MKTG MGMT – Kotler & Keller – Ch.

6, 7, 8, 11, 12 Chapter 6: Analyzing Consumer Markets  Chapter Questions: o How do consumer characteristics influence buying behavior? o What major psychological processes influence consumer responses to the marketing programs o How do consumers make purchasing decisions? o How do marketers analyze consumer decision making?  What influences Consumer Behavior? (p. 150) o Cultural Factors:  Culture: the fundamental determinant of a person’s wants and behavior.  Through family and other key institutions, a child growing up in the US is exposed to values such as achievement and success, activity, efficiency and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism, and youthfulness.  Subcultures: each culture consists of subcultures that provide more specific identification and socialization for their members.  Includes nationalities, religions, racial groups, and geographic regions. o Social Factors:  Reference groups: all the groups that have a direct (face-to-face) or indirect influence on their attitudes or behavior  Membership groups: groups that have a direct influence  Primary groups: where the person interacts fairly continuously and informally 1. Family, friends, neighbors and coworkers  Secondary Groups: tend to be more formal and require less continuous interaction 1. Religious, professional and trade-union groups  Aspirational Groups: those groups a person hopes to join  Dissociative Groups: those whose values or behavior an individual rejects  Opinion Leader: the person who offers informal advice or information about a specific product or product category 1. Such as which of several brands is best, or how a particular product may be used  Family: the most important consumer buying organization in society, and family members constitute the most influential primary reference group  Family of orientation: consists of parents and siblings

1. From parents a person acquires an orientation toward religion, politics, and economics and a sense of personal ambition, selfworth and love. o Personal Factors: age, life cycle stage, occupation, wealth, personality, values, lifestyle, self-concept  Age and stage in the life cycle: our taste in food, clothes, furniture, and recreation is often related to age  Occupation and economic circumstances: occupation also influences consumption patterns.  Marketers try to identify the occupational groups that have aboveaverage interest in their products and services and can tailor products for certain occupational groups  Personality and self-concept: each person has personality characteristics that influence his or her buying behavior:  Personality: a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli (including buying behavior)  Brand Personality: the specific mix of human traits that we can attribute to a particular brand. Stanford’s list of traits: 1. Sincerity: down-to-earth, honest, wholesome and cheerful 2. Excitement: daring, spirited, imaginative, and up-to-date 3. Competence: reliable, intelligent and successful 4. Sophistication: upper-class and charming 5. Ruggedness: outdoorsy and tough  Lifestyle and values: people from the same subculture, social class and occupation may lead quite different lifestyles:  Lifestyle: a person’s pattern of living in the world as expressed in activities interests and opinions  Multi-tasking: doing two or more things (consumers who experience time famine are prone to this)  Core Values: the believe systems that underlie attitudes and behaviors (consumer decisions are influenced by this.  Figure 6.1: Model of Consumer Behavior:

 Key Psychological Processes: (p. 160) o The starting point for understanding consumer behavior is the stimulus response model (above) o The processes include: Motivation, Learning, Perception & Memory o Motivation: we all have many needs at any given time  Biogenic: needs that arise from physiological states of tension such as hunger, thirst of discomfort  Psychogenic: needs that arise from psychological states of tension such as the need for recognition, esteem, or belonging. o Motive: when a need is aroused to a sufficient level of intensity to drive us to act  Motivation Theories: o Freud’s Theory: behavior is guided by subconscious motivations  Sigmund Freud assumed the psychological forces shaping people’s behavior are largely unconscious, and that a person cannot fully understand his or her own motivations  Laddering: a technique that allows marketers to trace a person’s motivations from stated instrumental ones to the more terminal ones (allowing the marketer to decide at what level to develop the message and appeal)  Projective techniques: techniques researchers use to uncover deeper motives triggered by a product  Examples include: word association, sentence completion, picture interpretation, and role playing, o Maslow’s Theory: Abraham Maslow sought to explain why people are driven by particular needs at particular times. o Hierarchy of Needs: Maslow theorized that human needs are arranged in a hierarchy from most to least pressing – i.e. behavior is driven by lowest, unmet need:  Ranked needs: Physiological, Safety, Social, Esteem & Self-actualization

(No evidence for this. which means that marketers work hard to attract consumers’ notice.Herzberg’s Theory: Frederick Herzberg developed a two-factor theory that distinguishes: 1. thirst. satisfiers must be present  Perception: (p.  People are more likely to notice stimuli:  that relate to a current need  they anticipate  whose deviations are large in relationship to the normal size of the stimuli o Selective Distortion: the tendency to interpret information in a way that fits our preconceptions o Selective Retention: Most of us don’t remember much of the information to which we’re exposed. organize. subliminal messages in ads or packaging. rises to a threshold level and becomes a drive o Information Search: consumers often search for limited amounts of information. Dissatisfiers: factors that cause dissatisfaction 2. 166) o Problem Recognition: buyer recognizes a problem or need triggered by internal (hunger. Satisfiers: factors that cause satisfaction o Herzberg’s Two Factor Theory: behavior is guided by motivating and hygiene factors  The absence of dissatisfiers is not enough to motivate a purchase. though)  Consumer Buying Process: The Five-Stage Model (p.  There are two levels of engagement in the search:  Heightened attention: the milder search state where a person simply becomes more receptive to information about a product o . but we do retain information that supports our attitudes and beliefs o Subliminal Perception: The selective perception mechanisms require consumers’ active engagement and thought  The argument that says marketers embed covert. sex) or external stimuli  An internal stimulus. and interpret information inputs to create a meaningful picture of the world (more important than reality) and can consist of three perceptual processes: o Selective Attention: the act of screening most stimuli out (but we are influenced by unexpected stimuli). one of the person’s normal needs. 161) o Perception: the process by which we select.

The consumer sees each product as a bundle of attributes with varying abilities to deliver the benefits  Beliefs & Attitudes:  belief: a descriptive thought that a person holds about something  . The consumer is looking for certain benefits from the product solution 3. the consumer learns about competing brands and their features. acquaintances  Commercial: Advertising. dealers. phoning friends. friends. going online. The consumer is trying to satisfy a need 2. brand-dominant hierarchy. using the product Search Dynamics: by gathering information. sales persons.  total set: total set of brands available  awareness set: the subset of brands that the individual consumer will come to know  consideration set: the brands that meet initial buying criteria  o Market Partitioning: the process of identifying the hierarchy of attributes that guide consumer decision making (e. Evaluation of Alternatives: understanding the consumer evaluation process: 1. packaging. displays  Experimental: Handling examining. neighbors. and visiting stores to learn about the product. nation dominated hierarchy)  In order to understand different competitive forces and how these various sets get formed. Information Sources: Major information sources to which consumers will turn fall into four groups:  Personal: Family. Web sites.  Active information search: the next level where searching includes looking for reading material.g.

