Final answer:
Marketing managers must recognize that higher levels of service typically involve greater costs due to additional resources required for quality service, as well as associated 'menu costs'.
Step-by-step explanation:
Even though most customers desire very good service at a very low price, marketing managers must understand that it usually costs more to provide higher levels of service. The economics behind this involves what are known as 'menu costs' as well as the general principle that quality service often requires additional resources, be it in the form of more skilled labor, better materials, or additional services that enhance the customer experience. These resources naturally increase the costs for the company.
For example, a messenger company that relies on gasoline for delivering packages will experience lower costs and may thus provide more services if the price of gasoline falls. However, improving the overall service quality often involves factors that go beyond just the costs of goods sold, like customer service, speed of delivery, and the like, all of which add to service expenses.