LINKS Supply Chain Management Simulation

Transcript

1 LINKS Servi ce Quality Management Simulation Revised April 2019 Ruth N. Bolton, PhD Randall G. Chapman, PhD

2 2 LINKS Service Quality Management Simulation Copyright (c) 20 10 - 2019 by Ruth N Bolton and Randall G Chapman LINKS ® is a registered trademark of Randall G Chapman. All rights reserved.

3 LINKS Service Quality Management Simulation 3 Table of Contents ... ... 5 ... Introduction ... ... 5 ... ... Why Use Simulations? ... ... ... ... 6 What Will You Learn? ... ... ... ... ... 6 LINKS Overview ... Market Demand Patterns ... ... 8 ... ... ... ... 8 ... LINKS Decisions ... ... ... ... Decisions 9 ... ... ... 9 Service Design and CSR Productivity rvice Operations Decisions ... ... ... 11 Se CSR Salary Decisions ... ... ... 11 ... ... ... 12 Service Hiring/Firing/Transfer Decisions ... ... ... 13 ... Service Time Allocation Decisions ... ... ... ... S 14 ervice Capacity ... ... ... ... 15 Unfilled Orders ... ... ... Service Overhead 15 ... Managing CSR Capacity Utilization ... ... ... 16 ... ... ... 16 Marketing Decisions ... ... ... ... Price Decisions 16 ... Marketing Spending Decisions ... ... ... 18 Introduction/Drop Decisions ... ... ... 18 Forecasting Decisions ... ... ... 20 ... s Forecasting Template ... ... 20 A Judgmental Sale ... ... ... 22 ... Financial and Operating Reports ... ... ... Performance Evaluation Report 22 ... ... ... .. 22 Corporate P&L Statement orate P&L Statement ... ... ... Historical Corp 26 Service P&L Statement ... ... ... ... 26 ... ... ... 26 Balance Sheet ... ... ... Service Operations Report 27 ... Service Center Statistics Report ... ... ... 27 Forecasting Accuracy Report ... ... ... 28 Sample Reports ... ... ... 28 ... ... ... ... 38 Research Studies ... - Earnings ... Research Study #1: Benchmarking 39 ... Research Study #8: Benchmarking Service (CSR Usage) - ... 39 ... Research Study #9: Benchmarking - Marketing ... ... 40 Research Study #12: Market Statistics ... ... 40 ... Research Study ... ... ... 41 #13: Employee Satisfaction Research Study #14: Regional Summary Analysis ... ... 41 Research Study #18: Experience Quality Perceptions ... ... 42 Research Study #20: Customer Satisfaction ... ... ... 44

4 4 LINKS Service Quality Management Simulation ... ... 44 Research Study #24: Price Sensitivity Analysis ... ... ... 46 Research Study #38: Retention Statistics Decision Forms ... ... ... 47 ... Perfo ... ... ... 51 rmance Evaluation Firm Management and Advice ... ... ... 53 Planning ... ... ... 53 ... ... ... ... 53 Team Management and Organization End - Gaming Strategies and Tactics ... ... ... 54 General Advice ... ... ... ... 54 - Based LINKS Access ... ... ... 55 Appendix: Web

5 LINKS Service Quality Management Simulation 5 Introduction , competing In the ation LINKS Service Quality Management Simul 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 Working with your management team, against other firms in the support services marketplace. your goal is to improve your firm's overall financial, operating, and market performance . The e Quality Management Simulation engages participants in all aspects and LINKS Servic quality challenges of service management:  Human Resources Management (hiring/firing/retaining and deploying service personnel). eting Management ( market selection , targeting, and p ortfolio management).  Mark  and forecasting). Service Operations Management (productivity, capacity management, Research resources are available to LINKS firms, including service quality metrics, employee and customer satisfaction surveys, and competitive benchm arking studies. LINKS firms are challenged to effectively integrate business processes to create value for customers and shareholders. LINKS highlights interrelationships among marketing activities, organizational capabilities, and service operations (hu man resource management and anagement, analysis, planning, and strateg technology), while challenging participants’ m y skills. The key to success in LINKS is a carefully developed long - run strategy with appropriate expertise being applied to sales forecast ing, 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 an d managerial acumen will be needed throughout the LINKS exercise. Why Use Simulation ? "I hear and I forget; I see and I remember; I do and I understand." – Confucius Why use simul ations 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 improv e 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. Like a flight simulator, a management simulator allows m ore 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 ation’s operating environment. And, perhaps more importantly, in the relative safety of the simul 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 simula tions in adult - learning environments.

6 6 LINKS Service Quality Management Simulation Compared to traditional lecture/case/discussion educational events, simulations: Reflect active rather than passive participation, enhancing learning motivation.  and planning.  Apply key management concepts, especially coordination  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  ri sk competitive dynamic environment. within a relatively low - Provide learning variety through novel learning environments.  What Will You Learn? "The ability to learn faster than competitors may be the only ive advantage." true sustainable competit Arie P. De Geus – LINKS Service Quality Management Simulation learning objectives The include:  Developing and executing a strategy that creates value for customers and for shareholders.  ( service capacity) in a competitive environment. Matching demand and supply  Managing service personnel (hiring/firing, training, compensation , and deployment )  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.  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 - pe rforming teams. associated with high LINKS Overview 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 different end users. Household and Major Accounts support services - l markets that do no overlap. categories in LINKS are separate vertica t 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 dependin g on their organizational capabilities (derived from how services are designed). ach LINKS firm in your support services industry has two services: one service targeted at the E Household market segment (service 1) and one service targeted at the Major Ac counts market segment (service 2). LINKS uses “f - s” terminology to describe specific firms and their service offerings. For example, service 3 - 2 is firm 3’s second service (a Major Accounts support service). Each LINKS decision period is a calendar You assume control of your LINKS firm at the

7 LINKS Service Quality Management Simulation 7 quarter. Within LINKS, each calendar Your first decisions will be end of quarter 3. for quarter 4. Although your firm has been quarter in the year is assumed to have an operating for some time, detailed information equal number of days. There is no known is only available about the recent past. - time year - of seasonality in LINKS markets. All firms in your industry started quarter 1 identically. This is consistent with an indust ry that has evolved over time so that (ultimately) all competitors now emulate each other. Decisions in - 3 were constant throughout these three quarters. However, due to the normal random quarters 1 forces in the various markets in which your firm operate s (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, t performance, and plans and implements on - going marketing analyzes and evaluates recen The LINKS analysis programs and operations capabilities. - implementation - evaluation - planning cycle is shown in Exhibit 1. This cycle repeats throughout your LINKS exercise enabling your team to le arn from experience. - Planning - Implementation - Evaluation Cycle Exhibit 1: LINKS Analysis (4) Evaluation : Compare : (1) Analysis (2) Planning : Based on : Analyze (3) Implementation ur plan to your results. Submit your decisions yo prior analyses and working current financial, for the next round What were you trying to operating, and market with your teammates, make via the LINKS Simulations performance, which decisions for the next round. accomplish? How well did hat corrective you do? W involves both individual website. These decisions represent your plan. - action is needed? team analysis. and within Iterate The LINKS currency unit is the LCU, the "LINKS Currency Unit." The LCU is $" and pronounced Ldollar ("el - dollar"). The "LINKS Currency abbreviated " - like multi - country currency. Unit" (LCU) is a Euro ou might have encountered the "$" symbol associated with currencies in Y Australia, the Bahamas, Barbados, Belize, Bermuda, Br unei Darussalam, Canada, Cayman Islands, Fiji, Guyana, Hong Kong, Jamaica, Liberia, Namibia, New Zealand, Singapore, Solomon Islands, Suriname, Taiwan, Trinidad/Tobago, and the United States . That's merely a coincidence. The "$" currency symbol is widely known to have originated with the Ldollar.

8 8 LINKS Service Quality Management Simulation Market Demand Patterns - service usage. Firms measure Customer demand in LINKS is measured in terms of (one time) - demand by counting transactions or “units” of service. erm c ontracts for support services Long t ot exist in the LINKS support services industry. Customers may have single or multiple do n transactions with a given servic e firm within a given quarter. ogram. For example, lower Demand for each support service is influenced by its marketing pr prices and more marketing spending stimulate higher demand. T here is no known time of - year - As with all goods or services, some customers are seasonality within LINKS support services. support services while others would never purchase support services relatively heavy users of even with a price of $0. Customers may use your firm’s support services, purchase from a - house or do - it - competitor, rely on internal (i.e., in ervice, or do without . yourself) support s Customer demand for support services in the Household and Major Accounts market segments may respond somewhat differently to the marketing variables at your firm’s disposal. Thus, what might work well for one service in one geographic market might not wor k well for other services in other geographic markets. For example, customers may be quite sensitive to price for a service offered in a particular market, while they are somewhat insensitive to prices in other markets LINKS Decisions 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 begi nning of LINKS, teams take over management responsibilities of existing firms with on - going marketing, human resource, and operations decisions in place. Whether these current - decisions are good, bad, or so profitable, so things so is unknown. However, your firm is currently 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 woul d 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 capab ilities. 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 participant’s manual. L INKS has a continuous decisi on framework built into it. All decisions from the previous quarter changes a decision. All LINKS decisions carry over intact into the present quarter, unless a firm are standing orders and they continue to be in force un til explicitly changed . ubmit your decision input changes and research study orders no later than the You’ll s designated input submission deadlines specified by your LINKS instructor. You’ll access the LINKS Simulation Database (via the LINKS website, http://www.LINKS - simulations.com) a nd use your firm’s LINKS passcode to access your LINKS division’s data/decisions, retrieve past financial reports, and make decision input changes for each quarter in your LINKS e vent .

