Exam 2

Question 1

Understand in detail each of the five ways to enhance operational efficiency of service systems.

Answer 1

1. Isolating technical core -> Optimize frontline (run the things that customers don’t see like a factory - subway chopping the tomatoes)
2. Production line the whole system -> Like fast food outlets, with little customization, more participation on the customer
   - - Take perspective, how do I make it like an assembly line, backroom (Subway)
3. Flexible Capacity -> Part-time employees, focus on customer-serving jobs during peak demand, share capacity with other firms with different peaks
4. Increase customer participation -> Replace work done with customer work, ATM, dump duties on the customers
5. Move time of demand to match capacity -> Rates for phone calls

Question 2

What three things need to be specified to determine service strategy?

Answer 2

Target Customer
Value Proposition
Capabilities required to deliver VP (capacity)

Question 3

Describes the six elements of a well-managed service company.

Answer 3

1. Strategic Service Vision: components mentioned above ^ (segment,service concept, delivery system)
2. Integrated Functions: Operations + marketing, integrated at lower levels
3. Treat Employees as Customers: Segment and create VPs for each segment, develop their delivery mechanism as well (ex. Even teachers needs are all different)
4. Rethinking Quality: Hire quality employees, provide them with good tools/training, (incentives for good service, make service provider visible to customers)
5. Scale Economies Reassessed: Scale economies are good at the company level but may not always be better, (with bigger purchasing power, you risk quality control)
6. Use Information Wisely to Minimize (Replace) Assets and Even Create Assets: (Like using forecasting data to carry less inventory; ex: a fire dept. gathered info on home layouts, floor plans of buildings, etc. in case of fires, smaller trucks and fewer crew members are needed to manage fires)

Question 4

What are the three components of a firm’s strategic performance?

Answer 4

1. Common Performance (captured common value)
   - Part of the profits that the firm has in common with its competitors i.e. the value both firms create and keep
2. Value Creation Advantage (of one firm over others)
   - Portion of the profits due to high value creation of the focal firm (e.g. better operational capabilities, greater brand reputation, etc.)
3. Bargaining (and pricing) Advantage
   - Part of the performance due to the firm’s ability to garner more of the value that was created

Question 5

What strategies can be used to obtain cost leadership?

Answer 5

1. Seek out low-cost customers: (ex. only selling insurance to military officers because they are usually low risk consumers)
2. Standardize service: Focus on services that can be automated, (ex. Since tax prep requires customization, only go for those who just need routine tax prep)
3. Reducing Personal Element in Service Delivery: Like an ATM, self-checkout etc.
4. Reduce Network Costs: service firms that require a network to deliver their services (i.e. electric utilities require transmissions lines) could gain cost adv. by reducing network costs
5. Taking Service Operations Online: for services where customers don’t need to be present, the service transaction can be decoupled with substantial cost savings (i.e. drop off/pick up kiosk for a shoe repair store)

Question 6

Why does Rue 21 locate its outlets in smaller towns? How does it do its site-selection?

Answer 6

Rue 21 chooses to focus on markets with fewer than 50,000 people and average household income of less than $55,000. Because these are under-served markets, there is limited competition.

Question 7

How does Rue 21’s merchandising strategy differ from the shopping-center merchandising?

Answer 7

Shopping centers look for narrow array styles with lots of stock, while retailers serving a much smaller population take a “broad and shallow” approach, carrying a limited quantity of a wide array of styles. The strategy is meant to encourage shoppers to return frequently. The clothes go for low prices and inventory turns over quickly. The strategy is all about fast and cheap.

Question 8

In the reading “The Henry Ford of Heart Surgery,” Dr. Shetty’s hospital manages to be profitable by relying on scale economies and high rate of capacity utilization. What are the risks of this assembly-line model of healthcare?

Answer 8

If you increase volume any more, you could compromise patient care and quality

Question 9

What is T.J. Maxx’s playbook, i.e., business model?

Answer 9

Offers brand-name goods at 20% to 60% below regular retail prices

Question 10

What is T.J. Maxx’s strategy?

Answer 10

Rely heavily on the instincts of its merchandise buyers, on the floor in 24, continuous stream of products to lure shoppers, fast-paced treasure hunting

Question 11

How does T.J. Maxx’s strategy differ from traditional retailers?

