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1
Q

Define ‘service’

A
  • any act, performance or experience that one party can offer another
  • does not result in ownership of anything
  • process that provides time, place, form, experience
2
Q

Explain the 5 differences between goods and services

A
Intangibility = customer cannot touch, taste, smell or see a service so hard to evaluate. Introduces element of perceived risk.
Inseparability = service provider and consumer co-produce (otherwise doesn't matter who's made it) eg. Deakin's multiple campuses
Variability = difficult to maintain uniform standard of service quality (rotation of staff)
Perishability = cannot be stored to be used later to satisfy demand (might have to turn people away one night but have barely any seats filled the next)
Ownership= service personnel and their performance cannot be owned by the customer
3
Q

Identify 5 differences between goods and services. Explain their implications and how effective marketing can address these.

A
  1. Most service products cannot be inventoried
    - customers may have to wait or be turned away
    - > advertise promotions, dynamic pricing and reservations
    - > work with operations to adjust capacity
  2. Intangible elements dominate value creation
    - customers cannot see, hear, touch elements
    - harder to evaluate and distinguish from competitors
    - > put emphasis on physical cues
    - > use concrete metaphors and vivid images in advertising/branding
  3. People may be part of the service experience
    - appearance, attitude, behaviour (service personnel and other customers) can shape experience and affect satisfaction
    - > recruit, train and reward employees to reinforce planned service concept
    - > target the right customers at the right time and shape their behaviour
  4. Operational inputs/outputs vary widely
    - harder to maintain consistency, reliability and service quality
    - harder to lower costs through higher productivity
    - difficult to shield customers from service failure
    - > set quality standards based on customer expectations, redesign product elements for simplicity and failure-proofing
    - > institute good service recovery procedures
    - > automate customer-provider interactions
  5. Distribution may take place through non-physical channels
    - information-based services can be delivered through electronic channels eg. internet, but core products involving physical activities cannot (eg personal training)
    - > seek to create user-friendly, secure websites or free access by telephone (ensure all information-based service elements easily downloaded)
4
Q

Explain how services create value for consumers

A
  • customers expect to obtain value in exchange for money, time and effort
  • value-creating elements rather than ownership eg. more convenient location, moving furniture before painting, delivery
  • firms must create and deliver services that are perceived (by customer) to provide value and communicate this effectively

Service Dominant Logic = customer is a co-creator of value. If they don’t bother using the gym membership then they are going to gain little value

5
Q

How might a company manage the intangibility, variability, inseparability and perishability of its services?

A
Intangibility 
- introduce key members of staff
- provide testimonials
- explain schedule of fees 
- offer free no-obligation consultation
- affiliations
- appropriate office surroundings 
Variability
- hire qualified, experienced staff
- ongoing professional training (technical and interpersonal skills)
- develop reward system
- standardise tasks
Inseparability
- convenient location
- staff training
- implement service recovery programme
- use of electronic delivery channels 
Perishability
- reservation system
- non-peak demand
- flexible pricing
- use casual staff and extend work hours when busy
6
Q

Summarise the key components of the Marketing Mix for the Hilton Hotel

A

Price
- 5 star so more expensive, expect luxury facilities eg pool, gym, conference rooms
Product
- accommodation and experience, high quality, premium (clean rooms, luxurious bedding)
Place
- accessibility!! accessible 24hrs/day, close to CBD
Promotion
- WoM important, list on hotel sites, promote aspects to attract customers (eg. business facilities for business travellers)
Process
- ‘backstage’ needs to be very smooth so customer’s ‘frontstage’ is positive eg. check in/out, high quality service (room service, turndown)
Physical Evidence (servicescape)
- expect atmosphere, full bar, room with a view (differentiate from other hotels), reputable chain lowers guests perceived risk
People
- need people that will work hard to deliver high quality service

7
Q

Briefly explain the hollowing out effect

A

Is the deterioration of a country’s manufacturing sector when producers opt for low-cost facilities overseas to reduce overheads

  • loss of employment means people move to service industry
  • eg. deregulation and privatisation (telecomms, banking)
  • eg. social changes (aging popn=safety features, duel income families = less time cleaning)
8
Q

Outline 5 differences between services

A
  1. Recipient of service
    - directed at the customer or objects that belong to them (hairdresser vs cleaning), so may not consume the benefits until later
  2. Customisation vs standardisation
    - should all customers receive the same service or underlying processes and service features be adapted to meet individual requirements (eg. KFC vs private health insurance)
  3. High vs Low contact
    - experiences shaped by the extent they are exposed to tangible elements and how these are divided between people (employees, other customers) and objects (buildings, equipment)
  4. Discrete vs Continuous
    - regular contact (Uni) means customers develop realistic expectations of value and service performance vs discrete (hospital stay), customer has less experience and fewer concrete expectations -> harder to evaluate
  5. Relationship with customer
    - each transaction is individually acknowledged (membership, hairdresser), others the customers make unidentified, fleeting transactions (hotel) so must use loyalty programs to create ongoing relationship
9
Q

Outline the service operations, delivery and marketing systems

A

Service operations system

  • involve service personnel or involve physical facilities and other tangibles
  • > customers evaluate production according to elements experienced and the perceived service outcome
  • > if a process backstage fails, will impact the customer (range from high-low contact)

Service delivery system

  • concerned with where, when and how service product is delivered to the customer
  • > may entail exposure to other customers and may seek to reduce direct contact with customers (self-service), can create sense of impersonalisation and may not be acceptable to all
  • > may require information campaign to educate customers and promote benefits

Service marketing system

  • all the different ways in which the customer may encounter or learn about the service organisation
  • > offers clues about the nature and quality of service product (inconsistency may weaken organisation’s credibility)
  • > customer encounters sometimes random (driving past an erratic driver of a company car)
10
Q

Outline features of each of the elements of the services marketing mix.

