LINKS Services

Marketing Simulation
Revised July 2016

Ruth N. Bolton, PhD

Randall G. Chapman, PhD

LINKS Services Marketing Simulation

Copyright (c) 2006-2016 by Ruth N. Bolton and Randall G. Chapman

LINKS is a registered trademark of Randall G Chapman. All rights reserved.

LINKS Services Marketing Simulation

Table of Contents
Chapter 1: Introduction ................................................................................................. 7
Why Use Simulations? ........................................................................................................ 7
What Will You Learn? .......................................................................................................... 8
LINKS Overview ................................................................................................................... 9
Market Demand Patterns ................................................................................................... 10
LINKS Decisions ................................................................................................................ 11
General Advice................................................................................................................... 11
Excel Spreadsheet Access To This Manuals Exhibits..................................................... 12

Chapter 2: Service Design Decisions ......................................................................... 13

Service Design and CSR Productivity............................................................................... 13
Reconfigurations ............................................................................................................... 16
Service Design Decisions Form ........................................................................................ 16

Chapter 3: Service Operations Decisions ................................................................... 18

CSR Salary Decisions ........................................................................................................ 18
Service Hiring/Firing Decisions......................................................................................... 19
Service Time Allocation Decisions ................................................................................... 20
Service Capacity ................................................................................................................ 20
Unfilled Orders................................................................................................................... 21
Service Overhead .............................................................................................................. 22
Managing CSR Capacity Utilization .................................................................................. 22
Service Operations Decisions Form ................................................................................. 23

Chapter 4: Marketing Decisions .................................................................................. 25

Price Decisions .................................................................................................................. 25
Marketing Spending Decisions ......................................................................................... 26
Marketing Program Details ................................................................................................ 28
Marketing Mix Allocation ............................................................................................. 28
Marketing Positioning .................................................................................................. 29
Introduction/Drop Decisions ............................................................................................. 30
Marketing Decisions Form ................................................................................................ 31

Chapter 5: Forecasting Decisions............................................................................... 33

Forecasting Accuracy........................................................................................................ 33
A Judgmental Sales Forecasting Template ...................................................................... 33
About Forecasting and Forecasting Accuracy ................................................................. 35
Forecasting Decisions Form ............................................................................................. 35

Chapter 6: Information Technology Decisions ........................................................... 37

Billing System Technology................................................................................................ 37
Industry-Wide CSR Employee Satisfaction Survey Participation .................................... 38
Internal CSR Employee Satisfaction Survey..................................................................... 38

LINKS Services Marketing Simulation

Internet-Delivered Ancillary Support ................................................................................. 38

Telecommunications Systems Support ............................................................................ 39
Information Technology Decision Form ........................................................................... 40

Chapter 7: Other Decisions ......................................................................................... 42

Chapter 8: Financial and Operating Reports .............................................................. 44
Performance Evaluation Report ........................................................................................ 44
Corporate P&L Statement.................................................................................................. 44
Historical Corporate P&L Statement ................................................................................. 48
Service P&L Statement ...................................................................................................... 48
Balance Sheet .................................................................................................................... 48
Service Operations Report ................................................................................................ 49
Service Center Statistics Report ....................................................................................... 49
Forecasting Accuracy Report............................................................................................ 50
Sample Reports ................................................................................................................. 50

Chapter 9: Research Studies ...................................................................................... 60

Research Studies Strategy ................................................................................................ 60
Research Study #1: Benchmarking - Earnings ................................................................ 62
Research Study #3: Benchmarking - Service Design ...................................................... 62
Research Study #8: Benchmarking - Service (CSR Usage) ............................................ 63
Research Study #9: Benchmarking - Marketing .............................................................. 63
Research Study #10: Benchmarking - Info Tech & Research Studies ............................ 64
Research Study #11: Benchmarking - Operating Statistics ............................................ 64
Research Study #12: Market Statistics ............................................................................ 65
Research Study #13: Employee Satisfaction ................................................................... 65
Research Study #14: Regional Summary Analysis ......................................................... 66
Research Study #18: Experience Quality Perceptions .................................................... 67
Research Study #20: Customer Satisfaction ................................................................... 69
Research Study #23: Concept Test .................................................................................. 69
Research Study #24: Price Sensitivity Analysis .............................................................. 70
Research Study #26: Importance-Performance Analysis ................................................ 73
Research Study #27: Marketing Program Benchmarking ............................................... 74
Research Study #28: Marketing Program Experiment .................................................... 75
Research Study #31: Self-Reported Preferences ............................................................ 77
Research Study #34: Accessibility Perception Drivers ................................................... 77
Research Study #38: Retention Statistics ....................................................................... 79
Interpreting Retention Statistics and Customer Lifetime Value: A Tutorial ................... 80
Research Studies Table of Contents ................................................................................ 82
Research Studies Decision Forms .................................................................................... 82

Chapter 10: Performance Evaluation .......................................................................... 86

Chapter 11: Firm Management and Advice................................................................. 88
Planning ............................................................................................................................. 88
Team Management and Organization ............................................................................... 88

LINKS Services Marketing Simulation

End-Gaming Strategies and Tactics ................................................................................. 90

Postscript ........................................................................................................................... 91

Appendix: Web-Based LINKS Access ........................................................................ 92

Index ............................................................................................................................. 94

LINKS Services Marketing Simulation

LINKS Services Marketing Simulation

Chapter 1: Introduction
"The secret of getting ahead is getting started. The secret of getting
started is breaking your complex, overwhelming tasks into small
manageable tasks, and then starting on the first one." Mark Twain

In the LINKS Services Marketing Simulation, competing firms market and deliver support
services (e.g., computing/IT support, financial management, health care, repair, or
maintenance services) to household (consumer) and major accounts (business) customers
through a direct sales channel in multiple market regions. Your management team competes
against other firms in the support services marketplace. Working with your management team,
your goal is to improve your firm's overall financial, operating, and market performance.
The LINKS Services Marketing Simulation engages participants in all aspects and challenges of
services management:
Human Resources Management (hiring/firing/retaining and service personnel).
Marketing Management (segmentation, market selection, differential advantage, marketing
mix decisions, and service design and portfolio management).
Service Operations Management (technology, productivity, capacity management,
forecasting, and service quality management).
Research resources are available to LINKS firms, including service quality metrics, employee
and customer satisfaction surveys, and competitive benchmarking studies.
LINKS firms are challenged to effectively integrate business processes to create value for
customers and shareholders. LINKS highlights the interrelationships among marketing
activities, organizational capabilities, and service operations (human resource management and
technology), while enhancing and challenging participants management, analysis, planning, and
strategy skills. Your management team will also encounter challenges and opportunities arising in
organizational and group settings. These management considerations will be as important as
analysis and decision making skills in achieving success in LINKS.
The key to success in LINKS is a carefully developed long-run strategy with appropriate expertise
being applied to sales forecasting, market monitoring, financial analysis of alternative strategies,
planning, and marketing and operations decision making. A second major imperative is superior
execution of strategy in a dynamic competitive environment. Large doses of common sense and
managerial acumen will be needed throughout the LINKS exercise.

Why Use Simulations?

"I hear and I forget; I see and I remember; I do and I understand." Confucius

Why use simulations in management education? Why not use traditional classroom lectures,
perhaps combined with case studies? Adults learn best by doing. "Doing" involves taking
responsibility for one's actions, receiving feedback, and having an opportunity to improve through
time. In management education and training settings, management simulations foster learning in
a non-threatening but competitive environment of the kind that real managers face every day.

LINKS Services Marketing Simulation

An ideal way to educate managers would involve taking over the management of a real
company. Unfortunately, real life has real-life costs and consequences associated with it. Few
companies would permit novices to run part or all of their business in real time. Perhaps more
importantly, real life evolves slowly. It takes quite a while for management initiatives to be
developed and implemented. Real life's feedback is slow in coming and often difficult or
impossible to interpret.
Like a flight simulator, a management simulator allows more rapid time compression, quick
feedback to the learner, and is a low-risk process (except to one's ego). A well-designed
management simulator can provide the student with a realistic education and training experience
in the relative safety of the simulations operating environment. And, perhaps more importantly,
the lessons learned in a management simulation occur within hours or days, not the months,
quarters, or years associated with real life.
Here are the classic reasons to favor management simulations in adult-learning environments.
Compared to traditional lecture/case/discussion educational events, simulations:
Reflect active rather than passive participation, enhancing learning motivation.
Apply key management concepts, especially coordination and planning.
Require analysis and decisions in the context of market-based feedback in the presence of
thoughtful, vigilant competitors.
Provide rapid feedback, encouraging participants to learn from their successes and failures
within a relatively low-risk competitive dynamic environment.
Provide learning variety through novel learning environments.

What Will You Learn?

"The ability to learn faster than competitors may be the only
true sustainable competitive advantage." Arie P. De Geus

The learning objectives implicit in the LINKS Services Marketing Simulation include:
Developing and executing a strategy that creates value for customers and for shareholders.
Crafting an effective marketing program to communicate value to customers.
Matching demand and supply (capacity) in a competitive environment.
Managing service quality and technology
Managing service personnel (hiring/firing, training, and compensation)
Interpreting business performance metrics (e.g., employee job satisfaction and customer
satisfaction survey data)
Enhancing and encouraging fact-based analysis and decision making
Experiencing competitive dynamics in an evolving marketplace.
Beyond these learning objectives, other subtle learning goals include improving your ability to
recognize, anticipate, and cope with uncertain market forces. For example, well-designed
strategies, tactics, and plans can be thwarted by unanticipated environmental or competitive
forces.
Since the LINKS management simulation learning environment is built around teams, small group
functioning and decision making skills are emphasized in the background throughout this
simulation exercise. Since most workplaces include project teams, the management simulation
learning environment provides hands-on experience in identifying key principles and practices
associated with high-performing teams.

LINKS Services Marketing Simulation

LINKS Overview
The best way to put distance between you and the crowd is to do an
outstanding job with information. How you gather, manage, and use
information will determine whether you win or lose. Bill Gates

Within LINKS, there are two support services categories (market segments): Household (i.e.,
individual consumers and family units) and Major Accounts (i.e., businesses and governments).
While sharing many elements in common from an operational perspective, these two market
segments represent completely different end-users. Household and Major Accounts support
services categories in LINKS are separate vertical markets that do not overlap.
Marketing activities articulate promises to potential customers of LINKS support services.
Support services are delivered by customer service representatives (CSRs). Firms support their
CSRs somewhat differently depending on their organizational capabilities (derived from how
services are designed) and technology investments.
Each LINKS firm in your support services industry has two services: one service targeted at the
Household market segment (service 1) and one service targeted at the Major Accounts market
segment (service 2). LINKS uses f-s terminology to describe specific firms and their service
offerings. For example, service 3-2 is firm 3s second service (a Major Accounts support service).
Each decision period in LINKS is one calendar quarter. Within LINKS, each calendar quarter
in the year is assumed to have an equal number of calendar days. There is no known time-ofyear seasonality in LINKS markets.
You assume control of your LINKS firm at the end of quarter 3. Thus, your first decisions will be
for quarter 4. Although your firm has been operating for a number of years, detailed information is
only available about the recent past.
All firms in your industry started quarter 1 identically. This is consistent with an industry that has
evolved over time so that (ultimately) all competitors now emulate each other. Decisions in
quarters 1-3 were constant throughout these three quarters. However, due to the normal random
forces in the various markets in which your firm operates (e.g., employee attrition), the financial
and market positions of the firms in your industry will vary somewhat at the end of quarter 3.
In each decision quarter, your management team accesses the previous quarter's results,
analyzes and evaluates recent performance, and plans and implements on-going marketing
programs and operations capabilities. The LINKS analysis-planning-implementation-evaluation
cycle is shown in Exhibit 1. This cycle repeats throughout your LINKS exercise enabling your
team to learn from experience.

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LINKS Services Marketing Simulation

Exhibit 1: LINKS Analysis-Planning-Implementation-Evaluation Cycle

(1) Analysis: Analyze
current financial,
operating, and market
performance, which
involves both individual
and within-team analysis.

(2) Planning: Based on

prior analyses and working
with your teammates, make
decisions for the next round.
These decisions represent
your plan.

(3) Implementation:
Submit your decisions
for the next round via
the LINKS Simulations
website.

(4) Evaluation: Compare

your plan to your results.
What were you trying to
accomplish? How well did
you do? What corrective
action is needed?

Iterate

The LINKS currency unit is the LCU, the "LINKS Currency Unit." The LCU is
abbreviated "$" and pronounced Ldollar ("el-dollar"). The "LINKS Currency
Unit" (LCU) is a Euro-like multi-country currency.
In your travels, you might have encountered the "$" symbol associated
with currencies in Australia, the Bahamas, Barbados, Belize, Bermuda, Brunei Darussalam,
Canada, Cayman Islands, Fiji, Guyana, Hong Kong, Jamaica, Liberia, Namibia, New Zealand,
Singapore, Solomon Islands, Suriname, Taiwan, Trinidad/Tobago, the United States, and
Zimbabwe. That's merely a coincidence. The "$" currency symbol is widely known to have
originated with the Ldollar.

Market Demand Patterns

"Just because the river is quiet does not mean the crocodiles have left." Malay Proverb

Customer demand in LINKS is measured in terms of (one-time) usage of a given service. In other
words, firms measure demand by counting transactions or units of service. Contracts for
support services that cover customers usage over a period of time do not exist in the LINKS
support services industry. Customers may have single or multiple transactions with a given
service firm within a given quarter. Some customers are more loyal than other customers, buying
more and (potentially) upgrading to a higher level of service.
Demand for each support service is influenced by its marketing program. For example, lower
prices and more marketing spending stimulate higher demand. In addition, various exogenous
factors influence market demand. There is no known time-of-year seasonality within the market
for LINKS support services. As with all goods or services, some customers are relatively heavy
users of support services while others would never purchase support services even with a price of
$0. Customers may choose to use your firms support services, purchase from a competitor, rely
on internal (i.e., in-house or do-it-yourself) support service, or do without altogether.
Customer demand for support services in the Household and Major Accounts market segments
may respond somewhat differently to the marketing variables at your firms disposal. Thus, what
might work well for one service in one geographic market might not work well for other services in
other geographic markets. For example, customers may be quite sensitive to price for a service

LINKS Services Marketing Simulation

11

offered in a particular market, while they are somewhat insensitive to wide ranges of prices for
services in other markets

LINKS Decisions
"The fight is won or lost far away from witnesses, behind the lines in the gym and
out on the road, long before I dance under those lights." Muhammad Ali

You assume control of your LINKS firm at the end of Quarter #3. Your first decisions are for
Quarter #4. Your predecessor management team left you no historical records other than the
Quarter #1-#3 financial and operating reports.
At the beginning of LINKS, teams take over management responsibilities of existing firms with ongoing marketing, human resource, and operations decisions in place. Whether these current
decisions are good, bad, or so-so is unknown. However, your firm is currently profitable, so things
can't be completely awful. You will have to live with uncertainty when LINKS begins. You are
expected to learn quickly. The strong current financial and market position of your firm means
that continuous negative profitability would be viewed as an obvious sign of poor management.
In each quarter, LINKS firms make a range of marketing, human resource, and operations
decisions that interact with each other, requiring close coordination between marketing programs
and operations capabilities. A number of research studies are available in LINKS. Firms may
choose to order these research studies in any quarter, incurring the associated research study
costs described later in the LINKS participants manual.
It is important to note that LINKS has a special continuous decision framework built into it. All
decisions from the previous quarter carry over intact into the present quarter, unless a firm issues
orders to change a decision. All decisions in LINKS are, therefore, standing orders and they will
continue to be in force until explicitly changed by a firm.
Youll submit your decision input changes and research study orders no later than the
designated input submission deadlines specified by your LINKS instructor. Youll access the
LINKS Simulation Database (via the LINKS website, http://www.LINKS-simulations.com) and
use your firms LINKS passcode to access your LINKS divisions data/decisions, retrieve past
financial reports, and make decision input changes for each quarter in your LINKS exercise.

General Advice
"The journey is the reward." Steve Jobs, Apple Computer Founder

Based on our observation of thousands of past LINKS participants, these general suggestions
have well-proven value:
Read and re-read this LINKS participant's manual (there's lots of good stuff in it).
Regularly think about general business and management principles and how they might relate
to and work within LINKS.
You don't have to know everything about LINKS at the beginning of the exercise, but you must
consistently increase your knowledge-base through time.
"Share toys" (i.e., work hard at sharing your useful fact-based analyses and important insights

12

LINKS Services Marketing Simulation

with all members of your LINKS team). "Knowing" something important personally is only a
part of the LINKS management challenge. Exploiting that knowledge effectively throughout all
of your LINKS team's deliberations, with and through your whole LINKS team, is the key to
harvesting the maximum ROI from your data, facts, analysis methodologies, insights, and
knowledge.
Get the facts and base your decisions on the facts, not on wishes, hopes, and dreams.
Work hard at anticipating and responding to changes in market-driving forces.
Coordination of demand and supply is key.
Remember the Ferengi proverb (for Star Trek fans): "There is no honor in volume without
profit." Volume, sales, and market share are easy to obtain, if there are no constraints on
profitability. Profitable volume is the "holy grail" in business and in LINKS.

Good luck and try to have fun in LINKS. It's all about learning and, in a "learning marathon" like
LINKS, everyone can cross the finish line in a personal-best time.

Excel Spreadsheet Access To This Manuals Exhibits

This participants manual for the LINKS Services Marketing Simulation includes a large number of
tabular exhibits. To facilitate convenient access to these exhibits for on-going referencing during
your LINKS exercise, these exhibits have been included in an Excel spreadsheet. To
access/download this Excel spreadsheet, point your favorite browser to this case-sensitive URL:
http://www.LINKS-simulations.com/SMktg/ExhibitsSMktg.xls

LINKS Services Marketing Simulation

13

Chapter 2: Service Design Decisions

"Someone's sitting in shade today because someone planted a tree a long time ago." Warren Buffett

Your firm has two support services in two categories (segments). Service 1 is provided to
Households and service 2 is provided to Major Accounts (i.e., business and government
customers).
You may modify the design of these support services, within the limits described in this chapter.
However, you may not change the support services category or target market (Household and
Major Accounts) for services 1 and 2.
Each of your support services has a particular design (configuration) when you assume control of
your LINKS firms. You may change the design of your support services as your LINKS event
evolves over time. Design changes influence demand for a service and firm service productivity,
leading to direct and indirect financial consequences. Service is provided by CSRs (customer
service representatives) in each market region. Managing trade-offs between service design,
cost, and CSR productivity will be important in LINKS.

Service Design and CSR Productivity

"You can have the Model T in any color, so long as it's black." - Henry Ford

LINKS support services have standardized designs across all market regions. There are no
regional variations in LINKS support services design. For example, service 3-1 is the same
Household support service design (configuration) in all market regions in which it is actively
marketed.
Since customer preferences may vary across market regions, firms may have to make trade-offs
in deciding how much to customize a services design (configuration) to create superior value for
customers in a particular market region. Customization of a support service to maximize sales in
one region might mean fewer sales to customers in other regions who prefer alternate support
service designs (configurations).
In LINKS, service design (configuration) is described as a seven-character code with the following
elements and interpretations:
(1) Service Category: "H" for Household, "M" for Major Accounts
(2) CSR Technical Training: 0-9 (hours per month)
(3) CSR Service Skills Training: 0-9 (hours per month)
(4) Service Appointment Scheduling: 1-7 (days)
(5) Scheduling Style: 0-4 (appointment scheduling window in hours)
(6) Service Call Duration: 1-3 (1=minimum, 2=more than minimum, 3=maximum)
(7) Service Call Format: 0 or 1 (0=telephone service, 1=on-site visit).
For example, service H243121 is a Household support service with 2 hours/month of Technical
Training and 4 hours/month of Service Skills Training for CSRs assigned to this support service,
Service Appointment Scheduling of 3 days (support service provided within 3 days of the service

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LINKS Services Marketing Simulation

request from customers), a Scheduling Style with a 1-hour appointment window for support
service calls, a more-than-minimum Service Call Duration is provided to solve the customers
service request, and an on-site visit Service Call
Format.
FAQ

CSRs (customer service representatives) deliver

support services. Each CSR has 22 8-hour days of
service capacity per month (i.e., 176 hours of
service capacity per month or 528 hours of service
capacity per quarter). The design (configuration) of
a support service influences the available service
capacity of your CSRs assigned to that support
service. For example, if a particular support service
includes a service design of 4 hours/month of CSR
Technical Training, then the available capacity of
the CSRs associated with that support service
would be reduced by 4 hours/month (12
hours/quarter) from the standard capacity of 176
hours of service capacity per month or 528 hours of
service capacity per quarter.

"Is it possible to have region-specific

service configurations?" No, a service's
configuration is the same in all market
regions. Each service may have only one
configuration at a time. With varying
customer preferences by region, the
implication is that trade-offs may be
required
in
meeting
customers'
heterogeneous preferences.
It is, of
course, possible to target a service's
configuration toward the preferences of
particular customers. But, that might be
to the detriment of customers in other
regions
who
prefer
alternate
configurations.

