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64 Cards in this Set
- Front
- Back
Why is the service sector so important?
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Some Overlap: Service Exists in ALL Physical Goods too.
“Customer Service” in support of manufactured goods. Dell reps Ordering Distribution of Physical Goods even bulk goods have service components Return of Defective Goods Approximately 82% of Total U.S. Employment (55% in 1929) Roughly 80% of GDP $85 Billion Trade Surplus McDonald’s, AMEX, FedEx Trade deficit is Huge – see the exact figure All New U.S. Job Growth 91% of new jobs from 1992 to 2005 |
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What are the unique Characteristics of Services?
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Intangibility - Lack of tangible assets which can be seen, touched, or smelled prior to purchase.
Perishability - Inability of a service to be inventoried or stored. Inseparability - Simultaneous production and consumption of a service. Variability - Unwanted or random levels of service quality customers receive when they patronize a service firm. |
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What strategic implications does each service characteristic have for service managers?
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Heterogeneity:
Customize a Physical Good; Standardize a Service. Dell versus The Ritz Curriculum at FSU Keys: Risk, Expectations Service Blueprinting diagramming the service operation to standardize the process Inseparability: Employees are Key You Remember How You Were Treated Key: The Physical Environment Why Go To Fenway Park or Wrigley Field? Other Customers Are A Factor Perceived Similarity, Crying Babies, Drunks Perishability: Manage Supply and Demand! The Marketing Mix Pricing Movies, Airlines, LD, 5:00, Early Birds Promotions Frequent Flier Restrictions, Buddy Passes, A’s $1 Night, Tuesday skiing Intangibility: Price-Quality Relationship in Services Wine and Lawyers Customer Referrals Word of Mouth |
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What are the “3 Other Characteristics of Services” and what types of products are these qualities associated with?
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Search Qualities - product/service attributes that can be evaluated before purchase.
Test drive, sampling, packaging, Associated with Physical Goods Experience Qualities - product/service attributes that can be evaluated only after purchase. Movie, haircut, maid service Credence Qualities - product/service attributes that cannot be evaluated, even after purchase. Health care, funeral services, legal advice. |
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What are the 7 Ps of services marketing?
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Product
Price Place Promotion People Process Physical Evidence Product - core vs. peripheral Airline: transportation vs. meal service Hotel: bed, roof vs. bellhop, maid service Education? Restaurant? Place - typically a direct channel Price - denotes quality, bundling (Value Meals) Promotion - Key: sell expertise to reduce risk manage expectations,offer guarantees |
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Why are (1) People, (2) Processes, and (3) Physical Evidence so important in services?
What role do they play in customers’ evaluations of service? |
People - functional quality
employees and customers (“other”) appearance, belonging Sometimes people are the service (consulting) Process - the operational flow of the service Southwest versus Delta McDonald’s versus Wendy’s Physical Evidence - the tangible aspects How do you evaluate insurance companies? Brochures, letters, brand symbol. (snoopy) “Servicescape” Repair, service people (Asplundh, UPS) Provide competitive advantage |
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How can service industries be classified?
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Orientation: hi tech and low tech
and length: discreet and continuous also.. object: person and good and nature: hedonic and utilitarian |
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Key factors contributing to service industry growth:
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Aging population - Baby Boomers
Longer life expectancies Movement to information age Implications Increased leisure time High per capita income discretionary income Changing social and cultural values |
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How do expectations shape consumers’ evaluations of service quality?
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Expectations set the tone for what customers will receive from a service provider.
Expectations are critical elements in customer evaluations of service quality. Fast food restaurants routinely get food ratings of “good” or better. How do they do that? So, expectations are not stable. They change depending on the firm, the context, and the customer |
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What is the zone of tolerance?
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Zone between adequate and desirable service.
Higher price= higher expectations Zone is larger at a lower price and expectation level. |
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What are the factors that can change customers’ zone of tolerance?
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price:higher= higher and smaller level
Recovery: larger in an initial encounter. recovery=smaller and higher Involvement: high involvement= smaller and higher zone. low involvement= larger and lower zone Mood: Bad=higher and smaller zone. Good= lower and larger zone Past Experience - Social Context - WOM - Promotions - Service personnel - Tangible cues - |
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What is the GAPS model of service quality?