A

Product
- performance characterstics, right product being sold in the right market, product mix
Price
- establishing the selling price to customers, trade margins or credit terms, low price tends to mean inferior goods
Promotion
- how to communicate to the audience, PR, adveritising, promotions
Place
- select the types and locations of outlets (cyberspace, physical), position and distribute somewhere accessible to consumers
People
- direct, personal interaction, those that believe in the product will perform better
Process
- how to make and deliver service, procedures to deliver (eg. script), systems/processes affecting execution
Physical Evidence
- tangible cues (servicescape - layout, ambience, furnishings)
- evidence service was delivered, how the business is perceived in the market place

11
Q

Briefly outline the service management trinity

A

Marketing function
- segmentation, targeting, positioning, loyalty
Operations function
- creation and delivery of service product, implementation of productivity and quality improvement, technological infrastructure
HR function
- job definition, recruitment, training, rewards, engage in design and monitoring of all service delivery processes involving employees

12
Q

Describe the steps of the customer decision process

A
  1. PRE-PURCHASE
    * need arousal
    - unconscious identity and aspirations
    - physical conditions (hungry so went to Maccas)
    - external sources (advertising)
    * information search
    - once need recognised, motivated to find solution
    - alternative solutions might involve deciding between different approaches to solving same problem eg. go to the movies, rent a movie, download a movie. These alternative brands that come to mind are the evoked set
    * perceived risk
    - risk with making a purchase, factors may enhance risk and uncertainty
    - > highly intangible
    - > relatively new (no past experience)
    - > complex
    - > customised
    - > customer is relatively inexperienced so lacks knowledge and confidence
    - > purchase is important
    * evaluation of alternatives
    - search qualities (qualities customer can access)
    - experience qualities (evaluated after the purchase eg. taste, style, treatment)
    - credence qualities (even after use hard to evaluate eg. medical services)
  2. SERVICE ENCOUNTER (purchase/consumption)
    * service expectations (high, medium, low contact)
    - factors influence customer desired and adequate expectations (zone of tolerance - may broaden, tighten depending on situation)
    - desired service takes into account individual needs/belief
    - relies on situational factors (minimum we’ll tolerate)
    - based on past experience, WoM, competing brands
    * mood states
    - emotions part of affective domain (greater intensity than mood and include boredom, aggression and joy)
    - moods temporary states that alter and vary in duration (mild, positive or negative, independent of buying situation)
    * consumers in a positive mood
    - process information more efficiently, less argumentative and easier to serve, enhanced experience
    * cultivation of positive mood
    - ambience, reception area, manner of staff, delivery process
    * script and role theory
    - role = social cues that guide and direct behaviour -> defines behaviour customers expect and feel comfortable with (congruence = consistent with expected roles, ambiguity = what the role entails (table service/pay at counter), conflict = uncomfortable with role)
    - script = cognitive structures guiding service transactions and specify alternatives to minimise complaints
    * control theory
    - behavioural (actual control) vs cognitive (predictibility and perceived control) eg. flight is delayed, by how long, can I go toilet? Can be resolved by making an announcement
    * understanding psychological needs and values
    - security (unthreatened, avoidance of physical/financial risk)
    - respect (made to feel important)
    - esteem (self esteem and ego maintained -> saving face
    - fairness (how customers feel they’re being treated in terms of justice, equity; distributional (perceived fairness of the outcomes) vs procedural (perceptions of whether procedures are fair)
    * critical incidents
    - lead to significant customer (dis)satisfaction depending on how they’re handled
    - employee response to delivery system failure (slow or unavailable service)
    - employee response to customer needs and requests (special needs, preferences, error)
    - umprompted/unsolicited employee actions (attention paid, behaviour, cultural norms)
  3. POST-PURCHASE
    * disconfirmed expectations
    - during decision-making process, customers assess attributes and risks relating to service offering (expectations, zone of tolerance)
    * customer satisfaction
    - confirmation (or not) of pre-consumption expectations
    - will be satisfied as long as experience falls within zone of tolerance
    - delight results from high performance, arousal and positive affect
13
Q

Explain 3 influences of culture on consumers.

A

=> culture is the sum of learned beliefs, values and customs that create behavioural norms for a given society

  1. Collectivism/Individualism
    - self image defined by ‘I’ or ‘we’
    - personal satisfaction comes from admiration/respect of one’s group (fitting in with others or looking after oneself)
  2. Uncertainty Avoidance
    - individuals attitude and tolerance towards change, risk and ambiguous situations (low avoidance in western societies), high in eastern
  3. Power Distance
    - extent to which less powerful members of society expect and accept that power is distributed unevenly (relatively equal distribution in western societies)
14
Q

Outline the 6 types of perceived risk with examples and solutions

A

Functional Risk (performance outcomes)
- will they service my car correctly?
- will this card be accepted everywhere I go incl overseas
+ servicescape (consistent signal of quality)
Financial Risk (monetary loss, unexpected costs)
- will I lose money if I go ahead with this investment
- will repairing my car cost more than quoted?
+ brochure of complete schedule of fees
Temporal Risk (wasting time, delay)
- will there be a long queue?
- will service be so slow I miss my meeting?
+ use a standardised script to help stay on schedule
Psychological Risk (personal fear, emotion)
- will the consultant understand I have little knowledge?
- will the lecturer understand English is my second language?
+ sensitivity when dealing with patients with poor oral hygiene
Social Risk (how others think/react)
- will my friends laugh at my new haircut?
- will my relatives approve of the restaurant I chose for dinner?
+ emphasis on pros of good oral hygiene
Sensory Risk (unwanted impacts on any of the senses)
- will I get a bad view from my room?
- will I be kept awake by the noise from other guests?
+ use of latest technology aimed at reducing pain and noise

15
Q

What are 5 ways a customer can reduced perceived risk?

A
  • seek more information (respected personal sources)
  • rely on reputation
  • look for guarantees/warranties/free trials
  • look for physical evidence to assess quality
  • ask knowledgable employees
16
Q

Outline the four principles of competitive positioning. Provide one example.

