CHAPTER 11:

EMPLOYEES’ ROLES IN SERVICE DELIVERY

CHAPTER TOPICS

 The Critical Importance of Service Employees

 Boundary Spanning Roles
 Strategies for Closing Gap 3
 Service Culture
 Technology Spotlight: Quality versus Productivity—How CRM Systems Help Employees
 Global Feature: How Well Does a Company’s Service Culture Travel?

CHAPTER OBJECTIVES

1. Illustrate the critical importance of service employees in creating customer satisfaction and service
quality.

2. Demonstrate the challenges inherent in boundary-spanning roles.

3. Provide examples of strategies for creating customer-oriented service delivery through hiring the right
people, developing employees to deliver service quality, providing needed support systems, and
retaining the best service employees.

4. Show how the strategies can support a service culture where providing excellent service to both
internal and external customers is a way of life.

LECTURE TIPS & AIDS

1. An alternative to presenting this material in straight lecture format would be to have students help in
the delivery of the service. Figure 11.6 provides an excellent framework for such an activity. In
particular, the class could be divided up into 12 approximately equal size groups (2-4 students,
depending on class size). Each group might be then assigned one of the human resource strategies
depicted in Figure 11.6. For example, one group might be assigned the “empower employees” strategy.
As part of their assignment, then, the students in that team would be asked to describe what we mean
by empowering employees, to discuss how this fits into one of the strategies (in this case “develop
people to deliver service quality”), and to provide examples from industry that they are aware of where
these strategies have been employed. This will help to break up the routine of regular lectures, and
allow students to become more involved in the classroom discussion.
2. Guest speakers can often make a valuable contribution to what is being said in class. Figure 11.6 can
also be used to structure a lecture around the topics in this chapter for a guest speaker. In particular, an
instructor might approach a guest speaker in advance. For example a vice president of marketing or
possibly human resource management in an organization, and ask him or her to come in during the
discussion of the material in this chapter. Without a lot of preparation, many guest speakers can talk
intelligently from this figure. In particular, many knowledgeable managers will know what their
company is planning and doing for many of the human resource strategies depicted in Figure 11.6. So
for example, a guest speaker can easily talk about what’s being done to empower employees, to train
for interactive skills, or things they may be doing to become a preferred employer.

Providing this figure as a framework provides benefits for both an instructor and the guest speaker. For
the instructor, it helps to keep the conversation and the discussion on topics related to class material.
For the guest speaker, it gives him/her an organized framework from which to talk. Most of the topics
are areas that he/she is probably very knowledgeable, and the figure provides an easy method to present
ideas and strategies used in their particular organization (without having to spend a lot of time in
developing a specific framework for that particular class lecture).

ACTIVE LEARNING ACTIVITIES

1. In groups of 5 or 6, develop “role plays” of some of the human resource strategies for closing gap 3
(see Figure 11.6). Each group should create two scenarios: one where these strategies are not used and
one where they are used effectively. Each group then presents its scenarios in class. Groups should
start with the “ineffective” scenario and then ask the class to critique what went wrong before presenting
their “effective” version.

2. Have students find clips from popular movies that demonstrate either very effective or very ineffective
internal service relationships. Show the clips to the class and provide a brief analysis of the film
material as it relates to Chapter 11.

Students often come up with amazing ideas for this assignment. One example of this is a student who
showed a clip from a James Bond movie where “Q” and the R & D personnel for Her Majesty’s Secret
Service were showing Bond all the gadgets they had developed to support his hazardous occupational
activities. The student then showed a scene from one of the Star Wars films that demonstrated the poor
internal service Darth Vadar received from his organization. The final part of this presentation was a
mini-analysis of the qualitative and quantitative impact of the internal service on the front-line
employees and their organizations (all very negative for Darth Vadar and the Evil Empire and very
positive for James Bond and Her Majesty’s Secret Service!).

3. The article “The Power of Internal Guarantees” [Christopher W. L. Hart (1995). “The Power of Internal
Guarantees.” Harvard Business Review. January-February: 64-73] defines internal guarantees as “a
promise or commitment by one part of an organization to another to deliver its products or services in
a specified way and to the complete satisfaction of the internal customer or incur a meaningful penalty,
monetary or otherwise” (p. 64). Summarize the key points of this article and relate it to the relevant
material in Chapter 11.

[Note: An excellent and enjoyable resource for understanding the impact and value of excellent
front-line employees can be found in The Real Heroes of Business and Not a CEO Among Them (by
Bill Fromm and Len Schlesinger (1993). New York, NY: Doubleday). Each of the book’s 14 chapters
tells the story of a different front-line service worker who provides extraordinary service. The workers’
lifetime value to the company is also calculated—which ties in nicely with the material covered earlier
in the text on the lifetime value of a customer. An excellent video resource on the topic of building
 customer relationships can be found in “Segment 4: Managing for Quality and Productivity
Improvements” from the video series Achieving Breakthrough Service by James Heskett, W. Earl
Sasser and Leonard Schlesinger. The series is available through Harvard Business School Video Series,
P.O. Box 1010, Boston, MA 02117, (800) 248-1878, FAX (617) 496-8866.]

4. A good question for stimulating lively discussion is “Is empowering employees always a good thing?”
To address this question, an instructor might consider passing out a copy of the article “Employees
Putting on the Ritz at KMC” included on the next page. This article discusses an employee
empowerment program at Kootenai Medical Center in Coeur d’Alene, Idaho.

Students could be asked to discuss potential benefits of the program of empowerment at KMC, and/or
discuss potential drawbacks. Perhaps the class might even be divided and forced to argue for the
benefits of such a program, or argue regarding the drawbacks of such empowerment. Students might
also, at the end of the discussion, think from a “services marketing” perspective whether or not KMC’s
program is a good idea, and asked to defend their opinion. Adaptations of this question have been used
very effectively in exams.
Employees Putting on the Ritz at KMC:
Hospital workers allowed to spend $1,000 a year to improve patient stays
By Craig Welch
COEUR d’ALENE—Kootenai Medical Center plans to give all 1,000 of its employees the
spending power of a hotel housekeeper. But not just any housekeeper—a Ritz-Carlton Hotel
housekeeper. Starting Nov. 1, KMC’s top brass will let every hospital worker spend up to $1,000
a year to improve patients’ or family members’ stays or to help resolve customer complaints. The
million-dollar move mirrors a program at the luxury hotel, which empowers all its employees to
spend money without a manager’s approval. The idea: Keep customers happy.

“We do everything we can to try to never lose a customer,” said Amber Vierra, a spokeswoman for
the Ritz in San Francisco. Joe Morris, the hospital’s chief executive officer, thinks that is a worthy
goal for a hospital as well. Morris stole the idea from author and business guru Tom Peters, who
lectured last month at Eastern Washington University.

“He told us about a housekeeper named Rosa in charge of the second floor at the Ritz-Carlton who
had the authority to spend a couple of thousand dollars to please a guest,” Morris said. Morris ran
with the brainstorm. Under his new program, radiologists could knock down a customer’s bill
when it’s clear the patient had been overcharged. A janitor could buy pizza for family members
waiting for grandma to come out of surgery. A dietician could pay for a cab ride for an elderly
woman who can’t find a ride home.

“People want to have as much control of their work as possible,” Morris said. “Giving them
authority to spend money is a symbolic one, and it takes care of needs of patients and family. That
sends a good message to folks.”

Currently, he said, patients with billing complaints go through a billing department. It may be
months before the complaint is resolved. Other examples abound. “Sometimes a person flies in to
visit a relative and the admitting desk clerk says they’re not in here and we later discover they are
in the hospital,” Morris said. Under the program, Morris said, a receptionist could apologize to
Uncle Joe and perhaps pay for his hotel room.

