the employer. The major cause of employee-organizationconflict is the two-boss dilemma. Employee-employee conflicts are caused by lack ofclear communication, lack of a clear chain-of-command, conflict of personalities,

competition for customers, and differences in perceived workloads. Conflicts withcustomers can occur because one party doesn't follow their correct role, over ownershiprights, or because of one party's behavior.

6. Identify the conflicts faced by customers of a service firm. Discuss why theseconflicts occur.

Customers can have conflicts with their role, with the organization, with other customers,and with employees. Customer-role conflicts normally occur because of lack ofunderstanding of their role. Customer-organization conflicts occur because ofdisagreement over policies and rules. Customer-customer conflicts occur because ofdifferent expectations, perceived inequality of treatment by service personnel, andpersonality differences. Customer-employee conflicts occur because one party doesn'tfollow their correct role, over ownership rights, and because of one party's behavior.

7. Identify methods individuals use to deal with conflict. Compare and contrast themethods used by service employees and customers.

Methods of dealing with conflict include avoidance of contact, psychological withdrawal,direct confrontation, and retaliation. Employees will use the avoidance approach first. Ifit does not work or they cannot avoid contact, then they will engage in psychologicalwithdrawal. Confrontation is only used if the first two methods fail. The last methodemployees use is retaliation. In most conflict cases, retaliation is never used. Forcustomers, avoidance is the primary method. Avoidance is demonstrated by patronizing adifferent firm. Customers often engage in retaliation by telling others of the bad service.Customers will also use confrontation, which is telling employees about the poor service.The method used least by customers is psychological withdrawal.



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8. Define internal marketing and discuss how a firm can use it.

Internal marketing is the process of using marketing techniques to satisfy the needs andwants of employees. Internal marketing is based on the premise that if a firm first meets

the needs of their employees, the employees will work harder to meet the need of thefirm's customers. Happy, satisfied employees will lead to happy, satisfied customers.

9. Describe each component of internal marketing and give an example of how eachcan be used by a service firm.

Marketing research is the process of researching the needs and wants of employees.Service firms can use marketing research to determine the feelings of customers towardsthe firm's policies and rules. Their needs in terms of fringe benefits can also bediscovered. Marketing segmentation is the process of matching employee skills with jobneeds. For example, employees who like people and like to interact with people should be

matched with customer contact jobs. Internal communications is the third component.Examples of internal communications include newsletters, formal meetings, and informalword-of-mouth communications. These methods of communication can be used byemployers to learn how employees feel as well as to convey management philosophy andideas. External communication impact employees for two reasons. First, it tells customerswhat to expect from service personnel. Second, it tells service personnel what the firmexpects them to provide to customers.

10. Discuss how a service business can develop customer-focused personnel.

Developing customer-focused personnel requires the following five steps. First, servicesmust write customer-focused job descriptions. Every job in the firm must be organizedwith the customer as the focus. Second, firms need to recruit people who have a desire toserve customers and meet their needs. Third, orientation and training has to focus oncustomers. New employees must see and hear that the customer is the focus of the firm.The fourth step is training employees on how to deal with customer dissatisfaction andproviding them with power to deal with dissatisfied customers. Without empowerment,employees will not become customer-focused. The last step is to use motivationtechniques that encourage customer service and a compensation system that rewardsemployees for good customer service.



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CHAPTER 7

SERVICE ENVIRONMENT

1. Identify the components of the servicescape. Cite an example of each component.

The components of the servicescape include the physical facility, the location, ambientconditions, and interpersonal conditions. The exterior appearance of a business would bean example of the physical facility. The location of the service could be in a mall,downtown, or even in the industrial park. Odors and noise at a business would beexamples of ambient conditions. Interpersonal conditions would involve the appearanceand behavior of a waiter at a restaurant.

2. Identify the response moderators of individuals to the servicescape. Cite examplesyou have seen of each type of response.

Possible response moderators include cognitive responses, affective responses, and physiological responses. Examples will vary but students should understand thatconsumers might react differently when exposed to the same servicescape. Cognitiveresponses are beliefs consumers form about a service based on the servicescape. Forexample, a tourist may conclude a restaurant does not have very good meals because onlya few cars are in the parking lot. Going to a physician for a medical exam will normallycreate feelings of distress while attending a musical concert will normally producefeelings of excitement and joy. Consumers react physically to an environment, especiallythe ambient conditions. If a retail facility is cold, consumers may move faster and rushtheir purchase decision. If it is crowded, they may feel uncomfortable. Normally the

physiological responses will trigger either cognitive or affective emotions.