Answer 11

TJX doesn’t offer discounts or promotions. Items that don’t sell within a month are marked down and moved to clearance racks. Most are sold after one or two markdowns.
harder for traditional department stores to change their layout, because space is devoted to specific brands.

Question 12

What is J.C. Penney’s strategy?

Answer 12

Used to be appliances, then they decided to turn to their original segment , Penney is trying to win back women in their 50s and 60s, opening stores an hour early exclusively for loyal customers,

Question 13

What are the reasons for Penney’s continued floundering?

Answer 13

They alienated their main market, choosing to focus on younger audiences and stocking hipper brands. On top of this, their leadership has been changing nonstop. Eliminated their chief merchant position.

Question 14

Compare UPS’s operations with FedEx’s?

Answer 14

Fedex is automated; UPS’s workers are unionized and FedEx’s ground-operations workers are not

Question 15

What is the reason behind the UPS’s rush to modernize its operations?

Answer 15

E-commerce is the main reason behind the rush to modernize operations because this has caused UPS drivers to have to make more delivers to homes as opposed to offices and businesses. Home deliveries are less profitable than larger deliveries to businesses, so they need to modernize operations to make home deliveries more profitable to remain competitive with companies like FedEx and Amazon.

Question 16

Why brand a service, i.e., what is the purpose of service branding? What roles do company brand and product brand play in physical products? (For example, Proctor & Gamble and Tide, respectively.) Is there such a distinction in services?

Answer 16

Allows your customers and clients to know what to expect from your company. Helps with customer loyalty in products.

• Differentiation, Identification
• Proctor and Gamble name brings closer relationship to the big brand

Question 17

Why re-brand a service? What is/ are the requirements for successful re-branding?

Answer 17

1. Changes in market place - customers, competition (Dunkin’, UPS)
2. Brand sin-offs/break-ups
3. Consolidation/Merger
4. Trust-damaging crisis (Wells Fargo)

Question 18

What recommendations would you offer to repair the image of a brand that is damaged due to the nefarious activities of the company?

Answer 18

Create a higher purpose mission so the company is not all about money
Develop higher purpose programs -> ex. Barclays -> How to protect yourself from online fraud, programs to help people, 1000 employees retrained in program
Distribute message about the brand’s purpose using peoples’ real stories

Question 19

“Why does UPS wish to redefine itself?”

Answer 19

UPS wants to redefine itself because they have been working to offer additional services in areas such as pharmaceuticals and e-commerce returns

Question 20

How is UPS trying to accomplish it?

Answer 20

They are rolling out new ad campaigns that communicate that they are about more than just package delivery (such as United Problem Solvers which communicates that they have been working more in global business supply chains which can be quite complicated)

Question 21

What challenges does UPS face in redefining its image?

Answer 21

UPS is already very well known, so it can be difficult to change how people think about the brand. UPS is also relatively new to the marketing scene because they didn’t advertise much if at all until the 1980s as the founder believed that service quality spoke for itself and marketing wasn’t necessary.

Question 22

What does “internalizing” a brand mean? How do you internalize a brand?

Answer 22

Making sure the employees understand, believe, and follow the brand. Ex. Reflecting on their brand, follow vs don’t follow the customer (Ex: Pier1 employees should allow the customer to shop and if the employees don’t understand this important part of the brand then they will provide bad service)

*Internalizing a brand involves involving employees in the core and nurturing of the brand

Question 23

How do customers perceive Dunkin’ Donuts at the time of the writing of this article?

Answer 23

Non-Dunkin’ loyalists found Dunkin’ to be stiff and unoriginal

Question 24

How does Dunkin’ wish to reposition itself?

Answer 24

Dunkin’ wants to be seen as a quick but appealing alternative to specialty coffee shops and fast food chains. They want to find the sweet spot between these two segments - they want their service to seem somewhat upscale but still target working-class customers.

Question 25

How do Dunkin’s customers differ from the Starbucks’?

Answer 25

Dunkin’s customers don’t want to stick around and lounge like Starbucks’ customers do, so they don’t care about having couches in the store. Dunkin’s customers don’t want to pay as much for their coffee nor do they like the stuff to be as fancy as it is at Starbucks (they don’t like the way Starbucks uses “tall” and “venti” for sizes). Dunkin’s customers would rather just be part of a crowd whereas Starbucks’ customers need to feel like individuals

Question 26

What changes did Dunkin’ plan to make (or did make) to change its image?

