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Services Marketing: Concepts, Strategies, And Cases, 5th Edition Solution Manual

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    Chapter 1 An Introduction to Services 1 CH APTER 1: AN INTRODUCTION TO SERVICES " It’s just the little touches after the average man would qui t that makes the master’s fame. " Orison Swett Marden, Founder, Success magazine Chapter Objectives : This chapter provides an introduction to the field of services marketing . Th e chapter discusses the basic differences between goods and services and the factors necessary for the creation of the service experience . In addition, the chapter establishes the importance of the service sector in the world economy and the need for services marketing education. Learning Objectives : After reading this chapter, you should be able to 1 . Understand the basic differe nce between goods and services. • In general, goods are defined as objects, devices, or things, whereas services are defined as deeds, efforts, or performances ( The term product refers to both goods and services and is used in such a manner throughout the remainder of this text). 2 . Develop an appreciation for how service can be used as a competitive advantage for both intangible and tangible products. • The scale of market entities displays a continuum of products based on their tangibility where goods are tangible dominant and services are intangible domina n t. The core benefit of a tangible dominant product typically involves a physical possession that contains service elements to a less degree. In contrast , intangible dominant products do not involve the physical possession of a product and can only be experienced. 3 . Appreciate the factors that create t he customer's service experience and why it is important to manage the overall experience . • The Servuction model is constructed of two parts: that which is visible to the consumer and that which is not . The visible part of the Servuction model consists of three parts: the inanimate environment, the contact personnel/service ➢ PowerPoint Slide: # 2 ➢ PowerPoint Slide: # 1

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    Chapter 1 An Introduction to Services 2 providers, and other customers . The invisible component of the model consists of the invisible organization and systems . 4 . Comprehend the driving forces behind the importance of the study of services marketing . • There are a number of reasons why the study of services marketing is important: (1) consumers evaluate services differently than goods , and service marketers must effectively manage the experiential aspects of the service product; (2) services can be effectively used as a differential advantage for tangible dominant products; (3) the growth of the global service economy in terms of contributions to g ross d omestic p roduct (GDP) has increased dramatically; (4) the growth of the global service workforce has also increased accordingly; (5) the emergence of technologically based e - services has transformed many service industries; and (6) knowledge is needed in the area of developing sustainable services m arketing business practices. Opening Vignette: “ The B urj al Arab Hotel • The world’s only 7 - star hotel offers guests a remarkable service experience: o Magnificent views o Large rooms o Rain showers and Jacuzzis standard o Fleet of chauffeur - driven Rolls - Royces o Finest in personal service • The concepts provide d in this text are the keys for delivering a truly remarkable service experience. L ecture Outline : I. Introduction A. Traditional goods producers are turning to the service aspects of their operation to establish a differential advantage in the marketplace B. New “global services era” characterized by: 1. Economies and labor force dominated by the service sector 2. More customer involvement in strategic business decisions ➢ PowerPoint Slide: # 3 ➢ PowerPoint Slide: # 4

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    Chapter 1 An Introduction to Services 3 3. Products that are increasingly market - focused 4. The development of technologies that assist in the provision of services 5. Employees with more discretionary freedom 6. T he emergence of new service industries and the “service imperative” - Reflects the view that the intangible aspects of products are becoming the key features that differentiate the product in the marketplace. II. What I s a Service? A. The distinction between goods and services is not perfectly clear. Examples include General Electric and IBM, generally thought of as major goods producers, who now generate more than half of their revenues from services. 1. Good s - is described as objects, devices, or things . 2. S ervices - is described as deeds, efforts, or performances . 3. Product – refers to both goods and services . B. Scale of Market Entities 1. H elps illustrate how products fall along a continuum that ranges from tangible dominant to intangible dominant. (See Figure 1.1) - Tangible dominant: products that possess physical properties that can be felt, tasted, and seen prior to the consumer’s purchase decision. - Intangible dominant : products that lack the physical properties that can be sensed by consumers prior to the purchase decision 2. Defining service businesses too narrowly, firms can develop classic cases of marketing myopia. - is the practice of too narrowly defining one’s business by overlooking the service aspects of one’s products . ➢ PowerPoint Slide: 5 ➢ PowerPoint Slide s : # 6 , 7