3. Servicescapes can be designed to meet the needs of customers, employees, or thefirm. Identify the goals that should be met by each type of servicescape. Cite anexample of each.

Firms operating in the customization and functional service quality sector will want todesign their servicescape to focus on the attraction, satisfaction, and retention ofcustomers. The offices of a consulting firm would be an example of this approach. Forfirms operating in the technical service quality sector, their servicescape goals are toprovide employee satisfaction, motivation, and operational efficiency. A nursing home,

hospital, or medical treatment facility may be designed this way. The last operating position is cost efficiency. The goal of the servicescape is to provide optimal costefficiency and productivity. Fast-food restaurants are an excellent example of thisapproach.



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4. List the steps a service should use to maximize their servicescape. Explain how adine-in restaurant could use each step.

The four steps are 1) identify the operational position, 2) identify the appropriate

servicescape position, 3) identify desired behaviors the servicescape should elicit, and 4)identify the factors that enhance these desired behaviors. The first step is deciding whichoperational position the restaurant will use. Answers on the last three steps will varydepending on which operational position is chosen by the student. The benefit of thisquestion is for students to see that the servicescape will be designed differently dependingon which operational position is chosen.

5. Identify the emotional states that can be created by a servicescape. Identify examplesof each that are not used in the textbook.

The eight emotional states are pleasant, unpleasant, arousing, sleepy, exciting, relaxing,

gloomy, and distressing. Examples will vary.

6. Discuss the criteria used in the selection of a site for a service. Explain how eachrelates to the firm's operational strategy.

The five criteria used in site selection include operational position, merchantability,traffic interception, cumulative competitive attraction, and competitive compatibility.Firms choosing a cost efficiency approach are very concerned about merchantability,traffic interception, cumulative competitive attraction, and competitive compatibility.Their site location has to generate a large volume of customers. Customization firms arethe least concerned about cumulative competitive attraction, competitive compatibility,traffic interception, and merchantability. Customers will drive to the service. It is notessential to be easily accessible. Firms using the service quality approach will vary. Thoseusing the technical quality will tend to be more like the cost efficiency service whilethose using the functional quality approach will tend to be more like the customizationapproach.7. Briefly discuss the components of the physical facility and ambient conditions that

impacts the service environment. Give examples of each type.

The physical facility elements include the exterior appearance, the interior decor, thelayout, the furniture, and the equipment. Ambient elements include temperature, noise,music, sounds, air quality, and odors. Examples of each will vary.

8. Discuss the interpersonal factors that will affect a service atmosphere. How shouldservice firms monitor these factors?

Interpersonal factors include crowding and the appearance, behavior, and mood ofemployees and customers. Interpersonal factors can be monitored through mysteryshoppers for large service operations or through observation for small firms. Customerscan be surveyed about their opinion concerning the appearance, behavior, and moods ofemployees. Crowding can be monitored by keeping a count of the number of people in a



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facility at one time. Comparing sales with the number of customers in a facility at onetime will tell the manager if crowding is having a negative impact on sales. Also, surveyscan be done of both employees and customers to gain their input on the impact ofcrowding.

9. Discuss the short-term and long-term affects of crowding. How can service firms

reduce the impact of crowding?

Short-term effects of crowding include negative feelings and in-service adaptivebehaviors. Long-term effects include cognitive and behavioral responses. The negativeimpact of crowding can be reduced through operation management and perceptionmanagement techniques. Operation management techniques include changing the layoutof a facility, reducing the capacity, and physically controlling the number of customersentering and leaving the facility. Perceptions management techniques include using signsand modifications of ambient conditions.

10. Briefly describe the differences between the servicescape at sporting events andrecreational theme parks and other services such as beauty salons. What servicescapefactors are most important to customers?

At sporting events, crowding and noise are an important positive element of the servicewhile for most other services it is negative. The ambient conditions and the physicalfacility itself are often less important than factors such as the level of excitement, thelevel of involvement, and the situational involvement with a particular game or event.Fans will endure cold, snow, and a hard seat to watch a football game while theycomplain that a chair in a heated restaurant is uncomfortable. For theme parks, the designof the physical facility is very important. They are there to have fun and the fun is basedon the servicescape. Ambient conditions are often modified to add to the excitement of aride or display. For both spectator sports and theme parks, more attention has to be givento servicescape factors than for other services such as a beauty salon.



