Deck 16: The Financial and Economic Impact of Service

Question 1

In 1991 when the US.General Accounting Office (GAO)studied the financial effect of service quality on companies that had won the Malcolm Baldrige National Quality Award,it determined that these elite quality firms benefited in all of the following ways EXCEPT:

A) Increased market share
B) Improved return on sales
C) Improved sales per employees
D) Increased return on assets
E) Increased advertising

Answer 1

E

Question 2

PIMS (profit impact of marketing strategy)research:

A) Is used for determining the short-term effect of service quality on company profits
B) Shows that companies offering superior service achieve the same market share growth as those who offer average service
C) Demonstrates the advantages of offensive marketing
D) Relies on executives' opinions to predict how services will affect profit
E) Is accurately described by all of the above

Answer 2

C

Question 3

The ROSQ approach would be appropriate for a service provider:

A) That used service blueprints
B) That terminated relationships with its least profitable customers
C) Deciding to purchase employee dental insurance
D) That was thinking of developing a home delivery service in addition to offering products at a central location
E) Deciding to increase prices for basic services by ten percent

Answer 3

D

Question 4

Which of the following has the strongest effect on a service provider's profits?

A) Market share
B) Unit costs
C) Location
D) Employee salaries
E) Customer defection

Question 5

The increased profits a service firm realizes from customer retention result from all of the following EXCEPT:

A) Lower costs
B) Increased volume of purchases
C) The ability to charge a price premium
D) Customer defection
E) Increased word-of-mouth communication

Question 6

Return on service quality (ROSQ):

A) Is based on the assumption that it is impossible to spend too much money on quality
B) Replaces intuition as a guide for service quality investments
C) Is an intuitive approach to determining whether a company should implement specific service quality strategies
D) Is based on the assumption that all quality expenditures are valid
E) Is accurately described by all of the above

Question 7

The best known and most widely respected approach that executives use for making decisions about service quality investments is:

A) Total quality management returns
B) Observational research
C) Focus groups
D) Return on service quality
E) Ethnographic research

Question 8

The benefits of offensive marketing have been documented through the use of:

A) PIMS (profit impact of marketing strategy)
B) Multiple regression analysis
C) Return on investment (ROI)analysis
D) Financial ratios
E) All of the above

Question 9

Which of the following is NOT likely to be a source of money when a company uses a defensive marketing effect?

A) Increased market share
B) Increased volume of purchases
C) Lower costs
D) Increased word-of-mouth communication
E) Increased price premium

Question 10

The owner of Fiori Flower and Gift Shop has noticed a gradual decline in its number of customers over the last three years.The owner suspects that it is experiencing _____ due to the recent opening of a Kroger supermarket in the community.

A) Customer defection
B) Customer empowerment
C) An ethical dilemma
D) Customer autonomizing
E) Customerization

Question 11

_____ marketing is used by companies to prevent customer defection.

A) Vertical integration
B) Guerilla
C) Defensive
D) Flank-movement
E) Offensive

Question 12

Which of the following is NOT likely to occur when a company uses an offensive marketing effect?

A) Higher market share
B) Increased price premium
C) Customer churn
D) Customer acquisition
E) Improved word-of-mouth communication

Question 13

Which of the following is NOT an assumption upon which the return on service quality (ROSQ)approach is based?

A) Quality is an investment
B) Quality efforts are financially accountable
C) It is possible to spend too much on quality
D) Not all quality expenditures are equally valid
E) All quality investments are a good investment

Question 14

When service quality first emerged as a pivotal competitive strategy what method did managers use to determine the effect of improved service quality on financial success?

A) Intuition
B) Return on service quality (ROSQ)
C) Trend analysis
D) Experiential research
E) Focus groups

Question 15

Service quality can help companies attract more and better customers to the business through _____ marketing.

A) Insurgent
B) Offensive
C) Flank-movement
D) Defensive
E) Guerilla

Question 16

There are several auto repair shops in a three-block area on King Street.One of the shop owners decided to extend her shop's operating hours until 10 p.m.Monday-Thursday and provide a pick-up and delivery service with bonded drivers as well as guarantee all repairs for six months.This job owner is engaged in _____ marketing.

