MIDLANDS STATE UNIVERSITY

FACULTY OF COMMERCE
SERVICES MARKETING MM406 EXAMINATIONS MAY 2009 DURATION: 3 HOURS

TOTAL MARKS: 100 INSTRUCTIONS 1. 2. 3. 4. Section A is a compulsory case study and carries 40 marks. Answer any 3 questions from section B. Credit will be given to clear and legible writing. Answer must be set out in a systematic way under appropriate heading and subheadings.

SECTION A CASE STUDY IMPROVING SERVICE AT BRITISH AIRWAYS In 1987, profits at British Airways were an industry-high $284 million. Its average revenue per passenger, $266, was also among the best in the industry. In terms of passengers carried and passenger miles flown, British Airways has become the largest international airline in the world. All this from the airline that lost an industry-record $1 billion in 1982. When Colin Marshall took over as CEO of British Airways in early 1983, the company was the laughing stock of the industry. Comedians referred to the company, known by its initials BA, as Bloody Awful. Employee morale had hit rock bottom: thousands of employees had just been laid off, and those remaining were embarrassed to work for the worst airline in the world. Marshalls first challenge was to restore pride. To send a clear message to both employees an potential customers, he ordered newly designed uniforms for all personnel. The fleet of planes was also repainted with bright stripes and the motto To fly, to serve. With this motto, the service era was born at British Airways. Words alone do not guarantee quality service, so Marshall launched a major campaign to change employees attitudes toward service. He surmised that many passengers, especially those travelling on business, desired better service from airlines. Marshall required that all BA employees attend a two-day seminar called Putting People First. The purpose of the seminar was to put the airline employees in the customers shoes. Employees were asked to think about some of their own bad experiences with service. Obvious problems-dull, tasteless food, poor cabin service, cramped leg room-were remedied immediately. But Marshall also scrutinized the less obvious details. For example, research had shown that passengers like to be called by name, so BA employees spent several months observing passengers on flights from London to Glasgow and Manchester. When ticket agents addressed passengers by name, customer satisfaction scores went up approximately 60 percent. Now, BA agents call customers by name whenever possible. Troubleshooters who speak several languages were placed at Londons Heathrow Airport to provide passenger assistance. Booths were set up at JFK Airport in the New York City for BA passengers to videotape comments about service. Finally, flights were scheduled for the convenience of customers, not the airline. BA also changed its Concorde service. Marshall decided to treat the firms seven concordes, which were losing money, as a symbol of a revitalized airline. The planes were redecorated, and prices were raised substantially. The new price is 30 percent higher than first-class fares on a conventional jet. But because the Concorde can cross the Atlantic Ocean in half the time It takes other jets, BA developed a new advertising theme to empahsise the importance of time to business travelers. As a result the Concorde began flying at over 60 percent occupancy (the breakeven point) on its trans-Atlantic routes.

Then, in early 1989, BA invested $40 million to improve first-class service. Video terminals were installed at each seat and the interiors of the cabins were redesigned. A new wine cellar offers an improved selection and menus allow first-class passengers to eat when they wish. These changes are all part of Collin Marshals service and managers from other service industries are taking note. Marshall himself likes to recall the famous Twentieth Century Limited, the train that ran from New York to Chicago. Conductors would pay passengers $1 for every minute the train was late, no matter who or what was to blame. With all the air traffic delays and weather problems, it would be tough for airlines to make the same offer. But, as Marshall says, We could promise to make the delays completely painless with concentrated service attention. Think how many customers you could acquire for life if and when the guarantee is cheerfully, quickly and easily paid.
Based on the information from Kenneth Labich, The big comeback at British Airways, Fortune, December 5, 1998.

i.

Demonstrate how Colin Marshall has used international marketing to improve the BA performance. (20) Services marketing often involves tangiblising the intangibles. How is this being done by Colin Marshall? (5) Looking at the BA case, what do the SERVQUAL dimensions specifically mean for this airline? What important attributes (if any) does the SERVQUAL list not cover for this particular airline? (15)

ii.

iii.

SECTION B 2. The central idea to marketing is universal and it makes no difference whether you are marketing furnaces, insane policies or margarine. Required Discuss the major assertions found in this argument. 3

(20)

Defining categories of service is arguably more complex than for manufactured goods the great diversity of services to a small number of categories is difficult to achieve. Required Discuss from the services marketing perspective the basis for and the importance of services classification. (20)

Service marketers interest in customers arises because of their involvement in the service production process, because of the need to understand their behavior as customers, because customers can influence other customers during the service production and consumption process. Discuss. (20)

5. People who work for a service organization should be incorporated more explicitly as an element ofh the service marketing mix. Discuss. (20)