Chapter 16 - Service and the Bottom Line Flashcards Preview

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Flashcards in Chapter 16 - Service and the Bottom Line Deck (25):

What are the 3 offensive marketing effects of service on profits? The whole story

So services done by any company regardless if they are service or product, influence these 3 things:

1. Increase Market Share

2. Better Reputation

3. Price Premium (can charge more)

These all generate bigger sales, which create bigger profits


What are the 4 defensive marketing effects of service on profit? The whole story

So good service influences customer retention, which influences these 4 things:

1. Lower costs

2. Volume of purchases

3. Price premium

4. Word of mouth

Increase margins, and therefore profits


What is the link between offensive and defensive marketing?

They are linked, and help each other. Defensive marketing increases margins, and offensive marketing increases sales. So more sales with a higher margin = higher profits


How do you make money with service-profit chain?

1. Importance of internal processes

2. Outcome (value makes satisfaction makes loyalty)



Why are internal processes important to service-profit chain?

They lead to maximizing peoples effect within organization. And people is part of 7Ps remember. Happy employees make happy customers, such as with Zappos, Jetblue


What are offensive effects of service quality?

gaining new customers


What are defensive effects of service quality?

retaining customers


What does ROSQ (ROSQ) model allow a company to do?

allows a company to gauge the return on investments in different service activities


What are the two most frequently asked questions by CEOs of companies looking to improve service quality and better meet customer expectations?

1. How do I know that service quality improvements will be a good investment

2. Where in the company do I invest money to achieve the highest return


The ROSQ (Return on Service Quality) model is based on what 4 assumptions?

1. Service quality is an investment

2. Service quality efforts must be financially accountable

3. It is possible to spend too much on service quality

4. Not all service quality expenditures are equally valid


The ROSQ approach looks at service quality investments as a chain of effects. Describe this chain of effects

1. Improvement will produced increased level of customer satisfaction at attribute or process level (decrease wait time)

2. Increased customer satisfaction at attribute level lead to increased overall customer satisfaction (could be checked by new satisfaction survey against last period)

3. Higher overall service quality of customer satisfaction will lead to increased behavioural intentions such as repurchase and usage increase (WOM, repeat visits)

4. Increased behavioural intentions will lead to behavioural impact, such as repurchase or cust retention, pos WOM, increased usage

5. behavioural effects will lead to improved profitability


For things such as ROSQ and knowing when to invest in service, is this intuition?

No, the manager doesn't have to rely on executive intuition anymore and can use info from software, and consulting companies to make informed decisions


What is the PIMS research?

Profit impact of marketing strategy is a study on benefits of offensive marketing (market share, reputation, price premiums)


What did PIMS find out?

Companies offering superior service achieve higher than normal market share growth and that service quality influences profits through increased market share and premium prices as well as lowered costs and less rework


Served correctly, customers generate what type of profits each year they stay with a company?

Increasingly more profits each year they stay

Longer a company keeps a customer, the more money it stands to make


What is WOM value called?

Referral values


Out of the 5 service dimensions, what did the bulk of research find was the most important?

Reliability, but take this with grain of salt and know that they all need to be delivered with different internal strategies and resources must be allocated where needed


How is sales/service encounter super important?

Well ⅘ of the service dimensions are often tested within 10 minutes of first service encounter, and this is a critical time when service quality perceptions are being made, which will impact behaviour intentions, and then customer retention, and then profits!


What is the issues with using only financials such as profit or cost as performance measurement?

What do you need?

You miss things such as operational processes, quality, customer satisfaction.

You need a balanced performance scorecard!


Define balanced scorecard?

set of measures giving top managers a fast but comprehensive view of the business, that complements financial measures with operational measures of customer satisfaction, internal processes, and organizations innovation and improvement activities, which are measures that are the drivers of future financial performance


Besides financial measures, what are the 3 other measures on the balanced scorecard?

Financial Measures
(price premium, volume increases, long-term value of customer etc)

1. Operation perspective
(% right first time, transaction time, process quality etc)

2. Innovation and learning perspective
(# of new products, return on innovation, skills etc)

3. Customer perspective
(perceptions, expectations, perceived value, behavioural intentions, # of customers, # of cross sales etc)


How can defections be a key performance standard?

Defections (lost customers) are key because they are the lost revenue to the firm, and they should know why they are losing them


Are operational measures independent of customer perceptual measures?

No, operational measures are intricately linked with customer perceptual measures, as customer-defined standards (gap 2)


What are the 4 major mistakes of measuring non financial performance measurements?

1. Not Linking Measures to strategy
(us Causal modeling approach to find important measures)

2. Not Validating the links
(Didn't link to financial measures)

3. Not setting right performance targets
(aim to high or low, 100% satisfaction is tough)

4. Measuring incorrectly
(can't just measure complex with one or two measures)


What does the Net Promoter Score measure?


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