9 LINKS Service Quality Management Simulation 9 Decisions wo support services in two categories (segments). Service 1 is provided to Your firm has t Households and service 2 is provided to Major Accounts (i.e., business and government customers). Service Design and CSR Productivity the design of your two services is fixed In the LINKS Service Quality Management Simulation, and no changes in service design are possible . LINKS support services have standardized designs across all marke t regions. There are no 1 is the same - regional variations in LINKS support services design. For example, service 3 Household support service design (configuration) in all market regions in which it is marketed. In LINKS, service design (configuration) i s described as a seven - character code with the following elements and interpretations: (1) Service Category: "H" for Household, "M" for Major Accounts 0 - 9 (hours per month) (2) CSR Technical Training: CSR Service Skills Training : 0 - 9 (hours per month) (3) (4) 1 - 7 (days) Service Appointment Scheduling: Scheduling Style: 0 - 4 (appointment scheduling “window” in hours) (5) (6) Serv ice Call Duration: 1 - 3 (1=”minimum”, 2=”more than minimum”, 3=”maximum”) (7) 0 or 1 (0=”telephone service”, 1=”on - site visit”). Service Call Format: is a Household support ser vice with 4 hours/month of Technical For example, service “H446320” Training and 4 hours/month of Service Skills Training for CSRs assigned to this support service, ppointment Scheduling of 6 days (s upport service provided within 6 days of the service Service A request from custome rs), a Scheduling Style with a 3 - hour appointment “window” for support more than service calls, a - minimum Service Call Duration is provided to solve the customer’s - telephone service ” Service Call Format. service request, and “ CSRs (customer service representati ves) deliver support services. Each CSR has 2 2 8 - hour days of service capacity per month (i.e., 1 76 hours of service capacity per month or 528 hours of service capacity per quarter). The design (configuration) of a support service influences the availabl e 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 servi ce would be reduced by 4 hours/month (12 hours/quarter) from the standard capacity of 1 76 hours of service capacity per month or 528 hours of service capacity per quarter. costs The design of each service influences customers’ preferences for it, as well as the associated with providing the service. The design of your two services (H446320 and M663131 , respectively ) in the LINKS Service Quality Management Simulation is fixed and no changes in service design are possible .

10 10 LINKS Service Quality Management Simulation rvice 2 Se Service 1 Direct service design costs for M663131 H446320 servic es 1 and 2 in the LINKS Quality Management Service 0.00 Support Service Category 0.00 Simulation are shown in the CSR Technical Training 0.00 0.00 ervice Variable sample LINKS S 0.00 0.00 CSR Service Skills Training Cost Report to the right . Direct Service Appointment Scheduling 1.00 12.50 and indirect cost details and 3.00 12.00 Scheduling Style associated CSR productivity 10.00 Service Call Duration 25.00 implications for each service .00 20 Service Call Format 10.00 design element foll ow below. $ $ 69.50 24.00 Service design influences variable costs per support service call and CSR productivity . Service Category : There are two service categories, “H” for support servi ces targeted at  is a Households and “M” for support services targeted at Major Accounts. Service 1 is a Major Accounts support service. Household support service and service 2 CSR Technical Training : Services 1 and 2 have 4 and 6 hours per month , respect  of ively, CSR Technical Training for CSRs assigned to the support service s . Indirect implications for CSR productivity arise with each hour of training reducing available CSR capacity by an hour.  CSR Service Skills Training : Services 1 and 2 have 4 and 6 hours per month, respectively, of CSR Service Skills Training for CSRs . Indirect assigned to the support services training hour reducing available CSR capacity implications for CSR productivity arise with each by an hour.  Service Appointment Scheduling : Service 1 and 2 appointments are scheduled within 6 Direct and indirect cost and 3 days, respectively, of a customer’s request for support service. implications associated with quicker service appointment scheduling. Direct Costs : Variable costs per Maj or Accounts support service call equal 0.5(8 - - - SAS)(8 SAS) where SAS is the level of Service Appointment Scheduling in days. For Major Accounts support service calls, the least expensive Service Appointment Scheduling - day service) incurs variable option (7 - 7)(8 - 7) = $0.50; the costs per service call of 0.5(8 most expensive Service Appointment Scheduling option (1 day service) incurs variable - - - 1) = $24.50. The variable costs associated with costs per service call of 0.5(8 1)(8 Household support service calls are one - half of the associated variable costs for Major Accounts support service calls. - : CSR productivity is influenced by Service Appointment Scheduling. To Indirect Costs tment provide sufficient standby/reserve CSR capacity to service shorter Service Appoin 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.  : Support service calls are scheduled within appointment - time “windows” Scheduling Style Services 1 and 2 have a - (e.g., between 100pm and 300pm on a particular day). ppointment of 3 and 1 hours, respectively. There are cost implications associated with time “windows” narrow - service call equal 3(4 - SS) for Household “window” scheduling. Variable costs per - SS) for Major Accounts support services, where SS is the level of support services and 4(4 Scheduling Style. Thus, a 3 - hour appointment - window scheduling style has associated window variable costs of $3 ehold supp ort services while a 1 - hour appointment - for Hous scheduling style has associated variable costs of $12 for Major Accounts support services.  Service Call Duration : Support service calls average one hour in duration to handle customers’ support service reques Services 1 and 2 have level 2 and level 3 service call ts. duration, respectively. minimum (level 2) and maximum (level 3) Service Call More - than -

11 LINKS Service Quality Management Simulation 11 have - minimum (level 2) associated consequences for CSR productivity. More Durations than - ion increase support service calls by an average of 6 minutes and maximum Service Call Durat (level 3) Service Call Durations increase support service calls by an average of 15 minutes. 2 Variable costs for service call duration for Household support services are $1 0.00 for l evel variable costs for service call duration for Major Accounts support services are $25.00 for and level 3. : Support service calls may be conducted over the telephone (level 0) or  Service Call Format site visit (level 1). Variable costs per service call associated with telephone support - via an on service are $10 - site for service 1 (level 0) while the corresponding variable costs per on for service 2 (level 1) are $20. CSR productivity for on - site support service calls is service call - verage travel time of 20 minutes between on site support service calls. reduced by the a Service Operations Decisions In LINKS, support services are delivered by CSRs (customer service representatives) in each region. Service employee decisions include CSR salary, CSR hiring and firing, CSR transfers among regions, and CSR time allocations in each market region to your support services. Your te. firm maintains a separate CSR staff in each market region in which you opera A firm’s utilization level of its CSRs i s the FYI: Customer Interaction Costs largest driver of its service quality. Higher CSR utilization is associated with lower Estimates of representative customer interaction perceived service quality due to service costs (in $US) are listed below: queuing, lack of time for CSRs to provide - Self  Service (Voice Recognition, Web quality service, and related issues high - Interaction): $0.1 - $0.4 s associated with high utilization level - $5 - .25 Mail Contact: $0 Direct  (including CSR turnover ).  Telephone Interaction: $2 - $5 - $6 Fax/Mail Interaction: $3  There is a natural lag between perceived Telemarketing Interaction: $8  - $24 service quality and CSR usage (utilization)  - Telephone Product Support Interaction: $4 since perceived service quality is a survey - $75  Field Sales Interaction: $40 - $400 based measure. Customers are surveyed of all about their service quality perceptions Source: Adapted from Figure 2 in Jonathan Wright and support services for which they have personal Jerry Quinn, "Ente rprise Service Management: The Key To recent experience. It follows that the Achieving Supply Chain Excellence Service Excellence," (San Francisco: Through Technology, Volume 4 current quarter's perceived service quality Montgomery Research, Inc., 2002), p. 190. is based on actual CSR usage (utilization) from the previous quarter. Balancing the trade - offs among CSR usage (utiliz ation), team. cost, and service quality perceptions will be an on - goin g challenge for your CSR Salary Decisions Firms may establish different CSR salary levels across regions. While cost - of - living consi derations 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.

12 12 LINKS Service Quality Management Simulation dollars per month. Thus, a $24,000 per year salary would CSR salaries are expressed in terms of 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. y of the service effort. Through time, higher CSR salary levels influence the quality and quantit salary levels will attract and retain more able service representatives, ultimately yielding higher service quality for customers. level directives. The specified salary levels in eac h region are averages. - CSR salaries are policy Regional service managers implement these policies appropriately. This will mean, for example, average that more experienced and more able service personnel will typically receive above - - salaries with others receiving correspondingl y below average salaries. These tactical issues are managed by your regional service managers. Service Hiring/Firing/Transfer Decisions You manage CSR service staff in each region by hiring, fi ring, and transferring CSRs. size  You may only hire new (inexperienced) CSRs in region 1. However, you may hire experienced CSRs directly into any region. Firing of CSRs is only possible in region 1.  costs for new (inexperience d) CSRs equal two month's salary, representing the costs  Hiring associated with recruiting, screening, and training.  costs incur a charge equal to three month's salary. Firing  Hiring and firing costs are recorded as "Service HFT" 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 qua rter are only two - thirds as productive as experienced CSRs. There is a single hiring and firing decision in FAQ LINKS. Positive values of this decision variable in region 1 reflect hiring decisions "Is a service usage level of 100% ideal?" With while negative values reflect firing decisions. 100% service usage, your service personnel Obviously, you would never hire and fire have for time training, no vacation, CSRs in region 1 in the same quarter, so a - administrative matters, or other non customer single decision variable is all that's necessary faci ng activity. This workload level may lead to to permit you to make CSR hiring and fi ring higher personnel turnover. In addition, 100% decisions in region 1. service usage means that lots of customers have to wait for service, with associated Planned changes in service workforce size degradation of perceived service quality. While by judicious hiring, firing, and transfer occur as higher 100% service usage h - than less - associated costs per contact, the key issue is the through decisions. Attrition reduces CSR staff - off between cost per contact and trade time, unless deliberate hiring and transfer perceived service quality. maintain your Thus, to decisions are made. existing CSR staffing levels, regular hiring of . service personnel will be required - Recent experience in the support services industry indicates that CSRs resign at the rate of 7%

13 LINKS Service Quality Management Simulation 13 10% per quarter. Workload and compensation are t hought 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 - paid service representatives. service representatives re sign with less frequency than lower training is required before they are fully functional in their new For newly hired CSRs, a month's positions. This month’s training ensures that newly hired CSRs are knowledgeable and courteous employees. New hires receive their normal salaries in this training month, but they don’t provide any support service to customers during the first month of employment. The maximum number of new CSRs that may be hired in any 99. The CSR quarter in region 1 is service force in region 1 can be reduced via a firing decision. Firms in the support services industry recognize that they can recruit from a labor pool that has two segments: people who have prior experience as a CSR (perhaps with competing firm or from another similar industry) or inexperienced people. More recruiting effort and expense is required to attract experienced people, but they require minimal training. Less recruiting effort and expense is necessary to attract inexperienced people, but they require more training time and expense. Specifically, since experienced CSRs require minimal training, they are fully productive immediately (i.e., in the initial month after hiring). Experie nced CSRs incur one - time charges equal to twice that of the hiring of new (inexperienced) CSRs. It is possible to hire a maximum of 12 experienced CSRs in any market region in any quarter. Hiring experienced CSRs has no impact on your regular CSR hiring decisions. Transferring CSRs from one region to another region is possible. Maximum transferees from any region to any other region are limited to 20 in any quarter. Transferred CSRs incur costs equal to one month’s salary. Transferred CSRs require one - half month’s training before they are available for support service calls in the region to which they are transferred. If you decide to stop selling all support services in a particular region, you would need to transfer all remaining CSR staff to other regions. Note that you may only fire CSRs in region 1. Service Time Allocation Decisions Two aspects of service quality, reliability and responsiveness, are heavily influenced by your decisions about servi ce 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 region. These time allocations must s um to 100% across your support services in each 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 mar keted 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 respons ibility 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 firm’s targeted