At the Ritz-Carlton in San Francisco, receptionists frequently eliminate phone charges if customers
can’t remember placing the call, said Vierra. “If another guest is making noise next door, we would
relocated the guest,” she said. “If we didn’t have a room, we’d offer them another night’s stay
free.” The hotel program aptly is named “instant guest pacification,” Vierra said. Morris is still
working out some of the finer points of the hospital’s program. He wants employees to fill out
reports explaining the expenses so the hospital can better track—and rectify—complaints.

And while 1,000 employees spending $1,000 each could cost $1 million a year, Morris says he isn’t
concerned. “Everyone is not going to spend all the money,” he said. Besides, “if they’re correcting
a mistake or problem, it’s something we should do anyway.” His biggest concern: Employees
might be reluctant to spend the money. “I might have to do it myself just to show them it’s OK,”
he said, laughing.

[Note: This article originally appeared in The Idaho Spokesman-Review, October 9, 1997, pp. A1 and A15.]

Copyright 1997. Reprinted with permission of The Spokesman-Review.

DISCUSSION QUESTIONS

1. Why are service employees critical to the success of any service organization? Why do we
include an entire chapter on service employees in a marketing course?

Because services are typically delivered by people to people, the employees who communicate about
and actually deliver the service are critical to the organization’s success. As stated at the beginning of
the chapter:

 They are the service.

 They are the organization in the customer’s eyes.
 They are the brand.
 They are marketers.

Each of the above ideas is developed on p. 318 of the text. Further, there is considerable research that
suggests that employee satisfaction and customer satisfaction are correlated. Organizations that ignore
or treat their employees badly will likely have customers who are less satisfied than will organizations
where employees are treated well. Exhibit 11.1 illustrates the underlying linkages between employee
satisfaction and customer satisfaction. Finally, the dimensions of service quality are frequently driven
by employee behaviors. Quality service is therefore highly dependent on recruiting, training, and
retaining employees who can and will deliver excellent service.

2. What is emotional labor? How can it be differentiated from physical or mental labor?

Emotional labor is a term coined by Arlie Hochschild in her book The Managed Heart (note 19 in the
chapter). It is the type of labor that goes beyond physical or mental skills, drawing on employees’
feelings and inner emotions. It means delivering smiles, making eye contact, showing sincere interest,
and engaging in friendly conversation with people who are essentially strangers. Emotional labor often
requires employees to suppress their true feelings at the moment. A good follow-up to this question is
to ask students to think about jobs they have had and whether emotional labor was a major part of the
job. The students’ own examples help to make the concept even more concrete.

3. Reflect on your own role as a front-line service provider, whether in a current job or in any
full- or part-time service job you’ve had in the past. Did you experience the kinds of conflicts described in
the boundary-spanning roles section of the chapter? Be prepared with some concrete examples for class
discussion.

This question allows students to make more concrete, through application, the types of conflicts
discussed in the text on pp. 323-324. Students will generally provide excellent and clear examples. The
four major sources of conflict are:

person/role conflicts: employees feel that they must suppress their own personalities, orientations, or
values to effectively perform their jobs.
 organization/client conflicts: employees are faced with conflicting needs of the organization
versus the customer; this conflict is especially intense when the employee believes the
organization’s policies/rules are wrong and the customer is right, but yet he/she can’t do what
the customer is asking for.
 interclient conflicts: these conflicts occur when the employee is serving multiple customers
with conflicting needs—to satisfy one customer may mean causing another customer to be
disappointed.
  quality/productivity trade-offs: in many instances, employees are asked to provide both high
quality/customer satisfaction and to be efficient and productive; these goals are not always
compatible, particularly at the level of individual employee/customer interactions.

4. Select a service provider (your dentist, doctor, lawyer, hair stylist) with whom you are familiar and
discuss ways this person could positively influence the five dimensions of service quality in the context
of delivering his or her services. Do the same for yourself (if you are currently a service provider).

This question allows students to see how the dimensions of service quality (reliability, assurance,
tangibles, empathy, and responsiveness) are reinforced by individual employees at the service
encounter level. Many times discussions of the dimensions tend to stay at the abstract or organizational
level. By focusing in on a specific person (or even themselves), students can start to see how the
behaviors of individual employees are what actually determine perceptions of quality in many
instances.

5. Describe the four basic human resource strategy themes and why each plays an important role in
building a customer-oriented organization.

The four basic themes are shown in Figure 11.6, and each is discussed in some detail on pp. 325-341.
It is important to point out that at the center of Figure 11.6 is the purpose for developing the four
strategic themes: customer-oriented service delivery. The four strategy themes are: hire the right
people; develop people to deliver service quality; provide needed support systems; and retain the best
people. The first paragraph at the beginning of each of the four strategy theme sections provides the
rationale for the strategy and how it is linked into the overall goal of delivering customer-oriented
service. This question can lead into a more detailed discussion of any/all of the specific strategies listed
within the four basic themes.

6. What is the difference between technical and interactive service skills? Provide examples
(preferably from your own work context, or from another context with which you are familiar). Why do
service employees need training in both?

Technical skills are those basic knowledge, physical, and mental skills and capabilities needed to
perform a particular job. For example (other examples are provided in the text):

 a bank teller must be able to operate the bank’s computer information system in dealing with
customers and must have basic math skills and knowledge of the bank’s policies and
procedures.

a medical doctor must have a degree from a certified medical school, have passed certain exams, and have
knowledge of policies and procedures related to hospitals, insurance companies, etc.

 a sanitation engineer (garbage collector) must be able to drive a particular type of large
collection vehicle and operate the equipment, have the physical strength required to do the job,
and have knowledge of the company’s policies and procedures.

In addition to the technical skills required to do the job, service employees also need interactive service
skills that allow them to provide courteous, caring, responsive and empathetic service. They need
training in listening, problem-solving, communication and interpersonal skills. Many times, it is the
ability to excel at interactive skills that can provide a competitive advantage for an individual provider
or a company. Customers often assume that the technical skills are there and do not give a firm “extra
credit” for being good at technical skills. However, excellence in interactive skills frequently surprises
customers and may even result in “exceeding their expectations.” Following a discussion of these two
 skills sets, using students’ own examples, it is useful to ask how many of them received training on
their jobs in one or both types of skills. In most cases, students will have had technical skills training,
but interactive skills training is far less common.

7. Is empowerment always the best approach for effective service delivery? Why is employee
empowerment so controversial?

This question can provide quite a long and meaningful discussion since empowerment is a well-used
and often poorly understood concept. If the instructor plans to use this question for a lengthy
discussion, Bowen and Lawler’s article (note 44 at the end of the chapter) provides excellent back-up
and additional material to add to the discussion. Empowerment may not always be the best approach
for effective service delivery, as pointed out in the text on page 323. In a 1992 Sloan Management
Review article, Bowen and Lawler presented a contingency framework for when empowerment is
most effective vs. a production line approach to service (note 44). They suggest that an
empowerment approach is best when:

 the business strategy is one of differentiation and customization

 customers are long-term relationship customers
 technology is nonroutine or complex
 the business environment is unpredictable
 managers and employees have high growth and social needs and strong interpersonal skills.

A production line approach is most appropriate when the opposite conditions hold.

Employee empowerment is controversial for a variety of reasons:

 it is often poorly understood

 poorly designed empowerment strategies are tried and fail to produce results
 it is threatening particularly to middle managers who may see their authority and scope of
control diminishing
 there are real benefits, costs, and tradeoffs (see Exhibit 11.3)
 it is not always the most appropriate strategy (as discussed above).

