1. MBA 601 Entrepreneurial Marketing Strategies Week Two Class Lecture Chapters 13, 14, 15 & 16

2. 13 Designing and Managing Services 1

3. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-3 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.

4. Services are Everywhere Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-4

5. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-5 Categories of Service Mix Pure tangible good Good with accompanying services Hybrid Service with accompany goods Pure service

6. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-6 Service Distinctions Equipment-based or people-based Service processes Client’s presence required or not Personal needs or business needs Objectives and ownership

7. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-7 Distinctive Characteristics of Services Intangibility Inseparability Variability Perishability

8. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-8 Physical Evidence and Presentation Place People Equipment Communication material Symbols Price

9. Inseparability Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-9

10. Variability Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-10

11. Increasing Quality Control Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-11

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

13. 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 13-13

14. Figure 13.3 Root Causes of Customer Failure Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-14

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

16. Figure 13.4 Types of Marketing in Service Industries Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-16

17. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-17 Best Practices Strategic Concept Top-Management Commitment High Standards Self-Service Technologies Monitoring Systems Satisfying Customer Complaints Satisfying Employees

18. 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 13-18

19. 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 13-19

20. Figure 13.6 Service-Quality Model Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-20

21. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-21 Determinants of Service Quality Reliability Responsiveness Assurance Empathy Tangibles

22. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13-22 Customer Worries Failure frequency Downtime Out-of-Pocket Costs

23. 14 Developing Pricing Strategies and Programs 1

24. 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 14-24

25. The Internet Changes the Pricing Environment – By Providing Information Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-25

26. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-26 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

27. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-27 Consumer Psychology and Pricing Reference prices Price-quality inferences Price endings Price cues

28. 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 14-28

29. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-29 Steps in Setting Price Select the price objective Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price

30. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-30 Step 1: Selecting the Pricing Objective Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership

31. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-31 Step 2: Determining Demand Price sensitivity Estimate demand curves Price elasticity of demand

32. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-32 Step 3: Estimating Costs Types of costs Accumulated production Activity-based cost accounting Target costing

33. Figure 14.2 Cost Per Unit at Different Levels of Production Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-33

34. 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 14-34

35. Analyzing Competitor’s Costs Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-35

36. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-36 Step 5: Selecting a Pricing Method Markup pricing Target-return pricing Perceived-value pricing Value pricing Going-rate pricing Auction-type pricing

37. Figure 14.5 Break-Even Chart for Determining Target-Return Price and Break-Even Volume Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-37

38. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-38 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

39. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-39 Geographical Pricing Pricing varies by location

40. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-40 Promotional Pricing Tactics Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting

41. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-41 Differentiated Pricing Customer-segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing

42. 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 14-42

43. Should We Raise Prices? Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-43

44. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14-44 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

45. 15 Designing and Managing Integrated Marketing Channels 1

46. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-46 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.

47. Intermediaries Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-47

48. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-48 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

49. REI Employs Hybrid Channels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-49

50. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-50 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

51. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-51 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

52. Marketing Channel Levels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-52

53. Figure 15.2 Consumer Markets Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-53

54. Figure 15.2 Industrial Markets Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-54

55. Reverse-Flow Channels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-55

56. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-56 Designing a Marketing Channel System Analyze customer needs Establish channel objectives Identify major channel alternatives Evaluate major channel alternatives

57. Figure 15.3 What European Consumers Value Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-57

58. Service Outputs of Channels Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-58 Lot size Waiting and delivery time Spatial convenience Product variety Service backup

59. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-59 Identifying Channel Alternatives Types of intermediaries Number of intermediaries Terms and responsibilities

60. Figure 15.5 Break-Even Cost Chart Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-60

61. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-61 Channel-Management Decisions Selecting channel members Training channel members Motivating channel members Evaluating channel members Modifying channel members

62. 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 15-62

63. Figure 15.6 The Hybrid Grid Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-63

64. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-64 Channel Conflict What types of conflict arise in channels? What causes conflict? What can marketers do to resolve it?

65. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-65 Causes of Channel Conflict Goal incompatibility Unclear roles and rights Differences in perception Intermediaries’ dependence on manufacturer

66. 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 15-66

67. E-Commerce Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-67 Pure-click Brick-and-click

68. M-Commerce Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-68

69. 16 Managing Retailing, Wholesaling, and Logistics 1

70. Retailing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-70

71. Table 16.1 Major Retailer Types Specialty store Department store Supermarket Convenience store Discount store Off-price retailer Superstore Catalog showroom Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-71

72. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-72 Nonstore Retailing Direct selling Direct marketing Automatic vending Buying service

73. Franchising System The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments The franchisee pays for the right to be part of the system The franchisor provides its franchisees with a system for doing business Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-73

74. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-74 Changes in the Retail Environment New retail forms and combinations Competition between store-based and non- store-based retailing Growth of giant retailers Decline of middle market retailers Growing investment in technology Global profile of major retailers Growth of shopper marketing

75. Retailers’ Marketing Decisions Target market Product assortment Procurement Prices Services Store atmosphere Store activities Store experiences Communications Location Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-75

76. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-76 Retailer Services Mix Prepurchase services Postpurchase services Ancillary services

77. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-77 Store Atmosphere and Experiences

78. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-78 Location Decision Central business districts Regional shopping centers Community shopping centers Shopping strips Location within a larger store

79. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-79 Wholesaling Functions Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling

80. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-80 Major Wholesaler Types Merchant Full-service Limited-service Brokers and agents Manufacturers Specialized

81. Supply Chain Management Supply chain management starts before physical distribution and means strategically procuring the right inputs (raw materials, components, and capital equipment); converting them efficiently into finished products; and dispatching them to the final destinations. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 16-81

82. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-82 Market Logistics Planning Deciding on the company’s value proposition to its customers Deciding on the best channel design and network strategy Developing operational excellence Implementing the solution

83. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-83 Market Logistics Sales forecasting Distribution scheduling Production plans Finished-goods inventory decisions Packaging In-plant warehousing Shipping-room processing Outbound transportation Field warehousing Customer delivery and servicing

84. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-84 Market Logistics Decisions How should orders be handled? Where should stock be located? How much stock should be held? How should goods be shipped?

85. Figure 16.1 Determining Optimal Order Quantity Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 16-85

86. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-86 Transportation Factors