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McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
Customer Expectations of Service
3
▪ Service Expectations
▪ Factors that Influence Customer Expectations of
Service
▪ Issues Involving Customers’ Service Expectations
3-2
Objectives for Chapter 3:
Consumer Expectations of Service
▪ Recognize that customers hold different types of expectations
for service performance.
▪ Discuss several sources of customer expectations of service.
▪ Acknowledge that the types and sources of expectations are
similar for end consumers and business customers, for pure
service and product-related service, for experienced customers
and inexperienced customers.
▪ Delineate some important issues surrounding customer
expectations.
3-3
Possible Levels of Customer Expectations
3-4
Dual Customer Expectation Levels
3-5
The Zone of Tolerance
3-6
The Zone of Tolerance
Desired Service
Zone of
Tolerance
Adequate Service
← Delights
← Desirables
← Musts
3-7
Zones of Tolerance
▪ The range of expectations between desired and
adequate…
▪ can be wide or narrow
▪ can change over time
▪ can vary among individuals
▪ may vary with the type of product/service
3-8
Zones of Tolerance for Different
Service Dimensions
3-9
Factors That Influence Desired Service
3-10
Factors That Influence Adequate Service
3-11
Factors That Influence Desired and Predicted
Service
3-12
Explicit Promises from Paytrust
3-13
Frequently Asked Questions About
Customer Expectations
▪ What does a service marketer do if customer
expectations are “unrealistic”?
▪ Should a company try to delight the customer?
▪ How does a company exceed customers’ service
expectations?
▪ Do customers’ service expectations continually
escalate?
▪ How does a service company stay ahead of competition
in meeting customer expectations?
3-14
FIN 3331 Assignment
Emily Smith just received a promotion at work that increased her annual salary to $42,000. She
is eligible to participate in her employer’s 401(k) retirement plan to which the employer matches,
dollar for dollar, workers’ contributions up to 5% of salary. However, Emily wants to buy a new
$25,000 car in 3 years, and she wants to have enough money to make a $10,000 down payment
on the car and finance the balance. Fortunately, she expects a sizable bonus this year that she
hopes will cover that down payment in 3 years.
A wedding is also in her plans. Emily and her boyfriend, Paul, have set a wedding date two years
in the future, after he finishes medical school. In addition, Emily and Paul want to buy a home of
their own in 5 years. This might be possible because two years later, Emily will be eligible to
access a trust fund left to her as an inheritance by her late grandfather. Her trust fund has $80,000
invested at an interest rate of 5%.
1. Justify Emily’s participation in her employer’s 401(k) plan using the time value of money
concepts by calculating the actual annual return on her own contributions. She will
contribute $1,000 per year to her 401(k) for 25 years and the employer will match dollar
for dollar. Assume that her 401(k) earns 6% per year for 25 years and all contributions
are made at the end of each year.
2. Calculate the amount of money that Emily needs to set aside from her bonus this year to
cover the down payment on a new car, assuming she can earn 4% on her savings. What if
she could earn 10% on her savings?
3. What will be the value of Emily’s trust fund in 36 years, assuming she takes possession
of $20,000 in 2 years for her wedding, and leaves the remaining amount of money
untouched where it is currently invested?
4. Suggest at least two conditions that Emily and Paul could take to accumulate more for
their retirement.
5. Suppose that Emily and Paul purchase a $200,000 home in 5 years and make $40,000
down payment immediately. Find the monthly mortgage payment assuming that the
remaining balance is financed at a 3% fixed rate for 15 years. What if its mortgage term
is 30 years?
6. What can you conclude about the relationship between the mortgage term and the amount
of the monthly payment? From Question 5, is the monthly payment with the 30-year term
half as large as the monthly payment with the 15-year term? Explain.
Use the following information to answer the following questions.
ABC, Inc. Income Statement (in thousands)
December 31, 2014
Sales
$200,000
Cost of goods sold
140,000
Gross profit on sales
60,000
Operating expenses
56,000
Operating income (EBIT)
4,000
Interest expense
1,000
Earnings before tax
3,000
Income tax
1,050
Net income available to common stockholders
$1,950
Number of shares outstanding
Market price per share
1, 500
$22
ABC, Inc. Balance Sheet (in thousands)
December 31, 2014
Assets
Cash
Accounts receivable
Inventories
Total current assets
Gross fixed assets
Accumulated depreciation
Net fixed assets
Total assets
Liabilities and Equity
Accounts payable
Accruals
Total current liabilities
Long-term debt
Total liabilities
Common stock (par value and paid in capital)
Retained earnings
Total stockholders' equity
Total liabilities and equity
Industry Key Ratios
Industry Average Ratios
Current ratio
1.1
Quick ratio
0.60
Days Sales Outstanding (DSO)
25 days
Fixed assets turnover
5.8
Total asset turnover
2.95
Liabilities-to-assets ratio
65%
Times-interest-earned
3.2
Net profit margin
1.3%
$2,000
17,800
8,700
28,500
70,000
26,500
43,500
$72,000
$18,000
13,350
31,350
8,250
39,600
2,000
30,400
32,400
$72,000
Return on equity
Price/earnings ratio
Market/book ratio
7.32%
20.38
3.19
1. Calculate current ratio and acid test ratio for the firm.
2. Calculate DSO, fixed assets turnover, and total asset turnover for the firm.
3. Calculate liabilities-to-assets ratio and times-interest-earned ratio for the firm.
4. Calculate net profit margin and return on equity for the firm.
5. Evaluate the performance of the firm in the following areas:
Liquidity management
Asset management
Debt management
Profitability management
When you explain the firm’s strength or weakness in each area, you must support your
arguments through the evaluative reasoning process by providing reasons, methods,
criteria, or assumptions behind the claims made.
6. Deductive reasoning starts with a general principle and deduces that it applies to a
specific case. Deductive reasoning moves with exacting precision from the assumed truth
of a set of premises to a conclusion which cannot be false if those premises are true.
Explain the deductive reasoning process applied to analyze the firm’s performance.