A) Defensive
B) Churn
C) Guerilla
D) Flank-movement
E) Offensive

Question 17

The owner of Fiori Flower and Gift Shop has noticed a gradual decline in its number of customers over the last three years.The owner suspects that many of its regular customers are now buying flowers at the newly opened Kroger supermarket.It would be appropriate for the owner to institute _____ marketing.

A) Guerrilla
B) Flanking-movement
C) Vertical integration
D) Defensive
E) Offensive

Question 18

Offensive marketing effects involve market share,reputation and:

A) Word-of-mouth communication
B) Vertical integration
C) Price premiums
D) High purchase volumes
E) Geodemographic segmentation

Question 19

Executives' most frequent questions about how to improve service quality are concerned with:

A) Cost reduction and environmental impact
B) Good investment and high return
C) Following federal regulations and employee satisfaction
D) Operating in the most economic environments and maintaining a satisfactory level of customer retention
E) Cost reduction and downsizing

Question 20

A review of two decades of studies examining the links among customer satisfaction,service quality,and firm performance concluded that improvements in customer satisfaction have _________ impact on firms' financial performance.

A) A significant and positive
B) Absolutely no
C) A small negative
D) An undetermined
E) A large negative

Question 21

The ________ metric is obtained by summing up the customer lifetime values of the firm's customers.

A) The customer equilibrium
B) Customer equity
C) Customer empowerment
D) Fiscal value
E) Service blueprint value

Question 22

The customer equity model illustrates how:

A) Customer equity is influenced by value equity,brand equity and relationship equity
B) Interactive marketing,external marketing and internal marketing are interrelated
C) To identify unexpected service encounters
D) Customer equity leads to more efficient defensive marketing
E) Organizations can more effectively monitor customer churn

Question 23

The development of _____ allows service companies to create,automate,and integrate measurements in all parts of the company in a balanced performance scorecard.

A) Relationship marketing
B) Search engines
C) Data mining
D) Integrative marketing
E) Enterprise-wide software

Question 24

The key drivers of service quality,customer retention and profits include:

A) The servicescape and internal marketing
B) The five dimensions of service quality and service encounters
C) External marketing communications and employee training
D) Public relations and direct marketing
E) All of the above

Question 25

Which type of promotion has more credibility than other sources of information about a service?

A) Word-of-mouth
B) Personalized direct mail
C) Network television advertising
D) Publicity
E) Advertising in prestige magazines

Question 26

Traditional measures of company performance:

A) Have relied on financial indicators such as profit,sales and return on investment
B) Predict the future performance of companies as well as the results of yesterday's decisions
C) Measure operational process and customer satisfaction as well as other quantitative factors
D) Are useful in measuring the effect of a short-term increase of service quality on a company's bottom line
E) Have used the soft measures primarily

Question 27

A Marriott hotel is able to charge four times as much as an Econo-Lodge for a room because of the amenities the Marriott offers.These amenities include a swimming pool,room service,exercise equipment,in-room iron,hair dryer and coffee maker,and more.The Econo-Lodge provides guests with a clean room to sleep in and little else.Marriott's ability to charge a premium price is the result of its _____ strategy.

A) Defensive
B) Price skimming
C) Neutral
D) Guerrilla
E) Flanking

Question 28

All of the following are customer perceptual measures within the balanced performance scorecard EXCEPT:

A) Number of defections
B) Number of cross sales
C) Service perceptions
D) Long-term value of customer
E) Service expectations

Question 29

Which of the following is an example of a soft measure of a company's success?

A) Return on investment
B) Customer satisfaction
C) Sales volume
D) Gross margin
E) Inventory turnover

Question 30

Which of the following statements about providing customers with service quality is true?

A) All customers must be provided the same superior quality of service
B) All customers are worth attracting and keeping through the use of service quality
C) The same services marketing strategy should be used with all customers
D) All customers will be profitable in the long run; therefore,each is deserving of quality service
E) Links exist among customer satisfaction,service quality,and increased purchases

Question 31

Which of the measurement areas in the balanced performance scorecard is the most difficult to capture quantitatively?

A) Operations measures
B) Financial measures
C) Customer measures
D) Sales measures
E) Innovation and learning measures

Question 32

All of the following are examples of operational measures within the balanced performance scorecard EXCEPT:

A) Process quality
B) Throughput time
C) Number of cross sales
D) Reduction in waste
E) Transaction time

Question 33

Many companies that have adopted a customer retention strategy are now using the extent of _________ as their main measure of customer loyalty.

