1. MBA 601 Entrepreneurial Marketing Strategies Week Four Class Lecture Chapters 13,14 & 15

2. 13 Designing and Managing Services 1

3. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-3 Chapter Questions  How do we define and classify services and how do they differ from goods?  What are the new services realities?  How can we achieve excellence in services marketing?  How can we improve service quality?  How can goods marketers improve customer support services?

4. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-4 What is a Service? A service is any act of performance that one party can offer another that is essentially intangible and does not result in the ownership of anything; its production may or may not be tied to a physical product.

5. Services are Everywhere Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-5

6. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-6 Categories of Service Mix  Pure tangible good  Good with accompanying services  Hybrid  Service with accompany goods  Pure service

7. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-7 Service Distinctions  Equipment-based or people-based  Service processes  Client’s presence required or not  Personal needs or business needs  Objectives and ownership

8. Figure 13.1 Continuum of Evaluation for Different Types of Products Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-8

9. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-9 Distinctive Characteristics of Services Intangibility Inseparability Variability Perishability

10. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-10 Physical Evidence and Presentation  Place  People  Equipment  Communication material  Symbols  Price

11. Table 13.1 Dimensions of Brand Experience Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-11

12. Inseparability Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-12

13. Variability Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-13

14. Increasing Quality Control Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-14

15. Perishability Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-15

16. Matching Demand and Supply Demand side  Differential pricing  Nonpeak demand  Complementary services  Reservation systems Supply side  Part-time employees  Peak-time efficiency  Increased consumer participation  Shared services  Facilities for future expansion Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-16

17. New Service Realities Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-17

18. Figure 13.3 Root Causes of Customer Failure Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-18

19. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-19 Solutions to Customer Failures  Redesign processes and redefine customer roles to simplify service encounters  Incorporate the right technology to aid employees and customers  Create high-performance customers by enhancing their role clarity, motivation, and ability  Encourage customer citizenship where customers help customers

20. Figure 13.4 Types of Marketing in Service Industries Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-20

21. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-21 Best Practices  Strategic Concept  Top-Management Commitment  High Standards  Self-Service Technologies  Monitoring Systems  Satisfying Customer Complaints  Satisfying Employees

22. Figure 13.5 Importance- Performance Analysis Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-22

23. Table 13.3 Factors Leading to Customer Switching Behavior  Pricing  Inconvenience  Core Service Failure  Service Encounter Failures  Response to Service Failure  Competition  Ethical Problems  Involuntary Switching Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-23

24. Improving Service Quality  Listening  Reliability  Basic service  Service design  Recovery  Surprising customers  Fair play  Teamwork  Employee research  Servant leadership Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-24

25. Figure 13.6 Service-Quality Model Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-25

26. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-26 Determinants of Service Quality  Reliability  Responsiveness  Assurance  Empathy  Tangibles

27. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-27 Customer Worries Failure frequency Downtime Out-of-Pocket Costs

28. 14 Developing Pricing Strategies and Programs 1

29. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-29 Chapter Questions  How do consumers process and evaluate prices?  How should a company set prices initially for products or services?  How should a company adapt prices to meet varying circumstances and opportunities?  When should a company initiate a price change?  How should a company respond to a competitor’s price challenge?

30. Synonyms for Price  Rent  Tuition  Fee  Fare  Rate  Toll  Premium  Honorarium  Special assessment  Bribe  Dues  Salary  Commission  Wage  Tax Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-30

31. Synonyms for Price  Rent  Tuition  Fee  Fare  Rate  Toll  Premium  Honorarium  Special assessment  Bribe  Dues  Salary  Commission  Wage  Tax Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-31

32. The Internet Changes the Pricing Environment – By Providing Information Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-32

33. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-33 Common Pricing Mistakes  Determine costs and take traditional industry margins  Failure to revise price to capitalize on market changes  Setting price independently of the rest of the marketing mix  Failure to vary price by product item, market segment, distribution channels, and purchase occasion

34. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-34 Consumer Psychology and Pricing  Reference prices  Price-quality inferences  Price endings  Price cues

35. Table 14.1 Possible Consumer Reference Prices  “Fair price”  Typical price  Last price paid  Upper-bound price  Lower-bound price  Competitor prices  Expected future price  Usual discounted price Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-35

36. Tiers in Pricing Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-36

37. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-37 Steps in Setting Price  Select the price objective  Determine demand  Estimate costs  Analyze competitor price mix  Select pricing method  Select final price

38. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-38 Step 1: Selecting the Pricing Objective  Survival  Maximum current profit  Maximum market share  Maximum market skimming  Product-quality leadership

39. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-39 Step 2: Determining Demand  Price sensitivity  Estimate demand curves  Price elasticity of demand

40. Figure 14.1 Inelastic and Elastic Demand Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-40

41. Table 14.3 Factors Leading to Less Price Sensitivity  The product is more distinctive  Buyers are less aware of substitutes  Buyers cannot easily compare the quality of substitutes  Expenditure is a smaller part of buyer’s total income  Expenditure is small compared to the total cost  Part of the cost is paid by another party  Product is used with previously purchased assets  Product is assumed to have high quality and prestige  Buyers cannot store the product Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-41

42. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-42 Step 3: Estimating Costs  Types of costs  Accumulated production  Activity-based cost accounting  Target costing