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    Chapter 1 An Introduction to Services 4 C. The Economic Value of Transforming Goods into Services 1. T he economic value of products, like the coffee bean, progresses from commodities to goods to services to experiences . ( S ee Figure 1.2) D. M olecular Model 1. A conceptual model of the relationship between tangible and intangible components of a firm’s operations . (See Figure 1. 3 ) 2. Understanding the importance and components of the service experience is critical. III. Creating the Service Experience A. Benefit concept - the encapsulation of the benefits of a product in the consumer’s mind 1. Services deliver a bundle of benefits through the experience that is created for the consumer. 2. For example, most consumers of an orange will never see the orange grove, will most likely never interact with the grove workers who harvest the fruit nor with the management staff that directs the workers; and they will also generally not consume the orange in the company of other consumers at the grocery store . B. Servuction Model - a model used to illustrate the factors that influence the service experience, including those that are visible to the consumer and those that are not . (See Figure 1. 4 ) Consists of four factors that directly influence consumer s ’ service experience : (visible) s ervicescape, conta ct personnel/service providers , o ther customers , and ( in visible) o rgan izations and systems ➢ PowerPoint Slide: # 8 ➢ PowerPoint Slide: # 9 ➢ PowerPoint Slide s : # 1 1 – 1 6 ➢ PowerPoint Slide: # 10

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    Chapter 1 An Introduction to Services 5 1. Servicescape - the physical evidence used to design service environments . a. Plainly visible to consumers. b. Consists of ambient conditions, inanimate objects, and other physical evidence. 2. Contact Personnel/Service Providers - Contact Personnel - employees other than the primary service provider who briefly interact with the customer. - Service Providers - the primary providers of a core service, such as a waiter or waitress, dentist, physician, or college instructor . a. Plainly visible to consumers. b. Interaction between consumers and contact personnel/service providers are commonplace. 3. Other Customers a. Plainly visible to consumers. b. Many customers may be served simultaneously . The influence of other customers can be active or passive. 4. Invisible Organization and Systems - reflects the rules, regulations, and processes upon which the organization is based. a. Invisible to consumers. b. Have a very profound effect on the consumer’s service experience . I V. Why Study Services? A. Growth of the global service economy 1. Caused by a highly competitive international marketplace ➢ PowerPoint Slide: # 1 7

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    Chapter 1 An Introduction to Services 6 2. Higher disposable incomes have led to a proliferation of personal services a. Particularly in the entertainment sector b. Breakdown of U . S . Service Supersectors and their respective contributions to GDP (see Figure 1. 5 ) c. End result has been phenomenal growth in service industries, shown clearly in Worldwide GDP (see Figure 1. 6 ) B. Growth of the global s ervice labor force 1. (See Figure 1. 7 ) The growth and shifting of employment from agriculture to manufacturing to services 2. U . S . Bureau of Labor Statistics expect ed service occupations to account for more than 96% of all new job growth for the period 2002 – 2012. 3. The bulk of new jobs created in America over the last 30 years have been white - collar jobs, in higher - level professional, technical, administrative, and sales positions. 4. Read Global Services in Action – Ski Dubai C. Emergence of e - services ? - an electronic service available via the N et that completes tasks, solve problems, or conducts transactions 1. Phenomenal developments in technology – particular ly the Internet a. In 20 14 , over 3 billion people representing 42.3 % of the world’s population had access to the Internet . ( S ee Figure 1. 8 ) ➢ PowerPoint Slide: # 1 8 ➢ PowerPoint Slide: # 1 9 ➢ PowerPoint Slide: # 21 ➢ PowerPoint Slide: # 22 ➢ PowerPoint Slide: # 20

