F11 MCS-1000 ExamNotes

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Fall 2011 MCS 1000 Notes

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Marketing 1000 Final Exam Study Notes

Needs/Wants/Demands

Needs

- States of felt deprivation, including basic physical needs for food, clothing, warmth, and safety.Social needs for belonging and affection, individual needs for knowledge and self-expression, these

needs were not created by marketers; theyre basic part of human make up.

-ex need for shelter, food,

Wants

- Form of human needs that take as shaped by culture and individual personality

- We need food, but we want Big Macs

Demands

- Human wants that are backed by buying power

-we as consumers demand products that we believe will satisfy our wants

Marketing Concepts

The Production Concept

Production Concept the idea that the buyers will favour products that are widely available and highly

affordable.

-management should focus on improving production and distribution efficiency

-useful in two situations: when demand>supply, and when the products cost is too high so the company

can use improved efficiency to bring it down

-can cause marketing myopia businesses can lose sight of the real objective of building customer

relationships by satisfying customers needs

The Product Concept

Product Concept the idea that buyers will favour products that offer the most in quality, performance,

and innovative features.

-marketing strategy should focus on making continuous product improvements

The Selling Concept

Selling Conceptthe idea that the market will not buy enough of the firms products unless it

undertakes a large-scale selling effort.

-typically used with unsought goods, such as insurance and blood donations

-used when a firm faces overcapacity

-marketing focuses on selling what they make rather than what the market wants

-focus on creating sales transactions rather than building long-term customer relationships

The Marketing Concept

Marketing Concept the marketing management philosophy that holds that achieving organizational

goals depends on knowing the needs and wants of target markets and delivering the desired

satisfactions better than competitors do.

-customer focus and value are the paths to sales and profits


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-job is to find the right products for your customers

The Societal Marketing Concept

Societal Marketing Concept a principle of enlightened marketing that holds that marketing strategy

should deliver value to the organizations customers in a way that maintains or improves the well-being

of society.

-questions whether the pure marketing concept overlooks possible conflicts between the short-term

needs and wants of individuals and the long-run welfare of society

Strategic Planning

Strategic Planningthe process of developing and maintaining a strategic fit between the organizations

goals and capabilities and its changing market opportunities.

-strategic planning involves adapting the firm to take advantage of opportunities in its constantly

changing environment.

Corporate Level: Defining Company Mission Setting Company Objectives and Goals Designing the

Business Portfolio

Business Unit, Product, and Market Level: Planning Marketing and Other Functional Strategies

-marketing planning occurs at the business unit, product, and market level and it supports company

strategic planning with more detailed plans for specific market opportunities.

-if you fail to plan, you are planning to fail

Strategic Business Unit

Strategic Business Unit (SBU) a unit of the company that has its own mission and objectives and that

can be planned independently from other company businesses.

Service Profit Chain

Service-Profit Chain the chain that links service firm profits with employee and customer satisfaction.

-reaching service profits and growth begins with taking care of those who take care of customers

Five links:

1) Internal Service Qualitysuperior employee selection and training, quality work environment, strongsupport for those dealing with customerswhich results in..

2) Satisfied and Productive Service Employees which results in

3) Greater Service Value more effective and efficient customer value creation and service delivery..

which results in..

4) Satisfied and Loyal Customerswhich results in

5) Healthy Service Profits and Growth superior service firm performance


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Requires:

Internal Marketing marketing by a service firm to train and effectively motivate its customer-contact

employees and all the supporting service people to work as a team to provide customer satisfaction.

-must precede external marketing

Interactive Marketing marketing by a service firm that recognizes that perceived service quality

depends heavily on the quality of buyer-seller interaction.

-service companies have three major marketing tasks: competitive differentiation, service quality, and

productivity

Product Life Cycle

Product Life Cycle the lifespan of a new product, from its development to its eventual decline.

- All products will pass through the PLC

Whats different is:

How long it takes between stagesHow long it remains in each stage

5 Stages of the PLC:

1) Development no customers, sales=0, heavy spending

-when company finds and develops a new product idea

2) Introduction early adopter customer, slow sales growth, no profits, high launch costs

-product is introduced in the market

3) Growth early majority customers, rapid sales growth and revenues

-rapid market acceptance and increasing profits

4) Maturity late maturity customers, flat sales, declining profits

-increased marketing outlays to defend product against competition

5) Decline laggard customers, declining sales and profits, replaced by new products

Criticisms of Marketing

Customer Concerns:

-High Prices caused by unnecessary advertising

-High-Pressure Selling commission based sellers

-Deceptive Practices


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-Unsafe Products

-Planned Obsolescence holding back features then revealing them later to make older models obsolete

-Weblining discriminating against customers based on their purchase behaviour, spending habits, etc

Societys Concern:

-false wants and too much materialism

-business yields too much political power

-marketings impact on other businesses

-too few social goods

-cultural pollution

Environmentalism

Environmentalism - An organized movement of concerned citizens, businesses, and government

agencies working to protect and improve the natural environment

-marketing systems goal should be to maximize life qualityEnvironmental sustainability - a management approach that involves developing strategies that

both sustain the environment and produce profits for the company.

