Service MKTG Questions

SERVICES MARKETING
CHAPTER – 1
INTRODUCTION TO SERVICES MARKETING
1. What is ambush marketing? Identify instances where it has been used.
Ambush marketing involves the situation where a firm who is not an official sponsor of
an event markets goods or services through reference to the event or through using
participants of the event. Although answers will vary, most instances of ambush
marketing involve sporting events. For example, businesses may make reference to a
local college's mascot in their advertisements or point-of-purchase displays. These
references normally increase if the local team becomes involved in an important game
such as a state or national title.
2. Cite examples of the differences between marketing products and marketing

services.
Answers will vary, but most will focus on the idea that products can be seen and touched
prior to purchase whereas services cannot. Students may also point out that many services
require the consumer to be present when the service is performed while products can be
manufactured and sold at a later time. To illustrate the differences, you may ask students
to discuss the process they use in purchasing a pair of shoes compared to purchasing
dental services or a haircut.
3. Identify the role of services in the economy in terms of the gross domestic product,
number of jobs, and importance to the economy.
In the United States, services account for approximately 79% of the GDP or $6.95
trillion. In terms of employment, services account for almost 77 % of the total
employment. In terms of future impact, services will furnish approximately 12.9 million
new jobs which will account for 91% of the growth. The largest growth will be the
transportation industry, warehouse and storage industry, communication’s industry, eating
and drinking establishments and computer and data processing.
4. List the reasons for the growth of the services sector.
The growth in the service sector is primarily due to the shift from a manufacturing-based
economy to a service economy and the shift to an information age because of the
invention of computers and telecommunications. Other causes include an aging
population, longer life expectancies, increased leisure time, higher per capita income,
increased time pressure, more female workers in the workforce, changing social and
cultural values, and advances in technology.
Services Marketing – Q & A 1 By S.John Manohar

5. Identify the unique characteristics of services and give examples of each.
The unique characteristics of services include intangibility, perishability, inseparability,

and variability. Although examples will vary, it is important for students to realize that
these characteristics are on a continuum and not absolute. For example, some services
such as legal services are more intangible than a restaurant. The same is true for
perishability. Entertainment services are highly perishable. Performances are held at
specific sites and at specific times, while other services are less perishable because they
involve goods with the services. Some services such as entertainment services are highly
inseparable. Production and consumption occur simultaneously. However, video and
audio recording technology has made it possible for consumers to watch or listen to
someone perform at a point after it is produced. If the service is highly dependent on
humans to perform the service, then it usually contains a high degree of variability.
Performers such as the Grateful Dead discussed in the first illustration file would have a
high degree of variability.
6. What are the marketing implications of the characteristics identified in Question 5?
The unique characteristics of services makes the marketing of them more challenging.
Services that are highly intangible will need to make the service more tangible to
consumers. They can do this by stressing tangible cues in their promotions. Service
organizations need to realize that consumers will often ask others for recommendations.
The image of the firm and word-of-mouth communications become more critical. In
terms of perishability, firms will have to carefully plan production to match demand. If
customers are present during the service process, the physical facility and its capacity
become an important marketing element as well as the human element. As with
perishability, inseparability requires a careful management of supply and demand to
ensure a profitable operation. From a marketing perspective, this may involve
manipulating demand or supply to ensure peak operating efficiency. For variability,
marketers have to be concerned about the operation of the firm and that it provides
customers with a consistent level of service quality. These characteristics of services
requires a close working relationship between the marketing department and those
performing the service.
7. Identify the six levels of the classification system for services and identify concerns
marketers would have at each classification level.
Level one is the nature of the organization. The purpose, structure, and type of
organization will have a major impact on the promotion strategy. For example, non-profit
organizations may focus its promotional effort on the donors rather than the users of the
services. The strategic approach the firm will use to market itself will vary depending on
the purpose, structure, and type of organization.
Level two is the nature of the service while level three deals with the customer
relationship. The classification at these two levels will impact an organization's operation,
efficiency, productivity, distribution, and personnel. For example, if customers must be
present for the service, then the efficiency and productivity would be impacted. The
service operation and personnel have to be planned allowing for the presence of the
customer. The distribution options would be affected. Managing supply and demand to
match the firm's physical capacity is critical since work cannot be hatched or performed
later. Managing supply and demand will become more difficult if an informal relationship
is used rather than a formal relationship.
Level four deals with the level of demand. Marketers not only must be concerned about
demand but also about supply and capacity. If demand exceeds supply or capacity, the
firm is adversely affected. Managing these elements become more difficult in situations
where demand fluctuates widely and the causes of the fluctuation are out of the control of
the customer. In such situations, marketers can do little to modify the demand pattern.
Level five involves the service package. Classification here impacts a service's
distribution, differentiation strategies, efficiency, productivity, staffing, promotion, and
pricing. If goods are offered as part of the service or through the service, managing
productivity normally is easier. Services that involve a high level of customization will be
concerned about staffing and the impact customization will have on efficiency.
The last level deals with the delivery method. This classification affects the distribution
strategies that can be used. Facility design and operations are also of concern.
8. Classify a tax service that prepares taxes for both individuals and businesses using
the service classification scheme and identify marketing concerns identified by the
classification.
At level one, the tax service serves both persons and businesses, is a for-profit
organization, and is privately held. By serving both markets, different promotional
appeals will have to be developed. At level two, nature of service, the tax service is a
pure service, directed at things, and has a high level of merchantability. Since it is a pure
service, issues such as intangibility and perishability will be of concern. Having a high
degree of merchantability allows the firm to enhance its efficiency since the customer
does not have to be present. In terms of customer relationship, level three, the tax service
has both an informal and formal relationship and the customer must start and finish the
service. Business customer relationships will tend to be formal and contractual while
individuals will tend to be informal. Operations are a concern since the tax service will
probably use a different operational process for the two types of customers. Pricing the
service will be of concern since the expectations and the relationships will vary. It may
even be necessary to have different personnel for the two types of customers since
different expertise may be required.
At the fourth level, demand sometimes exceeds capacity and the degree of fluctuation is
wide. During tax season, demand normally exceeds supply while the rest of the year the
firm may have excess capacity. Managing this supply and demand situation is a major
concern for the marketer. Since demand cannot be shifted to a slower period, the
marketer will have to look at ways of either decreasing demand or increasing supply. At
level five, the service package, the tax service offers multiple services, is defined by both
the situation and time, has a low degree of equipment base, a medium level of
customization, and medium degree of durability. Offering multiple services creates
concerns of efficiency, staffing, and productivity. Corporate customers may have
contracts while individual customers often ask the firm to do a specific transaction, such
as a tax return. Because of the medium level of customization, operations, efficiency,
pricing, and productivity are concerns. The amount of time it will take to do a customer's
tax return will vary, yet pricing based on time spent on the return may not be feasible for
both corporations and individuals. The last level of classification involves the delivery
method. The tax service may be available at only one location, is both a continuous and
discrete service, is consumed independently, and will probably have an allocation system
of reservation and order-of-arrival. Facility design is important since customers will
probably be present to initiate and conclude the service. Distribution is important. If the
firm has only one location, accessibility is greatly impeded. The nature of delivery and
type of consumption will effect the firm's operation and how the service process is
designed.
9. Identify the five elements of the services marketing mix and explain how each is
different from the marketing of products.
The five elements of the services marketing mix are service outcome, price, promotion,
distribution, and firm image. Service outcome includes both the technical and functional
component. How a customer is treated is often as important as the outcome of the service
itself. Pricing is more difficult for services because of the difficulty in estimating costs.
For example, how do entertainers such as the Grateful Dead decide on the price of a
concert? Promotion is different for services because service personnel, the physical
facility, and the service atmosphere are all part of the promotional package. Theme
restaurants such as the Kenny Rogers Roasters described in the second illustration file
highlights how important facility design is in the promotional strategy. Distribution
involves both accessibility and availability of a service. Most services cannot be
produced and sold separately as a good so distribution becomes a challenge. Because of
the unique characteristics of services, firm image is a marketing mix element that must be
managed. The importance of firm image is reinforced by the fact that word-of-mouth
communications are more important in the selection of a service than they are for a good.
10. Briefly outline the marketing mix for a hotel chain like the Sheraton.
For the Sheraton, both components of the service outcome will be important to
customers. They will be concerned about how they are treated as well as the amenities
provided by the hotel. The Sheraton will have to price their rooms competitively with
other hotels. A promotional strategy should stress the firm name, the quality of service,
and the availability of Sheraton at many locations. In addition to the many hotel sites, in
terms of distribution, the Sheraton will want to make it easy for customers to reserve
rooms. Allowing customers to use the telephone, fax, and the Internet can make the
Sheraton more accessible. Because of the level of competition in the hotel industry,
developing and maintaining a strong firm image is important.

CHAPTER – 2
THE PURCHASE PROCESS FOR SERVICES
1. Define the following consumption values and give an example of how each has
influenced a recent purchase decision in your life.
a. Functional value is the perceived utility acquired when a particular choice
provides utilitarian or functional benefits for the consumer.
b. Social value is the perceived utility from making a purchase decision that is
associated with a particular reference group.
c. Emotional value is obtained when the choice stimulates feelings and emotions
within the consumer.
d. Epistemic value is acquired when a purchase decision is perceived to satisfy a
desire for knowledge, novelty, or curiosity.
e. Conditional value is the perceived utility provided when an alternative is
chosen because of temporary situational factors that will enhance one of the
other consumption values.
Examples will vary.
2. Identify the three phases of the purchase process model. Explain what happens
during each of the stages.
The three phases of the purchase model are the pre-purchase phase, the service encounter,
and the post-purchase phase. During the pre-purchase phase, consumers are making
evaluations of service vendors. For high involvement decisions, they may be gathering
additional information. Consumers will also explore ways of reducing purchase risk.
During the service encounter, consumers are making an evaluation of the level of service
quality being received. Both the technical and functional components are being
evaluated. During the post purchase phase, consumers evaluate the level of service they
received. If they are satisfied they will be more likely to buy again. If they are
dissatisfied, they will search for the cause of the dissatisfaction. Future purchase
intentions will be affected by who or what is attributed to be the cause of the poor
service.
3. Identify the internal, external, and firm-produced factors that impact the purchase
decision during the pre-purchase phase.
Internal factors that influence the purchase process are individual needs and wants, past
experience, expectations, and the level of involvement. External factors affecting the
purchase process include competitive options, social context, and word-of-mouth
communications. Firm-produced factors impacting the purchase process include
promotions, pricing, and distribution.