A
  1. Establish position in customers’ minds
  2. position should provide one simple, consistent message
  3. position must set a company apart from competitors
  4. company cannot be all things to all people (must focus)

Cathay Pacific

  • target: quality and service conscious travellers
  • benefits: enjoyable pre and in-flight experience
  • position: better value, superior customer service in a commoditised industry
17
Q

Focus is providing relatively narrow product mix for a particular market segment - focusing on the customers it can service best. What are the four kinds of focus?

A

Fully focused
- limited range of services (or single core product) to a narrow, specific market segment
Market focused
- focuses on a marrow market but has a wide range of services (eg. insurance company for over 50s)
Service focus
- narrow range of services to broad market (need to be knowledge about each segment)
Unfocused
- try to serve broad market with range of services (eg. department stores but are failing to niche competitors)

18
Q

What are the points of difference in services?

A
Relevance = customer must see PoD to be relevant and important
Distinct = perceived as distinct and superior
Believable = seen to be believable and credible
19
Q

Outline the development of a marketing positioning strategy.

A
  1. Market analysis
  2. definition and analysis of segments
  3. selection of most appropriate target market segments
  4. articulation of desired position
  5. selection of which benefits to emphasise to customer
  6. competitive analysis
  7. analysis of possibilities for differentiation
  8. marketing action plan
20
Q

What is the benefit of a positioning map?

A
  • geographically represents consumer perceptions of alternate offerings regarding important variables (can compare services on price, quality etc)
21
Q

Outline the downfall of Starbucks in Australia

A
  • brought coffee in a less threatening way to America (sweet, syrupy)
  • created the ‘third place’ for people to visit and charged premium price for this experience
  • saturated market with stores
  • relied mostly on WoM rather than traditional advertising
  • Australian coffee shops about convenient location and small, personalised feel
  • have more sophisticated coffee tastes
  • overestimated their PoD and customer perceived value of supplementary services
  • implemented sales targets which degraded their service quality (what they were known for)
  • didn’t tailor their products to the Australian market at all
  • expanded too quickly and forced themselves on unwilling public
  • unsustainable business model -> failed to communicate brand (advertise) and entered too late into competitive market
22
Q

Objectives for establishing price

A

= Revenue and profit

  • Seek profit (cover costs)
  • > Make the largest possible profit
  • > Maximise revenue from a fixed capacity by varying prices and target markets over time (eg. ski resorts, airlines - revenue management)

= Patronage and user-base

  • Build demand
  • > Achieve full capacity utilisation where other customers are important to the experience (eg. AFL match, nightclub)
  • Build user base
  • > Encourage trial and adoption of a service eg. Tiger $18 one-way flights to build interest immediately
  • > Build market, especially if there are a lot of economies of scale that can lead to competitive ost advantage (eg. Cable TV)

= Non-monetary pricing
- Ensure fairness, equity and affordability for the markets served and focus on positive attidunial and behavioural response eg. legal aid, animal protection -> NFP

23
Q

Explain the cost-based pricing strategy and some problems with using this strategy

A
  • Number of units of input used, multiplied by cost per unit, plus profit margin eg. catering, accounting, legal, utilities
    ->Simple for many industries
    ->Trade and professional associations
    ..Contract stipulates final price based on costs incurred
  • Becoming less popular strategy, more revenue focused

Fixed costs => unchanging and incurred if no service provided (eg. permanent staff salaries, rent, insurance, security, cost of capital

Semi-variable costs => componenets of fixed and variable eg. telephone charges, staff overtime

Variable costs => fluctuate as direct consequence of what has been produced/sold eg. ingredients in a restaurant meal, casual staff

Marginal costs => incurred in making an additional sale

Contribution margin => difference between variable cost and price charged (covers overhead)

Problems

  • Not considering actual demand
  • Not considering that fixed and variable costs behave differently
  • Only suitable fo profit objective
  • Not taking competition into account
  • Difficulties in calculating cost/unit
  • Tedious record keeping
24
Q

Explain the 4 types of value

A
  • Functional/instrumental
    eg. fast broadband
  • Hedonic/experiential
    ….Focus on emotional/sensual experience or social connectedness
    Eg. Facebook, skydiving
  • Symbolic/expressive
    …..Taking parnter out for anniversary dinner
  • Cost/sacrifice
25
Q

How can companys reduce monetary/non-monetary costs

A
  • Working with operations to reduce time required to complete the purchase, delivery and consumption (eg. AVIS - 100 steps involved in ordering and getting car, identified what was most important to customers)
  • Redesign unpleasant and inconvenient procedures, retrain staff to be friendlier (pschological costs) (eg. electronic lockers that required people to remember pin numbers and numbers and hard to tell which were free, changed to electronic wristbands with locker number on it)
  • Eliminating /minimising unwanted physical or mental effort, notably during search and delivery process (eg. carpet cleaning brand that offers to move your furniture)
  • Decrease unpleasant sensory costs by creating more attractive visual environments, reduce noise, install more comfortable furniture
  • Suggest ways in which customers can reduce associated monetary costs
26
Q

Explain revenue yield management and when it is appropriate

A

= allocates perishable capacity units to existing demand in a way that maximises revenue not patronage
- Allocate capacity to highest paying customer segment first

  • Concerned with obtaining best possible yield from each available unit of capacity (eg. airline seat, hotel bed, educational institution)
  • Successful yield management depends on knowing the range of customers at any given time and then developing strategies that avoid selling each unit below what current customers would be willing to pay

= Appropriate when:

  • Realtively fixed capacity
  • Perishable inventory
  • Different market segments or customers, who arrive or make reservations at different times
  • Have low marginal sales costs and high marginal capacity change costs
  • Product sold in advance
  • Fluctuating demand
  • Customers who arrive or reserve early are more price sensitive than those who arrive/reserve late
27
Q

Explain what rates fences are and include 5 examples

A
  • Rate fences deter customers willing to pay more from trading down to lower prices (form of pricing discrimination)
  • *Physical Fences (product-related)
  • basic product
  • > eg. class of travel, size of rental car
  • service level
  • > eg. priority wait-list, separate check in counters, improved food/beverage selection, dedicated service hotlines
  • *Non-physical Fences (transaction characteristics)
  • time of booking/reservation
  • > eg. discounts for advance purchase
  • flexibility of ticket usage
  • > eg.fees/ penalties for cancelling or changing reservation, non-refundable reservation fees