Answer 26

Dunkin’ expanded its menu and focused more on snack as opposed to full meals to appeal to the trend of Americans eating more snacks and less full meals. Dunkin’ also changed the interior of their locations to adjust their image (got rid of laminate tables which were replaced with imitation-granite table tops and sleek chairs, put in rounded granite-style coffee bars where workers make espresso drinks face-to-face with customers & open-air pastry cases brim with yogurt parfaits and fresh fruit, plus a pop-music soundtrack is piped throughout the store).

Question 27

What happened when Dunkin’ tried to put Dunkin’ stores under the same roof with Baskin-Robbins and sandwich shop Togo’s?

Answer 27

People were confused. Franchisees complained that it was too difficult to manage everything because there was so much going on with the large differences between what they had to do to prep the food.

Question 28

What is the underlying cause of Dunkin’s desire to reposition itself?

Answer 28

c

Question 29

What is the biggest danger in this repositioning strategy?

Answer 29

The biggest danger is the amount of money that Dunkin’ is spending on it - if it isn’t what the customers want then it can be a huge waste of money.

Question 30

What is causing the movie theater attendance to fall?

Answer 30

Netflix/subscription services

Question 31

How are the theatre-owners responding to the crisis?

Answer 31

Putting in comfier seats, better acoustics and screens, new dining and drink options, and special attractions

Question 32

What is consumer response to renovated movie theaters?

Answer 32

The changes seem to be working - customers seem to be leaving their couches to come to the theaters for the movies and like to buy the extras (fancier food and drink) while they are there

Question 33

Understand and be able to explain the four criteria for testing the brand power of a name.

Answer 33

Distinctive, Memorability, Relevance, Flexibility

Question 34

What is the role of consistency in brand image building?

Answer 34

Logos/visual branding, messaging all contribute to solidifying brand recognition

Question 35

What are the steps for building a powerful service company brand?

Answer 35

Applies to every kind of repositioning -> new service/product

1. Research
2. Choose right medicine -> Make changes gradual
3. Work with existing name (link old with new)
4. Internalize the brand

Question 36

What is the meaning of evidence and what is the primary role of evidence?

Answer 36

Clues that teach customers about the service, reinforcing the marketing strategy

Question 37

What are the main categories of evidence?

Answer 37

Physical evidence, Communication, Prices

Question 38

What are the components of physical environment?

Answer 38

Ambient Factors (only draws attention when unpleasant), Design Factors (visual stimuli, aesthetics, layout), Social Factors (human component, behavior of customers employees in the environment)

Question 39

Why is the influence of ambient factors usually neutral or negative?

Answer 39

You don’t notice it until it’s unpleasant, it’s more in the background

Question 40

What is people-packaging? Which component of physical environment does it belong to?

Answer 40

Managing appearance of service personnel. Part of the social component of the environment. (ex. Disney and their polished appearance)

Question 41

Know the two broad ways of effectively managing evidence through communications: Tangiblize the service and tangibilize the message.

Answer 41

• Service ex. Make cruise (transportation) into more destination
• Message ex. Word of Mouth, Guarantees, Creative ads

Question 42

Who is more likely to be influenced by tangibles: customers who have little or no experience with the firm, or a customer who is more experienced?

Answer 42

Customers with no experience

Question 43

Role of price as evidence

Answer 43

Price can raise or lower expectations

Question 44

How do employees get affected by evidence?

Answer 44

Evidence affects their morale, turnover

Question 45

Do you agree with the UBS’s guidelines on dressing and grooming?

Answer 45

c

Question 46

What is the intent of the UBS’s policy?

Answer 46

They want people to know that they are at a UBS immediately upon entering the bank, so essentially they want their employees to have a unified representation of the brand image.

Question 47

How could the success of these guidelines be measured?

Answer 47

c

Question 48

Understand the meaning of service operations? Why are there more opportunities for cooperation and conflict between marketing and operations in a service business?

Answer 48

c

Question 49

What causes variability in service operations? How is operational efficiency related to variability or uncertainty-reduction? When can the maximum efficiency be obtained?

Answer 49

Uncertainty -> employees, customers, systems, real time -> Operational efficiency reduces uncertainty,

Question 50

What is a service blueprint?