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Service quality measurement from the customer's POV.
Gap 1: Between company's perceptions of consumer expectations and consumer's expectations GAP 2: Between Company Perceptions of Consumer Expectations and Customer-Driven Service Designs and Standards GAP 3: Between Customer-Driven Service Designs and Standards and Service Delivery GAP 4: Between Service Delivery and External Communications to Customers GAP 5: Between Perceived service and expected service |
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Why is service quality so important? What are the strategic benefits of delivering good quality?
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Service quality is one-half of customer value.
Service quality is a key differentiator--perhaps the only differentiator--in a competitive service market. Improved service quality leads directly to customer retention, loyalty, and growth. Service quality is profitable Firms focusing on quality can improve income over 100% over control firms. Service quality initiatives have been empirically linked to stock return, ROI, ROA, and P-E ratio. Businesses with top rated service quality realize an 8 percent price premium. Service quality should be a company initiative. |
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Service Quality Gap 1
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Difference between what customers expect and
management perceptions of customer expectations. CAUSES: Failure of management to identify consumer expectations. Managerial pride Lack of Research STRATEGIES: Communicate with customers (ask them!) Conduct market research Encourage upward communication (use inseparability) Decrease layers of management (flat=flow) |
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Service Quality Gap 2
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Difference between management perceptions of
customer expectations and the company’s ability/willingness to revise their service standards CAUSES: Resource constraints Market conditions Management indifference STRATEGIES: Top management commitment Consumer education initiatives Manage customer expectations |
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Service Quality Gap 3
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Difference between what customers want and employees’ ability/willingness to deliver
CAUSES: Employees unaware of specifications Employees do not have skills Employees unwilling to perform work Failure to manage supply and demand STRATEGIES: Enhance teamwork Ensure employee-job fit Ensure technology-job fit Role conflict Price and promotion offers to manage demand |
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Service Quality Gap 4
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Difference between service delivered
and external communications/advertising CAUSES: Poor or lack of communication Over-promising STRATEGIES: Increase horizontal communications Avoid propensity to over-promise |
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What are the 5 dimensions of SERVQUAL?
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1. Reliability
2. Responsiveness 3. Empathy 4. Assurance 5. Tangibles |
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What are the benefits of the SERVQUAL approach and what problems are associated
with this technique of measuring quality? |
Strengths:
Measures five dimensions of service quality. Highlights strengths and weaknesses Diagnostic value Problems: Expectations yield no variance - like importance. Use of disconfirmation. P-E may be misleading 5 Dimensions don’t capture the whole construct. |
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How did SERVPERF address the shortcomings of the SERVQUAL technique?
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SERVPERF is P-only
Better Predicts/Explains SQ SERVQUAL Better for Diagnosis |
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Why are people such an important part of the service experience?
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People drive the purchase process
People are the service People are the brand People are what brings you back - or not |
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What is internal service quality and how does it impact firm performance?
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Companies with an investment in Internal Service Quality can expect a 30-40% increase in performance.
Chick Fil-A: 78% of locations with above average satisfaction have above average employee satisfaction. Merry Maids: 1% in ESAT = .5% in employee commitment “100 Best Companies to Work for” are more profitable than typical companies. |
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In what way are service employees “boundary spanners” and what type of emotional
labor issues and conflict can this cause them to experience? |
“boundary spanners” – lowest paid, least trained, yet constantly in touch with customers.
Emotional labor Has anyone been forced to smile at work?? Delta Airlines puts employees through simulation training Trained not to absorb customers’ bad mood. Person/Role: “The customer is always right…even when they are wrong” Organization/Client: Employees disagree with organizational policies…especially prevalent when tips are common Interclient: Trying to meet everyone’s needs is bound to lead to failure on meeting one person’s needs. Quality/Productivity: Working fast does not always mean working well… |
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What strategies can service managers use to attract and retain productive, happy
employees? |
Conflict Reduction - clear protocol standards, not a fuzzy mission
Worker Segmentation - personality match - Nordstrom: “Hire the smile and train the skill” Reward Structure - Bermuda trip - Outback: Managers invest 25k up front in return for 10% of the cash flow (74k avg return). 65% of salary is incentive-based (20% is the industry norm). 5% turnover compared to 40% industry average. - Six Flags: give “Marvinopoly” cards to employees seen providing good service. win money, prizes, trips |
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What is empowerment and what are its benefits and potential drawbacks?