(Consumption characteristics)

  • time or duration of use
  • > eg. early bird special in a restaurant before 6pm, must stay over a Saturday night/at least 2 nights
28
Q

How can you measure the effectiveness of revenue management

A

=>Asset revenue generating efficiency (ARGE) Index

  • Index/measure of the extent to which an organisation’s assets are achieving their full revenue-earning potential and yield
  • Understand the relationship between the average price actually obtained per unit of service and maximum price that might have been charged for that same service unit

=>Role of marketing in ARGE maximisation

  • Identify principal market segments
  • Forecast volume of business/segment
  • Recommend ideal business mix
  • Provide specific sales targets per segment
  • Guidelines for what prices to charge each segment at specific points of time
  • Monitor actual performance and respond appropriately
29
Q

Outline some ethical considerations in Service pricing

A
  • Complex (eg. health insurance - paying more for fewer benefits)
  • Piling on fees (eg. credit card late payments, online air bookings - should reflect cost to firm but don’t)
  • Exploiting customer ignorance (eg. Trivago - show the hotels that pay them more per click rather than cheaper prices as stated)
  • Designing fairness into revenue management
  • > Design price schedules and fences that are clear, logical and fair
  • > Use high published prices and frame fences as discounts
  • > Communicate consumer benefits of revenue management
  • > Use bundling to ‘hide’ discounts so perceptions of reference prices aren’t reduced
  • > Take care of loyal customers
  • > Use service recovery to compensate for overbooking
30
Q

Define productive capacity

A
  • Physical facilities designed to contain customers eg. number of seats in a restaurant
  • Physical facilities designed for storing or processing goods eg. car park, cloakroom
  • Service provision equipment used to process people, possessions or information eg. airport scanner, cash register
  • Number, experience and expertise of personnel eg. trainee badges
  • Infrastructure eg. congested airways, traffic jam, power failure
31
Q

Explain the capacity challenge

A

=>Stretch/shrink existing capacity

  • Some capacity has an elastic ability to absorb extra demand (eg. pack commuters on a train) but the actual level of capacity remains unchanged
  • Extend opening hours eg. Melbourne Zoo
  • Reduce amount of time that customers or their possessions spend in process (eg. express lunch)

=>Adjust capacity to meet demand (involves tailoring overall level of capacity to match demand)

  • Schedule downtime during periods of low demand - carry out dataprocessing, repair and maintenance activities
  • Cross-train employees -> employees who can perform several functions can be moved to bottleneck points when needed eg. cinama, restaurant
  • Use part-time and casual employees eg. restaurant
  • Invite customers to perform self service (co-production) eg. self service checkouts at supermarket
  • Ask customers to share eg. taxi, restaurant table
  • Create flexible capacity eg. push two tables together, reconfigure hotel room
  • Rent or share extra facilities and equipment eg. Mt Buller, Las Vegas Hospital (rents out sections being unused to film producers)
32
Q

Identify some of the patterns and determinants of demand

A
  • Predictability => over a cycle of known duration eg. day (varies by hour), week (varies by day)
  • Causes of variation (eg. school holidays, seasonal changes)
  • Random changes => in demand and related causes (eg. weather)
  • Can demand patterns for a particular service be disaggregated by segment? (eg. fitness centre - busy early morning during the week (5-11) (people on the way to work before 7, then uni students til about 9 and then mothers who have dropped their children at school until 11)
33
Q

Explain what happens when demand is higher than maximum capacity, higher than optimal capacity, at optimum capacity and lower than optimum capacity

A

= Higher demand than maximum capacity

  • Lost business, may seek competitor offerings
  • Resources under enormous pressure
  • Service quality declines
  • Overcrowding

= Higher demand than optimal capacity

  • Optimal capcaity generally 70-90% of firm’s maximum capcity
  • All customers serviced
  • Excess pressure on resources
  • Long waits and queuing required
  • Overcrowding
  • Service quality suffers

= Optimum capacity

  • Productivity ideal
  • Quality service delivered
  • Resources uilised at optimum rate
  • No delays

= Lower demand than optimal supply levels

  • Productivity and profitability decline
  • Resources under-utilised
  • Excellent individual service
  • No waiting
  • Lack of atmosphere eg. rock concert
34
Q

How can a business use the marketing mix elements to shape demand patterns ?

A

= Pricing Strategies
- Effective pricing depends on the marketing manager having an understanding of how demands respond to increases/decreases in the price per unit (eg. short term promotions in quiet periods)
= Product Variations
- Ski resort adding dry run, restaurant providing entertainment at different times of day
= Modify Time & Location of Delivery (place)
- Vary the times when the service is available eg. shopping centres at Christmas
- Offer the service to customers at a new location eg. car wash at shopping centre, mobile library
= Communication Efforts
- Advertising, signage, publicity and sales, messages to encourage increased use in off-peak
= Short-Term Promotions
- Eg. Spirit of Tasmania, Jetstar (only to be used at certain times/dates)

35
Q

Explain why waiting lines occur and strategies for managing waiting lines/ benefits of a reservation system

A
  • Waiting lines occur when the number of arrivals exceeds the capacity of the system to process them
  • Queue management requires collection of extensive data on arrival patterns (some predictable, some random)
  • Solutions to queuing problems need to tackle root causes eg. late arrival of ground staff

Managing waiting lines

  • Rethinking design of the queuing system
  • Think carefully about the way queuing will work most effectively (eg. express checkout, snake)
  • Installing a reservations system
  • Tailoring the queuing to different market segments
  • Managing customer behaviour and their perceptions of the wait
  • Redesigning processes to shorten the time of each transaction
  • Virtual waits eg. hold someone’s spot, customer remains within ‘buzzing’ range (eg. Chemist Warehouse)
  • Queueing systems can be tailored to market segments eg. job urgency (hospital), payment of premium price (eg. Business class get to enter plane first and no wait time)
  • Cultures and queues eg. Japan, UK