Answer 50

A picture or map that portrays the customer experience and service system, so that the different people involved in providing the service can understand it objectively, regardless of their roles or their individual points of view.

Question 51

What are the components of a service blueprint?

Answer 51

1. Customer actions
2. Onstage/visible contact employee actions
3. Backstage/invisible contact employee actions
4. Support processes

Question 52

How does reading a blueprint vary depending upon the perspective, e.g.,

(a) to understand the customer’s experience.
(b) to understand employees’ roles and relation to onstage technology.
(c) to understand the integration of various elements of the service process

Answer 52

a) Read left to right, tracking the events in the customer action area
b) Read left to right but focus on the activities that fall directly above and below the line of visibility
c) Read vertically; you can see linkages from internal actions deep within the organization to frontline effects on the customer

Question 53

What are the six steps in building a service blueprint?

Answer 53

1. Identify the service process to be blueprinted
2. Identify the customer or customer segment 3. experiencing the service
3. Map the service process from the customer’s point of view
4. Map contact employee actions and/or technology actions
5. Link contact activities to needed support functions
6. Add evidence of service at each customer action step

Question 54

What was the experience of ARAMARK Parks and Destinations in blueprinting Lake Powell Destinations and Marinas?

Answer 54

They were able to find what customers didn’t like about visiting Lake Powell. Customers had to work hard for their vacations, customers weren’t getting what they had originally expected, and overall poor customer reviews / low repeat customers. After service blueprinting and discovering all of this, they figured out ways to improve in the areas that customers were disappointed by offering more service to customers (so they didn’t have to work as hard) and improving their website (so customers knew what to expect).

Question 55

What are the benefits and uses of blueprinting?

Answer 55

Blueprinting is used to give a visual depiction of the steps, actors, processes, and physical evidence of the service. The key feature of the service blueprint is the customer - their experiences are documented first and kept in view while the other features of the blueprint are being developed

Question 56

What customer service issues is McDonald’s facing?

Answer 56

They were facing friendliness issues with their employees; main complaints were “rude and unprofessional employees” as well as complaints about the speed of service

Question 57

What are the reasons behind the rise in customer complaints?

Answer 57

The reason is unclear, but some franchisees say that it is because customers now have more ways to supply feedback than they did before. High employee turnover could be another contributing factor.

Question 58

What steps is McDonald’s taking to alleviate the situation? What obstacles does it face?

Answer 58

They are increasing the number of people staffed during peak hours as well as rolling out a new system for taking orders. They have to train their employees how to use this new system and they have to train the customers on the new role of how the order taking process works with the new system (because there are new roles behind the counter - not just one person who takes your order and hands you your cup, there will be multiple people to do these tasks to keep more of an assembly line going)

Question 59

Do you see any conflict between marketing and operations in this article?

Answer 59

c

Question 60

What is a service marketing concept?

Answer 60

A description of the costs and benefits to the customer (of core and supplementary services)

Question 61

What is a service operations concept?

Answer 61

Describes anticipated processes involved and when, how, and where various operating assets should be deployed to perform specific tasks

Question 62

Understand various classes of service innovations.

Answer 62

1. Major Service Innovations:
   - New core services for markets that have not been previously defined
   - FedEx’s introduction of nationwide, overnight package delivery
2. Major Process Innovations
   - Using new processes to deliver existing core service in new ways with additional benefits
   — Ex: University of Phoenix; Amazon.com
3. Service-line Extensions
   - Additions by existing firms to their legacy airlines (i.e. Delta, United) launching separate low-cost operations designed to compete with discount carriers (i.e. JetBlue and Southwest Airlines)
4. Process-line Extensions
   - Less innovative than process innovations but often represent distinct new ways of delivering existing products/services resulting in either:
   — More convenience and a different experience for existing customers, or attracts new customers who find the traditional approach unappealing (i.e. ATMs, internet-base banking)
   — Self-service checkouts/ self check-in kiosks
   — i.e. Art services hotels (Australia); overstay in the room free until required by other guests (that day)
5. Others
   A. Supplementary Service Innovations
   i.e. accepting credit cards for payment (minor) vs. theme restaurants (i.e. Rainforest Café)
   B. Style Changes
   No changes in process and performance but create excitement and may motivate employees (i.e. minor changes to the décore, uniform, etc.)

