Connecting the Dots: Principles of Marketing in a Really Short Time Purdue University July 28, 2009

Slides taken from Principles of Marketing, 10th Edition, by Philip Kotler and Gary Armstrong and used with permission.

Changes in the Service Sector 1.Shift in the Base of World Economies 2.Your customer's Expectations Are Shifted by Forces Outside Your Industry 3.Technology, Technology, Technology!

Shift in World Economies Agricultural Industrialization Service

Your Customer’s Expectations Are Shifting! Your customer expects your service to be: Immediate Perfect Free

Opportunities Spring from Technology Creation of new or improved service More involvement of customers in operation tasks through self-service Creation of centralized customer service departments Recording customer information on easily accessible data banks

What is Marketing? needwant exchanging products Process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. More simply: Marketing is the delivery of customer satisfaction at a profit.

What is Marketing? "Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders." American Marketing Association 2004

What Motivates a Consumer to Take Action? Needs – state of felt deprivation for basic items such as food and clothing and complex needs such as for belonging. i.e. I need a better job Wants – form that a human need takes as shaped by culture and individual personality. i.e. I want a college degree Demands – human wants backed by buying power. i.e. I have money to obtain a college degree from XYZ University

How Do Consumers Choose Among Products and Services? Customer Value – benefit that the customer gains from owning and using a product compared to the cost of obtaining the product. Customer Satisfaction – depends on the product’s perceived performance in delivering value relative to a buyer’s expectations. Linked to Quality and Total Quality Management (TQM).

Marketing & Sales Concepts Contrasted Factory Existing Products Selling and Promoting Profits through Volume Market Customer Needs Integrated Marketing Profits through Satisfaction The Selling Concept The Marketing Concept Starting Point FocusMeansEnds

The Marketing Process Target Consumers Product PlacePrice Promotion Marketing Implementation Marketing Planning Marketing Control Marketing Analysis Competitors Marketing Intermediaries PublicsSuppliers Demographic- Economic Environment Technological- Natural Environment Political- Legal Environment Social- Cultural Environment

Seven P’s of Service Product Quality Features Options Style Brand Packaging Sizes Services Warranties Returns Traditional four P’s of Marketing Payment Period Credit Terms Price List Price Discounts Allowances

Seven P’s of Service Place Channels Coverage Location Inventory Transport Promotion Advertising Personal Selling Sales Promotion Publicity Direct Marketing

3 More P’s n Physical Evidence – Arrangements of objects – Materials used – Shapes/lines – Lighting/shadows − Color − Temperature − Noise n Process Design – Policies & Procedures – Factory/delivery cycle time n Participant – Service Provider – Other employees and customers − Training and rewarding systems − Customer being serviced

The Marketing Information System Marketing Information System Information Analysis Internal Data Marketing Research Marketing Intelligence Distributing Information Assessing Information Needs Marketing Managers Marketing Environment Marketing Decisions and Communications Developing Information

Characteristics Affecting Consumer Behavior Buyer Psychological Personal Social Culture

The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior

Steps in Segmentation, Targeting, and Positioning 1. Identify Bases for Segmenting the Market 2. Develop Profiles of Resulting Segments 3. Develop Measures of Segment Attractiveness 4. Select Target Segment(s) 5. Develop Positioning for Each Target Segment 6. Develop Marketing Mix for Each Target Segment Market Positioning Market Targeting Market Segmentation

Step 1. Market Segmentation Bases for Segmenting Consumer Markets Geographic Demographic Age, gender, family size and life cycle, or income Psychographic Social class, lifestyle, or personality Behavioral Occasions, benefits, uses, or responses Nations, states, regions or cities

Using Multiple Segmentation Bases: Geodemographics

Step 3. Positioning for Competitive Advantage: Strategies Against a CompetitorAgainst a Competitor Usage Occasions Usage Occasions Away from Competitors Away from Competitors Product Attributes Product Attributes Product Class Product Class Benefits Offered Benefits Offered Users B A A E D C H G F

Selecting the Right Competitive Advantages Criteria for Determining Which Differences to Promote Affordable Superior Profitable Preemptive Distinctive Important Communicable

Communicating A Strong Positive Image Image Formula (accuracy + clarity + consistency) x continuity Accuracy * Honest and reachable – 95% who we are and who we want to be Clarity * Is our message understandable and measurable? Consistency * Is everyone singing the same tune? Continuity * Over time

What is a Product? Anything that can be offered to a market for attention, acquisition, use or consumption. Satisfies a want or a need. Includes: Physical Products Services Persons Places Organizations Ideas Combinations of the above

Levels of Product Brand Name Quality Level Packaging Design Features Delivery & Credit Installation Warranty After-Sale Service Core Benefit or Service Actual Product Actual Product Core Product Augmented Product

Characteristics of Services Intangibility Inseparability Variability Perishability Can’t be seen, tasted, felt, heard, or smelled before purchase. Can’t be separated from service providers. Quality depends on who provides them and when, where and how. Can’t be stored for later sale or use.

