Exam 1 Study Guide

Question 1

characteristics of services

Answer 1

time dependent, place dependent, presence of a consumer in service production place, cannot be inventoried

Question 2

Understand the “goods-services” spectrum.

Answer 2

The goods services spectrum is based on how tangible or intangible the benefit of the product is. The more tangible the more to left of the spectrum the product will be which means it is more of a good. If a product is mostly intangible it will more to the right of the spectrum, which means it is more of a service. The spectrum identifies five different levels of tangibility going from highest to lowest.

• Relatively pure good (ex: packaged foods)
• Service intensive good (ex: private automobile transportation)
• Hybrid (ex: fast food)
• Goods intensive service (ex: airline transportation)
• Relatively pure service (ex: babysitting)

Question 3

What four steps should a manager take to ensure that the promised service is consistent with the delivered service?

Answer 3

1) . Solicit pre-campaign feedback from front-line operations personnel and customers about the perceived accuracy of proposed promotional messages (get some feedback from managers in charge of production and customers on whether or not what they are promoting is accurate about their service)
2) . Devote greater attention to managing the service evidence to project accurate cues about the service (use this info to project accurate information about the service.)
3) . Resist the urge to mimic competitors who fall prey to the temptation to overpromise. (don’t copy or lie)
4) . Conduct periodic research to assess the influence of their prices on customers expectation levels and price-value perceptions. (periodically check if what the price makes customers expect and if it is of value.)

Question 4

What are the ingredients of effective communication with customers?

Answer 4

• Making companies representatives easily accessible to customers
• Encouraging customers to contact the company
• Initiating contact with customers and following up regularly
• Training and facilitating employees to provide personalized, responsive, and caring service
• Rewarding employees for nurturing customer relationships

Question 5

Understand the service purchase process. What happens in each of the three phases?

Answer 5

1) . Prepurchase Phase
- Risks & Risk Reduction Strategies
2) . Service Encounter
- Role Theory
- Script Theory
- Service (Environment/Personnel/Support Services)
3) . Postpurchase Phase
- Service Quality: (Expected-Perceived) [Global evaluation of all past service experiences with provider].
- Satisfaction: [Episodic: relates to the last service experience].
- Attribution Theory: Service Failure—Attributed cause of service failure—Customer dissatisfaction level. (Controllable vs. uncontrollable factors).

Question 6

Understand the various types of risks involved in services’ consumption.

Answer 6

1) . Performance Risk: e.g., Lawn mowed to your satisfaction? Dental work or hair care met your expectations?
2) . Financial Risk: Loss incurred by the customer if service falls (accentuated because of a lack of guarantees).
3) . Time Loss: Time lost by the customer due to the failure of the service (e.g., auto repair)
4) . Opportunity Risk: When a customer must choose one service over another (e.g., go to a rock concert or a hockey game)
5) . Psychological Risk: Is the chance that the purchase of a service will not fit the individual’s self-concept (e.g., education, entertainment, religious organizations).
6) . Social Risk: The probability that a service will not meet with approval from significant others (e.g., high-visibility services—restaurants and hair stylist).
7) . Physical Risk: Chance that a service will actually cause physical harm to the customer (e.g., medical procedures, sun tanning salons).

Question 7

What strategies can businesses use to reduce perceived risk for the customers?

Answer 7

1) . Performance Risk:
- Reducing Uncertainty for Customer: Certification of service of service providers Branding=Standardization of quality (perception) (communicate quality-past performance/capability
- Reducing Consequences: Guarantees (e.g., H&R Block)
2) . Financial Risk:
- Reducing Uncertainty for Customer: Trial purchase (e.g., Health Club membership) Sampling (e.g., Free initial consultation visit) Promotional incentives (e.g., “Early bird” 5pm-7pm specials)
- Reducing Consequences: Guarantee
3) . Time loss/opportunity risk:
- Reducing Uncertainty for Customer: same as performance risk
- Reducing Consequences: Compensation offers
4) . Psychological/social risks:
- Reducing Uncertainty for Customer: Branding/Communications (testimonials)
- Reducing Consequences: ???
5) . Physical Risk
- Reducing Uncertainty for Customer: Instructions/communications (e.g., education Insurance on proper use of exercise equipment)
- Reducing Consequences: Insurnace

Question 8

What are the components of service encounter?