The design of each service influences customers

preferences for it, as well as the costs associated with providing the service. Generally speaking,
customers prefer in-person/on-site, quicker, and predictably-scheduled service from skilled CSRs.
Of course, customers also prefer lower-cost support service to higher-cost support service, all
else being equal. Your management team will have to learn how much customers are willing to
pay for particular service attributes and then develop and implement a plan to profitably serve
them.
Service design (configuration) influences variable costs per support service call and CSR
productivity as follows.
Service Category: There are two service categories, H for support services targeted at
Households and M for support services targeted at Major Accounts. Service 1 must always
be a Household support service and service 2 must always be a Major Accounts support
service. You cannot change the Service Category for these two support services. However,
your support services can be differentiated to create value for customers in a variety of ways,
described below.
CSR Technical Training: Each support service may have 0-9 hours per month of CSR
Technical Training for CSRs assigned to the support service. Indirect implications for CSR
productivity arise with each hour of training reducing available CSR capacity by an hour.
CSR Service Skills Training: Each support service may have 0-9 hours per month of CSR
Service Skills Training for CSRs assigned to the support service. Indirect implications for CSR
productivity arise with each hour of training reducing available CSR capacity by an hour.
Service Appointment Scheduling: Service appointments are scheduled within 1-7 days of a
customers request for support service. Customers prefer quicker scheduling of support
service calls. However, there are direct and indirect cost implications associated with quicker
service appointment scheduling.
- Direct Costs: Variable costs per Major Accounts support service call equal 0.5(8-SAS)(8SAS) where SAS is the level of Service Appointment Scheduling in days. For Major
Accounts support service calls, the least expensive Service Appointment Scheduling

LINKS Services Marketing Simulation

15

option (7-day service) incurs variable costs per service call of 0.5(8-7)(8-7) = $0.50; the
most expensive Service Appointment Scheduling option (1-day service) incurs variable
costs per service call of 0.5(8-1)(8-1) = $24.50. The variable costs associated with
Household support service calls are one-half of the associated variable costs for Major
Accounts support service calls.
- Indirect Costs: CSR productivity is influenced by Service Appointment Scheduling. To
provide sufficient standby/reserve CSR capacity to service shorter Service Appointment
Scheduling programs, available CSR service time is reduced by 1.5(7-SAS)(7-SAS) hours
per quarter where SAS is the Service Appointment Scheduling level associated with a
support service.
Scheduling Style: Support service calls
Case Study: Waiting For The Cable Guy
are scheduled within appointment-time
windows (e.g., between 100pm and
Some cable companies are decreasing wait
300pm on a particular day). Appointmenttimes and improving service via technolog.
time windows of 0-4 hours are possible,

Comcast Cable: Scheduling windows of

with a 0-hour window corresponding to a
four and two hours depending of technician
specific appointment time (i.e., no
and customer availability; rolling out mobile
appointment-time window but rather a
devices for all technicians to better
specific appointment time). Customers
communicate with dispatchers.
prefer narrow appointment-time windows

Time Warner Cable: Normal scheduling

but there are cost implications associated
windows of four hours, but two-hour
windows are available depending on
with
narrow-window
scheduling.
technician availability and type of service;
Variable costs per service call equal 3(4equipping technicians with hand-held
SS) for Household support services and
devices and experimenting with global
4(4-SS) for Major Accounts support
positioning systems in some areas.
services, where SS is the level of

Charter Communications:
Four-hour
Scheduling Style.
Thus, a 2-hour
scheduling windows; added tech support
appointment-window scheduling style has
through internet chat system and is
associated variable costs of $6 for
expanding on-line self-help.
Household support services while a 0-hour

Cox Communications: Two-hour scheduling

appointment-window scheduling style has
windows; testing new technician tracking
associated variable costs of $16 for Major
software and automated customer alert
calls.
Accounts support services.
Service Call Duration: Support service
Source: Sara Schaefer Munoz, "Finally, The Cable Guy Is
calls average one hour in duration to
Getting With The Program: With Complaints Mounting,
handle customers support service
Many Companies Shorten Wait Times For Service Calls,
requests. However, this minimum level of
The Wall Street Journal (January 25, 2007)
support service call (level 1) may not
provide as much hands-on customer
support and empathy as might be desired. More-than-minimum (level 2) and maximum (level
3) Service Call Durations are possible with associated consequences for CSR productivity.
More-than-minimum (level 2) Service Call Duration increase support service calls by an
average of 6 minutes and maximum (level 3) Service Call Durations increase support service
calls by an average of 15 minutes. Variable costs for service call duration for Household
support services are $5.00, $10.00, and $17.50 for levels 1-3, respectively. Corresponding
variable costs for service call duration for Major Accounts support services are $5.00, $12.50,
and $25.00 for levels 1-3, respectively.
Service Call Format: Support service calls may be conducted over the telephone (level 0) or
via an on-site visit (level 1). Variable costs per service call associated with telephone support
service are $10 while the corresponding variable costs per on-site service call are $20. CSR

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LINKS Services Marketing Simulation

productivity for on-site support service calls is reduced by the average travel time of 20
minutes between on-site support service calls.

Reconfigurations
"Get the product out there as soon as you can and let the market judge how good it is.
You can fix it as you go along." William R. Hambrecht, Founder/Chairman/CEO of WR Hambrecht & Co.

Changes in a services design are reconfigurations. A reconfiguration involves a change in

one or more of a services design (configuration) elements. Any service configuration
change incurs one-time costs of $50,000, plus an additional $10,000 per changed service
configuration element, for associated redesign, testing, and administrative activities. For example,
changing three design elements simultaneously results in a total associated reconfiguration cost
of $80,000. Reconfiguration occurs immediately, so sales in the next quarter involve the
reconfigured service.
Due to the workload associated with reconfigurations, your firm is limited to reconfiguring
a maximum of one service per quarter. A reconfiguration may involve changing more than one
element of a service's existing design (configuration).
Don't assume that everything stays the same forever in the support services industry. Customer
preferences for support services may change through time in some/all regions. In addition, coststructure changes that occur from time to time might require adjustments in lots of decisions,
including service design configurations. Thus, it may be necessary to reconfigure support
services more than one time.

Service Design Decisions Form

What's the right combination of service design elements for your firms support services? Whats
the most profitable support service design(s)? These are crucial questions to the successful
management of your LINKS firm.
The answer to these questions depends on customers' preferences for support services design
elements, customers' willingness and ability to pay for these elements, and the direct and indirect
costs associated with providing these elements. Surprisingly, the highest possible quality levels
with the most cutting-edge technologies may not be the best choices when customers' willingness
and ability to pay for service design elements are taken into account.
A blank "Service Design Decisions" form may be found on the next page. Complete this decision
form during your team deliberations if you wish to reconfigure any service.

LINKS Services Marketing Simulation

17

Service Design Decisions

Firm

Category {H=Household, M=Major Accounts}

CSR Technical Training {0-9 hours/month}

CSR Service Skills Training {0-9 hours/month}

Service Appointment Scheduling {1-7 days}

Scheduling Style {0-4 hour appointment window}

Service Call Duration {1=min, 2=more, 3=most}

Service Call Format {0=telephone, 1=on-site}

Quarter

Service 1

Service 2

Notes:
(1) Your firm may reconfigure, at most, one service per quarter.
(2) To reconfigure a service, enter new values for one or more configuration elements (CSR
Technical Training, CSR Service Skills Training, Service Appointment Scheduling, Scheduling
Style, Service Call Duration, and/or Service Call Format).
(3) Service 1 must always be a Household service and service 2 must always be a Major
Accounts service.

Reminders
Only input changes. If you're happy with the current values of these decisions, leave the
appropriate decision entries blank.
All decision inputs change the existing values to the values that you specify. Do not enter "+" or
"-" values. Rather, enter new values only (new values replace the existing value of the decision
variable with your designated value).

18

LINKS Services Marketing Simulation

Chapter 3: Service Operations Decisions

"It matters not whether a company creates ... a computer, a toaster, or a machine tool, or
something you can only experience, such as insurance coverage, an airplane ride, or a
telephone call. What counts most is the service built into that something - the way the
product is designed and delivered, billed and handled, explained and installed, repaired and
received." Ronald Henkoff, "Service Is Everybody's Business," Fortune (June 27, 1994), p. 48

In LINKS, support services are delivered by CSRs (customer service representatives) in each
market region. Service employee decisions include CSR salary, CSR hiring and firing, and CSR
time allocations in each market region to your support services. Your firm maintains a separate
CSR staff in each market region in which you operate.
A firms utilization level of its CSRs is the largest
driver of its service quality.
Higher CSR
utilization is associated with lower perceived
service quality due to service queuing, lack of
time for CSRs to provide high-quality service,
and related issues associated with high
utilization levels (including CSR turnover).
There is a natural lag between perceived service
quality and CSR usage (utilization) since
perceived service quality is survey-based.
Customers are surveyed about their service
quality perceptions of support services for which
they have personal recent experience. So, the
current quarter's perceived service quality is
based on actual CSR usage (utilization) from
the previous quarter. Balancing the trade-offs
among CSR usage (utilization), cost, and service
quality perceptions will be an on-going challenge
for your management team.

FYI: Customer Interaction Costs

Estimates of representative customer
interaction costs (in $US) are listed below:

Self-Service (Voice Recognition, Web

Interaction): $0.1-$0.4

Direct-Mail Contact: $0.25-$5

Telephone Interaction: $2-$5

Fax/Mail Interaction: $3-$6

Telemarketing Interaction: $8-$24

Telephone Product Support: $4-$75

Field Sales Interaction: $40-$400

Source: Adapted from Figure 2 in Jonathan Wright and
Jerry Quinn, "Enterprise Service Management: The Key
To Service Excellence," Achieving Supply Chain
Excellence Through Technology, Volume 4 (San
Francisco: Montgomery Research, Inc., 2002), p. 190.

CSR Salary Decisions

Firms may establish different CSR salary levels across regions.
While cost-of-living
considerations and competitive market forces might lead you to have CSR salaries that vary
across regions, wide variations may lead to morale problems, and not just in the regions where
salary levels are particularly low.
CSR salaries are expressed in terms of dollars per month. Thus, a $24,000 per year salary would
be specified as a $2,000 salary per month. CSR base monthly salary may not be changed by
more than $500 in any quarter from its previous value.
CSR salary levels influence the quality and quantity of the service effort. Through time, higher
salary levels will attract and retain more able service representatives, ultimately yielding higher

LINKS Services Marketing Simulation

19

service quality for customers.

CSR salaries are policy-level directives. The specified salary levels in each region are averages.
Regional service managers implement these policies appropriately. This will mean, for example,
that more experienced and more able service personnel will typically receive above-average
salaries with others receiving correspondingly below-average salaries. These tactical issues are
managed by your regional service managers.

Service Hiring/Firing Decisions

You manage CSR service staff size in each region by hiring and firing CSRs.
You may hire new (inexperienced) CSRs in any region.
Hiring costs for new (inexperienced) CSRs equal two month's salary, representing the costs
associated with recruiting, screening, and training.
Firing costs incur a charge equal to three month's salary.
Hiring and firing costs are recorded as "Service HF" on your financial reports.
Service personnel are hired immediately (i.e., at the start of the next quarter). However, they
train in the first month (at full salary) so they don't begin to provide service calls until the
following month. Thus, CSR hires in a quarter are only two-thirds as productive as
experienced CSRs.
There is a single hiring and firing decision
each market region in LINKS. Positive values
of this decision variable in reflect hiring
decisions while negative values reflect firing
decisions. Obviously, you would never hire
and fire CSRs in a particular region in the
same quarter, so a single decision variable in
each region is all that's necessary to permit
you to make CSR hiring and firing decisions in
the market regions.
Planned changes in service workforce size
are accomplished by judicious hiring and firing
decisions. Attrition reduces the number of
CSRs through time, unless deliberate hiring
and decisions are made. Thus, to maintain
your existing CSR staffing levels, it will be
necessary to hire service personnel regularly.

FAQ
"Is a service usage level of 100% ideal?" With
100% service usage, your service personnel
have
no
time
for
training, vacation,
administrative matters, or other non-customer
facing activity. This workload level may lead to
higher personnel turnover. In addition, 100%
service usage means that lots of customers
have to wait for service, with associated
degradation of perceived service quality. While
less-than-100% service usage has higher
associated costs per contact, the key issue is the
trade-off between cost per contact and
perceived service quality.

Recent experience in the support services industry indicates that CSRs resign at the rate of 7%10% per quarter. Workload and compensation are thought to influence resignation rates, in
positive and negative fashions respectively. If your CSRs are asked to work very hard, their
productivity increases but resignations may also increase. As might be expected, higher-paid
service representatives resign with less frequency than lower-paid service representatives.
For newly hired CSRs, a month's training is required before they are fully functional in their new
positions. This months training ensures that newly hired CSRs are knowledgeable and courteous
employees. New hires receive their normal salaries in this training month, but they dont provide

20

LINKS Services Marketing Simulation

any support service to customers during the first month of employment.

The maximum number of new CSRs that may be hired in any quarter in any region is 99. The
CSR service force any region can be reduced via firing decisions.
Transferring CSRs from one region to another region is not possible in the LINKS Services
Marketing Simulation.
If you decide to stop selling all support services in a particular region, you would need to fire all
remaining CSR staff in that region.

Service Time Allocation Decisions

Two aspects of service quality, reliability and responsiveness, are heavily influenced by your
decisions about service time allocation. You direct your regional service managers to allocate
available CSRs to each of your support services via time allocation decisions (expressed in
percentages) in each market region. These time allocations must sum to 100% across your
support services in each market region. If your firm only has a single support service actively
marketed in a region, you should have 100% of your CSRs time allocated to that single support
service. With two support services actively marketed in a region, any combination of time
allocation percentages (such as 50% and 50%, or 72% and 28%, or 10% and 90%) is possible as
long as they sum to 100% across your support services.
Service time allocations within each region are exclusive responsibility assignments. CSRs
implicitly assigned to one support service in a quarter are unavailable for overflow or
overcapacity support for other support services in that region, even if they have unused capacity
in a quarter. In general, your service goal should be to align your CSR staff time allocations
and CSR service force sizes to be consistent with service demand and your firms targeted
CSR usage (utilization) level for each support service.

Service Capacity
CSRs provide support services to your customers. Each CSR has 22 8-hour days of service
capability per month (i.e., 176 hours of service capacity per month or 528 hours of service
capacity per quarter). Support service design (configuration) influences the available service
capacity of CSRs assigned to that support service. For example, if a particular support service
includes a service design of 4 hours/month of CSR Technical Training, then the available capacity
of the CSRs associated with that support service would be reduced by 4 hours/month (12
hours/quarter). Note, also, that Service Call Duration and Service Call Format influence service
capacity, since these service design elements affect CSR call time per call.
Heres a sample calculation of CSR capacity in a particular region for a particular support
service. In this sample calculation, assume that
1. 4 hours of CSR Technical Training and 2 hours of CSR Service Skills Training are included
in that particular services design;
2. Service Appointment Scheduling is 7 and Service Call Duration and Service Call Format are
minimum (level 1), so that there are no indirect CSR productivity consequences.

LINKS Services Marketing Simulation

21

Standard CSR Capacity (528 hours/quarter)

CSR Technical Training (4 hours/month)
CSR Service Skills Training (2 hours/month)
Available Support Service Time Per CSR (hours/quarter)
Support Service Call Capacity: Telephone Service Calls
Support Service Call Capacity: On-Site Service Calls

528 hours/quarter
12 hours/quarter
6 hours/quarter
510 hours/quarter
510 calls/quarter
382.5 calls/quarter

This sample calculation is for continuing CSRs (non-hires). For CSR hires to this region, only
two-thirds of the 510 hours are available (CSR hires train for one month).
CSR staffing levels and staff-movement timing in each region are defined as follows:
Beginning Staff - Firings - Resignations + Hirings = Available Staff
In this CSR staffing level calculation, note that:
Available Staff includes a mixture of continuing CSRs and new hires (inexperienced
CSRs). New hires have less-than-full-hours availability due to their one month of training.
Forced CSR reductions through firing are assumed to occur at the beginning of a quarter.
CSR resignations are assumed to occur at the beginning of a quarter.
Available Staff in a quarter equals Beginning Staff in the subsequent quarter.
In calculating total service personnel salary in any service in any quarter, the relevant number
of service personnel equals Available Staff times the relevant region-specific salary level.
Each sale of a support service requires a service call. Thus, the number of service calls in a
quarter always equals the sales volume in that quarter.

Unfilled Orders
Similar to other services, support services are characterized by simultaneity of production and
consumption and, of course, perishability. Consequently, unfilled orders occur when customer
demand for any service in any market region exceeds the available CSR capacity for that service
in that market region. In LINKS, the difference between potential customer sales (orders) and
actual customer sales due to insufficient CSR capacity is "unfilled orders."
Unfilled orders are not backlogged orders. Unfilled orders are not guaranteed (i.e.,
contracted, pre-paid) future sales. Unfilled orders incur costs of $20/unit (recorded an Unfilled
Handling costs on your corporate P&L statements).
Past experience suggests that unfilled orders reflect three customer types. Some customers
immediately defect to another competitor's (available) support service. Other customers decide
not to buy any support service now or in the near future. Still other customers wait and attempt to
repurchase the preferred support service having these unfilled orders again in the future when
CSR capacity is more favorable. The size of these three types of unfilled-orders customers is
unknown. In all cases, however, it should be expected that customers remember their
experiences with unfilled orders and these unfavorable experiences influence their perceptions of
your service offering, negatively influencing subsequent sales.
Unfilled orders represent demand that might have been realized beyond "filled orders" (i.e., sales)
if sufficient service capacity had been available to meet all customer purchase requests. With

22

LINKS Services Marketing Simulation

unfilled orders for multiple services offered to the same market segment in the same quarter, the
same customers may have attempted to purchase from multiple firms, so firms must be wary of
the potential for industry-wide double-counting in unfilled orders reporting. In such a situation, a
single customer would be counted as an unfilled order by both services.

Service Overhead
Each CSR incurs direct and indirect overhead expenses in connection with providing support
services. Direct expenses include CSR benefits (health insurance, government taxes of various
kinds, and so on). Indirect costs to support service representatives include periodic service
training activities, service management overhead, office support, and infrastructure support
related to support services. In total, these service overhead expenses equal the CSR salary level.
Thus, if you have a monthly service force salary level of $3,000 in a region, a further $3,000 of
service overhead per month is also incurred to support each CSR.
Your firm is automatically billed for the direct and indirect costs associated with maintaining
service representatives in each of the market regions. These service overhead expenses are
recorded as "Service O/H" on your financial statements.

Managing CSR Capacity Utilization

Each market region may have a regionspecific CSR maximum capacity limit, which
is applied to all support services sold in that
region. Such limits ensure that your CSRs
will not be overworked beyond the specific
limits that you specify. However, if this limit
results in unfilled orders because more
service demand exists than your specified
capacity limits permit, then there might be
loss of goodwill among customers who were
unable to obtain support service this quarter.
This loss of goodwill might reduce service
demand in the future.
Rather than specifying CSR maximum
capacity utilization limits, it is possible to
adjust a service's marketing program to
temporarily reduce demand, to better match
demand and supply.
For example, a
temporary price increase will reduce service
demand until such time as service capacity
can be increased.
When spare (slack) service capacity time
exists, you may assume that CSRs use the
spare (slack) time productively to engage in

Case Study: Northwest Airlines

A planned capacity cut by Northwest Airlines
may restore orderly service after a week of
widespread cancellations, but Northwest pilots
lament the inevitable loss of revenue.
I think this is better than last-minute
cancellations, but we would prefer that we have
enough pilots to fly all the revenue flights, said
Monty Montgomery, spokesman for the Air Line
Pilots Association. The No. 5 U.S. airline said
last Friday that it would cancel one of its Detroitto-Frankfurt flights from July 18 to free-up pilots,
and in August would cut its domestic mainline
capacity by 3%.
The carrier said the capacity cuts would correct
a recent series of flight cancellations. From
June 22 to June 28, Northwest said it canceled
about 12% of its mainline flights, the route
system it operates itself rather than through
contract airlines.
Source: "Northwest Cuts Flights To Free Up Pilots, Avoid
Last-Minute Cancellations," USA Today (July 3, 2007)

LINKS Services Marketing Simulation

23

customer follow-up calls, self-improvement study, voluntary training, and related activities that
may enhance their long-run capabilities for providing high-quality service. When their available
time is fully used to service current demand, there is no time available for such productivity
improvement activities.
In the long run, operating at or near full capacity may lead to degradation in service quality and to
increases in CSR turnover. Thus, there is a delicate trade-off between maximizing short-run CSR
capacity utilization and maximizing long-run service quality.
There are no financial or operational consequences associated with setting CSR maximum
capacity limits above current sales volume realizations. CSR maximum capacity limits are
interpreted as contingencies that only take effect if needed.
CSR maximum capacity limits for each region may be any number (integer) between 50% and
100%.

Service Operations Decisions Form

Profit in business comes from repeat customers, customers that boast about
your product or service, and that bring friends with them. W. Edwards Deming

A blank "Service Decisions" form may be found on the next page. Complete this decision form
during your team deliberations.

24

LINKS Services Marketing Simulation

Service Operations Decisions

Service Operations Decisions

Region 1

Firm

Quarter

Region 2

Region 3

Region 1

Region 2

Region 3

100%

100%

100%

CSR Salary $/Month

CSR Hiring (+) and Firing (-)
CSR Maximum Capacity Limit

CSR Time Allocations

Service 1
Service 2
Total

Note: Service center time allocations must sum to 100% in each market region.