Question 63

Where do the ideas for creating service innovations come from?

Answer 63

1. Physical Goods as Sources of Service Ideas
   - Many services can be built around providing an alternative to owning a physical good and doing the work oneself
   - Physical goods, especially high-value durable items, tend to create need for related services (i.e. maintenance, cleaning, consulting, repair, disposal)
2. Technological Innovations
   - Jet engine
   - Internet
3. Service Process Reengineering
   - Used to enhance productivity of existing services
   - i.e. university contract with “The Work Number” for automated verification of employment and salary of employees
4. Traditional Marketing Research Methods
   - Typically used to decide about service features
   - i.e. Marriott Hotels:
   - - Is there a niche between full-service hotels and inexpensive motels? (In locations where demand was not high enough to justify large full-service hotels)
   - - 50 hotel attributes were grouped into 8 factors (i.e. external factors, room features, food-related services, etc.)
   - - For each factor, respondents were presented with a series of stimulus cards displaying various levels of performance for each attribute
   - - 601 respondents were shown a number of alternative hotel profiles (50 in all) each featuring different levels of performance on various attributes contained in 8 factors
   - - Respondents were asked to indicate on a five-point scale how likely they would be to stay at a hotel with these features given a specific room price per night
   - - Each respondent received 5 cards
   - - Based on their research, Marriott learned not only what features the target business segment wanted in a hotel but also what they were willing to pay for
   - - Research led to building the 3 courtyard by Marriott prototype hotels. Subsequently developed a chain -Courtyard by Marriott - the hotel designed by business travelers”
   - - Using the same research methodology, Marriott developed additional customer-driven products (i.e. Fairfield Inn and SpringHill suites)
5. Legal/Regulation changes as sources of services
   - i.e. Cellphone lots at airports were created because of the laws that prevent cars from waiting outside airport terminals
   - i.e. Mail It Home Safely - the airport would give you the option to pay to mail things home to yourself if you brought things with you that you couldn’t take onto the airplane (liquids, lighters, etc.) - this came about because of the laws that prevented you from bringing certain things onto airplanes
6. Sensing Latent Needs
   - Frontline employees: closest to customers
   - Customers: customer complaints/suggestions
   - Strategic planners: identify broader trends in demographic and technology
   - - i.e. rising health care costs and affordable medical services
   - - Aging of U.S. population
   - Changing needs and technology create a new service offering

Question 64

How can services make products obsolete? Give some examples.

Answer 64

RapidTables.com > Calculator

Google Maps > Maps

Question 65

What are the four elements a service business must get right?

Answer 65

The Offering
The Funding Mechanism
The Employee Management System
The Customer Management System

Question 66

What is the justification for becoming a multi-focused firm?

Answer 66

c

Question 67

Why are many large service providers unable to fend off attacks from the digital upstarts?

Answer 67

Large companies rarely put as much effort into innovating their services as they do in innovating their products.

Question 68

What are the four evolving trends companies must focus on to tap the potential for service innovation?

Answer 68

1. Higher customer expectations
2. Rise of mobile internet (growth opportunities such as youtube, instagram, etc)
3. Big Data and advanced analytics
4. Internet of Things (smart machines - smart refrigerator)

Question 69

Describe the three imperatives that forward-looking incumbents are pursuing to
meet the challenges of rapidly changing service’ environment.

Answer 69

1. Institutionalize service innovation:
2. Personalize customer experience: Part of this is segmentation, but part of this is also using big data to understand the customer better and make their experience more personalized. Ex: credit card company using the app to create personalized, real-time discounts for products and services that would appeal to that customer (based on location and other factors). Ex: Disney uses wristbands for customers as room keys, scheduling rides, and purchasing merch around the park - they can choose to enter personal data such as their birthday so that characters around the park will greet them by name and wish them a happy birthday
3. Simplify service experience:

Question 70

Understand in detail each of the five ways to enhance operational efficiency of service systems.