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Empowerment - giving employees the power to act immediately, decisively, and without fear in order to attain satisfaction & delight.
Nordstrom: “Use your good judgment. That’s the only rule.” Benefits: quicker responses employees feel more responsible employees tend to interact with warmth/enthusiasm empowered employees are a great source of ideas positive word-of-mouth from customers Drawbacks: greater investments in selection and training higher labor costs slower and/or inconsistent delivery may violate customer perceptions of fair play “giving away the store” (making bad decisions) |
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What is interaction quality and what are its 3 sub-dimensions?
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1. Attitude
2. Behavior 3. Expertise |
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1Which of the 4 major characteristics of services forces customers to become such an integral part of the service experience?
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Inseparability - customers are an integral part of service delivery.
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In what ways can customers be “good” or “bad” customers?
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Your customers - can be “good” or “bad”
Good: “apostles,” advocates, loyal, WOM Bad: “jaycustomers,” unprofitable Other customers - also can be good or bad Good: add to atmosphere, camaraderie, support Bad: the “wrong” segment, disruptive |
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What are the 4 types of customers? How does each type of customer behave?
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1. Apostle/True Friends - True Friends- highest profit potential/long-term customers. delighted, WOM advocates, benefactors of recovery?
Ex: Quicken, Volvo, Disney 2. Mercenary/Butterflies - chase price, buy on impulse, pursue fashion trends, thus they are difficult to predict. Expensive to acquire and quick to depart Music fans, team fans, bars, vacation spots Butterflies- profitable but transient customers; they avoid building a stable relationship w/ any single provider. Short-term customers 3. Hostage - stuck with poor service. local phone, cable Why offer good service? 4. Barnacles - most problematic customers. Do not generate satisfactory returns on investments made in account maintenance and marketing because the size and volume of their transactions are too low. Strangers- lowest profit potential/short-term customers |
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What is a “jaycustomer?” What are the 5 types of “jaycustomers?”
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1.Thief: steal services (“shrinkage”) cable TV, stolen credit cards, insurance fraud - come across any of these?
2. Rule Breaker: purposefully or not line skippers, speeding skiers, underage 3. Belligerent: angry, bitter, compulsive complainers air passengers 4. Feuders - bother, fight with other customers bars, sporting events 5. Deadbeats - don’t pay the bill dine-n-dash, foreclosures |
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Why should service firms be focused on recruiting and retaining the “right customers?”
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Objective: Close GAP 1 & GAP 3
Company vs. Customer KEY: Getting Information Relationship Marketing - “Customer Equity” Methods: Customer complaint systems, customer panels, surveys |
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What are the reasons that customers do not complain about poor service?
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1. Shortage of time and effort
2. No audience or response 3. Personality factors |
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What are the various research methods that service companies can use to find information
about their customers and their evaluations of services? |
Complaint Solicitation
Uses: Identify, Correct, and Reengineer Problem: Only 5 - 30% Complain Critical Incident Technique (CIT) Identifies Satisfying, Dissatisfying Factors Structured Brainstorming Focus group: “what, why, and how” Mystery Shoppers BK Example Observation Studies EnviroSell Lost Customer Research Exit Interviews |
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What is the ACSI?
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American Customer Satisfaction Index
“ACSI” Tracks customer perceptions across 200 firms - both products and services. Rank: Non-durables (soft drinks) Durables (cars) Services (airlines) Top Service Performers: FedEx, Nordstrom, AT&T |
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• Why is the quality of service declining?
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Price fascination (airlines)
More, better information on price structure Job Switching Low Unemployment Increased Expectations Internet Takeovers, Mergers, Acquisitions |
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What is outcome quality and what are its 3 sub-dimensions?