Reminders
Only input changes. If you're happy with the current values of these decisions, leave the
appropriate decision entries blank.
Don't forget to zero-out prior hiring/firing decisions if you don't wish them to continue
on into the next quarter.
All decision inputs change the existing values to the values that you specify. Do not enter "+" or
"-" values except for CSR firings which would, by definition, be a negative number. Rather,
enter new values only (new values replace the existing value of the decision variable with your
designated value).

LINKS Services Marketing Simulation

25

Chapter 4: Marketing Decisions

Your LINKS firm is responsible for a range of marketing decisions for your support services:
pricing, marketing spending, and marketing program details. These marketing decisions are an
important part of your firms effort to create and communicate a consistent value proposition to the
marketplace.
You sell your support services directly to final end-user customers in the Household and Major
Accounts categories. Since your firm sells directly to final end-users, the price you set for each
support service is the final price paid by end-users. $10 in order processing costs accrue for
every support service sale.

Price Decisions
You set prices for each support service in each region. Prices affect demand in the usual fashion.
Higher prices are normally associated with lower levels of customer demand in all categories and
market regions. The specific price sensitivities in the support services categories and market
regions in LINKS are unknown. Youll need to learn about the markets' responsiveness to price
through your experience in LINKS and by exploiting available LINKS research studies.
In addition to the physical costs of producing and distributing updated price sheets, lists, and
databases that accrue when a firm changes price (so-called menu costs), a range of indirect
and non-obvious costs arise with price adjustments.1
Managerial Costs: A firm must gather information, analyze, assess, and ultimately
communicate the logic associated with price changes throughout their organization.
Managerial costs presumably increase with larger price changes, since there is more to
assess/analyze and more organizational members become involved with larger price
changes.
Customer-Facing Costs: When implementing price changes, a communications program
must be created and executed to portray a price change in the most favorable light to
customers. In a B2B environment, price adjustments potentially involve (re)negotiation with
those customers who are resistant to new (higher) prices.
In LINKS, each price change by your firm for a service in a market region results in $10,000 in
costs plus $200 in costs per-dollar change in price (increase or decrease in price) plus costs of
1

Recent published research documents the range of direct and indirect costs associated with price
adjustments for a large U.S. industrial manufacturer (more than one billion USD$ revenues selling 8,000
products [used to maintain machinery] through OEMs and distributors). The authors found that
managerial costs are more than 6 times, and customer-facing costs are more than 20 times, the so-called
menu costs (physical costs) associated with price adjustments. In total, price adjustment costs comprise
1.22% of the companys revenue and 20.03% of the companys net margin. {Source: Mark J. Zbaracki,
Mark Ritson, Daniel Levy, Shantanu Dutta, and Mark Bergen, Managerial and Customer Costs of Price
Adjustment: Direct Evidence From Industrial Markets, The Review of Economics and Statistics,
Volume 86, Number 2 (May 2004), pp. 514-533.}

26

LINKS Services Marketing Simulation

0.25% of current-quarter revenues. For example, a $75 change in price for a service with
revenues of $4,500,000 in a particular region incurs price change costs of $10,000 + ($200)(75)
+ (0.0025)($4,500,000) = $10,000 + $15,000 + $11,250 = $36,250. These price change costs
are recorded as Price Changes in the Fixed and Other Costs section of your firms profitand-loss statements in the quarter in which the price change occurs.
It's very easy to drop price to attempt to
increase demand. However, it's always an
interesting question whether that increased
demand
actually
increases
profits.
Remember, the price drop that generates
increased demand also reduces your margin
on each unit sold. More importantly, it's easy
for competitors to see and feel threatened by
a price change. Price wars are often initiated
by thoughtless price manipulations by naive
managers who assume that competitors won't
notice, won't respond, or respond ineptly.

FYI: Price Cuts and Profits

Here are some estimates of the impact on
operating profit of a 1% reduction in price,
assuming no change in volume or costs:

Food and drug stores: -23.7%

Airlines: -12.9%

Computers, office equipment: -11.0%

Tobacco: -4.9%

Semiconductors: -3.0%
Across all industries, the average decrease in
operating profit from a 1% price decrease was
8.0%, assuming no change in volume or costs.

To provide a fact-based approach for making

pricing decisions, please refer to the "Pricing
Source: McKinsey & Co., cited in Janice Revell, "The Price
Is Not Always Right," Fortune (May 14, 2001), p. 110.
Worksheet" on the following page. Complete
this "Pricing Worksheet" anytime you're
planning to reduce prices.
Review the
worksheet details with your teammates. After this review, go ahead with the price decrease if you
really think that it's appropriate. Review this "Pricing Worksheet" again after you receive next
quarter's financial results to verify whether your assumptions and predictions were reasonable.

Marketing Spending Decisions

A marketing spending budget is required for each support service in each region. This budget is
managed by your firms region managers and is used for advertising, promotion, and sales force
efforts associated with your support services. Allocate funds to marketing spending as you see fit.
Spending doesnt have to be equal for all support services and regions.
Marketing spending is thought to increase demand for support services in all market regions.
Past industry practice has been to budget at least $50,000/quarter in marketing spending for all
actively-marketed support services and market regions. It is thought that the impact of marketing
spending on demand declines somewhat at higher expenditure levels, but the precise form of the
relationship between marketing spending and sales is unknown. You will have to learn about the
influence of marketing spending on sales through your experience within the LINKS support
services industry in which you are competing.

Price change costs only accrue for services that are already actively being sold in a region. No price
change costs accrue for a service as it is being introduced into a region (i.e., it was inactive in that region
in the last quarter).

LINKS Services Marketing Simulation

27

Pricing Worksheet
This pricing worksheet is designed to provide an analysis framework anytime you are
contemplating decreasing prices within LINKS.
Complete the "Before" columns and review the "Before" columns with your team members.
Complete the "After" column with actual data from the next quarter, after the results are available.
Review the before-after comparison with your team members.

Firm

Service

Region

Quarter

Before Action Analysis,

Review, and Forecast
Last
Quarter,
Actual
Industry Sales Volume [units]
*

Volume Market Share [%s]

Sales Volume [units]

Price [$]

Revenue [$]

Variable Costs [$]

Gross Margin [$]

Fixed Costs [$]

Operating Income [$]

Next
Quarter,
Predicted

After Action
Review
Next Quarter,
Actual

28

LINKS Services Marketing Simulation

Marketing Program Details

"Marketing is not the art of finding clever ways to dispose of what you
make. It is the art of creating genuine customer value. It is the art of
helping your customers become better off. The marketer's watchwords are
quality, service, and value." Philip Kotler

For each support service and region, a complete marketing program consists of three
components:
(1) Marketing spending budget (the Ldollars allocated to marketing support of a service in a
market region).
(2) Marketing mix allocation, a 6-digit code corresponding to the 2-digit percentages (excluding
"%" symbols) of the respective allocations of the total marketing spending budget to
advertising, promotion, and sales force sub-programs.
(3) Marketing positioning, a 2-digit code corresponding to competitive positioning ("how-you-sayit") and benefit proposition ("what-you-say").
Obviously, these marketing program elements should generally be consistent with your service
offerings actual standing in the support services industry. Customers will notice if your firm
promises things that it doesnt deliver! On the other hand, your firm may vary your marketing
decisions over time as the marketplace changes.
If you make any inadvertent input error in marketing mix allocation or marketing positioning inputs,
the previous quarter's values will continue to be in effect in the current quarter. Examples of input
errors include marketing mix allocations which don't sum to 100%, marketing mix allocations of
less than 10%, and invalid marketing positioning codes.
Marketing Mix Allocation
Marketing mix allocation refers to the distribution of your specified marketing spending budget
across advertising, promotion, and sales force programs in support of each support service in
each market region. Obviously, these three percentages must sum to 100% for each support
service in each market region. You may vary your marketing mix allocations across your support
services and market regions.
Advertising programs are implemented by your firm's advertising agency in each region in which
your firm operates. Your regional sales managers implement promotional and sales force
programs in your regions. Sales force programs can include both internal sales representatives
(company employees) and external sales representatives (independent sales representatives who
work for several non-competing companies simultaneously).
Your 6-digit marketing mix allocation (excluding "%" symbols) specifies the 2-digit percentage
allocations of your total marketing spending budget to advertising, promotion, and sales force
programs, respectively. You must allocate at least 10% of your marketing spending budget
to each of advertising, promotion, and sales force. For example, the 6-digit marketing mix
allocation 113653 specifies that 11%, 36%, and 53% of the total marketing spending budget is to
be allocated to advertising, promotion, and sales force programs, respectively.

LINKS Services Marketing Simulation

29

Marketing Positioning
Each support service in each market region has a marketing positioning to guide advertising,
promotion, and sales force efforts. Marketing positioning communicates the value proposition that
a service offers to customers in a market.
Marketing positioning includes both how to say it (competitive positioning) and "what to say"
(benefit proposition). LINKS firms select a two-digit marketing positioning code for each support
service in each market region.
First Digit: How To Say It
(Competitive Positioning)

Second Digit: What To Say

(Benefit Proposition)

Examples of how to say it include marketing

communications claims of more benefits for
the same price as competitors or equivalent
competitive benefits but at a lower price.

Examples of what to say include marketing

communications claims of superiority in design
quality, experience quality, or accessibility
either individually or in combination.

Details follow about the specifics of how to say it (competitive positioning) and what to say
(benefit proposition).
How to say it" (competitive positioning), the first digit in a LINKS marketing positioning
code, reflects a firms decision about whether to focus on benefit(s) exclusively, price exclusively,
or explicitly compare benefit(s) to price within marketing positioning. Your firm may use the
adjectives "more," "same," or "less" to describe your service offering relative to competing
services targeted at a specific market segment in a particular market region.
Different combinations of these competitive positioning options (benefits and price) produce eight
meaningful marketplace positions. These eight competitive positioning options, and their
associated LINKS codes, are described in the following table. Dominated options, such as less
benefits at a higher relative price, are "blacked out" (i.e., infeasible) because they are always
inferior to other competitive positioning options.
"Benefit"
More

Price

Same

More

Same

Less

No Mention

Less

No Mention

7
(Exclusive
Price
Emphasis)

8 (Exclusive "Benefit" Emphasis)

What to say (benefit proposition), the second digit in a LINKS marketing positioning
code, is an articulation of the specific benefit(s) offered by a service. For example, a support
service might provide benefits because it is better designed to match customer preferences, it
delivers a superior service experience, or it is more accessible to customers. In LINKS, the
specific benefit emphasis possibilities include design quality, experience quality, and accessibility.
A "Design Quality" (service design quality) emphasis promises benefits derived from the
support services design/configuration, such as convenient appointment scheduling and
superior service call handling

30

LINKS Services Marketing Simulation

An "Experience Quality" (service operations quality) emphasis promises benefits derived from
the customers experiences with your firm's CSRs (i.e., delivered service).
An "Accessibility emphasis generates top-of-mind awareness and promises benefits derived
from ease of access, purchase convenience, and general presence/prominence in the
marketplace.
A services marketing positioning may focus on one, two, or all three of these benefits. Note that
price is not a benefit to customers, but rather reflects the economic cost incurred to obtain the
offering's benefit(s). Price positioning is included within the first part of the marketing positioning
decision, "how you say it" (competitive positioning).
You may emphasize Design Quality
(service design quality), Experience Quality
(service
operations quality),
and/or
Accessibility individually, in pairwise
combination, or collectively in a services
marketing
positioning
using
these
3
benefit(s) proposition codes.

1
2
3
4
5
6
7

Design Quality
Experience Quality
Accessibility
Design Quality and Experience Quality
Design Quality and Accessibility
Experience Quality and Accessibility
Design Quality, Experience Quality, and Accessibility

Some examples of two-digit LINKS marketing positioning codes follow:

A LINKS marketing positioning code of 81 is an exclusive benefit emphasis on design quality

(service design quality), presumably related to particular distinctive design/configuration
elements of importance to customers.

A LINKS marketing positioning code of 24 is a "more-benefits-for-same-price" competitive

positioning with "benefits" referencing design quality (service design quality) and experience
quality (service operations quality).

A LINKS marketing positioning code of 11 is a more-benefits-for-more-price competitive

positioning with benefits referencing design quality (service design quality). This is a morebenefits-for-more-price-but-worth-it kind of marketing positioning.

A LINKS marketing positioning code of 71 is an exclusive price emphasis, presumably

referencing low price compared to competitive offerings.4
When marketing positioning changes, a variety of costs accrue to refresh and update all
advertising, promotion, and sales force documents, materials, graphics, visuals, and media. In
total, these marketing creative development costs equal the greater of $20,000 or 20% of
marketing spending for a service in a market region. These marketing creative development
costs are recorded as Marketing Creative costs on your firms profit-and-loss statements.

Introduction/Drop Decisions
You may introduce support services into market regions not currently active or cease to offer
(drop) services in some market regions. Introduction incurs a one-time cost of $250,000 per
region. Withdrawing (dropping) a service offering from a region incurs no special costs.
Introduction costs are recorded under "Introductions" on your financial statements.
3

Exhibit 3 (Volume Drivers in LINKS) and Exhibit 4 (Accessibility Perception Drivers in LINKS) provide
further details about the drivers of Design Quality, Experience Quality, and Accessibility.
4
If you choose an exclusive price emphasis for your competitive positioning (i.e., first digit of 7), then the
second digit of the marketing positioning code (benefit proposition) is irrelevant.

LINKS Services Marketing Simulation

31

If you wish to "activate" a support service in a market region, you must issue a specific
introduction decision. Change the "Active Service?" status to "Yes" to introduce a support service
into a specific market region. To drop a support service from active status in a market region,
change its "Active Service?" status to "No."
You only introduce a support service into a market region once. Once a support service is
active in a market region, it continues to be active until you make an explicit
withdrawal/drop ("No") decision.
You must explicitly introduce a support service to a market region, regardless of your marketing
spending and your sales volume forecasts. Setting marketing spending to zero does not result in
the associated support service being dropped from that market region.
If you drop a support service from a market region, you must change marketing spending to $0.
Otherwise, marketing spending continues to occur, in anticipation of a future relaunch.
Your firm has a policy of limiting simultaneous new service-region launches to a maximum
of three in any quarter. So, for example, two services each launched (introduced) into one
region in any quarter count as two launches. A reconfiguration isn't a launch if that service is
already actively distributed in a region.

Marketing Decisions Form

A blank "Marketing Decisions" form may be found on the next page. Complete this decision form
during your team deliberations.

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LINKS Services Marketing Simulation

Marketing Decisions

Service 1

Firm

Region 1

Region 2

Region 3

Region 1

Region 2

Region 3

Quarter

Active Service? {YesNo}

Price
Marketing Spending
Marketing Mix Allocation
Marketing Positioning

Service 2
Active Service? {YesNo}
Price
Marketing Spending
Marketing Mix Allocation
Marketing Positioning

Reminders
Only input changes. If you're happy with the current values of these decisions, leave the
appropriate decision entries blank.
All decision inputs change the existing values to the values that you specify. Do not enter "+"
or "-" values. Rather, enter new values only (new values replace the existing value of the
decision variable with your designated value).

LINKS Services Marketing Simulation

33

Chapter 5: Forecasting Decisions

"Forecasting is like looking into a Kaleidoscope. The patterns are beautiful, but
with a wrist flick, they change dramatically. The patterns all look clear today, but
just a flick of fate, a competitor's action, or a shift in customer preferences and
everything changes." Claire Verweij, University of Michigan MBA (1995)

Service organizations are challenged to match demand and supply in a dynamic competitive
marketplace. Consequently, sales forecasts are extremely important to effective management
and business performance in service organizations.
Forecasting accuracy requires an
understanding of how a firms decisions influence sales. In LINKS, quarterly sales volume
forecasts are required for each support services sales in every market region in which a support
service is active.

Forecasting Accuracy
In LINKS, forecasting accuracy influences operations performance both directly (via adjustments
in base administrative overhead for forecasting inaccuracies) and indirectly (via CSR capacity
management considerations).
Administrative overhead costs increase by 1% for every 1% inaccuracy in your sales volume
forecasts. For example, a forecast error of 10% (whether positive or negative) for a service in a
region increases the administrative overhead costs for that service in that region by 10%.
The maximum administrative overhead penalty associated with sales forecasting inaccuracy
for each service in each region is a doubling of administrative overhead.
Forecast error costs are recorded as Forecast Inaccuracy costs on your firms profit-and-loss
statements, so the reported base administrative overhead costs are always $100,000 per
quarter per service per region.
Forecasting accuracy is also one of the measures included in evaluating each firms business
performance via the LINKS scorecard. See Chapter 10 for details of the LINKS scorecard.
Forecasting accuracy is equal to 100*(1-(abs(Forecast-Actual)/Actual)) expressed in percentage
terms, where "abs" is the absolute value function. Thus, a forecast value of 11,000 and an actual
value of 8,000 result in a forecast accuracy of 100*(1-abs(11,000-8,000)/8,000) = 100*(1(3,000/8,000)) = 100*(1-0.375) = 62.5%. The minimum possible value of forecasting accuracy is
0.0%. For example, with an Actual sales volume of 8,000, a Forecast above 16,000 results in a
forecasting accuracy score of 0.0%.

A Judgmental Sales Forecasting Template

The following page contains a judgmental sales forecasting worksheet that provides a template
for systematically approaching the sales forecasting process. Judgmental adjustments are
challenging, but at least you're explicitly taking into account that your and their (competitors')
marketing (customer-facing) program changes influence your sales.

34

LINKS Services Marketing Simulation

Judgmental Sales Forecasting Worksheet

Sales forecasting drives everything in demand-supply coordination and management.
Unfortunately, sales forecasting is extraordinarily challenging due to the many factors influencing
your sales (your current and recent marketing programs, current and recent competitors'
marketing programs, and exogenous market forces).
Here's a judgmental sales forecasting process that, at a minimum,
provides an organizational template to systematically approach the sales
forecasting process. Judgmental adjustments are challenging, but at
least you're explicitly taking into account that your marketing (customerfacing) program changes, and those of your competitors, influence your
sales.

Step 1 (the "easy" part): Construct a trend-line extrapolation of past

sales realizations based on a crucial assumption: future market and
environmental forces will continue as they have existed in the recent
past. Be watchful for structural considerations like unfilled orders.

Step 2 (the "hard" part): Make adjustments for planned changes in your marketing (customerfacing) programs. The potential impacts of changes in service design, price, communications,
and service operations on your sales must be quantified.

Step 3 (the "subtle" part): Account for foreseeable competitors' changes in their marketing
(customer-facing) programs. It's easy to overlook competitors in forecasting. Assume that
competitors are vigilant and thoughtful and present.

Trend-Line Extrapolation of Past Sales Realizations (Base-Line

Forecast)

Adjustments For Planned Changes In Marketing Program (list specifics,

with judgmental estimates of sales impacts [expressed in +/- %s])

Service Design Changes

Price Changes
Communications Changes
Service Operations Changes
3

Adjustments For Foreseeable Changes In Competitors' Marketing

Programs (list specifics, with judgmental estimates of sales impacts [expressed in
+/- %s])

Service Design Changes

Price Changes
Communications Changes
Service Operations Changes
Adjusted Sales Forecast

LINKS Services Marketing Simulation

35

About Forecasting and Forecasting Accuracy

Given the importance of forecasting in running your LINKS business, you might find that reading
the following article has a positive return on your reading-time investment:
J. Scott Armstrong, "The Forecasting Canon: Generalizations To Improve Forecast
Accuracy," FORESIGHT: The International Journal of Applied Forecasting, Volume 1,
Issue 1 (June 2005), pp. 29-35.
http://www.forecastingprinciples.com/paperpdf/The_Forecasting_Canon.pdf

Forecasting Decisions Form

"Predicting rain doesn't count; building arks does." Warren Buffett

A blank "Forecasting Decisions" form may be found on the following page.

decision form during your team deliberations.

Complete this

36

LINKS Services Marketing Simulation

Forecasting Decisions

Short-Term (i.e., Next Quarter) Sales

Volume Forecasts

Firm

Region 1

Region 2

Quarter

Region 3

Service 1
Service 2

Reminders
Only input changes. If you're happy with the current values of these decisions, leave the
appropriate decision entries blank.
All decision inputs change the existing values to the values that you specify. Do not enter "+" or
"-" values. Rather, enter new values only (new values replace the existing value of the decision
variable with your designated value).

LINKS Services Marketing Simulation

37

Chapter 6: Information Technology Decisions

"Many of the most impactful ebusiness solutions are aimed at transforming
less glamorous but extremely important processes like supply chain
management, customer service and support, and distribution." Louis V.
Gerstner Jr., IBM CEO in Executive Excellence (October 1999)

Information technology (IT) options extend your firms current IT systems. Some IT options
provide optional reports that can be made available to a firm. Other IT options are enhancements
to existing hardware, software, systems, and infrastructure that entail a significant one-time
expenditure to purchase/install a technology platform, as well as on-going expenses to operate
the system in each subsequent quarter. The costs associated with your IT decisions are recorded
on your "Corporate P&L Statement" under the heading "Information Technology."
In addition to the costs associated with the information technology (IT) options described in this
chapter, your IT charges include a $1,000/page charge for all financial and operating reports
plus research studies. Each quarter's charge is based on the previous quarter's actual page
counts (e.g., the quarter-32 charge is based on the quarter-31 page count).