14 14 LINKS Service Quality Management Simulation CSR usage (utilization) level for each support service. Service Capacity 2 CSR 8 - hour days of service s provide support services to your customers . Each CSR has 2 hours of service capacity per month or 528 capability per month (i.e., 1 hours of service 76 . Support service design (configuration) influences the capacity per quarter) 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 se rvice 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. Here’s a sample calculation of CSR c apacity 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 service’s design; 2. eduling is 7 and Service Call Duration and Service Call Format are Service Appointment Sch minimum (level 1), so that there are no indirect CSR productivity consequences. hours/quarter Standard CSR Capacity ( 528 hours/quarter) 528 CSR Technical Training (4 hours/month) - 12 hours/quarter 6 hours/quarter - CSR Service Skills T raining (2 hours/month) 510 hours/quarter Available Support Service Time Per CSR (hours/quarter) = Support Service Call Capacity: Telephone Service Calls 510 calls/quarter Support Service Call Capacity: On - Site Service Ca lls 382.5 calls/quarter This sample calculation is for “continuing” CSRs (non - transfers) and for hires and non - thirds of the hours are - 510 experienced CSR hires. For CSR hires to this region, only two - sixths of the available (CSR hires train for one month); for CSR transfers to this region, only five hours are available (CSR transfers are in training for one - half of a month). 510 - movement timing in a particular region are defined as follows: CSR staffing levels and staff Beginning CSR Staff CSRs Fired [region 1 only] - CSR Resignations - CSR Transfers From This Region To Other Regions - CSR Transfers To This Region From Another Region + CSR Hires [region 1 only] + CSR Experienced Hires + Available CSR Staff = In this CSR staffing level calculation, note that:  Available CSR Staff includes a mixture of “continuing” CSRs, new hires (inexperienced CSRs and experienced CSRs), and transfers. New hires and transfers have less - than - full - hours availability due to their associated training (one month for new hires and one - half month for transfers).  Forced CSR reductions through firing are assumed to occur at the beginning of a quarter.

15 LINKS Service Quality Management Simulation 15 CSR resignations are assumed to occur at the beginning of a quarter.  CSR transfers from cur at the beginning of a quarter. region to another oc T ransferred one  CSRs are unavailable for use by the originating (sending) region in the quarter of transfer.  Available CSR Staff in a quarter equals Beginning CSR 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 CSR Staff times the relevant region specific salary level. Each sale of a support service requires a service call. Thus, the number of service call s 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 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 U nfilled Handling costs on your corporate P&L statements). Past experience suggests that unfilled orders reflect three types of customers. Some customers immediately defect to another competitor's (available) support service. Other customers decide not t o buy any support service now or in the near future. A third segment of customers are inclined to 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 - orders customers is unknown. In all cases, however, it should be expected that unfilled customers remember their experiences with unfilled orders and these unfavorable experiences influence their perceptions of your service offerin g, 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 purchase requests. If ther e are 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 w ith 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 over head, 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 fur ther $ 3 ,000 of service overhead per month is also incurred to support each CSR.

16 16 LINKS Service Quality Management Simulation Your firm is automatically billed for the direct and indirect costs associated with maintaining expenses are service representatives in each of the market regions. These service overhead recorded as "Service O/H" on your financial statements. Managing CSR Capacity Utilization specific Each market region may have a region - 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 mor e 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, a service's marketing program to temporarily reduce demand, to better match demand and supply. For may be adjusted n be example, a temporary price increase will reduce service demand until service capacity ca increased. may assume that CSRs use s lack You (if it exists) to productively /spare service capacity time - engage in customer follow - improvement study, and voluntary training that enhance up calls, self their long - run capabilities for providing high - qu ality service. When their available time is fully used to service current demand, no time is 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 reases in CSR turnover . Thus, there is a delicate trade off between maximizing short - run CSR inc - - capacity utilization and maximizing long run service quality. There are no financial or operational consequences associated with setting CSR m aximum 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 between 50% and 100%. Decisions Marketing Your LINKS firm is responsible for pricing, marketing spending, and introduction/drop decisions for your support services. - user customers in the Household and Major Accounts You sell support services to final end categories. Since your firm sells directly to final end - users, the price s that you set for your support services are the final price s 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.

17 LINKS Service Quality Management Simulation 17 ries and Higher prices are normally associated with lower levels of customer demand in all catego market regions. The price sensitivities in the support services categories and market regions in LINKS are unknown. You’ll need to learn about the markets' responsiveness to price through your experience in LINKS and by exploiting available LINK S research studies. In addition to the physical costs of producing FYI: Price Cuts and Profits and distributing updated price sheets, lists, and databases that accrue when a firm Here are some estimates of the impact on - e (so called “menu costs”), a changes pric operating profit of a 1% reduction in price, - obvious costs arise range of indirect and non 1 : assuming no change in volume or costs with price adjustments.  - Food and drug stores: 23.7%  Managerial Costs: A firm must gather  Airli 12.9% - nes: information, assess, and analyze, Computers, office equipment: 11.0% -  communicate the logic associated with  4.9% - Tobacco: throughout price their changes Semiconductors:  3.0% - organization. Managerial costs increase Across all industries, the average decrease in with larger price changes, since there is operating profit from a 1% price decrease was 8.0%, assuming no change in volume or costs. more to assess/analyze and more organizational members become involved ed in Janice Revell, "The Price Source: McKinsey & Co., cit with larger price changes. Is Not Always Right," (May 14, 2001), p. 110. Fortune  - Facing Costs: When Customer price changes, a implementing created and executed to portray a price change in the communications program must be 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. ge by your firm for a service in a market region results in $10,000 in In LINKS, each price chan costs plus $200 in costs per - dollar change in price (increase or decrease in price) plus costs of 2 0.25% of current - quarter revenues. For example, a $75 change in price on a service wi th 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 = $36,250. These price change costs - are recorded as “Price Changes” in the “Fixed and Other Costs” sect ion of your firm’s profit loss statements in the quarter in which the price change occurs. and - It's very easy to drop price to attempt to increase demand. However, it's always an interesting ts. Remember, the price drop question whether that increased demand actually increases profi that generates increased demand also reduces your margin on each unit sold. More importantly, 1 documents the range of direct and indirect costs associated with price Recent published research adjustments for a large U.S. industrial manufacturer (more than one billion USD$ revenues selling 8,000 s found that products [used to maintain machinery] through OEMs and distributors). The author 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 and 20.03% of the company’s net margin. {Source: Mark J. Zbaracki, 1.22% of the company’s revenue Mark Ritson, Daniel Levy, Shantanu Dutta, and Mark Bergen, “Managerial and Customer Costs of Price stics , Adjustment: Direct Evidence From Industrial Markets,” The Review of Economics and Stati 533.} - Volume 86, Number 2 (May 2004), pp. 514 2 No price change costs Price change costs only accrue for services that are being sold in a region. last quarter accrue for a service as it is i ntroduced into a region (i.e., it was inactive in that region in the ).

18 18 LINKS Service Quality Management Simulation it's easy for competitors to see and feel threatened by a price change. Price wars are often initiated by thoughtless price manipul ations by naive managers who assume that competitors won't notice, won't respond, or respond ineptly. To provide a fact - based approach for making pricing decisions, please refer to the "Pricing Worksheet" on the following page. Complete this "Pricing Wor ksheet" 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 ne xt 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. Th is budget is managed by your firm’s region managers and is used for advertising, promotion, and sales force efforts your support services. You are free to allocate funds to marketing spending as you see for fit. S pending does not have to be equal for all support services and regions. Significant percentages of advertising and promotion budgets are automatically spent on digital marketing, as is typical practice in other comparable industries. This includes allocations to Facebook, YouTube, and Google, f or example, as well as location - based mobile marketing. 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 spen ding 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. 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 off ering from a region incurs no special costs. Introduction costs are recorded under "Introductions" on your financial statements. If you wish to "activate" a support service in a market region, you must issue a specific "Active Service?" status to "Yes" to introduce a support service introduction decision. Change the 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 intr oduce 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 s upport

19 LINKS Service Quality Management Simulation 19 Pricing Worksheet This pricing worksheet is designed to provide an analysis framework anytime you are contemplating decreasing prices with in 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. - after comparison with your team member s. Review the before Service Region Firm Quarter Before Action Analysis, After Action Review, and Forecast Review Last Next Next Quarter, Quarter, Quarter, Actual Actual Predicted Industry Sales Volume [units] * arket Share [%s] Volume M = Sales Volume [units] Price [$] * = Revenue [$] - Variable Costs [$] = Gross Margin [$] - Fixed Costs [$] = Operating Income [$]

20 20 LINKS Service Quality Management Simulation therwise, marketing service from a market region, you must change marketing spe nding to $0. O spending continues to occur, in anticipation of a future relaunch. - region launches to a maximum Your firm has a policy of limiting simultaneous new service So, for example, two services each lau nched (introduced) into one of three in any quarter. region in any quarter count as two launches. A reconfiguration isn't a launch if that service is already actively sold in a region. Forecasting Decisions challenged to match demand and supply in a dynamic competitive Service organizations are marketplace. And, sales forecasts are extremely important to effective management and an understanding business performance in service organizations. Forecasting accuracy requires of how a firm’s decisions influence sales. In LINKS, quarterly sales volume forecasts are required for each support service’s sales in every region in which a support service is active. In LINKS, foreca sting accuracy influences operations performance both directly (via adjustments in base administrative overhead for forecasting inaccuracies) and indirectly (via CSR capacity management considerations). d costs increase by 1% for every 1% inaccuracy in your sales volume Administrative overhea 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 firm’s 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 firm’s business via the LINKS scorecard. performance accuracy is equal to 100*(1 - (abs(Forecast - Actual)/Actual)) expressed in percentage Forecasting ual terms, where "abs" is the absolute value function. Thus, a forecast value of 11,000 and an act - abs(11,000 - value of 8,000 result in a forecast accuracy of 100*(1 - 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 result s 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 t emplate 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.

