Services Marketing                                             Study Material1.    Recognize the major changes occurring i...
trade and tourism drives demand for freight and passenger transportation, international finance,communications, and hotel ...
6.   Make a list of at least 12 services that you have used during the past month.     a) Categorize them by type of proce...
9.   What are the backstage elements of (a) a car repair facility, (b) an airline, (c) a university, and (d)     a consult...
(attributes) which are important to customers in this (these) segment(s). Tell students that they willneed to satisfy you ...
both the corporate level (e.g., Marriott vs. Hilton; British Airways vs. United) and also at the productlevel (e.g., brand...
The hairdresser needs to build a clientele, none of whom will have previous experience with the salon.Hence providing info...
a) Driving School: use more expensive cars, have nice offices located in better parts of town,       require driving instr...
Market drivers stimulating this trend toward transnational strategies include common customerneeds, customers who demand c...
22. Why should service marketers be concerned with new developments in mobile communications?Each new technological develo...
Noble gifts), discreet buying (e.g., Victoria͛s Secrets), reputation of online firm (eBay, Amazon.com), etc.Possible disad...
5) The VandalͶPrevention through improved security, good lightning, printed warnings, and       security deposits.    6) T...
33. Crucial success factors needed for teams in an (a) airline include: (see also Best Practice in    Action 11Ȃ5)    a) T...
The FA, however, must be able to build this confidence quicklyͶthere are lots of other         passengers to serveͶso a wa...
firm to see better where the profits and the loss making segments are and tailor their marketingaccordingly in response.39...
Customers usually give the following three reasons for not complaining: (1) they don͛t think it͛s worththeir time and/or e...
In this case, as a major national bank, customer expect more, at the same time, the                letter from management ...
TQM and Six Sigma are established quality and productivity initiatives with their respective set of toolsand methods for m...
can get into price wars in order to attract customers. Apart from mechanics, the skill-level           required of staff i...
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  1. 1. Services Marketing Study Material1. Recognize the major changes occurring in the service sector and how they impact competition.The service sector is going through a period of almost revolutionary change and many servicebusinesses are struggling to cope with an increasingly competitive environment. The mostdramatic changes can be explained by the forces outlined in Fig. 1±3, including changingpatterns of government regulation; privatization of former state-owned corporations in manycountries; social changes, advances in IT; internationalization and globalization; and suchbusiness trends as pressures to improve productivity; the service quality movement; expansion ofleasing and rental businesses; the growing role of manufacturers as service providers; the needfor public and nonprofit organizations to find new income; and innovative hiring practices.Technology in all its forms is a key driver of service innovation.Customer needs are evolving, markets and competition are changing rapidly, and effectivestrategic leadership is vital to success. Students should recognize that understanding the threatsand opportunities posed by these challenges is a vital first step in developing effective strategies.In particular, the increasingly competitive nature of many service industries places a premium oneffective marketing strategy.2. Is it possible for an economy to be entirely based on services? Is it good for an economy to have a large service sector? Discuss.Yes it is, in theory, particularly if the population is educated and a good infrastructure exists. Some smallisland nations (e.g., Bermuda, Cayman Islands) now base their economies around tourism and financialservices, plus retail, transportation, professional and personal services, health, education, andgovernment. Manufactured products, fuels, and foodstuffs can always be imported. A service sectorthat accounts for a high proportion of GDP is a hallmark of many nations like the United States that havea high standard of living. The U.S. economy has grown even as the manufacturing sector has shrunk. Thedownside is that a country becomes less self-sufficient, which may constitute a threat to nationalsecurity. Moreover, if there are substantial imports of the food, fuels, and manufactured goods neededto support both the local and visiting population and to enable the local service industries to function,then there will be a serious balance of payments problem unless the country can generate sufficientforeign earnings from tourism and export of services to other countries.3. What are the main reasons for the growing share of the service sector in all major economies of the world?Increased productivity and automation in agriculture and industry, combined with growingdemand for both new and traditional services, have jointly resulted in a continuing increase overtime in the percentage of the labor force that is employed in services. Increased internationalProf. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  2. 2. trade and tourism drives demand for freight and passenger transportation, international finance,communications, and hotel entertainment, and food services. Increased spending on services byindividuals is often associated with higher standards of living. People eat out more, take morevacations, spend more on entertainment, and employ other people to undertake household choresthey used to undertake for themselves. Similarly, as companies become larger and moresophisticated, they may choose to outsource so-called internal services such as recruitment, legaland accounting services, payroll administration, office cleaning, landscape maintenance, supply-chain management, advertising, etc. to specialist subcontractors. When such tasks areoutsourced, they become part of the competitive marketplace and are therefore more easilyidentifiable as contributing to the services component of the economy. Technology has resultedin the creation of entire new service industries.4. Why is time so important in services?Many services are delivered in real time, so they can͛t be stocked for use at a later date. This means thatservice managers must try to match service supply with service demand in order to make the best use oftheir employees and facilities and to maximize profits. If customers have to be physically present toreceive services (like cinemas, amusement parks, restaurants, etc.), there are limits on how long theywill be willing to wait. Even if service delivery takes place without the customers͛ presence, they haveexpectations about how long a specific service should take to completeͶwhether it is repairing adysfunctional computer, changing the oil in a car, or preparing a legal document. Speed has become akey aspect of both good service and competitive positioning, because today͛s busy customers areincreasingly time sensitive. It͛s useful to get students talking about their own priorities in terms of timefor different types of services as well as their views on how well or badly service firms understandcustomer͛s time budgets.5. Why do marketing, operations, and human resources have to be more closely linked in services than in manufacturing? Give examples.Marketing is usually