43. Figure 14.2 Cost Per Unit at Different Levels of Production Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-43

44. Cost Terms and Production  Fixed costs  Variable costs  Total costs  Average cost  Cost at different levels of production Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-44

45. Figure 14.3 Cost per Unit as a Function of Accumulated Production Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-45

46. Target Costing Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-46

47. Analyzing Competitor’s Costs Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-47

48. Figure 14.4 The Three Cs Model for Price-Setting Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-48

49. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-49 Step 5: Selecting a Pricing Method  Markup pricing  Target-return pricing  Perceived-value pricing  Value pricing  Going-rate pricing  Auction-type pricing

50. Figure 14.5 Break-Even Chart for Determining Target-Return Price and Break-Even Volume Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-50

51. Dollar Store Pricing Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-51

52. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-52 Auction-Type Pricing English Dutch Sealed-Bid

53. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-53 Step 6: Selecting the Final Price  Impact of other marketing activities  Company pricing policies  Gain-and-risk sharing pricing  Impact of price on other parties

54. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-54 Geographical Pricing  Pricing varies by location

55. Price Discounts and Allowances  Discount  Quantity discount  Functional discount  Seasonal discount  Allowance Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-55

56. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-56 Promotional Pricing Tactics  Loss-leader pricing  Special-event pricing  Cash rebates  Low-interest financing  Longer payment terms  Warranties and service contracts  Psychological discounting

57. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-57 Differentiated Pricing  Customer-segment pricing  Product-form pricing  Image pricing  Channel pricing  Location pricing  Time pricing  Yield pricing

58. Traps in Price Cutting Strategies  Low-quality trap  Fragile-market-share trap  Shallow-pockets trap  Price-war trap Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-58

59. Should We Raise Prices? Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-59

60. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-60 Methods for Increasing Prices  Delayed quotation pricing  Escalator clauses  Unbundling  Reduction of discounts

61. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-61 Brand Leader Responses to Competitive Price Cuts  Maintain price  Maintain price and add value  Reduce price  Increase price and improve quality  Launch a low-price fighter line

62. 15 Designing and Managing Integrated Marketing Channels 1

63. Chapter Questions  What is a marketing channel system and value network?  What work do marketing channels perform?  How should channels be designed?  What decisions do companies face in managing their channels?  How should companies integrate channels and manage channel conflict?  What are the key issues with e-commerce and m-commerce? Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-63

64. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-64 What is a Marketing Channel? A marketing channel system is the particular set of interdependent organizations involved in the process of making a product or service available for use or consumption.

65. Intermediaries Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-65

66. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-66 Channels and Marketing Decisions  A push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users  A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries

67. REI Employs Hybrid Channels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-67

68. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-68 Buyer Expectations for Channel Integration  Ability to order a product online and pick it up at a convenient retail location  Ability to return an online-ordered product to a nearby store  Right to receive discounts based on total online and offline purchases

69. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-69 Table 15.1 Channel Member Functions  Gather information  Develop and disseminate persuasive communications  Reach agreements on price and terms  Acquire funds to finance inventories  Assume risks  Provide for storage  Provide for buyers’ payment of their bills  Oversee actual transfer of ownership

70. Figure 15.1 Marketing Flows in the Marketing Channel for Forklift Trucks Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-70

71. Marketing Channel Levels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-71

72. Figure 15.2 Consumer Markets Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-72

73. Figure 15.2 Industrial Markets Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-73

74. Reverse-Flow Channels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-74

75. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-75 Designing a Marketing Channel System  Analyze customer needs  Establish channel objectives  Identify major channel alternatives  Evaluate major channel alternatives

76. Figure 15.3 What European Consumers Value Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-76

77. Service Outputs of Channels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-77 Lot size Waiting and delivery time Spatial convenience Product variety Service backup

78. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-78 Identifying Channel Alternatives  Types of intermediaries  Number of intermediaries  Terms and responsibilities

79. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-79 Number of Intermediaries  Exclusive  Selective  Intensive

80. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-80 Terms and Responsibilities of Channel Members  Price policy  Condition of sale  Distributors’ territorial rights  Mutual services and responsibilities

81. Figure 15.4 The Value-Adds versus Costs of Different Channels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-81

82. Figure 15.5 Break-Even Cost Chart Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-82

83. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-83 Channel-Management Decisions  Selecting channel members  Training channel members  Motivating channel members  Evaluating channel members  Modifying channel members

84. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-84 Channel Power Coercive Reward Legitimate Expert Referent

85. Channel Integration and Systems  Vertical marketing systems  Corporate VMS  Administered VMS  Contractual VMS  Horizontal marketing systems  Multichannel systems Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-85

86. Integrated Marketing Channel System Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-86

87. Figure 15.6 The Hybrid Grid Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-87

88. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-88 Channel Conflict  What types of conflict arise in channels?  What causes conflict?  What can marketers do to resolve it?

89. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-89 Causes of Channel Conflict  Goal incompatibility  Unclear roles and rights  Differences in perception  Intermediaries’ dependence on manufacturer

90. Table 15.3 Strategies for Managing Channel Conflict  Strategic justification  Dual compensation  Superordinate goals  Employee exchange  Joint memberships  Cooptation  Diplomacy  Mediation  Arbitration  Legal recourse Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-90

91. E-Commerce Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-91 Pure-click Brick-and-click

92. M-Commerce Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-92