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

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Chapter 1An Introduction to Services1CHAPTER 1:AN INTRODUCTION TO SERVICES"It’s just the little touches after the average man would quit that makes the master’sfame."Orison Swett Marden,Founder,SuccessmagazineChapter Objectives:This chapter provides an introduction to thefield of services marketing.Thechapterdiscussesthebasic differences between goods and services and the factors necessaryfor the creation of the service experience.In addition, the chapter establishes theimportance of the service sector in the world economy and the need for servicesmarketing education.Learning Objectives:After reading this chapter, you should be able to1.Understand the basic difference between goods and services.•In general, goods are defined as objects, devices, or things, whereas servicesare defined as deeds, efforts, orperformances (The term product refers to bothgoods and services and is used in such a manner throughout the remainder ofthis text).2.Develop an appreciation for how service can be used as a competitiveadvantage for both intangible and tangible products.•The scale of market entities displays a continuum of products based on theirtangibility where goods are tangible dominant and services are intangibledominant. The core benefit of a tangible dominant product typically involves aphysical possession that contains service elements to a less degree. Incontrast,intangible dominant products do not involve the physical possession of a productand can only be experienced.3.Appreciate thefactors thatcreate the customer's service experienceand why itis important to manage the overall experience.•The Servuction model is constructed of two parts: that which is visible to theconsumer and that which is not.The visible part of the Servuction model consistsof three parts: the inanimate environment, the contact personnel/service➢PowerPoint Slide: #2➢PowerPoint Slide: #1

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Chapter 1An Introduction to Services2providers, and other customers.The invisible component of the model consists ofthe invisibleorganization and systems.4.Comprehendthe driving forces behind theimportance of the study of servicesmarketing.•There are a number of reasons why the study ofservices marketing is important:(1) consumers evaluate services differently than goods,and service marketersmust effectively manage the experiential aspects of the service product; (2)services can be effectively used as a differential advantage for tangibledominantproducts; (3) the growth of the global service economy in terms of contributionstogrossdomesticproduct (GDP) has increased dramatically; (4) the growth ofthe global service workforce has also increased accordingly;(5) the emergenceof technologically based e-serviceshastransformed many service industries; and(6) knowledge is needed in the area of developing sustainable servicesmarketing business practices.Opening Vignette:“The Burj al Arab Hotel•The world’s only 7-star hotel offers guests a remarkable service experience:oMagnificent viewsoLarge roomsoRain showers and Jacuzzis standardoFleet of chauffeur-driven Rolls-RoycesoFinest in personal service•The concepts provided in this text arethe keys for delivering a truly remarkableservice experience.Lecture Outline:I.IntroductionA.Traditional goods producers are turning to the service aspects of theiroperation to establish a differential advantage in the marketplaceB.New “global services era”characterized by:1.Economies and labor force dominated by the service sector2.More customer involvement in strategic business decisions➢PowerPoint Slide: #3➢PowerPoint Slide: #4

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Chapter 1An Introduction to Services33.Products that are increasingly market-focused4.The development of technologies that assist in the provision ofservices5.Employees with more discretionary freedom6.The emergence of new service industries and the “serviceimperative”-Reflects the view that the intangible aspects of products arebecoming the key features that differentiate the product inthe marketplace.II.WhatIs a Service?A.The distinction between goods and services isnot perfectlyclear.Examples include General Electric and IBM, generally thought of as majorgoods producers, who now generate more than half of their revenues fromservices.1.Goods-isdescribedas objects, devices,orthings.2.Services-isdescribedas deeds, efforts,orperformances.3.Product–refers toboth goods and services.B.Scale of Market Entities1.Helps illustrate how products fall along acontinuum that rangesfrom tangible dominant to intangible dominant.(See Figure 1.1)-Tangible dominant:products that possess physicalproperties that can be felt, tasted, and seen prior to theconsumer’s purchase decision.-Intangible dominant: products that lack the physicalproperties that can be sensed by consumers prior to thepurchase decision2.Defining service businesses too narrowly, firms can develop classiccases of marketing myopia.-isthe practice of too narrowly defining one’s businessbyoverlooking the service aspects of one’s products.➢PowerPoint Slide:5➢PowerPoint Slides:#6, 7