= Benefits of reservation system

  • Customer dissatisfaction due to exessive waits avoided
  • Reservations make it easier to control/smooth out demand eg. earlier restaurant booking
  • Enables revenue management and serves to pre-sell a service to different customer segments eg. emergency car servicing
  • Data from reservation systems also help organisation prepare operational and financial projections for future periods eg. stage show
36
Q

What are some of the psychological considerations in waiting

A
  • Unoccupied time feels longer than occupied time
  • Solo waits feel longer than group waits
  • Physically uncomfortable waits feel longer than comfortable ones
    pre/post-process waits feel longer than in-process
  • Unfair waits longer than equitable
  • Unfamiliar waits seem longer than familiar
  • Uncertain longer than known, finite
  • Unexplained longer than explained
  • Anxiety makes waits seem longer eg. cinema queue
  • The more important the service, the longer people wait (eg. grand final)
37
Q

Describe the six main queue configurations and give an example of when each is used

A
  1. Single line/single server/single stage
    - doctors reception
  2. Single line/single servers at sequential stations
    - suitable for small waiting time eg. graduation gowning
  3. Parallel lines to multiple servers
    - offers more than one serving station eg. supermarket
  4. Designated lines to designated servers
    - assign different lines to different categories of customer eg. express checkout, different check-ins at flight gates
  5. Single line to multiple servers (snake)
    - preferred, multiple lines may not move at same speed eg. bank
  6. Single/multiple servers (take a number)
    - Vicroads, supermarket deli
38
Q

Describe some demand management strategies for a restaurant to better manage customer demand fluctuations

A

WHEN QUIET

  • full a la carte
  • short-term promotions eg. 30% off on quietest night
  • develop loyalty card system
  • stimulate student market

WHEN BUSY

  • limit choice of menu items to process customers faster
  • have two-sittings and require reservation system, discounts for leaving early
  • keep prices high (no discounts)
  • self-service to improve productivity
39
Q

What are some of the reasons for marketing communications in services

A
  • Positions and differentiates service offerings
  • > Eg. Rainforest Cafe (environmentally considerate)
  • Promotes contribution of frontstage personnel and backstage operations
  • > eg. MK Restaurants (thai resturant that show training videos in advertising)
  • Adds value through communication content
  • > eg. information and consultation to reduce pre purchase risk
  • Faciltiates customer involvement in service production
  • > eg. Shouldice Hospital Canada (video to watch at home before procedure so have clear expectations)
  • Stimulates or dampens demand to match capacity eg. cinema

=>Overcoming the challenges of managing promises and expectations
- Create powerful service brand
eg. Qantas - reliability and experience
Google - cutting edge innovation
- External, controllable company communication must be coordinated
- Dont over promise and under deliver
- Create tiered-value service offerings

40
Q

Steps in planning for IMC…

A
  1. Defining the Target Audience
    - Prospects -> traditional channgels
    - Users -> more cost effective
    - Employees
  2. Setting Objectives
    - Before deciding which communication elements to use, in what manner, service marketers must first define their goals and decide what role communication should play in achieving the goal
    - Must formulate specific communications objectives
    - Common educational and promotional objectives:
    - >Create memorable images of companies and their brands
    - >Build awareness and interest in an unfamiliar service/brand
    - >Compare a service favourably with competitors’ offerings
    - >Build preference by communicating the strengths and benefits of the specific brand
    - >Reposition a service relative to competitors offerings
    - >Reduce uncertainty and perceived risk
    - >Provide reassurance eg. promoting service guarantees
    - >Encourage trials
    - >Familiarise customers with service processes in advance of use
  3. Sample Measurable Objectives
    - Advertising
    - >Build awareness of… from x% to y% between now and end of December
    - Direct mail
    - >Stimulate target market interest and generate x number of enquiries over a time period
    - Sales promotions
    - >Encourage early response and X number of bookings by a time period
    - Personal selling
    - >Increase revenue by 10% over the next 12 months by encouraging customers to take additional offerings
41
Q

Outline some of the traditional marketing channels

A

= Public relations
- Involves building credibility and fostering goodwill among individuals and groups
- Sponsorship, fundraising, corporate client entertainment, events, press releases, pro bono work
Eg. Westpac helicopter, Ronald McDonald House

= Sales Promotions

  • Communication attached to value-added incentive to push purchasing decision
  • Usually offered at point of sale eg. discount, two for one, sample
  • Assist in balancing supply and demand eg. short term promotion
  • Used to add excitement, stimulate customers, employees and intermediariries
  • May induce brand switch/trial
Sales Promotion Methods
- Sampling eg. first promotion free
- Coupons -> price cut
- Sign up rebates eg. zoo membership
- Future discounts (based on volume)
- Gift premiums eg. first class pens
- Prize promotions eg. involvement/excitement
price /quantity promotions eg. limited duration

= Personal Selling

  • Interpersonal encounters made face to face or voice to voice
  • Tailored message
  • Expensive
  • B2B dealings
  • > Dominant form owing to high complexity and transaction value eg. airlines, charities
42
Q

Define customer satisfaction and perceived quality

A

= Satsifaction is a consumer’s post-purchase evaluation of the overall service experience (process and outcome). It is affective (emotion) state or feeling reaction in which customer’s needs, desires and expectations during the course of the service experience have been met or exceeded.

= Benefits of customer satisfaction

  • Insulates customers from competition
  • Create sustainable advantage
  • Reduce failure costs
  • Encourage repeat patronage and loyalty
  • Enhance/promote positive word of mouth
  • Lowers costs of attracting new customers

Components of Perceived Value

  • Performance (quality) value: core service quality
  • Social value: enhancement of customers’ social self-concept (eg. highly regarded brand name)
  • Emotional value: positive affective states that the brand generates
  • Interaction vaue: derived from helpful, smiling staff
  • Price: financial sacrifice
43
Q

Explain the disconfirmation of expectations model.

