CHAPTER 13

DESIGNING AND MANAGING SERVICES

CONCEPT CHECK
1) A distinct characteristic of services is _____.

(a) Intangibility

(b) Inseparability

(c) Variability

(d) Perishability

(e) Inconsistency

Ans: Tangibility

2) Services are typically produced and consumed simultaneously. This is an

example of the _____ characteristic of services.

(a) Intangibility

(b) Variability

(c) Inseparability

(d) Simultaneously

(e) Perishability

Ans : Inseparability

3) Services cannot be stored. This describes the _____ characteristic of services.

(a) Intangibility

(b) Variability

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 (c) Inseparability

(d) Inconsistency

(e) Perishability

Ans : Perishability

4) _____ describes employees' skills in serving the client.

(a) Internal marketing

(b) External marketing

(c) Relationship marketing

(d) Interactive marketing

(e) Communication marketing

Ans: Interactive marketing

5) SSTS refers to _____.

(a) Service-standards testing

(b) Self service technologies

(c) Standard service technologies

(d) Self- service treatments

(e) Superior service technologies

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 Ans :self-service technologies

6) Top firms audit service performance by collecting _____ measurements to

probe customer satisfiers and dissatisfiers.

(a) Customer satisfier

(b) Customer complaint

(c) Voice of the customer

(d) Psychological

(e) Atmosphere

Ans :voice of the customer

7) The services a customer expects are called the _____ service package.

(a) Expected

(b) Augmented

(c) Primary

(d) Secondary

(e) Perceived

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 Ans :Primary

8) Added features to an offering are called _____ service features.

(a) Expected

(b) Augmented

(c) Primary

(d) Secondary

(e) perceived

Ans: Secondary

9) The intangibility of services has implications for the choice of _____.

(a) Brand elements

(b) Location

(c) Price

(d) Product features

(e) Channels of distribution

Ans: brand elements

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10) _____ cost refers to the product's purchase cost plus the discounted cost of
maintenance and repair less the discounted salvage value.

(a) Total

(b) Variable

(c) Life cycle

(d) Net

(e) Out-of-pocket

Ans: Life cycle

11) A service is any act or performance that one party can offer to another that is
essentially intangible and does not result in the ownership of anything.

(a) True

(b) False

Ans: True

12) An astonishing 80 percent of U.S. companies have not figured out how to get
customers the assistance they need.

(a) True
(b) False

Ans: True

13) Internal
marketing describes the normal work of preparing, pricing, distributing
and promoting services to customers.

(a) True

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 (b) False

Ans: False- this is external marketing

14) Internal
marketing describes training and motivating employees to serve
customers well.

(a) True
(b) False

Ans: True

15) If expected service falls below perceived service, customers are disappointed.

(a) True
(b) False

Ans: False- this happens when perceived service falls below expected service

16) Aservice company can differentiate itself on three levels: reliability, resilience,
and innovativeness.

(a) True
(b) False

Ans: True

17) The
importance performance analysis is divided into five sections according to
important service elements performance and desired levels.

(a) True
(b) false

Ans: False- four sections or quadrants

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18) Studiesof customer dissatisfaction show that customers are dissatisfied with
their purchases about 25 percent of the time but complain only about five
percent of the time.

(a) True
(b) False

Ans: True

19) Customers whose complaints are satisfactorily resolved still do not become as
loyal as customers who were never dissatisfied.

(a) True
(b) False

Ans: False- they often become even more loyal

20) Companies that encourage disappointed customers to complain have shown to

achieve higher revenues and greater profits than companies that do not have a
systematic approach to address service failures.

(a) True
(b) False

Ans: True

21) What are the five categories of offerings in the product-service mix?

Ans:

1. Pure tangible good - the offering consists primarily of a tangible good, no

services accompany the product.
2. Tangible good with accompanying services - the offering consists of a
tangible good accompanied by one or more services. Levitt observes that
"the more technologically sophisticated the generic product (e.g., cars and
computers), the more dependent are its sales on the quality and availability
of its accompanying customer services (e.g., display rooms, delivery, repairs

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 and maintenance, application aids, operator training, installation advice,
warranty fulfillment). In this sense, General Motors is probably more service
intensive than manufacturing intensive. Without its services, its sales would
shrivel.
3. Hybrid - the offering consists of equal parts of goods and services. For
example, people patronize restaurants for both food and service.
4. Major service with accompanying minor goods and services - the offering
consists of a major service along with additional services or supporting
goods. For example, airline passengers buy transportation. The trip includes
some tangibles, such as food and drinks, a ticket stub, and an airline
magazine. The service requires a capital-intensive good—an airplane—for
its realization, but the primary item is a service.
5. Pure service - the offering consists primarily of a service.
What are the five determinants of service quality in order of importance?