8. Define service culture. Can a manufacturing firm have a service culture? Why or why not?

As defined by Christian Gronroos and cited in the text, a service culture is “a culture where an
appreciation for good service exists, and where giving good service to internal as well as ultimate,
external customers is considered a natural way of life and one of the most important norms by
everyone.” The richness of this definition and the difficulty in achieving it are discussed on pp. 341-
344. Organizations that have very strong service cultures (e.g., FedEx, Nordstrom, Disney) usually
have had this type of culture for a long time, perhaps even from the time the organization was first
established. Changing from a non-service culture to a service culture, while it can be done is a long
and challenging process. Given the definition of a service culture, a manufacturing company can
certainly have a service culture. In fact, many are recognizing that to be competitive, they must work
toward achieving a service culture.
POSSIBLE WEB SITES FOR CHAPTER 11

Company Location
Chik-fil-A www.Chick-fil-A.com
McDonalds Hamburger University www.mcdonalds.com/corporate/careers/hambuniv/index.html
PeopleSoft www.peoplesoft.com
Rosenbluth International www.rosenbluth.com
SAS Institute www.sas.com
Siebel Systems www.siebel.com
Southwest Airlines www.southwest.com
Yellow Corporation www.yellowcorp.com

APPROPRIATE CASES FOR CHAPTER 11

From Zeithaml and Bitner (2003) Services Marketing text:

 Custom Research Inc. (A) – Case 2

 Northwest Airlines and the Detroit Snowstorm – Case 3

 Ernst & Young LLP – Case 4

 The Quality Improvement Customers Didn’t Want – Case 5

From other sources:

 AT&T (A): Focusing the Services Salesforce on Customers; AT&T (C): Employees as Customers
[included in the second edition of this text: Zeithaml and Bitner (2000) Services Marketing:
Integrating Customer Focus Across the Firm, New York, NY: McGraw-Hill Companies]

 EuroDisney: The First 100 Days [included in the second edition of this text: Zeithaml and Bitner
(2000) Services Marketing: Integrating Customer Focus Across the Firm, New York, NY:
McGraw-Hill Companies]

 Four Seasons Hotels and Resorts [Harvard Business School Case 9-800-385, 2000]

 PeopleSoft (1996), available through ITSMA [Information Technology Services Marketing

association, One Militia Drive, Suite 4, Lexington, MA; (781) 862-8500]

 The Ritz-Carlton: Using Information Systems to Better Serve the Customer [Harvard Business
School Press Case 9-395-064, 1995]

 Shouldice Hospital Ltd. [Harvard Business School Case 9-683-068, 1983; also reprinted in the
first edition of this text: Zeithaml and Bitner (1996) Services Marketing, New York, NY:
McGraw-Hill Companies]
 CHAPTER 12:
CUSTOMERS’ ROLES IN SERVICE DELIVERY

CHAPTER TOPICS

 The Importance of Customers in Service Delivery

 Customers’ Roles
 Self-Service Technologies—The Ultimate in Customer Participation
 Strategies for Enhancing Customer Participation
 Technology Spotlight: Technology Facilitates Customer Participation in Health Care
 Global Feature: At Sweden’s IKEA, Customers Create Value for Themselves

CHAPTER OBJECTIVES

1. Illustrate the importance of customers in successful service delivery.

2. Enumerate the variety of roles that service customers play: productive resources for the organization;
contributors to quality and satisfaction; and competitors.

3. Explain strategies for involving service customers effectively to increase both quality and
productivity.

LECTURE TIPS & AIDS

1. The topic of customers’ roles in service delivery is a very interesting one to discuss in a classroom
setting. To prepare students to take an active role in the lecture, students might be asked during the
meeting prior to the discussion of this chapter to do the following:

Your assignment is to choose a service that requires a moderate or high level of your participation as a
customer. Table 12.1 provides examples of such services. You should pick a unique service, one that
few people in the class are likely to select. The following questions pertain to the service you have
selected. In addition to answering the questions on this sheet, you should be prepared to discuss any
(or all) of these questions in class. Students will be randomly selected to discuss their responses to
these questions to illustrate various concepts included in the chapter.

1. What service have you selected?

2. Describe your role, as a customer, in the service delivery.
3. How did you learn your “role”?
4. How important is the customer to the service delivery process?
5. How would you describe your level of participation (low/medium/high)? Explain.
6. What influence do other customers have on your service experience?
7. When might other customers enhance your experience?
8. When might other customers diminish your experience?
9. Could you be considered a “partial employee” of this organization? Explain.
10. When might you, as the customer, be able to enhance your experience?
11. When might you, as the customer, be able to do something that diminishes your experience?
12. Is this a service that you might, at some point, be able to provide yourself (without the service
provider’s assistance)? Why or why not?
 The combination of providing the actual discussion questions in advance, allowing students to select a
service they are familiar with, and providing the opportunity for students to think through questions
prior to class can significantly help in increasing class participation. This activity is particularly good
in encouraging (or even “forcing”) participation from students who are normally very quiet in class. If
students are expected to turn in written answers to these questions, most of them will be fairly prepared
to contribute to class discussion. In a class of 20 or more, the instructor can easily move from one
question to another and from one student to another so that many students are involved in co-creating
the classroom experience.

1. The following suggestion is for those instructors that want to try something very different in their class.
This activity will, in effect, “turn the tables” in the classroom by having the students take on the role of
instructor and having the instructor become a student. In particular, the last part of the chapter (on
strategies for enhancing customer participation) will be “taught” by teams of students. The class is
divided into teams in the meeting prior to this one. (The example below is for seven teams, but the
outline could easily be altered for a different number of teams.) Team 1 is instructed (privately) that
the instructor will be a couple of minutes late and that they should begin the discussion at the normal
starting time for the class. Each team will be expected to cover their assigned material in 3-5 minutes.

In our next class, we will begin class by having each team “produce” a brief (3-5 minute)
presentation related to a specific issue for enhancing customer participation. Your task is to
address the major elements of the section of the Zeithaml and Bitner textbook that you have
been assigned. Each segment should highlight the major points of the section and provide an
example of each relevant issue (other than what is in the textbook). (Although you will not
have to discuss it, be sure to observe your own roles in the service delivery of this class session,
as you will be “co-creating” the service.)

Team 1 Overview/Introduction/Goals of a Customer Participation Strategy (p. 364)

Team 2 (1) Define Customers’ Roles (pp. 364-365)

Customer’s Job:
Helping Oneself

Team 3 Customer’s Job: (pp. 365-368)

Helping Others
Promoting the Company
Individual Differences: Not Everyone Wants to Participate

Team 4 (2) Recruit, Educate, and Reward Customers (pp. 368-370)

Recruit the Right Customers
Educate and Train Customers to Perform Effectively

Team 5 Reward Customers for Their Contributions (p. 370-372)

Avoid Negative Outcomes of Inappropriate
Customer Participation

Team 6 (3) Manage the Customer Mix (pp. 372-373)

Team 7 Summary of Customer Participation Strategies (p. 364-373)

The instructor’s role is to play a disruptive student. The following is a list of some “disruptive
behaviors” that students exhibit from time to time:

 Come to class late (and take a seat not so quietly)

 Dress in sweats, shorts, baseball cap (backwards, of course)
 Bring in backpack with noisy food (e.g., chips, apple, can of pop) and a newspaper
 Forget to bring notebook paper, a pencil, or the textbook
 Ask fellow students about what the topic is (and why the instructor is not up front)
 Pass notes, food, pencils, or whatever to students on the other side of the classroom
 Take a little nap (with head down on the desk)
 Read a newspaper
 Work on an assignment for another class
 Continually talk and make negative comments about wanting to be somewhere else
 (you probably have your own observations to add to the list…)

As the student teams attempt to deliver their 3-5 minutes worth of material they were assigned, others
in the class will most likely be distracted by the “new student” (the instructor) in the class. It is unlikely
that much of the material that is covered will be remembered by anyone other than the team that
prepared it. However, this exercise can be an extremely insightful lesson about the role the service
employee, customers themselves, and other customers can play in the delivery of the service.

Once the student teams are finished (you may want to stop them early) and you as the instructor are
now “back in charge,” the class can discuss what just occurred. Students can reflect on (1) the difficulty
(as the service provider) in delivering the service—even without the “disruptive student” (instructor),
(2) the difficulty of delivering the service when there is an uncooperative customer, and (3) the
difficulty of learning/paying attention when a fellow customer (“student”) is not doing his/her part. The
following questions can help to stimulate some interesting discussion:

 What problems can occur when the customer is a “co-producer” or “co-creator” of the
service?