What factors lead to (dis)satisfaction

A
  • *They are two indepdent and separeate constructs, therefore, different factors account for each
  • Motivator factor leads to satisfaction while dissatisfaction is caused by hygiene factors
  • Hygiene factors must be present to avoid dissatisfaction (eg. adequate parking and security at Deakin), however, they will not lead to satisfaction unless dimensins that act as motivating factors are also present (eg. helpful staff, real-world relevance)

**Other Influences on Satisfaction
- Prior attitudes towards the brand
- Attribution theory:
:Causal -> who is to blame for satisfaction or dissaisfaction
:Control -> is the cause of dissatisfaction in the control of the company
:Stability -> is the satisfaction or dissatisfaction likely to recur
- Equity theory
:Weigh up our inputs/outputs compared to service (eg. paying $30 for a tiny steak)
- Perceived value

44
Q

Explain expectations and their formation

A

Expectations
= provide a standard of comparison, may be subjective or based on collective previous experiences
- Types of expectations
->Desired or ideal expectations = concern the optimum level of perforamnce from a brand eg what could happen in the best circumstances
->Equitable or deserved expectations = develop from the clients feelings about what they should receive
->Predictive expectations = usually combine an ideal standard with reality of past experiences to form a realistic and acceptable level of expectation
->Adequate (minimum tolerable) expectations = relate to the lowest level of service that will be tolerated
= Formation
- Past experience
- WoM
- Advertising or promotion
- General attitude
= Managing expectations
- Dynamic and will change with new experiences and information

45
Q

What is the zone of indifference

A
  • The extent to which customers are willing to accept some degree of variation is referred to as the ‘zone of indifference’
  • Is the difference between a consumers desired and just adequate (minimum) expectations
  • Assimilation-contrast theory shows that when a performance is in the zone, differences between expectations and performance will be assimilated and viewed favourably ie consumers adjust their perceptions of performance to expectations or expectations to performance to avoid cognitive dissonance

= Factors affecting the zone of indifference

  • Importance of the occasion
  • Customers social and psychological needs
  • Customers mood state
  • Frequency of use
  • Importance of the particular service dimension of attribute
46
Q

Explain the relationship between service quality and productivity

A
  • Quality and productivity improvement strategies must be considered jointly rather than in isolation
  • Quality focuses on benefits
  • Productivity focuses on costs

Why is improving productivity important to marketers?

  • Helps to keep costs down which leads to higher profits or the ability to hold down prices eg. price leader
  • Firms with lower costs generate higher margins
  • Opportunity to secure the firms long-term future with investments in technology and research
  • Improving productivity and quality will benefit customers

Measuring productivity
- Can be problematic as output may be difficult to define
->Number of patients treated per year or average bed occupancy is easy but HOW do we evalaute differences in outcomes
->How do we define the output of a bank/consulting firm
->Easier to measure fast food output
- Improve productivity by
->Controlling costs
->Staff training
= Customer-driven approaches to improve productivity
->Change the timing of customer demand eg. encourage consumers to use service outside of peak times
->Encourage use of lower-cost service delivery channels and self-service
->Ask customers to use third parties eg. travel agents, ticketek

47
Q

Explain the service reliability diagram

A

Refer to diagram

48
Q

Explain the gaps model of service quality

A

Gap 1: not knowing what customers expect

  • Service design and delivery does not match the expectations of customers
  • > Eg. not offering wine at Euro Disney, US tourists wanting to be served quickly in Aus restaurants
  • Prescription => learn what customers expect
  • > eg. complaint analysis, customer panels, foster upward communication

Gap 2: management fail to design service standards that meet customer expectations

  • > Eg. courier customers want delivery before 10am not noon
  • Prescription => establish the right service quality standards ->eg. set clear goals, standardise, measure performance, provide training, reward service quality

Gap 3: service performance that does not match specifications

  • > Eg. Fedex package doesn’t arrive or arrives damaged
  • Prescription => ensure that service performance meets standards
  • > eg. match employees to jobs, training, reward systems, reduce role conflict and ambiguity

Gap 4: service performance falling short of promises

  • > Eg. package arrives on time and in good condition, but courier wasn’t as friendly and polite as the one depicted in the ad
  • Prescription => ensure that delivery matches promises eg. work with operations, ensure advertising promises reflect actual service quality, make service consistent

Gap 5: overall difference between expected and perceived service => Customer Gap

49
Q

Outline examples of service guarantees

A
  • Explicit promises made to customers about the level of service they can expect to receive
  • Involve a promise and a payout

= Specific attribute guarantees
- FedEx guarantees package delivery by a certain time
- British Airways advertised ‘comfort guaranteed or you get 25000 miles’
- McDonalds advertised guarantee maximum waiting time of 60 seconds
= Benefits of service guarantees
- Force organisations to focus on what customers expect
- Set clear standards
- Require the development of systems for generating meaningful customer feedback
- Force firms to understand why they fail and to overcome fail points
- Reduce perceived risk and build long-term loyalty

50
Q

Explain some ways to grow a service business

A
  • Attract new customers eg. expand geographically
  • Encourage existing customers to purchase more units of service
  • Encourage existing customers to purchase higher value services
  • Reduce the extent of turnover or ‘churn’, resulting from desirable customers that defect to a competing service supplier
  • Regain lost customers
  • Terminate unprofitable, stagnant or otherwise unsatisfactory relationships
51
Q

Explain the importance of customer loyalty and why long-term customer value is important

A

= Importance of customer loyalty

  • Opportunities to cross-sell other company services
  • Reduced operating costs
  • Increased purchases
  • Positive WoM

= Customers are more profitable over time

  • Profit from price premium and referrals
  • Profit from reduced operating costs
  • Profit from increased purchases and higher balance

= Long-term customer vlaue is more likely to be important when

  • High marketing expenses are required to obtain new customer
  • High administration expenses are needed to ‘enter’ a new customer into the firm’s system
  • Servicing costs relatively low
  • There are reasonably high margins on sales
  • There is a high sales volume per customer
  • There is high WoM referral
52
Q