separated from the operations and human resources functions in a manufacturingbusiness, where goods are usually produced in a factory and then distributed and sold at a separatelocation. In a service organization, customer involvement in the production process and the fact thatother customers and employees are often part of the product blur the lines between these functionalareas.Customer satisfaction with many services often centers on the quality of the staff and whether theprocesses in which they themselves are involved are user-friendly. Students will probably choose high-contact services like hotels, education, restaurants, or airlines to illustrate these points, but theinstructor may wish to ask if the same observations applies to low-contact services like Internetproviders, telecommunications vendors, and express delivery services (like UPS or FedEx). The fewer theperson-to-person contacts (face-to-face or by phone) with customers, in fact, the more important it isthat such contacts be customer focused. To the extent that self-service systems require customers to dosome of the work for themselves, it͛s important that the operation be designed in a user-friendlymanner.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  3. 3. 6. Make a list of at least 12 services that you have used during the past month. a) Categorize them by type of process. b) In which instances could you have avoided visiting the service factory and instead obtained service at arm͛s length? Comment. c) How did other customers affect your own service experiences²either positively or negatively?Students should be able to come up with a reasonable number of services to analyze. Their lists arelikely to include a number of food, entertainment, and leisure services in addition to such activities asusing a telephone, mailing letters, riding public transportation, going to school, using library and athleticservices, visiting a bank or ATM, getting a haircut, taking clothes to the cleaners or to a self-servicelaundromat, and so forth. There may also be use of professional services (e.g., lawyer, doctor,counselor). Some students may be confused about the distinctions between the four processingcategories, so it͛s worth spending some time reviewing their examples. The key, of course, is to focus onthe core service (Fig. 1ʹ5). For instance, the core product of a movie theater is providing mentalstimulus even though the nature of this form of entertainment is that it requires customers to come tothe service factory in person for an experience that may also include eating popcorn, ice cream, orbeverages. Students may also identify several types of processes for the same serviceͶvisiting a retailbank branch, using an ATM, making transactions by telephone, and doing home banking on the Internet.7. Visit the facilities of two competing service firms in the same industry (e.g., two retailers, restaurants, or hotels) that you believe have different approaches to service. Compare and contrast, using one or more of the frameworks in this chapter.Among the differences that students are likely to identify are greater or lesser degrees of self-service,variations on any of the elements of the 7Ps, relative emphasis on tangibles versus intangible elements,and use of the Internet as a communications tool. The discussion of retailers may also include rental(non-ownership) vs. sale of certain items. It͛s possible that a few students may address the issue ofcorporate values and ethical treatment of customers.8. What actions could a bank take to encourage more customers to bank by phone, mail, Internet, or ATMs rather than visiting a branch?Students may suggest additional fees or costs for visiting a teller in a branch. Alternatively, price andpromotional incentives could be provided to encourage customers to use more desirable servicedelivery options (at least from the company͛s viewpoint) like phone, mail, Internet or ATMs in non-branch locations. The bank͛s management could also educate consumers about how to use thesealternatives and ensure that the service processes are both convenient and user-friendly. Managersshould also consider conducting research to find out why customers resist use of new deliverymethodsͶthere may be different reasons for different segments, requiring different responses. In classdiscussion, try to get students to talk about why they don͛t use certain delivery options and what wouldbe needed to make them change their behavior. For instance, the great majority of students willprobably be willing to use an ATM to withdraw money, but our experience suggests that only a smallminority will be willing to use an ATM to make deposits.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  4. 4. 9. What are the backstage elements of (a) a car repair facility, (b) an airline, (c) a university, and (d) a consulting firm. Under what circumstances would it be appropriate to allow customers to see some of these backstage elements and how would you do it?Backstage operations involve the technical core of the total service system and are typically invisible tocustomers. Thus students should identify elements of the services listed above that are not viewed bycustomers, such as the following examples: a) car repairͶdiagnosis and repair of vehicles. b) airlineͶmaintenance of aircraft, training of crews, preparation of meals, handling of baggage between aircraft and terminal. c) universityͶadministration, staff meetings, behind the scenes maintenance, marking of exams. d) consulting firmͶstaff meetings to hire/fire/promote consultants, preparing proposals, fieldwork other than at client site, analysis, report writing.There are some situations where it might be appropriate to give customers a peek at backstageactivities. These activities can actually become part of the service performance if they are carefullyorchestrated (but they should then be treated more like front stage activities in terms of managing theirimpact on customers.) Examples of this include: car repair facilities where the service operations arefully visible through large plate glass windows and advertisements for consulting firms that describetheir approach to projects. Many of the backstage activities described above, however, would be boring,incomprehensible, inappropriate or unpleasant for customers to experience.10. How can positioning maps help managers better understand and respond to competitive dynamics?Simple graphic representations are often easier for managers to grasp than tables of data or paragraphsof prose. The relative performance between competitors on a specific attribute is easy to identify. Whena chart uses two or more attributes simultaneously, it becomes clear which competitors are clusteredtogether (occupying a similar position in the market) and which occupy entirely different positions. It isalso easy to see which firms have a distinctive position. The question then becomes: how much demandis there in that area of the market and can the firm in question defend its position against competitors?Charts and maps can facilitate a ͞visual awakening͟ to threats and opportunities and suggest alternativestrategic directions. Managers who have an in-depth understanding of how their industry is evolving(either locally or on a national/international basis may be able to make realistic predictions of howcompetitive positions are likely to change in the light of future developments.11. Choose an industry you are familiar with (like fast food restaurants or grocery stores) and create a perceptual map, showing the competitive positions of different companies in the industry.There are two basic requirements for successful completion of this exercise. First, identifying one ormore major market segments for the industry in question; and second, clarifying what criteriaProf. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  5. 5. (attributes) which are important to customers in this (these) segment(s). Tell students that they willneed to satisfy you that they can justify their stated customer choice criteria (this could be done byciting published research or by documenting some original researchͶe.g., a survey of a sample ofcustomers in the segment under consideration). To keep the project in manageable bounds, suggestthat they select four criteria and create two, two-dimensional positioning maps. (A highly creativestudent may want to try to attempt a four-dimensional map, using height for the third dimension andcolor or thickness of the vertical poles for the fourth).Students will find it useful to refer to the perceptual maps shown in Figs. 3-4 and 3-5 when undertakingthis assignment. As you check their work (or discuss it in class if you have students present their maps),make sure that the perceptual maps contain the following things. First, both the horizontal and verticalaxes should be labeled with attributes that would be important to customers. Second, the set ofcompetitors should match what might realistically be included in a customer͛s evoked set. For example,if the businesses are all fast food restaurants, are they close enough to each other to be considered asreasonable alternatives by a hungry customer?12. Travel agencies are losing business to online bookings. Identify some possible focus options for agencies wishing to develop new lines of business to compensate for loss of airline ticket salesResponses to this assignment need to be based around Fig. 3.1 (p. 58). Examples of possible approachesinclude the following: a) Service focused: Offer a narrow service directed at many market segments. Get out of scheduled airline industry sales and be known as an expert on other types of travel. For instance, some agencies focus on cruise ship sales and sell to a broad cross section of the population, promising to match them to the cruise that will fit their budget and their preferences for style, locations visited, social life on board, etc. b) Market focused. Offer a wide array of travel services to a narrowly defined market. For instance, create a new way of selling travel that appeals to people who prefer to visit travel agents in person and dislike using the Internet or telephone to obtain information and make bookings. One travel agent has created a very attractive travel superstore that is educational and represents an entertaining place to visit. c) Fully focused. Become a specialist in a specific type of travel for a specific type of customer. For instance, one agency has become very successful by focusing on meeting the travel and transportation needs of film production companies that need to move personnel and equipment to particular locales.13. How is branding used in services marketing? What is the distinction between a corporate brand such as Marriott and the names given to its several hotel chains?A brand is a name, phrase, design, symbol, or some combination of these that identifies a company orits individual service offerings, servicing to distinguish these from the competition͛s. Branding is used atProf. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  6. 6. both the corporate level (e.g., Marriott vs. Hilton; British Airways vs. United) and also at the productlevel (e.g., branding the different levels of hotel offered by Marriott (p. 113) or the different types ofservice offered by a specific airline such as BA (pp. 113ʹ114,) or by a software support firm such as SunMicrosystems (pp. 113ʹ114). The corporate brand is often referred to as the umbrella brand because itstands for a certain service style and set of corporate values, being held above all the product sub-brands. Historically, service companies emphasized the corporate name but today, in an era of greatercompetition and product proliferation, product brand names (sometimes referred to as sub-brands)have been given greater prominence.14. What does British Airways gain from using specific sub-brand names like Club World?BA wants travelers to know that Club WorldͶits intercontinental business class brandͶoffers adifferent type of experience from that of other airlines and also from that of its European business class,known as Club Europe. Ideally, every step of the process should represent a distinctive ͞branded-serviceexperience.͟ Branding is designed to create preference for a specific offering and to associate it withgreater value.15. In what ways do the objectives of service communications differ substantially from those of goods marketing?Whereas product marketer͛s objective is to add abstract ideas, service communication͛s objective is toadd physical evidence and imagery to abstract offers. In services business, many communicationobjectives are concerned with educating and training customers in new service features, theirimportance and usage. The emphasis of services marketing is on, not only, improving externalcommunication, but also improving internal communication with in the organization, so as to motivateemployees to serve the customers well.16. Consider each of the following scenarios and determine which elements of the marketing communications mix you would employ and for what purposes: a) A newly established hairdresser͛s in a suburban shopping center. b) An established restaurant facing declining patronage because of the arrival of new competitors. c) A large, single-office accounting firm doing business in a major city and serving primarily business clients.Each of these businesses requires different communications objectives to match its specific situation.Students should start by developing objectives for each service. They can then determine whichmarketing communications mix elements might be most appropriate for meeting these objectives. (Themarketing communications mix is discussed in detail on pp. 135ʹ146).Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  7. 7. The hairdresser needs to build a clientele, none of whom will have previous experience with the salon.Hence providing information and obtaining trial are key challenges. A geographically specificcommunications campaign will therefore be appropriate. Local newspapers and radio might beappropriate media. Perhaps the printed ads could include a coupon for a reduced price to encouragetrial. Advertising in the Yellow Pages should also be considered.The restaurant needs to win back former customers and attract new ones. Advertising will havesomething to talk about to this first group if there have been changes in the menu, décor, prices, orhours of service. If the restaurant has a list of customer͛s names, addresses, and phone numbers, itmight consider a direct mail campaign or even telemarketing. Otherwise, local media such as radio,cable TV, and newspapers may be needed. New customers may be addressed in similar ways to thehairdresser, above, plus listings in tourist brochures if this is a tourist area.The fitness center may offer ͞Ask a fitness question͟ service to the clients. Interesting advice canencourage potential customers to avail the expertise of center in keeping a good health. Through theirWeb sites, they can showcase their equipments and publicize testimonials about their fitness program.The accounting firm may choose to publicize client testimonials in local business newspapers andmagazines. Organizing seminars on accounting practices, new