Answer 70

1. Isolating technical core -> Optimize frontline (chipotle)
2. Production line the whole system -> Like fast food outlets, with little customization, more participation on the customer
3. Take perspective, how do I make it like an assembly line, backroom (Subway)
4. Flexible Capacity -> Part-time employees, focus on when peak demand is, share capacity with other firms with different peaks
5. Increase customer participation -> Replace work done with customer work, ATM, dump duties on the customers
6. Move time of demand to match capacity -> Rates for phone calls

Question 71

Customer operating segments

Answer 71

this type of segmentation aims to find populations of customers who share a notion of what constitutes excellent service

Question 72

The offering

Answer 72

While product designers focus on the characteristics buyers will value, service designers should focus more on the experiences customers want to have.

• Ex: Customers may attribute your service brand with convenience or friendly interaction. They may compare your offering favorably with competitors’ because of extended hours, closer proximity, greater scope, or lower prices.
• Note that a company usually has to make a trade off for the attributes it provides in its offering. For instance, it may be able to stay open later but have to charge higher prices. (Ex: Wal-Mart: gives up ambiance and sales help for low prices and wide selection because that is what customers value more) - this makes it important to use customer operating segments

Question 73

The Funding Mechanism

Answer 73

this is complicated for services because it is not just as simple as a price tag (like it is for products). Instead, there may be a subscription with a monthly fee or cases where non-buyers gain value from service environments even though they didn’t pay anything (such as gaining info from a sales person without buying from them). So, there are four forms of funding mechanisms in services:

1. Charge customers in a palatable way: this is the classic approach of having customers just pay for the service but doing it in a way that is less objectionable to the customer. Ex: Starbucks charges customers more for the coffee as opposed because they know that customers like to hang out in their store for long periods of time; it would be ridiculous to place meters next to the chairs and charge by the hour.
2. Create a win-win between operational savings and value-added services: enhance the customer experience while spending less. Ex: Progressive sends out a van to assess the damages and assist the person immediately after they were in an accident which the customer loves; this helps the company save money b/c insurance fraud is a really big problem and they are able to cut back on that by actually being physically at the scene of the accident to assess the damages as opposed to having pictures sent in or some alternative.
3. Spend now to save later: Ex: Intuit has the higher paid product-development people, not just customer service people, taking support calls so that they can have first-hand knowledge of the struggles their customers are facing when they go to design new innovations.
4. Have the customer do the work: this puts the costs back in the customer’s court in the form of labor and keeps the costs low. To maintain service excellence, the customer will have to prefer to do the self service. Ex: airlines with the check-in kiosks - customers were reluctant at first but now prefer to use this b/c of convenience and perks.

Question 74

Charge customers in a palatable way

Answer 74

this is the classic approach of having customers just pay for the service but doing it in a way that is less objectionable to the customer. Ex: Starbucks charges customers more for the coffee as opposed because they know that customers like to hang out in their store for long periods of time; it would be ridiculous to place meters next to the chairs and charge by the hour.

Question 75

Create a win-win between operational savings and value-added services

Answer 75

enhance the customer experience while spending less. Ex: Progressive sends out a van to assess the damages and assist the person immediately after they were in an accident which the customer loves; this helps the company save money b/c insurance fraud is a really big problem and they are able to cut back on that by actually being physically at the scene of the accident to assess the damages as opposed to having pictures sent in or some alternative

Question 76

Spend now to save later

Answer 76

Ex: Intuit has the higher paid product-development people, not just customer service people, taking support calls so that they can have first-hand knowledge of the struggles their customers are facing when they go to design new innovations

Question 77

Have the customer do the work

Answer 77

this puts the costs back in the customer’s court in the form of labor and keeps the costs low. To maintain service excellence, the customer will have to prefer to do the self service. Ex: airlines with the check-in kiosks - customers were reluctant at first but now prefer to use this b/c of convenience and perks.

Question 78

Employee Management System

Answer 78

Ability and Motivation - what makes our employees able to achieve excellences and what makes them motivated? You need to design a system where the average employee has the ability to thrive - Ex: Commerce Bank hires for attitude so they must make their jobs really easy so that they can train whoever they hire to do the service (that way you don’t have to hire someone with good attitude and high aptitude b/c they are expensive)

Question 79

The Customer Management System

Answer 79

Customers also impact the cost and quality of service but they are harder to control than employees. Ex: Zipcar is a car sharing company that relies on customers to clean and bring back the car on time for the next customer to be able to use it; the company had to instill complex rewards and penalties to motivate customers to perform these tasks whereas motivating an employee to do this would have been routine.