21 LINKS Service Quality Management Simulation 21 Judgmental Sales Forecasting Worksheet supply coordination and management. Sales forecasting drives everything in demand - s forecasting is extraordinarily challenging due to the many factors influencing Unfortunately, sale 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 rketing (customer - least you're explicitly taking into account that your ma facing) 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 force s will continue as they have existed in the recent past. Be watchful for structural considerations like unfilled orders. -  (the "hard" part): Make adjustments for planned changes in your marketing (customer Step 2 facing) programs. The potential impacts o f changes in service design, price, communications, and service operations on your sales must be quantified. (the "subtle" part): Account for foreseeable competitors' changes in their marketing Step 3  facing) programs. It's easy to overlook com petitors in forecasting. Assume that (customer - competitors are vigilant and thoughtful and present. - - Line Forecast) 1 Line Extrapolation of Past Sales Realizations (Base Trend (list specifics, wit h Adjustments For Planned Changes In Marketing Program 2 %s] ) judgmental estimates of sales impacts [expressed in +/ - Service Design Changes Price Changes Communications Changes Service Operations Changes Adjustments For Foreseeable Changes In Competitors' Marketing Programs 3 - %s] ) l estimates of sales impacts [expressed in +/ (list specifics, with judgmenta Service Design Changes Price Changes Communications Changes Service Operations Changes Adjusted Sales Forecast

22 22 LINKS Service Quality Management Simulation Financial and Operating Reports section . These are the standard The LIN KS financial and operating reports are described in this 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 – s chapter are lengthy and detailed. To provide The financial and operating reports described in thi 3 decompose net an overall roadmap for thinking about the drivers of profitability, Exhibits 2 - 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 ion. addition, Exhibit 4 provides a breakdown of the underlying drivers of accessibility percept 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 lo ok back every now and then to make sure it's still there." – Cowboy philosophy A detailed discussion of the "Performance Evaluation Report" that forms the first page of your fi nancial and operating reports is provided later in this LINKS participant’s m anual, in the “Performance Evaluation” section. Corporate P&L Statement The "Corporate P&L Statement" aggregates all of the service - - and - loss statements specific profit 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 expense s, 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 adju stments to income or expenses. For example, a research billing problem can be corrected via an appropriate negative "Consulting Fee."

23 LINKS Service Quality 23 Management Simulation Exhibit 2: Net Income Drivers in LINKS Volume Revenues Price Variable Costs Costs Fixed Costs Net Income Interest Rates Non - Operating Loans Income Marketable Securities Taxes

24 24 LINKS Service Quality Management Simulation Exhibit 3: Volume Drivers in LINKS Price Price Price Volatility (Over Time) Technical Training Service Skills Training Appointment Scheduling “Design Quality” Scheduling Style (Service De sign Quality) Service Call Duration Service Call Format CSR Capacity and Usage CSR Compensation CSR Turnover “Experience Quality” CSR Employee Satisfaction Volume (Service Operations Quality) Service Tangibles ervice Technology Support S Marketing Program (Marketing Spending) “Accessibility” Unfilled Orders Competitors’ Marketing Programs Uncontrollables Exogenous Factors (Customers, Economy, Regulatory and Technology Environment)

25 LINKS Service Quality 25 Management Simulation Exhibit 4: “Accessibility” Perception Drivers LINKS in Own Marketing Program - Marketing Spending “Awareness” Perception Competitors’ Marketing Programs “Accessibility” Perception “Availability” Fill Rate Perception

26 26 LINKS Service Quality Management Simulation Corporate overhead ("Corporate O/H") is $500,000 per support service per quarter . This  service charge is incurred if a support service is active in one or more market regions. per - records the costs associated with forecasting errors.  “Forecast Inaccuracy” "Information Technology" records all IT charges. Your IT charges include a $1,000/page  firm charge for all financial and operating reports plus research studies. This charge is per - and is not related to the number of members of your firm's management team. Each - 32 quarter's charge is based on the previous quarter's actual page counts (e.g., the quarter 31 page count). - charge is based on the quarter  "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 Incom equals "Gross Margin" minus "Total Fixed Costs."  e" ” Order Processing" records the $10/unit cost associated with processing all sales orders.  "Research Studies" reflects the total costs associated with la  st 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 HFT" costs are the service hiring, firing, and transfer costs.  costs are the unfilled orders handling costs ($20/unit). "Unfilled Handling" reflects corporate taxes payable. Your corporate tax rate is 50%.  "Taxes" "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 corporate - level 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 ma rket 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 r evenues is automatically invested in short - term "Marketable Securities" which earn 1.5% per quarter in "Non - Operating Income" on the "Corporate P&L Statement" in the following quarter. If cash falls below 5% of revenues, a loan is automatically

27 LINKS Service Quality 27 Management Simulation arranged to increase cash to 5% of revenues. You pay interest of 3% per quarter on "Loans" Operating Income" (a negative value of " - - Non and this interest payment is recorded as "Non Operating 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 t o shareholders. In any quarter in which "Net Income" is positive, 30% of the "Net Income" is allocated to "Dividends."  - value of your firm's investment i n "Facilities and Equipment Investment" represents the Ldollar facilities and equipment. You can't run out of cash within LINKS. L oans are automatically issued to bring your cash requirement up to minimum acceptable. Of course, you do have to pay interest on loans. is to allocate 30% of net income to dividends. Whenever profits are positive, corporate policy Service Operations Report The “Service Operations Report” provides the details of your CSR staffing, productivity, and CSR m anagement 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 cus tomer 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 purchasing preferences, complaints collect customer demographic information, 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 wit h your firm’s call center to purchase support services, schedule service appointments, and to ask questions about all aspects of your firm’s support services. Your firm systematically tracks/counts callers’ questions. The "Service Center Statistics Repor t" provides categorized service center call counts of callers’ questions for each of your firm’s 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. Th us, 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 you r firm operate s . Your firm pays your outsourced service cent er $6 / call received. These costs are recorded as “Call Center Service” on your firm’s financial statements.

28 28 LINKS Service Quality Management Simulation In the Excel results supplemental spreadsheet (accessible within the LINKS Simulation Database ditional service center results are reported within the on the LINKS website), ad 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/reg ion/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 ce center calls in scale - adjusted “call per sales order” terms. the servi Forecasting Accuracy Report The "Forecasting Accuracy Report" provides deta ils of the forecasting accuracy associated with your short - quarter) sales volume - term (next 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 f this report. at the end o accuracy is equal to 100*(1 - (abs(Forecast - Actual)/Actual)) Forecasting expressed in percentage terms, where "abs" is the absolute value f 8,000 function. Thus, a forecast value of 11,000 and an actual value o abs(11,000 8,000)/8,000) = - - results in a forecast accuracy of 100*(1 100*(1 - (3,000/8,000)) = 100*(1 - 0.375) = 62.5%. The minimum possible value of forecasting of 8,000, a accuracy is 0.0%. For example, with an Actual 000 sales volume Forecast above 16, s in a forecasting accuracy score of 0.0%. result Sample Reports "The meaning of life is to do the best you can with what you've got." Anonymous – s of the standard LINKS financial The following pages provide sample 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 pro vided 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 LINKS industry. illustrative of reports formatting. These data aren’t specific to your particular Please do not interpret these samples as suggested guidelines or benchmarks for good decisions and performance within LINKS.

29 LINKS Service Quality 29 Management Simulation ***************************************************************************** FIRM 5 : Support Servi ces Ltd. INDUSTRY SRV PERFORMANCE EVALUATION REPORT, QUARTER 16 PAGE 1 ***************************************************************************** For Your Information You receiv e the LINKS scorecard (shown above) automatically each quarter as the first page of your financial and operating and industry reports. This scorecard provides comparatives to assess how your firm's data compares to the industry averages bests Performance Indicatory (KPI). on every Key Historical plots of all KPIs are provided in your firm’s supplementary results Excel spreadsheet (“KPIcharts” worksheet), accessible within the LINKS website’s LINKS Simulation Database. Data from the past six quarters are d isplayed, 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 - best, industry average, and industry worst for your industry. specific industry

30 30 LINKS Service Quality Management Simulation ***************************************************************************** AAA FIRM 5: ?????????????????????????????????????????????????? INDUSTRY PAGE 4 CORPORATE P&L STATEMENT, QUARTER 6 ***************************************************************************** - 1 Service 5 - 2 All Services Service 5 ------------ ----------- ----------- Sales Volume 9 8,841 61,352 37,489 Unfilled Orders 2,133 0 2,133 Price 203 160 275 Revenues 20,125,795 9,816,320 10,309,475 4,077,933 1,472,448 2,605,485 - Variable Costs - Order Processing 988,410 613,520 374,890 ----------- ----------- ------------ Gross Margin 15,059,452 7,730,352 7,329,100 Fixed & Other Costs: Administrative O/H 600,00 0 3 00,000 3 00,000 Call Center Service 728,748 492,354 236,394 Consulting Fees 0 Corporate O/H 1,000,000 Forecast Inaccuracy 130, 130 62,769 67,361 Information Technology 17,000 Introductions 0 Marketing 2,400,000 1,200,000 1,200,000 Price Changes 0 0 0 Research St udies 0 Service Salaries 2,970,000 1,485,000 1,485,000 Service O/H 2,970,000 1,485,000 1,485,000 Service HFT 288,000 144,000 144,000 Unfilled Handling 42,660 Total Fixed & Other 11,146,538 5,169,123 4,917,755 ------------ ----------- ----------- Operating Income 3,912,914 2,561,229 2,411,345 ------------ --------- -- ----------- - Operating Income 53,650 Non Taxes - 1,983,282 ============ Net Income 1,983,282 ============

31 LINKS Service Quality 31 Management Simulation *************************************** ************************************** AAA FIRM 5: ?????????????????????????????????????????????????? INDUSTRY HISTORICAL CORPORATE P&L STATEMENT, QUARTER 6 PAGE 5 ******************** ********************************************************* Previous (Quarter 5) Current (Quarter 6) --------------------- --------------------- Sales Volume 101,491 98,841 Unf illed Orders 3,344 2,133 Price 204 203 Revenues 20,713,555 100.0% 20,125,795 100.0% - Variable Costs 4,20 6,324 20.3% 4,077,933 20.3% - Order Processing 1,014,910 4.9% 988,410 4.9% ------ ------------ ------------ ------ Gross Margin 15,492,321 74.8% 15,059,452 74.8% Fixed & Other Costs: 3. Administrative O/H 2.9 % 600,000 0 % 600,000 Call Center Service 735,072 3.5% 728,748 3.6% Consulting Fees 0 0.0% 0 0.0% Corporate O/H 1,000,000 4.8% 1,000,000 5.0% Forecast Inaccuracy 138,065 0.6% 130,130 0.6% Information Technology 17,000 0.1% 17,000 0.1% Introductions 0 0.0% 0 0.0% Marketing 2,400,000 11.6% 2,400,000 11.9% Price Changes 0 0.0% 0 0.0% Research S tudies 0 0.0% 0 0.0% Service Salaries 2,997,000 14.5% 2,970,000 14.8% Service O/H 2,997,000 14.5% 2,970,000 14.8% Service HFT 288,000 1.4% 288,000 1.4% Unfilled Handling 66,880 0.3% 42,660 0.2% Total Fixed & Other 11,239,017 54.3% 11,146,538 55.4% ------------ ---- -- ------------ ------ Operating Income 4,253,304 20.5% 3,912,914 19.4% ------------ ------ ------ ------------ Non - Operating Income 32,069 0.2% 53,650 0.3% Taxes - 2,142,686 - 10.3% - 1,983,282 - 9.9% ============ ====== ============ ====== Net Income 2,142,687 10.3% 1,983,282 9.9% ============ ====== ============ ======