A) Word-of-mouth
B) Personalized direct mail
C) Network television advertising
D) Publicity
E) Advertising in prestige magazines

Question 34

All of the following are measures within the innovation and learning perspective of the balanced performance scorecard EXCEPT:

A) Employee skills
B) Return on innovation
C) Number of new products
D) Time spent talking to customers
E) Service expectations

Question 35

The _____ is a set of measures that gives top managers a fast,but comprehensive view of the business.It complements financial measures with operational measures of customer satisfaction,internal processes and the organization's innovation and improvement activities.

A) Lifetime value of a customer
B) Multi-measure quality indicator
C) Balanced performance scorecard
D) FOCI satisfaction ratio
E) Benchmark of augmented success

Question 36

Which of the following is NOT included in the list of questions managers and researchers want answered about defensive marketing?

A) What is a loyal customer?
B) How can defection-prone customers be identified?
C) What is the role of service in defensive marketing?
D) What aspects of service are most important for customer retention?
E) What aspects of service are most important for increasing market share?

Question 37

Which of the following statements about customer perceptions of service and consumer purchase intentions is true?

A) There is no relationship between customer perceptions of service and any consumer intentions
B) While there is no relationship between customer perceptions of service and purchase intentions,there is a strong relationship between perceptions of superior service and increased word-of-mouth communications
C) Researchers suspect there is little relationship between a customer perception of service and his or her intent to buy
D) Customer perceptions of service affect consumer intentions in several positive ways - including the purchase intention
E) Customer expectations - not perceptions - affect consumer behavioral intentions

Question 38

All of the following are measurement areas contained in a balanced performance scorecard EXCEPT:

A) Competitor measures
B) Customer perceptual measures
C) Financial measures
D) Innovation and learning
E) Operational measures

Question 39

The research exploring the relative importance of service dimensions on overall service quality or customer satisfaction has confirmed _____ as the most critical dimension.

A) Assurance
B) Tangibles
C) Empathy
D) Responsiveness
E) Reliability

Question 40

The operational measures used within the balanced performance scorecard should be:

A) Customer-defined
B) Cost-driven
C) Competitively sensitive
D) Front-line employee-defined
E) Environmentally-derived

Question 41

Service quality,like advertising,has a cumulative effect on a company's profit.

Question 42

All of the following are financial measures used in the balanced performance scorecard EXCEPT:

A) Value of customer referrals
B) Customer satisfaction
C) Volume increases
D) Long-term value of the customer
E) Value of cross sales

Question 43

Evidence shows that customer perceptions of quality do not affect consumer intentions.

Question 44

Service encounters are among the key drivers of service quality.

Question 45

Attracting a new customer is five times as costly as retaining an existing one.

Question 46

Consumers believe that advertisements in publications like Newsweek,Time,and similar magazines have the highest level of credibility.

Question 47

ROSQ (return on service quality)is used to help managers make decisions about service quality investments.

Question 48

Service quality can help companies attract more and better customers to the business through offensive marketing.

Question 49

Guests who stay at a Walt Disney World resort hotel are asked to complete a comment card when they checkout.In one section of the comment card,guests are asked if they would recommend the hotel they stayed at to a friend and if they would return to the same hotel.These two behavioral intention questions are focusing on the _____ perspective of its balanced performance scorecard.

A) Competitive
B) Customer
C) Financial
D) Innovation and learning
E) Operational

Question 50

The comment card that is often found on the tables at a Wendy's fast-food restaurant asks about the customer's perceptions of the quality of the food,its cleanliness and the friendliness of the employees.These questions are focusing on _____ in Wendy's balanced performance scorecard.

A) Competitive measures
B) Customer perceptual measures
C) Financial measures
D) Innovation and learning
E) Operational measures

Question 51

Defensive marketing can be used to reduce customer defection.

Question 52

A service firm that calculates the long-term value of a customer is looking at the _____ in its balanced performance scorecard.

A) Competitor perspective
B) Customer perspective
C) Financial measures
D) Innovation and learning perspective
E) Operational measures

Question 53

From the inception of service quality,managers had highly sophisticated tools to measure the impact of improved service on profits.