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CHAPTER 8

PRICING

1. Discuss the role of pricing in the marketing of services.

Consumers use prices in three ways. First, prices are an input into forming expectationsof a service. Second, prices affect the purchase decision. Third, pricing is used byconsumers in evaluating the level of service quality. Price is an important element incontrolling demand. By lowering price, demand can be increased. By raising price,demand is reduced.

2. Identify the factors that impact the pricing decision. Give an example of each factor.

The factors impacting the pricing decision are organizational pricing objectives, cost,demand/price curve, elasticity of price, competition, operational position, and marketingmix composition. Examples will vary but it may be beneficial to use an industry, such asthe trucking industry to see how the factors are related. For example, in the truckingindustry, a firm with a profit maximization objective will charge more for their servicethan a firm with a sales maximization objective. It is important to calculate costs todetermine an appropriate price. The cost of the tractor and trailer will have to bedepreciated over time. The cost of a driver and other incidental expenses will need to beconsidered in determining the price. The demand/price curve will show the demand fortrucking services at various price levels. These can be based on historical data, surveyresults, or test markets. Because of the high level of competition, pricing will be highly

elastic. Competitive pricing is very important. To survive, the firm must charge pricesthat are close to the competition. The operational position of the firm will have an impacton pricing. A trucking company that has chosen a technical service quality approach willcharge more than one that has chosen a cost efficiency approach. The other elements ofthe marketing mix will have an impact on price. A firm with a high image will chargemore. If extensive advertising is being conducted, normally the price will be higher or atleast equal to the competition.

3. What are the pricing objectives service firms can use? Give an illustration of aservice firm that uses each type of objective.

The four pricing objectives are profit maximization, sales maximization, market sharemaximization, and competitive parity. Without internal knowledge of a firm's operation, itis not always clear what pricing objective is being used. Also, most sales and marketshare maximization objectives are defined within certain constraints, which are normally,an acceptable level of profit or return. Examples of the profit maximization may beHilton Hotels, Disneyland, ServiceMaster, and one of the large accounting firms. Salesmaximization examples may include Holiday Inn, McDonald's, and Alamo Car Rental.Market share maximizing firms may include Taco Bell, Southwest Airlines, and H&R



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Block. Firms that appear to be using competitive parity are Burger King, AmericanAirlines, Orkin, and Avis.

4. What factors affect price elasticity? Cite examples of each factor.

Price elasticity is affected by six factors: availability of substitutes and complements,

relation to competitors' prices, whether the service is a necessity or luxury, consumers' personal characteristics, and time perspective of purchase. Elasticity for recreationalservices is normally high because substitutes are readily available. If a bowling centerincreases their prices, consumers can substitute golf, miniature golf, a gym, or othersporting type activity. Complements would be like photo developing for a camera. If theprice of cameras is increased, photo-developing demand will be affected. Price elasticityfor luxury services, such as entertainment, tends to be more elastic than for necessityservices such as hair styling. The further a price is from the competition, the more elasticit tends to be. Increasing the price of airline tickets substantially above competition willdrastically reduce demand. The reverse would also be true. The lower the price is inrespect to competition, the more elastic the demand will change. Personal characteristics

of individuals have an impact on elasticity. A luxury service for one consumer may be anecessity service for another. For example, some individuals feel it is important to get aperm every two weeks and price will not change that demand while others will waitlonger between perms if the price increases. Services tend to be more elastic in the shortrun. If the price of taxis goes up, consumers may have little alternatives in the short run.However, in the long run, they may make arrangements for alternate types oftransportation.

5. Explain differential pricing. Cite examples of services that use each type ofdifferential pricing.

Differential pricing involves using different prices for different market segments.Differential pricing can be used in five ways. First is by time of usage. A golf course thatcharges more on the weekend than it does during a weekday is an example. Differentialpricing can be based on time of reservation. Airlines and hotels often use this system. Thethird method of differential pricing is by the time the service is purchased. Concerts oftenuse this type of differential pricing, charging less for tickets purchased in advance.Differential pricing can be based on different target markets. Move theaters often chargeless for children and senior citizens. The last method is by location of consumption. Mostsports stadiums have different prices for the various seats based on location. Concertswill often do the same. Front row sections are more expensive than the middle section orthe last sections. Balcony seats may even be less than any of the others.