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Chapter 1An Introduction to Services4C.The Economic Value ofTransforming Goods into Services1.The economic value of products, like the coffee bean, progressesfromcommoditiestogoodstoservicestoexperiences.(See Figure1.2)D.Molecular Model1.A conceptual model of therelationship between tangible andintangible components of a firm’s operations.(See Figure 1.3)2.Understanding the importance and components of the serviceexperience is critical.III.Creatingthe Service ExperienceA.Benefit concept-the encapsulation of the benefits of a product in the consumer’smind1.Services deliver a bundle of benefits through the experience that iscreatedfor the consumer.2.For example, most consumers ofanorangewill never see theorange grove,will most likely never interact with thegrove workerswhoharvest the fruitnor with the management staff that directs theworkers; and they will also generally notconsume the orangein thecompany of other consumersat the grocery store.B.Servuction Model-a model used to illustrate the factors that influence the serviceexperience, including those that are visible to the consumer andthose that are not.(See Figure 1.4)Consists of fourfactors that directly influence consumers’serviceexperience: (visible)servicescape, contact personnel/serviceproviders, other customers, and(invisible)organizations andsystems➢PowerPoint Slide: #8➢PowerPoint Slide: #9➢PowerPoint Slides: #11–16➢PowerPoint Slide: #10

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Chapter 1An Introduction to Services51.Servicescape-the physical evidence used to design serviceenvironments.a.Plainly visible to consumers.b.Consists of ambient conditions, inanimate objects, and otherphysical evidence.2.Contact Personnel/Service Providers-Contact Personnel-employees other than the primaryservice 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 collegeinstructor.a.Plainly visible to consumers.b.Interaction between consumers and contactpersonnel/service providers are commonplace.3.Other Customersa.Plainly visible to consumers.b.Many customersmay be servedsimultaneously.Theinfluence of other customers can be active or passive.4.Invisible Organization and Systems-reflects the rules, regulations, and processes upon whichthe organization is based.a.Invisible to consumers.b.Have a very profound effect on the consumer’s serviceexperience.IV.Why Study Services?A.Growth of the global serviceeconomy1.Caused by a highly competitive international marketplace➢PowerPoint Slide: #17

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Chapter 1An Introduction to Services62.Higher disposable incomes have led to a proliferation of personalservicesa.Particularly in the entertainment sectorb.Breakdown of U.S.Service Supersectors and theirrespective contributions to GDP (see Figure 1.5)c.End result has been phenomenal growth in serviceindustries, shown clearly in Worldwide GDP (see Figure 1.6)B.Growth of the global servicelaborforce1.(See Figure 1.7) The growth and shifting of employment fromagriculture to manufacturing to services2.U.S.Bureau of Labor Statistics expectedservice occupations toaccount for more than 96% of all new job growth for the period2002–2012.3.The bulkofnew jobs created in America over the last 30 yearshave been white-collar jobs, in higher-level professional, technical,administrative, and sales positions.4.ReadGlobal Services in Action–Ski DubaiC.Emergence ofe-services?-an electronic service available via theNet that completes tasks,solve problems, or conducts transactions1.Phenomenal developments in technology–particularlythe Interneta.In 2014,over 3billion people representing42.3% of theworld’s population had access to the Internet.(See Figure1.8)➢PowerPoint Slide: #18➢PowerPoint Slide: #19➢PowerPoint Slide: #21➢PowerPoint Slide: #22➢PowerPoint Slide: #20

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Chapter 1An Introduction to Services72.Growth ofe-servicesa.Includingself-service technologies1.Technologically based services that helpcustomershelp themselves.2.Includinglocal bank’s online account services, ATMs,UPS package tracking service, Schwab’s stocktrading services, Travelocity’s online purchasingoptions, a grocery store’sself-check-outb.Read E-Service In Action–Restaurants Ride the SocialMedia WaveD.Developing sustainable service marketing business practices-the ability to meet current needs without hindering the ability tomeet the needs of future generations in terms of economic,environmental, and social challenges1.Why would a service provider want to embrace sustainablepractices?a.When the social good can overlap with business opportunityb.The overlap is known as the “sweet spot”2.There are four areas in which a company can achieve a source ofcompetitive advantage: eco-efficiency, environmental costleadership, beyond compliance leadership, and eco-branding.3.Read Sustainability & Service in Action–The Origins and Growthof “Green”V.SummaryUltimately, servicemarketing is about managing the compromising relationshipsthat must exist among marketing, operations, and human resources.Services permeate every aspect of our lives; consequently, the need forservicesmarketing knowledge is greater today thanever before.➢PowerPoint Slide: #23

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Chapter 1An Introduction to Services8REVIEWQUESTIONS:1.Define the following terms:goods, services, products.In general, goods are defined as objects, devices, or things, whereas, services aredefined as deeds, efforts, or performances.The term product refers toboth goodsand services.2.What can be learned from the service imperative?Today’s business environment is experiencing theemergence of new serviceindustries and the “service imperative,” where the intangible aspects of the productarebecoming more and more the key features that differentiate product in themarketplace. There are countless examples of firms using the service imperative todrive their businesses forward to profit and growth.3.Why is it difficult to distinguish between many goods and services? Use thescale of market entities and the molecular model concept to explain youranswer.The distinction between goods and services is not always perfectly clear.In reality,most services contain some tangible components, while most goods also containintangible components.It is difficult to say whether a pure service or a pure goodeven exist.The scale of market entities helps us understand whether the productunder consideration is tangibledominant or intangibledominant.4.Utilizingtheservuction 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 andsystems.5.How would yourservuctionmodel, discussed in question4, change as youdescribe the experience at a local restaurant?Answers will vary, but at the core should be a description of the visibleservicescape,contact personnel/service providers, other customers,and invisible organization andsystems.6.How does the organization and systems dimension of theservuctionmodeldiffer from the other three dimensions? What is the purpose of the organizationand systems dimension?The organization and systems dimension is invisible to the customer.Of course, thevisible components that comprise theservuction modelcannot exist in isolation, and