Marketing Strategies for Service Firms Managing Service Differentiation Develop offer, delivery and image with competitive advantages. Managing Service Quality Empower employees Become “Customer obsessed” Develop high service quality standards Watch service performance closely Managing Service Productivity Train current or new employees Utilize technology

Value = Benefits – Costs

Benefits = Solution to a problem

Costs = n Financial n Time n Hassle n Opportunity n Physical n Psychological n Social

Distribution n Access n Location n Control the pathways

The Communication Process Media Message Response Feedback Sender Encoding Decoding Receiver

Steps in Developing Effective Communication Step 1. Identifying the Target Audience Step 2. Determining the Communication Objectives Buyer Readiness Stages Step 2. Determining the Communication Objectives Buyer Readiness Stages Purchase Conviction Preference Liking Knowledge Awareness

Setting the Promotion Mix Nature of Each Promotion Tool Advertising Reaches Many Buyers, Expressive Impersonal Advertising Reaches Many Buyers, Expressive Impersonal Personal Selling Personal Interaction, Builds Relationships Costly Personal Selling Personal Interaction, Builds Relationships Costly Sales Promotion Provides Strong Incentives to Buy Short-Lived Sales Promotion Provides Strong Incentives to Buy Short-Lived Public Relations Believable, Effective, Economical Underused by Many Companies Public Relations Believable, Effective, Economical Underused by Many Companies Direct Marketing Nonpublic, Immediate, Customized, Interactive Direct Marketing Nonpublic, Immediate, Customized, Interactive

Customer Satisfaction Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations. Buyer’s Expectations Are Based On: Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises Product’s Actual Performance Performance Exceeds Expectations– Customer is Delighted Performance Below Expectations – Customer is Dissatisfied

The Basis of Service Quality

Other’s Definition Quality = Zero Defects – Deming Conformance to specifications – Crosby “Attention to detail and exceeding customer expectations” – Disney

The Customer’s Definition Reliability Consistency Dependability Honor your promises Responsiveness Willingness/readiness of employees to provide service Timeliness of service – Berry et al

Competence Possession required skills and knowledge Of contact personnel Of operational support personnel Research capability of firm Access Approachability and ease of contact

Courtesy Politeness Respect Consideration Friendliness Communication Keeping customers informed in language they understand Listening to customers

Credibility Trustworthiness Believability Honesty Security Freedom from danger, risk or doubt Physical safety Financial Confidentiality

Understanding the Customer The marketing concept Specific customer requirements Individualized attention Recognizing the regular customer Tangibles Physical evidence of service Facilities Personnel Other customers Tools or equipment

Breakdown in Service Quality Key Factors: Lack of market segmentation Insufficient marketing research Inadequate use of marketing research Lack of interaction between management and customers Insufficient communication between contact employees and managers Customer Expectations Perceptions of Customer Expectations Source of For Service Gaps: Zeithaml, Berry & Parasuraman, GAP 1 Service Gaps

Breakdown in Service Quality Key Factors: Lack of customer-defined standards and process management Absence of formal process for setting service quality goals Perception of infeasibility — that customer expectations cannot be met Inadequate management commitment to service quality Perceptions of Customer Expectations Service Quality Standards Source of For Service Gaps: Zeithaml, Berry & Parasuraman, GAP 2 Service Gaps

Breakdown in Service Quality Key Factors: Role ambiguity among employees Role conflict among employees Poor employee - technology - job fit Inappropriate evaluation / compensation system lack of perceived control (contact personnel!) Lack of teamwork Service Quality Standards Service Delivery Source of For Service Gaps: Zeithaml, Berry & Parasuraman, GAP 3 Service Gaps

Breakdown in Service Quality Service Gaps Key Factors: Inadequate management of expectations Overpromising in advertising Overpromising in personal selling Inadequate communication among departments/functions Differences in policies and procedures across branches or units Service Delivery External Communications to Customers Source of For Service Gaps: Zeithaml, Berry & Parasuraman, GAP 4

Thank you!