32 32 LINKS Service Quality Management Simulation ***************************************************************************** FIRM 5: ?????????????????????????????????????????????????? INDUSTRY RNB 1 P&L STATEMENT, SERVICE 5 QUARTER 6 PAGE 6 - ***************************************************************************** All Regions Region 1 Region 2 Region 3 ral) ( North) ( East) (TOTAL ) ( Cent ------------ ------------ ------------ ------------ Active? Yes Yes Yes Sales Volume 61,352 17,995 17,85 0 25,507 Unfilled Orders 0 0 0 0 Price 160 160 160 160 Revenues 9,816,320 2,879,200 2,856,000 4,081,120 Variable Costs 1,472,448 431,880 428,400 612,168 - - Order Processing 613,520 179,950 178,500 255,070 ------------ ------------ ------------ ------------ Gross Margin 7,730,352 2,267,370 2,249,100 3,213,882 Fixed Costs: Administrative O/H 3 00,000 1 00,000 1 00,000 1 00,000 Call Center Service 492,354 139,458 142,560 210,336 Forecast Inaccuracy 62,769 3,245 34,672 24,852 Marketing 1,200,000 400,000 400,000 400,000 Price Changes 0 0 0 0 549,000 400,500 535,500 Service Salaries 1,485,000 Service O/H 1,485,000 549,000 400,500 535,500 Service HFT 144,000 54,000 36,000 54,000 Total Fixed Costs 5,169,123 1,794,703 1,514, 232 1,860,188 ------------ ------------ ------------ ------------ Operating Income 2,561,229 472,667 734,868 1,353,694 ============================================================================= Sales Volume Forecast 17,411 11,661 19,168 Service: CSR Salary $/Month 3,000 3,000 3,000 Service: CSR Hiring&Firing 12 0 0 Service: CSR Exp erienced Hiring 3 6 9 Service: CSR Transfer From Region 1 0 0 0 Service: CSR Transfer From Region 2 0 0 0 Service: CSR Transfer From Region 3 0 0 0 Service: CSR Maximum Capacity Limit 95 95 95 Service: CSR Time Allocation 50 50 50 Service 1 - 1 Configuration: 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.

33 LINKS Service Quality 33 Management Simulation ********** ******************************************************************* AAA FIRM 5: ?????????????????????????????????????????????????? INDUSTRY BALANCE SHEET, QUARTER 6 PAGE 8 ***************************************************************************** ASSETS ------ Cash 1,895,795 Marketable Securities 7,593,318 Facilities and Equipment Investment 50,000,000 Total Ass ets 59,489,113 LIABILITIES AND EQUITIES ------------------------ Corporate Capitalization 50,000,000 Dividends, Current Quarter - 725,938 Dividends, Cumulative Prior To This Quarter 3,340,821 - Loans 0 Retained Earnings, Current Quarter 2,419 ,795 Retained Earnings, Cumulative Prior To This Quarter 11,136,077 Total Liabilities and Equities 59,489,113 ***************************************************************************** 5: ?????????????????????????????????????????????????? INDUSTRY AAA FIRM SERVICE VARIABLE COST REPORT, QUARTER 6 PAGE 8 ***************************************************************************** Service Service 5 1 5 - 2 - ------- ------- Support Service Category 0.00 0.00 CSR Technical Training 0.00 0.00 CSR Service Skills Training 0.00 0.00 Service Appointment Scheduling 0.25 12.50 Scheduling Style 0.00 12.00 Service Call Duration 10.00 5.00 Service Call Format 10.00 20.00 ------- ------- 20.25 49.50

34 34 LINKS Service Quality Management Simulation ***************************************************************************** ASU FIRM 5: ?????????????????????????????????????????????????? INDUSTRY OPERATIONS REPORT, QUARTER 6 PAGE 9 SERVICE ***************************************************************************** All Region Region Region 3 Regions 1 2 ------- ------- ------- ------- =============== STAFFING REPORT =============== Beginning CSRs 314 136 82 96 - 31 - 15 - 8 - 8 - CSR Resignations - CSR Firing 0 0 + Experienced Hires 18 3 6 9 + CSR Hiring 12 12 + CSR Transfer From R1 0 0 0 + CSR Transfer From R2 0 0 0 + CSR Transfer From R3 0 0 0 CSR Transfer To R1 0 0 0 - - CSR Transfer To R2 0 0 0 CSR Transfer To R3 0 0 0 - = Available CSRs 313 136 80 97 =================== ODUCTIVITY REPORT PR =================== SERVICE 5 - 1 [H217420] Gross CSR Productivity 528.0 528.0 528.0 - - Technical Training - 6.0 - 6.0 6.0 - Service Skills Training - 3.0 - 3.0 - 3.0 - Service Appoint Schedul ing 0.0 0.0 0.0 - - 47.2 - 47.2 - 47.2 Duration and Format Net CSR Productivity 471.8 471.8 471.8 CSRs 124 80 97 Hires Productivity 314.5 Hires 12 Transfer Productivity 393.2 393.2 393.2 Transfers To This Region 0 0 0 Time Allocation 50% 50% 50% Potential CSR Capacity 31,139 18,872 22,883 CSR Maximum Capacit y Limit 95% 95% 95% Actual CSR Capacity 29,582 17,928 21,738 - 2 [M53 7 SERVICE 5 111] Gross CSR Productivity 528.0 528.0 528.0 - Technical Training - 15.0 - 15.0 - 15.0 - Service Skills Training - 9.0 - 9.0 - 9.0 - Service Appoint Scheduling 0.0 0.0 0.0 - Duration and Format - - 126.0 - 126.0 126.0 Net CSR Productivity 378.0 378.0 378.0 CSRs 124 80 97 Hires Produc tivity 252.0 Hires 12 Transfer Productivity 315.0 315.0 315.0 Transfers To This Region 0 0 0 Time Allocation 50% 50% 50% 24,947 15,119 18,332 Potential CSR Capacity CSR Maximum Capacity Limit 95% 95% 95% Actual CSR Capacity 23,699 14,363 17,415

35 LINKS Service Quality 35 Management Simulation ***************************************************************************** ?????????????????????? INDUSTRY FIRM 5: ???????????????????????????? ASU SERVICE OPERATIONS REPORT, QUARTER 6 PAGE 10 ***************************************************************************** =============== ACTIVITY REPORT =============== RVICE 5 - 1 SE Service Calls 58,850 23,808 13,304 21,738 CSR Capacity 72,894 31,139 18,872 22,883 CSR Utilization [Q# 6] % 71 % 9 0% 76 CSR Utilization [Q# 5] 74% 70% 91% CSR Cost/Call 5 0.31 53.68 56.83 42.64 CSR Turnover 10 % 10 % 8 % - 2 SERVICE 5 Service Calls 34,698 15,370 8,120 11,208 CSR Capacity 58,398 24,947 15,119 18,332 CSR Utilization [Q# 6] 62 % 54 % 61 % CSR Utilization [Q# 5] 60% 50% 58% CSR Cost/Call 85.34 83.15 93.10 82.71 CSR Turnover % 12 % 10 % 8

36 36 LINKS Service Quality Management Simulation ***************************************************************************** 5 INDUSTRY AAA FIRM : AAA Support Services 6 PAGE 11 SERVICE CENTER STATISTICS REPORT, QUARTER 1 ***************************************************************************** All Region Region Region Regions 1 2 3 ------- ------- ------- ------- SERVICE 1 1 - ----------- Billings 3,743 1,381 836 1,526 1,172 845 1,755 Design Configuration 3,772 Design Quality 16,351 5,588 3,388 7,375 - Time Usage 8,823 2,903 2,081 3,839 First Introduction 0 0 0 0 Miscellaneous 7,708 2,859 1,584 3,265 Service Call Duration 3,547 1,142 766 1,639 Service Experience 8,414 1,978 3,078 3,358 Service Scheduling 31,840 11,166 7,596 13,078 Unfilled Orders 832 0 636 196 SERVICE 1 2 - ----------- 2,587 1,156 841 590 Billings Design Configuration 2,422 1,075 845 502 Design Quality 9,378 4,432 3,114 1,832 First - Time Usage 5,758 2,623 2,008 1,127 Introduction 0 0 0 0 Mi scellaneous 5,705 2,485 1,966 1,254 Service Call Duration 1,247 603 401 243 Service Experience 6,929 2,157 3,034 1,738 Service Scheduling 8,905 4,163 2,906 1,836 Unfilled Orders 601 425 176 0 ALL SERVICES ------------ Billings 6,330 2,537 1,677 2,116 Design Configuration 6,194 2,247 1,690 2,257 Design Quality 25,729 10,020 6,502 9,207 First - Time Usage 14,581 5,526 4,089 4,966 Introduction 0 0 0 0 Miscellaneous 13,413 5,344 3,550 4,519 Service Call Duration 4,794 1,745 1,167 1,882 Service Experience 15,343 4,135 6,112 5,096 Service Scheduling 40, 745 15,329 10,502 14,914 Unfilled Orders 1,433 425 812 196 ... Total ... 128,562

37 LINKS Service Quality 37 Management Simulation ***************************************************************************** INDUSTRY FIRM 5: ?????????????????????????????????????????????????? ABC 6 PAGE 13 1 FORECASTING ACCURACY REPORT, QUARTER ***************************************************************************** Region Forecast Actual Accuracy ------ ---------- ---------- -------- Service 5 - 1 1 17,421 23,808 73.2% Service 5 - 1 2 11,784 13,304 88.6% - 1 3 19,114 21,738 87.9% Service 5 Service 5 2 1 13,870 15,370 90.2% - Service 5 - 2 2 9,765 8,120 79.7% Service 5 - 2 3 6,747 11,208 60.2% SUMMARY: For 6 forecasts, average forecasting accuracy is 80.0% Note: Forecasts count within the calculation of forecasting accuracy only if the "actual" value being forecast is greater than 100 f or 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 - - line reporting of forecasts. by ------------- Quarter Quarter Quarter Quarter Quarter Quarter SALES HISTORY 1 1 2 1 3 1 4 1 5 1 6 1 ------------- -------- -------- -------- -------- -------- -------- REGION 1 Service 5 1H 17,421 20,665 19,287 22,765 20,485 23,808 - Service 5 - 20,416 15,370 2M 13,870 14,881 18,138 12,513 REGION 2 Service 5 - 1H 11,784 14,578 13,246 13,821 18,175 13,304 - 2M 9,765 12,149 12,017 11,333 14,365 8,120 Service 5 REGION 3 Service 5 - 1H 19,114 20,393 15,856 19,628 21,514 21,738 Service 5 - 2M 6,747 6,994 8,817 8,399 8,881 11,208