 In what ways can a student take an “active” role in the delivery of a university class?

 Why is it important for the student to take an “active” role in the delivery of a university
class?

 How can other students’ participation in the service delivery process enhance your experience
with and satisfaction in a class such as this?

 What did you learn from the “customer participation” experience?

ACTIVE LEARNING ACTIVITIES

1. This activity requires the instructor to break the class into groups of 3-4 people. Each group is then
assigned a category of “levels of customer participation” from Table 12.1. Ideally, one third of the
groups will be assigned to each of the three categories. Groups complete the following activities:

 Decide on a service in your category that your group would like to discuss.

 Attempt to describe the “typical” customer behavior for your service.

 Develop a plan for enhancing customer participation.

2. The instructor asks students to review the chapter material on customers’ roles before coming to class.
At the beginning of class, students watch the film “What’s Your Gripe?” (a CBS 48 Hours broadcast
from December 7, 1994, available through CBS Video). For the remainder of the class session, students
do an in-class writing assignment that relates the chapter material on customers’ roles to the customer
behavior they saw in the film.

3. The instructor starts this activity by handing out the one page article “Stop Ordering Me Around”
[Stacey Wilkins (1993). “Stop Ordering Me Around.” Newsweek. January 4: 10] and asking students
to read it in class. Students then discuss the interaction between the service provider (the waitress) and
the customers using the drama metaphor described on p. 319. What roles were each of the parties
playing? How could the waitress and/or the customers have been “coached” to avoid or improve the
situation described in the article?

DISCUSSION QUESTIONS

1. Discuss the general importance of customers in the successful delivery of service using your own
personal examples.

This question focuses on understanding the importance of both the customer him/herself as well as
other customers in the successful delivery of service. This topic is novel and can result in a lively and
interesting discussion. The discussion can focus first on the role and importance of the customer
him/herself as presented in the text. In almost all types of services, the customer has a role to play. But
the role is increasingly more important and critical as one proceeds from services where a low level of
participation is required (e.g., concert, motel, fast-food) to a high level of participation (e.g., personal
training, weight-reduction, counseling). See Table 12.1 for additional examples and more detail.

The discussion can then turn to the role of other customers in the successful delivery of service.
Classroom settings offer an obvious and relevant example here, and it should be apparent to students
and the instructor how significant the influence of other individuals can be in altering the service
delivery process. All students and instructors can recall specific classes and their “personalities” that
come about as the result of the particular combination of students in the class. Other settings (e.g.,
hotels, restaurants, health clubs and airlines) also share this characteristic.
2. Why might customer actions and attitudes cause gap 3 to occur? Use your own examples to
illustrate your understanding.

This question allows students to see the relevance of customer actions and attitudes within the context
of the Service Quality Gaps model. Even when the service is designed to meet customer needs and
expectations, there may be a failure to deliver service quality when customers do not perform their roles
effectively or when other customers interfere with the process. This can occur when: customers lack
understanding of their roles; customers are unwilling or unable to perform their roles; customers are
not rewarded for good performance; other customers interfere; or market segments are incompatible.
Each of these themes is further developed in the chapter.

3. Using Table 12.1, think of specific services you have experienced that fall within each of the three levels
of customer participation: low, medium and high. Describe specifically what you did as a customer in
each case. How did your involvement vary across the three types of situations?

This question focuses students on understanding the variety of levels of involvement of customers in
the service delivery process. By using their own examples, the levels of participation become more
concrete. A useful extension of the discussion is to ask what strategies the organization used in each
type of situation to prepare them for their participation role. What could the organization have done
differently or better? This can then lead into a more structured lecture/discussion on “strategies for
enhancing customer participation.”

4. Describe a time when your satisfaction in a particular situation was increased because of
something another customer did. Could (or does) the organization do anything to ensure that this
happens routinely? What does it do? Should it try to make this a routine occurrence?

Examples of types of situations where customers are most likely to influence each other positively are
discussed in the chapter. Students will provide their own examples, and this discussion can lead
logically into a discussion of strategies for educating and using customers effectively to enhance the
satisfaction of others. While not appropriate in all cases, such strategies can be quite effective in the
right setting (e.g., schools and universities, health clubs, certain types of recreation and resort settings,
nursing homes, and other residential settings).

5. Describe a time when your satisfaction in a particular situation was decreased because of
something another customer did. Could the organization have done anything to manage this situation
more effectively? What?

The discussion of this question can be combined with Question 4. Strategies for effectively handling
“problem customers” and managing the customer mix so segments are compatible can be discussed in
this context.

[Note: Questions 6, 7, and 8 focus students on the three primary roles of customers in service delivery.
By using their own concrete examples in each case, the abstract ideas take on more meaning. The
global feature in this chapter, describing IKEA of Sweden, can serve as an excellent focal point for
discussing these questions. Any or all of the questions can lead effectively into a lecture/discussion on
strategies for enhancing customer participation.]
6. Discuss the customer’s role as a productive resource for the firm. Describe a time when you
played this role. What did you do and how did you feel? Did the firm help you to perform your role
effectively? How?

In serving as productive resources, customers can be viewed as “partial employees” of the organization
(as discussed in the text). They contribute time, effort, information, and other resources to facilitate
delivery of the service. When customers perform effectively as productive resources, their labors can
cut costs for the organization which may be passed on in the form of lower prices for customers. Total
self service is the extreme case of using customers as productive resources.

7. Discuss the customer’s role as a contributor to service quality and satisfaction. Describe a time when
you played this role. What did you do and how did you feel? Did the firm help you to perform your
role effectively? How?

Through their effective participation, customers can contribute to service quality and to their own
satisfaction. In many services, such participation is essential (e.g., education, health care, weight loss
and counseling). Unless the customers perform their roles in these settings, they cannot receive quality
service. In other less extreme cases, customers can still enhance service value and their own satisfaction
by asking questions, preparing for the service in advance, and complaining when there is a service
failure. Exhibit 12.2, as well as the IKEA of Sweden global feature, can provide nice focal points for
this discussion along with the students’ own examples.

8. Discuss the customer’s role as a potential competitor. Describe a time when you chose to provide a
service for yourself rather than pay someone to provide the service for you. Why did you decide to
perform the service yourself? What could have changed your mind, causing you to contract with
someone else to provide the service?

The role of customers as potential competitors is discussed in the chapter. For many services customers
can actually choose to provide the service themselves, thus essentially competing with the service
provider who must convince them it can provide the service better, more conveniently, or at lower total
cost to the customer. The contingency framework included in the “customers as competitors” section
for when a customer—whether an organizational customer or an individual—will decide to produce a
service for him/herself provides a nice focal point for this discussion. For more detail on this
framework, see Lusch, Brown, and Brunswik (note 23).
POSSIBLE WEB SITES FOR CHAPTER 12

Company Location
Amazon.com www.amazon.com
Charles Schwab & Company www.schwab.com
Cisco Systems www.cisco.com
Integrated Information Systems www.iis.com
IKEA Systems www.ikea.com
iPrint.com www.iPrint.com
Ritz Carlton www.ritzcarlton.com
Weight Watchers International www.weightwatchers.com
Wells Fargo Bank www.wellsfargo.com

APPROPRIATE CASES FOR CHAPTER 12

From Zeithaml and Bitner (2003) Services Marketing text:

 Northwest Airlines and the Detroit Snowstorm – Case 3

 Ernst & Young LLP – Case 4

 The Quality Improvement Customers Didn’t Want – Case 5

 General Electric Medical Systems – Case 6

From other sources:

 Alaska Airlines: For the Same Price, You Just Get More... [Harvard Business School Case, 9-
800-004, 2000]

 EuroDisney: The First 100 Days [included in the second edition of this text: Zeithaml and Bitner
(2000) Services Marketing: Integrating Customer Focus Across the Firm, New York, NY:
McGraw-Hill Companies]