Explain reasons why loyalty does not always mean profitability

A
  • Not all types of services incur heavy promotional expenditures to attract new customers
  • Loyal customers may not necessarily spend more than one-off buyers, and they may even expect price discounts
  • Many heavy users are multi-brand loyal
  • Long-term customers are more knowledgeable and price sensitive
  • Long-life customers are less costly to serve
  • Higher average prices are paid by short-life customers
    Eg. Nypro -> global employee-owned company reduced its customer base from 800 to 30
    Adopted a customer initimacy strategy
    18 consecutive years of record sales
53
Q

How can you manage the different segments from the diamond of loyalty

A

= Managing loyals

  • Your most profitable customers but only 10-20% customer base
  • Place at the centre of communications strategy
  • Develop partnership programs and preferred access
  • Continuous improvement of product and service quality and service experience

= Managing habituals

  • Profitable customers representing up to 30% customer base
  • Multichannel integration and access
  • Point-of-sale communications and convenience of purchase

= Managing multibranders

  • High potential for profit increase representing 25-50% current base
  • Continuous service improvement and portfolio development
  • Multichannel integration and access
  • Strategic and tactical communications

= Managing switchers

  • Profits follow low costs of service for up to 25% customer base
  • Manage for transactions, not relationships
  • Short term hard sell
  • Divest (deprive) problematical switchers
54
Q

Describe the customer tiers

A

= Platinum

  • Small number of customers, heavy users and contribute large share of profits
  • Less price sensitive but expect highest service levels

= Gold

  • More customers than platinum but individual customers contribute less profit
  • More price sensitive and less committed

= Iron

  • Bulk of customer base and give the firm scale economies
  • Only marginally profitable and do not warrant special treatment

= Lead

  • Generate low revenues
  • Loss making because require same level of service as lead, migrate or terminate
55
Q

Explain the first strategy for customer retention

A

= Build a foundation for customer retention

  • Segment market to match customer needs with firm profile
  • Manage customer database via effective tiering of services
  • Deliver value and satisfaction to all customers
  • Develop trust in the brand
  • Install effective complaints handling and recovery procedures
  1. Create loyalty bonds
    - Play on customer loyalty motives
    - Engage the customer
    - Give rewards for loyalty
    - Build higher level bonds
  • Customer satisfaction
  • Create value -> sum of benefits received from choosing and staying with one service supplier minus the sum of costs
  • Customer loyalty motives
    • value the most**
  • > Confidence benefits = feelings of trust or confidence in the provider along wth reduced anxiety and comfort in knowing what to expect
  • > Social benefits = investments of time and energy that produce positive interpersonal relationships between the two parties
  • > Special treatment benefits = special price deals or preferential treatment eg. free desert at restaurant
  • Reward based bonds: strengthening the customer’s preference for one brand over another eg. loyalty programs - RACVs years of membership benefits programme is based on continuous years of membership and links to card colours -> benefits improve greatly for reaching year thresholds
  • Customer engagement (forming strong emotional bond with brand) may be a better predictor of loyalty than satisfaction
  • > Dimensions incl confidence and pride in the brand, integrity and passion for the brand
  • Social brands eg. hairdresser
  • Structural bonds eg. Boeing has meetings with American Airlines to work out what customers want in the plane
56
Q

Explain the second strategy for customer retention

A
  1. Build in switching barriers
    = Economic
    - Switchig barriers = economic or financial disincentives to leave that are used to ‘lock-in’ customers eg. Frequent Flyer points, bank exit fees
    = Psychological
    - Switching barriers = valuing a personal relationship and finding it stressful to leave eg. doctor
    = Stages of customer retention
    - Level 1 = customer is linked to the firm through various financial or other incentives
    - Level 2 = a longer-term relationship is developed via stronger social bonds
    - Level 3 = involves developing structural bonds as well as economic and social ones; structural bonds forged when two parties adapt to each other in some economic or technical way eg. product or process adjustments
57
Q

Explain the third strategy for customer retention

A
  1. Reduce churn drivers
    - Conduct churn diagnostics
    - Understand key defection triggers
    - Address key churn drivers
    - Develop retention strategies

= Strategies for reducing customer defection

  • Analyse customer defections and monitor declining accounts
  • Address key churn drivers
  • Regain lost customers
  • > Lost customers are a distinct target segment if serious about relationship marketing
  • > Strategies for regaining lost customers may include comparative advertising, improved service provision and more favourable pricing
  • Implement effective complaint handling and service recovery procedures
58
Q

Describe some of the buy-seller traits likely to impact on buy-seller relationship in service settings

A

= personal relationships
W -> developed in short-timeframe
E-> relationships take long time to establish

= face-to-face orientation
W -> less emphasis
E -> stress involvement with people and being together for emotional exchange

= communication
W -> tends to be direct, clear statement of intention and adherence to formal scripts and procedures
E -> more emphasis on indirect style of communication

= confrontation avoidance
W -> confrontation-solution oriented strategies
E -> avoid confrontation and attempt to maintain harmony

59
Q

Explain CRM and its outcomes

A

= A sophisticated software that permits a company to analyse customer revenue and costs, identify high-value customers, target direct marketing efforts, capture customer behviour data and track customer defections and retention levels (referred to as gaining 360 degree view of customers

= Allows a company to
- Understand, segment and tier its customer base better
Target promotions and cross-selling better
- Implement churn alerts systems that signal if a customer is in danger of defecting