4. Define the seven types of risk involved in purchasing a service. For each type of risk,
cite an example of a service that would be considered a high risk.
Although answers will vary, listed below in parentheses are some services that would be
considered to have a high risk to most consumers.
a. Performance risk—chance that a service will not perform or provide the benefit
for which it was purchased (tutoring services, financial services).
b. Financial risk—monetary loss incurred by the consumer if the service fails
(education, musical concerts).
c. Time loss risk—time lost by the consumer due to the failure of the service
(entertainment, education, weight loss services).
d. Opportunity risk—risk involved when consumers must choose one service over
another (sporting events, recreational services).
e. Psychological risk—chance that the purchase of a service will not fit into the
individual's self-concept (hair stylist, dating services).
f. Social risk—probability that a service will not meet with approval from others
who are significant to the consumer making the purchase (education, night
clubs).
g. Physical risk—Chance that a service will actually cause physical harm to the
customer (medical services, service clubs such as YMCA).
5. Discuss the strategies service firms can use to reduce the uncertainty of each type of
risk and the consequences of each type of risk.
The uncertainty of performance risk can be reduced through certification of employees,

branding the service, and communications with customers. Consequences can be reduced
with warranties and through adhering to quality control standards and procedures. For
financial risk, the uncertainty can be reduced through offering customers trial purchases,
sampling, or promotional incentives. The consequences can be reduced through
guarantees. The uncertainty of time loss risk can be reduced through branding while
compensation offers will reduce the consequences component. For opportunity risk,
uncertainty is reduced through branding and communications.
Consequences are reduced through quality control standards and procedures, Branding
and communications can be used to reduce the uncertainty of psychological, social, and
physical risk. The consequences of both psychological and social risk can be reduced by
using quality control standards and procedures. To reduce the consequence component of
physical risk, safety standards can be used.
6. What is meant by a service encounter? What factors influence the service encounter?
Explain the impact of each factor.
The service encounter is the point of interaction between the customer and the service
provider. The service encounter is affected by role theory, script theory, service
environment, service personnel, and support services. Role theory implies that both the
customer and service provider have certain roles to play in the service process. It is
especially important that the service providers follow their prescribed roles or the roles
that customers expect of them. Within the context of role theory, is the concept that
customers and service providers have prescribed scripts. The quality of interaction will be
dependent on how well both parties follow their scripts. The service environment, which
consists of the tangibles, the atmosphere, and other customers, impacts the quality of the
service process.
Service personnel are an important factor; both how they act and how they look are
important. Although not seen by customers, support services are critical to providing a
high-level service experience.
7. Define the two components of service quality. Give an example of each.
The two components of service quality are the functional (the how) and technical (the
what). For a haircut, how your hair looks after the hair stylist is finished is an example of
the technical. The functional is the quality of interaction the customer has with the hair
stylist while he or she is performing the work.
8. Identify post-purchase behaviors of customers who are satisfied with a service.
The post-purchase behaviors of satisfied customers include repeat purchase behavior,

firm loyalty, and positive word-of-mouth communications.
9. Explain the concept of attribution theory. Give an example of how attribution theory
works in practice.
When services fail or are performed poorly, customers look for causes of the failures.
This process of locating a blame or cause for the poor service is called attribution theory.
If a customer feels the cause of the poor service was beyond the control of the firm, then
they tend not to be dissatisfied. However, if they feel the firm was responsible or could
have prevented the service problem, then the customer will be dissatisfied.
10. Identify post-purchase behaviors of customers who are not satisfied with a service.
Post-purchase behaviors of customers dissatisfied with a service include firm switching

behavior and negative word-of-mouth communications.

CHAPTER – 3
CONSUMER EXPECTATIONS OF SERVICES
1. Identify the levels of consumer expectations and give examples of each.
The levels of consumer expectations are ideal service level, desired service level,
adequate service level, and predicted service level. Examples will vary but can be
illustrated by using an example of a business-to-business transportation and warehousing
service. The ideal may be for the transportation company to provide 100% on-time arrival
of shipments with a 100% fill rate. Realizing the ideal will be virtually impossible to
meet, the desired level may be for a 95% on-time delivery rate with a 90% fill rate. The
adequate service level which is the lowest that will be accepted without being dissatisfied
may be a 90% on-time delivery rate with a 80% fill rate. The predicted is what a
consumer expects. Based on past experience, the predicted may be a 93% on-time
delivery with an 88% fill rate.
2. Identify the personal factors that impact consumer expectations and explain how
each will affect expectations.
The personal factors that impact consumer expectations include individual needs, level of
involvement, past experience, and service philosophy. Individual needs influence the
consumption values a consumer will expect from a service. For example, someone who is
extremely hungry will expect more in terms of quantity of food, which is the functional
value, than someone who is dining with a significant other. In the latter case, quality of
service and aesthetics will be more important. He or she may be looking for social or
even emotional consumption benefits. Level of involvement will impact consumer
expectations. Normally as the level of involvement increases, the ideal, desired, and
adequate expectation levels all increase. The predicted is effected more by past
experience with the firm. Past experience may also affect desired, ideal, and adequate
levels of expectations, but normally to a lesser extent. Service philosophy has an impact
on all but predicted service level.
3. Explain how situational factors will impact consumer expectations.
Consumer expectations are often modified by situational factors. For example, the reason
for the purchase will often modify expectations. A business that uses a commercial
employment agency to hire a high level executive will have different expectations than if
they were hiring a dockworker to load trucks. Their ideal, desired, and adequate service
levels will all be higher. They will expect the firm to spend more time in screening
applicants in the former case. Consumer mood will affect expectations. Individuals who
are in a joyful, positive mood normally have lower adequate service expectations than an
individual who is in a bad, negative mood. The ideal and desired levels of expectations
are not normally affected. The predicted level may be affected. A person in a bad mood
will often predict they will receive poor service. Weather may be a factor for a couple of
reasons. One reason is that weather affects people's mood, which in turn, will affect what
they expect. Second, weather itself will modify expectations. In foggy, snowy, or heavy
rain, passengers expect airline flights to be delayed. Their adequate, predicted, and

desired service level expectations will all decline. Time constraints will normally affect
expectations. The impact can go either way. For example, an individual who needs their
home cleaned for a major event and contacts a cleaning agency at the last minute will
normally lower their predicted level of expectations. In most cases, when a consumer
faces time constraints, they will lower their adequate and desired level of expectations.
4. Briefly outline how service alternatives available to consumers will affect their
expectations.
The competitive options available to consumers will impact their desired and adequate
level of consumer expectations. Normally the ideal and predicted levels are not impacted.
A business firm that has ten competent accounting firms from which to choose will
normally have higher expectations than a business that has only four from which to
choose. The desired level will change because there are alternatives available that can
supply the service. The minimum level of expectations will increase because there are
other competent firms than can perform the service at a higher level. Thus, competition
normally drives expectations upward.
5. Explain why past experience is the most important factor affecting consumer
expectations. Give illustrations of how it works.
Because of the risk involved in purchasing services, consumers tend to patronize the
same firms. Based on past experience, they know what to expect. They have developed a
clearly, defined predicted level of service. A new firm is unknown. The ideal, desired, and
adequate level of expectations are intact, but with no experience, it is difficult to form a
predicted level. A consumer would have to rely on word-of-mouth communications or
other information. The examples students will use to illustrate this concept will vary
widely. But in most cases, for example, students patronize the same hair stylist because
they know what to expect. A new hair stylist is seen as more risky.
6. List the informational sources that have an impact on consumer expectations and
give specific examples.
Information sources include word-of-mouth communications and promotions by a service

organization. Word-of-mouth communications can be received from three sources:
personal sources, expert sources, or derived sources. Personal sources would be a
consumer's friend or relative. Expert sources could be a physician, an attorney, or
individual who works for a carpet cleaning company. Derived sources are received
second hand. It may be a friend saying their mother used a particular dentist. Promotions
are firm-sponsored sources of information. These sources can be advertising, sales
promotions, and sales personnel.

7. Identify the firm-produced factors that affect consumer expectations. Describe
examples of each.
Firm-produced factors include promotions, pricing, distribution, service personnel,

tangible cues, other customers, firm image, and pre-service waiting. Examples will vary
but here are the ways that expectations would normally be effected. Promotions by a
service organization will affect the predicted level of expectations. It may have an impact
on the desired level, but seldom will it affect the ideal level. Adequate level of
expectations may be raised if consumers are promised a certain level of service by
advertisements or sales personnel. Pricing normally has a direct impact on expectations.
As price increases, expectations increase. Distribution will affect the predicted service
level and may impact the adequate, but seldom impact the ideal or desired. Service
personnel can affect all four. Promises or communication by the service personnel of the
service can modify any of the expectations either upward or downward. Tangible cues
normally only affect the predicted level of service. Other customers normally impact only
the predicted although they may have an impact on the other levels of expectations
depending on what they say or do. Firm image is positively related to expectations. The
higher the firm image, the more that is expected at all four levels. Pre-service waiting
normally has a dual impact. Predicted service levels decrease, but adequate service levels
will increase. Consumers will feel the firm will not perform as high as they originally
expected, but the minimum level they are willing to tolerate will increase due to the
waiting.
8. Explain how a consumer's image of a service will affect their expectations.
Firm image is positively related to expectations. As firm image increases, expectations

increase. Predicted service level is the primary level of expectations affected by firm
image but all the others can also be affected. The adequate service level may be higher
for a firm with a high image than for a firm that has a low image. The same may be true
for the desired level of expectations. The ideal should not be affected as much.
9. Briefly outline the role of consumer expectations during the pre-purchase phase, the
service encounter, and the post-purchase phase.
During the pre-purchase phase, expectations impact the purchase decision. The higher the
expectations, the more likely the consumer will make a purchase. However, due to risk,
consumers will tend to patronize the same firms as long as past experience is satisfactory.
Consumer expectations will form the basis for service quality evaluations and the level of
customer satisfaction. These evaluations begin during the service encounter and are fully
formulated during the post-purchase phase. Word-of-mouth communications and future
purchase intentions are based on how well the service met the consumer's expectations.