 Building Brand Community on the Harley-Davidson Posse Ride [Harvard Business School Case
9-501-015, 2000; Teaching Note 5-501-052; Video 9-501-801]

 Shouldice Hospital Ltd. [Harvard Business School Case 9-683-068, 1983; also reprinted in the
first edition of this text: Zeithaml and Bitner (1996) Services Marketing, New York, NY:
McGraw-Hill Companies]
 CHAPTER 13:
DELIVERING SERVICE THROUGH INTERMEDIARIES
AND ELECTRONIC CHANNELS

CHAPTER TOPICS

 Service Intermediaries
 Direct or Company-owned Channels
 Common Issues Involving Intermediaries
 Key Intermediaries for Service Delivery
 Strategies for Effective Service Delivery Through Intermediaries
 Technology Spotlight: Nine Reasons to Worry about Privacy in Electronic Channels
 Global Feature: Starbucks Goes Global

CHAPTER OBJECTIVES

1. Identify the primary channels through which services are delivered to end customers.

2. Provide examples of each of the key service intermediaries.

3. View delivery of service from two perspectives—the service provider and the service deliverer.

4. Identify the benefits and challenges of each method of service delivery.

5. Outline the strategies that are used to manage service delivery through intermediaries.

LECTURE TIPS & AIDS

1. One idea for a guest speaker on this topic would be to contact the person responsible for “continuing
education” at your university. Many universities offer classes (e.g., personal financial planning,
Chinese cooking, pottery) to those in the community that are not for college credit, but as a service to
the community. In so doing, they often use instructors on a short-term basis. So, in effect, the
continuing education department (or whatever it is called) delivers its services through intermediaries.
The issues raised in the chapter of “conflict over objectives and performance,” “conflict over costs and
rewards,” “control of service quality,” and “empowerment vs. control,” are all issues that are of concern
to the sponsoring organization. Assuming the representative from the continuing education department
is a solid speaker, this outline can be used to have him/her come in and discuss these topics in the
classroom setting, as they are indeed important and very real issues for such organizations.

2. Another idea for a guest speaker would be the local manager of a franchise that is part of a national
chain (assuming one is sufficiently close). For example, a fast food restaurant (e.g., McDonald’s,
Burger King, Wendy’s, Subway, or Blimpie) could come in and discuss many of the same issues that
are brought up in the text regarding franchisers and franchisees. No doubt many of the same issues
discussed in the chapter will be of concern and of interest to the guest speaker, and they can be
highlighted with the discussion a guest speaker could bring to the class.
3. A third idea for a guest speaker would be a direct service provider—a local restaurateur, the owner of
a local coffee shop that competes with the chains, or an independent hair stylist. Ask the speaker to
comment particularly on the difficulties he/she faces in competing with the large franchise operations.
Ask the speaker why the company chooses to remain independent in the face of these challenges. What
issues do they have that the class can talk about and perhaps produce helpful ideas? This discussion
should bring out clearly the benefits and disadvantages of direct service delivery.

ACTIVE LEARNING ACTIVITIES

1. Research an industry that you know uses intermediaries for service distribution (e.g., the airlines or
financial services). Have there been any significant trends in the industry that have altered the
relationship between the service company you chose and its intermediaries? Describe the trend(s) and
the impact on the intermediaries. Has technology affected the distribution for your service?

2. Identify several service businesses that would be very difficult to franchise. Discuss the reasons you
believe franchising would not be an effective form of service delivery.

DISCUSSION QUESTIONS

1. In what specific ways does the distribution of services differ from the distribution of goods?

Intangibility of services makes their distribution different from the distribution of products. Because
of intangibility, there are no titles or rights to services and inventories cannot exist. Many of the primary
functions of distributors—inventorying, securing, and taking title to goods—do not exist in services.
This limits the type of distributors that are appropriate for services as well—franchises, agents, brokers,
and electronic channels—are the only distribution channels that bring sellers and buyers of services
together.

2. Which of the reasons for channel conflict described at the beginning of this chapter is the most
problematic? Why? Based on the chapter, and in particular the strategies discussed at the end of the
chapter, what can be done to address the problem you selected? Rank the possible strategies from
most effective to least effective.

Of all the problems listed at the beginning of the chapter, difficulty controlling quality and consistency
across outlets probably looms the largest. The strategies suggested at the end of the chapter that could
address this problem are control strategies (particularly measurement), empowerment strategies (such
as providing needed support systems and developing intermediaries to deliver service quality) and
partnering strategies (such as alignment of goals and consultation and cooperation). Partnering
probably works best, with empowerment strategies being next in effectiveness and control strategies
the least effective.

3. Identify other service firms that are company owned and see whether the services they provide are
more consistent than ones provided by the franchises mentioned in this chapter.

In many cases, franchisers retain ownership of some number of outlets for text marketing and other
reasons. For example, more than half of McDonald’s outlets are company-owned. On the other hand,
some companies retain ownership of all of their outlets, largely because of the control provided by
ownership. Taco Bell owns its own outlets. Saturn dealerships, usually because of the unique nature
of the offering, are owned by the company. Joe’s Crab Houses, a popular “entertainment” restaurant
that will be known to many of the students, remain owned by the company.
4. List five services that could be distributed on the Internet that are not mentioned in this chapter. Why
are these particular services appropriate for electronic distribution? Choose two that you particularly
advocate. How would you address the challenges to electronic media discussed in this chapter?

Entertainment such as movies and concerts could be distributed via the Internet. (For one such example,
see http://www.netflix.com, a company that rents DVDs.) Doing literature searches of virtually any
data base could also be accomplished, as could previewing vacations, playing electronic games, and
shopping for obscure or hard-to-find items such as antiques. All of these are appropriate for electronic
distribution because they are information or entertainment services that can be widely distributed,
whose quality can be controlled, and that appeal to adequately large audiences. Literature searches do
not suffer from many of the challenges of electronic distribution because they could be customized, and
neither security nor customer (lack of) involvement are issues. Similarly, customers shopping for
difficult-to-find items would be adequately motivated to ignore the cluttered electronic environment
and other challenges.

5. List services that are sold through selling agents. Why is the use of agents the chosen method of
distribution for these services? Could any be distributed in the other ways described in this chapter?

Selling agents are used in services such as insurance, travel, art, antiques, and financial services. Agents
are chosen rather than franchises for these services because there is nothing to display in a retail
environment and there are few tangibles associated with their sale. Agents are chosen over electronic
media for these services because negotiation and education about the services must take place and
cannot be handled adequately through electronic channels.

6. What are the main differences between agents and brokers?

Agents generally work for principals on a continuous basis whereas brokers work for shorter periods
of time. Agents also typically have more discretionary authority than brokers over price, terms, and
conditions.

7. What types of services are bought through purchasing agents? What qualifies a purchasing agent to
represent a buyer in these transactions? Why does the buyer not engage in the purchase herself, rather
than hiring someone else to do it?

Services bought through purchasing agents are usually ones where finding objects (such as antiques,
art, or rare jewelry) requires skill and cannot be accomplished by the average person or by the principal,
which is why he or she hires a purchasing agent.

8. Which of the three categories of strategies for effective service delivery through intermediaries do you
believe is most successful? Why? Why are the other two categories less successful?

Partnering is likely to be the most successful of the three strategies because it represents a win-win
situation and capitalizes on the skills and strengths of the principal and intermediary. It respects both
parties and allows for goal alignment and cooperation. On the other hand, control strategies are less
effective because they represent a win-lose relationship–the principal is in a better-than position with
the intermediary. Control strategies reflect a lack of trust and a position of unequal power, which is one
of the reasons they are not as effective as empowerment or partnering strategies. Empowerment
strategies are probably more effective than control strategies but less effective than partnering
strategies.
POSSIBLE WEB SITES FOR CHAPTER 13

In many situations, there are huge differences when services are distributed over the Internet
than when they are distributed in traditional ways. Listed below are Web sites that you can
use to explore these differences in class with students or that you can assign students for
exercises or homework. Distribution is a topic that can be very dull, unfortunately, and using
these sites in class can make the discussion much more lively.