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1. Tangibles
2. Valence 3. Waiting Time |
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What factors do evaluations of the tangibles, valence, and waiting time consider?
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1. Tangibles
Food - quality, temperature, presentation Other examples: Wrinkle free clothes Clean car Souvenirs 2. Valence - reflects whether the outcome itself was favorable or not. Sports: Did the team win? Bank: Did you get a loan? Legal service: Did you win the case? Mechanic: Did he/she find the problem? Dentist: Were any cavities found? College: Did you pass the class? 3. Waiting Time - reflects your perception of how long you had to wait. Pre-process Waiting to get into the park In-Process Waiting to get on a ride Post-Process Waiting to get out of parking lot |
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Why is waiting time such an important aspect of service quality?
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Inevitability of Waiting:
Waiting results from variations in arrival rates and service rates Managing perishability is key Economics of Waiting: High utilization purchased at the price of customer waiting. Make waiting productive (salad bar) or profitable (drinking bar). |
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What are some known laws of waiting?
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Maister’s First Law:
Customers compare expectations with perceptions. Maister’s Second Law: It’s hard to play catch-up ball. Skinner’s Law: The other line always moves faster. Jenkin’s Corollary: However, when you switch to another other line, the line you left moves faster. |
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What are the ten propositions of the psychology of waiting lines?
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1. Unoccupied waiting time feels longer
Six Flags, Dr, TVs in line, Beer Barber, others??? 2. Preprocess and Postprocess waits feel longer Restaurant, Airplane queues 3. Anxiety makes waiting feel longer Emergency room, legal verdict, lab tests 4. Uncertain waiting is longer than known Traffic, phone system queues Unexplained waiting is longer than explained Airport, Lost package 5. Unfair waiting is longer than equitable waiting Dance Clubs, McDs queue 6. The more you desire the service, the longer you’ll wait Sporting events, concerts, “tent cities” 7. Solo waiting is longer than group waiting The T, Jury Duty Physically uncomfortable waiting is longer MRI, Cabs in winter 8. New users perceive waiting to be longer Don’t know what to expect |
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What are the 4 waiting strategies and what is the goal of each?
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1. Animate - make it as fun as possible.
Give visual stimulation (Disney) or creature comforts Omni hotel in NY gives free drinks to everyone in line if a line exceeds 6 people 2. Discriminate - treat your best customers best. High profit/volume customers are given priority Avis has high volume renters sign a permanent rental agreement so customers simply go straight to their cars. 3. Automate - as in phone systems. Firms are now using standard scripts to avoid bouncing customers around Employee keys in the question and a database of answers to known questions gives the script. The database is updated bi-weekly. Web offers this too. Airlines say that by 2012, all tickets will be delivered via a bar code sent to passengers’ cell phones. Passengers will simply scan their phone and proceed to security 4. Obfuscate - conceal the line Wrap the line around corners to hide the masses in front. It’s recommended to post expected wait times. Restaurants exaggerate the wait estimate. |
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What are some waiting strategies that we’re currently seeing and should see in the future?
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Movie previews
Restaurant expected wait estimate “Overnight air” Magazines at Dr. Office Appetizers, bread on table, nachos Organ at church In-flight movies, magazines Nachos, Bread Sun Pass TVs in concession areas/seat backs E-ticket kiosks Disney reservations Self-checkout grocery stores Mechanic car loans Free wireless in airports, hotels Online grade delivery |
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Why is managing demand and capacity especially important for service managers?
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Services have finite capacity to serve customers
fire code limits, number of rooms, seats, etc. Customers tend to value the same times and locations Since managers can’t inventory the most popular options, they have to manage demand and capacity. |
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What are the four scenarios for excess demand and capacity that service managers face?
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Excess Demand – when demand exceeds maximum capacity.
Have to turn away customers or make them wait too long. Lost business and perhaps NWOM Class is full Demand exceeds optimum capacity – nobody is turned away but quality suffers. Overcrowding, slow service, frustration 500 seat auditorium Demand and Supply are Balanced – when demand and supply are optimal. Staff is not overworked, customers receive quality service without delay. Excess capacity – demand is low/below optimum capacity. Resources are underutilized – not profitable 10 students in a section Quality may be excellent, unless other customers add to the atmosphere |
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What are the different types of capacity constraints that services have to manage?