6. Discuss how yield management can produce higher revenues than traditionaldifferential pricing techniques.

Yield management is a differential pricing methodology designed to maximize revenuesbased on detailed analysis if past purchase behavior. The concept of yield management isto charge a higher price for the market segment that is least price sensitive and willing topay a higher price. In the airline industry, yield management is used extensively. Theseats in an airplane are reserved on a system that allows the cheapest seats to be sold firstand the highest price seats last. Business travelers who cannot make travel arrangements



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several weeks in advance are willing to pay more for a seat, thus the higher prices arenear departure time. By using this methodology, airlines are able to fill every seat on anairplane while maximizing revenue.

7. What is price bundling? List examples of services that use each type of pricebundling.

Price bundling is the practice of offering two or more services or goods in a singlepackage for a special price. Pure price bundling is used by services such as automotivelube facilities, fitness centers, YMCAs, and some medical services. Mixed bundling isused by services such as fast-food restaurants, consulting services, accounting services,and travel agencies.

8. Describe the concept of multiple-use pricing discounts. How can it be used byservice firms?

Multiple-use pricing discounts are some type of price reduction to customers for repeat

usage of a service. Multiple-use pricing can be used to retain current customers. It can beused to encourage repeat purchase behavior. It can be used to discourage firm switchingbehavior. Lastly, it can be used to counter competitive price or promotional offers.

9. Outline the strategies service firms can use to increase prices.

The first strategy is to wait until another firm raises their prices, and then quickly followthe lead. A second strategy is to increase the prices, then use a communication program toexplain to customers why the price increase was necessary. A third strategy is to make noacknowledgment of the price hike and hope customers do not notice. A fourth approach isto make the price increase over several small increments. The last strategy is to add acomplementary service or a service feature to justify the price increase. With this strategyit is important that the additional service feature does not cost more than the priceincrease. It is also important that the additional service is seen as valuable by customers.

10. Explain what is meant by customer-focused pricing.

Customer-focused pricing is making pricing decisions with the customer in mind.Customers are concerned about the perceived value of the service, availability ofalternatives, switching costs, personal needs, and purchase risk.



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CHAPTER 9

DISTRIBUTION

1. Briefly discuss the importance of operating hours to a service firm. Identify ways a

service firm can increase accessibility to their service.

Operating hours are one of the most important aspects of distribution since it determineswhen the business is available to consumers. Businesses can expand operating hoursthrough allowing alternate forms of access such as the ATM, telephone, and computerlinks. The Internet is a new form some businesses are using to allow 24-hour a dayaccess.

2. Briefly explain the differences between the three channel structure strategiesavailable to service firms. Specify an example of each not discussed in the text.

Exclusive distribution is the use of a limited number of agents or outlets that sell only onebrand. Most fast-food restaurants such as McDonald's, Burger King, and Taco Bell are ofthis type. A selective distribution involves the use of a few intermediaries. Subway iscurrently using a selective distribution. In addition to its own outlets, Subway hascontracted with some convenience stores and universities to operate a Subway branch.Intensive distribution involves placing the service with as many different parties aspossible. The airlines use this strategy when customers can reserve tickets using anytravel agent.

3. What is multi-channel distribution? Explain the pros and cons of using a multi-channel distribution strategy.

A multi-channel distribution uses two or more channels to reach one or more marketsegments. The advantages of using a multi-channel distribution strategy include increasedmarket coverage, lower distribution costs, and easier access for customers. Thedisadvantages include difficulty in controlling the quality of service, firm imageconfusion, and reduced profits.

4. Define each of the distribution growth strategies. List an example of each notdiscussed in the text.

Multi-site distribution strategy is the expansion of a service to additional locations.Examples may include H&R Block, Budget Car Rental, and SunGlo. Multi-servicedistribution strategy is the addition of new services. ServiceMaster has used this strategywhen it added cleaning of hospitals and commercial food service to institutions such asuniversities and hospitals. Multi-segment distribution strategy is the expansion of acurrent service to a new market segment. An Internet service that starts by servingresidential customers is using a multi-segment strategy when it starts marketing smallbusinesses. A multi-site, multi-service strategy is the addition of new services and newsites. An example would be a hospital offering selected outpatient services at clinicsthroughout a city or rural area. Multi-site, multi-segment strategy is the offering of aservice to a new market segment at a new sight. Education institutions often use this



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strategy. A college may offer college classes at a remote site to adult learners oremployees of a corporation. A multi-service, multi-segment strategy is offering a newservice to new market segments. An accounting firm may offer different services todifferent market segments. To individual consumers, the service may offer taxpreparation and estate planning. To small businesses, the firm may offer bookkeeping,payroll preparation, and tax services. To large businesses, the firm may offer auditing

services. The last strategy is the multi-site, multi-service, multi-segment. It is theexpansion of new services, to new market segments, at new sites. Travel agents such asTravel Agents International often use this strategy. They serve several market segmentsand have multiple offices. They also may offer many different services from bookingairline tickets to arranging corporate retreats and meetings.