10. List the strategies service firms can use to manage consumer expectations during the
pre-purchase phase, the service encounter, and the post-purchase phase.
During the pre-purchase phase, service organizations should learn what customers expect,
tell customers what to expect, and consistently provide the service customers expect.
During the service encounter, services should communicate with customers during the
service. If possible, they should modify the service to meet customer expectations. If it is
not possible to modify the service, then they should explain to the customer why it cannot
be modified. During the post-purchase phase, services should communicate with
customers to see if expectations were met, develop a follow-up program, and develop a
procedure for dealing with dissatisfied customers.

CHAPTER – 4
SERVICE QUALITY
1. What are the underlying themes of service quality? Suggest illustrations of each
theme.
The three underlying themes of service quality are that service quality is more difficult to
evaluate for services than for goods, service quality is based on consumers' perceptions of
the outcome of the service and how the service was performed, and service quality
perceptions result from a comparison of what was expected to what was received.
Illustrations will vary but should be relatively easy for students to develop. For example,
most students will readily see that evaluating the quality of medical or legal care is more
difficult than evaluating the quality of a pair of jeans. The fact that thousands of
individuals can attend a concert and leave with varying levels of service quality
evaluations indicates that service quality is based on individual perceptions. The last
principle can be illustrated by asking students how many were disappointed with a movie
they watched. Often this disappointment occurs because they were lead to have high
expectations.
2. Define the following terms and give examples of each:
A. Search qualities are attributes consumers can evaluate prior to purchase. Texture,
color, style of a good such as jeans would be an example. Services tend not to be
high in search qualities unless the service is produced through a good, such as a
bakery. Cakes and doughnuts would be high in search qualities.
B. Experience qualities are attributes that consumers can evaluate only during or
after the consumption process. Most services fit into this quality. Evaluating the
service quality of restaurants, airline travel, recreational theme parks, and
plumbing would be some examples.
C. Credence qualities are attributes that consumers have difficulty evaluating even
after the consumption is complete. Professional and business-to-business
services often fall into this category. Examples would be medical services, legal
services, consulting services, and accounting services. Because of the lack of
expertise of the consumer, it is difficult to evaluate the level of service received.
3. Define the five dimensions of service quality. Give an example of each dimension.
The five dimensions of service quality are

 tangibles,
 reliability,
 responsiveness,
 assurance, and
 empathy.
Tangibles would be physical elements such as the firm's furniture, equipment, and
appearance of their employees. An example of reliability would be an accounting service
preparing a tax return accurately and on the date promised. Responsiveness would be a

service employee at a dry cleaners helping a customer get their garments cleaned quickly
because of a special event. It is responding to a customer in a timely and proficient
manner. Assurance is conveyed by the pest control technician when he or she explains
how the chemical being used will rid a house of certain insects or pests. Empathy is the
display of caring, individualized attention to a customer. It can be illustrated by a waiter
taking food that is not prepared to the customer's taste back to the kitchen and having a
new plate prepared.
4. Explain the SERVQUAL model. How is it used by service marketers?
SERVQUAL is an instrument that was developed to measure service quality. It consists

of 22 items. The first part of the questionnaire measures consumer's ideal level of service
while the second part measures a consumer's evaluation of the service provided by a
particular firm. Service quality is evaluated by subtracting the perceived level of service
received from the consumer's expectations. It is used by service marketers to evaluate the
quality of service being provided by their firm. Based on the results, weak areas of the
service process can be located, and then corrected. It may also point out strong areas that
can be promoted as competitive advantages.
5. Identify the potential problems with SERVQUAL and the use of the gap theory
methodology for measuring service quality. Discuss the precautions that should be taken
to reduce these problems.
SERVQUAL has three potential problems. First, SERVQUAL measures expectations of

the ideal firm in an industry, not the firm under consideration. Second, SERVQUAL is
generic and therefore will not measure dimensions specific to an industry. Third,
SERVQUAL is based on Gap Theory, which can lead to biased results. Since both
expectations and service evaluation are measured after the service experience,
measurement of the expectations component will be biased. To reduce these problems,
services should modify SERVQUAL to fit the specific industry being used. Consumer
expectations should be measured prior to the service while the experience evaluation
should be measured after the service.
6. Identify the two types of performance measures that can be used to measure service
quality. Cite examples of each type.
The two types of performance measures are internal measures and customer measures.
Internal measures could be the number of customer complaints received, the amount of
time it takes to perform a service, or the time it takes to respond to a customer inquiry.
Customer measures may include surveying customers about the way they were treated by
service personnel or the opinion of certain aspects of the service.

7. Explain the weaknesses of internal measures of service quality. Discuss the
advantages of using internal measures of service quality.
The weaknesses of internal measures include the fact that it is from the service firm's
viewpoint, the service variables being monitored may not be important to customers, and
the behavioral side of the service is not evaluated. The advantages of internal measures
are that they are objective measures of service quality and they provide valuable data on
strengths and weaknesses of the service process.
8. Explain the weaknesses of customer measures of service quality. Discuss the

advantages of using customer measures of service quality.
The weaknesses of customer measures are that they do not reflect the opinions of non-
customers, they do not provide any comparative information, and it is difficult to get
unbiased information. The primary advantage of customer measures is that they provide
valuable information about how customers feel. This information can be used to improve
service efforts.
9. Identify the gaps in the evaluation of service quality. Identify the causes of each gap
and the marketing strategies firms can use to reduce the size of each gap.
Gap One is the difference between what customers expect and what management
perceives customers expect. The cause of Gap One is the failure of management to
correctly identify consumer expectations. Strategies for reducing Gap One include
communicating with customers, conducting market research, encouraging upward
communication, and decreasing layers of management.
Gap Two is the difference between management's perception of consumer expectations
and service quality specifications. Causes of Gap Two include resource constraints,
market conditions, and management indifference. Strategies for reducing Gap Two
include top management commitment, development of service quality goals,
standardization of tasks, and addressing feasibility of customer expectations.
Gap Three is the difference between service quality specifications and delivery of those
specifications. Causes of Gap Three include employees are unaware of specifications, do
not have the skills to perform the specifications, or are unwilling to perform the
specifications. Strategies for reducing Gap Three include enhancing teamwork, ensuring
employee-job fit, ensuring technology-job fit, providing employees with perceived
control, developing a supervisory control system, reducing role conflict, and reducing
role ambiguity.
Gap Four is the difference between the service delivered and external communications
about the firm. Causes of Gap Four include poor or lack of communication and over-
promising. Strategies for reducing Gap Four include increasing horizontal
communication and avoiding the propensity to over promise.

10. What is ROQ analysis? Discuss how service firms can use this methodology to
determine which quality initiatives to develop.
ROQ analysis is a method firms can use to evaluate current or proposed service quality
programs. ROQ analysis compares benefits to cost. Service firms can use ROQ analysis
to evaluate current service quality programs. It can also be used to evaluate proposed
service quality modifications.

CHAPTER – 5
PROCESS
1. Discuss the benefits of industrialization in manufacturing. Explain why these

benefits are difficult to achieve in services.
The primary benefits of industrialization to consumers include lower prices and universal
availability of goods. These benefits are difficult to achieve in services because of the
service characteristics of intangibility, perishability, inseparability, and variability. Goods
cannot be produced in advance and stored in inventory until customers want to buy them.
2. Identify the operational positions available to services. Define each operational

position and cite examples of services using each position.
The three operational positions are cost efficiency, customization, and service quality.
Cost efficiency emphasizes industrialization procedures to reduce capital investments,
labor, and operating costs. Customization approach involves designing the service to
meet the needs of individual customers. Service quality emphasizes a superior level of
either technical or function service to customers. Cost efficiency firms include firms such
as Taco Bell, McDonald's, Southwest Airlines, and H& R Block. Customization firms
would be Arthur Andersen Consulting and the general practitioner physician. Firms
emphasizing service quality would be ServiceMaster, Marriott Hotels, and Chili's.
3. Discuss the concepts of divergence and complexity. Cite examples of each.
Complexity refers to the number of steps and sequences in a service process. Divergence
is the variability and latitude in those steps and sequences. Performing a medical
operation is complex because it involves a large number of steps and sequences. The
same would be true for programming a computer system to run an automated assembly
line. Medical services tend to be high in divergence because the physician has a wide
latitude in treatments he or she can use as well as tests that can be conducted. Fast-food
restaurants are low in divergence because customers have few choices while a formal
dine-in restaurant is high in divergence because customers have many choices.
4. What is meant by position mapping? Explain how position mapping can benefit
firms in the hotel industry.
Position mapping is the process of placing each firm in an industry on a triangular shaped
map. Firms in the hotel industry can benefit from developing a position map. The
position map will identify the strategies being used by their competitors. It will also
identify who are their primary competitors, which are those firms that compete most
directly in the sector of the market. The position map may also identify areas that
competition is low.

5. Explain blueprinting. Define each element used in blueprinting.
Blueprinting is the process of diagramming a service operation. A box identifies actions

to be taken by service personnel. A fan attached to a box indicates a potential range of
decisions customers make. A fan attached to a circle indicates potential events that can
occur or directions the company can take.
6. Define complexity and divergence. Give examples of services in each of the four
quadrants of the divergence/complexity matrix and identify which operational
positioning strategy should be used.
Complexity refers to the number of steps and sequences in a service process. Divergence
is the variability and latitude in those steps and sequences. Services such as fast-food
restaurants are low in both complexity and divergence and should therefore use the cost
efficiency operational position. Most educational institutions are low in complexity but
high in divergence and should use the functional service quality approach. Services such
as hotels are high in complexity but low in divergence and should use the technical
service quality operational position. Most professional services are high in both
complexity and divergence and should use the customization approach.
7. Identify strategies a firm can use in the cost efficiency operational approach. Discuss
a service that has used these strategies.
The operational goal of services in the cost efficiency sector is to maximize productivity.
Strategies that can be used include locating the customer contact component of the
facility near customers and the support component in low cost areas. The facility layout
should maximize the speed and efficiency of operation. Job design strategies include
minimization of the customer contact component, maximization of the support
component, standardization of service process procedures, division of labor, job
specialization, cross-training of employees, computerization, automation, batching of
work, component purchasing, and self-service by customers. Firms using these strategies
include Taco Bell, McDonald's, Southwest Airlines, and H&R Block.
8. Outline strategies a firm can use in the customization operational approach. Describe
a service that has used these strategies.
The operational goals of services using the customization approach are to maximize the
personalization of the service and customer contact component of the service. The facility
should be located in a high image area that enhances their reputation. The facility layout
should emphasize the importance of the client or customer. Job design strategies include
enhancing the customer contact component, standardization of the support component,
division of labor, job specialization, computerization, and automation. Firms using the
customization approach include Arthur Andersen Consulting and most professional
services such as medical, dental, and legal services.

