RST 325 exam 2

Be able to apply the three cost-based pricing strategies

-Break-even Analysis & Target Profit Pricing -Mark-up Pricing -Activity-based Costing (ABC)

Be able to outline the three foundations of a pricing strategy as represented by the pricing tripod

-Cost -Competition -Value

Understand the characteristics of a service business that make the application of revenue management effective

-High fixed cost with fixed capacity -Varying and uncertain demand -Varying customer price sensitivity/price elasticity

Understand the concept of perceived value and be able to apply different ways of reducing customers' non-monetary costs

-Perceived value = perceived benefits - perceived costs

Know the intensifiers and inhibitors of price competition

-Price Competition Intensifiers • Increasing number of competitors. • Increasing number of substituting offers. • Decreasing number of demands -Price Competition Inhibitors • Personal relationships • Switching costs are high

Be familiar with different pricing objectives

-Profit and Revenue Objectives • Gain profits • Cover costs -User Base-related Objectives • Manage demand • Increase demand • Shift demand • Build market share -Strategy-related Objectives • Support positioning strategy • Support competitive strategy

Thoroughly know the different ways to implement differential pricing

-Time of booking or reservation - e.g., discount for advance purchase -Location of booking or reservation -Flexibility of usage - e.g., non-refundable tickets -Time or duration of use - e.g., happy hour, two-night minimum stay -Frequency or volume of consumption - e.g., season tickets -Group membership - e.g., resident/senior/student discounts

Know what is franchising

A franchise is the agreement or license between two legally independent parties which gives: (a) a person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (franchisor); (b) the franchisee the right to market a product or service using the operating methods of the franchisor; (c) the franchisee the obligation to pay the franchisor fees for these rights, and (d) the franchisor the obligation to provide rights and support to franchisees.

Know how service employees and other customers can be part of the servicescape.

Appearance and behavior of both service personnel and customers can strengthen or weaken impression created by a service environment. E.g., employees at Disneyland, customer dress code for upscale hotel, spectator dress code for games

Thoroughly understand what the actual price/cost of a service is

Composite price = price + monetary sacrifice + nonmonetary sacrifice

Be able to explain the concept of price elasticity

Price elasticity=Percentage change in demand/ percentage change in price

Be able to perform break-even analysis to calculate the break-even price for a service

Profit=price*volume - (fixed cost + variable cost*volume

Thoroughly understand the pros and cons of the traditional marketing channels

Pros: • reaches a large number of audiences at once • low cost • accurate cons: • one-way communication • low response rate • most expansive

Define revenue management in your own words

Revenue Management: sell the right service to the right customer at the right time for the right price

Know the definition of service environment (i.e. servicescape)

Service environments (i.e., servicescapes) relate to style and appearance of physical surroundings and other experiential elements encountered by customers at service delivery sites

Be able to describe what is search engine optimization in your own words

The process of optimizing a website for the purpose of getting traffic from search engines to the website

Understand when communications should take place

Timing is closely matched to the various perceptions and behaviors the firm wants to manage in the Service Communications Funnel (e.g. three months before summer travel)

be able to apply different ways of reducing customers' non-monetary costs

• Search Costs • Time Costs • Physical Costs • Psychological costs • Sensory costs • Post-purchase costs

Understand the roles of signs, symbols, and artifacts

•(1) as labels (e.g., name of the department); •(2) for giving directions (e.g., exit); •(3) for communicating the service script (e.g., take a queue number); •(4) for reminders about behavioral rules (e.g., no smoking)

Thoroughly understand the Mehrabian-Russell Stimulus-Response Model

•A theory behind consumer responses to service environments •Feelings are central to the model, which drive behavior •It's important to design the environment to match customers' affective expectations •The more complex a cognitive process becomes, the more powerful its potential impact on affect is.