= CRM outcomes

  1. Coding
    - Customers are graded based on how profitable their business is
    - Service staff are instructed to handle customers differently based on their category code
    - >Eg. platinum customer of a hotel wants to propose to girlfriend, so they organise entry to Taj Mahal after hours, also provide flowers, upgraded suite and reception created by hotel staff
  2. Routing
    - Cell centres route incoming calls based on the customer’s code
    - Customers in profitable code categories get to speak to live customer service representatives, less profitable customers are inventoried in automated telephone queues
    - > Eg. top 350 business clients are served by six people, the next 700 are handled by another 6 people, the next 30,000 are served by two representatives and the final 30,000 are routed to an automated telephone system
  3. Targeting
    - Profitable customers have fees waived and are targeted for special promotions
    - Less profitable customers may never hear of special deals
    - > Eg. Centura Bank ranks its 2M customers on a profitability scale from 1 to 5
    - Most profitable customers are called several times a year (retention rate has increased 50%) while most unprofitable has decreased from 27% to 21%
  4. Sharing
    - Sharing of customer info to other parts of the organisation, and selling of information to third parties can occur, although the customer may be new to the organisation, their purchase history and buying potential may be well-known
    - > Eg. Continental Airlnes has a customer info system that sends customer history and value to all 43,000 gates, reservation and service employees
    - System suggests specific service recovery remedies and perks (coupons) for delays and auto upgrades, enables more consistent staff behaviour and service delivery
60
Q

Identify the types of service failure

A
  • The service itself
  • > eg. unavailable service - going for a 3-month pregnancy check-up and the doctor gets called away
  • Service provider
  • > Eg. rude, unhelpful, robotic
  • Things outside service providers control
  • > Eg. air traffic controllers on strike, another flight is delayed and needs the runway
  • Customer-related
  • > Eg. made booking for the wrong day
61
Q

Explain the process that leads to rage behaviour and how to deal with these incidents

A

Refer to diagram

Before

  • take pre-emptive action to anticipate rage incidents
  • recruit service-minded people and train staff for customer dissatisfaction

During
- develop a culture that welcomes complaints
0 minimise damage to customer relationship and protect employees
- empower frontline staff to make discretionary decisions
- restore customer sense of self-esteem, fairness and give control

After

  • attempt to salvage customer relationship and limit psychological damage to employees
  • conduct root-cause analysis
  • involve senior management if high-net-worth customer
62
Q

Explain the theory of stress and coping

A

= Think-feel-do framework
- Cognitive appraisal is the process of categorising the encounter, with respect to its importance to wellbeing
- Coping refers to the constantly changing efforts (behavioural and cognitive) that people employ to master, tolerate or minimise a stressful situation
->Emotion-focused coping eg. venting
->Problem-focused coping eg. written complaint
- People complain
->To recover economic loss
->Rebuild self esteem
- Consumer attributions of blame
->Causal = who is to blame for (dis)satisfaction
->Control = is the cause of dissatisfaction in the control of the company
->Stability = is the (dis)satisfaction likely to recur
- Service recovery paradox
-> Customers who experience a service failure but subsequently receive excellent service recovery beyond what they expected, may ultimately be even more satisfied than they were before the failure
-> Companies should plan to lower expectations so they can recover and gain stronger loyalty
…Eg. suggest wait will be half an hour but will really only be 10 minutes
->SRP tends to occur in low harm failures followd by an exemplary ervice recovery

63
Q

Explain the factors that influence complaining behaviour

A
  • Level of dissatisfaction
  • Personal importance of the service
  • Cost of complaining eg. time and effort and anxiety involved with confrontation
  • Benefit to be gained from complaining ie value of the outcome
  • Access to a means of registering a complaint
  • Who is to blame for the problem (attributions)
  • Demographic factors eg. education, age, culture
  • Successful past complaint
64
Q

Explain service switching behaviours

A

= Pricing

  • High price
  • Price increases
  • Unfair pricing
  • Deceptive pricing

= Inconvenience

  • location/hours
  • Wait for appointment
  • Wait for service

= Core service failure

  • Service mistakes
  • Billing errors
  • Service catastrophe

= Service encounter failures

  • Uncaring impolite
  • Unresponsive
  • Unknowledgable

= Responsive to service failure

  • Negative response
  • No response
  • Reluctant response

= Competition
- Found better service

= Ethical problems

  • Cheat
  • Hard sell
  • Unsafe
  • Conflict of interest

= Involuntary switching

  • Customer moved
  • Provider closed
65
Q

Explain the components of the service recovery process

A

= service recovery involves actions taken by the organisation to put things right for the customer following a service (core or supplementary) failure
- Most customer complaints are only satisfied with the response 50% of the time

Refer to diagram

66
Q

Outline the three types of justice - it is the major service recovery theory

A
  1. Procedural justice
    - Process used to resolve the problem eg. speed and convenience
  2. Interactional justice
    - Behaviour of the firms representatives during the complaint resolution process eg. open communication, concern, effort
  3. Distributive (outcome) justice
    - What a customer receives as an outcome of the recovery process eg. refund, replacement
67
Q

Outline some strategies for developing an effective service recovery process

A
  • Top management commitment
  • Develop a ‘complaints as opportunities’ culture
  • Training and empowerment
  • Ownership of the complaint
  • Service recovery tactics
  • > Act fast
  • > Apologise but don’t be defensive
  • > Show you understand the problem from the customers point of view
  • > Don’t argue with customers
  • > Acknowledge customer feelings
  • > Give customers benefit of the doubt
  • > Clarify the steps needed to solve the problem
  • > Keep customers informed of progress
  • > Consider compensation
  • Learning from experience and preventing problem recurrence
  • > Blueprinting = understand the processes behind service delivery to identify potentially weak links
  • > Control charts = displaying performance as measured by specific criteria over a period of time
  • > Fishbone diagram = a cause and effect analysis
  • > Pareto analysis = used to identify the principal causes of observed outcomes (80% of problems caused by 20% of areas)
68
Q

Explain some things that would dictate the level of compensation for poor service/quality

A
  • Positioning of the restaurant (for pizza restaurant maybe offer to replace for free, for fine dining offer to waive the bill)
  • Importance of the customer to the business (eg. a regular customer may expect to receive preferential treatment plus the restaurant has more to lose should the customer not be satisfied)
  • The degree of dissatisfaction and damage/inconvenience incurred to the customer eg. if the customer entertains an important client, the failure is seen as more serious
  • Rule of thumb - customer shoul be compensated with generosity
  • Firm cant be perceived as stingy and calculating BUT should not be seen to be overcompensating
  • > Overcompensation does not only fail to increase satisfaction much further beyond recovery perceived as fiar, but gives the wrong incentives to the wrong customers to complain too much