Billing System Technology

Your firm may choose to purchase technology to support an improved billing system compared to
the basic billing system in place as you and your team assume managerial control of your LINKS
firm at the end of Quarter #3. An ideal billing system produces accurate bills that are easy for
customers to understand, and also provides CSR support when they handle service requests or
respond to billing-related questions.
Decision options and associated costs for this IT option are as follows:
Decision Option 0: Basic billing-system functionality with no associated incremental costs.
Basic billing system costs are already included in your Corporate Overhead.
Decision Option 1: Enhanced billing-system functionality with associated one-time costs of
$200,000 and on-going quarterly costs of $150,000/quarter.
Decision Option 2: Advanced billing-system functionality with associated one-time costs of
$500,000 ($400,000 if the billing system is being converted from enhanced functionality to
advanced functionality) and on-going quarterly costs of $225,000/quarter.
Enhanced and advanced billing-system functionality is thought by industry experts to increased
design quality (service design quality) and experience quality (service operations quality)
perceptions. However, the exact magnitude of the impacts on design quality (service design
quality) and experience quality (service operations quality) has never been well documented. On
the other hand, it is well accepted that such billing system improvements improve employee
satisfaction by several percentage points on standard employee satisfaction surveys.

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LINKS Services Marketing Simulation

Industry-Wide CSR Employee Satisfaction Survey Participation

The Support Services Industry Trade Association conducts a regular, quarterly industry-wide CSR
employee satisfaction survey. The results of this survey, Research Study #13 (Employee
Satisfaction), are available for purchase by all industry members.
Your firm only has access to Research Study #13 (Employee Satisfaction) in any quarter that
you choose to participate in that quarters industry-wide CSR employee satisfaction survey.
Your firm may, of course, prefer to conduct your own internal CSR employee satisfaction
survey, the results of which are only available to your firm.
Decision options and associated costs for this IT option are as follows:
Decision Option 0: Do not participate in this quarters industry-wide CSR employee
satisfaction survey conducted by the Support Services Industry Trade Association. By
declining to participate, your firms CSR employee satisfaction results this quarter are not
reported in Research Study #13 (Employee Satisfaction) and your firm may not purchase
Research Study #13 (Employee Satisfaction) this quarter.
Decision Option 1: For $1,000, your firm may participate in this quarters industry-wide
CSR employee satisfaction survey conducted by the Support Services Industry Trade
Association. Note that your firms participation in the regular, quarterly industry-wide CSR
employee satisfaction survey doesnt provide your firm with a research study report. Your
firm must explicitly order Research Study #13 (Employee Satisfaction) if you wish to have
industry-wide CSR employee satisfaction survey results.

Internal CSR Employee Satisfaction Survey

Firms may conduct their own internal CSR employee satisfaction survey in any quarter. Such a
within-firm CSR employee satisfaction survey is proprietary to the sponsoring firm; the results are
not shared with the Support Services Industry Trade Association.
This survey provides top-box service- and region-specific employee satisfaction results. CSR
employees report current job satisfaction on four-point poor-fair-good-excellent rating scales
and the reported top-box results reflect the percentage of survey respondents answering
excellent on this four-point rating scale.
Decision options and associated costs for this IT option are as follows:
Decision Option 0: Do not conduct an internal CSR employee satisfaction survey.
Decision Option 1: For $10,000, conduct and report the results of an internal CSR employee
satisfaction survey this quarter.

Internet-Delivered Ancillary Service

Your firm may invest in technology (hardware and software) to support Internet-delivered ancillary
services to your customers. Your firm has a website, but additional funds are required if you wish
to increase benefits to customers and leverage the productivity of your CSRs.
Three levels of Internet-delivered ancillary services are possible. Each service level is a subset of

LINKS Services Marketing Simulation

39

the next higher service level.

Low-level systems allow customers to view past bills online and download software.
Medium-level systems enable customers to make simple service requests that are
ultimately carried out by CSRs, as well as manage/change appointments for on-site visits.
These systems are more expensive because they require dynamic updating of service
operations records.
High-level systems provide real-time, online access to employees who can help customers
with their service requests. In the system support industry, high-level systems are called
customer relationship management (CRM) systems because they provide an integrated way
of managing how the customer interacts with service operations. Customers can move
fluidly between CSR-supported services and technology-supported services.
Decision options and associated costs are as follows:
Decision Option 0: No internet-delivered ancillary service.
Decision Option 1: Low-level internet-delivered ancillary service (one-time development
cost of $250,000 and on-going maintenance costs of $100,000/quarter).
Decision Option 2:
Medium-level internet-delivered ancillary service (one-time
development cost of $550,000 and on-going maintenance costs of $150,000/quarter).
Decision Option 3: High-level internet-delivered ancillary service (one-time development
cost of $1,000,000 and on-going maintenance costs of $250,000/quarter).
In all cases, one-time development costs for a level are reduced by any previous one-time
development costs incurred. For example, in moving from low-level to high-level InternetDelivered Ancillary Service, the incremental one-time costs are $750,000.
Higher levels of internet-delivered ancillary services are thought by services management
experts to increase service quality perceptions (service operations quality). Some experts think
that indirect benefits to employee satisfaction also arise with internet-delivered ancillary
services. Best available estimates are that low-level, medium-level, and high-level internetdelivered ancillary service improve service quality perceptions by 1%, 3%, and 6%, respectively.

Telecommunications Systems Support

Your firm may choose to invest in telecommunications systems that directly support CSR service
delivery. Such telecommunications systems can provide sophisticated call handling capabilities
(efficiently distributing customer calls to CSRs at peak call volume periods) as well as automated
voice response (AVR) for some simple, menu-driven customer requests.
You may choose telecommunications systems support in one or more of your market regions.
There are separate telecommunications systems support IT decisions in each LINKS market
region. When you first initiate telecommunications systems support in a region, you incur onetime charges of $100,000/region. On-going costs in each region are $25,000 in on-going
maintenance costs plus $450/CSR in each subsequent quarter in which telecommunications
systems support is active.
If engaged, telecommunications systems support applies to all CSRs assigned to all support
services in a region. Telecommunications systems support has the potential to improve employee
satisfaction, service quality perception, and customer satisfaction, although the precise magnitude
of these improvements is unknown.

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LINKS Services Marketing Simulation

Information Technology Decision Form

"Debugging is twice as hard as writing the code in the first place.
Therefore, if you write the code as cleverly as possible, you are, by
definition, not smart enough to debug it." - Brian W. Kernighan

A blank "Information Technology Decisions" form may be found on the following page. Complete
this decision form during your team deliberations.

LINKS Services Marketing Simulation

41

Information Technology Decisions

Firm

Quarter

Billing System Technology? {012}

Industry-Wide CSR Employee Satisfaction Survey Participation? {01}
Internal CSR Employee Satisfaction Survey? {01}
Internet-Delivered Ancillary Service? {0123}
Telecommunications Systems Support?

Region(s)?

Note: See the descriptions of these information technology options for the interpretation of each
possible decision option.

Reminders
Only input changes. If you're happy with the current values of these decisions, leave the
appropriate decision entries blank.
All decision inputs change the existing values to the values that you specify. Do not enter "+" or
"-" values. Rather, enter new values only (new values replace the existing value of the decision
variable with your designated value).

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LINKS Services Marketing Simulation

Chapter 7: Other Decisions

"A rose by any other name would smell as sweet." William Shakespeare

Your firm may choose a firm name. Any firm name with up to 40 characters is acceptable. This
firm name is printed on the top of all financial, operating, and research reports. Firm names have
no cost or known demand-side implications, so you are free to choose (or change) your firm's
name as you wish.
A blank "Other Decisions" form may be found on the following page. Complete this decision form
during your team deliberations.

LINKS Services Marketing Simulation

43

Other Decisions

Firm

Quarter

Firm Name {max of 40 characters}

Reminders
Only input changes. If you're happy with the current values of these decisions, leave the
appropriate decision entries blank.
All decision inputs change the existing values to the values that you specify. Do not enter "+" or
"-" values. Rather, enter new values only (new values replace the existing value of the decision
variable with your designated value).

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LINKS Services Marketing Simulation

Chapter 8: Financial and Operating Reports

The LINKS financial and operating reports are described in this chapter. These are the standard
reports that you receive after each quarter of the LINKS simulation.

Profitability Drivers
"A company can outperform rivals only if it can establish a difference that it can
preserve. Competitive strategy is about being different, deliberately choosing a
different set of activities to deliver a unique value mix." Michael Porter

The financial and operating reports described in this chapter are lengthy and detailed. To provide
an overall roadmap for thinking about the drivers of profitability, Exhibits 2-3 decompose net
income into its underlying components. In Exhibit 2, the principal drivers of net income are
revenues and costs. Taxes and non-operating income play lesser roles. Exhibit 3 provides a
breakdown of the underlying drivers of volume, one of the two key drivers of revenues. In
addition, Exhibit 4 provides a breakdown of the underlying drivers of accessibility perception.
Collectively, these exhibits provide a sense of the DNA of net income in LINKS.

Performance Evaluation Report

"If you're riding ahead of the herd, take a look back every now
and then to make sure it's still there." Cowboy philosophy

Please consult Chapter 10 for a detailed discussion of the "Performance Evaluation Report" that
forms the first page of your financial and operating reports.

Corporate P&L Statement

The "Corporate P&L Statement" aggregates all of the service-specific profit-and-loss statements
into an overall corporate profit-and-loss statement. A variety of line items appear on the
"Corporate P&L Statement" only, because it is not possible to unambiguously allocate those costs
to specific services in specific regions.
Definitions of non-obvious line items on the "Corporate Current P&L Statement" follow:

Administrative overhead ("Administrative O/H") is $100,000/quarter per service in all market

regions.

"Consulting Fees," adjustments to income or expenses, may be positive or negative.

Conversations with your instructor are without charge, so don't worry about "Consulting Fees"
associated with such consultations. In LINKS, the "Consulting Fees" line item represents a
convenient mechanism for making adjustments to income or expenses. For example, a
research billing problem can be corrected via an appropriate negative "Consulting Fee."

LINKS Services Marketing Simulation

45

Exhibit 2: Net Income Drivers in LINKS

Volume
Revenues
Price

Variable Costs

Costs
Fixed Costs

Net Income

Interest Rates
Loans

Non-Operating
Income

Marketable Securities

Taxes

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LINKS Services Marketing Simulation

Exhibit 3: Volume Drivers in LINKS

Price
Price Volatility (Over Time)

Technical Training
Service Skills Training
Appointment Scheduling
Scheduling Style
Service Call Duration
Service Call Format
CSR Capacity and Usage
CSR Compensation
CSR Turnover
CSR Employee Satisfaction
Service Tangibles
Support Service Technology

Marketing Program
(Marketing Spending, Mix
Allocation, Positioning,)

Price

Design Quality
(Service Design Quality)

Experience Quality
(Service Operations Quality)

Accessibility

Unfilled Orders

Competitors Marketing
Programs
Exogenous Factors
(Customers, Economy,
Regulatory and
Technology Environment)

Uncontrollables

Volume

LINKS Services Marketing Simulation

47

Exhibit 4: Accessibility Perception Drivers in LINKS

Own Marketing Program

- Marketing Spending
- Marketing Mix Allocation
- Marketing Positioning

Awareness
Perception

Competitors Marketing
Programs

Accessibility
Perception

Fill Rate

Availability
Perception

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LINKS Services Marketing Simulation

Corporate overhead ("Corporate O/H") is $500,000 per support service per quarter. This
per-service charge is incurred if a support service is active in one or more market regions.
Forecast Inaccuracy records the costs associated with forecasting errors.
"Information Technology" records all IT charges. Your IT charges include a $1,000/page
charge for all financial and operating reports plus research studies. This charge is per-firm
and is not related to the number of members of your firm's management team. Each
quarter's charge is based on the previous quarter's actual page counts (e.g., the quarter-32
charge is based on the quarter-31 page count).
"Introductions" reflects costs when services are introduced into market regions.
"Marketing" equals total marketing spending.
"Non-Operating Income" derives either from interest earned on "Marketable Securities"
(from the previous quarter's "Balance Sheet") or from interest paid on "Loans" (from the
previous quarter's "Balance Sheet").
"Operating Income" equals "Gross Margin" minus "Total Fixed Costs."
"Order Processing" records the $10/unit cost associated with processing all sales orders.
"Reconfiguration" equals the total costs associated with service design reconfigurations.
"Research Studies" reflects the total costs associated with last quarter's research study
requests. Note that the current quarter's research studies are executed after the current
quarter's financial reports are prepared. Thus, research study billings are lagged a quarter.
"Service Salaries" is the total salary cost associated with all CSRs.
"Service O/H" is the overhead cost levied on CSR salaries.
"Service Hire&Fire costs are the service hiring and firing costs.
"Unfilled Handling" costs are the unfilled orders handling costs ($20/unit).
"Taxes" reflects corporate taxes payable. Your corporate tax rate is 50%.
"Total Fixed Costs" is the sum of all fixed costs. Note that "Total Fixed Costs" does not sum
correctly down and across since some fixed costs are not allocated to specific services.

Historical Corporate P&L Statement

The "Historical Corporate P&L Statement" reports the previous and current quarter's corporatelevel profit-and-loss data. In addition, all elements in the "Historical Corporate P&L Statement"
are expressed in percentage-of-revenue terms.

Service P&L Statement

Each support service has a current profit-and-loss statement each quarter. The service "P&L
Statement" includes the relevant data for all market regions.

Balance Sheet
Your balance sheet records the usual assets and liabilities associated with your firm at the end of
each quarter.
On the "Balance Sheet":

"Cash" in excess of 10% of revenues is automatically invested in short-term "Marketable

Securities" which earn 1.5% per quarter in "Non-Operating Income" on the "Corporate P&L

LINKS Services Marketing Simulation

49

Statement" in the following quarter. If cash falls below 5% of revenues, a loan is automatically
arranged to increase cash to 5% of revenues. You pay interest of 3% per quarter on "Loans"
and this interest payment is recorded as "Non-Operating Income" (a negative value of "NonOperating Income") in the following quarter's "Corporate P&L Statement."
"Corporate Capitalization" is the Ldollar-value of the original capital invested by your
shareholders to start your firm.
"Dividends" are cash payments to shareholders. In any quarter in which "Net Income" is
positive, 30% of the "Net Income" is allocated to "Dividends."
"Facilities and Equipment Investment" represents the Ldollar-value of your firm's investment in
facilities and equipment.

You can't run out of cash within LINKS. As necessary, loans are automatically issued to bring
your cash up to minimum requirements. Of course, you do have to pay interest on loans.
Whenever profits are positive, corporate policy is to allocate 30% of net income to dividends.

Service Operations Report

The Service Operations Report provides the details of your CSR staffing, productivity, and CSR
management activities. These are hard (engineering and operations) metrics that provide
insights into customer experiences and customer perceptions of service quality (reliability,
responsiveness, assurance, and empathy). This report will undoubtedly be one of the most
frequently-referenced reports among all of the LINKS financial and operating reports.

Service Center Statistics Report

While many companies gather customer feedback and suggestions through focus
groups and surveys, call centers capture customer input from a much broader customer
base. At a typical call center, agents talk to thousands of customers every day and
collect customer demographic information, purchasing preferences, complaints
suggestions, and competitive intelligence. This information can be used to spot trends.
Brad Cleveland, Chief Executive, Incoming Calls Management Institute, Annapolis MD

Current and potential customers interact with your firms call center to purchase support services,
schedule service appointments, and to ask questions about all aspects of your firms support
services. Your firm systematically tracks/counts callers questions.
The "Service Center Statistics Report" provides categorized service center call counts of callers
questions for each of your firms services in each market region. Service center call counts are
reported for these ten categories: billings, design configuration, design quality, first-time usage,
introduction (service introductions to market regions), miscellaneous, service call duration, service
experience, service scheduling, and unfilled orders. Where a single caller has several questions,
the call is recorded in multiple categories. Thus, these call counts are really question counts
rather than counts of caller calls.
Your firm outsources service center management to a reputable provider/vendor in each region
in which your firm operates. Your firm pays your outsourced service center $6/call received.
These costs are recorded as Call Center Service on your firms financial statements.

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LINKS Services Marketing Simulation

In the Excel results supplemental spreadsheet (accessible within the LINKS Simulation Database
on the LINKS website), additional service center results are reported within the
financial/operations results for the current quarter.
A Service Center Statistics History Report follows immediately after the Service Center
Statistics Report. Historical service center statistics (service center calls in each of the ten
calling categories) are reported for each service and region for each of the last six quarters.
This report permits convenient historical analysis of trends in service center calls.
Sales volume for each service/region/quarter is included with the service center statistics and
the service center statistics history (an additional row of data) to permit convenient data
scaling. For example, dividing the raw service center calls data by sales volume expresses
the service center calls in scale-adjusted call per sales order terms.

Forecasting Accuracy Report

The "Forecasting Accuracy Report" provides details of the forecasting
accuracy associated with your short-term (next-quarter) sales volume
forecasts. In addition, the sales history for all of your firm's services
(sales by support service and region) for the last six quarters is displayed
at the end of this report.
Forecasting accuracy is equal to 100*(1-(abs(Forecast-Actual)/Actual))
expressed in percentage terms, where "abs" is the absolute value
function. Thus, a forecast value of 11,000 and an actual value of 8,000
results in a forecast accuracy of 100*(1-abs(11,000-8,000)/8,000) =
100*(1-(3,000/8,000)) = 100*(1-0.375) = 62.5%. The minimum possible value of forecasting
accuracy is 0.0%. For example, with an Actual sales volume of 8,000, a Forecast above 16,000
results in a forecasting accuracy score of 0.0%.

Sample Reports
"The meaning of life is to do the best you can with what you've got." Anonymous

The following pages provide samples of the standard LINKS financial

and operating reports. In addition to these reports, you'll receive the
results of any research studies that you order on additional pages after
the last page of your financial and operating reports.
These samples are provided to familiarize you with the style and format of the reports that are
provided to your firm after each LINKS round. The data reported in these sample reports are only
illustrative of reports formatting. These data arent specific to your particular LINKS industry.
Please do not interpret these samples as suggested guidelines or benchmarks for good decisions
and performance within LINKS.

LINKS Services Marketing Simulation

51

*****************************************************************************
FIRM 5 Support Services Ltd.
INDUSTRY SRV
PERFORMANCE EVALUATION REPORT, QUARTER 16
PAGE
1
*****************************************************************************

For Your Information

You receive the LINKS scorecard (shown above) automatically each quarter as the first page of your financial and operating
reports. This scorecard provides comparatives to assess how your firm's data compares to the industry averages and industry
bests on every Key Performance Indicatory (KPI).
Historical plots of all KPIs are provided in your firms supplementary results Excel spreadsheet (KPIcharts worksheet),
accessible within the LINKS Simulation Database on the LINKS website. Data from the past six quarters are displayed, to the
extent available in your industry's historical archives, to create quarter-by-quarter plots for each of the LINKS performance
evaluation metrics (KPIs) compared to the relevant quarter-specific industry best, industry average, and industry worst for your
LINKS industry.