38 38 LINKS Service Quality Management Simulation Research Studies Marston Bates "Research is the process of going up alleys to see if they ar - e blind." LINKS Service Quality This chapter describes the research studies that are available in the Management 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 dies in “real” industries. However, there's no reason to believe that every one of research stu 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 co sts. 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 appr opriate. Thus, - completed quarter's experience. research studies reports always reflect the just An overview of the available LINKS research study resources is provided in Exhibit 5. Exhibit 5: Overview of LINKS Research Studies Research Study # Cost Limit 1 Benchmarking - $500 Earnings 8 Benchmarking - Service (CSR Usage) $5,000 9 - Marketing $5,000 Benchmarking $2,500 12 Market Statistics Employee Sat isfaction 13 $15,000 14 Regional Summary Analysis $5,000 per region 18 Experience Quality Perceptions $10,000 20 $10,000 Customer Satisfaction 24 Price Sensitivity Analysis $20,000 per service per region 4 38 Retention Statistics $10,000 In th inking 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 compo nent of

39 LINKS Service Quality 39 Management Simulation making process. Do not relegate your research studies pre - ordering your LINKS decision - decisions to the last five minutes of team meetings. Rather, treat research studies ordering - g process. decisions as a fundamental part of your whole LINKS decision makin Plan ahead. To identify patterns and trends, you will probably need to order some research  or - less regular basis. A formal research studies plan should be a part of studies on a more - your management planning process. Systematize the post - analy sis of research studies. This might involve, for example, the  continual updating of databases, charts, or graphs to reformat the raw LINKS research studies results into more meaningful and useful forms. Share insights derived from particular research stud  ies 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 everyth ing. In the following research study descriptions, sample output illustrates style and formatting of These samples are only for illustrative purposes. research study output. The output should not be viewed as providing any specific insight into your par ticular support services industry. - Earnings Research Study #1: Benchmarking Sample Output : This research study provides Purpose ======================================================================= - Earnings ) RESEARCH STUDY # 1 (Benchmarking earnings benchmarks for your industry. The ======================================================================= - quarter - to earnings, cumulative - date current Current Cumulative Current earnings, and current - quarter dividends of Net Income Net Income Dividends --------- -- ----------- ----------- each firm in your industry are reported. In Firm 1 2,974,292 5,788,265 892,287 Firm 2 3,472,461 6,234,171 1,041,738 ... addition, a variety of financial market Financial Market Statistics [stock price, shares outstanding (millions), statistics are reported. earnings per share, dividends p er share, market capitalization ($millions)] ------ ------ ------ ------ Firm 1 Firm 2 Firm 3 Firm 4 ------ ------ ------ ------ : These data are Information Source StockPrice 120.00 131.80 117.63 123.96 0M 2.0M 2.0M Shares 2.0M 2. based on public information. EPS 1.49 1.74 1.44 1.57 DPS .45 .52 .43 .47 MarketCap 240M 264M 235M 248M $500. : Cost Research Study #8: Benchmarking Service (CSR Usage) - Sample Output : This research study provides Purpose service benchmarks in the forms of CSR ======================================================================= RESEARCH STUDY # 8 (Benchmarking - Service (CSR Usage) ) the last usage rates (utilization) for each of ======================================================================= four quarters are reported by service and Quarter 93 Quarter 94 Quarter 95 Quarter 96 ----------- ----------- ----------- ----------- region. -------- REGION 1 -------- 1H 61 70 80 73 Service 1 - : This research study Information Source - e 1 Servic 2M 51 56 65 62 - Service 2 2M 66 71 67 69 is based on information sharing and pooling ... agreements administered by the Support Services Industry Trade Association. : $5,000. Cost

40 40 LINKS Service Quality Management Simulation - Marketing Research Study #9: Benchmarking Sample Output : This research study provides Purpose marketing benchmarks for your industry. ================= ====================================================== RESEARCH STUDY # 9 (Benchmarking – Marketing ) Price and marketing statistics (minimum, ======================================================================= average, and maximum) for each service ter 57 Quarter 58 Quarter 55 Quarter 56 Quar ----------- ----------- ----------- ----------- category and market region are provided for ----------- each of the last four quarters. HOUSEHOLD REGION 1 min/ave/max ----------- Price [$] 435 520 657 431 554 689 437 542 662 429 542 662 : This research study Information Source Mktg [$K] 100 161 300 0 183 300 0 157 300 0 181 326 is based on information sharing and pooling ----------- agreements administered by the Support MAJORACC REGION 1 Services Industry Trade Association. min/ave/max ----------- Price [$] 465 515 603 477 573 692 489 594 687 579 676 839 Mktg [$K] 100 130 200 94 138 200 100 149 200 100 157 218 : $5,000. Cost Research Study #12: Market Statisti cs George Santayana "Those who cannot remember the past are condemned to repeat it." - Sample Output : This research study provides a Purpose ========================== ============================================= RESEARCH STUDY #12 (Market Statistics ) ariety of market statistics for the last four v ======================================================================= quarters: Quarter 11 Quarter 12 Quarter 13 Q uarter 14 ----------- ----------- ----------- ----------- (final demand Industry  customer -------- ------- purchases) and unfilled orders are INDUSTRY DEMAND -------- ------- Region 1: reported for Household and Major Household Demand 60,231 59,075 59,244 59,165 0 0 0 Household Unfilled 0 Accounts service categories. MajorAcc Demand 29,940 31,385 31,145 30,422 MajorAcc Unfilled 0 0 0 0 Overall market shares  for each firm are Region 2: 136 22,930 Household Demand 21,988 23,306 23, provided fo r each of the last four ... ... quarters. These market shares are --------------------- OVERALL MARKET SHARES user customer purchase based on end - --------------------- Firm 1 18.0 26.6 25.3 20.7 volumes. Firm 2 19.5 17.4 18.8 17.9 19.9 19.1 17.6 20.0 Firm 3 Firm 4 21.7 19.8 19.7 19.6 Firm 5 20.9 17.1 18.6 21.8 Information Source : This research study is compiled by your research vendor using a variety of sources. : $2,500. Cost

41 LINKS Service Quality 41 Management Simulation Research Study #13: Employee Satisfaction Sample Output Purpose : This research study provides employee satisfaction estimates of all firms’ ===================================== ================================== RESEARCH STUDY #13 (Employee Satisfaction ) services in all regio ns for the last four ======================================================================= quarters - based on results of an industry Quarter 33 Quarter 34 Quarter 35 Quarter 36 ----------- ----------- ----------- ----------- wide CSR employee satisfaction survey -------- conducted by the Support Services Industry REGION 1 -------- 1H 23.0 18.8 27.2 25.8 - Service 1 Trade Association. Service 3 1H 16.0 22.8 26.8 23.4 - Se rvice 4 2M 25.2 27.2 29.3 20.0 - - Service 5 1H 31.5 29.5 29.9 21.9 ... Information Source : Employee satisfaction is estimated via a regular, quarterly industry - wid e CSR employee 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. : $15,000. Cost Research Study #14: Regional Summary Analysis "If you torture the data long enough, it will confess." – Anonymous Purpose : This research stud y provides a regional summary analysis for each specified market quarter market shares, prices, and perceptions of design quality (service - region, including current - actively design quality), experience quality (service operations quality), and accessibility of all marketing support services. Sample Output "Design Quality" (service design quality) ======================================================================= is perceived service offering design RESEARCH STUDY #14 (Regional Summary Analysis ) ======= ================================================================ quality which follows from the service’s ─ REGION 2 ┌ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ┐ configuration. │ Volume │ Market Share │ Price │ HOUSEHOLD DQ │ EQ │ Ac │ ┤ ─ ─ ─ ─ ┼ ┌ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ █ │ 46+ │ 1 - 1 │ 17,092 │ 17.8 - █ █ █ █ █ █ █ █ █ █ █ █ █ │ 220 │ 2 │ 71+ │ Quality"  "Experience (service 2 - 1* │ 28,135 │ 29.4+ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ │ 225 │ 26+ │ 77+ │ 40+ │ │ 212 │ 3 - 1 │ 15,938 │ 16.6 - █ █ █ █ █ █ █ █ █ █ █ █ █ █ │ │ 2 │ 72+ │ 38 - │ operations quality) reflects customers' │ 4 - 1u │ 11,673 │ 12.2 - ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ │ 210 │ 2 │ 68+ │ 44+ │ ▒ │ 5 - 1 │ 15,855 │ 16.6 █ █ █ █ █ █ █ █ █ █ █ █ █ │ 215 │ 2 │ 77+ │ 31 │ perceptions of the service operations │ 6 - 1* │ 7,082 │ 7.4 ▒ ▒ ▒ ▒ ▒ ▒ │ 230 │ 2 │ 27 - │ 30 - │ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ─ ┘ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ┴ └ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ quality associated with their support ─ REGION 2 ┌ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ┐ service experience. Service quality │ │ Volume │ Market Share │ Price MAJORACC DQ │ EQ │ Ac │ ─ ┌ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ┤ derives from experiences with each 1 - 2r │ 8,956 │ 9.4 - █ █ █ █ │ █ █ │ 330 │ 3 │ 72+ │ 43+ │ █ │ 2 - 2u │ 5,821 │ 6.1 - ▒ ▒ ▒ ▒ ▒ │ 299 - │ 3 │ 74+ │ 29 - │ █ 330 │ █ █ █ █ █ █ █ █ █ █ │ 46+ │ 71+ │ 12+ │ │ 3 - 2r │ 27,839 │ 29.1+ █ █ █ █ █ █ █ █ █ █ █ firm's CSRs. High utilization levels of ▒ │ 4 - 2* │ 30,483 │ 31.9+ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ ▒ │ 380+ │ 68+ │ 66+ │ 30 - │ │ │ 5 - 2r │ 10,828 │ 11.3 - █ █ █ █ █ █ █ █ █ │ 330 │ 3 │ 74+ │ 41 CSRs presumably leads to lower 470 │ - 27 │ 96 │ │ ▒ ▒ ▒ ▒ │ - 31 │ 6 - 2u │ 11,781 │ 12.3 - ▒ ▒ ▒ ▒ ▒ ┴ ─ ┘ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ┴ └ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ service levels, since customers must queue for service and be served by Notes: (1) "Volume" is sales volume in units. - CSRs. worked over (2) Other variables listed above are market share, customer price ("Price"), ty ("DQ"), perceived experience erceived design quali p "Accessibility" is perceived service  and perceived accessibility ("Ac"). quality ("EQ"), (3) Ch anges of more than 2%, $20, 2%, 2%, and 2%, respectively, in these variables from the previous quarter are flagged with "+" (increase) accessibility, reflecting customers' " (decrease) signals after the numerical values. and " - service# denotes a reconfigured serv - (4) "r" after a firm# ice this quarter. - of - top of perceptions mind - service# denotes a service with unfilled orders. (5) "u" after a firm# (6) "*" after a firm# service# denotes a reconfigured service that has - awareness, inaccessibility due to unfilled orders. unfilled orders, ease of access, purchase convenience, and general market place. presence/prominence in the