timing. There are three choice heuristics here: 1. and action tendencies toward some object or idea Expectancy-value Model: a model of attitude formation posits that consumers evaluate products and services by combining their brand beliefs – the positives and negatives – according to importance  A compensatory model. the consumer may make up to five subdecisions: brand. and payment method  Stage between Evaluation of Alternatives and a Purchase decision:  Noncompensatory Models of Consumer Choice: when consumers do not sit simultaneously consider all positive and negative attribute considerations in making a decision  Heuristics: a rule of thumb or mental shortcuts in the decision process.o attitudes: a person’s enduring favorable or unfavorable evaluations. emotional feelings. in that perceived good things about a product can help to overcome perceived bad things  Example of consumer choosing a laptop:  o Strategies to stimulate greater interest in brand:  Real positioning: redesigning the product  Psychological repositioning: altering the beliefs about the brand  Competitive depositioning: alter beliefs about competitors’ brands  Alter the importance of the weights: the marketer could try to persuade buyers to attach more importance to the attributes which the brand excels  Call attention to neglected attributes: The marketer could draw buyers’ attention to neglected attributes  Shift the buyer’s ideals: the marketer could try to persuade buyers to change their ideal levels for one or more attributes Purchase Decision: in this phase. quantity. dealer. Conjunctive heuristic: the consumer sets a minimum acceptable cutoff level for each attribute and chooses the first alternative that meets the minimum standard for all attributes  .

the amount of attribute uncertainty. the consumer might experience dissonance from noticing certain disquieting features or hearing favorable things about other brands and will be alert to information that supports his or her decision. and brands are eliminated if they do not meet minimum acceptable cutoff levels  Intervening Factors: Even if consumers form brand evaluations. two general factors can intervene between the purchase intention and the purchase decision (See Figure):  Attitudes of others: the influence of another person’s attitude depends on: 1. Lexicographic heuristic: a consumer choosing the best brand on the basis of its perceived most important attribute 3. Physical Risk: The product poses a threat to the physical well-being or health of the user or others 3. or another purchases take priority. Heavily influenced by one or more types of perceived risk (the degree of perceived risk varies with the amount of money at stake. Elimination-by-aspects heuristic: situation in which the consumer compares brands on an attribute selected probabilistically. Psychological Risk: The product affects the mental well-being of the user 6.o 2. Financial Risk: The product is not worth the price paid 4. Our motivation to comply with the other person’s wishes  Unanticipated situational factors: loss of job. Social Risk: The product results in embarrassment in front of others 5. Marketers must monitor: . Time Risk: The failure of the product results in an opportunity cost Post purchase Behavior: After the purchase. Functional risk: the product does Stages between evaluation of not perform to expectations alternatives and Purchase 2. The intensity of the other person’s negative attitude toward our preferred alternative 2. and the level of consumer self-confidence): 1.

or complaining to other groups (such as business.   Postpurchase satisfaction: a function of the closeness between expectations and the product’s perceived performance  Dissappointment: occurs if the product performance falls short of expectations  Satisfaction: occurs if the product meets expectations  Delighted: occurs when the product exceeds expectations Postpurchase actions: Satisfied consumers are more likely to purchase the product again and will also tend to say good things about the brand to others. Dissatisfied customers may abandon or return the product  Public actions: complaining to the company. private. or government agencies)  Private Actions: include deciding to stop buying the product (exit option) or warning friends (voice option) Postpurchase Uses & Disposal:  Consumers may fail to replace some products soon enough because they overestimate product life  The marketer needs to know how consumers dispose of products because it may damage the environment  There may be product opportunities in disposed products How Customers Use or Dispose of Products . going to a lawyer.

185) o Straight Re-buy: purchases are made on a routine basis and chooses from suppliers on an approved list o Modified Re-buy: the buyer in a modified re-buy wants to change product specifications. and how does it differ from the consumer market? o What buying situations do organizational buyers face? o Who participates in the business-to-business buying process? o How do business buyers make their decisions? o How can companies build strong relationships with business customers? o How do institutional buyers and government agencies do their buying?  Definitions: o Organizational Buying: the decision-making process by which formal organizations establish the need for purchased products and services and identify. or supplied to others. 152) o What is the business market. 187) o Systems buying: when business buyers buy a total problem solution from one seller o Turnkey solution desired: Bids Solicited  Prime Contractors  Second-Tier Contractors  System subcomponents assembled  The Buying Center (p. evaluate. Initiators: users or others in the organization who request that something be purchased 2. larger buyers o Close supplier-customer relationships o Professional purchasing o Multiple buying influences o Multiple sales calls o Derived demand o Inelastic demand o Fluctuating demand o Geographically concentrated buyers o Direct purchasing  Buying Situations: (p. 184) o Fewer. rented. delivery requirements. or other terms o New Task: a new-task purchaser buys a product or service for the first time  Systems Buying and Selling (p. prices. . and choose among alternative brands and suppliers o Business Market: all the organizations that acquire goods and services used in the production of other products or services that are sold. 188) o Includes all members of the organization who play any of the following seven roles in the purchase decision process: 1.Chapter 7: Analyzing Business Markets  Chapter Questions: (p.  Characteristics of Business Markets: (p. Users: Those who will use the product or service.

the buying center will specify and rank desired supplier attributes. quantity needed. Product specification: determination of the item’s general characteristics and required quantity 4. warranties and so on. and the Internet (See: Forms of Electronic Marketplaces) 5. the buyer will invite a few suppliers to make formal presentations. or end a supplier relationship. trade shows. . listing: the technical specifications. including price 3. 4. 8. the expected time of delivery. return policies. 6. modify. Performance review: may lead to the buyer to continue. The buyer periodically reviews the performance of the chosen supplier(s) using one of three methods:  Receiving evaluations from end users  Rate the supplier on several criteria using a weighted-score method  Aggregate the cost of poor performance to come up with adjusted costs of purchase. often using a supplier evaluation model 7. Supplier search: the buyer tries to identify the most appropriate suppliers through trade directories. Order-routine specification: the buyer negotiates the final order. contacts with other companies. 6. Buyers: people who have formal authority to select the supplier and arrange the purchase terms 7. Problem Recognition: starts the buying process – when someone in the company recognizes a problem or need that can be met by acquiring a good or service 2. Proposal solicitation: the buyer invites qualified suppliers to submit proposals. 5.Influencers: People who decide on product requirements or on suppliers Deciders: people who decide on product requirements or on suppliers Approvers: people who authorize the proposed actions of deciders or buyers. and after evaluation. Gatekeepers: people who have the power to prevent sellers or information from reaching members of the buying center  Sales Strategies o Small Sellers  Key buying influencers o Large Sellers Multilevel In-depth selling  Stages in the Buying Process: (p. General need description: determination of the item’s general characteristics and required quantity 3. Supplier selection: Before selecting a supplier. trade advertisements. 195) o Buyphases: eight stages in the buying-decision process: 1.

