Services Marketing: Concepts, Cases and Strategies
Hoffman, Bateson, Wood & Kenyon
ISBN: 9781844808137
SHORT-ANSWER ESSAYS
Chapter 12: People Issues – Managing Service Customers
1. Increasing consumer participation in the service delivery process has become a popular
strategy to increase the supply of service available to the firm and to provide a form of service
differentiation. Provide guidelines that assist the firm in effectively increasing the amount of
consumer participation.
ANS:
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Develop customer trust.
Promote the benefits and stimulate trial.
Understand customer habits.
Pretest new procedures.
Understand the determinants of consumer behavior
Teach customers how to use service innovations
Monitor and evaluate performance
2. Discuss the pros and cons of increasing customer participation in the service
delivery process.
ANS:
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Increasing customer participation is associated with a number of advantages and
disadvantages. The primary advantage to the customer and the service firm is that
customers can customize their own service and produce it faster and less expensively
than if the firm had produced it. Customers who pump their own gas, make their own
salads, and pick their own strawberries are classic examples. On the other hand,
increased levels of customer participation are also associated with the firm’s losing
control of quality, increased waste, which increases operating costs, and customer
perceptions that the firm may be attempting to distance itself from its customers.
3. List the eight "principles of waiting".
ANS:
1.
2.
3.
4.
5.
6.
7.
8.
Unoccupied time feels longer than occupied time.
Preprocess waits feel longer than in-process waits
Anxiety makes the wait seem longer.
Uncertain waits are longer than known, finite waits.
Unexplained waits are longer than explained waits.
Unfair waits are longer than equitable waits.
The more valuable the service, the longer the customer will wait.
Solo waits are longer than group waits.
Services Marketing: Concepts, Cases and Strategies
Hoffman, Bateson, Wood & Kenyon
ISBN: 9781844808137
4. Discuss the CRM outcomes of coding, routing, targeting and sharing.
ANS:
 Coding: Categorizing customers based on how profitable their business is.
 Routing: Directing incoming customer calls to customer service representatives where
more profitable customers are more likely to receive faster and better customer service.
 Targeting: Offering the firm’s most profitable customers special deals and incentives.
 Sharing: Making accessible key customer information to all parts of the organization and
in some cases selling that information to other firms.
5. Discuss the reasons behind the increased deployment of CRM systems.
ANS:
 Customer relationship management (CRM) is the process of identifying, attracting,
differentiating, and retaining customers. CRM allows the firm to focus its efforts
disproportionately to its most lucrative clients. CRM is based on the old adage that 80%
of a company’s profits come from 20% of its customers; therefore, the 20% should
receive better service than the 80%.
 The increased usage of CRM practices, where high-value customers are treated superior
to low-value customers, can be attributed to several trends. First, some believe that
customers have done it to themselves by opting for price, choice, and convenience over
high quality service. Another reason CRM is currently fashionable is that labor costs
have risen, yet competitive pressures have kept prices low. The end result is that gross
margins have been reduced to 5 to 10 percent in many industries. With these kinds of
margins, companies simply cannot afford to treat of all its customers equally.
Finally, CRM is being increasingly implemented because markets are increasingly
fragmented and promotional costs are on the rise.
6. Discuss the limitations of CRM practices.
ANS:
 Technology greatly enhances CRM processes by identifying current and potential
customers, differentiating among high-value and low-value customers, and customizing
offers to meet the needs of individual high-value customers. However, there are
limitations. First, customers do not like hearing that some customers are valued more
than others, especially where they are not the ones receiving the “white glove” treatment.
Another concern relating to CRM practices involves privacy issues. How much should a
company really know about its customers? When discussing its new Customer
Information System, the Vice-President of Continental Airlines recently boasted…”We
even know if they [the customers] put their eyeshades on and go to sleep.” CRM is also
limited by its focus on past purchase patterns. In reality, what someone spends today is
not necessarily a good predictor of what their behavior will be tomorrow. Questions are
Services Marketing: Concepts, Cases and Strategies
Hoffman, Bateson, Wood & Kenyon
ISBN: 9781844808137
being asked such as how many potential profitable customers are being eliminated today
because their current purchasing behavior has them slotted and treated as “commoners.”
Spurned by such treatment, how many of these customers defect to another provider that
appreciates their potential and treats them appropriately. Life situations and spending
habits do change over time. Finally, service discrimination also leads to some interesting
ethical questions. Should only the wealthy be recipients of quality service? Is this a form
of red-lining—the practice of identifying and avoiding unprofitable types of
neighborhoods or types of people.