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    Chapter 1 An Introduction to Services 7 2. Growth of e - services a. Including self - service technologies 1. Technologically based services that help customers help themselves. 2. Including local bank’s online account services, ATMs, UPS package tracking service, Schwab’s stock trading services, Travelocity’s online purchasing options, a grocery store’s self - check - out b. Read E - Service In Action – Restaurants Ride the Social Media Wave D. Developing sustainable service marketing business practices - the ability to meet current needs without hindering the ability to meet the needs of future generations in terms of economic, environmental, and social challenges 1. Why would a service provider want to embrace sustainable practices? a. When the social good can overlap with business opportunity b. The overlap is known as the “sweet spot” 2. There are four areas in which a company can achieve a source of competitive advantage: eco - efficiency, environmental cost leadership, beyond compliance leadership, and eco - branding. 3. Read Sustainability & Service in Action – The Origins and Growth of “Green” V . Summary Ultimately, service marketing is about managing the compromising relationships that must exist among marketing, operations, and human resources. Services permeate every aspect of our li ves; consequently, the need for services marketing knowledge is greater today than ever before. ➢ PowerPoint Slide: # 23

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    Chapter 1 An Introduction to Services 8 REVIEW QUESTIONS: 1 . Define the following terms: goods, services, products . In general, goods are defined as objects, devices, or things, whereas, services are defined as deeds, efforts, or performances . The term product refers to both goods and services. 2 . What can be learned from the service imperative? Today’s business environment is experiencing the emergence of new service industries and the “service imperative , ” where the intangible aspects of the product are becoming more and more the key features that differentiate product in the marketplace. There are countless examples of firms using the service imperative to drive their businesses forward to profit and growth. 3 . Why is it difficult to distinguish between many goods and services? Use the scale of market entities and the molecular model concept to explain your answer. The distinction between goods and services is not always perfectly clear . In reality, most services contain some tangible components, while most goods also contain intangible components . It is difficult to say whether a pure service or a pure good even exist . The scale of market entities helps us understand whether the product under consideration is tangible dominant or intangible dominant. 4 . U tilizing the s ervuction model, describe your classroom experience . Answers will vary, but at the core should be a description of the visible servicescape, contact personnel/service providers, other customers , and invisible organization and systems . 5 . How would your servuction m odel, discussed in question 4 , change as you describe the experience at a local restaurant? Answers will vary, but at the core should be a description of the visible servicescape, contact personnel/service providers, other customers , and invisible organization and systems . 6 . How does the organization and systems dimension of the servuction m odel differ from the other three dimensions? What is the purpose of the organization and systems dimension? The organization and systems dimension is invisible to the customer . Of course, the visible components that comprise the servuction model cannot exist in isolation, and

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    Chapter 1 An Introduction to Services 9 indeed, they have to be supported by invisible components that tie together the organization and its systems . Invisible organization and systems reflects the rules, regulations, and processes upon which the organization is based. 7 . As you consider the table that provides Worldwide GDP information, a mix of countries comprise the top 10 service economies. These countries sometimes differ greatly, yet still generate large service economies. Please explain. Countries that industrialized their economies first eventually come under attack by other countries that are newly making the transition from an agricultural to an industrial economy . These “n ewcomer ” countries offer lower product costs that attract industry. Consequently, as industrial sectors flow from one country to the next, the countries they abandon begin to more heavily rely on the growth of their service sectors as the mainstay of their economies. All developed economies now have large service sectors; and Japan, France, and Great Britain have service economies at least as developed as that of the United States . Leading the pack are Hong Kong and the Bahamas. 8 . Discuss the keys to delivering effective self - service technologies. Self - service technologies are purposely created to automate routine interactions between customers and providers with the goal of providing convenience and efficiency to both parties . A self - service must provide the customer a benefit ( e . g ., convenience, an opportunity to customize, cost savings, time savings, etc . ). A n SST that is implemented purely to decrease the operating cost of the firm will most likely not be well - received. 9 . Describe online services that help humanize the online experience. E - service s play a critical role in the transformation of the customer’s online experience that progresses over time from a functional experience to a more personalized experience. E - service humanizes the N et by providing various customer service activities while simultaneously reducing the online firm’s operating costs. 10 . Discuss the four approaches to using sustainability as an effective business positioning strategy. The four areas include: eco - efficiency, environmental cost leadership, beyond compliance leadership, and eco - branding . Eco - efficiency focuses on the concept of the “double dividend.” Companies that attempt to reduce wastes and inefficiencies within the system see positive results both financially and environmentally. Environmental cost leadership involves developing a radical innovation that will allow the company to be more environmentally friendly while maintaining cost competitiveness . Beyond compliance leadership involves companies wanting to increase their sustainability efforts, but also wanting these efforts to be acknowledged