9. What strategies can a firm use in the service quality operational approach? Discuss a
service that has used these strategies.
The operational goal of services using the technical service quality approach is to
maximize the service outcome while the goal of services using the functional service
quality approach is to maximize the service process. The facility location strategy is to
locate the customer contact component in a high image area while the support component
is located in a low cost area. The facility layout should emphasize the importance of the
customer contact component and to maximize the efficiency of the support component. In
terms of job design, the techniques used by the technical quality services include
minimization of the customer contact component, maximization of the support
component, standardization of service process procedures, division of labor, job
specialization, cross-training of employees, computerization, automation, batching of
work, and component purchasing. Services using the technical service quality approach
include ServiceMaster and Orkin. Firms using the functional service quality approach
include Disneyland and sports teams.
10. Identify the principles of managing customer waiting and queues. Explain how a
service can effectively manage each of the principles.
The principles of managing customer waiting and queues include unoccupied time
appearing to be longer than occupied time; pre-service waiting seems longer than waiting
during a service encounter; customer anxiety makes waiting appear to be longer; waiting
seems longer if customers do not know how long they will be waiting; waiting that is not
explained appears to be longer; if customers feel their waiting is unfair, it will seem
longer; the more expensive the service, the longer the wait appears to be; and customers
waiting by themselves perceive the wait to be longer than if other customers are also
waiting. Waiting and queues can be managed through operation management and
perception management techniques. Operational management techniques reduce the
actual waiting time. Some operation management techniques would include getting
customers out of queues; encouraging customers to use other methods of transacting
business; adding additional service personnel; using reservation systems, and
encouraging customers to use the service at non-peak times. Perception management
techniques include: keeping customers occupied; breaking the waiting up into smaller
intervals; informing customers about the length and reason for their wait; and reducing
any anxiety that may exist through providing information.

CHAPTER – 6
PEOPLE
1. Compare and contrast the role of customer contact personnel and support personnel.
Customer contact personnel are the interface between the service and its customers. They
are primarily responsible for the functional component of service quality while support
personnel are primarily responsible for the technical component. The customer contact
personnel is responsible for communicating with the customer while the support
personnel is responsible for performing the service. The support personnel will seldom
interact or communicate with customers.
2. Discuss the motivational job characteristics in terms of both customer contact and
support job design.
Because of interaction with customers, customer contact personnel normally need a wider
variety of job skills than do support personnel. Customer contact personnel need to be
empathetic, have the ability to listen, and interact with people. Most customer contact
personnel have high task identity. They see the outcome of the service. However, a few
customer contact individuals such as a telephone receptionist seldom see or know about
the outcome of the service. Because of division of labor and specialization, support
personnel often have distinct units of work, but seldom see the outcome of their work. A
similar difference exists in terms of task significance. Customer contact individuals see
the impact their work has on the company and on customers. Since support personnel are
removed from customers, often they view their job as having little task significance. In
most cases, customer contact personnel have more autonomy than do support personnel.
In terms of feedback, customer contact personnel often receive immediate feedback from
customers. Support personnel normally only get feedback if customers are dissatisfied
and want something re-done. Managers also tend to provide more feedback to customer
contact personnel than support personnel.
3. Discuss the issue of control during the service encounter. Identify methods firms and
service personnel can use to increase their control.
A struggle for control exists in the service encounter among customers, service
employees, and the service organization. Customers like to have control so they can get
the service they want. Service employees want control so they have the freedom to
provide the service properly. Service firms want to control the service encounter so they
can control costs, productivity, and efficiency. Service firms and service personnel use
physical control, leadership, rewards, and education to increase their control.

4. Identify methods firms can use to give customers greater control during the service
encounter.
The process of giving customers more control of a service experience is called behavioral
control. The process of giving customers more perceived control is called cognitive
control.
5. Identify the conflicts faced by employees of a service firm. Discuss why these
conflicts occur.
Employees face conflicts with their role, the organization, other employees, and
customers. Employee-role conflicts occur because of a perceived inequality dilemma or
dress codes established by the employer. The major cause of employee-organization
conflict is the two-boss dilemma. Employee-employee conflicts are caused by lack of
clear communication, lack of a clear chain-of-command, conflict of personalities,
competition for customers, and differences in perceived workloads. Conflicts with
customers can occur because one party doesn't follow their correct role, over ownership
rights, or because of one party's behavior.
6. Identify the conflicts faced by customers of a service firm. Discuss why these
conflicts occur.
Customers can have conflicts with their role, with the organization, with other customers,
and with employees. Customer-role conflicts normally occur because of lack of
understanding of their role. Customer-organization conflicts occur because of
disagreement over policies and rules. Customer-customer conflicts occur because of
different expectations, perceived inequality of treatment by service personnel, and
personality differences. Customer-employee conflicts occur because one party doesn't
follow their correct role, over ownership rights, and because of one party's behavior.
7. Identify methods individuals use to deal with conflict. Compare and contrast the
methods used by service employees and customers.
Methods of dealing with conflict include avoidance of contact, psychological withdrawal,

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

8. Define internal marketing and discuss how a firm can use it.
Internal marketing is the process of using marketing techniques to satisfy the needs and
wants of employees. Internal marketing is based on the premise that if a firm first meets
the needs of their employees, the employees will work harder to meet the need of the
firm's customers. Happy, satisfied employees will lead to happy, satisfied customers.
9. Describe each component of internal marketing and give an example of how each
can be used by a service firm.
Marketing research is the process of researching the needs and wants of employees.
Service firms can use marketing research to determine the feelings of customers towards
the firm's policies and rules. Their needs in terms of fringe benefits can also be
discovered. Marketing segmentation is the process of matching employee skills with job
needs. For example, employees who like people and like to interact with people should be
matched with customer contact jobs. Internal communications is the third component.
Examples of internal communications include newsletters, formal meetings, and informal
word-of-mouth communications. These methods of communication can be used by
employers to learn how employees feel as well as to convey management philosophy and
ideas. External communication impact employees for two reasons. First, it tells customers
what to expect from service personnel. Second, it tells service personnel what the firm
expects them to provide to customers.
10. Discuss how a service business can develop customer-focused personnel.
Developing customer-focused personnel requires the following five steps. First, services
must write customer-focused job descriptions. Every job in the firm must be organized
with the customer as the focus. Second, firms need to recruit people who have a desire to
serve customers and meet their needs. Third, orientation and training has to focus on
customers. New employees must see and hear that the customer is the focus of the firm.
The fourth step is training employees on how to deal with customer dissatisfaction and
providing them with power to deal with dissatisfied customers. Without empowerment,
employees will not become customer-focused. The last step is to use motivation
techniques that encourage customer service and a compensation system that rewards
employees for good customer service.

CHAPTER – 7
SERVICE ENVIRONMENT
1. Identify the components of the servicescape. Cite an example of each component.
The components of the servicescape include the physical facility, the location, ambient
conditions, and interpersonal conditions. The exterior appearance of a business would be
an example of the physical facility. The location of the service could be in a mall,
downtown, or even in the industrial park. Odors and noise at a business would be
examples of ambient conditions. Interpersonal conditions would involve the appearance
and behavior of a waiter at a restaurant.
2. Identify the response moderators of individuals to the servicescape. Cite examples

you have seen of each type of response.
Possible response moderators include cognitive responses, affective responses, and

physiological responses. Examples will vary but students should understand that
consumers might react differently when exposed to the same servicescape. Cognitive
responses are beliefs consumers form about a service based on the servicescape. For
example, a tourist may conclude a restaurant does not have very good meals because only
a few cars are in the parking lot. Going to a physician for a medical exam will normally
create feelings of distress while attending a musical concert will normally produce
feelings of excitement and joy. Consumers react physically to an environment, especially
the ambient conditions. If a retail facility is cold, consumers may move faster and rush
their purchase decision. If it is crowded, they may feel uncomfortable. Normally the
physiological responses will trigger either cognitive or affective emotions.
3. Servicescapes can be designed to meet the needs of customers, employees, or the

firm. Identify the goals that should be met by each type of servicescape. Cite an
example of each.
Firms operating in the customization and functional service quality sector will want to
design their servicescape to focus on the attraction, satisfaction, and retention of
customers. The offices of a consulting firm would be an example of this approach. For
firms operating in the technical service quality sector, their servicescape goals are to
provide employee satisfaction, motivation, and operational efficiency. A nursing home,
hospital, or medical treatment facility may be designed this way. The last operating
position is cost efficiency. The goal of the servicescape is to provide optimal cost
efficiency and productivity. Fast-food restaurants are an excellent example of this
approach.