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LINKS Services Marketing Simulation

*****************************************************************************

FIRM 3: ??????????????????????????????????????????????????
INDUSTRY SMK
CORPORATE P&L STATEMENT, QUARTER 6
PAGE
2
*****************************************************************************

Sales Volume
Unfilled Orders
Price
Revenues
- Variable Costs
- Order Processing
Gross Margin
Fixed & Other Costs:
Administrative O/H
Call Center Service
Consulting Fees
Corporate O/H
Forecast Inaccuracy
Information Technology
Introductions
Marketing
Marketing Creative
Price Changes
Reconfiguration
Research Studies
Service Salaries
Service O/H
Service Hire&Fire
Unfilled Handling
Total Fixed & Other
Operating Income
Non-Operating Income
Taxes
Net Income

All Services
------------

Service 3-1
-----------

Service 3-2
-----------

95,734

57,762

37,972

239

150

375

22,903,800
4,025,341
957,340
-----------17,921,119

8,664,300
1,386,288
577,620
----------6,700,392

14,239,500
2,639,053
379,720
----------11,220,727

600,000
694,776
-300,000
1,000,000
104,179
17,000
0
2,400,000
0
0
0
0
2,826,000
2,826,000
162,000
0
10,329,955
-----------7,591,164
-----------121,434
-3,856,299
============
3,856,299
============

300,000
464,172

300,000
230,604

49,517

54,662

1,200,000
0
0

1,200,000
0
0

1,439,010
1,439,010
63,180

1,386,990
1,386,990
98,820

4,954,889
----------1,745,503
-----------

4,658,066
----------6,562,661
-----------

LINKS Services Marketing Simulation

53

*****************************************************************************
FIRM 3: ??????????????????????????????????????????????????
INDUSTRY SMK
HISTORICAL CORPORATE P&L STATEMENT, QUARTER 6
PAGE
3
*****************************************************************************
Previous (Quarter 5)
--------------------Sales Volume
Unfilled Orders
Price
Revenues
- Variable Costs
- Order Processing
Gross Margin
Fixed & Other Costs:
Administrative O/H
Call Center Service
Consulting Fees
Corporate O/H
Forecast Inaccuracy
Information Technology
Introductions
Marketing
Marketing Creative
Price Changes
Reconfiguration
Research Studies
Service Salaries
Service O/H
Service Hire&Fire
Unfilled Handling
Total Fixed & Other
Operating Income
Non-Operating Income
Taxes
Net Income

Current (Quarter 6)
---------------------

99,611

95,734

243

239

24,291,750
4,281,461
996,110
-----------19,014,179

100.0%
17.6%
4.1%
-----78.3%

22,903,800
4,025,341
957,340
-----------17,921,119

100.0%
17.6%
4.2%
-----78.2%

600,000
698,238
-300,000
1,000,000
129,294
17,000
0
2,400,000
0
0
0
0
2,844,000
2,844,000
162,000
0
10,394,532
-----------8,619,647
-----------76,774
-4,348,210
============
4,348,211
============

2.5%
2.9%
-1.2%
4.1%
0.5%
0.1%
0.0%
9.9%
0.0%
0.0%
0.0%
0.0%
11.7%
11.7%
0.7%
0.0%
42.8%
-----35.5%
-----0.3%
-17.9%
======
17.9%
======

600,000
694,776
-300,000
1,000,000
104,179
17,000
0
2,400,000
0
0
0
0
2,826,000
2,826,000
162,000
0
10,329,955
-----------7,591,164
-----------121,434
-3,856,299
============
3,856,299
============

2.6%
3.0%
-1.3%
4.4%
0.5%
0.1%
0.0%
10.5%
0.0%
0.0%
0.0%
0.0%
12.3%
12.3%
0.7%
0.0%
45.1%
-----33.1%
-----0.5%
-16.8%
======
16.8%
======

54

LINKS Services Marketing Simulation

*****************************************************************************
FIRM 3: ??????????????????????????????????????????????????
INDUSTRY SMK
SERVICE 3-1 P&L STATEMENT, QUARTER 6
PAGE
4
*****************************************************************************
All Regions
(TOTAL
)
------------

Region 1
( Central)
------------

Region 2
(
North)
------------

Region 3
(
East)
------------

Yes

Yes

Yes

57,762

19,015

13,119

25,628

150

150

150

150

8,664,300
1,386,288
577,620
-----------6,700,392

2,852,250
456,360
190,150
-----------2,205,740

1,967,850
314,856
131,190
-----------1,521,804

3,844,200
615,072
256,280
-----------2,972,848

300,000
464,172
49,517
1,200,000
0
0
1,439,010
1,439,010
63,180
4,954,889
-----------1,745,503

100,000
149,922
13,852
400,000
0
0
445,770
445,770
63,180
1,618,494
-----------587,246

100,000
103,506
10,724
400,000
0
0
312,840
312,840
0
1,239,910
-----------281,894

100,000
210,744
24,941
400,000
0
0
680,400
680,400
0
2,096,485
-----------876,363

Active?
Sales Volume
Unfilled Orders
Price
Revenues
- Variable Costs
- Order Processing
Gross Margin
Fixed Costs:
Administrative O/H
Call Center Service
Forecast Inaccuracy
Marketing
Marketing Creative
Price Changes
Service Salaries
Service O/H
Service Hire&Fire
Total Fixed Costs
Operating Income

=============================================================================
Sales Volume Forecast
Service:
Service:
Service:
Service:

CSR
CSR
CSR
CSR

Salary $/Month
Hiring&Firing
Maximum Capacity Limit
Time Allocation

Marketing Mix Allocation

Marketing Positioning
Service 1-1 Configuration:

16,381

11,712

19,236

3,000
27
95
39

3,000

3,000

95
44

95
70

403030
37

403030
37

403030
37

H446320

For Your Information

The standard LINKS quarterly reports include separate P&L statements for each of your
support services. In this sample display, only the report for service 1 is included.

LINKS Services Marketing Simulation

55

*****************************************************************************
FIRM 3: ??????????????????????????????????????????????????
INDUSTRY SMK
BALANCE SHEET, QUARTER 6
PAGE
6
*****************************************************************************
ASSETS
-----Cash
Marketable Securities
Facilities and Equipment Investment
Total Assets

1,772,795
8,697,216
50,000,000
60,470,011

LIABILITIES AND EQUITIES

-----------------------Corporate Capitalization
Dividends, Current Quarter
Dividends, Cumulative Prior To This Quarter
Loans
Retained Earnings, Current Quarter
Retained Earnings, Cumulative Prior To This Quarter
Total Liabilities and Equities

50,000,000
-854,748
-3,632,395
0
2,849,163
12,107,991
60,470,011

*****************************************************************************
FIRM 3: ??????????????????????????????????????????????????
INDUSTRY SMK
SERVICE VARIABLE COST REPORT, QUARTER 6
PAGE
6
*****************************************************************************

Support Service Category

CSR Technical Training
CSR Service Skills Training
Service Appointment Scheduling
Scheduling Style
Service Call Duration
Service Call Format

Service
3-1
------0.00
0.00
0.00
0.25
0.00
10.00
10.00
------20.25

Service
3-2
------0.00
0.00
0.00
12.50
12.00
5.00
20.00
------49.50

56

LINKS Services Marketing Simulation

*****************************************************************************
FIRM 1: Support Services Inc.
INDUSTRY TRC
SERVICE OPERATIONS REPORT, QUARTER 18
PAGE
7
*****************************************************************************
All
Region Region Region
Regions
1
2
3
------- ------- ------- ------===============
STAFFING REPORT
===============
127
-9
0
18
136

42
-3
0
0
39

108
-14
0
8
102

SERVICE 1-1 [H446320]

Gross CSR Productivity
528.0
- Technical Training
-12.0
- Service Skills Training
-12.0
- Service Appoint Scheduling
-1.5
- Duration and Format
-45.7
Net CSR Productivity
456.8
CSRs
118
Hires Productivity
304.5
Hires
18
Time Allocation
40%
Potential CSR Capacity
23,754
CSR Maximum Capacity Limit
93%
Actual CSR Capacity
22,091

528.0
-12.0
-12.0
-1.5
-45.7
456.8
39
304.5
0
42%
7,482
95%
7,107

528.0
-12.0
-12.0
-1.5
-45.7
456.8
94
304.5
8
65%
29,495
91%
26,840

SERVICE 1-2 [M663131]

Gross CSR Productivity
528.0
- Technical Training
-18.0
- Service Skills Training
-18.0
- Service Appoint Scheduling -24.0
- Duration and Format
-172.4
Net CSR Productivity
295.6
CSRs
118
Hires Productivity
197.1
Hires
18
Time Allocation
60%
Potential CSR Capacity
23,055
CSR Maximum Capacity Limit
93%
Actual CSR Capacity
21,441

528.0
-18.0
-18.0
-24.0
-172.4
295.6
39
197.1
0
58%
6,685
95%
6,350

528.0
-18.0
-18.0
-24.0
-172.4
295.6
94
197.1
8
35%
10,276
91%
9,351

+
=

Beginning CSRs
CSR Resignations
CSR Firing
CSR Hiring
Available CSRs

277
-26
0
26
277

===================
PRODUCTIVITY REPORT
===================

LINKS Services Marketing Simulation

57

*****************************************************************************
FIRM 1: Support Services Inc.
INDUSTRY TRC
SERVICE OPERATIONS REPORT, QUARTER 18
PAGE
8
*****************************************************************************

===============
ACTIVITY REPORT
===============
SERVICE 1-1
Service Calls
48,902
CSR Capacity
60,731
CSR Utilization [Q#18]
CSR Utilization [Q#17]
CSR Cost/Call
54.40
CSR Turnover

18,605
23,754
78%
78%
55.76
2%

5,242
7,482
70%
85%
62.59
6%

25,055
29,495
85%
83%
51.68
16%

SERVICE 1-2
Service Calls
34,909
CSR Capacity
40,016
CSR Utilization [Q#18]
CSR Utilization [Q#17]
CSR Cost/Call
77.53
CSR Turnover

21,133
23,055
92%
93%
73.63
11%

6,350
6,685
95%
94%
71.35
8%

7,426
10,276
72%
71%
93.89
8%

58

LINKS Services Marketing Simulation

*****************************************************************************
FIRM 3: AAA Support Services
INDUSTRY MBA
SERVICE CENTER STATISTICS REPORT, QUARTER 8
PAGE
9
*****************************************************************************
All
Region Region Region
Regions
1
2
3
------- ------- ------- ------SERVICE 1-1
----------Billings
Design Configuration
Design Quality
First-Time Usage
Introduction
Miscellaneous
Service Call Duration
Service Experience
Service Scheduling
Unfilled Orders

3,743
3,772
16,351
8,823
0
7,708
3,547
8,414
31,840
832

1,381
1,172
5,588
2,903
0
2,859
1,142
1,978
11,166
0

836
845
3,388
2,081
0
1,584
766
3,078
7,596
636

1,526
1,755
7,375
3,839
0
3,265
1,639
3,358
13,078
196

SERVICE 1-2
----------Billings
Design Configuration
Design Quality
First-Time Usage
Introduction
Miscellaneous
Service Call Duration
Service Experience
Service Scheduling
Unfilled Orders

2,587
2,422
9,378
5,758
0
5,705
1,247
6,929
8,905
601

1,156
1,075
4,432
2,623
0
2,485
603
2,157
4,163
425

841
845
3,114
2,008
0
1,966
401
3,034
2,906
176

590
502
1,832
1,127
0
1,254
243
1,738
1,836
0

2,537
2,247
10,020
5,526
0
5,344
1,745
4,135
15,329
425

1,677
1,690
6,502
4,089
0
3,550
1,167
6,112
10,502
812

2,116
2,257
9,207
4,966
0
4,519
1,882
5,096
14,914
196

ALL SERVICES
-----------Billings
6,330
Design Configuration
6,194
Design Quality
25,729
First-Time Usage
14,581
Introduction
0
Miscellaneous
13,413
Service Call Duration
4,794
Service Experience
15,343
Service Scheduling
40,745
Unfilled Orders
1,433
... Total ...
128,562

LINKS Services Marketing Simulation

59

*****************************************************************************
FIRM 3: ??????????????????????????????????????????????????
INDUSTRY UND
INFORMATION TECHNOLOGY REPORT, QUARTER 6
PAGE 10
*****************************************************************************

Billing System Technology?

Industry Employee Satisfaction Survey Participation?
Internal CSR Employee Satisfaction Survey?
Internet-Delivered Ancillary Service?
Telecommunications Systems Support?

IT Costs
-------0
1,000
0
0
0

0
1
0
0
000

Note: This listing of IT Costs does not include the $1,000/page charge for
the previous quarter's financial/operating reports and research studies.

*****************************************************************************
FIRM 3: Worldwide Support Services Unlimited
INDUSTRY IMC
FORECASTING ACCURACY REPORT, QUARTER 16
PAGE 11
*****************************************************************************

Service
Service
Service
Service
Service
Service
SUMMARY:

3-1
3-1
3-1
3-2
3-2
3-2
For

Region
------

Forecast
----------

Actual
----------

Accuracy
--------

1
2
3
1
2
3

16,452
11,840
19,277
12,904
9,811
6,805

17,731
12,203
22,301
15,016
10,383
8,675

92.8%
97.0%
86.4%
85.9%
94.5%
78.4%

6 forecasts, average forecasting accuracy is

89.2%

Note: Forecasts count within the calculation of forecasting accuracy only

if the "actual" value being forecast is greater than 100 for sales volumes
(to not penalize you for "small" forecasts). Otherwise, the relevant values
of "forecast" and "actual" are only reported for reference purposes, but such
forecasts are not counted for forecasting accuracy scoring. This is the
reason why the number of forecasts referenced in "SUMMARY" may be less than
the detailed line-by-line reporting of forecasts.
------------SALES HISTORY
-------------

Quarter Quarter Quarter Quarter Quarter Quarter

11
12
13
14
15
16
-------- -------- -------- -------- -------- --------

REGION 1
Service 3-1H
Service 3-2M

16,452
12,904

16,305
15,040

20,604
14,561

16,171
12,826

16,582
17,143

17,731
15,016

REGION 2
Service 3-1H
Service 3-2M

11,840
9,811

12,485
11,527

11,957
11,246

11,952
9,791

11,970
10,071

12,203
10,383

REGION 3
Service 3-1H
Service 3-2M

19,277
6,805

23,861
8,593

27,637
9,642

24,909
7,744

25,848
8,690

22,301
8,675

60

LINKS Services Marketing Simulation

Chapter 9: Research Studies

"Research is the process of going up alleys to see if they are blind." - Marston Bates

This chapter describes the research studies that are available in the LINKS Services Marketing
Simulation. These research studies provide information about competitors and about your firm,
competing firms, and about the support services industry and markets. These research studies
are typical of the kinds of research resources that exist in service industries, and the associated
costs are typical of the approximate magnitude of the costs associated with such research studies
in real industries. However, there's no reason to believe that every one of these research
studies is appropriate and useful at all times or worth the associated costs. You'll have to decide
whether these research studies are worth their stated costs.
Research studies requests are submitted along with your other decision variable changes.
Although LINKS research studies are ordered prior to the beginning of the next quarter,
research studies are executed during and after the next quarter, as appropriate. Thus,
research studies reports always reflect the just-completed quarter's experience.
An overview of the available LINKS research study resources is provided in Exhibit 5.
In the following research study descriptions, sample output illustrates the style and formatting of
research study output. These samples are only for illustrative purposes. The output should
not be viewed as providing any specific insight into your particular support services industry.

Research Studies Strategy

"Time spent in reconnaissance is seldom wasted." Sun Tzu, 4BC

Which research studies should you purchase? When should you purchase these research
studies? Two snappy but uninformative responses would be "purchase exactly the research
studies that you need and no others" and "it depends." Unfortunately, these responses are not
very constructive counsel. Heavy-duty anticipatory thinking is needed before deciding on
research study purchases.
Bruce Henderson, noted strategist, author, and management consultant, offers the following
insightful process-based suggestion for conducting research:
"Define the problem and
hypothesize the approach to a solution intuitively before wasting time on data collection and
analysis. Do the first analysis lightly. Then, and only then, redefine the problem more rigorously
and reanalyze in depth. Don't go to the library and read all the books before you know what you
want to learn." The problem "reanalysis" stage is particularly relevant since that is where research
studies may play a role, once you have determined that the information provided in the research
may provide useful insight into the problem.

LINKS Services Marketing Simulation

61

Exhibit 5: Overview of LINKS Research Studies

#

Research Study

Cost

Limit

Benchmarking - Earnings

$500

Benchmarking - Service Design

$500 per service

Benchmarking - Service (CSR Usage)

$5,000

Benchmarking - Marketing

$5,000

10

Benchmarking - Info Tech & Research Studies

$1,000

11

Benchmarking - Operating Statistics

$2,500

12

Market Statistics

$2,500

13

Employee Satisfaction

$15,000

14

Regional Summary Analysis

$5,000 per region

18

Experience Quality Perceptions

$10,000

20

Customer Satisfaction

$10,000

23

Concept Test

$15,000 per concept per region

24

Price Sensitivity Analysis

$20,000 per service per region

26

Importance-Performance Analysis

$7,500 per region

27

Marketing Program Benchmarking

$500 per category per region plus

$500 per active service in each
category and region

28

Marketing Program Experiment

$12,500 per experiment

31

Self-Reported Preferences

$20,000

34

Accessibility Perception Drivers

$20,000

38

Retention Statistics

$10,000

In thinking about research studies strategy and tactics, some generalizations are possible:
Excellent strategy can only be developed based on excellent analysis. Since research
provides the raw data for excellent analysis, research should be an important component of
your LINKS decision-making process. Do not relegate your research studies pre-ordering
decisions to the last five minutes of team meetings. Rather, treat research studies ordering
decisions as a fundamental part of your whole LINKS decision-making process.
Plan ahead. To identify patterns and trends, you will probably need to order some research
studies on a more-or-less regular basis. A formal research studies plan should be a part of
your management planning process.
Systematize the post-analysis of research studies. This might involve, for example, the
continual updating of databases, charts, or graphs to reformat the raw LINKS research studies

62

LINKS Services Marketing Simulation

results into more meaningful and useful forms.

Share insights derived from particular research studies with all of your team members. These
may require research studies' "experts" to assume coaching roles with research studies
"novices." This is a natural state of affairs. Given the complexity of LINKS, it is not possible to
be an "expert" on everything.

Research Study #1: Benchmarking - Earnings

"Every accomplishment starts with the decision to try." Anonymous
Sample Output

Purpose: This research study provides

earnings benchmarks for your industry. The
current-quarter earnings, cumulative-to-date
earnings, and current-quarter dividends of
each firm in your industry are reported. In
addition, a variety of financial market
statistics are reported.
Information Source:
These data are
based on public information.

=======================================================================
RESEARCH STUDY # 1 (Benchmarking - Earnings
)
=======================================================================

Firm 1
Firm 2
...

Current
Net Income
----------2,974,292
3,472,461

Cumulative
Net Income
----------5,788,265
6,234,171

Current
Dividends
----------892,287
1,041,738

Financial Market Statistics [stock price, shares outstanding (millions),

earnings per share, dividends per share, market capitalization ($millions)]
------ ------ ------ -----Firm 1 Firm 2 Firm 3 Firm 4
------ ------ ------ -----StockPrice
120.00 131.80 117.63 123.96
Shares
2.0M
2.0M
2.0M
2.0M
EPS
1.49
1.74
1.44
1.57
DPS
.45
.52
.43
.47
MarketCap
240M
264M
235M
248M

Cost: $500.

Research Study #3: Benchmarking - Service Design

Purpose: Current configurations are reported for all services actively sold in at least one region.
The last quarter in which each service was reconfigured is reported, with quarter "0" referencing
reconfigurations which occurred prior to quarter 1.
Information Source:
These research
study results are based on reverse
engineering efforts by your research
supplier and on information sharing
arrangements administered by the Support
Services Industry Trade Association.
Cost: $500 per competitor service.

Sample Output
=======================================================================
RESEARCH STUDY # 3 (Benchmarking Service Design
)
=======================================================================
Service 1-1H Configuration:
Service 1-2M Configuration:
Service 2-1H Configuration:
...

H351120
M724310
M522211

[reconfigured in quarter 3]
[reconfigured in quarter 13]
[reconfigured in quarter 7]

LINKS Services Marketing Simulation

63

Research Study #8: Benchmarking - Service (CSR Usage)

Purpose: This research study provides
service benchmarks in the forms of CSR
usage rates (utilization) for each of the last
four quarters are reported by service and
region.
Information Source: This research study
is based on information sharing and pooling
agreements administered by the Support
Services Industry Trade Association.

Sample Output
=======================================================================
RESEARCH STUDY # 8 (Benchmarking - Service (CSR Usage)
)
=======================================================================
Quarter 93
-----------------REGION 1
-------Service 1-1H
Service 1-2M
Service 2-2M
...

61
51
66

Quarter 94
-----------

70
56
71

Quarter 95
-----------

80
65
67

Quarter 96
-----------

73
62
69

Cost: $5,000.

Research Study #9: Benchmarking - Marketing

Purpose: This research study provides
marketing benchmarks for your industry.
Price and marketing statistics (minimum,
average, and maximum) for each service
category and market region are provided for
each of the last four quarters.
Information Source: This research study
is based on information sharing and pooling
agreements administered by the Support
Services Industry Trade Association.
Cost: $5,000.

Sample Output
=======================================================================
RESEARCH STUDY # 9 (Benchmarking Marketing
)
=======================================================================
Quarter 55
-----------

Quarter 56
-----------

Quarter 57
-----------

Quarter 58
-----------

----------HOUSEHOLD
REGION 1
min/ave/max
----------Price [$]
Mktg [$K]

435 520 657

100 161 300

431 554 689

0 183 300

437 542 662

0 157 300

429 542 662

0 181 326

----------MAJORACC
REGION 1
min/ave/max
----------Price [$]
Mktg [$K]

465 515 603

100 130 200

477 573 692

94 138 200

489 594 687

100 149 200

579 676 839

100 157 218

64

LINKS Services Marketing Simulation

Research Study #10: Benchmarking - Info Tech & Research Studies

Purpose:
This research study provides
information technology and research studies
ordering benchmarks for your industry.
Information Source: This research study is
based on information sharing and pooling
agreements administered by the Support
Services Industry Trade Association.
Cost: $1,000.

Sample Output
=======================================================================
RESEARCH STUDY #10 (Benchmarking - Info Tech & Research Studies
)
=======================================================================
Firm Firm Firm Firm Firm Firm Firm
1
2
3
4
5
6
7
---- ---- ---- ---- ---- ---- ---Billing System Technology
Industry CSR Satisfaction Survey
Internal CSR Satisfaction Survey
Internet-Delivered Ancillary Service
Telecommunications Systems Support

Yes
Yes
Yes
No
Yes

No
No
No
Yes
No

No
No
No
No
Yes

Yes
No
No
No
No

No
No
No
Yes
No

No
Yes
No
No
No

No
Yes
No
No
No

-----------------------------------------------------------------Research Study Ordering Frequency Across All Firms in Industry AAA

-----------------------------------------------------------------1 Benchmarking - Earnings
4.8%
8 Benchmarking - Service (CSR Usage)
9.5%
9 Benchmarking Marketing
14.3%
10 Benchmarking - Info Tech & Research Studies
14.3%
11 Benchmarking - Operating Statistics
14.3%
12 Market Statistics
9.5%
....