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    Chapter 1 An Introduction to Services 10 by the public. These companies often spend money on environmental certifications, such as LEEDS building certifications. The first - movers in an industry in this case have the greatest advantage. Those who take the first initiative are seen as innovative, while the rest of the companies within the industry are forced to follow suit . Eco - branding strategies focus on the use of marketing differentiation based on the environmental attributes (e.g., organic, vegan, or fair - trade status) of products. There are three basic prerequisites that often exist for firms to successfully execute this approach: consumers must be willing to pay for the costs of ecological differentiation; reliable information about the product’s environmental performance must be readily available to the consumer; and the differentiation must be difficult to imitate by competitors.

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    Chapter 2 The Service Economy: Supersectors and Ethical Considerations 11 CHAPTER 2 : THE SERVICE ECONOMY : SUPERSECTOR S AND ETHICAL CONSIDERATIONS " If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing. " Henry Kravis Chapter Objectives: This chapter provides an overview of the service economy by introducing the nine service supersectors. Although on the surface many of these supersectors seem quite diverse, service classification schemes are discussed that assist in our understanding of the commonalities among service industries. Trends and concerns pertaining to the growth of service industries are presented that further our understanding of the service economy. Finally, this chapter introduces the very important topic of ethical issues in services marketing. Service marketers as well as service customers often face unique ethical issues that merit discussion. Learning Objectives: After reading this chapter, you should be able to 1. Describe the nine supersectors that comprise the service economy. • An in - depth look into the service economy provid es an overview of the service economy supersectors including: (1) education and health services, (2) financial activities, (3) government, (4) information, (5) leisure and hospitality, (6) professional and business services, (7) transportation and utilities, (8) wholesale and retail trade, and (9) other services. 2. Identify the trends and concerns pertaining to the growth of the service economy. • Several key forces continue to influence the growth of the service sector. These tends include t he emergence of technologically based e - services, socio - cultural forces derived from an aging population, and the competitive force of “outservicing , ” which involves the offshoring, outsourcing, and industrialization of many services. ➢ PowerPoint Slide: #2 ➢ PowerPoint Slide: #1

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    Chapter 2 The Service Economy: Supersectors and Ethical Considerations 12 3 . Understand the reasons consumers are particularly vulnerable to ethical misconduct within the service sector. • Reasons contributing to consumer vulnerability include: (1) services possess few search attributes; (2) services are often technical and specialized, thereby, difficult to understand; (3) a time lapse sometimes exist between service performance and consumer evaluation; (4) many services are sold without warranties or guarantees; (5) many services are provided by unsupervised boundary - spanning personnel; (6) services are nonstandardized; consequently, some variability is accepted; (7) reward structures based solely on sales tend to reward and fa il to punish ethical misconduct ; and (8) due to the consumers ’ involvement in the production process, consumers often accept part of the blame for less than perfect performance. 4. Appreciate the types of ethical issues that often arise in the business sector. • The most typical issues that managers and/or employees will face while conducting business include: conflict of interest, organizational relationship, honesty, fairness, and communication. 5. Discuss the consequences of ethical misconduct. • Employees forced to deal with ethical issues on a continuous basis frequently suffer from job - related tension, frustration, anxiety, ineffective performance (i.e., reduced sales and reduced profits), turnover intentions and lower job satisfaction. In addition to the personal effects of ethical misconduct, the organization as a whole suffers. Ethical improprieties have also been linked to customer dissatisfaction (loss of sales), unfavorable word - of - mouth publicity for the organization, and a negative public image for the entire industry. 6. Explain strategies that attempt to facilitate positive ethical behaviors. • Strategies suggested to control the ethical behavior of personnel include employee socialization, standards of conduct , corrective control , leadership training, service/product knowledge, monitoring of employee performance, and the building of long - term customer relationships. Opening Vignette: Getaway2Give • Getaway2Give (G2G) is the world’s only philanthropic vacation club . Its destinations i nclude elite resorts and privately owned homes in coveted beach, ski, city and international destinations, such as Anguilla, Aspen, New York City, ➢ PowerPoint Slide: #3