accounting developments and invitingrepresentatives from major business organizations would increase the awareness about the firm.Advertising about the firm, using billboards, at the commercial centers of the city may attract attentionof a large segment of target audience.17. Why is a word of mouth considered to be so important for the marketing of services? How can a service firm that is quality leader in its industry induce and manage WOM?WOM is the only promotional method that is of consumers, by consumers, and for consumers. Peoplealways ask otherͶfriends, relatives, and professionals for a recommendation for doctor, insuranceagent, and consultant. Because the recommender is assumed to be a neutral person, his advice carriesmore weightage than firm initiated communications. In fact, greater the risk involved in the services, themore effective is WOM communication.There are various strategies to stimulate positive WOM communication. Involving customers indelivering the service, creating exciting promotions that get people talking about the services,developing referral incentive schemes, publicizing testimonials from satisfied customers, and fastercomplaint handling are some of the ways to manage WOM properly.18. What tangible cues could a driving school or dentist use for up-market positioning?Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  8. 8. a) Driving School: use more expensive cars, have nice offices located in better parts of town, require driving instructors to dress in business attire, feature upscale customers in their advertising, emphasize expertise and successful results rather than low prices. b) Dentist: have attractive office in an upscale part of town, be formal rather than casual in making appointments, conversing with patients, offer upscale magazines and newspapers as reading material in the waiting room, have all staff dress smartly and somewhat conservatively19. From a customer perspective, what factors create value in the following services and how do they affect pricing strategy? a) nightclub b) hairdressing salon c) legal firm specializing in business and taxation lawStudents should discuss the specific pricing strategies used by each of these services. They should alsodescribe both tangible and intangible factors that these firms use to create value for their customers.These factors should vary significantly by service.A nightclub provides entertainment and beverages, so it combines both mental stimulus processing andpeople processing. The core benefits are relaxation and entertainment. Pricing sometimes involves asubstantial cover charge (similar to an admission fee). Also, customers usually expect to pay prices fortheir drinks that are above what they might be charged in an ordinary bar. The better the entertainmentand the more dramatic or luxurious the servicescape, the higher the prices are likely to be. The longercustomers remain in the club, the more drinks they will consume and thus the more they will spend. Thestaff sometimes pressure customers to keep ordering additional drinks.A hairdressing salon creates value by giving a customer clean, trimmed, and more stylish hair(sometimes involving tinting as well). Usually a pricing menu is displayed. Customers may pay a statedprice for each element of the service, e.g., so much for a wash, so much for a cut, so much for tinting,perming, etc. Sometimes, there is an all-in price covering multiple elements. Customers can expect topay more for a well-known stylist, a prestigious salon, or a more luxurious servicescape, because allimply higher quality.A legal firm specializing in business and taxation law. Professional firms are usually concerned with thebillable hours of each professional staff member, a rate that is based upon salary plus a substantialmargin for overheads. The cost of providing legal service is thus a function of how many hours differentprofessionals at different billable rates devote to preparing and delivering that service, whether itinvolves backroom research, courtroom appearances, or face-to-face consultation. In some instances,however, where the specific advice given is known to have a particular value (e.g., how much tax will thecustomer avoid having to pay), firms may relate the fee to some proportion of the value obtained by thecustomer.20. Understand the drivers of globalization of services and their distribution.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  9. 9. Market drivers stimulating this trend toward transnational strategies include common customerneeds, customers who demand consistent service from suppliers across the world, and theavailability of international channels in the form of efficient physical supply chains or electronicnetworks.Competition drivers include competition from different countries, the interdependence ofcountries and the transnational polices of competitors.Technological advances in information technology and telecommunications (e.g., digitalcapabilities and broadband) are drivers of the transnational strategy. These advances intechnologies lead to faster and cheaper transportation and help to shrink distance and bringcountries even closer together. Economies of scope can also be gained by centralizinginformation hubs on a continent-wide or even global basis.Cost drivers include the significant economies of scale that can be gained by an internationaloperation, the sourcing efficiencies achieved by favorable logistics, and lower cost of productionin certain countries. Cost drivers, however, may be less applicable to services that are people-based or services where elements have to be replicated in multiple locations.Government policies can encourage or discourage transnational strategies. Some drivers include:favorable trade policies, compatible technical standards, and common marketing/ advertisingregulations. Government policies are expected to be more favorable toward people andpossession processing services as they can generate local employment.The nature of the service process may make some types of services easier to internationalize thanothers. The important variations in the impact of the drivers on the three categories of servicesare illustrated in Table 7±2.21. What risk and opportunities are entailed for a retail service firm in adding electronic channels of delivery (a) paralleling a channel involving physical stores, (b) replacing the physical stores with an all-Internet cum call center channel? Give examples.Adaptive strategies employ the Internet to supplement other marketing arrangementsͶfor instance,setting up a Web site as another channel of communication or (in the case of information-basedservices) as another delivery channel. In such situations, the company continues to function much as itdid previously, but now offers customers additional convenience. Risk may include brand dilution ifeither channel cannot deliver the brand promise, (e.g., if the online store delivery time falls short of thebrand promise of ͞getting your goods by the next day͟). Other risks may include the initial cost involvedin maintaining the Web site and the technology involved such as CRM and the forecasting applications.Opportunities will include the possible growth of a new market and allow for greater marketsegmentation of the market.In a transformative application, the Internet becomes the major driver of the firm͛s strategy. As a result,the firm restructures its organization around the Internet, and other channels are used (if at all) tosupplement Internet-led transactions. The risk involves losing the customer base if the transition to theonline channel is not managed properly. A service that involves highly tangible products and/or servicelevels such as tailored suits, or customer interaction such as a consultation firm may face greaterchallenges moving to an online presence as this mode would possibly take away several of the firm͛scompetencies. Opportunities include saving manpower and store overheads, there could also be greaterconvenience for the customer.