Company Location
Ameritrade www.ameritrade.com
Bankrate.com www.bankrate.com
CompareNet www.compare.com
Dell Computer www.dell.com
E*Trade Securities www.etrade.com
Jones International University www.jonesinternational.edu
L.L. Bean www.llbean.com
Mediconsult www.mediconsult.com.my
Netflix www.netflix.com
Priceline.com www.priceline.com
Charles Schwab & Company www.schwab.com
Starbucks Corporation www.starbucks.com

APPROPRIATE CASES FOR CHAPTER 13

From Zeithaml and Bitner (2003) Services Marketing text:

 Ernst & Young LLP – Case 4

 The Quality Improvement Customers Didn’t Want – Case 5

 Giordano – Case 8

From other sources:

 EuroDisney: The First 100 Days [included in the second edition of this text: Zeithaml and Bitner
(2000) Services Marketing: Integrating Customer Focus Across the Firm, New York, NY:
McGraw-Hill Companies]

 Fairfield Inn (A) and (B) [Harvard Business School Case 9-689-092, 1993 (A) and 9-692-005,
1993 (B); Teaching Note 5-693-025, 1992]
 First Direct: Branchless Banking [INSEAD, France; available through European Case Clearing
House, Babson College, 1997]

 Taco Bell 1994 [Harvard Business School Case 9-694-076, 1995] and Taco Bell (Abridged
Update) [Harvard Business School Case 9-395-010, 1999]

 The TV-Home Shopping Wars: QVC and Its Competitors [Harvard Business School Case 5-396-
251, 1996; Teaching Note 5-396-251, 1996]

 Virtual Vineyards [Harvard Business School Case 9-396-264, 1996]

 Wells Fargo Online Financial Services (A) [Harvard Business School Case 9-198-146, 1999]
 CHAPTER 14:
MANAGING DEMAND AND CAPACITY

CHAPTER TOPICS

 The Underlying Issue: Lack of Inventory Capability

 Understanding Capacity Constraints
 Understanding Demand Patterns
 Strategies for Matching Capacity and Demand
 Yield Management: Balancing Capacity Utilization, Pricing, Market Segmentation, and Financial
Return
 Waiting Line Strategies: When Demand and Capacity Cannot Be Aligned
 Technology Spotlight: Technology Allows Sophisticated Management of Capacity and Demand
 Global Feature: Cemex Creatively Manages Chaotic Demand for Its Services

CHAPTER OBJECTIVES

1. Explain the underlying issue for capacity-constrained services: lack of inventory capability.

2. Present the implications of time, labor, equipment, and facilities constraints combined with variations
in demand patterns.

3. Lay out strategies for matching supply and demand through (a) shifting demand to match capacity or
(b) flexing capacity to meet demand.

4. Demonstrate the benefits and risks of yield management strategies in forging a balance among
capacity utilization, pricing, market segmentation, and financial return.

5. Provide strategies for managing waiting lines for times when capacity and demand cannot be aligned.

LECTURE TIPS & AIDS

1. This chapter is very amenable to a discussion based around an in class exercise that asks students to
chart the demand patterns and develop strategies for a local business. This exercise is described in the
active learning activities that follow (activity number 4). A short lecture can introduce or wrap up this
activity.

A guest speaker from a capacity-constrained industry can also be an excellent way to explore this topic.
Airline, hotel or resort managers are good choices. They can discuss the challenges they face as well
as strategies they have used to overcome capacity issues.
ACTIVE LEARNING ACTIVITIES

1. In a small group, discuss examples of times you have had to wait during a service experience. Answer
the following questions for the services you discuss, using the material on pp. 429-435 as a reference:

 Did the wait seem long or short to you? Why?

Did the service business do anything to make your wait more tolerable? If so, what? If not, what might
the company have done?

 Did other customers have to wait? How did they impact your experience in any way?

2. This assignment requires an on-site evaluation of “queuing behaviors.” In an unobtrusive way, observe
a queue for 20 minutes (this can also include waiting room situations). Spend some time observing the
queue and different customers in line. Then take notes describing where you are in relationship to the
queue, the service for which people are waiting, and the general mood of the queue. What are people
in line doing, and how are others reacting? Do you think customers expected the line? Did it enhance
or detract from their service experience? Write a paper summarizing your observations, thoughts, and
reactions.

3. Identify several services that can be inventoried for use at a later date than they are actually produced.
Has technology played a role in the ability to inventory the service? If so, how?

4. To further explore issues in managing supply and demand, ask students to select a service (or,
alternatively, the instructor may provide a list of services). Then, have the students work through the
following questions:

 Chart the demand pattern for this service. Is it predictable?

 What is the constraint(s) on capacity?

 What strategies could be used to match demand and capacity by:

(a) shifting demand to meet capacity?
(b) flexing capacity to meet demand?

 Is a waiting line strategy needed? If yes, what type of approach would you use? If no, why
not?

 Is yield management relevant in this context? If yes, how would you use it? If no, why not?
DISCUSSION QUESTIONS

1. Why do service organizations lack the capability to inventory their services? Compare a car
repair and maintenance service with an automobile manufacturer/dealer in terms of inventory capability.

In general, service organizations lack the capability to inventory their services because of two basic
characteristics: simultaneous production and consumption; and perishability. Because services are
produced and consumed simultaneously, they generally cannot be produced prior to the customer
demanding the service. While elements of the service may be prepared in advance (e.g., a hotel room
can be readied in advance to receive a guest), the actual service cannot be provided until the customer
arrives ready to consume it. And, in the hotel room example, unless a guest arrives, uses, and pays for
the room, the revenue-producing capacity of that service perishes for that particular night. This
combination of simultaneous production and consumption and perishability results in a general lack of
inventory capability for most service organizations.

In comparing car repair and maintenance services with an automobile manufacturer/dealer, it is obvious
how inventory plays an entirely different role in two types of firms in the same industry:

 On the one hand, the car repair service has no real inventory capability. The shop can be
open, staffed, and ready to provide service. But unless a customer and his/her car show up,
no actual service can be provided. And, if the resources (time, labor, equipment) of the
shop are not used on a particular day, the revenue-producing potential of those resources
for that day is lost forever.

 On the other hand, an automobile manufacturer or dealer can hold cars in inventory if a
sale is not made on a particular day. While a loss is incurred for every day an automobile
is not sold, the full revenue-producing potential of the vehicle is not lost. Further, swings
in demand cycles for cars can be planned for in the production cycle of the automobile
manufacturer. Cars can be produced and held in inventory in anticipation of a high demand
period; similarly, production can be slowed following unexpected periods of slow demand.
(It should be pointed out that most manufacturers try to avoid building up inventories, and
strategies such as “just in time” inventory management are fully focused on avoiding large
inventories and the costs associated with them.)

2. Discuss the four scenarios presented in Figure 14.1 and presented in the text (excess demand,
demand exceeds optimum capacity, demand and supply are balanced, excess capacity) in the context
of a basketball team selling seats for its games. What are the challenges for management under each
scenario?

This discussion should be preceded with a short lecture/discussion about the differences in maximum
capacity utilization and optimum capacity utilization. In an excess demand situation, some people who
want tickets to the game will be turned away. All seats will be filled, and capacity will be stretched to
its maximum. Service quality may suffer unless additional staff is hired to help with food lines, parking,
seating, etc. Ticket scalping may become an issue for management, especially if it is illegal in the
particular state or location.

When demand exceeds optimum capacity, everyone who wants a ticket will get one. Capacity will be
stretched beyond what is ideal and there could be a problem with maintaining optimal levels of service
quality. Management may decide to hire additional staff to help with food lines, parking, seating, etc.
to avoid service quality problems.
 [Note: If either of these first two scenarios occur continually, excess wear and tear on the facilities and
other resources could result. Renewal, repair, and maintenance of the facilities would need to be
planned in to the schedule.]