Ans:

1. Reliability - the ability to perform the promised service dependably and

accurately.
2. Responsiveness - the willingness to help customers and to provide prompt
service.
3. Assurance - the knowledge and courtesy of employees and their ability to
convey trust and confidence.
4. Empathy - the provision of caring, individualized attention to customers.
5. Tangibles - the appearance of physical facilities, equipment, personnel, and
communication materials.

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CONCEPT CHALLENGE

1. An offering that consists primarily of a tangible good with no services at all is

considered a _____.

(a) Pure tangible good

(b) Tangible good with accompanying services
(c) Hybrid
(d) Major service with accompanying minor goods and services
(e) Pure service

Ans: pure tangible good

2. A restaurant is an example of a(n) _____.

(a) Pure tangible good

(b) Tangible good with accompanying services
(c) Hybrid
(d) Major service with accompanying minor goods and services
(e) Pure service

Ans: Hybrid

3. _____ refers to the willingness to help customers and to provide prompt

service.

(a) Reliability
(b) Responsiveness
(c) Assurance
(d) Empathy
(e) Tangibles

Ans: Responsiveness

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4. _____ refers to the knowledge and courtesy of employees and their ability to
convey trust and confidence.

(a) Reliability
(b) Responsiveness
(c) Assurance
(d) Empathy
(e) Tangibles

Ans: Assurance

5. _____ refers to the ability to perform the promised service dependably and
accurately.

(a) Reliability
(b) Responsiveness
(c) Assurance
(d) Empathy
(e) Tangibles

Ans: Reliability

6. Mystery shoppers refer to the use of _____.

(a) Undercover shoppers

(b) Undercover sales representatives
(c) Mysterious point of purchase displays
(d) Unknown shoppers
(e) Disguised survey instruments to record shopping habits

Ans: Undercover shoppers

7. Customers often view a service as fairly homogeneous, caring less about the
provider than the price. Service marketers must therefore _____ their services.

(a) Augment
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 (b) Improve
(c) Homogenize
(d) Differentiate
(e) Condense

Ans: Differentiate

8. Marriott is setting up hotel rooms for high-tech travelers who need

accommodations that will support computers, fax machines, and e-mail. These
are examples of _____ service features.

(a) Expected
(b) Augmented
(c) Primary
(d) Secondary
(e) Perceived

Ans: Secondary

9. _____ extensions often require sub-branding strategies where the corporate

name is combined with an individual brand name or modifier.

(a) Horizontal
(b) Vertical
(c) Up-market
(d) Down-market
(e) Sideways

Ans: Vertical

10. Services such as installations, staff training, maintenance, and repair services
and financing are called _____ services.

(a) Expected
(b) Augmented

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 (c) Value-added
(d) Facilitating
(e) Optional

Ans: facilitating

11. The service-producing sector is the dominant employment generator in the

U.S. economy.

(a) True
(b) False

Ans: True

12. The government sector is considered part of the manufacturing sector.

(a) True
(b) False

Ans: false- service sector

13. Credence qualities are characteristics the buyer can evaluate before purchase.

(a) True
(b) False

Ans: false –search qualities

14. Credence qualities are characteristics the buyer normally finds hard to
evaluate even after consumption.

(a) True
(b) False

Ans: true

15. Increasing customer expectations of what the firm will deliver can lead to
improved perceptions of overall service quality.

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 (a) True
(b) False

Ans: true

16. Decreasing customer expectations of what the firm should deliver can lead to
improved perceptions of overall service quality.

(a) True
(b) False

Ans: true

17. The biggest obstacle to SSTS is the technology itself.

(a) True
(b) False

Ans: false- convincing the customer to use it

18. Voice of the customer measurements are used to rate the various elements of
the service bundle and identify what actions are required.

(a) True
(b) False

Ans: false- importance-performance analysis

19. Quadrant A of the importance-performance analysis shows important service

elements that are being performed well.

(a) True
(b) False

Ans: false- Quadrant B

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 20. Quadrant B of the importance-performance analysis shows important service
elements that are not being performed at the desired levels.