42 42 LINKS Service Quality Management Simulation 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 point "poor" - “fair” - ”good” - "excellent" rating scale. accessibility as "excellent" on a 4 - : $5,000 per region. Cost Research Study #18: Experience Quality Perceptions Purpose : This research study provides the experience quality perc eptions of all services in the three quarters. This research Household and Major Accounts categories in all regions for the last study plots current - - quarter's CSR usage quarter experience quality perception against last 3 quarters for all services in your industry. the last Charts three (utilization) rates using data from are provided for the Household and Major Accounts support service categories in each region. "Experience Quality" is perceived service operations qual ity 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 operat ions 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 agr eements 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. 3 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 For example, in Quarter #10: perceptions are plotted - quarter service capacity usage rate. inst last aga  The first of the three quarter’s of available historical data are Q#10 experience quality perceptions vs. Q#9 service capacity usage rates.  The second of the three quarter’s of av ailable historical data are Q#9 experience quality perceptions vs. Q#8 service capacity usage rates.  The third of the three quarter’s of available historical data are Q#8 experience quality perceptions vs. Q#7 service capacity usage rates.

43 LINKS Service Quality 43 Management Simulation Sample Output : =============================================== ======================== RESEARCH STUDY #18 (Experience Quality Perceptions ) ======================================================================= Quarter 14 Quarter 15 Quarter 1 6 Quarter 17 ----------- ----------- ----------- ----------- -------- REGION 1 -------- - 1H 50.2 47.4 55.2 13.0 Service 1 - 35.9 13.0 Service 1 2M 43.9 44.6 - Service 2 1H 61.1 54.1 42.9 38.3 Service 2 - 2M 47.7 40.5 40.0 42.5 - Service 3 1H 36.2 9.9 10.2 9.0 Service 3 - 2M 36.6 20.0 26.5 36.6 ┌ ─ ─ ─ ─ ─ ─ ─ ─ ─ -------- ─ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┐ ┬ REGION 1 . . . . . │ │ . . . . . │ -------- │ │ . . . . . │ ├ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ┤ 80 │ . . . . . │ │ . . . . . │ │ │ HOUSEHOLD . . 1. . . ┤ ├ Perceived 60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 . . │ Experience │ │ │ Quality . . 1 .1 1 . . │ . . . 2 . . │ (%), This ├ . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . ┤ Quarter 40 [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 quarte rs 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 "*".

44 44 LINKS Service Quality Management Simulation Research Study #20: Customer Satisfaction Sample Output : This research study provides Purp ose customer satisfaction estimates of all ======================================================================= RESEARCH STUDY #20 (Customer Satisfaction ) services in the Household and Major ======================== =============================================== Accounts categories in all regions for the Quarter 33 Quarter 34 Quarter 35 Quarter 36 ----------- ----------- ----------- ----------- last four quarters. -------- REGION 1 -------- 1H 23.0 18.8 - Service 1 27.2 25.8 Information : Customer Source Service 3 - 1H 16.0 22.8 26.8 23.4 2M 25.2 27.2 29.3 20.0 - Service 4 satisfaction is based on a customer survey. Service 5 - 1H 31.5 29.5 29.9 21.9 ... Custome r satisfaction is the percentage of survey respondents rating their overall point "poor" - satisfaction with a support service as "excellent" on a 4 - "excellent" rating - “fair” - “good” scale. : $10,000. Cost Research Study #24: Price Sensitivity Analysis Arthur C. Clarke – "Any sufficiently advanced technology is indistinguishable from magic." Purpose : This research study provides a Case Study: Amazon.com price sensitivity analysis for a specific support pecific region (or all regions). service in a s Amazon.com has been charging customers different prices for the same products. For : This research study is Information Source example, the company has charged some users $23.97 and others $25.97 for a DVD version of based on surveys of customers, using "Men in Black." Patty Smith, an Amazon advanced marketing research techniques. , said the different prices were spokeswoman part of a test Amazon is conducting "to measure Study Details : These price sensitivity what impacts a decision to purchase or not to analyses isolate the impact of price on market purchase." Ms. Smith said Amazon test share, while holding other market share customers are selected randomly and the prices drivers constant (design quality, experience they receive aren't based on any other quality, and accessibility perceptions). acteristics. char Nine price levels are used in this research Source: "Amazon.com Varies Price of Identical Items For specified price input, - study. With no user (September 7, 2000) The Wall Street Journal Test," these price levels are automatically centered the current price (the “Reference around Price”) of the service in each region for which 40%, - - this research study is executed. Values of 30%, - 20%, - 10%, 0% (i.e., current price), +10%, +20%, 30%, and +40%, relative to the service's “Reference Price,” are used . its If price is default value (0), then Research Study #24 is executed with the existing left at - service centered around the current price of the specified service. Otherwise, the user specified price (with the specified price being the “Reference Pric e”) is used. Market share predictions are provided for all tested prices in Research Study #24. R esearch s tudy output includes market share and gross margin estimates in research study requests . Cost : $20,000 per price sensitivity analysis (per service per region). If you execute this research

45 LINKS Service Quality 45 Management Simulation region LINKS environment, the total cost would be $60,000. study for regions in a 3 - : Sample Output - 1H PREDICTED GROSS MARGINS IN REGION 8 [HOUSEHOLD] SERVICE 9 Reference Price: 18 5 ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ─ ─ ┬ ─ ─ ─ ─ ┌ ─ ┬ ─ ─ ─ ─ ─ ─ ┐ ─ ─ Price $ 111 │ $ 130 │ $ 148 │ $ 167 │ $ 185 │ $ 203 │ $ 222 │ $ 240 │ $ 259 │ │ │ │ │ │ $ 65 │ $ 65 │ $ 65 │ $ 65 Cost $ 65 │ $ 65 │ $ 65 │ $ 65 │ │ $ 65 $ 137 Margin │ $ 64 │ $ 82 │ $ 101 │ $ 119 │ $ 45 │ $ 156 │ $ 174 │ $ 193 │ │ │ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ├ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┤ ─ │ │ 61,320 │ 47,178 │ 37,327 │ 29,233 │ 23,308 │ 18,701 │ 14,935 │ 12,305 │ 10,138 │ Sales Volume │ Market Share 94.7% │ 72.9% │ 57.7% │ 45.2% │ 36.0% 28.9% │ 23.1% │ 19.0% │ 15.7% │ │ │ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ├ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┤ ─ │ │ - 62.2% │ - 46.2% │ - 31.1% │ - 15.1% │ Margin Chang │ 15.1% │ 31.1% │ 46.2% │ 62.2% │ 0.0% │ 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 $0 00s) │ │ │ │ │ │ │ │ │ │ │ ─ ─ ─ ─ ├ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┤ ─ │ │ 4,470 │ 3,439 │ 2,721 │ 2,131 │ 1,699 │ 1,363 │ 1,088 │ 897 │ Service Cost │ 739 │ (in $000s) │ │ │ │ │ │ │ │ │ │ ├ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┼ ─ ─ ─ ─ ─ ─ ┤ │ │ - 1,711 │ - 420 │ 339 │ 821 │ 1,074 │ 1,199 │ 1,241 │ 1,244 │ 1,217 │ Adjusted │ Gross Margin │ │ │ │ ─ ─ ─ ─ ─ ─ ┤ │ │ │ │ ├ │ (in $000s) │ │ │ │ │ │ │ │ │ │ └ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ┘ └ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ┴ ─ ─ ─ ─ ─ ─ ┘ In estimating "Service Cost," it is assumed that the current cost - - call per 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 p rices included in this price sensitivity - per - call for service 1 in analysis. For your reference, the current cost 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. ese estimated per - Th 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 pric e 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 itivity Analysis. In addition, it this region across any of the price levels tested in this Price Sens 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 i nappropriate, the Adjusted Gross Margin estimates are provided at the bottom of the price sensitivity analysis results. 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.

46 46 LINKS Service Quality Management Simulation : These market share predictions and subsequent estimates of gross Additional Information 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. run estimates of market - The reported market shares in Research Study #24 are long - shares if you continue with all of your current customer facing initiatives (configurations, ey are now and so do competitors. Market marketing spending, service levels, etc.) as th 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). Research Study #38: Retention Statistics Sample Output : This research study provides pose Pur retention rates for all actively marketed ====================================================================== ) RESEARCH STUDY #38 (Retention Statistics services in all markets for the last four ====================================================================== quarters. Quarter 13 Quarter 14 Quarter 15 Quarter 16 ---------- ---------- ---------- ---------- -------- REGION 1 Information Source : Retention rates are ------ -- 1H 60.2 58.3 58.1 58.0 - Service 1 estimated based on a customer survey of - 2M 39.6 40.5 39.4 38.9 Service 1 Service 2 - 1H 60.5 58.2 60.2 60.7 current purchaser s of support services. 41.1 41.3 40.3 2M 41.4 - Service 2 - 1H 59.0 60.0 61.4 57.9 Service 3 Retention rates are customers’ stated Service 3 2M 39.1 38.8 39.0 41.0 - - 1H 58.0 61.3 58.6 60.5 Service 4 intentions of probability of future purchase of ... the just - purchased support service. Cost : $10,000. - Other Comments : Retention rates are measure s of long - run average customer loyalty to a just purchased support service. They are estimates of the average current purchaser’s stated intention of probability of repeat purchase.

47 LINKS Service Quality 47 Management Simulation Decision Forms "The secret of getting ahead is getting started. The secret of getting arted is breaking your complex, overwhelming tasks into small st manageable tasks, and then starting on the first one." – Mark Twain Use the LINKS decision forms on the following three pages during your team deliberations to record your decisions in each mo nth of the LINKS Marketing Tactics Simulation. Then, input - server. these decisions into LINKS via the LINKS web With the exception of research studies orders (which must be made every month), all LINKS decisions are standing orders. (i.e., permanent unti l explicitly changed). You only need to enter decision changes. If you are satisfied with a current decision, there is no need to change it. You are responsible for your own LINKS input. Here's advice from a past participant: "Never ask just one perso n to input the data. The volume of input data is so extensive that even the most dependable individual will make mistakes. Our team president was responsible for data entry, but we always had one additional person verify the inputs. Even with this verif ication process, we still made input errors."