20(3) + . advertising.10(3) = 3. steel.30(4) + . Functional hubs: (logistics.10 X . 195) o Major Stages (Buyphases) of the Industrial Buying Process in Relation to Major Buying Situations (Buyclasses): New Task Yes Yes Yes Yes Yes Yes Yes Yes Buyclasses Modified Re-buy Maybe Maybe Yes Maybe Maybe Maybe Maybe Yes Straight Re-buy No No Yes No No No No Yes 1.30 .5 Excellent (4) X X . chemicals. General need description 3. media buying. The Buygrid Framework: (p. Supplier search Buyphases 5. Order-routine specification 8. prices change by the minute o Private exchanges: private exchanges can be operated to link with specially invited groups of suppliers and partners over the Web o Barter markets: participants offer to trade goods or services o Buying alliances: several companies buying the same goods can join together to form purchasing consortia to gain deeper discounts on volume purchases  Methods of e-Procurement: (p.30(4) + . Product specification 4. Proposal solicitation 6. specialized Web sites (e-hubs) that sell industrial products o “Pure Play” auction sites: buyers can buy products at auctions o Spot (or exchange) markets: on spot electronic markets. paper) 2. 196) o Catalog sites: companies can order thousands of items through electronic catalogs o Vertical Markets. energy management) o Other forms of e-procurement:  Set up direct extranet links to major suppliers  Form buying alliances  Set up company buying sites  Vendor Analysis: o The buying center can use a suppler-evaluation model like this: Attributes Price Supplier reputation Product reliability Service reliability Supplier flexibility Rating Scale Importance Weights Poor (1) Fair (2) Good (3) . Vertical hubs: centered on industries (plastics.10(2) + . Supplier selection 7. 197) o Web sites are organized around two types of e-hubs: 1.10 X Total Score: .30 .20 X . Problem recognition 2. Performance Review  Forms of Electronic Marketplaces: (p.

which the supplier promises to resupply the buyer as needed. Handling Price-Oriented Customers: (p.Likability  Trust Dimensions: Transparent Cooperating Design Product / Service Quality Product Comparison Incentive Supply Chain Partnering Pervasive Advocacy  Factors Affecting Buyer-Supplier Relationships: o Availability of alternatives o Importance of supply o Complexity of supply o Supply market dynamism .  Establishing Corporate Trust and Credibility: o Expertise – Trustworthiness -. Prohibit refunds 3. 201) o Stockless Purchase plans: a blanket contract where a long-term relationship is established. 199) o The buying center may attempt to negotiate with preferred suppliers for better prices and terms before making the final selection o Some companies handle price-oriented buyers by setting a lower price but establishing restrictive conditions: 1. Provide no services  Methods for Researching Customer Value: o Internal engineering assessment o Field value-in-use assessment o Focus-group value assessment o Direct survey questions o Conjoint analysis o Benchmarks o Compositional approach o Importance ratings  Order-Routine Specification: (p. Make no adjustments 4. Limit quantity purchased 2. o Continuous replenishment programs: when suppliers are privy to the customer’s inventory levels and take responsibility for replenishing it automatically. over a specified period of time o Vendor Managed Inventory (VMI): when the ordering responsibility is shifted to their suppliers in systems. at agreedupon prices.

competition rather than cooperation is the dominant form of governance  Cooperative systems: the partners in cooperative systems are united in operational ways. but neither demonstrates structural commitment through legal means or adaptation  Collaborative: In collaborative exchanges. cooperation and interaction  Customer Supply: In this traditional custom supply situation. 202) o Much research has advocated greater vertical coordination between buying partners and sellers. cooperative relationship. routine exchanges with moderate levels of cooperation and information exchange  Bare bones: these relationships require more adaptation by the seller and less cooperation and information exchange  Contractual transaction: These exchanges are defined by formal contract and generally have low levels of trust. so they can transcend merely transacting and instead engage in activities that create more value for both parties. o Buyer-supplier relationships are classified into eight categories:  Basic buying and selling: simple. much trust and commitment lead to true partnership  Mutually adaptive: Buyers and sellers make many relationship-specific adaptations. but without necessarily achieving strong trust or cooperation  Customer is King: In this close. the seller adapts to meet the customer’s needs without expecting much adaptation or change in exchange . Categories of Buyer-Seller Relationships: (p.

sophisticated. gender. counties. o Demographic (p. education. or response to a product. impulsive people who seek variety and excitement. income. or neighborhoods. generation. use of. cities. or values. 226): o One of the most popular commercially available classification systems based on psychographic measurements  The four groups with higher resources are:  Innovators: successful. online clicks)  Segmenting Consumer Markets: (p. religion. enthusiastic. active.Chapter 8: Identifying Market Segments and Targets  Chapter Questions: (p. occupation. and reflective people motivated by ideals and who value order. 216): when the market is divided on variables such as age. attitude toward. “take-charge” people with high self-esteem  Thinkers: Mature. family size.  Achievers: Successful. satisfied. regions. (See below)  The VALS Segmentation System (p. o Psychographic (p. and social class. lifestyle. nationality. states. goal-oriented people who focus on career and family  Experiencers: Young. 225): when buyers are divided into different groups on the basis of their psychological/personality traits. race.  Psychographics: the science of using psychology and demographics to better understand customers o Behavioral: when marketers divide buyers into groups on the basis of their knowledge of. 212) o What are the different levels of market segmentation? o How can a company divide a market into segments? o How should a company choose the most attractive target markets? o What are the requirements for effective segmentation?  Four levels of Micromarketing o Segments: consists of a group of customers who share a similar set of needs and wants o Niches: all efforts focus on a very narrow segment of an overall target market o Local Areas: Geographic segmentation – regional marketing means marketing right down to a specific zip code o Individuals: an individual’s habits can be monitored to appeal to their buying habits (company databases of previous purchases. knowledge and responsibility. . family life cycle. 214) o Geographic: divides the market into geographical units such as nations.

Shifting Loyals: Consumers who shift loyalty from one brand to another 4. and regular users.  Behavioral Segmentation: (p. and some intend to buy  Loyalty status: Marketers usually envision four groups based on brand loyalty status: 1. Hard-core Loyals: Consumers who buy only one brand all the time 2. some are informed. down-to-earth. 229) o Marketing funnel: breaks the market down into different buyer-readiness stages:  Aware  Ever tried Recent Trial Occasional user Regular User  Most Often Used  . year or other well-defined temporal aspects of a consumer’s life  Benefits: [no info]  User status: Every product has its nonusers. indifferent. and traditional people with concrete beliefs  Strivers: Trendy. ex-users. negative and hostile  Multiple bases: combining different behavioral bases can provide a more comprehensive and cohesive view of a market and its segments  The Brand Funnel: (p. Split Loyals: Consumers who are loyal at two or three brands 3. 227) o Decision Roles: Initiator. potential users. some desire the product. first-time users. passive people concerned about change and loyal to their favorite brands. conventional. week.The four groups with lower resources are:  Believers: Conservative.  Usage rate: markets can be segmented into light. and User. Buyer. and fun-loving people who are resource-constrained  Makers: Practical. some are interested. month. Influencer. self-sufficient people who like to work with their hands  Survivors: Elderly. Decider. o Behavioral variables:  Occasions: mark a time of day. medium and heavy product users  Buyer-readiness: Some people are unaware of the product. Switchers: Consumers who show no loyalty to any brand  Attitude: Five consumer attitudes about products are enthusiastic. positive. some are aware.

and market access). and usage behaviors make the segment distinct and identifiable (actionable) o Segment attractiveness: Using predetermined segment attractiveness criteria (such as market growth. determine which demographics. personal characteristics  Steps in Segmentation Process: (p. 230) o Demographic. competitive intensity. situational factors. Behavioral Segmentation Breakdown: (p. determine the overall attractiveness of each segment o Segment profitability: determine segment profitability . Operating Variables. o Segment Identification: for each needs-based segment. 231) o Needs-Based Segmentation: group customers into segments based on similar needs and benefits sought by customers in solving a particular consumption problem. 229)  The Conversion Model:  Segmenting for Business Markets: (p. Purchasing approaches. lifestyles.