(a) True
(b) False

Ans: false -Quadrant A

21. What are the four distinctive service characteristics that greatly affect the
design of marketing programs? Explain each of these. How might the
potential buyer look to reduce uncertainty and risk for each of these?

Ans:

Intangibility -To reduce uncertainty, buyers will look for evidence of quality.
They will draw inferences about quality from the place, people, equipment,
communication material, symbols, and price that they see. Therefore, the service
provider's task is to "manage the evidence," to "tangibilize the intangible." Whereas
product marketers are challenged to add abstract ideas, service marketers are
challenged to add physical evidence and imagery to abstract offers.

Service companies can try to demonstrate their service quality through physical
evidence and presentation.A hotel will develop a look and a style of dealing with
customers that realizes its intended customer value proposition, whether it is
cleanliness, speed, or some other benefit.

Inseparability - services are typically produced and consumed at the same time.
Because the client is often present as the service is produced, provider-client
interaction is a special feature of services marketing. To reduce uncertainty and
risk the service provider can learn to work with larger groups and learn to work
faster. By training more service providers the service organization can build up
consumer confidence.

Several strategies exist for getting around this limitation. The service provider can
learn to work with larger groups. Psychotherapists have moved from one-on-one
therapy to small-group therapy to groups of over 300 people in a large hotel
ballroom. The service provider can learn to work faster—the psychotherapist can
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spend 30 more-efficient minutes with each patient instead of 50 less-structured
minutes and can see more patients

Variability - Because services depend on who provides them and when and where
they are provided, they are highly variable. Some doctors have an excellent
bedside manner; others are less patient with their patients. Some surgeons are very
successful in performing a certain operation; others are not. Service buyers are
aware of this variability and often talk to others before selecting a service provider.
Here are three steps service firms can take to increase quality control.

i. Invest in good hiring and training procedures

ii. Standardize the service-performance process throughout the organization.

iii. Monitor customer satisfaction.

Perishability - Services cannot be stored. Perishability is not a problem when
demand is steady. When demand fluctuates, service firms have problems. For
example, public transportation companies have to own much more equipment
because of rush-hour demand than if demand were even throughout the day. Some
doctors charge patients for missed appointments because the service value exists
only at that point.

Several strategies can produce a better match between demand and supply in a
service business. On the demand side:
• Differential pricing will shift some demand from peak to off-peak periods.
Examples include low early evening movie prices and weekend discount prices for
car rentals.
• Nonpeak demand can be cultivated. McDonald's pushes breakfast service
and hotels promote mini-vacation weekends.
• Complementary services can be developed to provide alternatives to waiting
customers, such as cocktail lounges in restaurants and automatic teller machines in
banks.

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 • Reservation systenis are a way to manage the demand level. Airlines, hotels,
and physicians employ them extensively.

On the supply side:

• Part-time employees can be hired to serve peak demand. Colleges add part-
time teachers when enrollment goes up, and restaurants call in part-time servers
when needed.
• Peak-time efficiency routines can be introduced. Employees perform only
essential tasks during peak periods. Paramedics assist physicians during busy
periods.
• Increased consumer participation can be encouraged. Consumers fill out
their own medical records or bag their own groceries.
• Shared services can be developed. Several hospitals can share medical-
equipment purchases.
• Facilities for future expansion can be developed. An amusement park buys
surrounding land for later development.
22. Discuss the five gaps that cause the unsuccessful delivery of high service

quality.

Ans:

1) Gap between customer expectations and management perception :

Management does not always correctly perceive what customers want.
Hospital administrators may think that patients want better food, but patients
may be more concerned with nurse responsiveness.
2) Gap between management perception and service-quality
specifications : Management might correctly perceive customers' wants but
not set a performance standard. Hospital administrators may tell the nurses
to give "fast" service without specifying it in minutes.
3) Gap between service-quality specifications and service delivery :
Personnel might be poorly trained, or incapable of or unwilling to meet the
standard; or they may be held to conflicting standards, such as taking time to
listen to customers and serving them fast.

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4) Gap between service delivery and external communications :Consumer
expectations are affected by statements made by company representatives
and ads. If a hospital brochure shows a beautiful room, but the patient
arrives and finds the room to be cheap and tacky looking, external
communications have distorted the customer's expectations.
5) Gap between perceived service and expected service: This gap occurs
when the consumer misperceives the service quality. The physician may
keep visiting the patient to show care, but the patient may interpret this as an
indication that something really is wrong.

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