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There are several reasons that service capacity is constrained
Time – some service providers sell their time Labor – staff levels can cause constraints Equipment – sometimes equipment or vehicles are in short supply Facilities – the physical environment |
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What are the 4 waiting strategies and what is the goal of each?
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1. Animate - make it as fun as possible.
Give visual stimulation (Disney) or creature comforts Omni hotel in NY gives free drinks to everyone in line if a line exceeds 6 people 2. Discriminate - treat your best customers best. High profit/volume customers are given priority Avis has high volume renters sign a permanent rental agreement so customers simply go straight to their cars. 3. Automate - as in phone systems. Firms are now using standard scripts to avoid bouncing customers around Employee keys in the question and a database of answers to known questions gives the script. The database is updated bi-weekly. Web offers this too. Airlines say that by 2012, all tickets will be delivered via a bar code sent to passengers’ cell phones. Passengers will simply scan their phone and proceed to security 4. Obfuscate - conceal the line Wrap the line around corners to hide the masses in front. It’s recommended to post expected wait times. Restaurants exaggerate the wait estimate. |
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What are some waiting strategies that we’re currently seeing and should see in the future?
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Movie previews
Restaurant expected wait estimate “Overnight air” Magazines at Dr. Office Appetizers, bread on table, nachos Organ at church In-flight movies, magazines Nachos, Bread Sun Pass TVs in concession areas/seat backs E-ticket kiosks Disney reservations Self-checkout grocery stores Mechanic car loans Free wireless in airports, hotels Online grade delivery |
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Why is managing demand and capacity especially important for service managers?
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Services have finite capacity to serve customers
fire code limits, number of rooms, seats, etc. Customers tend to value the same times and locations Since managers can’t inventory the most popular options, they have to manage demand and capacity. |
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What are the four scenarios for excess demand and capacity that service managers face?
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Excess Demand – when demand exceeds maximum capacity.
Have to turn away customers or make them wait too long. Lost business and perhaps NWOM Class is full Demand exceeds optimum capacity – nobody is turned away but quality suffers. Overcrowding, slow service, frustration 500 seat auditorium Demand and Supply are Balanced – when demand and supply are optimal. Staff is not overworked, customers receive quality service without delay. Excess capacity – demand is low/below optimum capacity. Resources are underutilized – not profitable 10 students in a section Quality may be excellent, unless other customers add to the atmosphere |
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What are the different types of capacity constraints that services have to manage?
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There are several reasons that service capacity is constrained
Time – some service providers sell their time Labor – staff levels can cause constraints Equipment – sometimes equipment or vehicles are in short supply Facilities – the physical environment |
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What are some examples of services with random versus predictable demand patterns?
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Services have demand patterns that are often predictable
When will demand for these services be high and how do firms make adjustments? Airlines Phones Health clubs Amusement parks College classes Some services have random demand patterns Which service demand patterns depend on the weather? What about a team’s performance? Natural disasters Utility truck caravans |
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How can service firms effectively shift demand for their service products?
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Two options: shift demand or shift capacity
Shifting demand: Change the service – ski resorts offer mountain biking and toboggan runs in summer; Nantucket promotes a “Christmas stroll”; can rent out restaurants, amusement parks at slow times Demarket busy times – banks let customers know the busiest times; Hospital ER wait times; “Avoid the rush!” Shifting demand: Change price – matinee movies; early bird specials; happy hour; “off-season” discounts; FSU lowers game prices for certain teams, raises price for others Disney value season: January 1 - January 15January 19 - February 12August 9 - October 1November 29 - December 17Martin Luther King Weekend Jan. 16-18 Presidents Day Weekend Feb. 13-15 Shifting demand: Use promotions – Red Sox offer the “Patriot pack”; Disney Cruise “kids go free”; Braves have Dave Ramsey dollar night (against the Marlins |
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How can service firms shift capacity?
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Shifting capacity:
Extend hours – post office on tax day, Xmas hours, “Black Friday” shopping Stretch labor – overtime, faculty overload Stretch facilities – portable classrooms, temporary seating, FSU anthropology |
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• What are some ways that services can align capacity and demand?
