978-0136074892 Solution Manual Chapter 15

Unlock access to all the studying documents.

View Full Document

Chapter 15: Special Topic: Strategies for Service Markets

Chapter Objectives

After reading this chapter, students should understand:

·The nature of services and the characteristics that distinguish them from

manufactured goods

·The service quality model

·Measuring the quality of services

·Developing marketing strategies for services

·Marketing-mix decision making for service businesses

·How information technology affects the marketing of services

Chapter Overview

The purpose of this chapter is to introduce concepts underlying the differences in

developing strategies for services versus manufactured products.

Chapter Outline and Key Terms

Key Terms:

·Loss aversion

·SERVQUAL

·Return on quality (ROQ)

A. Definitions

1. Loss aversion: A psychological phenomenon characterized by customers reacting

more strongly to unexpectedly poor service than to unexpectedly good service.

2. SERVQUAL: A popular survey instrument that measures service quality by

grouping questions into five categories of service quality.

3. Return on quality (ROQ): An approach that attempts to quantify financial returns on

investments in improved service quality.

B. The Nature of Services

1. Difficult to distinguish between the product and the service because they are

bundled together

2. Classification of goods

·Different type of product attributes that distinguish products from services

·Figure 15.3 Page 439 Continuum of Evaluation for Different Types of

Products

·Classification

·Search attributes: characteristics of which the qualities can be assessed

prior to purchase

·Experience attributes: characteristics of which the qualities can be

assessed only during consumption

·Credence attributes—Characteristics of which the qualities can not be

assessed even after consumption

3. Characteristics of services

·Intangibility: difficulty in assessing service quality and difficulty in

inventorying services

·Non-standardization: service is not the same each time it is given or

received and it is difficult to control quality for services

·Inseparability of production and consumption

C. Service Quality

A. Perceptions pay an important role in the assessment of quality services.

B. Customers needs affect expectations and experience with the company affect

perceptions.

C. Attributes or features of the service and how they are delivered influence

customer perceptions.

·Figure 15.4 Page 440 A Model of Perceived Quality This is an expanded

version of Figure 14.9 from Chapter 14.)

·Figure 15.5 Page 441 The Dimensions of Service Quality. Outlines the

factors that influence service quality. These include:

·Reliability

·Assurance

·Tangibles

·Empathy

·Responsiveness

·Illustration: The Broadmoor Hotel (www.broadmoor.com) Page

441

1. Gaps in perceptions of quality

·When customer’s expectation and the experienced quality do not match.

·A customer who is dissatisfied will talk about negative experiences more

than positive ones (loss aversion)

·Figure 15.6 Page 442 Loss Aversion of Service Quality

·Four types of gaps

·The gap between customer’s expectations and

management’s perceptions

·The gap between management’s perceptions and

service quality specifications

·The gap between service quality specifications and service delivery

·The gap between service delivery and external communications

2. Measuring service quality

·One method to measure service quality is with the SERVQUAL

instrument

·Table 15.1 Page 444 Example of SERVQUAL Survey

·One survey given to customers regarding expectations.

·Another given about a specific company.

·The rating is the difference between the two.

·Not evidence that states that if a company gets good satisfaction

rating they will get repeat customers.

3. Return on quality

· Based on philosophy that quality is an investment, quality improvement

efforts must be financially accountable, it is possible to spend too much

on quality and not all quality expenditures are equally valid.

·Figure 15.7 Page 445 Linking Customer Satisfaction to Retention

·Illustration: Marriott (www.marriott.com) Page 445

D. Strategic Issues

1. The problem of intangibility

·Need to make services appear more tangible by reminding customers the

service that they have gotten.

2. The problem of low barriers to entry

·Companies must differentiate their service from the competition and

communicate this to customers by paying attention to dimensions of

service quality and the value chain

·Communicate differentiation by effectively communicating or

positioning the service:

·Reliability

·Assurance

·Tangibles

·Additional framework for differentiating services is value chain shown

in Chapter 1, Figure 1.2:

·Inbound logistics

·Operations

·Marketing and sales

·Service

3. Professional services

·Dependant on the quality of the employees

·Emphasis on specialized expertise, reputation and integrity will get

customers to consider services with that particular firm

·Making the service tangible and attention to customer relationship

management

4. Service design

·Service blueprinting involves using flow charts to describe the flow of

activity from point of entry through the customer receiving service.