Thoroughly understand the intangibility challenges of service communications

•Abstractness- your service/ core product is a concept •Generality-general and not specific enough •Non-search ability-many of the service attributes cannot be searched or inspected physically before they are purchased •Mental implacability-many services are sufficiently complex

•Thoroughly know elements of communications available via traditional marketing channels, service delivery channels and communications that originate outside the organization

•Advertising •Sales promotion •Direct marketing •Personal selling •Public relations

Be able to apply the key ambient conditions in designing a service environment

•Ambient conditions refer to characteristics of environment that pertain to the five senses. • Music, sounds and noise • Scents and smells • Color schemes and lighting • Temperature and air movement • Taste

Recognize the factors that attract customers to use online services

•Convenience. •Ease of search •A broader selection. •Potential for better prices. •24/7 service with prompt delivery

Understand some common tactical service communications objectives along the three-stage of service consumption

•Customer acquisition •Service encounter management •Customer engagement

Thoroughly understand the three main ways of service distribution

•Customer goes to service organization •Service organization comes to customer •Customer and service organization transact remotely (mail or electronic communication)

Be able to explain the pros of franchising

•Fast growth with limited resources •Protection of the brand from being copied •Long-term commitment of franchisees •Local knowledge from franchisees to deal with local authorities, labor market, media and customers

Two ways to increase perceived value

•Increase perceived benefits •Decrease perceived costs

Be able to describe what is being distributed in a service business context

•Information and promotion flow — distribution of information and promotion materials relating to the service offer. — information and consultation supplementary services Negotiation flow — reaching an agreement on the service features and configuration, and the terms of the offer — order-taking, billing and payment (e.g., reservation, ticket) Product flow — physical facilities for delivery and development of a network of local sites

Be able to explain the cons of franchising

•Less control over delivery system and customer experience •Difficult to ensure franchisees adopt the same priorities and procedures •Franchisees may gain experiences and start to operate without the constraints imposed by the agreement

Be able to describe what intermediaries are and be able to provide an example of intermediaries in RST.

•Many service organizations find it cost-effective to outsource certain aspects of distribution. •E.g., cruise lines and hotels have travel agents handle information, order-taking, consultation, billing and payment

Know the three sources of message received by the target audience

•Market communications •Service delivery •Messages originating from outside the organization

Be familiar with the tactical location considerations

•Population size and characteristics. •Pedestrian and vehicular traffic and its characteristics. •Convenience of access for customers. •Competitors in this area. •Nature of nearby businesses and stores. •Availability of labor. •Availability of site locations, rental costs, and contractual conditions and regulations.

Know the factors that determine extended operating hours.

•Pressure from consumers •Changes in legislation •Economic incentives to improve asset utilization •Availability of employees to work during "unsocial" hours •Automated self-service facilities

Be familiar with three broad target audiences for any service communications program

•Prospects (Potential Customers) — not known in advance •Users (Current Customers) — existing target audience •Employees (Internal Customers) — secondary audience

Know the roles of a company's website in service communications

•Service Outlets •Front line Employees •Self-Service Delivery Points

communications strategies that can overcome these

•Service consumption/process episode •Documentation (operation and performance) •Testimonials •Reputation/awards/qualifications

Thoroughly understand the four purposes of service environments

•Shape customers' experiences and behaviors • Physical surroundings help to "engineer" appropriate feelings and reactions in customers and employees, can help to build loyalty towards firm •Signal quality and position, differentiate and strengthen brand • Customers use service environment as an important quality proxy, and firms go to great lengths to signal quality and portray desired image •Core component of value proposition •Facilitate service encounter and enhance both service quality and productivity

Be familiar with the strategic location considerations

•Understanding customer needs and expectations, competitive activity, and the nature of the service operation. •Firms should make it easy for people to access frequently purchased services, especially those that face active competition •Markets can be segmented by accessibility preferences and price sensitivity.

Thoroughly know the 5 'W's of the Integrated Service Communications Model

•Who: target audience decision •What: communications objectives •How: message decision •Where: media decisions •When: timing decisions

Know the three main dimensions of the service environment

•ambient conditions •space/functionality •signs, symbols and artifacts