and characteristics of the segments can be measured. purchasing power. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program.  If married and unmarried women respond similarly to a sale on perfume. price.  Accessible: The segments can effectively be reached and served. they do not constitute separate segments. create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics o Segment acid test: Create “segment storyboard” to test the attractiveness of each segment’s positioning strategy o Marketing-Mix Strategy: Expand segment positioning strategy to include all aspects of the marketing mix: product.  Actionable: Effective programs can be formulated for attracting and serving the segments  Patterns of Target Market Selection: Target Market Selection: o  Segment-by-Segment Invasion plan: . 231) o Not all segmentation schemes are useful. In order to be useful. market segments must rate favorably on key criteria:  Measurable: The size. and place  Effective Segmentation Criteria: (p.Segment positioning: For each segment. promotion.  Differentiable: The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs.  Substantial: The segments are large and profitable enough to serve.

mobility. objectives. and weaknesses? o How can market leaders expand the total market and defend market share? o How should market challengers attack market leaders? o How can market followers or nichers compete effectively?  Five Forces Determining Segment Structural Attractiveness:  Industry Concept of Competition: o Number of sellers and degree of differentiation o Entry.Chapter 11: Competitive Dynamics (Dealing with Competition)  Chapter Questions: o How do marketers identify primary competitors? o How should we analyze competitors’ strategies. and exit barriers o Cost structure o Degree of vertical integration o Degree of globalization Strategic Groups Competitor’s Expansion Plans Customer Ratings of Competitors on Key Success Factors . strengths.

making the brand almost impregnable  Flank Defense: The market leader should erect outposts to protect a weak front or support a possible counterattack. and Heart Share Hypothetical Market Structure  Defensive Marketing: (p. o A dominant firm can use six defense strategies (See Figure):  Position defense: means occupying the most desirable market space in consumers’ minds. perhaps with guerilla action across the market – hitting one competitor here. Mind Share. another there – and keeping everyone off balance.  Counteroffensive Defense: The market leader can meet the attacker frontally and hit its flank. or launch a pincer movement so it will have to pull back to defend itself  Mobile Defense: The leader stretches its domain over new territories through  market broadening: shifts the company’s focus from the current product to the underlying generic need  market diversification: shifts the company’s focus to unrelated industries . and lessen their intensity. o Speed of response can make an important difference to profit. 303) o The aim of defensive strategy is to reduce the probability of attack.  Preemptive Defense: A more aggressive maneuver is to attack first. divert attacks to less-threatened areas. Strengths and Weaknesses: o Share of market o Share of mind o Share of heart Market Share.

relative product quality. hurting product value and service delivery . are loyal to competitors. The cost of gaining further market share might exceed the value if holdout customers dislike the company.  Planned Contraction/Strategic Withdrawals: companies give up weaker markets and resign sources to stronger ones Six Types of Defense Strategies  Increasing Market Share: (p.  The effect of increased market share on actual and perceived quality: Too many customers can put a strain on the firm’s resources. 304) o The cost of buying higher market share through acquisition may far exceed its revenue value. (See Figure)  Optimal market share: 50%  The danger of pursuing the wrong marketing activities: Companies successfully gaining share typically outperform competitors in three areas: new-product activity. so a company should consider four factors first:  The possibility of provoking antitrust action: frustrated competitors are likely to cry “monopoly” and seek legal action if a dominant firm makes further inroads. Contraction Defense: Sometimes large companies can no longer defend all their territory. have unique needs.  Economic Cost: profitability might fall with market share gains after some level. and marketing expenditures. or prefer dealing with smaller firms.

such as lower-priced or discounted products. 305) o Defining the strategic objective and opponent(s): a market challenger must first define its strategic objective. price and distribution o Flank Attack: another name for identifying shifts that are causing gaps to develop. including selective price cuts. conventional and unconventional. The challenger must decide whom to attack:  It can attack the market leader  It can attack firms its own size that are not doing the job and are underfinanced  It can attack small local and regional firms o Choosing a General Attack Strategy: Given clear opponents and objectives. 306) o Frontal attack: the attacker matches its opponent’s product. and occasional legal action.  General Market Challenger Attack Strategies: (p. and innovative distribution strategies. then rushing to fill the gaps o Encirclement Attack: attempts to capture a wide slice of territory by launching a grand offensive on several fronts. intermittent attacks. 305) o Market Challengers: companies that attack the leader and other competitors in an aggressive bid for further market share o Market followers: companies that choose not to “rock the boat” o Market Nichers: a company that leads in a small market  Market Challenger Strategies: (p. usually to increase market share. new or improved products and services. to harass the opponent and eventually secure permanent footholds  Specific Market Challenger Attack Strategies: (p. advertising. o Bypass Attack: Bypassing the enemy altogether to attack easier markets instead offers three lines of approach:  Diversifying into unrelated products  Diversifying into new geographical markets  Leapfrogging into new technologies o Guerilla Attacks: consists of small. intense promotional blintzes. the following five types of attacks can be executed: o Choosing a specific attack strategy: Any aspect of the marketing program can serve as the basis for attack (See below). a wider variety of offerings. 306) Price discounts Lower-Priced goods Value-priced goods Product Proliferation Product Innovation Prestige goods Improved services Distribution Innovation Manufacturing-cost Reduction Intensive Advertising Promotion . Other Competitive Strategies: (p.

pricing. but still need to implement strategies:  Counterfeiter: The counterfeiter duplicates the leader’s product and packages and sells it on the black market or through disreputable dealers  Cloner: The cloner emulates the leader’s products. The adapter may choose to sell to different markets. 308) o Firms entering a market should initially aim at a niche rather than the whole market. 307) o Many companies prefer to follow rather than challenge the market leader. or location  Adapter: The adapter takes the leader’s products and adapts or improves them. o Types of roles: End-User Specialist Vertical-Level Specialist Customer-Size Specialist Specific-Customer Specialist Geographic Specialist Product-Line Specialist Job-Shop Specialist Quality-Price Specialist Service-Specialist Channel Specialist . o Multiple niching is preferable to single niching: with strength in two or more niches. but often it grows into a future challenger  Niche Specialist Roles: (p. name. and packaging. with slight variations  Imitator: The imitator copies some things from the leader but differentiates on packaging. the company increases its chances for survival. Market Follower Strategies: (p. advertising.

labeling.Chapter 12:Setting Product Strategy  Chapter Questions: (p. the marketer needs to address five product levels that constitute a customer-value hierarchy:  Core benefit: the service or benefit the customer is really buying  Basic Product: the second level where the marketer must turn the core benefit into the basic product  Expected Product: a set of attributes and conditions buyers normally expect when they purchase this product  Augmented Product: a product that exceeds customer expectations that is prepared by the marketer  Potential Product: encompasses all the possible augmentations and transformations the product or offering might undergo in the future (This is where companies search for new ways to satisfy customers and distinguish their offering) Five Product Levels . 326) o In planning its market offering. 324) o What are the characteristics of products and how do marketers classify products? o How can companies differentiate products? o How can a company build and manage its product mix and product lines? o How can companies combine products to create strong co-brands or ingredient brands? o How can companies use packaging. warranties. 326)  Product Levels: The Customer-Value Hierarchy (p. and guarantees as marketing tools?  Components of the Market Offering (p.