4. List the steps a service should use to maximize their servicescape. Explain how a
dine-in restaurant could use each step.
The four steps are 1) identify the operational position, 2) identify the appropriate
servicescape position, 3) identify desired behaviors the servicescape should elicit, and 4)
identify the factors that enhance these desired behaviors. The first step is deciding which
operational position the restaurant will use. Answers on the last three steps will vary
depending on which operational position is chosen by the student. The benefit of this
question is for students to see that the servicescape will be designed differently depending
on which operational position is chosen.
5. Identify the emotional states that can be created by a servicescape. Identify examples
of each that are not used in the textbook.
The eight emotional states are pleasant, unpleasant, arousing, sleepy, exciting, relaxing,
gloomy, and distressing. Examples will vary.
6. Discuss the criteria used in the selection of a site for a service. Explain how each
relates to the firm's operational strategy.
The five criteria used in site selection include operational position, merchantability,
traffic interception, cumulative competitive attraction, and competitive compatibility.
Firms choosing a cost efficiency approach are very concerned about merchantability,
traffic interception, cumulative competitive attraction, and competitive compatibility.
Their site location has to generate a large volume of customers. Customization firms are
the least concerned about cumulative competitive attraction, competitive compatibility,
traffic interception, and merchantability. Customers will drive to the service. It is not
essential to be easily accessible. Firms using the service quality approach will vary. Those
using the technical quality will tend to be more like the cost efficiency service while
those using the functional quality approach will tend to be more like the customization
approach.
7. Briefly discuss the components of the physical facility and ambient conditions that
impacts the service environment. Give examples of each type.
The physical facility elements include the exterior appearance, the interior decor, the
layout, the furniture, and the equipment. Ambient elements include temperature, noise,
music, sounds, air quality, and odors. Examples of each will vary.
8. Discuss the interpersonal factors that will affect a service atmosphere. How should
service firms monitor these factors?
Interpersonal factors include crowding and the appearance, behavior, and mood of
employees and customers. Interpersonal factors can be monitored through mystery
shoppers for large service operations or through observation for small firms. Customers
can be surveyed about their opinion concerning the appearance, behavior, and moods of
employees. Crowding can be monitored by keeping a count of the number of people in a
facility at one time. Comparing sales with the number of customers in a facility at one
time will tell the manager if crowding is having a negative impact on sales. Also, surveys
can be done of both employees and customers to gain their input on the impact of
crowding.
9. Discuss the short-term and long-term affects of crowding. How can service firms
reduce the impact of crowding?
Short-term effects of crowding include negative feelings and in-service adaptive

behaviors. Long-term effects include cognitive and behavioral responses. The negative
impact of crowding can be reduced through operation management and perception
management techniques. Operation management techniques include changing the layout
of a facility, reducing the capacity, and physically controlling the number of customers
entering and leaving the facility. Perceptions management techniques include using signs
and modifications of ambient conditions.
10. Briefly describe the differences between the servicescape at sporting events and
recreational theme parks and other services such as beauty salons. What servicescape
factors are most important to customers?
At sporting events, crowding and noise are an important positive element of the service
while for most other services it is negative. The ambient conditions and the physical
facility itself are often less important than factors such as the level of excitement, the
level of involvement, and the situational involvement with a particular game or event.
Fans will endure cold, snow, and a hard seat to watch a football game while they
complain that a chair in a heated restaurant is uncomfortable. For theme parks, the design
of the physical facility is very important. They are there to have fun and the fun is based
on the servicescape. Ambient conditions are often modified to add to the excitement of a
ride or display. For both spectator sports and theme parks, more attention has to be given
to servicescape factors than for other services such as a beauty salon.

CHAPTER – 8
PRICING
1. Discuss the role of pricing in the marketing of services.
Consumers use prices in three ways. First, prices are an input into forming expectations
of a service. Second, prices affect the purchase decision. Third, pricing is used by
consumers in evaluating the level of service quality. Price is an important element in
controlling demand. By lowering price, demand can be increased. By raising price,
demand is reduced.
2. Identify the factors that impact the pricing decision. Give an example of each factor.
The factors impacting the pricing decision are organizational pricing objectives, cost,
demand/price curve, elasticity of price, competition, operational position, and marketing
mix composition. Examples will vary but it may be beneficial to use an industry, such as
the trucking industry to see how the factors are related. For example, in the trucking
industry, a firm with a profit maximization objective will charge more for their service
than a firm with a sales maximization objective. It is important to calculate costs to
determine an appropriate price. The cost of the tractor and trailer will have to be
depreciated over time. The cost of a driver and other incidental expenses will need to be
considered in determining the price. The demand/price curve will show the demand for
trucking services at various price levels. These can be based on historical data, survey
results, or test markets. Because of the high level of competition, pricing will be highly
elastic. Competitive pricing is very important. To survive, the firm must charge prices
that are close to the competition. The operational position of the firm will have an impact
on pricing. A trucking company that has chosen a technical service quality approach will
charge more than one that has chosen a cost efficiency approach. The other elements of
the marketing mix will have an impact on price. A firm with a high image will charge
more. If extensive advertising is being conducted, normally the price will be higher or at
least equal to the competition.
3. What are the pricing objectives service firms can use? Give an illustration of a
service firm that uses each type of objective.
The four pricing objectives are profit maximization, sales maximization, market share
maximization, and competitive parity. Without internal knowledge of a firm's operation, it
is not always clear what pricing objective is being used. Also, most sales and market
share maximization objectives are defined within certain constraints, which are normally,
an acceptable level of profit or return. Examples of the profit maximization may be
Hilton Hotels, Disneyland, ServiceMaster, and one of the large accounting firms. Sales
maximization examples may include Holiday Inn, McDonald's, and Alamo Car Rental.
Market share maximizing firms may include Taco Bell, Southwest Airlines, and H&R

Block. Firms that appear to be using competitive parity are Burger King, American
Airlines, Orkin, and Avis.
4. What factors affect price elasticity? Cite examples of each factor.
Price elasticity is affected by six factors: availability of substitutes and complements,

relation to competitors' prices, whether the service is a necessity or luxury, consumers'
personal characteristics, and time perspective of purchase. Elasticity for recreational
services is normally high because substitutes are readily available. If a bowling center
increases their prices, consumers can substitute golf, miniature golf, a gym, or other
sporting type activity. Complements would be like photo developing for a camera. If the
price of cameras is increased, photo-developing demand will be affected. Price elasticity
for luxury services, such as entertainment, tends to be more elastic than for necessity
services such as hair styling. The further a price is from the competition, the more elastic
it tends to be. Increasing the price of airline tickets substantially above competition will
drastically reduce demand. The reverse would also be true. The lower the price is in
respect to competition, the more elastic the demand will change. Personal characteristics
of individuals have an impact on elasticity. A luxury service for one consumer may be a
necessity service for another. For example, some individuals feel it is important to get a
perm every two weeks and price will not change that demand while others will wait
longer between perms if the price increases. Services tend to be more elastic in the short
run. If the price of taxis goes up, consumers may have little alternatives in the short run.
However, in the long run, they may make arrangements for alternate types of
transportation.
5. Explain differential pricing. Cite examples of services that use each type of
differential pricing.
Differential pricing involves using different prices for different market segments.
Differential pricing can be used in five ways. First is by time of usage. A golf course that
charges more on the weekend than it does during a weekday is an example. Differential
pricing can be based on time of reservation. Airlines and hotels often use this system. The
third method of differential pricing is by the time the service is purchased. Concerts often
use this type of differential pricing, charging less for tickets purchased in advance.
Differential pricing can be based on different target markets. Move theaters often charge
less for children and senior citizens. The last method is by location of consumption. Most
sports stadiums have different prices for the various seats based on location. Concerts
will often do the same. Front row sections are more expensive than the middle section or
the last sections. Balcony seats may even be less than any of the others.
6. Discuss how yield management can produce higher revenues than traditional
differential pricing techniques.
Yield management is a differential pricing methodology designed to maximize revenues

based on detailed analysis if past purchase behavior. The concept of yield management is
to charge a higher price for the market segment that is least price sensitive and willing to
pay a higher price. In the airline industry, yield management is used extensively. The
seats in an airplane are reserved on a system that allows the cheapest seats to be sold first
and the highest price seats last. Business travelers who cannot make travel arrangements
several weeks in advance are willing to pay more for a seat, thus the higher prices are
near departure time. By using this methodology, airlines are able to fill every seat on an
airplane while maximizing revenue.
7. What is price bundling? List examples of services that use each type of price
bundling.
Price bundling is the practice of offering two or more services or goods in a single
package for a special price. Pure price bundling is used by services such as automotive
lube facilities, fitness centers, YMCAs, and some medical services. Mixed bundling is
used by services such as fast-food restaurants, consulting services, accounting services,
and travel agencies.
8. Describe the concept of multiple-use pricing discounts. How can it be used by

service firms?
Multiple-use pricing discounts are some type of price reduction to customers for repeat
usage of a service. Multiple-use pricing can be used to retain current customers. It can be
used to encourage repeat purchase behavior. It can be used to discourage firm switching
behavior. Lastly, it can be used to counter competitive price or promotional offers.
9. Outline the strategies service firms can use to increase prices.
The first strategy is to wait until another firm raises their prices, and then quickly follow
the lead. A second strategy is to increase the prices, then use a communication program to
explain to customers why the price increase was necessary. A third strategy is to make no
acknowledgment of the price hike and hope customers do not notice. A fourth approach is
to make the price increase over several small increments. The last strategy is to add a
complementary service or a service feature to justify the price increase. With this strategy
it is important that the additional service feature does not cost more than the price
increase. It is also important that the additional service is seen as valuable by customers.
10. Explain what is meant by customer-focused pricing.
Customer-focused pricing is making pricing decisions with the customer in mind.

Customers are concerned about the perceived value of the service, availability of
alternatives, switching costs, personal needs, and purchase risk.

CHAPTER – 9
DISTRIBUTION
1. Briefly discuss the importance of operating hours to a service firm. Identify ways a
service firm can increase accessibility to their service.
Operating hours are one of the most important aspects of distribution since it determines
when the business is available to consumers. Businesses can expand operating hours
through allowing alternate forms of access such as the ATM, telephone, and computer
links. The Internet is a new form some businesses are using to allow 24-hour a day
access.
2. Briefly explain the differences between the three channel structure strategies
available to service firms. Specify an example of each not discussed in the text.
Exclusive distribution is the use of a limited number of agents or outlets that sell only one
brand. Most fast-food restaurants such as McDonald's, Burger King, and Taco Bell are of
this type. A selective distribution involves the use of a few intermediaries. Subway is
currently using a selective distribution. In addition to its own outlets, Subway has
contracted with some convenience stores and universities to operate a Subway branch.
Intensive distribution involves placing the service with as many different parties as
possible. The airlines use this strategy when customers can reserve tickets using any
travel agent.
3. What is multi-channel distribution? Explain the pros and cons of using a multi-
channel distribution strategy.
A multi-channel distribution uses two or more channels to reach one or more market
segments. The advantages of using a multi-channel distribution strategy include increased
market coverage, lower distribution costs, and easier access for customers. The
disadvantages include difficulty in controlling the quality of service, firm image
confusion, and reduced profits.
4. Define each of the distribution growth strategies. List an example of each not
discussed in the text.
Multi-site distribution strategy is the expansion of a service to additional locations.