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Chapter 1An Introduction to Services9indeed, they have to be supported by invisible components that tie together theorganization 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 ofcountries comprise the top 10 service economies. These countries sometimesdiffer greatly, yet still generate large service economies. Please explain.Countries that industrialized their economies first eventually come under attack byothercountries that are newly making the transition from an agricultural to anindustrial economy.These“newcomer”countries offer lower product coststhatattractindustry. Consequently, as industrial sectors flow from one country to the next, thecountries they abandon begin to more heavily rely on the growth of their servicesectors as the mainstay of their economies. All developed economies now have largeservice sectors; and Japan, France, and Great Britain have service economies atleast as developed as that of theUnited States. Leading the pack are Hong Kong andthe Bahamas.8. Discuss the keys to delivering effective self-service technologies.Self-service technologies are purposely created to automate routine interactionsbetween customers andproviders with the goal of providing convenience andefficiency to both parties.A self-service must provide the customer a benefit (e.g.,convenience, an opportunity to customize, costsavings, timesavings,etc.). AnSSTthat is implemented purely to decrease the operating cost of the firm will most likelynot be well-received.9.Describeonline services that help humanize the online experience.E-servicesplay a critical role in the transformation of the customer’s onlineexperience that progresses over time from a functional experience to a morepersonalized experience. E-service humanizes theNet by providing various customerservice activities while simultaneously reducing the online firm’s operating costs.10. Discuss the four approaches tousingsustainability as an effectivebusiness positioning strategy.The four areas include: eco-efficiency, environmental cost leadership, beyondcompliance leadership, and eco-branding.Eco-efficiencyfocuses on the concept ofthe “double dividend.” Companies that attempt to reduce wastes and inefficiencieswithin the system see positive results bothfinancially and environmentally.Environmental cost leadershipinvolves developing a radical innovation that will allowthe company to be more environmentally friendly while maintaining costcompetitiveness.Beyond compliance leadershipinvolves companies wanting toincrease their sustainability efforts, but also wanting these efforts to be acknowledged

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Chapter 1An Introduction to Services10by the public. These companies often spend money on environmental certifications,such as LEEDS building certifications. The first-movers in an industry in this casehave the greatest advantage. Those who take the first initiative are seen asinnovative, while the rest of the companies within the industry are forced to followsuit. Eco-brandingstrategies focus on the use of marketing differentiation based onthe environmental attributes (e.g., organic, vegan, or fair-trade status) of products.There are three basic prerequisites that often exist for firms to successfully executethis approach: consumers must be willing to pay for the costs of ecologicaldifferentiation; reliable information abouttheproduct’s environmental performancemust be readily available to the consumer; and the differentiation must be difficult toimitate by competitors.

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Chapter 2The Service Economy:Supersectors and Ethical Considerations11CHAPTER2:THE SERVICEECONOMY:SUPERSECTORSAND ETHICALCONSIDERATIONS"If you don’t have integrity, you have nothing. You can’t buy it. You can have all the moneyin the world, but if you are not a moral andethical person, you really have nothing."Henry KravisChapter Objectives:This chapter provides an overview of the service economy by introducing the nineservice supersectors.Although on the surface many of these supersectors seem quitediverse, service classification schemes are discussed that assist in our understanding ofthe commonalities among service industries.Trends and concerns pertaining to thegrowth of service industries are presentedthatfurther our understanding of the serviceeconomy.Finally,this chapter introduces the very important topic of ethical issues inservices marketing. Service marketers as well as service customers often face uniqueethical issues that merit discussion.Learning Objectives:After reading this chapter, you should be able to1.Describe the nine supersectors that comprise the service economy.•An in-depth look into the service economy providesan overview of the serviceeconomy supersectors including: (1) education and health services, (2) financialactivities, (3) government, (4) information, (5) leisure and hospitality, (6) professionaland business services, (7) transportation and utilities, (8) wholesale and retail trade,and (9) other services.2.Identify thetrends and concerns pertaining to the growth of the serviceeconomy.•Several key forces continue to influence the growth of the service sector.Thesetends include the emergence of technologicallybased e-services, socio-culturalforces derived from anaging population, and the competitive force of“outservicing,” which involves the offshoring, outsourcing, and industrialization ofmany services.➢PowerPoint Slide: #2➢PowerPoint Slide: #1