5. Identify the different methods service firmscan use to expand internationally. Citeexamples of each not discussed in the text.

The six methods of international expansion are direct exporting, joint ventures, directforeign investment, agents, franchises, and license agreements. Examples will vary.

6. Explain why many firmsfail in their international expansion efforts.

A common mistake firms make is thinking they can market their services in othercountries in the same manner as they do at home. Because of this philosophy, marketresearch is neglected. It is the market research that provides a company with informationto build an effective marketing plan. A second mistake is the tendency to overstandardize. Too often firms transplant the operation that is successful at home to anothercountry with few modifications. Because of differences in culture, competition, andmarket needs, this strategy seldom works. Burger King learned this lesson when the firsttwo attempts to expand into Japan failed. The last reason for failure is poor follow-up.Once established, business ventures in anther country must be monitored closely.Problems must be addressed and solved immediately.

7. What are the advantages of using franchising as a growth strategy? What are thedisadvantages?

For the franchisor, the advantages of franchising include additional capital for growth,faster growth, additional management personnel, and additional income. Thedisadvantages for the franchisor include lower potential profits, controlling the quality ofservice being provided by the franchise, and controlling firm image. For the franchisee,the advantages include lower risk, an established brand name, a successful business plan,and expert assistance. Disadvantages include paying franchise fees, lack of freedom, andcontrol by the franchisor.



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8. Explain how a brand name can benefit a service organization. What should a serviceorganization do to maximize those benefits?

Brand names offer several benefits. First, it helps in preventing the classification as a

commodity service. Second, branding assures customers will receive a uniform level ofservice. Third, branding provides value by enhancing the efficiency and effectiveness ofmarketing programs. Fourth, brand loyalty and repeat purchase behavior are enhanced.To maximize the benefit of a brand name, it should be distinctive and relevant to theservice. It should have a tangible quality. For maximum effect, the most importantservices are branded and linked together.

9. What are the two components of distribution management? Explain the importanceof each to a service firm.

Distribution management has two components: organizational management structure and

economies-of-scale plan. The organizational structure is important because it willdetermine the process that will be used for decision-making. Centralized structures willplace power in upper management while decentralized will give local entities power.Economies-of-scale is important for survival in competitive markets. With globalcompetition, some type of economies is essential.

10. Identify the components of a customer-focused distribution strategy. Why is long-term success dependent on following these steps?

The components of a customer-focused distribution strategy are: 1) identification of themarket segments being served, 2) identification of benefits being sought by customers, 3)matching customer needs to corporate channel and distribution growth strategies, 4)managing quality control, and managing corporate growth. In the long run, firms thatmeet and satisfy customers will survive. Following these steps will ensure that thedistribution strategy will allow customers to have access to the service in such a way as tobe competitive.



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CHAPTER 10

COMPETITIVE MARKETING STRATEGIES

1. Identify the requirements of a sustainable competitive advantage. Why is eachrequirement important?

The first requirement for an SCA is that it be of value to customers. A competitiveadvantage that is not valued by customers will not result in additional sales. The secondrequirement is that the SCA have no readily available substitutes. If competitors cannotcopy the competitive advantage but substitute another SCA for it, then the impact of theSCA is neutralized. The third requirement for an SCA is that the firm have the resourcesand capability of delivering the advantage to customers. If the firm does not have theresources or lacks the capability, the SCA will be short-lived. It may also cause the firmto spend money on trying to develop a SCA that it does not have the capability of ever

delivering. The last requirement is that the competitive advantage be sustainable. If itcannot be sustained over time, then the SCA will not last and the firm has no advantagesover its competition.

2. Discuss the barriers-to-imitation that prevent a service's competitive advantage frombeing copied.

The barriers-to-imitation are some type of economies-of-scale, service offeringdifferentiation, buyer switching costs, access to distribution channels, or experienceeffects. Strong economies-of-scale provide cost savings that are hard for new firms orother firms to copy. Service offering differentiation can be a barrier to imitation if the

differentiation cannot be easily copied. Buyer switching costs can be used as barrier if afirm has increased the actual cost of switching or even the perceived cost. Electronichookups and data exchange are now being used by many firms to make it difficult for acustomer to switch. Perceived switching costs can be increased by building a strongtrusting relationship with customers. Services that can control or limit the access todistribution of a service make it difficult for other firms to compete effectively.Occasionally firms can build barriers to imitation through experience. In high-risksituations, firms with experience will often be preferred.