Answer 8

1) . Role Theory: in purchasing service, buyers and sellers play certain roles. They are expected to play. (Deviation from the role will create role ambiguity or confusion).
2) . Script Theory: service personnel and customers have prescribed scripts that they are expected to follow.
3) The service environment
4) Service personnel
5) Support services

Question 9

What are “scripts” in the context of a service? Why are scripts important? What happens when scripts are significantly altered?

Answer 9

• Scripts: are learned sequences of behaviors obtained through experience or through communications with others (EX: script for visiting dentist)
  o scripts provide information for standardization of operations and enhancement of productivity
  o If scripts are altered it can be frustrating to customers—need to educate (Zuzu example)

Question 10

What are the six criteria for meaningful segmentation? Why are the service segments narrower than the market segments?

Answer 10

1) . Measurability: the degree to which the size and purchasing power of the resulting segment can be measured
2) . Accessibility: the degree to which resulting segments can be effectively reached and served
3) . Responsiveness: the degree to which the resulting segment would respond favorably to the changes in product and other marketing mix variables, i.e., segmentation should lead to behavioral consequences in the market place.
4) . Homogeneity: There should be maximum homogeneity within the segment and maximum heterogeneity between segments.
5) . Substantiality: The degree to which the resulting segments are large and/or profitable enough to be worth considering for separate marketing attention
6) . Stability: The segments should be relatively stable. (Over time).

They are narrower because they are based on the needs - and each person has different expectations (even the same person going at a different time).

Question 11

What is the meaning of fuzzy or conflicting segmentation strategies? Are they good or bad? Why?

Answer 11

Don’t mix segments

Question 12

What is the new cruise ship class system?

Answer 12

Areas and sections only for upper class members of the cruise.

Question 13

Why does Sam’s Club want to be less like Wal-Mart?

Answer 13

get away from low income customers

Question 14

Learn the characteristics of services and their marketing mix. How do the services’ marketing mixes differ from the products’?

Answer 14

3 PS- PEOPLE PROCESS AND PHYSICAL EVIDENCE

4 PS- PRODUCT PLACE PRICE AND PROMOTION

Question 15

Understand what is meant by internal, external and interactive marketing.

Answer 15

Internal Marketing: employees considered “internal customer who must be command of a company’s vision and worth—goal is to align every aspect of intended operations to ensure they provide value to their customers - “enabling the promise”- actually doing it
External Marketing: delivering targeted message to consumers. Effective external marketing program can generate general demand for your product/service—”setting up the promise”- telling them about it
Interactive Marketing: buyers specify the nature application of products they want to buy/sellers try to match the requests—”Delivery the Promise” getting the customer to buy

Question 16

Understand the relationship between zones of tolerance, expectations and loyalty.

Answer 16

o Customers have a desired level and adequate level of expectations
o Zone of Tolerance: separates these two—range of service performance that a customer considers satisfactory
o Performance level above tolerance zone= increased loyalty
o Reliability as the “service care”

Question 17

Know the difference between the following (with respect to expectations):
enduring service intensifiers
personal needs
transitory service intensifiers
self percieved service role
explicit service promises
implicit service promises
word of mouth
past experience