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  10. 10. 22. Why should service marketers be concerned with new developments in mobile communications?Each new technological development has the potential to change marketplace dynamics. One aspect oftechnology is to increase geographic reachͶthrough enhancements in both physical transportation andtelecommunications linksͶwhich expands the market. Another is to increase the speed with whichservices can be delivered, thus reducing the turnaround time between order and fulfillment. ITdevelopments combined with miniaturization allow services to be more mobile and transactions to beconducted in cyberspace. Improvements in methods technology often result in higher productivity,which can bring down costs, leading to reduced prices and perhaps an increase in demand. Increasedcomputer power, new ways of capturing consumer information, and powerful analytical software haveled to the development of massive data banks that can be ͞mined͟ for new insights and relationshipsbetween variables. These data banks also contain information about individual customers and theirbehavior that are valuable for tracking and managing relationshipsThe communication element of the marketing mix has been particularly affected by developments intelecommunications and the Internet, providing new and more interactive ways to communicate withcustomers. Service marketers should be concerned with new developments in mobile communicationsas broadband telecommunications channels are capable of moving vast amounts of data at great speedand this development, together with the growing accessibility to the Internet, could open up newchannels and markets across the world especially for information based services. Other developments inmobile technology such as short message services (SMS), multimedia messaging (MMS) and thirdgeneration technology (3G) are drastically changing the way by which services are being distributed,e.g., SMS alerts are now being used to alert subscribers to plane departures or news updates, etc.23. What are the key drivers for increasing globalization of services?Key drivers include market forces, competition, advances in technology, cost, and government factors.The nature of the service process may make some types of services easier to internationalize thanothers. The important variations in the impact of the drivers on the three categories of services areillustrated in Table 7ʹ2.24. Identify three situations in which you use self-delivery. What is the motivation for using this approach to delivery, rather than having service personnel do it for you?Make sure that students clarify their motivationsͶare they driven by a desire to save money, save time,exercise control, benefit from greater convenience (e.g., obtain service that would otherwise beunavailable in a particular location or at a particular time?) If several motivations are present, which isthe most important? In situations where they use self-service because there is no alternative, wouldthey prefer to have somebody else perform the service for them?25. Think of three services that you mostly or exclusively buy from the Internet. What is the value proposition of this channel over alternative channels (e.g., phone, mail, or branch network)?Students should be encouraged to discuss the value proposition of Internet buying vis-à-vis the otherchannels. Possible value propositions raised may include convenience of home shopping (e.g., Barnes &Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  11. 11. Noble gifts), discreet buying (e.g., Victoria͛s Secrets), reputation of online firm (eBay, Amazon.com), etc.Possible disadvantages of buying over the Internet include the uncertainty in the security of the onlinetransactions or the intangibility of the service.26. Know under what circumstances customers should be viewed as ͞co-producers͟ of service, and what the implications are.In co-production customers work as partial employees whose performance will affect the productivityand quality of output. Services such as a weight reduction program, marriage counseling, andmanagement consulting require highly customized service. Client͛s ineffective participation willjeopardize the quality of service outcome in such cases so customers should co-produce the outcome byactive participation. Service managers need to educate and train customers so they will have the skillsneeded to perform their co-production tasks well.27. Understand what factors lead customers to embrace or reject new self-service technologies.People love self-service technologies (SSTs), when SST machines provide more convenience and quickservice, as they can operate 24/7 at more number of locations. ATM machines are a good example ofSSTs. Users get angry, however, when machines are out of service or when they are poorly designed andmake it difficult for customers to understand the process and use them properly. Companies must besmart to enable customers to call the company when they need more information than the SSTs provideor when SSTs are down. Poorly designed technology and improper training and are the main reasons forcustomers to reject SSTs.Jaycustomers. This chapter also exposes students to the concept of ͞jaycustomers͟ who behave badly,raising the question of what management can and should do to (a) minimize the risk of such incidentsand (b) control and correct situations when they arise. Ask students to provide examples ofjaycustomers from their own experience, as well as to debate the implications of promotingmanagement philosophies that ͞the customer is always right͟ in service industries where employeesfrequently encounter abusive customers. Students who have worked in frontline service jobs can beinvited to share their own experiences of abusive customers and how they (and the company) dealt withsuch problems.28. What are the various types of jaycustomers and how can a service firm deal with their behavior?Jaycustomers can be categorized into six broad categories. 1) The ThiefʹFirst step should be to find out how, how people steal a service to prevent theft and then catch them to prosecute appropriately. Provision, however, must be made for honest but absent-minded customers who forget to pay. 2) The RulebreakerͶEducate customers about the rule and course of action needs to be laid down explicitly to protect employees and punish wrongdoing by customers. 3) The BelligerentͶRole-playing training exercises to help employees develop assertiveness to deal with upset customers. 4) The Family FeudersͶNeed to analyze the situation on the spot.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  12. 12. 5) The VandalͶPrevention through improved security, good lightning, printed warnings, and security deposits. 