lumber. 327) o Nondurable Goods: tangible goods normally consumed in one or a few uses  Beer & shampoo o Durable Goods: tangible goods that normally survive many uses  Refrigerators. and with minimal effort  Staples: convenience goods consumers purchase on a regular basis (ketchup)  Impulse goods: are purchased without any planning or search effort (candy)  Emergency goods: purchased when the need is urgent (umbrellas) o Shopping: goods that the consumer characteristically compares on such bases as suitability. clothing. supplier credibility. machine tools. and adaptability  Haircuts. iron ore  Manufactured Materials and parts: fall into two categories:  Component materials: materials that are usually fabricated further (iron. variable. and clothing o Services: tangible. 327) o Convenience goods: products that the consumer usually purchases frequently. fruits and vegetables  Natural Products: fish. and perishable products that normally require more quality control. cotton. yarn. quality. o Specialty goods: goods that have unique characteristics or brand identification for which enough buyers are willing to make a special purchasing effort (cars) o Unsought goods: goods that the consumer does not know about or would normally think of buying (smoke detectors)  Industrial Goods Classification: (p. livestock. price. crude petroleum.  Heterogeneous shopping goods: differ in product features and services that may be more important than price. immediately. inseparable. and are classified in two ways:  Raw materials: fall into two major groups:  Farm Products: wheat. wires)  Component Parts: enter the finished product with no further change in form (small motors. legal advice. Product Classification Schemes: o Marketers classify products on the basis of:  Durability  Tangibility  Use  Durability and Tangibility: (p. cement. and style (Furniture. castings) . and appliance repairs  Consumer Goods Classification: (p. 327) o Materials and parts: goods that enter the manufacturer’s product completely. and major appliances)  Homogeneous shopping goods: goods similar in quality but different enough in price to justify shopping comparisons. tires.

mainframe computers. o . and products can be differentiated in the following ways:  Product Form: the size. elevators)  Equipment: includes portable factory equipment and tools (hand tools. copier repair  Business advisory services: legal.  Maintenance. Repair and Operations (MRO) Goods: the classification of supplies (the equivalent of convenience goods) which come in two kinds:  Maintenance and repair items: paint. lift trucks) and office equipment (personal computers. management consulting. drill presses. advertising  Product Differentiation: (p. services. They include two groups:  Installations: major purchases that can consist of buildings (factories. brooms  Operating supplies: lubricants. 329) o To be branded. coal. offices) and heavy equipment (generators. pencils  Business services: this includes:  Maintenance and repair services: window cleaning. desks) These types of equipment don’t become part of a finished product o Supplies / business services: are short-term goods and services that facilitate developing or managing the finished product.Capital Items: are long-lasting goods that facilitate developing or managing the finished product. or physical structure of a product  Features: products can be offered with varying features that supplement their basic function  Calculate customer value versus company cost for each potential feature  Customization: marketers can differentiate products by customizing them  Mass customization: the ability of a company to meet each customer’s requirements – to prepare on a mass basis individually designed products. writing paper. programs and communications  Performance quality: the level at which the product’s primary characteristics operate  Conformance quality: the degree to which all produced units are identical and meet promised specifications  Durability: a measure of the product’s expected operating life under natural or stressful conditions  Reliability: a measure of the probability that a product will not malfunction or fail within a specified time period  Repairability: measures the ease of fixing a product when it malfunctions or fails  Style: describes the product’s look and feel to the buyer. nails. products must be differentiated (made to stand out). shape.

information systems. or experience products in person to determine suitability and can’t be eliminated by the company in the short run through any of these means.  Maintenance and repair: these programs help keep purchased products in good working order. Six levels exist (Example: life Insurance) o Need family: the core need that underlies the existence of a product family (security) o Product family: al the product classes that can satisfy a core need with reasonable effectiveness (financial instruments) o Product line: a group of products within a product class that are closely related because they perform a similar function. The main service differentiators are:  Ordering ease: refers to how easy it is for the customer to place an order with the company  Delivery: refers to how well the product or service is brought to the customer. or individual brand that has been line extended.  Goal: to have fewer products returned and put a higher percentage back into the distribution pipeline to be sold again.  Installation: refers to the work done to make a product operational in its planned location.  Customer training: helps the customer’s employees use the vendor’s equipment properly and efficiently  Customer consulting: includes data.  Returns: a nuisance to customers. 336) o The product hierarchy stretches from basic needs to particular items that satisfy those needs. are sold to the same customer groups. and improved transportation and forward logistics by the seller or its supply chain partners. Ease of installation is a selling point for buyers of complex products like heavy equipment and for technology novices.  Product Hierarchy: (p. try. Service Differentiation: (p. or fall within given price ranges.  Uncontrollable returns: result from the need for customers to actually see. product returns are also an unavoidable reality of doing business. are marketed through the same outlets or channels. (Life insurance) . retailers. Returns can be thought of in two ways:  Controllable returns: results from problems or errors by the seller or customer and can mostly be eliminated with improved handling or storage.  Basic strategy: to eliminate the root causes of controllable returns while developing processes for handling uncontrollable returns. better packaging. A product line may consist of different brands. or a single family brand. and advice services the seller offers to buyers. and distributors alike. 330) o When the physical product cannot easily be differentiated. manufacturers. the key to competitive success may lie in adding valued services and improving their quality.

cases. armbands. or some other way. or some other attribute (Prudential renewable term life insurance)  Product Systems and Mixes: (p. cables and docks. price. Four product mix dimensions permit the company to expand its business::  Width: refers to how many different product lines the company carries. appearance. power and car accessories. companies normally develop a basic platform and modules that can be added to meet different customer requirements and lower production costs. distribution channels.  Depth: refers to how many variants are offered of each product in the line. 337) o In offering a product line. and speakers o Product Mix: (also called a product assortment) is the set of all products and items a particular seller offers for sale. maintain. their margins. harvest. or divest. or both.  Product Line Analysis: (p.  Market profile: the product line manager must review how the line is positioned against competitors’ lines:  Product map: shows which competitors’ items are competing against company X’s items Product Map for a Paper – Product Line o .  Length: refers to the total number of items in the mix. o They also need to understand each product line’s market profile:  Sales and profits: a company’s product portfolio contains products with different margins. 336) o Product system: a group of diverse but related items that function in a compatible manner  Example: The extensive iPod product system that includes headphones and headsets.Product type: A group of items within a product line that share one of several possible forms of the product (Term Life Insurance) o Item: (also called stock-keeping unit or product variant) – a distinct unit within a brand or product line distinguishable by size. Company’s should recognize that items can differ in their potential for being Product-item Contributions to a product Line’s priced higher or advertised more Total Sales and Profits as ways to increase their sales. production requirements.  Consistency: describes how closely related the various product lines are in end use. o Product line managers need to know the sales and profits of each item in their line to determine which items to build.