Additional Information: The research study

ordering frequencies are based on the last
two quarters, to the extent that such historical
data are available in the archives for your
industry. Only research studies with non-zero ordering frequencies are reported.

Research Study #11: Benchmarking - Operating Statistics

"There is no finish line." Nike Corporation motto

Purpose: This research study provides a

variety of operating statistics benchmarks
for your industry. Various "Corporate P&L
Statement" figures are reported as
percentages of revenues for your firm and
for three industry aggregates (minimum,
average, and maximum). Average CSR
monthly salary in all regions is reported. In
addition, industry-wide service statistics
are reported.
Information Source: This research study
is based on information sharing and
pooling agreements administered by the
Support
Services
Industry
Trade
Association.
Cost: $2,500.

Sample Output
=======================================================================
RESEARCH STUDY #11 (Benchmarking - Operating Statistics
)
=======================================================================

P&L OPERATING STATISTICS

Revenues
Variable Costs
Gross Margin
Administrative O/H
Marketing
Research Studies
Service
Total Fixed Costs
Operating Income
Net Income
CSR SALARY
Region 1
Region 2
Region 3
CSR CALLS STATISTICS
Region 1
Region 2
Region 3
CSR $/CALL STATISTICS
Region 1
Region 2
Region 3

Firm 8
-----------

Minimum
-----------

Average
-----------

Maximum
-----------

100.0%
50.7%
30.5%
5.7%
4.5%
.0%
4.7%
25.7%
4.8%
2.9%

100.0%
44.3%
30.5%
4.7%
3.8%
.0%
3.6%
22.0%
4.8%
2.9%

100.0%
49.1%
32.6%
5.6%
4.7%
.0%
4.5%
24.9%
7.8%
4.4%

100.0%
50.7%
38.2%
6.0%
6.0%
.1%
4.9%
27.2%
13.7%
7.3%

2,000
1,975
2,025

1,850
1,910
1,950

1,956
2,005
2,075

2,125
2,150
2,200

21,059
18,485
29,680

19,107
17,339
25,487

19,964
18,171
27,747

21,059
18,930
30,611

10.73
11.79
7.88

10.73
11.79
7.36

11.57
12.90
8.10

12.99
14.42
8.55

LINKS Services Marketing Simulation

65

Research Study #12: Market Statistics

"Those who cannot remember the past are condemned to repeat it." - George Santayana
Sample Output

Purpose: This research study provides a

variety of market statistics for the last four
quarters:
Industry demand (final customer
purchases) and unfilled orders are
reported for Household and Major
Accounts service categories.
Overall market shares for each firm are
provided for each of the last four
quarters. These market shares are
based on end-user customer purchase
volumes.
Information Source: This research study
is compiled by your research vendor using
a variety of sources.

=======================================================================
RESEARCH STUDY #12 (Market Statistics
)
=======================================================================

--------------INDUSTRY DEMAND
--------------Region 1:
Household Demand
Household Unfilled
MajorAcc Demand
MajorAcc Unfilled
Region 2:
Household Demand
...
...
--------------------OVERALL MARKET SHARES
--------------------Firm 1
Firm 2
Firm 3
Firm 4
Firm 5

Quarter 11
-----------

Quarter 12
-----------

Quarter 13
-----------

Quarter 14
-----------

60,231
0
29,940
0

59,075
0
31,385
0

59,244
0
31,145
0

59,165
0
30,422
0

21,988

23,306

23,136

22,930

18.0
19.5
19.9
21.7
20.9

26.6
17.4
19.1
19.8
17.1

25.3
18.8
17.6
19.7
18.6

20.7
17.9
20.0
19.6
21.8

Cost: $2,500.

Research Study #13: Employee Satisfaction

Purpose: This research study provides
employee satisfaction estimates of all firms
services in all regions for the last four
quarters.

Sample Output
=======================================================================
RESEARCH STUDY #13 (Employee Satisfaction
)
=======================================================================
Quarter 33
-----------

Quarter 34
-----------

Quarter 35
-----------

Quarter 36
-----------

Information
Source:
Employee -------REGION 1
-------Service 1-1H
23.0
18.8
27.2
satisfaction is estimated via a regular,
Service 3-1H
16.0
22.8
26.8
Service 4-2M
25.2
27.2
29.3
quarterly industry-wide CSR employee
Service 5-1H
31.5
29.5
29.9
...
satisfaction survey.
CSR employee
satisfaction is the percentage of survey
respondents rating their overall job satisfaction with as "excellent" on a 4-point "poor"-fair-good"excellent" rating scale.
Cost: $15,000.
Limitations: The results of any quarters employee satisfaction survey only exist for firms who
agree to participate in the industry-wide CSR employee satisfaction survey. Blanks are reported
for firms declining to participate. Note also that this research study is only available to firms who
are currently participating in the industry-wide CSR employee satisfaction survey conducted by
the Support Services Industry Trade Association.

25.8
23.4
20.0
21.9

66

LINKS Services Marketing Simulation

Research Study #14: Regional Summary Analysis

"If you torture the data long enough, it will confess." Anonymous

Purpose: This research study provides a regional summary analysis for each specified market
region, including current-quarter market shares, prices, and perceptions of design quality (service
design quality), experience quality (service operations quality), and accessibility of all activelymarketing support services.

"Design Quality" (service design

Sample Output
quality) is perceived service offering
=======================================================================
design quality which follows from the RESEARCH STUDY #14 (Regional Summary Analysis
)
=======================================================================
services configuration.
2

"Experience
Quality"
(service REGION
HOUSEHOLD Volume
Market Share
Price DQ EQ Ac

220 2 71+ 46+

operations quality) reflects customers' 1-1 17,092 17.8-

2-1* 28,135 29.4+

225 26+ 77+ 40+

3-1

15,938
16.6

212 2 72+ 38-

perceptions of the service operations 4-1u 11,673 12.2-

210 2 68+ 44+

5-1

15,855
16.6

215 2 77+ 31
quality associated with their support 6-1* 7,082 7.4

230 2 27- 30-

service experience. Service quality

2
derives from experiences with each REGION
MAJORACC Volume
Market Share
Price DQ EQ Ac

firm's CSRs. High utilization levels of 1-2r 8,956 9.4-

330 3 72+ 43+

2-2u 5,821 6.1-

299- 3 74+ 29-

CSRs presumably leads to lower 3-2r 27,839 29.1+ 330 12+ 71+ 46+

4-2* 30,483 31.9+

380+ 68+ 66+ 30-
10,828 11.3-

330 3 74+ 41
service levels, since customers must 5-2r
6-2u 11,781 12.3-

470 96 27- 31-

queue for service and be served by
over-worked CSRs.
Notes:
"Volume" is sales volume in units.

"Accessibility" is perceived service (1)

(2) Other variables listed above are market share, customer price
("Price"), perceived design quality ("DQ"), perceived experience
accessibility, reflecting customers'
quality ("EQ"), and perceived accessibility ("Ac").
(3) Changes of more than 2%, $20, 2%, 2%, and 2%, respectively, in these
perceptions
of
top-of-mind
variables from the previous quarter are flagged with "+" (increase)
and "-" (decrease) signals after the numerical values.
"r" after a firm#-service# denotes a reconfigured service this quarter.
awareness, inaccessibility due to (4)
(5) "u" after a firm#-service# denotes a service with unfilled orders.
after a firm#-service# denotes a reconfigured service that has
unfilled orders, ease of access, (6) "*"
unfilled orders.
purchase convenience, and general
presence/prominence in the market
place.
Information Source: Perceived design quality (service design quality), perceived experience
quality (service operations quality), and perceived accessibility are based on a survey of support
services customers. These perceptual ratings are the percentages of survey respondents rating
design quality (service design quality), experience quality (service operations quality), and
accessibility as "excellent" on a 4-point "poor"-fair-good-"excellent" rating scale.
Cost: $5,000 per region.

LINKS Services Marketing Simulation

67

Research Study #18: Experience Quality Perceptions

Purpose: This research study provides the experience quality perceptions of all services in the
Household and Major Accounts categories in all regions for the last three quarters. This research
study plots current-quarter experience quality perception against last-quarter's CSR usage
(utilization) rates using data from the last three quarters for all services in your industry.5 Charts
are provided for the Household and Major Accounts support service categories in each region.
"Experience Quality" is perceived service operations quality which reflects customers
perceptions of the delivery of the support services experience. Service operations quality derives
from customers experiences with each firm's CSRs. High CSR usage (utilization) rates
presumably lead to lower service operations quality levels, since customers must be queued for
service and may be served by more harried CSRs. CSR usage rate (lower is better from the
customer's viewpoint), CSR salary (higher salary attracts, retains, and motivates more-able
service personnel), and turnover (training of new CSRs takes time and energy away from
providing customer service) all influence service operations quality perception.
Information Source: Service quality perception is based on a customer survey of current users.
Service quality perception is the percentage of survey respondents rating the service's operations
quality as "excellent" on a 4-point "poor"-fair-good-"excellent" rating scale. CSR service
capacity usage rates are based on information sharing and pooling agreements among all firms in
support services industry. This information sharing and pooling agreement is administered by the
Support Services Industry Trade Association.
Cost: $10,000.

The historical time span for Research Study #18 is the current and preceding three quarters. But, only
three quarters of historical data pairs are available for analysis since current-quarter experience quality
perceptions are plotted against last-quarter service capacity usage rate. For example, in Quarter #10:

The first of the three quarters of available historical data are Q#10 experience quality perceptions vs.
Q#9 service capacity usage rates.

The second of the three quarters of available historical data are Q#9 experience quality perceptions
vs. Q#8 service capacity usage rates.

The third of the three quarters of available historical data are Q#8 experience quality perceptions vs.
Q#7 service capacity usage rates.

68

LINKS Services Marketing Simulation

Sample Output:
=======================================================================
RESEARCH STUDY #18 (Experience Quality Perceptions
)
=======================================================================

-------REGION 1
-------Service
Service
Service
Service
Service
Service

1-1H
1-2M
2-1H
2-2M
3-1H
3-2M

Quarter 14
-----------

Quarter 15
-----------

Quarter 16
-----------

Quarter 17
-----------

50.2
43.9
61.1
47.7
36.2
36.6

47.4
44.6
54.1
40.5
9.9
20.0

55.2
35.9
42.9
40.0
10.2
26.5

13.0
13.0
38.3
42.5
9.0
36.6

-------REGION 1
--------

.
.
.
.
.

.
.
.
.
.

.
.
.
.
.

80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

.
.
.
.
.

.
.
.
.
.

HOUSEHOLD

.
.
1.
.
.

Perceived 60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experience

.
.
1.1
.
.

Quality

.
.
1 .1 1
.
.

(%), This

.
.
. 2
.
.

Quarter
40 . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . .
[n= 18]

.
.
.
1 .
.

.
.
.
.
1 .

.
.
.
.
.

20 . . . . . . . . . . . . . . . . . . . . . . . . 1 . .1. .

.
.
.
.
.
3

.
.
.
.
.1 1

20
40
60
80
100
HOUSEHOLD Service Capacity Usage Rate (%), Last Quarter

Note: Active services for the last three quarters are plotted with multiple
data points in the same grid location coded by numbers (e.g., if three data
points occupy the same grid location, then the number "3" is reported). Ten
or more data points at one grid location are denoted by "*".

LINKS Services Marketing Simulation

69

Research Study #20: Customer Satisfaction

Purpose: This research study provides
customer satisfaction estimates of all
services in the Household and Major
Accounts categories in all regions for the
last four quarters.

Sample Output
=======================================================================
RESEARCH STUDY #20 (Customer Satisfaction
)
=======================================================================
Quarter 33
-----------

Quarter 34
-----------

Quarter 35
-----------

Quarter 36
-----------

-------REGION 1
-------Service
Service
Service
Service
...

1-1H
23.0
18.8
27.2
Information
Source:
Customer
3-1H
16.0
22.8
26.8
4-2M
25.2
27.2
29.3
satisfaction is based on a customer survey.
5-1H
31.5
29.5
29.9
Customer satisfaction is the percentage of
survey respondents rating their overall
satisfaction with a support service as "excellent" on a 4-point "poor"-fair-good-"excellent" rating
scale.

25.8
23.4
20.0
21.9

Cost: $10,000.

Research Study #23: Concept Test

"The final question needed to come to grips with the business purpose and business
mission is: What is value to the customer? It may be the most important question. Yet it is
the one least often asked. One reason is that managers are quite sure that they know the
answer. Value is what they, in their business, define as quality. But this is almost always
the wrong definition. The customer never buys a product. By definition, the customer buys
the satisfaction of a want. He buys value. What a companys different customers consider
value is so complicated that it can be answered only by the customers themselves.
Management should not even try to guess at the answers. It should always go to the
customers in a systematic quest for them." Peter Drucker

Purpose: This research study provides concept test scores for a range of service configurations
"around" a designated configuration in a specified market region.
Information Source: This research study is based on end-user customer surveys.
Study Details: These concept test scores are "top-box" scores. They represent the percentage
of end-user customers surveyed assessing the hypothetical support services concept as being
"excellent" on a 4-point "poor"-"fair"-"good"-"excellent" rating scale. This rating scale is equivalent
to design quality perception reported in
Sample Output
other LINKS research studies.
Concept test scan searches are =======================================================================
RESEARCH STUDY #23 (Concept Test
)
conducted
"around"
the
specified =======================================================================
1-2 Current Configuration [Region 1]
configuration. Here, "around" means that Service
M886320
.9% [Region 1]
M885210 1.9%
M875220 2.1%
M885310 2.5%
M885320 3.1%
243 concept tests are executed (subject to
M886210 2.3%
M876220 2.9%
M886310 3.7%
M886320 3.7%
M875210 1.9%
M875220 1.9%
M875310 2.4%
M875320 2.6%
prevailing support services technology
M876210 2.3%
M876220 2.4%
M876310 3.2%
M876320 3.0%
limits), one for each of the configuration ...
attributes that are tested in concept tests,
varying the values up and down one from the specified configuration for each attribute. Concept
test scores are reported for all scanned concepts whose scores exceed that of the
designated configuration by at least 1%.

70

LINKS Services Marketing Simulation

As may be noted from the sample output, the concept test score for the specified
configuration is reported, along with all of the results for the concept test scanning search around
that specified configuration. Only those scanned concept scores exceeding the specified
configuration by at least 1% are reported. In this sample output, the configuration M886320 is
apparently an unattractive configuration in region 1, thus accounting for the generally low concept
test scores for the specified configuration and for its scanned variants.
Cost: $15,000 per concept test per region for up to four concept tests in a quarter. Concept tests
beyond four in a single quarter cost double the standard cost of $15,000 (per concept test per
region).
Limitations: A maximum of eight (8) research studies of this type may be executed each quarter.
Each of these research study requests must reference a specific region; this research study
cannot be executed for "all" regions, but only for a single region. Concept test scans ordered
for all regions (region "0") will not be executed.
Additional Information: You need baseline concept test scores to interpret concept test scores.
A concept test score of 40% is interesting, but there is no way to tell if that score is associated
with a configuration that offers competitive advantage unless you have corresponding concept test
scores for existing support services that are already on the market. Current configurations or the
configurations of leading support services are obvious baselines. Of course, you would have to
execute concept tests on such baseline configurations (in addition to the hypothetical concepts of
interest) if you want access to such baseline-configuration concept test scores.

Research Study #24: Price Sensitivity Analysis

"Any sufficiently advanced technology is indistinguishable from magic." Arthur C. Clarke

Purpose: This research study provides a price sensitivity analysis for a specific support service in
a specific region (or all regions). This research study permits the simultaneous testing of a
reconfiguration of an existing, active service and an associated price level of the users
choosing. Thus, Research Study #24 is a focused test marketing experiment with userspecified configurations and prices.
Information Source: This research study is based on surveys of customers, using advanced
marketing research techniques.
Study Details: These price sensitivity analyses isolate the impact of price on market share, while
holding other market share drivers constant (design quality, experience quality, and accessibility
perceptions).
Nine price levels are used in this research study. With no user-specified price input, these
price levels are automatically centered around the current price (the Reference Price) of the
service in each region for which this research study is executed. Values of -40%, -30%, -20%, 10%, 0% (i.e., current price), +10%, +20%, 30%, and +40%, relative to the service's Reference
Price, are used.
If configuration and price are left at their default values (?? and 0, respectively), then
Research Study #24 is executed with the existing service centered around the current price of
the specified service. Otherwise, the user-specified configurations and prices (with the
specified price being the Reference Price) are used. Market share predictions are provided for

LINKS Services Marketing Simulation

71

all tested prices in Research Study #24.

Research study output includes market share and gross margin estimates in research study
requests with no configuration change. With a configuration change, research study output
only includes estimated market shares. Users will need to calculate/estimate their own variable
costs (and, therefore, gross margin) associated with any configuration change.
Cost: $20,000 per price sensitivity analysis (per service per region). If you execute this research
study for regions in a 3-region LINKS environment, the total cost would be $60,000.
Sample Output With No Configuration Change:
SERVICE 9-1H PREDICTED GROSS MARGINS IN REGION 8 [HOUSEHOLD]
Reference Price:
185

Price
$ 111$ 130$ 148$ 167$ 185$ 203$ 222$ 240$ 259
Cost
$
65$
65$
65$
65$
65$
65$
65$
65$
65
Margin
$
45$
64$
82$ 101$ 119$ 137$ 156$ 174$ 193

Sales Volume61,32047,17837,32729,23323,30818,70114,93512,30510,138
Market Share 94.7% 72.9% 57.7% 45.2% 36.0% 28.9% 23.1% 19.0% 15.7%

Margin Chang-62.2%-46.2%-31.1%-15.1% 0.0% 15.1% 31.1% 46.2% 62.2%

MS Change
163.1%102.4% 60.1% 25.4% 0.0%-19.8%-35.9%-47.2%-56.5%
Net Change -0.5% 8.9% 10.4% 6.4% 0.0% -7.6%-16.0%-22.8%-29.5%

Gross Margin$2,759$3,019$3,060$2,952$2,773$2,562$2,329$2,141$1,956
(in $000s)

Service Cost 4,470 3,439 2,721 2,131 1,699 1,363 1,088

897
739
(in $000s)

Adjusted -1,711 -420

339
821 1,074 1,199 1,241 1,244 1,217
Gross Margin

(in $000s)

In estimating "Service Cost," it is assumed that the current cost-per-call

for service 1 in region 8 applies for all sales volumes included in this
price sensitivity analysis. CSR staffing for service 1 in region 8 is
assumed to adjust to the predicted sales volumes, to maintain the current
service capacity usage level at all prices included in this price sensitivity
analysis. For your reference, the current cost-per-call for service 1 in
region 8 is 72.91 and the current CSR utilization is 90.0%.
Unfilled orders are assumed to be zero in this price sensitivity analysis.
These estimated per-unit costs of $ 65.50 include these cost components:
Variable Costs
$ 55.50
Order Processing Costs
$ 10.00

Special Interpretation Reminder: In interpreting these Gross Margin estimates for different
price levels tested, service-related costs are assumed to be fixed. That is, it is assumed that
there is no change in CSR staffing assignments (and service costs) for this support service in
this region across any of the price levels tested in this Price Sensitivity Analysis. In addition, it
is assumed that there is sufficient CSR capacity available for this support service in this region
so that no unfilled orders exist across any of the price levels tested. Since these assumptions
may be inappropriate, the Adjusted Gross Margin estimates are provided at the bottom of the

72

LINKS Services Marketing Simulation

price sensitivity analysis results.

Sample Output With A Reconfiguration:
=======================================================================
RESEARCH STUDY #24 (Price Sensitivity Analysis
)
=======================================================================
SERVICE 8-3H PREDICTED GROSS MARGINS IN REGION 2 [MAKORACC]
Configuration: H111111
Reference Price:
400
Price
Sales Volume
Market Share

$240
6,508
10.1%

$280
4,603
7.2%

$320
4,398
6.8%

$360
3,319
5.2%

$400
2,778
4.3%

$440
2,564
4.0%

$480
2,432
3.8%

$520
2,487
3.9%

$560
1,781
2.8%

This price sensitivity analysis involves a service reconfiguration. Margin

Estimates are not provided due to the many cost-related assumptions required
To estimate variable costs associated with a reconfigured service.

Limitations: A maximum of four (4) research studies of this type may be executed each quarter.
Each of these price sensitivity analysis research study requests must reference a single service
and one or all regions. This research study may only be conducted for services that are already
actively distributed in a region. This research study may not be used for services prior to their
introduction into a region.
Additional Information: These market share predictions and subsequent estimates of gross
margins are based on the assumption that competing support services don't change their
generate demand programs. Obviously, large price changes will tend to evoke competitive
responses.
The reported market shares in Research Study #24 are long-run estimates of market
shares if you continue with all of your current customer-facing initiatives (configurations,
marketing spending, service levels, etc.) as they are now and so do competitors. Market
infrastructure issues (like unfilled order status) are not considered. Only your price is
"manipulated" in Research Study #24. Thus, these Research Study #24 estimates of market
share will not correspond exactly to your current actual market shares (as reported, for
example, in Research Study #14).

