part 5 PowerPoint Presentation by Charlie Cook Copyright © 2003 South-Western College Publishing. All rights reserved. All rights reserved. Customer Service, Product, and Distribution Strategies 15 Small Business Marketing 12e

Copyright © by South-Western College Publishing. All rights reserved. 15–2 Looking Ahead After studying this chapter, you should be able to: 1. Explain how customer satisfaction influences customer loyalty. 2. Identify the key characteristics of consumer behavior. 3. Explain product strategy and related concepts. 4. Describe the components of a firm’s total product offering. 5. Describe the legal environment affecting product decisions.

Copyright © by South-Western College Publishing. All rights reserved. 15–3 Looking Ahead (cont’d) 6. Explain the role of distribution in marketing. 7. Describe the major considerations in structuring a distribution system.

Copyright © by South-Western College Publishing. All rights reserved. 15–4 Customer Satisfaction: The Key to Customer Loyalty Three Basic Beliefs: 1.Superior customer service creates customer satisfaction. 2.Customer satisfaction produces customer loyalty. 3.Small firms possess great potential for providing superior customer service.

Copyright © by South-Western College Publishing. All rights reserved. 15–5 Fig High Level of Customer Service Customer Satisfaction Customer Loyalty TacticResponseGoal Relationship of Customer Service to Customer Loyalty

Copyright © by South-Western College Publishing. All rights reserved. 15–6 Components of Customer Satisfaction 1.The most basic element of the product or service that customers expect all competitors to deliver. 2.General support services, such as customer assistance. 3.A recovery process for counteracting bad experiences. 4.Extraordinary services that excel in meeting customers’ preferences and make the product or service seem customized.

Copyright © by South-Western College Publishing. All rights reserved. 15–7 Ways to Develop Extraordinary Services Naming Names –Greet customers by name. Custom Care –Know what your customers’ want. Keeping in Touch –Communicate frequently with your customers. Boo-Boo Research –Ask lost customers why they went elsewhere.

Copyright © by South-Western College Publishing. All rights reserved. 15–8 The Customer Service Commitment Exceptional customer service provides a potential competitive edge opportunity to small firms. Being attentive and respectful of customers leads to customer satisfaction and to success. Superior levels of customer service are not easy to attain and are not cheap.

Copyright © by South-Western College Publishing. All rights reserved. 15–9 Evaluating Customer Service Customer service problems are the main source of customer complaints. Ways to address complaints: –Watch for problems –Talk to customers –Check up on the service Evaluating customer service is essential of any business

Copyright © by South-Western College Publishing. All rights reserved. 15–10 Understanding the Customer Key Points about Customers: –Customers are first and foremost human beings. –A customer’s satisfaction results from their interaction with the firm. –Understanding customers leads to more customer satisfaction and loyalty.

Copyright © by South-Western College Publishing. All rights reserved. 15–11 Fig Decision-Making Process Sociological Factors Culture Social Class Reference Groups Opinion Leaders Psychological Factors Needs Perceptions Motivations Attitudes Information Search and Evaluation Problem Recognition Purchase Decision Post-Purchase Decision Simplified Model of Consumer Behavior

Copyright © by South-Western College Publishing. All rights reserved. 15–12 Stage 1 in Consumer Decision Making Problem Recognition –The current state or a change in current state is not the ideal state of affairs due to:  Change in financial status  Change in household characteristics  Normal depletion of a resource  Product or service performance  Past decisions  Availability of products

Copyright © by South-Western College Publishing. All rights reserved. 15–13 Stage 2 in Consumer Decision Making Information Search and Evaluation –Evaluation criteria  The features of a product or service that customers use to compare brands. –Evoked set  A group of brands that a customer is both aware of and willing to consider as a solution to a purchase problem.

Copyright © by South-Western College Publishing. All rights reserved. 15–14 Stages 3 & 4 in Consumer Decision Making Purchase decision –Deciding how and where to make the purchase decision:  Store versus nonstore (catalog, TV, and the Internet) Post-purchase evaluation –Cognitive dissonance  The anxiety that occurs when a customer has second thoughts immediately following a purchase.

Copyright © by South-Western College Publishing. All rights reserved. 15–15 Fig Post-Purchase Activities of Consumers

Copyright © by South-Western College Publishing. All rights reserved. 15–16 Fig Consumer Options for Dealing with Product or Service Dissatisfaction Source: Adapted from Del I. Hawkins, Roger J. Best, and Kenneth A. Coney. Consumer Behavior, 8th ed. (Boston: McGraw Hill, 2001), p. 642.