Answer 17

• enduring service intensifiers: Factors that intensify the customers sensitivity to service on an ongoing basis (e.g., expectations of an affiliated party such as the customers customer)
• EX: Doctors who use blood tests have high expectations and therefore I have high expectations
• personal needs: Individual requirements dictated by customer-specific physical, psychological, social or resource characteristics
• EX: “I expect the broker to do a great deal of my work because I don’t have the staff..”
• transitory service intensifiers: Factors that heighten the customers sensitivity to service on a temporary basis (e.g., personal emergencies, problems with the initial service)
• Automobile repair customer
• perceived service alternatives: Customers perceptions of the degree to which they have options in obtaining the service
• Hotel customer, “ when your options are limited, you take the best you can get. My expectations are not necessarily lower but my tolerance level is higher
• self-perceived service role: Customers perceptions of the degree to which they themselves influence the level of service they receive
•
• explicit service promises: Company statements about the service made to customers (e.g., advertising, personal selling, contracts)
•
• implicit service promises: Service-related cues other than explicit promises that lead to inferences about what the service should or will be like (e.g., price, tangibles associated with the service)
• IF you are paying big bucks for these pieces of equipment, you expect more in the way of service
• word-of-mouth: Statements made by parties other than the company about what the service will be like. These statements may come from both personal (e.g., friends) and ‘experts’ (e.g., Consumer Reports) sources
•
• past experience: Customers previous exposure to service that is relevant to the present service

Question 18

Why do consumers perceive greater risk when buying services than when buying products?

Answer 18

Service are done in real time and are difficult to evaluate. Products are much easier to evaluate. Servers are High in credence quality, meaning aspects of services that cannot be evaluated by a consumer even after “consumption” but have perceived value.

Question 19

What it the relationship between perceived risk and the fact that services and products differ on search attributes, experience attributes, and credence attributes. (Remember, products or services high in search attributes or qualities can be evaluated before purchase (e.g., clothing); those high in experience attributes can be evaluated during and after purchase (e.g., a restaurant meal), but those high in credence attributes cannot be evaluated either before or during the purchase (e.g., medical diagnosis).

Answer 19

Perceived Risk: a consumer level of uncertainty regarding an outcome of a purchase decision, can be related to these qualities b/c:
• Search Attributes: which are evaluated before purchase- clothing, jewelry, furniture, all can be searched and consumers know right away which products are cheaper, more reliable, etc.
• Experience Attributes: can be evaluated after /before purchase
o Restaurants, vacations, haircuts,
- Credence Attributes: cannot be evaluated either before/during the purchase - surgery, repair, legal services- it takes a while for service is done
- Strategies: 1). Become brand loyal/store loyal 2). Relying on word of mouth

Question 20

Understand the distinction between “will” and “should” expectations? What is the “zone of tolerance?”

Answer 20

• Will be: adequate level (what they find acceptable)
• Should be: desired level (what they hope to receive)
• Zone of Tolerance: separates the desired and adequate service levels. It is a range of service performance that a customer considers satisfactory. (pg58)
o Ideally businesses will try to operate within zone of tolerance

Question 21

What does it take to exceed customer expectations?

Answer 21

• excel in service delivery

- capitalize on service recovery

Question 22

Know what do the terms MSA and MSS stand for and be able to explain them.

Answer 22

MSA= Perceived Service - Adequate Service (measure of service adequacy)
• If the average value of perceived service is greater than the average value of the minimum acceptable service, then MSA is positive
• The MSA is a measurement of any “gap” between the perception of the service received and the minimum level of service desired
MSS= Perceived Service - Desired Service (measure of service superiority)
• If the average value of Perceived Services received is higher than the average value of the Desired Services, than the MSS is positive. •
(see figure on word document)
A company’s MSA and MSS scores will determine its competitive position from a service quality standpoint
• The adequate service level reflects the minimum performance level expected by customers after they consider a variety of personal and external factors
• Companies must perform above the adequate service level to use service quality for competitive advantage

Question 23

What are the six criteria for meaningful segmentation?