If demand and supply are balanced, everyone who wants a ticket will get one. Seats will be filled at an
optimal level. (In the case of entertainment and sports, optimal seating capacity is frequently very close
to the maximum number of seats available.) Resources (labor, facilities, parking, etc.) will be used at
their optimal level so service quality should be consistent.

During situations of excess capacity everyone who wants a ticket will get one, but there will be excess
seats. While service quality may be high as a result, attendees at the game may question the value of
coming since there is obviously not a high demand for seats. Morale among employees may suffer, and
the organization will lose potential revenues from unoccupied seats forever.

3. Discuss the four common types of constraints (time, labor, equipment, and facilities) facing service
businesses and give an example of each (real or hypothetical).

This question allows students to explore the various types of constraints facing service organizations in
planning for optimal capacity utilization. It also highlights the revenue-producing potential of various
types of service resources. It should be pointed out in the discussion that most organizations operate
under multiple constraints.

 Time is the primary constraint for organizations that essentially sell time, advice, counsel, personal
services, etc. Examples include lawyers, consultants, doctors, accountants, and others. Unless these
professionals can sell their time on a given day, the revenue-producing capability of that time is
lost forever. If there is excess demand for their time, more time cannot be produced nor can time
be saved in inventory from one day to the next.

 Labor is the primary constraint in labor-intensive services where individual workers can produce
service up to some (often difficult to determine) maximum capacity. Examples of such
organizations are law firms, consulting firms, and health clinics. These organizations are
constrained by the number of people available to serve customers at a given point in time.

 Equipment is a third common constraint for service businesses. Some services depend heavily on
certain types of equipment to deliver the service, and the constraint they face is the capacity of the
equipment. Examples include delivery services dependent on trucks and aircraft,
telecommunications, and/or utilities. Sometimes, as in the case of an airplane, the capital
investment in the equipment is tremendous. Unless that equipment is used to capacity, revenue is
severely affected. On the other hand, service cannot be provided above the maximum capacity of
the equipment.

 Facilities are a very common constraint in services like hotels, restaurants, hospitals, airlines,
schools, theaters, and churches. In all of these cases, the facility itself has a certain maximum
capacity, beyond which service cannot be provided. However, if the facility is not fully used on a
particular day, its revenue-producing capability is lost forever.
4. How does optimal capacity utilization differ from maximal capacity utilization? Give an example
of a case where the two might be the same, and an example of where they are different.

Optimal capacity utilization occurs when the organization’s resources are being employed at some ideal
level (sometimes difficult to determine) where service quality can be consistently delivered and
resources are not taxed to the point where they wear out or burn out. Customers are happy, employees
are happy, demand and supply are balanced, and revenues are being produced at an ideal level.

Maximum capacity utilization occurs when the organization’s resources are being used to their absolute
maximum, i.e., every seat is full, every minute and every hour are being used, and/or equipment is
operating at maximum levels continuously. In most cases, organizations cannot support maximum
capacity utilization over long periods of time (without adding capacity) since equipment, people, and
facilities will wear out and burn out at some point.

Examples where optimal and maximum use of capacity might be the same include entertainment, sports
events, and package delivery services. Examples where optimal and maximum use of capacity are
probably not the same include university classrooms, most restaurants, and sports activities (like
swimming pools and golf courses).

5. Choose a local restaurant or some other type of service with fluctuating demand. What is the
likely underlying pattern of demand? What causes the pattern? Is it predictable or random?

This question allows students to apply the concepts of understanding demand patterns to a situation
they are familiar with. This question works very well as an in-class exercise. Students can be divided
into groups and the instructor can give them a choice of several local establishments to chart demand
patterns. For example, the instructor might choose a local theater, a restaurant near campus, an
accounting firm or a “ski resort in Utah.” In groups, students then chart the likely demand patterns (by
season, week, day, or whatever they believe is relevant). The exercise can also be combined with
Question 6 to add more strategic insight.

6. Describe the two basic strategies for matching supply and demand and give at least two specific
examples of each.

This question works very well as an in-class exercise when combined with the exercise described in
Question 5. The two basic strategies are: shifting demand to match capacity (pp. 419-421) and flexing
capacity to meet demand (pp. 422-424). After students have charted the demand patterns in Question
5, they can then develop strategies for addressing the patterns and their underlying causes.

7. What is yield management? Discuss the risks in adopting a yield management strategy.

Yield management is a very useful concept for students to begin to grasp. The discussion and examples
provided in the book are intentionally kept simple. The important point for students is to see the
underlying logic of the concept. It can be pointed out that organizations (particularly transportation
industries) use extremely sophisticated models to manage their yield. The risks and challenges of yield
management are great, particularly from a marketing, positioning, and image perspective. Dealing with
unrealistic price expectations (when customers get a low price one time and must pay more at a later
date) is also a challenge. These risks and challenges are enumerated in the text.
8. How might yield management apply in the management of the following: a Broadway theater? A
consulting firm? A commuter train?

In each of these cases, the students should first identify the constraint on capacity (e.g., seats,
time/hours or cars/seats, respectively) and the underlying demand patterns. Then they can begin to
explore how pricing might be used to offer the service at different price levels to different market
segments at various times. They should keep in mind the goal of yield management to maximize
revenue producing potential at any given time and to make optimal use of capacity. This discussion
can be followed up with a more structured discussion/lecture on the risks and challenges of yield
management.

9. Describe the four basic waiting line strategies, and give an example of each one, preferably
based on your own experiences as a consumer.

The four basic strategies are:

Employ operational logic - This strategy can involve a “one time fix” (see Chapter 9), where the
organization observes that it has a waiting problem and focuses in on designing processes and systems to
reduce waiting as much as possible. If waiting is inevitable, then the queuing system should be designed
in an optimal way from an operational perspective. See Figure 14.6 for some common options.

 Establish a reservation process - This strategy involves essentially “inventorying demand” by

asking customers to reserve a place or time for service. The idea here is to avoid waiting lines
by having customers arrive at predictable times geared to some optimal use of capacity.

 Differentiate waiting customers - This strategy differentiates customers on various criteria to

determine who should be served first. Common criteria are: first-come, first served;
segmentation by importance of the customer; urgency of the need for service; length of the
service transaction; and payment of a premium price.

 Make waiting fun, or at least tolerable - This strategy offers a variety of possibilities based on
“psychology of waiting lines” theories discussed in the text.
POSSIBLE WEB SITES FOR CHAPTER 14

Company Location
American Airlines www.AA.com
Austrian Airlines www.austrianair.com
Cemex www.cemex.com
Marriott International www.marriotthotels.com
NeoIT www.neoit.com
Ritz Carlton Phoenix www.ritzcarlton.com/hotels/phoenix/
Yellow Freight Systems www.yellowfreight.com

APPROPRIATE CASES FOR CHAPTER 14

From Zeithaml and Bitner (2003) Services Marketing text:

 Virgin Atlantic Airways – Case 1

From other sources:

 Grupo IUSACELL (A) [Harvard Business School Case 9-395-028, 1994]

 Marriott Rancho Las Palmas Hotel [Harvard Business School Case 9-581-084, revised 1988]
 CHAPTER 15:
INTEGRATED SERVICES MARKETING COMMUNICATIONS

CHAPTER TOPICS

 The Need for Coordination in Marketing Communication

 Key Reasons for Service Communication Problems
 Four Categories of Strategies to Match Service Promises with Delivery
 Exceeding Customer Expectations: Caveats and Strategies
 Technology Spotlight: Does the Banner Still Wave in Internet Advertising?
 Global Feature: Language as a Cultural Barrier in Services Marketing Communications

CHAPTER OBJECTIVES

1. Introduce the concept of integrated services marketing communication and discuss the key reasons for
service communication problems.

2. Present four key ways to integrate marketing communications in service organizations.

3. Present specific strategies for managing promises, managing customer expectations, educating
customers, and managing internal communications.