Question 54

Companies sometimes aim too high in setting improvement targets for nonfinancial measures of performance.Managers tend to make mistakes in this area by assuming:

A) Leading and lagging variables do not influence time utility
B) Qualitative metrics are more telling than quantitative metrics
C) 100 percent customer satisfaction is the only important goal
D) Statistical reliability and statistical validity are always important
E) The improvement of non-financial measures leads to offensive marketing

Question 55

Many companies do not identify and act on the correct non-financial measures.One mistake the companies make is _______ that involves not laying out the cause-and-effect relationships between drivers and strategic success.

A) Not linking measures to strategy
B) Not validating the links
C) Not setting the right performance targets
D) Measuring incorrectly
E) Not creating a balanced scorecard

Question 56

FedEx measures customer satisfaction and service quality with a 12-item statistical measure called the Service Quality Indicator.One of the items measured by FedEx is the number of missed pickups per day.In a balanced performance scorecard,the number of missed pickups per day would represent a(n)_____ measure.

A) Competitor
B) Customer
C) Financial
D) Innovation and learning
E) Operational

Question 57

An organization that wanted to create quantitative measures of its innovation and learning should use:

A) Rate of customer defection
B) The 80/20 principle
C) Long-term value of innovation to customers
D) The operating efficiencies continuum
E) Performance-to-goal percentages

Question 58

Many companies do not identify and act on the correct non-financial measures.One of the four major mistakes that companies make is _______.In other words,they do not verify that the non-financial measures lead to financial performance.

A) Not linking measures to strategy
B) Not validating the links
C) Not setting the right performance targets
D) Measuring incorrectly
E) Not creating a balanced scorecard

Question 59

Many companies do not identify and act on the correct non-financial measures.One of the four major mistakes that companies make is _______.In other words,companies attempt to measure complex phenomenon with one or two simple measures or use quantitative metrics to capture qualitative results for factors such as leadership.

A) Not linking measures to strategy
B) Not validating the links
C) Not setting the right performance targets
D) Measuring incorrectly
E) Not creating a balanced scorecard

Question 60

Traditionally,organizations have measured their performances almost completely on the basis of financial indicators.

Question 61

What is considered to be more credible as a source of information than any other?

Question 62

What area of the balanced performance scorecard is a company studying when it examines transaction time,throughput time,reduction in waste and process quality?

Question 63

What is ROSQ? Why would the manager of a large management consulting firm use ROSQ to determine which service offerings customers like and which customers don't really care for? Explain the assumptions that the manager must accept in order to use this approach.

Question 64

What are the key determinants of service quality,customer retention and profits?

Question 65

What type of services marketing needs to be used to stop customer defection?

Question 66

The easiest area of the balanced scorecard to measure quantitatively is innovation and learning.

Question 67

What research methodology has been used to determine the benefits of offensive marketing on a company's market share and profits?

Question 68

What are the positive effects of implementing defensive marketing to reduce or eliminate customer defection?

Question 69

Describe the innovation and learning area of the balanced performance scorecard including some of the specific measures that may be appropriate for this area.

Question 70

Balanced scorecards sound good in theory,but they are nearly impossible to implement; therefore,their use is nominal.

Question 71

Customer perceptual measures are leading indicators of financial performance.

Question 72

What area of the balanced performance scorecard is a company studying when it examines overall customer service perceptions?

Question 73

Which approach to measuring service quality assumes that not all expenditures aimed at improving quality are equally valid?

Question 74

What is another name for customer-linked operational measures that would be used in a balanced performance scorecard? What are some of the specific measures that may appropriate to include in this area of the balanced performance scorecard?

Question 75

Financial measures used in the balanced scorecard include the long-term value of the customer,the number of new products,return on innovation,and number of customer referrals.

Question 76

How have companies traditionally measured their performance?

Question 77

How does the way the balanced performance scorecard examines operational measures differ from the traditional uses of such measurements?

Question 78

Companies can actually measure increases and decreases in revenue from the retention and defection of customers.

Question 79

Why have managers replaced traditional tools for measuring a company's performance with the balanced scorecard?

Question 80

The money a company makes from customer retention comes from four sources.List them.