Examples may include H&R Block, Budget Car Rental, and SunGlo. Multi-service
distribution strategy is the addition of new services. ServiceMaster has used this strategy
when it added cleaning of hospitals and commercial food service to institutions such as
universities and hospitals. Multi-segment distribution strategy is the expansion of a
current service to a new market segment. An Internet service that starts by serving
residential customers is using a multi-segment strategy when it starts marketing small
businesses. A multi-site, multi-service strategy is the addition of new services and new
sites. An example would be a hospital offering selected outpatient services at clinics
throughout a city or rural area. Multi-site, multi-segment strategy is the offering of a
service to a new market segment at a new sight. Education institutions often use this
strategy. A college may offer college classes at a remote site to adult learners or
employees of a corporation. A multi-service, multi-segment strategy is offering a new
service to new market segments. An accounting firm may offer different services to
different market segments. To individual consumers, the service may offer tax
preparation and estate planning. To small businesses, the firm may offer bookkeeping,
payroll preparation, and tax services. To large businesses, the firm may offer auditing
services. The last strategy is the multi-site, multi-service, multi-segment. It is the
expansion of new services, to new market segments, at new sites. Travel agents such as
Travel Agents International often use this strategy. They serve several market segments
and have multiple offices. They also may offer many different services from booking
airline tickets to arranging corporate retreats and meetings.
5. Identify the different methods service firms can use to expand internationally. Cite
examples of each not discussed in the text.
The six methods of international expansion are direct exporting, joint ventures, direct
foreign investment, agents, franchises, and license agreements. Examples will vary.
6. Explain why many firms fail in their international expansion efforts.
A common mistake firms make is thinking they can market their services in other
countries in the same manner as they do at home. Because of this philosophy, market
research is neglected. It is the market research that provides a company with information
to build an effective marketing plan. A second mistake is the tendency to over
standardize. Too often firms transplant the operation that is successful at home to another
country with few modifications. Because of differences in culture, competition, and
market needs, this strategy seldom works. Burger King learned this lesson when the first
two attempts to expand into Japan failed. The last reason for failure is poor follow-up.
Once established, business ventures in anther country must be monitored closely.
Problems must be addressed and solved immediately.
7. What are the advantages of using franchising as a growth strategy? What are the
disadvantages?
For the franchisor, the advantages of franchising include additional capital for growth,
faster growth, additional management personnel, and additional income. The
disadvantages for the franchisor include lower potential profits, controlling the quality of
service being provided by the franchise, and controlling firm image. For the franchisee,
the advantages include lower risk, an established brand name, a successful business plan,
and expert assistance. Disadvantages include paying franchise fees, lack of freedom, and
control by the franchisor.

8. Explain how a brand name can benefit a service organization. What should a service
organization do to maximize those benefits?
Brand names offer several benefits. First, it helps in preventing the classification as a
commodity service. Second, branding assures customers will receive a uniform level of
service. Third, branding provides value by enhancing the efficiency and effectiveness of
marketing programs. Fourth, brand loyalty and repeat purchase behavior are enhanced.
To maximize the benefit of a brand name, it should be distinctive and relevant to the
service. It should have a tangible quality. For maximum effect, the most important
services are branded and linked together.
9. What are the two components of distribution management? Explain the importance
of each to a service firm.
Distribution management has two components: organizational management structure and

economies-of-scale plan. The organizational structure is important because it will
determine the process that will be used for decision-making. Centralized structures will
place power in upper management while decentralized will give local entities power.
Economies-of-scale is important for survival in competitive markets. With global
competition, some type of economies is essential.
10. Identify the components of a customer-focused distribution strategy. Why is long-

term success dependent on following these steps?
The components of a customer-focused distribution strategy are: 1) identification of the

market segments being served, 2) identification of benefits being sought by customers, 3)
matching customer needs to corporate channel and distribution growth strategies, 4)
managing quality control, and managing corporate growth. In the long run, firms that
meet and satisfy customers will survive. Following these steps will ensure that the
distribution strategy will allow customers to have access to the service in such a way as to
be competitive.

CHAPTER – 10
COMPETITIVE MARKETING STRATEGIES
1. Identify the requirements of a sustainable competitive advantage. Why is each

requirement important?
The first requirement for an SCA is that it be of value to customers. A competitive

advantage that is not valued by customers will not result in additional sales. The second
requirement is that the SCA have no readily available substitutes. If competitors cannot
copy the competitive advantage but substitute another SCA for it, then the impact of the
SCA is neutralized. The third requirement for an SCA is that the firm have the resources
and capability of delivering the advantage to customers. If the firm does not have the
resources or lacks the capability, the SCA will be short-lived. It may also cause the firm
to spend money on trying to develop a SCA that it does not have the capability of ever
delivering. The last requirement is that the competitive advantage be sustainable. If it
cannot be sustained over time, then the SCA will not last and the firm has no advantages
over its competition.
2. Discuss the barriers-to-imitation that prevent a service's competitive advantage from

being copied.
The barriers-to-imitation are some type of economies-of-scale, service offering

differentiation, buyer switching costs, access to distribution channels, or experience
effects. Strong economies-of-scale provide cost savings that are hard for new firms or
other firms to copy. Service offering differentiation can be a barrier to imitation if the
differentiation cannot be easily copied. Buyer switching costs can be used as barrier if a
firm has increased the actual cost of switching or even the perceived cost. Electronic
hookups and data exchange are now being used by many firms to make it difficult for a
customer to switch. Perceived switching costs can be increased by building a strong
trusting relationship with customers. Services that can control or limit the access to
distribution of a service make it difficult for other firms to compete effectively.
Occasionally firms can build barriers to imitation through experience. In high-risk
situations, firms with experience will often be preferred.
3. Identify the sources of a sustainable competitive advantage. Cite an example of a

firm for each.
Sustainable competitive advantages can be built on a unique or different operational

position, scale effects, cost and demand synergy, brand or firm equity, customer
relationships, spatial preemption, service package, or information technology. Examples
will vary for each source of a SCA.

4. Name the four stages of the service life cycle. List the characteristics of each.
The four stages of the service life cycle are the introductory stage, growth stage, maturity
stage, and decline stage. The introductory stage is characterized by few or no
competitors, low profit margins, negative cash flows, and market segments that are not
well defined. The growth stage is characterized by a rapid growth in the industry, positive
cash flows, higher profits, influx of new firms, increased level of competition, and
development of distinct market segments. The maturity stage is characterized by leveling
of industry sales, intense competition, shaking out of weaker firms, distinct market
segments, and brand parity within the industry. During the decline stage, there is
declining industry sales, less competition, lower cash flows, and declining profits.
5. Identify the strategies a service firm can use in each stage of the service life cycle.
During the introductory stage, services can involve users in the service design, identify
early adopters, develop prototypes, obtain feedback from early adopters, build industry
demand, use introductory offers, and stimulate positive word-of-mouth communications.
During the growth stage, strategies include developing a competitive advantage, brand
preference, and firm loyalty or repeat purchase behavior. For the maturity stage,
strategies include reducing operating costs, enhancing technical or functional service
quality, concentrating on specific market segments, adding complementary services,
using persuasive advertising, matching competitors' sales promotions, and developing an
SCA. The strategies for the decline stage are divestment, harvest, pruning, retrenchment,
or rejuvenation.
6. Explain each of the market defender strategies. How does a firm determine which is
the best strategy?
The three market defender strategies include blocking strategies, retaliation strategies,
and adaptation strategies. Blocking strategies would consist of performance guarantees,
intensive advertising, controlling location or access to distribution, high switching costs,
and satisfied customers. The purpose of the blocking strategies is to either increase the
cost of entering a new market or decrease the attractiveness of the market. If both can be
done, then the market is less inviting to potential new entrants. The purpose of retaliation
strategies is to reduce the anticipated profits or return. If a new entrant does not earn
enough, they may abandon their plans. Retaliation strategies include reducing service
trial, fighting aggressively to maintain market share, and developing a reputation for
being aggressive. The last defender strategy accepts the new entrant as a member of the
industry. The goal of adaptation strategies is to prevent eroding of market share.
Adaptation strategies include matching competitors' offers, expanding the service
package, becoming a market specialist, and developing a strong SCA. The selection of a
defender strategy will depend on a firm's operational position and their competitive
advantage. The best strategy is one that build's on their SCA. Not only does this increase
the strength of their competitive advantage, it is also their strongest position. Making new
entrants fight one's strength makes a lot more sense than allowing new entrants to use
guerilla warfare tactics.

7. Explain what is meant by consumer positioning. Why it is important to a service
firm?
Consumer positioning is the position a firm holds in the minds of consumers relative to
competition. It is important to service firms because consumer positioning will determine
from which competitor a service will be purchased. In purchasing a service, consumers
compare service offerings and service firms. Purchase decisions are based on these
comparisons. Service quality evaluations are also affected by the consumer positioning.
In evaluating the level of quality, consumers will compare the service they received to
what they expected from a particular firm as well as what they would expect from other
firms that they see as comparable substitutes.
8. Identify the ways a service can position itself in the marketplace. Identify an
example for each consumer positioning strategy.
Service firms can be positioned by service attributes, use or application, price/quality

relationships, service class, service user, and competitor. Examples will vary but some
that may be suggested are:
Service attributes—MGM Grand Casino, Boots & Coots
Use or application—Gold's Gym, Westec Security
Price/quality relationships—Dollar Rent a Car, Access
Service class—T.G.I. Friday's, Denny's
Service user—Caring Calls, Cazadero Performing Arts Camp
Competitors—MCI, Burger King
9. Explain what is meant by position mapping. How is it beneficial to a service

company?
Position mapping is placing a firm's primary competitors on a two dimensional map

based on the two most important purchase criteria. It is beneficial because it allows a firm
to see how it is viewed by consumers in relation to its competitors. It will help a firm to
know if its current positioning strategy is a good one or if it should change its position.
The map may indicate an area that is desirable where there is less competition.
10. What are the steps a service organization should go through to determine the best
positioning strategy?
To determine a positioning strategy, services should follow the following six steps. First,
the service should identify its competitors. From the viewpoint of the customers, who are
the primary competitors? Step two is to assess consumers' perceptions of each firm in the
industry or with whom the firm competes. The third step is taking this information and
place each firm on a perceptual map. The fourth step is to analyze consumer preferences.
Why do they prefer one firm to another? The fifth step is to make a decision concerning
the desired position. The last step is to develop a plan to either reinforce the current
image or shift the firm's image to a new position.