Copyright © by South-Western College Publishing. All rights reserved. 15–17 Consumer Behavior Model Psychological Factors –Needs  Can be classified as physiological, social, psychological, and spiritual.  Consumers’ needs are never completely satisfied.  Difficulty occurs in determining which need can be satisfied by a specific product or service.  A service or product can satisfy more than one need.

Copyright © by South-Western College Publishing. All rights reserved. 15–18 Consumer Behavior Model (cont’d) Psychological Factors (cont’d) –Perceptions  The individual processes that give meaning to the stimuli confronting consumers. –Perceptual categorization  The process of grouping similar things so as to manage huge quantities of incoming stimuli.  Brand loyalty (a perceptual barrier) makes it difficult for competing brands to reach the loyal consumer.

Copyright © by South-Western College Publishing. All rights reserved. 15–19 Consumer Behavior Model (cont’d) Psychological Factors (cont’d) –Motivations  Goal-directed forces that organize and give direction to the tension caused by unsatisfied needs.  Provide the behavioral impetus for consumers to act to fulfill a need.  Marketing is motivation and does not create needs. –Attitudes  An enduring opinion based on knowledge, feeling, and behavioral tendency.

Copyright © by South-Western College Publishing. All rights reserved. 15–20 Consumer Behavior Model (cont’d) Sociological Factors –Culture  Behavioral pattern and values that characterize a group of consumers in a target market. –Social class  Societal divisions that have different levels of social prestige.

Copyright © by South-Western College Publishing. All rights reserved. 15–21 Consumer Behavior Model (cont’d) Sociological Factors –Reference groups  Groups that an individual allows to influence his or her behavior. –Opinion leaders  A group leader who plays a key communications role.

Copyright © by South-Western College Publishing. All rights reserved. 15–22 Product Strategy Product –A total bundle of satisfaction—a service, a good, or both—offered to consumers in an exchange transaction. –Includes both the main element (physical product or core service) and complementary components (features).

Copyright © by South-Western College Publishing. All rights reserved. 15–23 Service Marketing versus Goods Marketing Characteristics Pure Services Marketing Pure Goods Marketing Tangibility Production/ Consumption Standardization Perishability Tangibility Production/ Consumption Standardization Perishability Intangible goods Occur at the same time Less standardization Greater perishability Intangible goods Occur at the same time Less standardization Greater perishability Tangible goods Occur at different times Greater standardization Less perishability Tangible goods Occur at different times Greater standardization Less perishability Hybrid Services/ Goods Marketing

Copyright © by South-Western College Publishing. All rights reserved. 15–24 Product Strategy (cont’d) Product Strategy –The way the product component of the marketing mix is used to achieve a firm’s objectives. –Product item  The lowest common denominator in the product mix— the individual item –Product line  The sum of the related individual product items –Product mix consistency  The similarity of product lines in a product mix

Copyright © by South-Western College Publishing. All rights reserved. 15–25 Product Development Process Idea Accumulation Business Analysis Total Product Development Product Testing

Copyright © by South-Western College Publishing. All rights reserved. 15–26 Product Strategy (cont’d) Product Development Process –Idea accumulation  Increasing the number of ideas under consideration –Business analysis  Product’s relationship to the existing product line  Cost of development and introduction  Available personnel and facilities  Competition and market acceptance

Copyright © by South-Western College Publishing. All rights reserved. 15–27 Product Strategy (cont’d) Product Development Process (cont’d) –Total Product Development  Branding, packaging, pricing, and promotion –Product Testing  Proving the product design through consumer reaction to the product.

Copyright © by South-Western College Publishing. All rights reserved. 15–28 Product Strategy Options Key to Strategy Alternatives (1) One product/one market(3) Modified product/one market(5) Multiple products/one market (2) One product/multiple markets(4) Modified product/multiple markets(6) Multiple products/multiple markets One Market Multiple Markets One Product Modified Product Multiple Products (1) (2) (3) (4) (5) (6) Product MixStrategy AlternativesTarget Market(s)

Copyright © by South-Western College Publishing. All rights reserved. 15–29 Building the Total Product Offering Branding –A verbal and/or symbolic means of identifying a product. Rules for Naming a Product: –Select a name that is easy to pronounce and remember. –Choose a descriptive name. –Use a name that can have legal protection. –Select a name with promotional properties. –Select a name that can be used on several product lines of a similar nature.