 Product Mix Pricing: o Product-mix pricing: when the firm searches for a set of prices that maximizes profits on the total mix. Use the parent brand name on all its offerings (Sony) 2. such as razor blades or film  Two-part pricing: consists of a fixed fee plus a variable usage fee (cell phones) . The company may find that the middle market is stagnating or declining  A company faces a number of naming choices in deciding to move a brand down-market: 1. There are six situations calling for product-mix pricing:  Product-line pricing: Companies normally develop product lines rather than single products and introduce price steps. The company may wish to tie up lower-end competitors who might otherwise try to move up-market. it often decides to counterattack by entering the low end of the market 3. or simply position themselves as full-line manufacturers. This strategy is expensive to implement and means brand equity will have to be built from scratch. 340) o Occurs when a company lengthens its product line beyond its current range. Introduce lower-priced offerings using a sub-brand name (Bounty Basics) 3.  Up-market stretch: Companies may wish to enter the high end of the market to achieve more growth. And can happen in three ways:  Down-market stretch:  A company positioned in the middle market may want to introduce a lower-priced line for any of three reasons: 1. but the equity of the parent brand name is protected. realize higher margins. Best Buy. If the company has been attacked by a low-end competitor. and others attract a growing number of shoppers who want value-priced goods 2.  Two-way stretch: Companies serving the middle market might stretch their line in both directions. and services with their main product.  Optional-feature pricing: Many companies offer optional products.  Captive-product pricing: Some products require the use of ancillary or captive products:  Captive products: products that are necessary to the use of other products. Line Stretching: (p. features. The company may notice strong growth opportunities as mass retailers such as Walmart. Introduce the lower priced offerings under a different name (Gap’s Old Navy brand).

347) o Identify the brand o Convey descriptive and persuasive information o Facilitate product transportation and protection o Assist at-home storage o Aid product consumption  . and other chemicals. and make a favorable overall impression  Consumer affluence: Rising affluence means consumers are willing to pay a little more for the convenience. create consumer confidence. often results in by-products that should be priced on their value. the shopper passes some 300 products per minute. dependability.  Innovation Opportunity: Unique or innovative packaging such as resealable spouts can bring big benefits to consumers and profits to producers  Packaging Objectives: (p. the effective package must perform many sales tasks: attract attention. describe the product’s features. normally charging less for the bundle than if the items were purchased separately  Factors Contributing to the Emphasis on Packaging: o Packaging: includes all the activities of designing and producing the container for a product. and might have up to three layers (Example: cologne):  Primary package: Cool Water cologne comes in a bottle  Secondary package: The bottle comes in a package  Shipping package: a corrugated box containing six dozen bottles in cardboard boxes o Various factors contribute to the growing use of packaging as a marketing tool:  Self-service: An increasing number of products sold are on a self-serve basis. and prestige of better packages. which may stock 15.By-product pricing: The production of certain goods – meats.000 items.  Company and brand image: Packages contribute to instant recognition of the company or brand. petroleum products. appearance. Given that 50-70% of all purchases are made in the store.  In an average super market.  Any income earned on the by=products will make it easier for the company to charge a lower price on its main product if competition forces it to do so  Product-bundling pricing: sellers often bundle products and features  Pure bundling: occurs when a firm offers its products only as a bundle (a form of tied-in sales)  Mixed bundling: when the seller offers goods both individually and in bundles.

motion picture companies. plumbing repair companies. insurance companies. postal service. hotels. or salt with no accompanying services  Tangible good with accompanying services: a tangible good. Its production may or may not be tied to a physical product. and customer service representatives  Categories of Service Mix: (p. with additional services or supporting goods such as snacks and drinks. Typically. toothpaste. and legal staff (they make up a “service factory” – providing services to the “goods factory”  Retail sector: cashiers. loan agencies. churches. 354) o How do we define and classify services and how do they differ from goods? o How do we market services? o How can we improve service quality? o How do services marketers create strong brands? o How can goods marketers improve customer support services?  Service Sectors: (p. regulatory agencies. or massage . of equal parts goods and services. police and fire departments. like air travel.Chapter 13: Designing and Managing Services  Chapter Questions: (p. banks. clerks. charities. like a car. and schools  Private nonprofit sector: museums. management consulting firms. 356) o Service: any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything. o The following industries are considered service industries:  Government sector: with its courts. foundations and hospitals  Business sector: airlines. computer or cell phone. medical practices. military services. the more technologically advanced the product. Five categories of offerings can be distinguished:  Pure tangible good: a tangible good such as soup. People patronize restaurants for both the food and its preparation. employment services. but the primary item is a service  Pure service: primarily an intangible service such as babysitting. psychotherapy.  Major service with accompanying minor goods and services: a major service. accompanied by one or more series. like a restaurant meal. the greater the need for highquality supporting services  Hybrid: an offering. colleges. 356) o The service component can be a minor or a major part of the total offering. This offering requires a capital-intensive good – an airplane – for its realization. hospitals. accountants. salespeople. and real estate firms  Manufacturing sector: computer operators.

when crossed. fast-food. skilled or professional workers provide them  Service companies can choose among different processes to deliver their service.  Continuum of Evaluation for Different Types of Products: (p. (carrying a more risk in their purchase) o . and candlelight service formats  Some services need the client’s presence.  Restaurants offer cafeteria-style. (brain surgery. accounting services – and vary by whether unskilled. produce four quite different types of organizations. 357) o Customers typically cannot judge the technical quality of some services even after they have received them o The figure below shows various products and services according to difficulty of evaluation. Service providers typically develop different marketing programs for these markets  Service providers differ in their objectives (profit or nonprofit) and ownership (private or public). These two characteristics. haircuts)  Services may meet a personal need (personal services) or a business need (business services).  At the left are goods high in search qualities – characteristics the buyer can evaluate before purchase  In the middle are goods and services high in experience qualities – characteristics the buyer can evaluate after purchase  At the right are goods and services high in credence qualities – characteristics the buyer normally finds hard to evaluate even after consumption. Oil rigs  People based: window washing.The range of service offerings makes it difficult to generalize without a few further distinctions:  Services vary as to whether they are:  Equipment based: automated car washes. vending machines.

heard or smelled before they are bought. services cannot be seen.  Physical Evidence and Presentation: (p. 360) o Because of variability. Distinctive Characteristics of Services: (p. services are typically produced and consumed simultaneously. so their perishability can be a problem when demand fluctuates. copy machines.  Variability: Because the quality of services depends on who provides them.  How to Increase Quality control: (p.  Inseparability: Whereas physical goods are manufactured. service firms can employ one of three steps to increase quality control:  Invest in good Hiring and training procedures  Standardize the service-performance process throughout the organization  Monitor customer satisfaction  Matching Demand and Supply: (p. and ATMs should look like. (Low matinee movies) . services are highly variable. and be. 358) o Service companies try to demonstrate their service quality through physical evidence and presentation. but there should be a sufficient number to manage the workload. 358) o Four distinctive service characteristics greatly affect the design of marketing programs:  Intangibility: Unlike physical products.  Symbols: The bank’s name and symbol should suggest fast service  Price: The bank could advertise that it will deposit $5 in the account of any customer who waits in line more than five minutes. The layout of the desks and the traffic flow should be panned carefully. 361) o Demand or yield management is critical – the right services must be available to the right customers at the right places at the right times and right prices to maximize profitability. desks. then distributed. and later consumed. and can make this positioning strategy tangible through any number of marketing tools (Example: A bank):  Place: the exterior and interior should have clean lines. and to whom. when and where. tasted. Several strategies can produce a better match between service demand and supply:  On the demand side:  Differential pricing: this will shift some demand from peak to off-peak periods.  Equipment: Computers. then inventoried.  Communication material: printed materials – text and photos – should suggest efficiency and speed. state of the art. Waiting lines should not get overly long. felt.  Perishability: Services cannot be stored.  People: Employees should be busy.