CHAPTER – 11
MANAGING SUPPLY, DEMAND, AND PRODUCTIVITY
1. Identify the reasons matching supply to demand is important. Also, discuss what
happens when supply and demand do not match.
Because services are perishable and cannot be inventoried or stored, matching supply and
demand is important. If supply exceeds demand, then the firm is not operating efficiently.
Unit costs will be high, making it difficult to compete with other firms. If demand
exceeds supply, customers will be turned away. Customers turned away will be inclined
to switch to another firm. Also, the quality of service is normally adversely affected if a
firm is operating at capacity.
2. Explain why it is important to determine the demand pattern. Cite some examples of
how service firms can determine the demand pattern.
Managing supply and demand requires an understanding of the demand pattern. If a

service knows when demand is going to be high, they can expand their supply to meet it.
If they know when demand is going to be low, they can reduce supply to cut costs. Firms
have several methods they can use to determine the demand pattern. First is through
using historical data. Computer trend-series analysis or other forecasting software can be
valuable in determining a demand pattern. Other factors that a firm may wish to monitor
may include the weather, actions by a competitor, and advertising campaigns.
3. Explain how service organizations can assess the causes of demand variations.
Discuss why assessing the causes of variation are important.
Once the pattern of demand is determined, services should look for the causes. Factors
should be separated into those that are within the control of the customer and those that
are not. Factors that are within a customer's control can be shifted or modified. Those
outside their control cannot be changed. Firms will focus their supply and demand
strategies on those factors that are within the control of the customer.
4. List the methods by which a firm can manage supply. Discuss the benefits, marketing
concerns, and customer concerns relevant to each method.
Services can manage supply through part-time employees, employees working overtime,
peak-time operating procedures, cross training of employees, customer participation,
shared facilities, and outsourcing. Part-time employees offer the benefits of cost reduction
and increased capacity. Marketing concerns include less training, lower performance,
lower productivity, and poor attitude. Customer concerns include the possibility of less
knowledgeable employees, lower levels of service, less personalization, and higher
turnover. Peak-time operating procedures offer the benefit of keeping the operation near
capacity. The primary marketing concern is identifying the peak routines that will be
done and the tasks that will not be performed. Customers are concerned about the lack of
personal attention, an incomplete job, crowded facilities, and feeling cheated in terms of
the service provided. Cross training offers the benefits of keeping operations near
capacity, reducing bottlenecks in the service, and filling in for absent employees.

Marketing concerns focus on potential for lower service quality and lower productivity.
Customers are concerned about receiving inferior service quality. Increasing customer
participation will increase productivity and maximize capacity. From a marketing
perspective, customers may lack expertise to do part of the job and it may also create a
conflict with pre-learned scripts. Customers are concerned about the conflict of scripts
and the reduced level of service quality. Shared facilities offer the benefits of reduced
capital investment costs and maximization of facility utilization. Marketing concerns
would be efficient scheduling and having access to the shared facility. Customers
concerns would focus on confusion about where or who is performing the service. Using
third parties or outsourcing has the benefit of expanding capacity. Marketing concerns
would be the level of service quality being provided by the third party and if they would
steal customers. Customer concerns would be the quality of the service and the conflict of
who was hired to do the work.
5. Identify the strategies firms can use to shift demand. Discuss when each would be
appropriate.
Firms have three strategies they can use to shift demand. These strategies are to shift
some demand from a high period to a low period, decrease demand at peak times, and
stimulate demand at low times. The preferred strategy would be to shift demand from a
high period to a low period. With this strategy, no customers are lost and the demand for
the service is more uniform. This strategy allows a firm to provide a supply at a steady
level that increases productivity and efficiency. If excess capacity is still present at low
demand periods, then stimulating demand at these times would be a good strategy. Firms
have to be careful that stimulating demand at low times does not increase demand further
at high periods. Seldom will for-profit firms want to reduce demand. This strategy is only
used when demand always exceeds capacity or when demand cannot be shifted to a
slower period.
6. Identify the tools firms have to manage demand. Cite an example of how each can be
used.
The tools available to services to manage demand include a reservation system,

differential pricing, and communication. Examples will vary. Most professional services
use a reservation system to create a steady demand stream. Differential pricing is used for
many services that see demand exceed capacity. Examples include movie theaters,
airlines, hotels, and resorts.
7. List the different forms of communication that can be used to manage demand.
Explain when each should be used.
Forms of communication that can be used include sales personnel, service personnel,
advertising, and sales promotions. To shift demand to a slower period, sales personnel
and service personnel are the best since they have contact with the customer. In shifting
demand, it is important not to lose customers. Advertising is the best for stimulating
demand at slow periods and reducing demand. It is not the best method for shifting
demand. The same would be true for sales promotions.

8. Explain how firms can cope with fluctuating demand. Discuss why it is important.
Effectively managing fluctuating demand requires strategies that simultaneously adjust

both supply and demand. Because the goal is for supply and demand to be equal,
managing both makes it easier to accomplish this goal. The most used strategies in use
today include hiring extra part-time employees, having current employees work overtime,
and cross training of employees.
9. Identify the methods a firm can use to improve productivity. Cite benefits that can
occur from using each method.
The methods of improving productivity include improving the quality of the labor force,
investing in capital equipment, automating tasks, modifying the customer-service
interaction, separating the customer contact portion of the service from the support
component, increasing self-service options, and using third parties. Improving the quality
of the work force will offer the benefits of higher quality service, fewer customer
complaints, and lower employee turnover. Investing in capital equipment will reduce
labor costs, increase the number of customers that can be served, and improve the
consistency of the service. Automating tasks offers the benefits of cost reduction, more
consistent service quality, and increase in the number of customers that can be served.
Changing the customer-service interaction will speed-up transactions and increase the
number of customers that can be served. Benefits of separating the customer contact
component from the support component include increased service quality and
enhancement of customer-employee relationships. Increasing self-service options reduce
costs and increase the number of customers. Using outsourcing offers the benefits of
reducing costs, improving quality, increasing the number of customers, and increasing
sales.
10. Discuss why customer behavior is important in a service innovation. Explain how a
service can gain customer acceptance of a new service process or new equipment.
Customer acceptance of a service change is essential because in most services customers

are present during the production process. Services planning to introduce changes in their
services should use the following steps to ensure customer acceptance of the change. The
steps are: develop customer trust, understand customer habits, pretest the innovation or
change, teach customers how to use the innovation or change, promote the benefits,
stimulate trial usage, and monitor and evaluate the performance of the innovation or
change.

CHAPTER – 12
CUSTOMER RETENTION
1. Identify the states of satisfaction. Give examples of service experiences that would
illustrate each state.
The states of satisfaction are angry, dissatisfied, irritated, O.K., pleased, and excited.
Examples will vary.
2. Explain the concept of the customer value package. Why is it important for service
organizations to understand this concept?
The customer value package is the perceived combination of factors the in the consumer's
mind creates the best value for them. The factors that make up the customer value
package are price, technical service quality, functional service quality, and firm image.
The customer value package is important because customers will patronize the firm that
is perceived to offer them the best value.
3. Outline the difference between brand loyalty and repeat purchase behavior. Discuss
how a service can develop either brand loyalty or repeat purchase behavior in its
customers.
Customers who are brand loyal will buy only their preferred brand. They will not
substitute another brand. Repeat purchase behavior refers to subsequent purchases of a
particular service based on factors such as price, convenience, sales promotions, or
personal preference. If a customer's preferred brand is not available or a competitor offers
a better deal, the customer will switch to another brand. Brand loyalty results from a firm
offering to customers a superior customer value package based on service quality and
image. Repeat purchase behavior results from a firm offering a better price, a better
location, better convenience, or some other factor.
4. Explain the concept of compatibility management. Discuss how a firm can manage
customer-to-customer interactions at each stage.
Compatibility management is the process of managing customer interactions. The goal is

not merely to reduce conflicts among customers, but to actually use customer interactions
to enhance the satisfaction of other customers. Compatibility consists of three stages.
During the first stage, the goal is to attract a target market that tends to be homogeneous
in nature. A homogeneous group will tend to have fewer conflicts than a heterogeneous
group. The goal of the second stage is to set the stage for customers before they arrive.
This goal is accomplished by properly setting the physical environment to either
discourage or encourage interaction among customers. It is also accomplished by setting
rules of conduct for customers that will reduce conflicts. The last stage is the
management of customer interactions during the service. During this stage, employees
take on several important roles. They can serve as a matchmaker. A matchmaker will
separate groups or individuals who may have conflicts and bring together individuals

who appear to be compatible. A second role is that of Santa Claus. This role is to reward
and encourage courtesy and hospitality among customers. Occasionally, service
personnel will have to serve as a police officer to ensure customers follow rules and do
not disturb other customers. The last role is that of a cheerleader. In this role, the
employee is encouraging customers to interact with each other in a cooperative effort to
increase their participation in the service.
5. Explain the concept of lifetime value of a customer. Why does the value of a
customer increase over time?
The lifetime value of a customer is the amount of revenue a customer would generate for
a firm over his or her expected lifetime. The lifetime value of a customer is calculate by
multiplying the average amount of each purchase times the average number of purchases
per year times the average number of years a consumer lives in a community or the
average number of years a customer has need of the service. The value of a customer
increases over time because customers tend to use a service more over time, service firms
become more efficient over time, customers refer others to the firm, and firms can
increase their prices because of quality and dependable service.
6. What is meant by defections management? How can a firm reduce the number of
defectors?
Defections management is the process of identifying and reducing the number of

defections. Reducing defections can be accomplished through three steps. First, don't try
to eliminate all defections. Second, watch for customers who have defected, are ready to
defect, or who have reduced purchases. Third, develop a service recovery program.
7. Discuss the importance of an unconditional guarantee. Cite an example of an

unconditional guarantee used by a service.
Unconditional guarantees are important because of the statement they make to customers.
It supports a zero defections culture and the belief that customers are important.
Examples of unconditional guarantees are rare among services. Have students go through
the five tests to see if the guarantee is truly unconditional.
8. What is meant by a service failure? Cite an example from your personal experience
of a service failure.
Service failure is when a service fails to meet a consumer's expectations. Personal

experiences will vary.
9. Explain how services can recover customers after a service failure. How can service
failures be prevented?
Service recovery requires four steps. First, the firm needs to develop a service recovery
program in their company. Second, firms should encourage customers to complain so that
resolution of even irritated customers can be recovered. It must be kept in mind, without
encouraging customers to complain, most will not. Third, data concerning the causes of
service failure should be kept to be used for improving the service process. Last, firms
need to allocate sufficient resources to service recovery so that it becomes a company
strength.
10. What is meant by relationship marketing? How can a firm develop a relationship
marketing program?
Relationship marketing is the process of building a long-term connection between a firm

and its customers. The first step in developing a relationship marketing program is to
locate prospects. Encouraging prospects to buy from the firm will lift them to a customer
status. By meeting the needs of customers, they will be clients, which means the majority
of their purchases will be made from the firm. The last step is turn the client into an
advocate for the firm. This requires developing a bond with the customer.