LINKS Services Marketing Simulation

73

Research Study #26: Importance-Performance Analysis

Purpose: This research study provides importance-performance analyses for active services in a
specified market region. These charts assess a service's relative competitive standing on all
relevant customer drivers (relative importance weights). The importance-performance chart's
quadrants have these implications:

Competitive Importance-Performance Analysis

high
Relative

Competitive Disadvantage:

Competitive Advantage: Keep up the

Concentrate performance improvement efforts

here. These are your major problem areas.
Fix these problems, if you can.

good work and emphasize these things in your

communications programs (reinforce the
importance of these buying factors as well as
your own relative competitive standing.

False Alarm: Don't sweat the small stuff.

Misleading Advantage: This is

Leave bad enough alone. These are low

priority things, unless you and your
competitors are more-or-less "tied" on the
more important considerations.

apparently a case of "overkill." Should the

resources deployed here be redirected toward
your customers' higher priority concerns?

Customer
Importance
low

below
average

1.0

above
average

Relative Competitive Performance

Information Source: Self-reported importance weights are based on customer surveys

conducted by your research supplier. Performance elements are derived from other research
conducted by your research supplier.
Cost: $7,500 per region.
Other Comments: The "Notes" in this study output provide important definitions and
qualifications. Please do carefully read these "Notes."

74

LINKS Services Marketing Simulation

Determining the true importance of market share drivers (such as price, perceived [service]
design quality, perceived [service] experience quality, and perceived accessibility) to customers is
one of the great continuing challenges in
Sample Output
marketing. And, of course, to further
complicate the matter, these importances ====================================================
RESEARCH STUDY #26 (Importance-Performance Analysis)
presumably vary across customer Service 7-2 [MAJOR ACCOUNTS], Region 3
====================================================
segments. The stakes are very high
MS=12.0% [ms=13.4%]
here. If you were sure that perceived
P= 330 [ p= 230 ]
D= 2.9% [ d= 2.9%]
(service) design quality was the major
E=39.2% [ e=62.3%]
A=38.3% [ a=42.3%]
driver in a particular market segment, the
--------------------38.1|
|
|
right managerial response would be to
|
|
|
|
E |
e
|
work to improve (service) design quality.
|
|
|
|
|
|
|
|
|
This would have the most significant RELATIVE
CUSTOMER
--------------------|
|
impact on market share. In such a IMPORTANCE ||
|
|
|
P|
p |
circumstance, great attention and
|
| Dd
|
|
| Aa
|
resources would be appropriately
18.0|
|
|
--------------------devoted to reconfiguration activities. On
0
1
3+
the other hand, if price was crucial, then
RELATIVE COMPETITIVE PERFORMANCE
[compared to all competitors]
efforts to lower prices would be
paramount (perhaps via efforts to
reconfigure costs out of a service. Note Notes:
(1) Relative Customer Importance" references self-reported importance
weights.
that these are two entirely different (2) "Relative
Competitive Performance" compares a particular driver (e.g.,
perceived accessibility) to the average driver value. In such relative
strategies, and they depend crucially on
comparisons, an index value of 1.0 denotes parity with the industry
average while values greater [less] than 1.0 denote superiority
the true underlying importance of the
[inferiority]. For price, the index is reversed, so that higher
performance (i.e., lower price than the industry average) represents
superior performance.
drivers of market share.
(3) Symbol definitions in these importance-performance charts are as follows:
MS [ms] = market share, current [previous] quarter
Self-reported importance weights are
P [p] = end-user price, current [previous] quarter
D [d] = perceived (service) design quality, current [previous] quarter
fragile things, subject to a variety of
E [e] = perceived (service) experience quality, current [previous]
quarter
possible biases. Survey respondents
A [a] = perceived accessibility, current [previous] quarter.
may report that they want it all
("everything is important"), that the
convenient-to-answer price-effect is quite important when it really isn't, or may be unable or
unwilling to make reliable trade-offs among price, perceived (service) design quality, perceived
(service) experience quality, and perceived accessibility.

Research Study #27: Marketing Program Benchmarking

Purpose: This research study provides marketing program benchmarking information for all
active services in specified regions. You may execute this research study for one region, any
combination of regions, or all regions.
Sample Output

Information Source: This research study

is based on analyses conducted by your
research supplier.
Cost: $500 per category per region plus
$500 per active service in each category
and region.
Study Details: For each active service in

=======================================================================
RESEARCH STUDY #27 (Marketing Program Benchmarking
)
=======================================================================
Marketing Program Spending
Marketing --------------------------Spending Advertis Promotion SalesFor Pos
--------- -------- --------- -------- --REGION 1, HOUSEHOLD
1-1H
500,000
2-1H
900,000
3-1H
450,000
4-1H
600,000
5-1H
362,000
...

250,000
180,000
180,000
210,000
144,800

150,000
360,000
135,000
210,000
144,800

100,000
360,000
135,000
180,000
72,400

53
12
23
21
12

LINKS Services Marketing Simulation

75

each category in each specified market region, marketing program benchmarks are provided:
total marketing spending; advertising spending ("Advertis"); promotion spending; sales force
spending ("SalesFor"); and, marketing communications positioning ("Pos").

Research Study #28: Marketing Program Experiment

"I know that half of my marketing budget is wasted,
but I just don't know which half." - Unknown

Purpose: This research study conducts a marketing program experiment. Inputs include a full
marketing program (marketing spending, marketing mix allocation, and positioning) for a service
in one or all regions. Outputs include customer perceptions of design quality, experience quality,
and accessibility.
Information Source:
This marketing program experiment is executed in a small but
representative part of the specified market region. This marketing program experiment is
executed using your specified marketing program and all other current marketing mix variables of
your service and all competitors' services. Your competitors will not be aware of the existence of
this marketing program experiment and they have no opportunity to intervene to attempt to
influence the results of this experiment. Competitors' marketing decision variables are held
constant at their values in the previous quarter.
Cost: $12,500 per marketing program experiment.
Execution Details: To specify "all" regions within a single marketing program experiment, enter
"0" (zero) as the region selection. This, of course, would involve multiple executions of marketing
program experiments with consequent cost implications. Marketing program experiments must be
executed for a specific service. If you wish to execute multiple marketing program experiments,
you must specify them separately for each service.
Research Study #28 (Marketing Program Experiment) automatically includes three
experiments for each RS#28 input set. Research Study #28 includes experiments with the
specified marketing spending input plus additional experiments with 50% more and 50% less
than the specified marketing spending input. These three experiments are included at the
standard cost of Research Study #28.

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Sample Output:
=======================================================================
RESEARCH STUDY #28 (Marketing Program Experiment
)
=======================================================================
Marketing Program Inputs

Service 4-1
Service 4-1
Service 4-1

MktgSp

2
2
2

200K
100K
150K

MktgMx Adve Prom SFor MP

502525 100K
343333 34K
202060 30K

50K
33K
30K

50K 73
33K 12
90K 37

Perceptions
DQ
27.1%
34.2%
14.3%

EQ

Ac

20.1% 23.5%
15.9% 25.1%
18.3% 43.9%

Notes:
(1) In the heading, "R" refers to region, "MktgSp" refers to total marketing
spending (in L$000s), "MktgMx" refers to marketing mix allocations (2-digit
%s of total marketing spending allocated to advertising, promotion, and sales
force), "Adve" refers to implied advertising spending (in L$000s), "Prom"
refers to implied promotion spending (in L$000s), "SFor" refers to implied
sales force spending (in L$000s), and "MP" refers to marketing positioning.
(2) This research study may only be executed for services already actively
marketed in a region. Blank results are reported for perceptions for
services not actively marketed.

Limitations: A maximum of seven (7) marketing program experiments may be conducted in any
quarter. Each marketing program experiment may reference one or all regions.
Marketing program experiments may only be executed for services already actively
distributed in a region. Blank results are reported for perceptions for services not already
actively distributed in a region.
Other Comments: Marketing program experiments permit an assessment of the impact of
marketing spending, marketing mix allocation, and positioning on key perceptual outputs (design
quality perceptions, experience quality perceptions, and accessibility perceptions). Although not a
final outcome measure like market share, sales volume, or profitability, customer perceptions
have the advantage of being the direct consequences of a services marketing program. Final
outcome measures like market share, sales volume, and profitability are influenced by many
forces, not just a service's marketing program.
Benchmarks are needed to assess the perceptual results in marketing experiments. You can
create your own benchmark by testing the marketing program along with variations of interest.
While such benchmarking requires the execution of a base marketing experiment (with current
marketing spending, marketing mix allocation, and positioning) in addition to the test variations of
interest, such benchmarking provides the standard against which marketing program variations
may be compared.
Marketing experiments have some randomness inherent in their results. This implies that you
would only change your marketing program (marketing spending, marketing mix allocation, and
positioning) if a particular marketing program variation yielded a noteworthy change in customer
perceptions.

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77

Research Study #31: Self-Reported Preferences

Purpose: This research study provides self-reported importance weights for a variety of
customer-facing elements for the Household and Major Accounts categories of support services
for each market region.
Information Source: This research study is based on
end-user customer surveys.
Study Details: These self-reported importance weights
are the averages across all survey respondents.
Seven-point rating scales are used in this end-user
customer surveying, where "1" is anchored by "Not
Important" and "7" is anchored by "Very Important."
Cost: $20,000.

Sample Output
=========================================================
RESEARCH STUDY #31 (Self-Reported Preferences
)
=========================================================
Region
1
------

Region
2
------

Region
3
------

2.46
3.60
3.55
6.56
3.11
2.03
5.60
5.27
3.32
3.65
2.75
2.27
4.78
4.49

5.54
2.40
4.24
4.66
5.01
4.36
3.12
4.03
3.13
3.94
4.69
4.07
3.18
6.18

3.41
6.19
5.63
2.10
3.90
3.20
5.97
6.00
3.17
3.75
4.61
5.81
6.16
2.78

--------HOUSEHOLD
--------Accessibility
Advertising
CSR Service Skills Training
CSR Technical Training
Design Quality
Experience Quality
Marketing
Price
Promotion
Sales Force
Scheduling Style
Service Appointment Schedule
Service Call Duration
Service Call Format

Other Comments: Self-reported importance weights

are easy things to ask survey respondents. There is,
however, considerable debate about the usefulness of
such measures.
Customers may have trouble -------------MAJOR ACCOUNTS
distinguishing low-importance and high-importance -------------Accessibility
4.44
2.66
5.83
5.75
4.87
3.21
elements. Customers may report that everything is Advertising
...
important, failing to provide the differentiation of interest
to marketing managers. It's also not clear how to use
self-reported importance weights to predict future buying behavior, since self-reported importance
weights aren't developed from actual behavior. Perhaps they're only meant to be directional in
nature, identifying only really low and really high importance factors.
Self-reported importance weights are of uncertain quality. Its easy for customers to report
what they want on such survey instruments, but the statistical veracity of these self-reported
weights has been questioned by many professional marketing researchers.

Research Study #34: Accessibility Perception Drivers

Purpose: This research study provides a summary analysis of some potential drivers of
accessibility perception for all regions and categories (household and major accounts) in the
support services industry.
Information Source: This research study is based on the analysis of historical data in your
support services industry.
Study Details: The summary results reported in this research study are based on statistical
correlations between accessibility perception and some of its potential drivers based on data from
each market region and category from your industry's historical database (i.e., for the last four
quarters).
In the sample output, "H"/"M"/"L"/"?" refer to high, medium, low, and uncertain (or
impossible-to-assess) correlations while "h"/"m"/"l" refer to high, medium, and low correlations
with less statistical certainty due to small sample sizes in the historical database used to estimate

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these market-driver correlates of accessibility. Missing correlations ("?") represent potential

drivers with insufficient historical data to permit reliable measurement of correlations.
Cost: $20,000.
Other Comments: The "Notes" in this study output provide important definitions and
qualifications. Please do carefully read
Sample Output
these "Notes."
Correlations measure the strength of =======================================================================
RESEARCH STUDY #34 (Accessibility Perception Drivers
)
linear association between two variables. =======================================================================
HOUSEHOLD
MAJORACC
Correlations run from -1.0 (exact
--------------------Reg
Reg
Reg
Reg
Reg Reg
negative relationship) to +1.0 (exact
1
2
3
1
2
3
----------- --positive relationship). A zero correlation MARKETING SPENDING:
Advertising Spending
m
H
M
l
m
M
implies that two variables are statistically
Promotion Spending
H
m
H
H
l
h
Sales Force Spending
h
M
l
?
M
l
unrelated to one another.
Pairwise MARKETING POSITIONING:
DesQual
h
?
?
m
?
?
correlations can be influenced by other
ExpQual
?
m
?
?
m
?
Accessibility
?
?
l
?
?
l
DesQual and ExpQual
?
?
?
?
?
?
forces which are highly correlated with
DesQual and Accessibility
?
?
?
?
?
?
ExpQual and Accessibility
?
?
?
?
?
?
the two variables for which correlations
DesQual, ExpQual, and Acc
M
L
M
L
M
M
are calculated.
Correlation does not
mean causation. These correlations, like Notes:
(1) These summary results are based on statistical correlations between
accessibility perception and some of its potential drivers based on data
all correlations, should be interpreted with
in each region and category from the historical database (i.e., for the
last four quarters).
a measure of caution.
(2) "H"/"M"/"L"/"?" refer to high, medium, low, and uncertain (or impossibleto-assess) correlations while "h"/"m"/"l" refer to high, medium, and low
correlations with less statistical certainty due to particularly small
Correlations have the obvious
sample sizes in the historical database used to estimate these marketdriver correlates of accessibility perception.
strength of not being based on survey (3) Missing
correlations ("?") represent potential drivers with insufficient
historical data to permit reliable measurement of correlations.
respondents' self-reports but rather on
actual purchasing behavior.
Most
academic marketing researchers now believe that inferred importances (such as correlations) are
demonstrably superior to stated importances (such as self-reported weights). However,
correlations can easily be uninformative. For example, if all services use the same positioning,
then there will be near-zero correlation between accessibility perception and that particular
positioning. This does not mean that particular positioning is irrelevant or unimportant in general.
Rather within the range of the sample data (with little or no variation in positioning), positioning is
not a major correlate of accessibility perceptions. However, don't make the mistake of
extrapolating broadly and presuming that other positionings will have no impact on accessibility
perceptions.
The statistical correlations summarized in this research study are based on all active services
in each market region. These correlations are, therefore, aggregate in nature reflecting overall
market place patterns and relationships across, for example, large-share and small-share
services, "new" and "old" services, and "high-priced" and "low-priced" services. This is the reason
why no correlates are reported in this research study for the "how you say it" part of marketing
positioning. The impact of "how you say it" marketing positioning on accessibility perceptions
depends, in part, on a service's current competitive positioning as well as the saliency to
customers of particular "how you say it" benefits positionings.
The influence of marketing programs on accessibility perceptions may depend on a service's
relative competitive standing in general or in some specific marketing element. Relative
competitive standing can, of course, change through time due to the activities of competitors.
Thus, these summary correlations should be interpreted as suggestive (as "guidelines") rather
than being completely conclusive under all relative competitive standing conditions.

LINKS Services Marketing Simulation

79

Research Study #38: Retention Statistics

Purpose:
This research study provides
retention rates for all actively marketed
services in all markets for the last four
quarters.
Information Source: Retention rates are
estimated based on a customer survey of
current purchasers of support services.
Retention rates are customers stated
intentions of probability of future purchase of
the just-purchased support service.

Sample Output
======================================================================
RESEARCH STUDY #38 (Retention Statistics
)
======================================================================

-------REGION 1
-------Service
Service
Service
Service
Service
Service
Service
...

1-1H
1-2M
2-1H
2-2M
3-1H
3-2M
4-1H

Quarter 13
----------

Quarter 14
----------

Quarter 15
----------

Quarter 16
----------

60.2
39.6
60.5
41.4
59.0
39.1
58.0

58.3
40.5
58.2
41.1
60.0
38.8
61.3

58.1
39.4
60.2
41.3
61.4
39.0
58.6

58.0
38.9
60.7
40.3
57.9
41.0
60.5

Cost: $10,000.
Other Comments: Retention rates are measures of long-run average customer loyalty to a justpurchased support service. They are estimates of the average current purchasers stated
intention of probability of repeat purchase. Retention rates are also used by marketing analysts to
estimate customer lifetime value (CLV).

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Interpreting Retention Statistics and Customer Lifetime Value: A Tutorial

Customer lifetime value (CLV) is calculated as the net present value of expected future cash flows
over the lifetime of an individual customer. The equation (shown below) explicitly accounts for
customer churn or turnover by adjusting the cash flow for each time period by the probability that
the customer will be retained (r):
T

CLV
t 1

(GMt )r t
(1 d ) t

GMt = gross contribution margin per customer in time period t

r = retention rate
d = discount rate
t = a time index (e.g., a quarterly time index)

Calculating Customer Lifetime Value

The steps in calculating CLV are as follows:
1. Determine annual profit (or cash) flow pattern for customers over time.
2. Establish customer defection/retention pattern.
3. Calculate customer NPV using firms discount rate.
It is preferable to calculate CLV using gross contribution margin per customer in the numerator.
However, in some instances, firms have difficulty assigning their costs to specific customers, so
gross contribution margin per customer is replaced by revenue per customer.
Different market segments may have very different cash flow characteristics (that is, different
gross contribution margins and retention rates). Hence, it is useful to calculate CLV separately for
the typical customer in each market segment.
Interpreting Customer Lifetime Value
The CLV framework is a useful way of thinking about managing customer relationships to
maximize shareholder value. From a managerial standpoint, there are three ways for a company
to increase aggregate CLV (and consequently shareholder value) next year: (1) Acquire new
customers; (2) Increase retention of existing customers; or, (3) Increase gross margin (through
cross-selling or changes in cost-structure, for example).
Firms generally consider customers with a high CLV to be most attractive and if these
customers perceive the firms product to have a high value it will be profitable for the firm to
invest in marketing to them. Firms generally undertake defensive strategies to retain customers
with a high CLV who do not perceive the firms product to have a high value because they are
vulnerable and may be lost to competitors.
Recent research has shown that the CLV framework (i.e., using forecasts of acquisition, retention,
and margins) can be used to calculate the value of the firms current and future customer base.
Gupta, Lehmann and Stuart (2004) used publicly available information from annual reports and
other financial statements to calculate a customer-based valuation of five companies. They
compared their estimates of customer value (post-tax) with the reported market value for each of

LINKS Services Marketing Simulation

81

the companies. Their estimates were reasonably close to the market values for three firms, and
significantly lower for two firms (Amazon and eBay). They inferred that these two firms are either
likely to achieve higher growth rates in customers or margins than they forecast, or they have
some other large option value that the CLV framework doesnt capture.
Sample Customer Lifetime Value Calculation
An auto dealership tracks customers who use its service facility. New customers represent $50 in
1st-year margins, $100 in 2nd-year margins, $125 in 3rd-year margins, and $100 in margins in
subsequent years. The dealership estimates that customers defect at a rate of 20% per year.
That is, only 80% of new customers continue to use the automobile dealership's services in the
second year, only 60% of new customers continue to use the automobile dealership's services in
the third year. etc. Assume the firms discount rate is 20%. We can calculate the CLV for the
average customer as follows:
2

CLV = 50/1.20 + (100x0.80)/(1.20) + (125x0.60)/(1.20) + (100x0.40)/(1.20) + (100x0.20)/(1.20)

= $167.96.

Suppose the auto dealership was able to reduce customer defections from 20% to 15% per year.
Then, CLV for the average customer would be $205.10. Thus, a 5% reduction in the rate of
customer defections (a 5% increase in the customer retention rate) increases profitability by
22.1%. Note that, in this example, we discount cash flows back to year 0 and assume there was
no acquisition cost at year 0.

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Research Studies Table of Contents

Research studies are output in numerical order so you always know the general location of any
research study in your output (e.g., lower numbered research studies are printed closer to the
front of your research studies output). However, since the research studies ordered vary through
time and the space required for research studies also varies, the specific page number of any
particular research study is not precisely known ahead of time. For your convenience, a
Research Studies Table of Contents is included as the last page of your research studies output.

Research Studies Decision Forms

Blank "Research Studies Decisions" forms may be found on the next three pages. Complete
these decision forms during your team deliberations.

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83

Research Studies Decisions (1)

1

Benchmarking - Earnings

Benchmarking - Service Design

Benchmarking - Service (CSR Usage)

Benchmarking - Marketing

10

Benchmarking - Info Tech & Research Studies

11

Benchmarking - Operating Statistics

12

Market Statistics

13

Employee Satisfaction

14

Regional Summary Analysis

18

Experience Quality Perceptions

20

Customer Satisfaction

Firm

Quarter

Region(s)?

Notes:
(1) Circle the number of each research study that you wish to order. If additional information is
required for a research study, provide that information in the designated space(s).
(2) When region numbers are required, enter a single region number. Use region "0" as a
designation to run a research study for all regions. See the research study descriptions for
details about the associated multi-region costs.

Reminders
Research study requests are for one quarter only. If you wish to reorder a research study in a
subsequent quarter, you must reenter that research study request.