·Figure 15.11 Page 450 Express Mail Delivery Service Blueprint is an

example of a service blueprint

·Figure 15.13 Page 452 Singapore Airlines: Detailed Customer

Service Activities

·Illustration: Singapore Airlines (www.singaporeair.com) Page 451

E. Marketing-Mix Implications of Service Marketing

1. Decisions on pricing, channels of distribution and communication are

similar with some subtle differences

2. Channels of distribution

·Physical distribution does not apply because services are not tangible.

·In order for distribution to occur the service, organization has to be

present or someone designated by the service principal has to present.

·The service principal must design a channel structure to bring the service

and the customer together.

·Three major approaches to service distribution

·Franchising

·Agents and Brokers

·Electronic channels: Internet

1. Advertising

·Role of advertising in service industry is helping to shape service

expectations.

·Important not to promise what cannot be delivered.

·Should contain vivid information that will help customers understand the

service and evaluate the service compared to other services.

·Make the service tangible through use of concrete and specific language

and dramatizations.

·Want the customer to connect brand with a product category through

repetition or interactive imagery.

2. Pricing

·Must be consistent with overall strategy for the product and customer

perception.

F. Customer Relationship Management

1. Remind customers of benefits of service

2. Track the customers’ usage and develop a system to remind customer to use

the service.

G. Global Aspects of Service Marketing

1. Table 15.2 I Page 457 Issues Posed By Internationalization of a

“Strategic Service Vision”

2. Three basic growth strategies

·Multi-site: more locations

·Multii-service: more services

·Multi-segment: targeting different customer segments

3. Illustration: Euro Disney Page 452 (Disneyland Paris

www.disneylandparis.com)

H. Impact of Technology on Service Marketing

1. Created a new channel of distribution in the Internet.

2. Computers provide some standardization that humans cannot provide.

3. The Internet has provided information to customers allowing service

companies a mechanism for differentiating their services and making the

service appear more tangible.

4. Illustration: Page 459 Travel Services

·Expedia www.expedia.com

·Travelocity www.travelocity.com

·Orbitz www.orbitz.com

·Pricline www.priceline.com

·Kayak www.kayak.com

5. Illustration: Car-sharing Services Page 459

·Zipcar www.zipcar.com

·Connect by Hertz www.connectbyhertz.com

·Mint Cars on Demand www.drivemint.com

·I-Go Car Sharing www.igocars.org

Teaching Tips and Strategies from Barbara S. Faries, MBA

The purpose of this chapter is to introduce the concepts involved with services

marketing.

Key Terms and Concepts Introduced Include:

·Loss aversion

·SERVQUAL

·Return on quality (ROQ)

Note: Two recurring themes in this Instructor’s Manual are the first two items:

·Link theory to practice.

·Engage students to link work experience to the concepts demonstrated in

the text.

·Instructors are encouraged to link theory to practice by finding current examples

in the business environment that demonstrate the key concepts above.

·If your class contains those already working in the field, have them describe how

the concepts in theory match those in the actual workplace.

When teaching this type of chapter and topic, I normally emphasize the following

areas:

·Strategic Issues

·Customer Relationship Management

·Global Aspects of Services Marketing

·Impact of Information Technology on Services Marketing

Most of the students who are working in the field will recognize these as important

topics for discussions. Students who have yet to enter the workforce will need to be

familiar with the topics as most will be involved in the strategic issues, customer

relationship management implications, the global aspects and the impact of information

technology. In the “real world,” these are all topics that most will encounter regardless of

the size of corporation they will work.

Depending on the class, I ask for examples from their workplaces or supplement

with case studies that will spark discussion and tie these elements together.

Review Questions

1. Consider the three kinds of attributes described in this chapter: search, experience, and

credence. Which of these are most appropriate for services? What are the implications

for marketing managers?

2. Recall the last time you had an unsatisfactory encounter with a service provider. Given

dimensions of service quality discussed in the chapter, exactly where were the negative

gaps between expectations and the actual service?

3. Pick two services, one consumer and one industrial. What can a company in each

industry do to make its services more tangible to customers?

4. Develop a blueprint for the course registration process at your school or university.

Where are the likely service failure points? Where can the school improve its service

levels?

5. Suppose you have spent the first five years of your career working for Procter &

Gamble as the assistant, associate, or brand manager for Crest toothpaste. You apply

for a job as a senior marketing manager for United Airlines. What have you learned at

P&G that is applicable to airline marketing? What do you need to learn about airline

marketing to be effective beyond the fact that airlines are different from toothpaste?

Key items learned would include super brand management and the power of brand

recognition. Other items might include matching customer expectations with service

6. As the U.S. economy continues to be increasingly dominated by services, is it necessary

to change our thinking about marketing and marketing strategy? Would a marketing

course be different between the U.S. and, say, China, which is a manufacturing-

dominated economy?