CHAPTER – 13
DEVELOPING AN INTEGRATED COMMUNICATIONS PROGRAM
1. Identify communications objectives for each of the purchase phases. Cite examples
of promotions that could be used for each of the communications objectives.
Communications objectives for the pre-purchase phase include reducing purchasing risk,
increasing the probability of purchase, developing a corporate image, building brand
equity, and increasing awareness. Communications objectives for the consumption phase
include enhancing customer satisfaction and increasing repeat purchase behavior.
Communications objectives for the post-purchase phase include reducing cognitive
dissonance, stimulating positive word-of-mouth communications, and increasing repeat
purchase behavior. Examples of promotions for each will vary.
2. Explain the importance of firm image in purchase decisions. Outline the process
firms should use to develop a positive firm image.
Firm image is an important component in the purchase process and service quality
evaluation. To develop a positive firm image, services should conduct an image analysis,
decide on an image position, and then promote the desired image. An image analysis
consists of determining the relevant criteria customers use to evaluate a service then
survey customers to see how each firm in an industry are viewed on those criteria. Based
on this research, a service is ready to make a decision on the desired image they wish to
promote.
3. Identify the elements of the promotional mix. Discuss the major advantage and
disadvantage of each element.
The three primary promotional options include advertising, sales promotions, and
personal selling. Advertising is an excellent means of building brand loyalty and reaching
many consumers simultaneously. Its primary weakness is that it is costly and may not
always accomplish the desired objectives. Sales promotions are the best means of
stimulating sales and encouraging repeat purchase behavior. Sales promotions are not
effective in building brand equity. Personal selling is good at developing personal
relationships with customers and handling sales objections. It is ideal for business
marketing and large ticket consumer services. However, the biggest disadvantage of
personal selling is its cost.
4. Discuss the role of the servicescape in the communications program. Cite an

example of both a servicescape that supports the firm's communications program and
one that does not.
The servicescape impacts consumer expectations of a service, evaluation of the service

quality, and purchase intentions. The servicescape is important in all three phases of the

purchase process but is most important during the consumption phase. Examples will
vary.
5. Explain the role of advertising in the communications program. How can advertising
be used to reduce the negative impact of the service characteristics of intangibility,
perishability, variability, and inseparability?
The role of advertising is to inform, persuade, remind, or induce action. Advertising can
reduce the negative impact of the service characteristics by increasing the probability of
purchasing, clarifying what consumers can expect which will enhance the perceptions of
service quality, and by increasing the level of customer satisfaction through knowledge of
what to expect. Advertising can make a service more tangible by displaying tangible cues
in the advertisement. In television ads, consumers can be shown the outcome of the
service or the service process itself. Advertising can reduce perishability by informing
consumers of high and low demand periods. Inseparability can be reduced by advertising
ways to conduct the transactions. Variability can be reduced by advertising either
industrialization concepts of a service or customization of a service.
6. Identify the sales promotional tools that can be used by service firms. Explain how a
firm’s operational position has an impact on the sales promotions that should be
used.
Sales promotional tools available to services include coupons, premiums, contests,

sweepstakes, tie-ins, frequency programs, sampling, price-offs, rebates, and refunds. The
operational position of a firm is important in choosing the best sales promotions. For
example, the service quality positions want to maintain an image of providing a high
level of service. Therefore coupons, contest, sweepstakes, tie-ins, and price-offs tend to
be poor sales promotions. The best promotions are premiums, frequency programs, and
sampling. For cost efficiency firms, all but rebates and refunds are good sales promotions
since sales promotions encourage repeat purchase behavior. Only premiums and
frequency programs are suitable for firms using the customization approach.
7. What role does personal selling play in the communication program? Explain the
different roles of personal selling in each of the three stages of the purchase process.
Personal selling is the link between selling organizations and buyers. Salespeople often
represent the firm. Salespeople can accomplish all nine communication objectives.
During the pre-purchase phase, salespeople can reduce purchase risk. They can tailor the
sales presentation to the needs of each customer. During the consumption phase,
salespeople are seldom present. However, if they are, they can clarify customer
expectations and interact with the customer. After the service has been completed, it is
important for salespeople to follow up. Contact with customers is as important. During
the post-purchase phase, salespeople can help deal with cognitive assonance and
encourage repeat purchase behavior.

8. Why do firms use sponsorship marketing? What are the different types of
sponsorship marketing?
Sponsorship marketing is seen as a means of increasing sales volume, of enhancing

corporate image, and increasing brand and firm awareness. Sponsorship marketing is
seen as a way of avoiding all of the media clutter where most advertisements go
unnoticed. Sponsorship marketing also allows a firm to reach various market segments
that are sometimes difficult to reach through traditional advertising.
9. Discuss the steps firms should use in developing an integrative marketing program.
Why is it important for service firms to go through all of the steps?
The first step in developing an integrative marketing program is to identify the target
market of the communication. The second step is to identify which purchase phase it will
be directed. The third step is to analyze customer needs. The fourth step is to determine
the communication objectives that are desired. The fifth step is to determine the
consumer image position that should be promoted in the communication. The sixth and
seventh steps should be done simultaneously. The sixth step is to design the message
while the seventh step is to determine the promotional mix. The last step is to evaluate the
communication program for effectiveness.
10. Identify the various methods available to firms to measure the effectiveness of a
communications program. Discuss when each method should be used.
The effectiveness of communications programs can be measured using recall tests,

recognition tests, opinion tests, intention-to-buy tests, actual sales figures, and test
markets. Recall and recognition tests are best for measuring awareness. Opinion tests can
be used to measure the effectiveness of all the communication objectives except
awareness and an increase in repeat purchase behavior. Intention-to-buy surveys are good
to measure the effectiveness of reducing purchase risks, increasing the probability of
purchasing, increasing actual repeat purchase behavior, and reducing cognitive
dissonance. Actual sales figures can be used to evaluate the communications objectives of
reducing purchase risk, increasing the probability of purchasing, enhancing customer
satisfaction, and increasing repeat purchases. Test markets are good for measuring
purchase risk reductions, an increase in the probability of purchasing, actual repeat
purchase behavior, a change in positive word-of-mouth communications.

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SERVICES MARKETING

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

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

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

Services Marketing – Q & A 1 By S.John Manohar

The unique characteristics of services include intangibility, perishability, inseparability,

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

Services Marketing – Q & A 4 By S.John Manohar

THE PURCHASE PROCESS FOR SERVICES

Examples will vary.

Services Marketing – Q & A 5 By S.John Manohar

The uncertainty of performance risk can be reduced through certification of employees,

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

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

The post-purchase behaviors of satisfied customers include repeat purchase behavior,

Post-purchase behaviors of customers dissatisfied with a service include firm switching

Services Marketing – Q & A 7 By S.John Manohar

CONSUMER EXPECTATIONS OF SERVICES

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

3. Explain how situational factors will impact consumer expectations.

Services Marketing – Q & A 8 By S.John Manohar

Information sources include word-of-mouth communications and promotions by a service

Services Marketing – Q & A 9 By S.John Manohar

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

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

Firm image is positively related to expectations. As firm image increases, expectations

Services Marketing – Q & A 10 By S.John Manohar

Services Marketing – Q & A 11 By S.John Manohar

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

The five dimensions of service quality are

Services Marketing – Q & A 12 By S.John Manohar

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

SERVQUAL is an instrument that was developed to measure service quality. It consists

SERVQUAL has three potential problems. First, SERVQUAL measures expectations of

Services Marketing – Q & A 13 By S.John Manohar

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

Services Marketing – Q & A 14 By S.John Manohar

Services Marketing – Q & A 15 By S.John Manohar

1. Discuss the benefits of industrialization in manufacturing. Explain why these

2. Identify the operational positions available to services. Define each operational

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

Services Marketing – Q & A 16 By S.John Manohar

Blueprinting is the process of diagramming a service operation. A box identifies actions

Services Marketing – Q & A 17 By S.John Manohar

Services Marketing – Q & A 18 By S.John Manohar

Services Marketing – Q & A 19 By S.John Manohar

Methods of dealing with conflict include avoidance of contact, psychological withdrawal,

Services Marketing – Q & A 20 By S.John Manohar

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

Services Marketing – Q & A 21 By S.John Manohar

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

2. Identify the response moderators of individuals to the servicescape. Cite examples

Possible response moderators include cognitive responses, affective responses, and

3. Servicescapes can be designed to meet the needs of customers, employees, or the

Services Marketing – Q & A 22 By S.John Manohar

Short-term effects of crowding include negative feelings and in-service adaptive

Services Marketing – Q & A 24 By S.John Manohar

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

Services Marketing – Q & A 25 By S.John Manohar

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

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

Yield management is a differential pricing methodology designed to maximize revenues

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