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LINKS Services Marketing Simulation

Research Studies Decisions (2)

23

24

Concept Test

Price
Sensitivity
Analysis

Firm

Region?

Configuration?

Region?

Configuration?

Region?

Configuration?

Region?

Configuration?

Region?

Configuration?

Region?

Configuration?

Region?

Configuration?

Region?

Configuration?

Quarter

Service?

Region?

Configuration?

Price?

Service?

Region?

Configuration?

Price?

Service?

Region?

Configuration?

Price?

Service?

Region?

Configuration?

Price?

26

Importance-Performance Analysis

Region(s)?

27

Marketing Program Benchmarking

Region(s)?

31

Self-Reported Preferences

34

Accessibility Perception Drivers

38

Retention Statistics

Notes:
(1) Circle the number of each research study that you wish to order. If additional information is required for a
research study, provide that information in the designated space(s).
(2) When region numbers are required, enter a single region number. Use region "0" as a designation to run
a research study for all regions. See the research study descriptions for details about the associated
multi-region costs.

Reminders
Research study requests are for one quarter only. If you wish to reorder a research study in a subsequent
quarter, you must reenter that research study request.

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85

Research Studies Decisions (3)

28

Marketing Program Experiment

Service?

Firm

Region?

MarketingMix?
Service?

Region?

Region?

Region?

Region?

MarketingMix?

Marketing$?
Positioning?

Region?

MarketingMix?
Service?

Marketing$l?
Positioning?

MarketingMix?
Service?

Marketing$?
Positioning?

MarketingMix?
Service?

Marketing$?
Positioning?

MarketingMix?
Service?

Marketing$?
Positioning?

MarketingMix?
Service?

Quarter

Marketing$?
Positioning?

Region?

Marketing$?
Positioning?

Reminders
Research study requests are for one quarter only. If you wish to reorder a research study in a
subsequent quarter, you must reenter that research study request.

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Chapter 10: Performance Evaluation

"If you're riding ahead of the herd, take a look back every now
and then to make sure it's still there." Cowboy philosophy

Profitability measures obviously matter in assessing the long-run performance of a business.

However, "other things" are leading indicators of future profitability and root causes of profitability.
As youll note from the details that follow, current performance and change in performance are
considered in the LINKS multi-dimensional performance evaluation scorecard.
The LINKS scorecard is a boardroom-level scorecard. It focuses on top-line financial,
operational, and customer performance measures and sub-measures. The LINKS scorecard
includes the measures and weights described in Exhibit 6. Each firm in your support services
industry submits their raw data to the Support Services Industry Trade Association, which
provides your firm's scorecard every quarter.
The LINKS scorecard is based on a ranking of performance on each sub-measure. These
rank-order comparisons across all competing firms within your industry avoid the undue
influence of particularly extreme values of individual sub-measures. This LINKS scorecard is a
within-industry performance evaluation system. Comparisons across industries are problematic
due to variations in environmental and competitive milieu. Your firm receives weighted points for
each competitor for whom your performance on a sub-measure is better. For example, if your
firm's ratio of "Net Profits" to "Revenues" is better than three other firms' ratios, your firm receives
9 points. (Of course, the top-performing firm on "Net Income" to "Revenues" ratio in a 6-firm
industry would receive 15 points.) In general, the maximum available points on any sub-measure
are W*(N-1) where "W" is the sub-measure's weight and "N" is the number of firms in the industry.
Points accumulate each quarter throughout the LINKS exercise.
To avoid an overemphasis on minor quarter-to-quarter variations in the calculation of the ranking
of firms on the performance sub-measures in the LINKS scorecard, minor differences in the submeasures are treated as ties in the calculation of ranking points. The thresholds for differences to
be treated as meaningful are listed in Exhibit 6 for each sub-measure. For example, differences
of 0.2% or less for "Ratio of Net Income to Revenues" are considered to be statistically
insignificant, and firms within 0.2% of each other would be treated as being tied. Thus, two firms
with ratios of Net Income to Revenues of 4.5% and 4.6% would be treated as being tied in the
calculation of ranking position and associated points received in any quarter.
You receive the LINKS scorecard automatically each quarter as the first page of your financial
and operating reports. This scorecard provides comparatives to assess how your firm's data
compares to the industry averages on every KPI.
In addition, historical plots of past performance are provided. Data from the past six quarters
are used, to the extent available in your industry's historical archives, to create quarter-byquarter plots for each of the LINKS performance evaluation metrics. For each metric and
quarter, the range of values the range of values across all firms in your LINKS industry is
shown and your firm's position in these ranges is identified.

LINKS Services Marketing Simulation

87

Exhibit 6: LINKS Scorecard Measures

Financial Sub-Measures

Weight

Sub-Measure Details

Ratio of Net Income to

Revenues

Current profitability is the best overall signal of business

performance, hence its high weight. Firms are "tied" if their
scores are within 0.2% of each other.

Change in Ratio of Net

Income to Revenues

Improvement in profitability is important but less important

than current profitability. Firms are "tied" if their scores are
within 0.2% of each other.

Weight

Sub-Measure Details

Fill Rate

The percentage of orders that are filled. "Unfilled orders"

occur when available capacity is less than orders in a
quarter. Firms are "tied" if their scores are within 0.5% of
each other.

Forecasting Accuracy

Forecasting accuracy is a relatively pure signal of

management skill and expertise (in this case, in the area of
understanding customers and customer demand generating
forces). Firms are "tied" if their scores are within 0.5% of
each other.

CSR Turnover

-1

Equal to the ratio of within-quarter CSR resignations to CSR

staff size at the beginning of a quarter. Firms are tied if
their scores are within 0.10 of each other.

CSR Cost/Call

-1

Equal to service spending (of all kinds) divided by total

service center calls. Lower CSR cost/call is desirable.
Firms are "tied" if their scores are within 0.20 of each other.

Weight

Sub-Measure Details

Change in Market Share

Change in market share is an overall measure of customer

reaction to the firm's offerings. Firms are "tied" if their
scores are within 0.1% of each other.

Customer Satisfaction

Customer satisfaction measures the overall performance of

the service from the perspective of purchasers. Thus, it's a
clear measure of customer performance and a long-run
leading indicator of repeat purchasing behavior and
customer retention. Average customer satisfaction across
all services and regions is used here. Firms are "tied" if
their scores are within 0.5% of each other.

Operational Sub-Measures

Customer Sub-Measures

Notes: Positive "weights" are associated with sub-measures where "more is better" and negative
"weights" are associated with sub-measures where "less is better." "Change" measures are
based on quarter-to-quarter changes.

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Chapter 11: Firm Management and Advice

"Success doesn't come to you. You go to it." Marva Collins

This chapter discusses a range of topics related to successfully managing your LINKS firm
throughout your LINKS event.

Planning
"Direct, simple plans, and clear concise orders are essential to reduce the chances of
misunderstanding and confusion. Other factors being equal, the simplest plan executed
promptly is to be preferred over the complex plan executed later." U.S. Army Field Manual 100-5

Planning occurs throughout LINKS. Your decisions are your plans. But that's not the whole story.
How are plans developed? And, much more importantly, how are good plans developed?
Planning and plans are the consequence of careful analysis and formulation of appropriate
strategies and tactics. Your plan is, therefore, the natural consequence of considerable prior
analysis and thinking. This analysis-planning-implementation-evaluation sequence iterates
through time as the results of your plans are revealed in the market place (and in your financial
and operating statements).
The essence of planning involves answering these questions (and in this order):
(1) What is happening?
(2) How are we doing?
(3) How and what are "they" (our major competitors) doing?
(4) What factors are important for success?
(5) What are we going to do? Why? With what effect? At what cost?
(6) Who - specifically - is to do what to make the plan work?
The SWOT Analysis Worksheet, on the next page, is the classic strengths-weaknessesopportunities-threats template for organizing your thoughts under the "What is happening?" and
"How are we doing?" questions.

Team Management and Organization

"Great leaders are almost always great simplifiers, who can cut through argument, debate
and doubt, to offer a solution everybody can understand." General Colin Powell

Youre a member of a team in LINKS. Managing your team to obtain the best efforts of all team
members is a continuing management challenge.
Your most limited resource is your team's available time. Well-performing teams inevitably
manage their management time carefully and thoughtfully. You will need to think carefully
about how to allocate your management time to necessary tasks that exist within LINKS.

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SWOT Analysis Worksheet

Strengths

Weaknesses

What are your firm's strengths relative to your

competitors? What are your most important
strengths? Why?

What are your firm's weaknesses relative to

your competitors? What is impeding you from
achieving your desired results? Prioritize your
weaknesses.

Opportunities

Threats

How can you convert these strengths,

weaknesses, and threats into opportunities for
your firm? What considerations are most
important for your success?

What
organizational,
competitive,
and
environmental threats do you face now and in
the near future?

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As you gain experience with LINKS, it may well appear that a review is needed of an earlier
group decision about how to allocate tasks, responsibilities, and available management time.
Don't be shy within your LINKS team about asking the question: "Are we organized in the
best way for the tasks ahead?" This is always a good question.

There are predictable signals of well-performing teams in simulations (and in real life!). Pamela
Van Rees (Boston University MBA student), provided the following list of characteristics of wellfunctioning simulation teams:
The firm's long-term well-being is the top priority of all members.
Relevant issues are fully and adequately explored.
Proposals and objectives are clearly explained.
Members feel comfortable and spontaneous.
Feedback is given freely and directly.
Members feel respected, supported, and listened to.
Disagreements are tactfully stated without being offensive.
Differences and misunderstandings are resolved in such a way as to strengthen and deepen
rather than weaken relationships (by exploring the origins and implication of ideas).
Everyone's judgment is acknowledged and explored.
Interruptions are minimal.
Everyone's schedule is accommodated as fully as possible.
At any given time in a group meeting, each firm member is either engaged in holding the
focus (proposing an idea or decision), listening to another's focus, giving feedback about the
focus, or facilitating (creating the structure or leading) the discussion.
The principal causes of poor team performance in the simulation are a combination of the
following factors:
(1) uncoordinated demand-supply management;
(2) not really meeting customer requirements for support services (i.e., failure to establish any
meaningful differential advantage, particularly regarding service design);
(3) lack of focus (capacity, reconfiguration, time, and human resource constraints combine to
favor concentrated effort in fewer than "all" market regions);
(4) limited research and/or limited efforts to interpret the research studies that are available;
(5) limited attention to competitive developments (i.e., lack of in-depth competitor analysis to
discover the underlying drivers of market behavior);
(6) financial mismanagement related to cost structure management (variable and fixed costs
management, covering corporate-wide overheads, etc.), and capacity management;
(7) not understanding the simulation's structure/environment (i.e., treating the participant's manual
in a cursory, fashion rather than something to be studied and referenced regularly);
(8) poor work ethic (not spending enough time on the simulation); and,
(9) team mismanagement (not spending enough time thinking about and discussing team
management issues and related human resource deployment strategies and tactics).

End-Gaming Strategies and Tactics

"It's time to break camp." Dwight Dowdell, Accenture

Should you do anything special or unusual at or near the end of your LINKS exercise? Behave as
if the simulation will not end at any specific pre-announced quarter. Keep a long-run view and
continuously try to improve your firm's performance. Attempts to end-game the simulation can

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91

easily be counter-productive, resulting in substantial last-minute deteriorations in hard-earned

market share, margins, and profits. Also, how do you know for sure that the simulation will really
end after a particular quarter? Perhaps there will be an unexpected and unannounced change at
the last minute, resulting in a longer or shorter simulation exercise. All in all, taking a long-run
view seems like the only sensible and prudent thing to do.
The best counsel about end-gaming is simply to manage your firm to improve its profitability
through time. You don't have to get it perfect (i.e., achieve "optimal" profits, whatever that is), but
you must improve through time. You take over a LINKS firm that is profitable as of quarter 1.
Seek to improve your firm's profitability through time ... and that time extends to and beyond the
actual end of your particular LINKS exercise.

Postscript
"The journey is the reward." Steve Jobs, Apple Computer Founder

Good luck and try to have fun in LINKS. It's all about learning and, in a "learning marathon" like
LINKS, everyone can cross the finish line in a personal-best time.

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Appendix: Web-Based LINKS Access

LINKS has no software to download/upload/install. Point your favorite web browser at the LINKS
Simulations website to interact with LINKS
http://www.LINKS-simulations.com
and then access the LINKS Simulation Database using your firms case-sensitive passcode.
You'll be e-mailed your LINKS firm's passcode just before your LINKS event begins.
LINKS uses e-mail to communicate with all LINKS participants. Please ensure that your
preferred e-mail software is configured to receive e-mail messages from domains ending with:
@ChapmanRG.com @LINKS-simulations.com @LINKS-simulations.info
Your may wish to consult your personal information technology advisor to ensure that your email software is configured appropriately to receive LINKS e-mail from these domains.
While the LINKS Simulation Database works with all web browsers, Microsofts Internet Explorer
is recommended. LINKS website access requires a Java-enabled browser.
Output Retrieval After a LINKS Round: You'll be advised via e-mail when LINKS game-run
results are available on the LINKS Simulations website. Links within the LINKS Simulation
Database permit you to access your Word doc and Excel results after a game run.
Inputs For the Next LINKS Round: When you're ready to input decisions for the next LINKS
round, access the LINKS Simulation Database and make your input changes.
o While any number of members of a LINKS firm may access the LINKS Simulation
Database simultaneously to browse, only one team member at a time can input
new decisions.
If multiple members of a LINKS firm attempt to make inputs
simultaneously, problems can arise; all decision inputs might not be saved successfully on
the LINKS server with simultaneous inputs from multiple members of a LINKS firm.
o You may make some inputs now and others later. Only your final LINKS inputs at the input
submission deadline for your LINKS industry are included in the next LINKS round.
o Within the LINKS Simulation Database, current decision values are displayed on the input
screens. You only need to make changes. All LINKS decision variables are "standing
orders" and remain in effect until changed. However, you must input specific instructions
each LINKS round for ordering research studies. Otherwise, research studies will be
executed only once since "standing orders" don't exist for research studies.
o Inputs are checked for input integrity, including upper and lower bounds on permissible
numeric inputs. Invalid entries result in an error message reporting valid minimums and
maximums. And, informative messages are reported at the bottom of each web screen.
Save Input Changes on a LINKS input
web screen before moving to another input
screen in the LINKS Simulation Database.
Review reminder, warning, and
error messages reported at the bottom of the regenerated web screen after the inputs
are processed by the LINKS web server.

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93

Decision Inputs Audit: To provide

decision inputs auditing support, the
LINKS Simulation Database includes
a Decision Inputs Audit.
Accessible on the initial login and Exit web screens in the LINKS Simulation Database,
the Decision Inputs Audit checks a firms current decision inputs for potential problems
and inconsistencies. This LINKS Simulation Database audit function is not an audit of
the individual quality of each decision input (e.g., theres no attempt to assess whether a
price of $345 is good or bad). But, possible problems are flagged for attention. For
example, forecasts that havent been changed since the last decision round are noted in
the audit display because forecasts are normally updated every decision round.

Accessing LINKS Results Files Via a Browser on a Public Computer: Web browsers leave
tracks to previously accessed web-pages in browser history files. If you access LINKS results
files on a public computer (e.g., in a public PC lab), others could access your results too via the
browser history.
Instructions for cleaning the cache in Internet Explorer follow. Other web browsers have
similar browser-cache cleaning protocols.
If you access LINKS results files on a public computer, follow these steps to clear
Internet Explorers browser history (cache):
1. Exit/close Internet Explorer after accessing your LINKS results file.
2. Re-start Internet Explorer.
a. Click on Tools and then Internet Options.
b. On the Internet Options screen, look for the Browsing History sub-section. Check
Delete browsing history on exit (it may already be checked).
c. Click the Delete button in the Browsing History sub-section.
d. Check the History box on the Delete Browsing History screen (it may already be
check).
e. Click the Delete button at the bottom of the Delete Browsing History screen.
f. Wait until the Internet Options screen re-appears.
g. Click the OK button.
3. Exit/close Internet Explorer.
These steps clear the browsing history from Internet Explorer on any computer and preserve
the security and privacy of your LINKS results files.

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Index
accessibility perception, 66
Active Service?, 31
administrative overhead, 33
Administrative Overhead, 44
advertising, 28
advice, 11
team management and organization, 88
Balance Sheet, 48
Billing System Technology, 37
calendar, 9
Call Center Service, 49
capacity utilization, 22
case studies
Northwest Airlines, 22
Waiting For The Cable Guy, 15
Change in Market Share, 87
Change in Ratio of Net Income to Revenues,
87
Consulting Fees, 44
Corporate Capitalization, 49
Corporate O/H, 48
Corporate P&L Statement, 44
corporate tax rate, 48
CSR capacity utilization, 22
CSR Cost/Call, 87
CSR productivity, 13, 14
CSR salary, 18
CSR Service Skills Training, 13
CSR Technical Skills Training, 13
CSR Turnover, 18, 23, 87
currency, 10
customer lifetime value (CLV), 79, 80
Customer Satisfaction, 87
decision form
information technology, 41
marketing, 32
other decisions, 43
research studies (1), 83
research studies (2), 84

service design, 17
service operations, 24
design quality perception, 66
Dividends, 49
dropping a service, 31
end-gaming, 90
Equipment and Facilities Investment, 49
evaluation, 86
scorecard, 87
experience quality perception, 66, 67
Fill Rate, 87
financial and operating statements, 44
firm management, 88
Forecast Inaccuracy, 33, 48
forecasting, 33
forecasting accuracy, 33, 35, 50
sales volume, 33
Forecasting Accuracy, 87
Forecasting Accuracy Report, 50
FYI
Customer Interaction Costs, 18
Price Cuts and Profits, 26
Historical Corporate P&L Statement, 48
Household, 9
Industry-Wide CSR Employee Satisfaction
Survey Participation, 38
information technology, 37
Billing System Technology, 37
costs, 48
Industry-Wide CSR Employee
Satisfaction Survey Participation, 38
Internal CSR Employee Satisfaction
Survey, 38
Internet-Delivered Ancillary Service, 38
Telecommunications Systems Support,
39
information technology decision form, 41

LINKS Services Marketing Simulation

Internal CSR Employee Satisfaction Survey,

38
Internet-Delivered Ancillary Service, 38
introducing a service, 31
Judgmental Sales Forecasting Worksheet, 34
Ldollar, 10
learning objectives, 8
Loans, 49
Major Accounts, 9
management, 88
market shares, 65
Marketable Securities, 48
marketing creative, 30
marketing decisions form, 32
marketing mix allocation, 28
marketing positioning, 29
marketing creative, 30
marketing spending decisions, 26
Non-Operating Income, 48, 49
Operating Income, 48
Order Processing Costs, 25, 48
other decisions, 42
other decisions form, 43
performance evaluation, 86
scorecard, 87
Performance Evaluation Report, 44
planning, 88
price decisions, 25
Pricing Worksheet, 27
profitability drivers, 44
promotion, 28
Ratio of Net Income to Revenues, 87
reconfiguration, 16
cost, 16
limit of two per quarter, 16
research studies, 60

95

research studies decisions form (1), 83

research studies decisions form (2), 84
research studies strategy, 60
research studies table of contents, 82
Research Study # 1: Benchmarking Earnings, 62
Research Study # 3: Benchmarking Service Design, 62
Research Study # 8: Benchmarking
Service (CSR Usage), 63
Research Study # 9: Benchmarking Marketing, 63
Research Study #10: Benchmarking - Info
Tech & Research, 64
Research Study #11: Benchmarking Operating Statistics, 64
Research Study #12: Market Statistics, 65
Research Study #13: Employee
Satisfaction, 65
Research Study #14: Regional Summary
Analysis, 66
Research Study #18: Experience Quality
Perceptions, 67
Research Study #20: Customer Satisfaction,
69
Research Study #23: Concept Test, 69
Research Study #24: Price Sensitivity
Analysis, 70
Research Study #26: ImportancePerformance Analysis, 73
Research Study #27: Marketing Program
Benchmarking, 74
Research Study #28: Marketing Program
Experiment, 75
Research Study #31: Self-Reported
Preferences, 76
Research Study #38: Retention Statistics,
79
retention statistics, 79, 80
sales force, 28
sales volume forecasting, 33
Scheduling Style, 13
scorecard, 87
seasonality, 9, 10
service
average CSR monthly salary, 64
firing cost, 19
hiring cost, 19

96

hiring limit, 20
overhead, 22
resignations, 19
time allocation, 20
training, 19
Service Appointment Scheduling, 13
Service Call Duration, 13
Service Call Format, 13
Service Center Statistics Report, 49
service design, 13
service design decision form, 17
Service Hire&Fire Costs, 48
Service O/H Costs, 48
service operations decision form, 24
Service Operations Report, 49
Service P&L Statement, 48
Service Salaries Costs, 48
simulation
end-gaming, 90
why use?, 7
SWOT Analysis Worksheet, 88, 89
Taxes, 48
team management and organization, 88
Telecommunications Systems Support, 39
Total Fixed Costs, 48
Unfilled Handling Costs, 48
unfilled orders, 21
website, 7
worksheets
Judgmental Sales Forecasting
Worksheet, 34
Pricing Worksheet, 27
SWOT Analysis Worksheet, 89

LINKS Services Marketing Simulation