4. Provide perspective on the popular service objective of exceeding customer expectations.

LECTURE TIPS & AIDS

1. To assist in the discussion of integrated services marketing communications, the instructor might bring
in to class 4-6 print advertisements for services and have students critique them using the criteria
suggested in the chapter. The advertisements could be (1) all from one company, (2) all for one type
of service provider, or (3) a group of very good (or very poor) ads. A discussion of the positioning
strategy in each ad could serve as a review for various services marketing concepts discussed during
the course. If the Internet is accessible in the classroom, the instructor could also “bring in” to class
various Internet ads for similar discussion. Alternatively, this activity could be combined with Active
Learning Activity 2 (see below) and the students could be responsible for leading the discussion.

2. If the classroom has access to the Internet, visit the following Web sites to evaluate whether the
company is using integrated services marketing communications:

 www.kraftfoods.com
 www.fedex.com
 www.intuit.com
 www.jobnavy.com

What are the strengths of each in terms of integrated external marketing communications? Is there
evidence of integrated interactive marketing communications?
ACTIVE LEARNING ACTIVITIES

1. Go to the Mail Boxes, Etc. (MBE) Website at www.mbe.com. Explore each area of the site and make
a list of the types of information you can find based on the three categories of marketing communication
(external, interactive, internal) discussed in this chapter. What additional information would you find
useful on the site?

2. Find five effective service advertisements in newspapers and magazines. According to the criteria
given in this chapter, identify why they are effective. Critique them using the list of criteria and discuss
ways they could be improved.

3. Debate the issue of exceeding customer expectations with another person or group in the class. One
of the groups or individuals should be for establishing a company goal of exceeding customer
expectations and one should be against establishing such a goal. What company evidence can you
provide for your side of the argument?

DISCUSSION QUESTIONS

1. Think of another services company that provides integrated services marketing communications. Is it
as comprehensive as Mail Boxes, Etc. as described in the opening vignette? Why or why not?

Students will often think about the services they know well such as McDonald’s, IBM, AT&T, MCI,
and Burger King. The selections will vary. In any case, unless they choose Federal Express or Hewlett
Packard, the integrated services marketing communications will not be as good as Mail Boxes, Etc.
Looking at the Web sites of their selections will demonstrate this but, for the most part, the question is
an opinion question and the discussion (not the exact answer) is where the value is.

2. Which of the key reasons for provider gap 4 discussed in the beginning of this chapter is the easiest to
address in a company? Which is the hardest to address? Why?

The easiest of the four reasons for gap 4 to address is probably insufficient customer education. The
reason this is the easiest strategy is that it can be prepared and executed by the marketing department;
armed with tangible information to give the customer, contact personnel can, at a minimum, distribute
this information. The more involved contract personnel are in education, of course, the more effective
the strategy. Probably the most difficult gap 4 reason to address is inadequate management of customer
promises. This reason requires coordination and cooperation across all parts of the organization that
are involved with making and delivering on customer promises, including advertising, sales, operations
and human resources.

3. Review the four general strategies for achieving integrated services marketing communications. Would
all of these be relevant in goods firms? Which would be most critical in goods firms? Which would be
most critical in services firms? Are there any differences between those most critical in goods firms
and those most critical in services firms?

The four strategies would be relevant in goods firms but to a lesser degree. In pure goods firms, internal
communication would not be as important as in services firms. Having internal functions communicate
in the design or redesign of a good is, of course, critical but once the good is created a continual dialogue
is not essential as it is in services firms. Probably the most critical strategies in goods firms are
managing customer expectation and providing sufficient customer education if the good is complex.
4. What services do you know that advertise on the Internet? What are the most effective Internet
advertisements you have seen? Why are they effective?

This question is completely open-ended and will be very time-sensitive. Services advertising changes
quickly and, for that reason, there is no single right answer to this question. Among the categories
where good advertising occurs are films (go to any site advertised on television for a particular movie),
music, and television shows.

5. Review Exhibit 15.2 on basic marketing communication principles. Are there any other differences
(besides those we discussed in the chapter) between the way these work with goods and services?

This is an open-ended question that requires the students to think critically and from their own
experience. In our experience, there are no other major differences that have been documented by
research or discussed in the literature, but the give and take from student discussion on this question
allows the instructor to make sure that students understand goods-services differences. For the most
part communication principles are valid with services, except for the differences introduced by
intangibility, heterogeneity, and inseparability.

6. Using the section on managing customer expectations, put yourself in the position of your instructor
who must reduce the amount of “service” provided to the students in your class. Give an example of
each strategy in this context. Which of the strategies would work best with you (the student) in
managing your expectations? Why?

While students will have a variety of their own ideas on this question, here is an example of each
strategy:

 Offer choices. If students believe that the instructor has assigned too much work, one strategy
might be to tell the students that they have a choice of completing all the work assigned and earning
the highest possible grade in the course (assuming that the quality is present) or completing one
less assignment for a drop in letter grade. Many instructors make this offer to executive MBA
students who are very busy. They feel that the tradeoff between grade and work is very fair.

 Create tiered-value offering. In this option, the instructor could lay out different levels of
requirements (in terms of rigor) for students. The lowest tier, for those students who simply want
to pass the course, would have shorter papers, lower hurdles for test marks, etc. In the upper tiers,
students would be required to achieve higher levels on tests and complete longer papers.

 Communicate criteria for service effectiveness. One of the best ways the instructor executes this
strategy is through the class syllabus. Clearly explaining the criteria for grades and requirements
tells students in advance what will be expected of them.

 Negotiate unrealistic expectations. Students often have many unrealistic expectations—that they
will not have to come to class and still get full participation grades, that they will be able to turn in
assignments late, and/or that they will be exempted from class requirements while they take a two-
week vacation during the school year. These unrealistic expectations can be addressed early if they
are elicited at the beginning of the semester.
7. Why is internal marketing communication so important in service firms? Is it important in product
firms?

Internal marketing is so important in service firms because it enables interactive marketing

communication. It provides the tools—training, communication, resources, support personnel,
teamwork, incentives, among other factors—to motivate and prepare contact personnel to provide
outstanding interactive service. Interactive marketing communication is not present in goods situations
unless there is service associated with the good (such as selling or servicing). In such situations, of
course, we would be dealing with services surrounding the goods not the goods themselves.

8. Which form of internal marketing communication—vertical or horizontal—would you invest in if you

had to select between them as an organization’s CEO? Why?

Vertical communication would seem to be the first priority, for if services employees did not know
what they were supposed to do the result would be chaos. Once a certain level of vertical
communication has been established, horizontal communication is necessary.

9. What other strategies can you add to the four offered in the section on customer education? What types
of education do you expect from service firms? Give an example of a firm from which you have received
the adequate education. What firm has not provided you with adequate education?

Other strategies include: (1) educating customers throughout the service process, perhaps after each
major step; (2) developing an ongoing customer education program through direct mail or the Internet;
(3) provide customers incentives for being knowledgeable about the company; and (4) encourage a
dialogue between customers and the company so that the company understands what customers need
to know.

POSSIBLE WEB SITES FOR CHAPTER 15

Company Location
American Broadcasting Company, Inc. www.abc.com
Best Western International www.bestwestern.com
CBS Worldwide, Inc. www.cbs.com
Mail Boxes, Etc. www.mbe.com
Marriott International www.marriotthotels.com
Web sites for fan clubs of students’ favorite
musical groups
Current movie web sites

APPROPRIATE CASES FOR CHAPTER 15

From Zeithaml and Bitner (2003) Services Marketing text:

 Virgin Atlantic Airways – Case 1

From other sources:

 Bronner Slosberg Humphrey [Harvard Business School Case 9-598-136, 1998; Teaching Note
5-598-141, 1998]

 Earle Palmer Brown (A) and (B) [Harvard Business School Cases 9-398-012, 1997 (A) and
9-398-014, 1997 (B)]