Copyright © by South-Western College Publishing. All rights reserved. 15–30 Building the Total Product Offering (cont’d) Packaging –Color, design, and protection for the product. Labeling –Shows the brand and informs the consumer. Warranties –A promise that the product will perform at a certain level or meet certain standards.  Implied and written warranties  Policy considerations: Cost, service capability, competitive practices, customer perceptions, legal implications

Copyright © by South-Western College Publishing. All rights reserved. 15–31 Product Strategy Within The Legal Environment Consumer Protection –Labeling  Nutrition Labeling and Education Act of 1990  Listing of contents  Proper care and use –Product safety  Consumer Product Safety Act of 1972  Packaging  Use instructions  Disposal

Copyright © by South-Western College Publishing. All rights reserved. 15–32 Protecting a Product Offering Trademark –An identifying feature used to distinguish a manufacturer’s product Service Mark –A legal term indicating the exclusive right to use a brand to identify a service. Vinnie’s Villa ™

Copyright © by South-Western College Publishing. All rights reserved. 15–33 Protecting a Product Offering (cont’d) Patent Protection –The registered, exclusive right of an inventor to make, use, or sell and invention. –Utility patent  Registered protection for a new process or product’s function –Design patent  Registered protection for the appearance of a product and its inseparable parts –Plant patent  Registered protection for any distinct and new variety of plant

Copyright © by South-Western College Publishing. All rights reserved. 15–34 Protecting a Product Offering (cont’d) Copyright –The exclusive right of a creator to reproduce, publish, perform, display, or sell his or her works. –Copyright notice  The copyright symbol ©  The year the work was published  The copyright owner’s name Trade Dress –Elements of a firm’s distinctive image (“look”) not protected by a trademark, patent, or copyright.

Copyright © by South-Western College Publishing. All rights reserved. 15–35 Fig CopyrightsTrade Dress Trademarks Patents Ways of Protecting Intangible Assets Protecting a Firm’s Intangible Assets

Copyright © by South-Western College Publishing. All rights reserved. 15–36 The Role of Distribution Activities in Marketing Distribution –Physically moving products and establishing intermediary relationships to support such movement. Physical Distribution (Logistics) –The activities of distribution involved in the physical relocation of products. Channel of Distribution –The system of relationships established to guide the movement of a product.

Copyright © by South-Western College Publishing. All rights reserved. 15–37 The Role of Distribution Activities in Marketing (cont’d) Functions of Intermediaries –Perform the marketing function better. –Provide efficient distribution of the product. –Merchant middlemen  Intermediaries that take title to the goods they distribute. –Agents/brokers  Do not take title to the goods they distribute.

Copyright © by South-Western College Publishing. All rights reserved. 15–38 The Role of Distribution Activities in Marketing (cont’d) Types of Distribution Channels –Direct channel  A distribution system without intermediaries –Indirect channel  A distribution system with one or more intermediaries. –Dual distribution  A distribution system with more than one channel.

Copyright © by South-Western College Publishing. All rights reserved. 15–39 Fig Retailer Channel Wholesaler Channel Agent/Broker Channel Direct Channel Indirect Channels Producer Consumers or Industrial User Consumers or Industrial User Consumers or Industrial User Consumers or Industrial User Retailers or Industrial Distributor Retailers or Industrial Distributor Retailers or Industrial Distributor Wholesalers Agents or Brokers Alternative Channels of Distribution

Copyright © by South-Western College Publishing. All rights reserved. 15–40 Structuring a Distribution Channel Important Factors in Building a Distribution Channel –Costs associated with establishing a direct channel distribution –Coverage is increased through the use of indirect channels of distribution. –Control is enhanced using a direct distribution channel.

Copyright © by South-Western College Publishing. All rights reserved. 15–41 Determining the Scope of Physical Distribution Transportation—which mode to use? –Common carriers  Transportation intermediaries available for hire to the general public. –Contract carriers  Transportation intermediaries that contract with individual shippers. –Private carriers  Lines of transport owned by shippers.

Copyright © by South-Western College Publishing. All rights reserved. 15–42 Determining the Scope of Physical Distribution (cont’d) Storage – Lack of storage space is a common problem. Materials Handling –Protecting the firm’s output during warehousing. Specifying Responsibility for Delivery Terms –Paying freight costs. –Selecting the carriers. –Bearing the risk of damage. –Selecting the modes of transport.

Copyright © by South-Western College Publishing. All rights reserved. 15–43 Determining the Scope of Physical Distribution (cont’d) Logistics Companies –Firms which specialize in providing cost-effective transportation, storage, and distribution services to small companies.  Trucking  Packaging  Warehousing