the points of customer contact. (An amusement park buys surrounding land for later development)  A Blueprint for Overnight Hotel Stay: (p. (Consumers fill out their own medical records or bag their own groceries. and the evidence of service from the customer’s point of view  The figure below shows a service blueprint for a guest spending a night at a hotel:  . (Several hospitals can share medical-equipment purchases)  Facilities for future expansion: can be a good investment. 360) o A service blueprint can map out the service process.Nonpeak demand: this can be cultivated (McD’s pushes breakfast service)  Complementary services: can provide alternatives to waiting customers (cocktail lounges in restaurants & ATMS in banks)  Reservation systems: are a way to manage the demand level  On the supply side:  Part-time employees: can serve peak demand (Extra clerks for the holidays)  Peak-time efficiency: routines can allow employees to perform only essential tasks during peak periods (Paramedics assist physicians during busy periods)  Increased consumer participation: free service providers’ time.)  Shared services: can improve offerings.

motivation. The figure below displays the four broad causes of customer failures:  Solutions to Customer Failures: (p. and promoting the service to customers  Internal Marketing: describes the training and motivating employees to serve customers well. 364) o Unfortunately. Marketing excellence with services requires excellence in three broad cases (see figure):  External Marketing: describes the normal work of preparing. The most important contribution the marketing department can make is arguable to be “exceptionally clever in getting everyone else in the organization to practice marketing. Improving Service Quality: o Listening o Surprising Customers o Reliability o Fair play o Basic Service o Teamwork o Service design o Employee research o Recovery o Servant leadership  Root Causes of Customer Failure: (p. distributing. although many firms have well-designed and executed procedures to deal with their own failures. 365) o The increased importance of the service industry has sharpened the focus on what it takes to excel in the marketing of services. they find managing customer failures (when a service problem arises from a customer’s lack of understanding or ineptitude) much more difficult.  Incorporate the right technology to aid employees and customers  Create high-performance customers by enhancing their role clarity. 364) o Solutions come in all forms:  Redesign processes and redefine customer roles to simplify service encounters. and ability  Encourage “customer citizenship” so customers help customers (customers encouraging other customers in performance)  Three Types of Marketing in Service Industries: (p. pricing.” .

Clients judge service not only by its technical quality but also by its functional quality. 5. Interactive Marketing: describes employees’ skill in serving the client. 4. Gap between perceived service and expected service: This gap occurs when the consumer misperceives the service quality .  Gaps that Cause Unsuccessful Service Delivery: 1. such as taking time to listen to customers and serving them fast. Gap between service delivery and external communications: Customer expectations are affected by statements made by company representatives and ads. Gap between consumer expectation and management perception: Management does not always correctly perceive what customers want 2.  The Service-Quality Model: (p. 373) o The service-quality model highlights the main requirements for delivering high service quality (see figure). they may be held to conflicting standards. Gap between management perception and service-quality specification: Management might correctly perceive customers’ wants but not set a performance standard 3. Gap between service-quality specifications and service delivery: Employees might be poorly trained. or incapable of or unwilling to meet the standard.

Tangibles: The appearance of physical facilities. 5. personnel. a history of top-management commitment to quality. researchers identified five determinants of service quality. on a regular basis.  Monitoring Systems: Top firms audit service performance. 374) o Based on this service-quality model. profit tiers. Responsiveness: Willingness to help customers and provide prompt service 3.  Top-management Commitment: Companies look monthly not only at financial performance. but also at service performance  High Standards: The best service providers set high quality standards  Profit Tiers: Firms have decided to raise fees and lower services to those customers who barely pay their way. individualized attention to customers. and systems for monitoring service performance and customer complaints. well-managed service companies share a strategic concept. 366) o In achieving marketing excellence with their customers.  Best Practices of Top Service Companies: (p. Assurance: The knowledge and courtesy of employees and their ability to convey trust and confidence 4. both their own and competitors’.  Example of a monitoring system for an auto dealership with rating attributes – see figure and table: Job done right the first time Fast action on complaints Prompt warranty work Able to do any job needed Service available when needed Courteous and friendly service Car ready when promised Perform only necessary work Low prices on service Clean up after service work Convenient to home Convenient to work Courtesy buses and cars Send out maintenance notices . and to coddle big spenders to retain their patronage as long as possible. Determinants of Service Quality: (p.  Services can be judged on customer importance and company performance. high standards. in this order of importance: 1. Empathy: The provision of caring. Reliability: The ability to perform the promised service dependably and accurately 2. and communication materials. equipment.  Strategic Concept: Top companies have a clear sense of their target customers and their needs and have developed a distinctive strategy for satisfying these needs.

customers have had three specific worries about product service:  Failure frequency: Customers worry about reliability and failure frequency.  Downtime: The longer the downtime. 376) o Traditionally. the higher the cost. The customer counts on the seller’s service dependability – the seller’s ability to fix the machine quickly or at least provide a loaner  Out-of-pocket costs: How much does the customer have to spend on regular maintenance and repair costs? . Developing Brand Strategies for Services: o Choosing Brand Elements o Establishing Image Dimensions o Devising Branding Strategy  Customer worries: (p.

accounting services – and vary by whether unskilled. • Restaurants offer cafeteria-style. produce four quite different types of organizations. skilled or professional workers provide them  Service companies can choose among different processes to deliver their service. This offering requires a capital-intensive good – an airplane – for its realization. 357) ○ Customers typically cannot judge the technical quality of some services even after they have received them ○ The figure below shows various products and services according to difficulty of evaluation. (brain surgery. Oil rigs • People based: window washing. psychotherapy. fast-food. but the primary item is a service  Pure service: primarily an intangible service such as babysitting. vending machines. haircuts)  Services may meet a personal need (personal services) or a business need (business services). ➢ Continuum of Evaluation for Different Types of Products: (p. or massage ○ The range of service offerings makes it difficult to generalize without a few further distinctions:  Services vary as to whether they are: • Equipment based: automated car washes. (carrying a more risk in their purchase) .  At the left are goods high in search qualities – characteristics the buyer can evaluate before purchase  In the middle are goods and services high in experience qualities – characteristics the buyer can evaluate after purchase  At the right are goods and services high in credence qualities – characteristics the buyer normally finds hard to evaluate even after consumption.services or supporting goods such as snacks and drinks. These two characteristics. when crossed. and candlelight service formats  Some services need the client’s presence. Service providers typically develop different marketing programs for these markets  Service providers differ in their objectives (profit or nonprofit) and ownership (private or public).