3. Identify the sources of a sustainable competitive advantage. Cite an example of afirm for each.

Sustainable competitive advantages can be built on a unique or different operational position, scale effects, cost and demand synergy, brand or firm equity, customerrelationships, spatial preemption, service package, or information technology. Exampleswill vary for each source of a SCA.



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4. Name the four stages of the service life cycle. List the characteristics of each.

The four stages of the service life cycle are the introductory stage, growth stage, maturitystage, and decline stage. The introductory stage is characterized by few or no

competitors, low profit margins, negative cash flows, and market segments that are notwell defined. The growth stage is characterized by a rapid growth in the industry, positivecash flows, higher profits, influx of new firms, increased level of competition, anddevelopment of distinct market segments. The maturity stage is characterized by levelingof industry sales, intense competition, shaking out of weaker firms, distinct marketsegments, and brand parity within the industry. During the decline stage, there isdeclining industry sales, less competition, lower cash flows, and declining profits.

5. Identify the strategies a service firm can use in each stage of the service life cycle.

During the introductory stage, services can involve users in the service design, identify

early adopters, develop prototypes, obtain feedback from early adopters, build industrydemand, use introductory offers, and stimulate positive word-of-mouth communications.During the growth stage, strategies include developing a competitive advantage, brand preference, and firm loyalty or repeat purchase behavior. For the maturity stage,strategies include reducing operating costs, enhancing technical or functional servicequality, concentrating on specific market segments, adding complementary services,using persuasive advertising, matching competitors' sales promotions, and developing anSCA. The strategies for the decline stage are divestment, harvest, pruning, retrenchment,or rejuvenation.

6. Explain each of the market defender strategies. How does a firm determine which isthe best strategy?

The three market defender strategies include blocking strategies, retaliation strategies,and adaptation strategies. Blocking strategies would consist of performance guarantees,intensive advertising, controlling location or access to distribution, high switching costs,and satisfied customers. The purpose of the blocking strategies is to either increase thecost of entering a new market or decrease the attractiveness of the market. If both can bedone, then the market is less inviting to potential new entrants. The purpose of retaliationstrategies is to reduce the anticipated profits or return. If a new entrant does not earnenough, they may abandon their plans. Retaliation strategies include reducing servicetrial, fighting aggressively to maintain market share, and developing a reputation forbeing aggressive. The last defender strategy accepts the new entrant as a member of theindustry. The goal of adaptation strategies is to prevent eroding of market share.Adaptation strategies include matching competitors' offers, expanding the servicepackage, becoming a market specialist, and developing a strong SCA. The selection of adefender strategy will depend on a firm's operational position and their competitiveadvantage. The best strategy is one that build's on their SCA. Not only does this increasethe strength of their competitive advantage, it is also their strongest position. Making newentrants fight one's strength makes a lot more sense than allowing new entrants to useguerilla warfare tactics.



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7. Explain what is meant by consumer positioning. Why it is important to a servicefirm?

Consumer positioning is the position a firm holds in the minds of consumers relative tocompetition. It is important to service firms because consumer positioning will determine

from which competitor a service will be purchased. In purchasing a service, consumerscompare service offerings and service firms. Purchase decisions are based on thesecomparisons. Service quality evaluations are also affected by the consumer positioning.In evaluating the level of quality, consumers will compare the service they received towhat they expected from a particular firm as well as what they would expect from otherfirms that they see as comparable substitutes.

8. Identify the ways a service can position itself in the marketplace. Identify anexample for each consumer positioning strategy.

Service firms can be positioned by service attributes, use or application, price/quality

relationships, service class, service user, and competitor. Examples will vary but somethat may be suggested are:Service attributesMGM Grand Casino, Boots & CootsUse or applicationGold's Gym, Westec SecurityPrice/quality relationshipsDollar Rent a Car, AccessService classT.G.I. Friday's, Denny'sService userCaring Calls, Cazadero Performing Arts CampCompetitorsMCI, Burger King

9. Explain what is meant by position mapping. How is it beneficial to a servicecompany?

Position mapping is placing a firm's primary competitors on a two dimensional mapbased on the two most important purchase criteria. It is beneficial because it allows a firmto see how it is viewed by consumers in relation to its competitors. It will help a firm toknow if its current positioning strategy is a good one or if it should change its position.The map may indicate an area that is desirable where there is less competition.

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Service Mktg Questions