Answer 23

1) . Measurability: the degree to which the size and purchasing power of the resulting segment can be measured
2) . Accessibility: the degree to which resulting segments can be effectively reached and served
3) . Responsiveness: the degree to which the resulting segment would respond favorably to the changes in product and other marketing mix variables, i.e., segmentation should lead to behavioral consequences in the market place.
4) . Homogeneity: There should be maximum homogeneity within the segment and maximum heterogeneity between segments.
5) . Substantiality: The degree to which the resulting segments are large and/or profitable enough to be worth considering for separate marketing attention
6) . Stability: The segments should be relatively stable. (Over time).

Question 24

What types of advantages result by segmenting markets for a service? Consider segmentation’s impact on productivity and profitability; demand and supply; and undesirable demand.

Answer 24

Improves productivity and profitability by helping to match supply and demand

• Offer different service levels
• Shift demand of some segments via incentives to off peak periods: electric co. offering incentives to do laundry during certain times
• Expand capacity by expanding customers’ role
• When capacity is short, top segments have first claim on the service
• Reveal undesirable demand (cats stuck in trees – fire dept. has to get them down)

Question 25

Explain servuction model. According to this model,

(i) What are the issues relating to: (a) services’ innovation (b) operational efficiency versus marketing effectiveness? (c) contact people as products, and (d) quality control problems.

Answer 25

The model that illustrates the factors that influence the service experience; it includes visible and invisible parts that impact the service experience.
Visible: inanimate environment, contact personnel/service provider, other customers.
Invisible: organization and system

Services innovation: innovations are difficult to create and easy to copy; requires changes in employees and customers as well as the factories
Operational efficiency versus marketing effectiveness: efficiency takes away from effectiveness; they are in conflict; you either get efficiency or effectiveness – try to find the balance between the two
Contact people as products: quality issues; there is human error; as humans we can’t always control our emotions/how our bodies are feeling and so each day we may have a different experience with the people as products
Quality control problems: geographic location; customer variability; employee variability

New product features (innovation) is a problem because it is hard to implement and requires changes of the employees and customers
New geographic locations cause problems because it can be difficult to maintain quality control

The silo approach was very bad especially in services. Everything that comes into contact with the customer and everyone who comes into contact with the customer is a part of the service so they all need to be involved in marketing.

Question 26

What strategies do consumers adopt to minimize perceived risks involved in purchasing services?

Answer 26

1). Become brand loyal/store loyal 2). Relying on word of mouth

Question 27

proposition 1-

Answer 27

consumers seek and rely more on information from personal sources than from non-personal sources when evaluating services before purchase

Question 28

proposition 2-

Answer 28

Consumers engage in greater post purchase evaluation and information seeking with services than with goods

Question 29

proposition 3-

Answer 29

consumers engage in more post purchase evaluation than pre purchase evaluation when selecting and consuming services

Question 30

proposition 4

Answer 30

consumers perceive greater risks when buying services than when buying goods

Question 31

proposition 5

Answer 31

the consumers evoked set of alternatives is smaller with services than with goods.

Question 32

proposition 6-

Answer 32

the delivery of service can be conceived as drama where: service personnel are the “actors” service customers are the audience” physical evidence is the “setting” and the process of setvice assembly is the “performance”

Question 33

proposition 7-

Answer 33

service encounters can be viewed as role performances

Question 34

proposition 8-

Answer 34

negative departures from the customer’s expected script will detract from service performance

Question 35

proposition 9-

Answer 35

customer compatibility is a factor that influences customer satisfaction, particularly in services where groups of customers are served in the same setting

Question 36

proposition 10-

Answer 36

consumer contribute some of their dissatisfaction with services to their own inability to specify or perform their part of the service

Question 37

proposition 11-

Answer 37

consumers may complain less frequently about services than about goods due to their belief that they themselves are partly responsible for their dissatisfaction.

Question 38

proposition 12-

Answer 38

consumer adopt innovations in services more slowly than they adopt innovations in goods

Question 39

proposition 13-

Answer 39

brand switching is less frequent with services than with products.