48 48 LINKS Service Quality Management Simulation Quarter Firm Service Operations Decisions Service Operations Decisions Region 2 Region 1 Region 3 CSR Salary $/Month - ) CSR Hiring (+) and Firing ( CSR Experienced Hiring CSR Transfer From Region 1 CSR Transfer From Region 2 CSR Transfer From Region 3 CSR Maximum Capacity Limit CSR Time Allocations Region 2 Region 3 Region 1 Service 1 Service 2 Total 100% 10 100% 0% 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 fo - out prior hiring/firing and transfer decisions if you don't wish them rget to zero 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).

49 LINKS Service Quality Management Simulation 49 Quarter m Fir Marketing and Forecasting Decisions Service 1 Region 1 Region 2 Region 3 Yes │ Active Service? { } No Price Marketing Spending Sales Volume Forecast Service 2 Region 1 Region 2 Region 3 Active Service? { Yes No } │ Price Marketing Spending me Forecast Sales Volu 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).

50 50 LINKS Service Quality Management Simulation Firm Quarter Research Studies Decisions Benchmarking - Earnings 1 Benchmarking Service (CSR Usage) 8 - Benchmarking Marketing - 9 Market Statistics 12 Employee Satisfact ion 13 Region(s)? Regional Summary Analysis 14 Experience Quality Perceptions 18 20 Customer Satisfaction Configuration? Price? Service? Region? Price 24 Sensitivity Service? Region? Configuration? Price? Analysis Service? Configurati on? Price? Region? Configuration? Service? Price? Region? Retention Statistics 38 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 desi gnated space(s). When region numbers are required, enter a single region number. Use region "0" as a (2) designation to run a research study for all regions. See the research study descriptions for - region costs. details about the associated multi 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.

51 LINKS Service Quality Management Simulation 51 Performance Evaluation "If you're riding ahead of the herd, take a look back every now – Cowboy philosophy and then to make sure it's still there." Profitability measures obviously matter in assessing the long - run performance of a business. However, "other th ings" are leading indicators of future profitability and root causes of profitability. As you’ll note from the details that follow, current performance and change in performance are - dimensional performance evaluation scorecar d. considered in the LINKS multi 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 su pport services industry submits their raw data to the Support Services Industry Trade Association, which provides your firm's scorecard every quarter. - measure. These The LINKS scorecard is based on a ranking of performance on each sub - rank ons across all competing firms within your industry avoid the undue order comparis - influence of particularly extreme values of individual sub measures. This LINKS scorecard is a within - industry performance evaluation system. Comparisons across industries are problemati c 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 e other firms' ratios, your firm receives firm's ratio of "Net Profits" to "Revenues" is better than thre - performing firm on "Net Income" to "Revenues" ratio in a 6 - firm 9 points. (Of course, the top industry would receive 15 points.) In general, the maximum available points on any sub - measure - 1) where "W" i are W*(N - measure's weight and "N" is the number of firms in the industry. s the sub 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 per formance sub - measures in the LINKS scorecard, minor differences in the sub - measures 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 exa mple, 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 scorecar d 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 hi storical archives, to create quarter - by - quarter 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 t hese ranges is identified.

52 52 LINKS Service Quality Management Simulation Exhibit 6: LINKS Scorecard Measures W eight Sub - Measures Financial Sub - Measure Details Current profitability is the best overall signal of business 3 Ratio of Net Income to performance, hence its high weight. Firms are "tied" if their Revenues scores are within 0.2% of each ot her. Improvement in profitability is important but less important Change in Ratio of Net 1 than current profitability. Firms are "tied" if their scores are Income to Revenues within 0.2% of each other. Weight Measures Op Sub - erational - Measure Details Sub The percentage of orders that are filled. "Unfilled orders" 1 Fill Rate occur when available capacity is less than orders in a quarter. hin 0.5% of each other. Firms are "tied" if their scores are wit Forecasting accuracy is a relatively pure signal of 2 Forecasting Accuracy management skill and expertise (in this case, in the area of understanding customers and customer demand generating forces). Fir ms are "tied" if their scores are within 0.5% of each other. Equal to the ratio of within - quarter CSR resignations to CSR CSR Turnover - 1 staff size at the beginning of a quarter. Firms are “tied” if their h other. scores are within 0.10 of eac Equal to service spending (of all kinds) divided by total service CSR Cost/Call - 1 center calls. Lower CSR cost/call is desirable. Firms are "tied" if their scores are within 0.20 of each other. Weight Mea - Sub sures Customer - Measure Details Sub Change in market share is an overall measure of customer 1 Change in Market Share reaction to the firm's offerings. Firms are "tied" if their scores are within 0.1% of each other. Customer satisfaction measures the overall performance of Customer Satisfaction 2 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 beh avior 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. 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.

53 LINKS Service Quality Management Simulation 53 Firm Management and Advice – Marva Collins "Success doesn't come to you. You go to it." Planning , how are plans Planning occurs throughout LINKS. Your decisions are your plans. B ut developed? And, 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 imple evaluation sequence iterates through time as the results of your plans are mentation - revealed in the market place (and in your financial and operating statements). The essence of planning involves answering these questions (and in this order): What is happening? (1) How are we doing? How and what are "they" (our major competitors) doing? (2) 3 What factors are important for success? ( ) (4 What are we going to do? Why? With what effect? At what cost? ) (5 Who - specifically ) is to do what to make the pl an work? - Team Management and Organization You are a member of a team in LINKS. Managing your team to obtain th e best efforts of all team members is a continuing management challenge. Your most limited resource within LINKS is your team's available time. Well - performing teams  hink carefully abou t inevitably manage their management time carefully and thoughtfully. T how to allocate your management time to necessary tasks that exist within LINKS. As you gain experience with LINKS, it may well appear that a review is needed of an earlier  ement time. group decision about how to allocate tasks, responsibilities, and available manag 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. - performing teams in simulations (and in real life!) There are predictable signals of well . Pamela Van Rees (Boston University MBA student), provided the following list of characteristics of well - functioning 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 f  eel comfortable, spontaneous, respected, supported, and listened to.  Feedback is given freely and directly.  Disagreements are tactfully stated without being offensive.  Differences and misunderstandin gs 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.  At any given time in a group meetin g, each firm member is either engaged in holding the

54 54 LINKS Service Quality Management Simulation 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. team performance are a comb : sim ination of the following ulation The principal causes of poor (1) - supply management; uncoordinated demand (2) lack of focus (capacity, reconfiguration, time, and human resource constraints combine to ons); favor concentrated effort in fewer than "all" market regi ) limited research and/or limited efforts to interpret the research studies that are available; (3 (4 - depth competitor analysis to ) limited attention to competitive developments (i.e., lack of in discover the underlying drivers of market behavior); ) (5 financial mismanagement related to cost structure management (variable and fixed costs management, covering corporate wide overheads, etc.), and capacity management; - ) pant's manual (6 not understanding the simulation's structure/environment (i.e., treating the partici in a cursory, fashion rather than something to be studied and referenced regularly); (7 poor work ethic (not spending enough time on the simulation); and, ) team mismanagement (not spending enough time thinking about and discussing team ) (8 nagement issues and related human resource deployment strategies and tactics). ma - Gaming Strategies and Tactics End Should you do anything special ” 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. anage your firm to improve its Always m ime. You don't have to get it perfect (i.e., achieve "optimal" profits, whatever profitability through t 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 t hat time extends to and beyond the actual end of your particular LINKS exercise. General Advice Based on extensive observations of the performance of thousands of past LINKS partic ipants, - advice nuggets are of well - proven value: these general suggestions and summary  Read and re - read this LINKS participant's manual (there's lots of good stuff in it). relate  Regularly think about general business and management principles and how they might to and work within LINKS.  You don't have to know everything about the LINKS support services industry at the beginning of the exercise, but you must consistently increase your knowledge - base through time.  ... work hard at sharing your use ful fact - based analyses and important insights "Share toys" with all members of your LINKS team).  Get the facts and base your decisions on the facts, not on wishes, hopes, and dreams.  Coordinate demand and supply by continually striving to see the whole demand - chain and supply chain within the LINKS support services industry. Don't focus myopically on a single - part of the LINKS demand - chain without regard for how it relates to, and is influenced by, other LINKS parts and to the "whole" of LINKS.  Remember the Ferengi proverb (for Star Trek fans): "There is no honor in volume without profit." Volume, sales, and market share is easy to obtain, if there are no constraints on profitability. Profitable volume is the "holy grail" in business and in LINKS.

55 LINKS Service Quality Management Simulation 55 Based LINKS Access Appendix: Web - LINKS has n o software to download/upload/install. Point your favorite web browser at the LINKS Simulations website to interact with LINKS simulati http://www.LINKS - ons.com - sensitive passcode. and then access the LINKS Simulation Database using your firm’s case You'll be e - mailed your LINKS firm's passcode just before your LINKS event begins. - mail to communicate with all LINKS participants. Please ens ure that your LINKS uses e - preferred e - mail messages from domains ending with: mail software is configured to receive e - - simulations.info @ChapmanRG.com @LINKS simulations.com @LINKS that your e - Your may wish to consult your personal information technology advisor to ensure - mail from these domains. mail software is configured appropriately to receive LINKS e While the LINKS Simulation Database works with all web browsers, Microsoft’s Internet Explorer is recommended. - enable d browser. LINKS website access requires a Java 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 aft er 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 D atabase 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 ser ver 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 NKS round for ordering research studies. Otherwise, research studies will be each LI 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 input s. 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 S Simulation Database. screen in the LINK 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.

56 56 LINKS Service Quality Management Simulation 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 firm’s current decision inputs for potential problems and inconsistenc ies. This LINKS Simulation Database audit function is not an audit of the individual quality of each decision input (e.g., there’s no attempt to assess whether a price of $345 is good or bad). But, possible problems are flagged for attention. For exampl e, forecasts that haven’t 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 ” to previously accessed web pages in browser history files. If you access LINKS results “tracks - 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 Explorer’s browser history (cache): 1. Exit/close Internet Explorer after accessi ng your LINKS results file. 2. Re - start Internet Explorer. a. Click on “Tools” and then “Internet Options.” - section. Check b. On the “Internet Options” screen, look for the “Browsing History” sub “Delete browsing history on exit” (it may already be checked). Click c. - section. the “Delete” button in the “Browsing History” sub 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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