The layout of the desks and the traffic flow should be panned carefully.  Symbols: The bank’s name and symbol should suggest fast service . tasted.  Equipment: Computers. heard or smelled before they are bought. then distributed. and to whom.  Communication material: printed materials – text and photos – should suggest efficiency and speed. state of the art. 358) ○ Four distinctive service characteristics greatly affect the design of marketing programs:  Intangibility: Unlike physical products.  Inseparability: Whereas physical goods are manufactured. felt. and ATMs should look like. 358) ○ Service companies try to demonstrate their service quality through physical evidence and presentation. copy machines. when and where.  Perishability: Services cannot be stored.  People: Employees should be busy. and can make this positioning strategy tangible through any number of marketing tools (Example: A bank):  Place: the exterior and interior should have clean lines.  Variability: Because the quality of services depends on who provides them. and be. services are highly variable.➢ Distinctive Characteristics of Services: (p. services cannot be seen. then inventoried. Waiting lines should not get overly long. so their perishability can be a problem when demand fluctuates. and later consumed. desks. but there should be a sufficient number to manage the workload. services are typically produced and consumed simultaneously. ➢ Physical Evidence and Presentation: (p.

the points of customer contact. Several strategies can produce a better match between service demand and supply:  On the demand side: • Differential pricing: this will shift some demand from peak to off-peak periods. ➢ How to Increase Quality control: (p. (Several hospitals can share medical-equipment purchases) • Facilities for future expansion: can be a good investment.) • Shared services: can improve offerings. (An amusement park buys surrounding land for later development) ➢ A Blueprint for Overnight Hotel Stay: (p. service firms can employ one of three steps to increase quality control:  Invest in good Hiring and training procedures  Standardize the service-performance process throughout the organization  Monitor customer satisfaction ➢ Matching Demand and Supply: (p. 360) ○ A service blueprint can map out the service process.Price: The bank could advertise that it will deposit $5 in the account of any customer who waits in line more than five minutes. (Low matinee movies) • Nonpeak demand: this can be cultivated (McD’s pushes breakfast service) • Complementary services: can provide alternatives to waiting customers (cocktail lounges in restaurants & ATMS in banks) • Reservation systems: are a way to manage the demand level  On the supply side: • Part-time employees: can serve peak demand (Extra clerks for the holidays) • Peak-time efficiency: routines can allow employees to perform only essential tasks during peak periods (Paramedics assist physicians during busy periods) • Increased consumer participation: free service providers’ time. 361) ○ Demand or yield management is critical – the right services must be available to the right customers at the right places at the right times and right prices to maximize profitability. 360) ○ Because of variability. (Consumers fill out their own medical records or bag their own groceries. and the evidence of service from the customer’s point of view  .

 The figure below shows a service blueprint for a guest spending a night at a hotel: .

The figure below displays the four broad causes of customer failures: ➢ Solutions to Customer Failures: (p. they find managing customer failures (when a service problem arises from a customer’s lack of understanding or ineptitude) much more difficult.➢ Improving Service Quality: ○ Listenin g ○ ○ ○ ○ Reliabili ty Basic Service Service design Recover y ○ Surprising Customers Fair play Teamwork Employee research Servant leadership ○ ○ ○ ○ ➢ Root Causes of Customer Failure: (p. 364) ○ Solutions come in all forms:  Redesign processes and redefine customer roles to simplify service encounters. although many firms have well-designed and executed procedures to deal with their own failures. 364) ○ Unfortunately.  Incorporate the right technology to aid employees and customers .

Clients judge service not only by its technical quality but also by its functional quality. motivation. The most important contribution the marketing department can make is arguable to be “exceptionally clever in getting everyone else in the organization to practice marketing. 365) ○ The increased importance of the service industry has sharpened the focus on what it takes to excel in the marketing of services. distributing.  ➢ The Service-Quality Model: (p. Marketing excellence with services requires excellence in three broad cases (see figure):  External Marketing: describes the normal work of preparing. and promoting the service to customers  Internal Marketing: describes the training and motivating employees to serve customers well. and ability  Encourage “customer citizenship” so customers help customers (customers encouraging other customers in performance) ➢ Three Types of Marketing in Service Industries: (p. ➢ Gaps that Cause Unsuccessful Service Delivery: 1.Create high-performance customers by enhancing their role clarity.”  Interactive Marketing: describes employees’ skill in serving the client. Gap between consumer expectation and management . 373) ○ The service-quality model highlights the main requirements for delivering high service quality (see figure). pricing.

3. Gap between perceived service and expected service: This gap occurs when the consumer misperceives the service quality . 5. or incapable of or unwilling to meet the standard. perception: Management does not always correctly perceive what customers want Gap between management perception and service-quality specification: Management might correctly perceive customers’ wants but not set a performance standard Gap between service-quality specifications and service delivery: Employees might be poorly trained. they may be held to conflicting standards.2. 4. Gap between service delivery and external communications: Customer expectations are affected by statements made by company representatives and ads. such as taking time to listen to customers and serving them fast.

Assurance: The knowledge and courtesy of employees and their ability to convey trust and confidence 4.➢ Determinants of Service Quality: (p. ➢ Best Practices of Top Service Companies: (p.  Strategic Concept: Top companies have a clear sense of their target customers and their needs and have developed a distinctive strategy for satisfying these needs. Empathy: The provision of caring. personnel. equipment. both their own and competitors’. individualized attention to customers. on a regular basis. Responsiveness: Willingness to help customers and provide prompt service 3. 366) ○ In achieving marketing excellence with their customers. researchers identified five determinants of service quality. and communication materials. and systems for monitoring service performance and customer complaints. high standards. a history of topmanagement commitment to quality. profit tiers.  Top-management Commitment: Companies look monthly not only at financial performance. and to coddle big spenders to retain their patronage as long as possible. 5. 374) ○ Based on this service-quality model. but also at service performance  High Standards: The best service providers set high quality standards  Profit Tiers: Firms have decided to raise fees and lower services to those customers who barely pay their way. Tangibles: The appearance of physical facilities. • Example of a monitoring system for an auto dealership with rating attributes – see figure and table: Job done right the first time Perform only necessary work . in this order of importance: 1. Reliability: The ability to perform the promised service dependably and accurately 2. well-managed service companies share a strategic concept.  Monitoring Systems: Top firms audit service performance. • Services can be judged on customer importance and company performance.

the higher the cost.Fast action on complaints Prompt warranty work Able to do any job needed Service available when needed Courteous and friendly service Car ready when promised Low prices on service Clean up after service work Convenient to home Convenient to work Courtesy buses and cars Send out maintenance notices ➢ Developing Brand Strategies for Services: ○ Choosing Brand Elements ○ Establishing Image Dimensions ○ Devising Branding Strategy ➢ Customer worries: (p. 376) ○ Traditionally. customers have had three specific worries about product service:  Failure frequency: Customers worry about reliability and failure frequency. The customer counts on the seller’s service dependability – the seller’s ability to fix the machine quickly or at least provide a loaner  Out-of-pocket costs: How much does the customer have to spend on regular maintenance and repair costs? .  Downtime: The longer the downtime.

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