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Analyze a recent service purchase by assessing the service using the 7Ps, including the core benefit, service provisions, and tangibles. Discuss how the concepts of intangibility, inseparability, inconsistency, and perishability/inventory relate to this service. Describe a personal experience of a service failure, including whether you complained, the outcome, and if you experienced service recovery. Suggest what the company could have done to recover if you did not experience it. Additionally, solve the provided pricing problems showing all work, including break-even analysis, full-cost pricing, target profit calculation, market-based pricing, and job pricing with markup. Finally, provide insights on the Enron accounting scandal and its implications on financial contagion and industry integrity.
Paper For Above instruction
The study of service marketing emphasizes understanding the core elements that define service quality and customer satisfaction. Recently, I purchased a premium coffee subscription service, which provides daily coffee deliveries to my residence. This service exemplifies several marketing principles, particularly the 7Ps: product, price, place, promotion, people, process, and physical evidence. Analyzing these elements sheds light on how the service delivers value and how its shortcomings can lead to customer dissatisfaction and recovery strategies.
The core benefit of the coffee subscription service is the convenience of freshly brewed coffee delivered daily, fostering a sense of comfort and routine for the customer. The service provisions include the actual delivery, the quality of coffee beans, and the customer support team. Tangibles manifest as the packaging, delivery vehicle, and the branding visible on the cups and correspondence. These tangible elements reinforce the brand image and influence perceived quality.
Understanding the characteristics of services—intangibility, inseparability, inconsistency, and perishability—is crucial to evaluating service performance. Intangibility refers to the inability to see or touch the service before purchase; in this case, customers rely on reviews and brand reputation. Inseparability implies that the service delivery occurs simultaneously with consumption, meaning that the delivery process directly impacts customer satisfaction. Inconsistency pertains to the variability in service quality—delivery timing and coffee freshness may fluctuate based on operational factors. Perishability refers to the finite nature of service capacity; the daily delivery implies a need for efficient scheduling to avoid unmet demand or excess inventory.
An incident of service failure occurred when a delivery was delayed by several hours due to logistical issues. I contacted customer support to express my dissatisfaction. Initially, I received generic apologies and no compensation. However, I escalated the complaint to a supervisor, who offered a complimentary week of service. This act of service recovery restored my trust, and I continued the subscription. The company's quick response and compensation exemplify effective recovery strategies that reinforce customer loyalty.
In cases where service recovery is not swift, companies could implement proactive measures such as personalized follow-up, discounts, or service guarantees. These actions can transform a negative experience into a positive one, encouraging continued patronage.
Transitioning into the financial aspects, the first problem involves calculating the break-even point for an umbrella manufacturer. The fixed costs are $275,000 annually, and the variable cost per umbrella is $5. Selling price is $10. To find the break-even units, the formula is:
Break-even units = Fixed costs / (Selling price - Variable cost) = $275,000 / ($10 - $5) = 275,000 / 5 = 55,000 units.
The second problem pertains to pricing a box of chocolates using full-cost pricing. Fixed costs per month total $50,000, with variable costs of $3 per box, and a sales volume of 100,000 boxes. With a desired profit margin of 20%, the total cost per unit is:
Total fixed costs per unit = $50,000 / 100,000 = $0.50
Total cost per unit = $3 + $0.50 = $3.50
Profit per unit = 20% of selling price, which we solve for as follows:
Selling price = Total cost + Profit
Let P be the price, then:
Profit = 0.20 * P
Total cost + Profit = P
3.50 + 0.20*P = P
0.80*P = 3.50
P = 3.50 / 0.80 = $4.375
Therefore, the price should be approximately $4.38 to meet the profit margin goals.
The third problem requires determining the units needed to reach an $80,000 profit with a $120,000 investment, variable costs of $20 per unit, and selling price of $100. The units needed are calculated as:
Required sales units = (Investment + Desired Profit) / (Selling Price - Variable Cost)
= ($120,000 + $80,000) / ($100 - $20)
= $200,000 / $80 = 2,500 units.
The fourth scenario involves setting a price for an athletic mouth guard to achieve a 30% ROI on a $500,000 investment, with an estimated 1% market penetration of 18 million athletes. The potential sales volume is 180,000 units, with a variable cost of $2.50. The desired profit is 30% of the total investment, which is $150,000. The total revenue needed is:
Total revenue = Investment + Desired profit = $500,000 + $150,000 = $650,000
Market share: about 1% of athletes, or 180,000 units; thus, price per unit is:
Price = Total revenue / Units sold = $650,000 / 180,000 ≈ $3.61
Considering competitors and market positioning, pricing slightly higher at around $4.00 could be justified for brand positioning and perceived quality, but a lower price might maximize sales volume. I would lean toward $4.00 to ensure coverage of costs and targeted ROI.
The final pricing problem involves calculating the job price for a renovation with costs including permits, supplies, subcontracted labor, and miscellaneous expenses, with a markup of 25%. Costs are:
- Permits: $500
- Supplies: $2,000
- Subcontracted labor/materials: $4,000
- Miscellaneous: $500
Sum of costs = $500 + $2,000 + $4,000 + $500 = $7,500
Adding a 25% markup:
Price = Cost + (Markup Cost) = $7,500 + 0.25 $7,500 = $7,500 + $1,875 = $9,375
This would be the charge the customer pays for the renovation project.
Finally, reflecting on the Enron scandal, it serves as a cautionary tale about the dangers of unethical accounting practices and their potential to trigger widespread financial contagion. Enron’s use of off-balance-sheet entities to conceal debt and inflate earnings misled investors and regulators. When the fraud was uncovered, it resulted in massive shareholder losses, job cuts, and a loss of public trust in financial reporting. The scandal prompted reforms like the Sarbanes-Oxley Act to improve corporate accountability and transparency. The broader lesson emphasizes the importance of ethical standards, regulatory oversight, and the need for investors and auditors to scrutinize financial statements carefully to prevent similar contagion in the financial industry.
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