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Aligning demand and capacity:
Seasonal employees – holiday, tax, summer employees Add temporary facilities – rented mail trucks for Holidays; Jacksonville cruise ships for Super Bowl; Schedule downtime – Busch Gardens Williamsburg is closed all of November – Tampa open; Spring break campus projects Modify facilities – 777 planes can be reconfigured to allow for more/less passengers and cargo. |
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What is Yield Management and how does it work?
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Describes a variety of methods that empirically maximize returns from available capacity
Hotel occupancy rates Airline fare rates Table configurations Staff levels |
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How can service firms use even a very simple yield management formula to understand
how they’re utilizing available capacity? |
YM is a ratio of how much a firm made, given its capacity limitations versus how much it could have made.
Yield= Actual/potential capacity |
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Be able to provide examples of how servicescapes can provide physical evidence of the service received.
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WHY IS THE SERVICE ENVIRONMENT IMPORTANT?
Tangible Cues - “surrogates” for the five senses. Examples FACILITY Parking, Signage, Landscaping, Exterior, Interior Design Other Tangibles Business Cards, Billing statements, Employee Dress, Brochures, Web Pages, etc. |
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How does the service environment impact service evaluations?
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Mood – ambiance impacts mood
cerebral: coffee houses, book stores fun interactive: Chuck E Cheese Expectations peanuts on the floor Service quality Outcome Evaluations via other people Purchase decision approach/avoidance |
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Know the roles that the servicescape can play
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Socializer – encourages interaction
bars, casinos (blackjack) Differentiator - conveys information about price/quality |
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Know what servicescape ambience is and how it is evaluated (e.g., color, music, scent).
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Based in Environmental Psychology
Service Environment has two broad implications Cognitive - “object language” the environment portrays nonverbal communication A lawyer’s suit, an Accountant’s desk, a Beautician’s hair Affect - can convey subconscious emotional stimuli the environment makes us feel “happy,” “relaxed,” nervous Disney vs. Emergency waiting room Management Keys: Scent - studies show it increases lingering time reportedly increases slot machine use by 45% positively influenced Nike evaluation Cinnabun, Starbuck’s coffee, Marriot scents its lobby to alleviate stress Music - slower tempo, low volume encourage leisure, and people tend to spend more. Also improves perception of wait - Muzak Color – influences customer perceptions Marketers rely heavily on visual elements in store design and packaging. Meanings are communicated on the visual channel through a facility’s color, size and styling. Colors may influence our emotions more directly. Arousal and stimulated appetite (e.g. red) Relaxation (e.g. blue) Marketers rely heavily on visual elements in store design and packaging. Meanings are communicated on the visual channel through a facility’s color, size and styling. Colors may influence our emotions more directly. Arousal and stimulated appetite (e.g. red) Relaxation (e.g. blue) |
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What are they 4 keys for creating an experience?
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4 Keys to Creating an Experience
entertaining - movies, theatre, ball game educational - museum of science, aquarium escapist - white water rafting, sky-diving aesthetic - botanical gardens The Best Experiences are all 3 Epcot, Sea World, Smithsonian |
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Know what design and social factors are and how they can be managed
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Refers to spatial relationships between furniture, machinery, equipment etc.
Key attribute, especially for self service outlets buffets, internet shopping Also key for retail stores Target vs. Kmart |
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Know the 4 methods for assessing the Servicescape
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Environment Surveys
adv: Ease of administration, interpretation disadv: Doesn’t always capture true perceptions Experiments - manipulate music,layout, atmosphere, etc. adv: validity disadv: cost and time Blueprinting - combining a floor plan and photos to better understand customers’ actions. (Envirosell) adv: Complete overview of environment disadv: Doesn’t give solutions, only identifies problems Observation - observe interaction, behaviors in Service Environment adv: depth of information disadv: cost, time |
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Understand the Overall Model of Service Quality
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1. Interaction
-Attitude -Behavior -Expertise 2. Outcome -Waiting time -tangible -valence 3. Physical Environment -ambient condition -design -social |