The location focus for service firms should be on determining the volume of Customers and Revenue. The major determinants of the volume of Customers and Revenue are:

(A) Service and image compatibility with demographics of the customer drawing area.
(B) Proximity to raw materials and suppliers.
(C) Quality of the competition.
(D) Uniqueness of the firm’s and competitor’s location.
(E) Operating Policies of the competitor.

Choose the correct answer from the options given below:

Correct option is C

For service firms, choosing the right location is critical to attract a high volume of customers and maximize revenue. The factors that influence this include:

1. (A) Service and image compatibility with demographics of the customer drawing area:

   • The target audience’s preferences, income levels, and lifestyle influence whether they will visit a service location.

   • Example: A luxury spa will perform better in a high-income area compared to a low-income neighborhood.

2. (C) Quality of the competition:

   • The presence of strong competitors can affect the volume of customers and revenue.

   • Businesses located near high-quality competitors may need to offer better service or pricing to attract customers.

3. (D) Uniqueness of the firm’s and competitor’s location:

   • A unique location, such as a prime commercial area or a tourist hotspot, can attract more customers.

   • If a competitor is located in an easily accessible area, a service firm may need to strategically choose a distinct and convenient location to differentiate itself.

These three factors are key determinants of customer volume and revenue for service firms.

Information Booster:

1. Demographics and service compatibility ensure the business aligns with customer expectations.

2. Competition quality influences customer choices; high competition can push businesses to improve services.

3. Location uniqueness plays a role in attracting foot traffic, ensuring visibility and exclusivity.

4. Businesses in high-traffic areas or prime commercial zones tend to have higher revenue potential.

5. Customer convenience, accessibility, and brand positioning significantly impact service firm success.

Additional Knowledge:

1. (B) Proximity to raw materials and suppliers – Incorrect

   • This factor is crucial for manufacturing firms rather than service firms.

   • Service businesses (e.g., restaurants, retail, salons) focus more on customer accessibility than supplier proximity.

2. (E) Operating Policies of the competitor – Incorrect

   • While competitor strategies affect business performance, location decisions are not directly influenced by a competitor’s internal policies.

   • Instead, factors like pricing, customer service, and branding play a bigger role in competitive strategy.