1. Afjal Hossain Assistant Professor Department of Marketing
MKT 5207 Service Marketing
Afjal Hossain
Assistant Professor
Department of Marketing

2. Chapter 18 The Financial and Economic Impact of Service

3. The Direct Relationship between Service and Profits?
Service
Profits
Figure 18.1

4. Offensive Marketing Effects of Service on Profits
share
Sales
Reputation
Price
premium
Figure 18.2

5. Defensive Marketing Effects of Service on Profit
Lower
costs
Margins
Volume of
purchases
Service
Customer
retention
Price
premium
Profits
Word of
mouth
Figure 18.3

6. Top Box Scores, Repurchase Intentions, and Referral Intentions
Overall Satisfaction
with XYZ
(% of customers)
Definitely Will Repurchase from XYZ
Definitely Would Recommend XYZ
TOP BOX Very Satisfied
(64%)
= 96%
= 91%
44-point drop
55-point drop
SECOND BOX
Somewhat Satisfied
(29%)
All Customers
= 52%
= 36%
BOTTOM 3 BOXES
Neutral to Very Dissatisfied
(7%)
= 7%
= 4%
Source: Technical Assistance Research Bureau (TARP), 2007.

7. The Effects of Service Service Profits Margins Sales Customer
Lower
costs
Margins
Volume of
purchases
Customer
Retention
Service
Behavioral
Intentions
Price
premium
Profits
Word of
mouth
Sales
Figure 18.4

8. The Key Drivers of Service Quality, Customer Retention, and Profits
Service Attributes
Service
Encounters
Service
encounter
Service
encounter
Service
Quality
Behavioral
Intentions
Customer
Retention
Profits
Service
encounter
Service
encounter
Figure 18.6

9. Sample Measurements for the Balanced Scorecard
Financial Measures
Price Premium
Volume increases
Value of customer referrals
Value of cross sales
Long-term value of customer
Customer
Perspective
Service perceptions
Service expectations
Perceived value
Behavioral intentions:
% Loyalty
% Intent to Switch
# Customer Referrals
# Cross Sales
# of Defections
Operational
Perspective
Right first time (% hits)
Right on time (% hits)
Responsiveness
(% on time)
Transaction time
(hours, days)
Throughput time
Reduction in waste
Process quality
Innovation and
Learning Perspective
Number of new products
Return on innovation
Employee skills
Time to market
Time spent talking to customers
Figure 18.7
Source: Adapted from: R.S. Kaplan and D.P. Norton, “The Balanced Scorecard—Measures That Drive Performance,” Harvard Business Review 70 (January-February 1992), pp

10. Service Quality Spells Profits
Lower
costs
Margins
Defensive Marketing
Volume of
purchases
Service
Price
premium
Customer
Retention
Profits
Word of
mouth
Market
share
Sales
Offensive Marketing
Reputation
Price
premium

11. The Measures That Matter Most: Fast Food Example
Figure 18.8
Source: Christopher D. Ittner and David F. Larcker, “Coming Up Short on Nonfinancial Performance Measurement,” Harvard Business Review 81 (November 2003), pp. 88–95.