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    Chapter 2 The Service Economy: Supersectors and Ethical Considerations 13 and Tuscany. Its designated charities receive half of new membership fees and a percentage of all rental fees . • Another way G2G differentiates itself is by facilitating “voluntourism,” or special activities that allow members to give their talents and time to deserving charities while on vacation. • G2G appeals to affluent Americans who feel grateful for their fortunate lifestyle and want to give something back . Lecture Outline: I. Introduction A. The first half of the chapter focuses on the nine service supersectors that collectively comprise the service economy. For students seeking a career in services marke ting, the information on projected supersector growth, salary implications, and educational requirements should be particularly helpful . B. Next, the chapter introduces and discusses concepts related to social responsibility and services marketing ethics. Because of the unique opportunities that exist for ethical misconduct in service organizations, students of services marketing courses in particular should be made aware of the issues surrounding ethical decision making. II. What I s the Service Economy? A. It is generally accepted that the service economy includes the “soft parts” of the economy consisting of nine industry supersectors – education and health services, financial activities, government, information, leisure and hospitality, professional and business services, transportation and utilities, wholesale and retail trade, and other services. 1. Figure 2.1 The U . S . Service Economy (Employment Growth Projections 2006 – 2016) 2. Figure 2.2 Past, P resent, and F uture: U . S . Service Supersector Employment B. Education and Health Services 1. The educational services subsector includes schools, colleges, universities and training centers. ➢ PowerPoint Slide: #4 ➢ PowerPoint Slide: #5 ➢ PowerPoint Slide: #6

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    Chapter 2 The Service Economy: Supersectors and Ethical Considerations 14 . The second largest employment industry. b. Accounting for 13.3 million jobs. 2. The health care and social assistance subsector is comprised of: a. Health services such as hospitals, nursing care facilities, physician’s offices and home health care services. 1. The largest employment industry in the private sector. 2. Accounting for 14 million jobs. 3. Seven of the top 20 fastest growing occupations are in health care. b. Social assistance such as individual and family services, vocational rehabilitations services, and community food and housing, and emergency and other relief services. C. Financial Activities 1. Banking and Insurance subsector is comprised of: a. Commercial banking, savings institutions, credit unions. b. Banking employment expected to increase by 4% (2006 – 2016). c. Insurance subsector provides clients protection against financial loss for a variety of incidents. 2. Securities, commodities, and other investments a. Manage the issuance, purchase, and sale of financial instruments. b. Staggering 46% employment increase expected because of the growing need for investments and securities to fuel the global marketplace, as well as the increase in need for financial advice. ➢ PowerPoint Slide: #7

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    Chapter 2 The Service Economy: Supersectors and Ethical Considerations 15 D. The Government 1. Consist of three subsectors: a. Not - for - profit sector (advocacy, grantmaking, and civic organizations) b. Federal government c. State and local government s 2. Employed approximately 1.2 million personnel in 2006; projected increase by 13% (2006 – 2016) in the not - for - profit sector . 3. Federal government is largest single employer with 1.8 million civilian employees. E. Information 1. Consist of establishments that produce and distribute information and cultural products, provide the means to distribute or transmit these products, and/or process data. 2. Major players include publishing industries, the motion picture and sound recording industries, the broadcasting industries, the telecommunication industries, Internet service providers and web search portals, data procession industries , and information services industries. a. Represent s 2.6% of all employment and 1.9% of all establishments . b. Software publishers are currently the fastest growing industry within the Information supersector , with a projected growth rate of 32% (2006 – 2016) . 3. Read E - Services in Action – Top Ten Social Media Retailers F. Leisure and Hospitality 1. A rts, entertainment, and recreation ➢ PowerPoint Slide: #8 ➢ PowerPoint Slide: #9 ➢ PowerPoint Slide: #10

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