6) The DeadbeatͶInsist on prepayment and promptness in presenting the bill.29. What is the role of blueprinting in designing, managing, and redesigning service processes?Service design is a complex task, which can benefit from a more sophisticated version of flowcharting.Blueprint distinguishes between customer experience at front stage and the support activities atbackstage. Because blue print clarifies the interaction between customer and employees so it is easier tointegrate activities across various departments, in the completion of a service. So blueprint help us tothink us from a service point of view. As a result of this perspective, we can redesign the processeswhich are not so conducive in the completion of a service.30. Explain how blueprinting helps to identify the relationship between core and supplementary services?Most of the services can be divided into acts. (1) Prologue and introductory scenes, (2) actual delivery ofthe core product, and (3) subsequent activities after actual delivery. Blueprints prescribe the sequenceof actions over time so take into consideration all these three phases, for any service product. So it iseasy to evaluate the effect of first and last phases on the actual delivery of core product. The first andthe last phase represent the supplementary services and their relation with the core service in thesecond phase.31. What is emotional labor? Explain the ways in which it may cause stress for employees in specific jobs. Illustrate with suitable examples.Many service encounters involve more than just correct technical execution of a task. They also involvehuman elements like personal demeanor, courtesy and empathy. Because these factors are a basic partof the service from the customers͛ point of view, employees must sometimes undergo emotional laborto make sure that their behavior meets or exceeds company and customer expectations. Some servicejobs require workers to be friendly, others to act compassionate, sincere, or even self-effacing. Trying toconform to customers͛ (and employers͛) expectations on these dimensions can be stressful foremployees, who may be required to act out emotions they don͛t feel at times during the course of theirjobs. Special training on how to handle these emotions is often an important part of employee trainingin service jobs like policing, fire fighting and emergency medical care. (Students may be able to offerinsights from their own working experience in front stage service jobsͶyou may want to encouragethis.)32. Identify the factors needed to make service teams successful in (a) an airline, and (b) a restaurant.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  13. 13. 33. Crucial success factors needed for teams in an (a) airline include: (see also Best Practice in Action 11Ȃ5) a) Top management commitment to development of successful service delivery teams. b) Minimizing team disruption and turnover thus allowing teams to build up team camaraderie, e.g., keeping in-flight service crew similar for long haul trips. c) Appointment of a team leader with experience and strong people skills, (e.g. an in- flight crew captain, to ensure that the team progress is monitored). d) Measurement systems and staff appraisals to monitor staff performance within the team> e) Team rewards for excellent consistent and excellent teamworkCrucial success factors needed for teams in a (b) restaurant include: a) Top management commitment to development of successful restaurant teams> b) Minimizing team disruption and turnover thus allowing teams to build up team camaraderie, (e.g., keeping restaurant crew consistent). c) Appointment of a team leader with experience and strong people skills, (e.g., a restaurant captain, to ensure that the team progress is monitored). d) Measurement systems and staff appraisals to monitor staff performance within the team. e) Divide tips on a team basis.34. How can a service firm build a strong service culture that emphasizes on service excellence and productivity?To do so, the top management must take the lead in embracing a service culture that is conducive to thedevelopment of service excellence and productivity. Once the management has committed itself tobuilding this strong service culture, the next most important thing is to filter this message, in amanageable and meaningful form, down to the service personnel. Employees gain their understandingof the firm͛s direction through daily interactions with the management. Management should spend timewith the service personnel, sharing and impressing onto them the importance of the frontline and howthey are a big source of the company͛s competitive advantage.A strong communications plan should also be in place to shape the culture and spread the message.Examples include the Ritz-Carlton Gold Standards (see Best Practice in Action 11ʹ6).35. An airline runs a recruiting advertisement for cabin crew that shows a picture of a small boy sitting in an airline seat and clutching a teddy bear. The headline reads: ͞His mom told him not to talk to strangers. So what͛s he having for lunch?͟ Describe the types of personalities that you think would be (a) attracted to apply for the job by that ad and (b) discouraged from applying. a) The situation calls for skills in gaining a reticent child͛s confidence. The flight attendant (FA) must persuade the boy that s/he is not a scary stranger but someone he can comfortably talk to.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  14. 14. The FA, however, must be able to build this confidence quicklyͶthere are lots of other passengers to serveͶso a warm, disarming smile will probably help. Finally, the FA must help the child to choose something he will like from the limited menu. This ad will appeal to people with warm, friendly personalities who are good at establishing rapport with others, like children, can sum up situations quickly, and are flexible enough to tailor their approach to different situations. b) This ad will discourage individuals who see working as an FA as an occupation that brings them into contact with glamorous people and takes them to exciting destinations. It will be a particular turn off to those who dislike children, are inflexible in their dealings with others, and have a manner that quickly turns brusque and impatient when a standardized greeting and questioning procedure doesn͛t work.36. Understand the strategies associated with the concept of relationship marketingMarketers are increasingly interested in developing long-term relationships with customers beyond thesingle transaction (also transactional marketing). Relationship marketing includes three categories withtheir own strategies (i.e. database, interaction, and network marketing). 1) Database marketing involves the use of technology in information exchange by maintaining a database and delivering differentiated service levels to consumers with differing characteristics and preferences and subsequently tracking each relationship. 2) Interaction marketing is more commonly found in business-to-business services. In this case, although the service remains important, people and the social process also add value that is often mutually beneficial. 3) Network marketing also occurs in the business-to-business context where companies commit resources to develop positions in a network of relationships with the stakeholders and relevant agencies. This form of marketing is also relevant in the consumer marketing environments.These four categories, including transactional marketing, are often not mutually exclusive and can beapplied together in total relationship marketing. Relationships with customers can also be cultivated forboth discrete and ongoing services (Table 12ʹ1).37. Why is targeting the ͞right customers͟ so important for successful customer relationship management?Attracting the right customers is important as they bring in long-term revenues, continued growth inreferrals etc. Emphasis must also be given to prevent attracting the wrong customers that typicallyresults in costly churn, a diminished company reputation and disillusioned employees. Targeting theright customers also helps to ensure that customer acquisition is consistent with the firm͛s goals andcapabilities.38. What is tiering of services?Use the Customer Pyramid (Fig. 12±5) as a reference in answering this question. Tiering ofservices refers to the segmentation of the customer base around different levels of profitcontribution, needs (including sensitivities to variables such as price, comfort and speed), andidentifiable personal profiles such as demographics. Slicing the customer base per se allows theProf. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  15. 15. firm to see better where the profits and the loss making segments are and tailor their marketingaccordingly in response.39. Identify some of the measures that can be used to create customer bonds and encourage long- term relationships with customers.Relationship marketing involves activities aimed at developing long-term, cost-effective links betweenan organization and its customers for the mutual benefit of both parties. Service firms can use a varietyof strategies to maintain and enhance relationships, including treating customers fairly, offering serviceaugmentations, and treating each individual customer as if he or she was especially important. Frequentuser programs are also a widely used strategy for rewarding customer loyalty and building long-termrelationships. Tiering of service, loyalty bonds, and membership programs can all help in buildingcustomer loyalty and encouraging long-term relationships.40. What are the arguments for spending money to keep existing customers loyal?Loyalty in a business setting describes a customer͛s willingness to continue patronizing a firm over thelong term, purchasing and using its products on a repeated and hopefully exclusive basis, and voluntarilyrecommending the firm to friends and acquaintances. Frederick Reichheld, author of The Loyalty Effect,suggests that loyal customers should be thought of as annuities because they can be a constant sourceof revenue for a firm over a long period of time. Customer loyalty, however, can͛t be taken for granted.It will only continue as long as customers feel they are getting better value from a service provider thancould be obtained by switching to another supplier. Thus companies need to nurture desirablecustomers by treating them well and providing extra incentives when possibleͶeven if these efforts dorequire spending money. Another factor to consider is that it typically costs a firm less to retain anexisting customer than to acquire a new one.41. What is the role of CRM in delivering a customer relationship strategy?CRM is an enabler of loyalty marketing, capturing customer information (such as history of transactions,customer preferences etc.), and delivering it to the various touch points thus offering a ͞unitedcustomer interface͟ and a better service experience for the customer.42. Explain why customers complain and what they expect from the firm.There are two main reasons why customers complain. They may want compensation for a monetarylossͶeither in the form of a refund and/or by having a service performed again. A second reason forcomplaining is to rebuild self-esteem. When customers feel service employees have mistreated them,their self-esteem, self-worth, or sense of fairness may be negatively affected. Before customerscomplain, however, they will consider the costs of taking action. These can include monetary costs (likepostage or a long-distance phone call), costs in time and effort, or psychological costs associated withhaving to complain in person to a service employee. Customers͛ are more likely to complain aboutservice outcomes than service processes. Cultural and social norms may also affect complainingbehavior. In some countries (e.g., Japan), customers feel awkward or embarrassed about making acomplaint. Social norms also tend to discourage criticisms of professional service providers like doctorsor lawyers, because they are viewed as experts in the services they offer.43. Why don͛t unhappy customers complain? What do customers expect the firm to do once they filed a complaint?Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  16. 16. Customers usually give the following three reasons for not complaining: (1) they don͛t think it͛s worththeir time and/or effort; (2) they don͛t believe the service provider will be concerned about theirproblem and/or resolve it; or (3) they don͛t know where to go and what to do. Cultural and social normsmay also affect complaining behavior. In some European and Asian countries, customers feel awkwardor embarrassed about making a complaint. Social norms may discourage criticisms of professionalservice providers, because they are viewed as experts in their fieldsOnce a complaint is made, customers expect to be adequately compensated in a fair manner. The firm isexpected to assume responsibility in having a convenient and responsive recovery process. Not onlymust the employees of the firm be able to explain and resolve the failure, they have to come across asgenuine, honest, and polite throughout. Lastly, the compensation given has to cover the losses incurredby the customer both in terms of actually monetary loss and other potential cost incurred as a result ofthe failure (e.g., time, effort).44. What is the service recovery paradox? Under what conditions is this paradox most likely to hold? Why is it best to deliver the service as planned, even should the paradox hold in a specific context?Its been observed that customers who experience service failure and then have it resolved to their fullsatisfaction are more likely to make future purchase than customers who did not experience a problemin the first placeͶthis is essence is the service recovery paradox. This only holds true for the initialservice failure, however. Customers may not be as forgiving for subsequent failures as they may havehigher expectations from their previous experience. At the same time, the success of a service recoveryvery much depends on severity and ͞recoverability͟ of the failureͶsome mistakes are simply notrecoverable to full satisfaction.Thus, it is always best to do it right the first time. Even with the most well executed recoveries, failureshould not be tolerated. Empirical evidence has also shown that between 40 to 60% of customers arenot satisfied with their service recovery experience.45. What would be an appropriate service recovery policy for a wrongly bounced check for (a) your local savings bank, (b) a major national bank, or (c) a high-end private bank for high net-worth individuals. Please explain your rationale, and also compute the economic costs of the alternative service recovery policies. o Local savings bankͶImmediately clear the check. An apology from the staff handling the case and the branch manager would probably be sufficient as it is likely that less is expected from a local bank. The economic cost incurred is minimal. o Major national bankͶImmediately clear the check. Letter of apology from the management would be ideal. At the same time, some form of complementary product could be offered, for example a checkbook. This economic cost incurred is relatively low.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  17. 