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Chapter 2The Service Economy:Supersectors and Ethical Considerations123.Understand the reasons consumers are particularly vulnerable to ethicalmisconduct within the service sector.•Reasons contributing to consumer vulnerability include: (1) services possess fewsearch attributes; (2) services are often technical and specialized, thereby,difficult to understand; (3) a time lapse sometimes exist between serviceperformance and consumer evaluation; (4) many services are sold withoutwarranties or guarantees; (5) many services are provided by unsupervisedboundary-spanning personnel; (6) services are nonstandardized; consequently,some variability is accepted; (7) reward structures based solely on sales tend toreward and fail to punish ethical misconduct; and (8) due to the consumers’involvement in the production process, consumers often accept part of the blamefor 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 whileconducting 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 frequentlysuffer 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 awhole suffers.Ethical improprieties have also been linked to customerdissatisfaction (loss of sales), unfavorable word-of-mouth publicity for theorganization, andanegative 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 includeemployeesocialization, standards of conduct, corrective control, leadershiptraining, service/product knowledge, monitoringofemployee performance, andthe buildingof long-term customer relationships.Opening Vignette:Getaway2Give•Getaway2Give(G2G)is the world’s only philanthropic vacation club.Itsdestinations include elite resorts and privately ownedhomes in coveted beach,ski, city and international destinations, such as Anguilla, Aspen, New York City,➢PowerPoint Slide: #3

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Chapter 2The Service Economy:Supersectors and Ethical Considerations13and Tuscany.Its designated charities receive half of new membership feesandapercentage ofallrental fees.•Another way G2G differentiates itself is by facilitating “voluntourism,” or specialactivities that allow members to give their talents and time to deserving charitieswhile on vacation.•G2Gappeals to affluent Americans who feel grateful for their fortunate lifestyleand want to give something back.Lecture Outline:I.IntroductionA.The first half of thechapterfocuses on the nine servicesupersectors thatcollectively comprise the service economy. Forstudents seeking a careerin services marketing, theinformationonprojectedsupersector growth,salary implications, and educational requirementsshould be particularlyhelpful.B.Next,thechapterintroducesanddiscussesconceptsrelatedtosocialresponsibilityandservicesmarketingethics.Becauseoftheuniqueopportunities that exist for ethical misconduct in service organizations,students of services marketing courses in particular should be made aware ofthe issues surrounding ethical decision making.II.WhatIs the Service Economy?A.It is generally accepted that the service economyincludes the “soft parts”of the economy consisting of nine industry supersectors–education andhealth services, financial activities, government, information, leisure andhospitality, professional and business services, transportation and utilities,wholesale and retail trade, and other services.1.Figure 2.1TheU.S.Service Economy (Employment GrowthProjections 2006–2016)2.Figure 2.2 Past,Present,andFuture: U.S.Service SupersectorEmploymentB.Education and Health Services1.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 2The Service Economy:Supersectors and Ethical Considerations14.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 inhealth care.b.Social assistance such as individual and family services,vocational rehabilitations services, and community food andhousing, and emergency and other relief services.C.Financial Activities1.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 againstfinancial loss for a variety of incidents.2.Securities, commodities, and other investmentsa.Manage the issuance, purchase, and sale of financialinstruments.b.Staggering 46% employment increase expected because ofthe growing need for investments and securities to fuel theglobal marketplace, as well as the increase in need forfinancial advice.➢PowerPoint Slide: #7

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Chapter 2The Service Economy:Supersectors and Ethical Considerations15D.The Government1.Consist ofthree subsectors:a.Not-for-profit sector (advocacy, grantmaking, and civicorganizations)b.Federal governmentc.State and local governments2.Employed approximately 1.2 million personnel in 2006; projectedincrease by 13% (2006–2016) in the not-for-profit sector.3.Federal government islargest single employer with 1.8 million civilianemployees.E.Information1.Consist of establishments that produce and distribute information andcultural products, provide the means to distribute or transmit theseproducts, and/or process data.2.Major players include publishing industries, the motion picture andsound recording industries, the broadcasting industries, thetelecommunication industries, Internet service providers and websearch portals, data procession industries,and information servicesindustries.a.Represents2.6% of all employment and 1.9% of allestablishments.b.Software publishers are currently the fastest growing industrywithin the Information supersector, with a projected growthrate of 32% (2006–2016).3.Read E-Services in Action–Top Ten Social Media RetailersF.Leisure and Hospitality1.Arts, entertainment, and recreation➢PowerPoint Slide: #8➢PowerPoint Slide: #9➢PowerPoint Slide: #10

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