17. In this case, as a major national bank, customer expect more, at the same time, the letter from management gives the recovery a personal touch. Together with the complementary checkbook, it signals to the customers that the bank takes customer service seriously. o High-end private bankͶImmediately clear the check. Reimburse any additional cost results from the failed transaction. Senior management probably would have to pay a visit to the client to apologize for the service failure. At the same time, a high value complementary gift would be necessary, for example front-row concert tickets. The economic cost incurred is much higher, however, given the amount of business the customer gives to the bank, it is a relatively small amount. At the same time, given the prestige of a high-end private bank, a personalized recovery is likely to be expected by the customer.Nevertheless, in all three cases, it is important that the service recovery must come across as genuine,we can also analyze the situation along the three dimensions of fairness proposed by Tax and Brownnamely; Procedural, Interactional and Outcome justice.46. Explain the relationship between service productivity and service quality.Service productivity is concerned with how efficiently inputs are transformed into outputs and, thus,with the operational and human elements of creating a service. Low productivity relative to competingservice providers means that a firm will have higher costs and thus find it difficult to compete on priceand still remain competitive.Service quality is concerned with customer evaluations and perceptions of an array of service featuresrelating to both the delivery process and the outcome of using the service. Services that are perceived asbeing of lower quality than competing alternatives in the same price range are less likely to attractrepeat purchases from loyal customers.47. Why are both ͞soft͟ and ͞hard͟ measures of service quality needed?Both measures measure significantly different areas of the key activities that have an impact oncustomers and excellent service companies makes use of both soft and hard measures to improveservice quality. Soft measures of service quality (e.g., SERVQUAL) provide direction, guidance andfeedback to employees on ways to achieve customer satisfaction and can be quantified by measuringcustomer perception and beliefs. This is then further complemented by hard measures that measureoperational processes and outcomes. It is only when both measures are taken into consideration that acomplete picture of service quality, from both the operational and the customer or marketing viewpointis attained.48. How do concepts like TQM, ISO 9000, Malcolm-Baldrige Approach, and Six Sigma relate to managing and improving productivity and service quality?Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  18. 18. TQM and Six Sigma are established quality and productivity initiatives with their respective set of toolsand methods for managing and improving service quality and productivity. Some of these tools are alsonow increasingly used in companies that may not have embraced the entire TQM or Six Sigma concept.The Fishbone diagram, Pareto Analysis, and control charts are examples of tools that originated fromTQM but have found their way to common use among companies interested in improving servicequality. The DMAIC model, a Six Sigma improvement model, is also commonly used for analyzing andimproving business processes.The Malcolm-Baldrige Awards and the ISO 9000 certification comprises requirements, standards,guidelines, definitions, and related standards that provide an independent assessment and certificationof whether companies are practicing best practices in quality management and are a benchmark ofquality achievements.Companies, in managing and improving quality and productivity, should consider the approach that isbest aligned with the overall business strategy and adopt a mixture of tools from the above systemicapproaches depending on their own needs and desired level of sophistication. For example, TQM toolscan be used at any level of sophistication by any service firm, although the Six Sigma initiative requiresmuch more commitment and investments.49. Describe the causes of tensions between the marketing, operations, and human resource functions? Provide specific examples of how these tensions might vary from one service industry to another.Tension often reflects different perspectives and priorities. It may also derive from struggles to gain (orprotect power) and influence within the organization. Changes in procedures are a common cause oftension, particularly if they threaten existing ways of working or require new organizational structures.Common areas of disagreement concern the priority that should be given to increasing revenues vs.decreasing costs, different time horizons, and a perceived poor fit between new service products andthe existing operation. Tensions may vary according to the extent to which an industry is high contactvs. low contact, employs localized delivery in numerous small service ͞factories͟ vs. centralized delivery,is already high tech vs. moving toward greater emphasis on technology, is a relatively new industry (e.g.cable TV) vs. one with long-established traditions (e.g. railroads). Professional service firms that employindependent-minded professionalsͶsuch as lawyers, doctors, or consultantsͶto deliver service in apartnership organizational structure often run into difficulties when trying to develop new marketinginitiatives because the professionals don͛t wish to give up any control.50. Contrast the roles of marketing, operations, and human resources in (a) a gas station chain, (b) a Web-based brokerage firm, and (c) an insurance company. a) Gas stations are capital-intensive, possession-processing businesses, with a substantial front-stage component to their operations. Depending on the degree of self-service facilities provided, in general, numerous employees do come into contact with customers. The marketing task emphasis more on tailoring its (i.e., its distribution network) locations to be present at key locations, as well as pricing to reflect costs, competitive strategies and consumer sensitivity to different price levels. For example, it has been noted that gas stations along a certain stretch of road tend to price at similar if not the same prices, andProf. M C. Rashid Khan, GSBA, Greater Noida, UP͙
  19. 19. can get into price wars in order to attract customers. Apart from mechanics, the skill-level required of staff is relatively low. Nevertheless given that attendants are usually the first point of contact, attention to recruitment, training, and motivation of staff is important, because the attitude and behavior of customer-contact personnel may be one of the few characteristics differentiating one gas station from another. b & c) Brokerage and insurance are information-processing services. The marketing task emphasizes attraction of new accounts and retention of desirable existing customers. Most transactions are done at arm͛s length by mail or phone and there is growing potential for self-service through the Web. Direct customer contact with the business is infrequent and usually limited to a retail setting or a meeting in a home or independent office setting with a salesperson or broker. The task of operations focuses primarily on backstage activities centering on analysis and processing of information. In both types of businesses, the handling and processing of paper is giving way to manipulation of electronic data, thus placing a premium on effective management of information technology. Human resource management emphasizes the performance of employees working in backstage activities. Customer service activities are delivered primarily by telephone and sometimes this task is subcontracted to personnel working in a call center owned and operated by a specialist organization.Prof. M C. Rashid Khan, GSBA, Greater Noida, UP͙

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