-Sustainability is a crucial but difficult goal

-goal is to establish a sustainable global economy: an economy that the planet is capable of supporting

indefinitely

Pricing Strategies/Pricing Methods

Marketing Skimming Pricing setting a high price for a new product to skim maximum revenues layer bylayer from the segments willing to pay the price.

-early adopters want new products right away, regardless of the price

-introduced at the highest price marketers think consumers will pay for it

-price is then lowered in stages

Market Penetration Pricing a strategy that sets a low price for a new product to attract a segment of

buyers, then raises the price.

-goal is to attract a large number of buyers quickly and gain a large market share

-idea is that high sales volumes will reduce costs

Prestige Pricing a product that offers the buyer prestige in exchange for a high price.

-ex Ferrari

-can also work for ordinary products for example Stella Artois

Product Line Pricing

Optional-Product Pricing offering to sell an optional or accessory product along with their main

product.

-ex. Bluetooth in a car


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Captive-Product Pricing setting a price for products that must be purchased along with a main product.

-ex razor blades (that go with razors), printer cartridges (that go with the printer)

By-Product Pricing company seeks a market for byproducts to help offset the costs of disposing of

them and to help make the price of the main product more competitive.

Bundle Pricing when marketers group more than one product together and charge a price for the set.

-ex a combo at a fast food restaurant

Consumerism

Consumerism an organized movement of citizens and government agencies to improve the rights and

power of buyers in relation to sellers.

-Consumer Association of Canada

Traditional Sellers Rights:

-right to introduce any product in any size and style

-right to charge any price for the product

-right to spend any amount to promote the product

-right to use any product message

-right to use any buying incentive schemes

Fundamental Consumer Rights:

-right to safety

-right to be informed

-right to choose

-right to be heard

-right to redress against damage

-right to consumer education

Marketing Environment

Marketing Environment all the actors and forces outside the marketing department that affect

marketing managements ability to perform its functions.

Microenvironment the actors and forces close to the company that affect its ability to serve customers

the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.

Macroenvironment actors and forces in society and the world that affect the microenvironmentdemographic, economic, natural, technological, political, and cultural forces.


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Marketing/Distribution Channels

Marketing Intermediaries third-party companies neither the marketer nor the customer that help

the company promote, sell, and distribute its goods to customers.

Marketing Intermediaries include:

Retailers buy merchandise from manufacturers and resell them in stores to consumersDistributors physically stock and move goods from their point of origin

Brokers arrange for the movement of goods from their point of origin to their retailer or wholesaler,

but never physically touch or take possession of the merchandise

Marketing Services Agencies perform marketing tasks

Financial Intermediaries help finance transactions or insure against the risks associated with the

buying and selling of products

Wholesaler

-wholesaler is the company that sells the product to the retailer who sells the product to the consumer

-buy in bulk then break the lots into smaller quantities for retailers

-takes a risk by holding the product between the manufacturer and retailer

Retailer

Retailing all activities involved in selling goods or services directly to final customers for their personal

(not business) use.

-classified in terms of the amount of service they offer (self-service, limited service, full service), the

breadth and depth of their product lines, their pricing approaches, and how they are organized.

Marketing Intelligence

Marketing Intelligence - A systematic collection and analysis of publicly available information about

competitors and developments in the marketing environment.

- Is a specific branch of competitive intelligence

- Goal is to improve strategic decision making, assess and track co mpetitors actions, and provide early

warning of opportunities and threats

- Growing use of marketing intelligence raises some ethical issues, most techniques are legal, but some

are considered questionable

-good marketing intelligence usually comes from public sources

Marketing Research

Marketing Research the systematic design, collection, analysis, and reporting of data relevant to a

specific marketing situation facing an organization.

-can hire someone to conduct research on a specific area or buy data collected by outside firms


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Research Process

The Marketing Research Process has four steps:

1.Defining the Problem and research objectives

2. Developing the research plan for collecting info

3. Implementing the research plan

4. Interpreting and reporting the findings

Defining the Problem and Research Objectives

-manager best understands the decision for which info is needed

-researcher best understands marketing research and how to obtain the info

-often the hardest step in the process

-see research objectives section below

Developing the Research Plan-need to determine exact info needed, develop a plan for gathering it efficiently, and present the plan to

management

-research plan includes: existing data, spells out research approaches, contact methods, sampling plans,

and instruments that researchers will use to gather new data

-research plan should be presented in a written proposal

-proposal should cover management problems addressed and research objectives, info to be obtained,

and how the results will help, and research costs

Primary Data info collected for the specific purpose at hand.

Secondary Data info that already exists somewhere, having been collected for another purpose.

Gathering Secondary Data-can use companys internal database, commercial data sources, government sources, etc

Online Databases computerized collections of data available online, either from closed, subscriber-

only services, or via the public internet.

-secondary data can usually be obtained faster and at a lower cost than primary data

-evaluate info to make sure it is relevant, accurate, current, and impartial

Primary Data Collection

-research approaches: observational, survey, experiment

Observational Research the gathering of primary data by observing relevant people, actions,

and situations.

-mechanical observations, ex meters attached to TV sets

Research Objectives: Exploratory, Descriptive, Causal

-market research is about finding the answers to questions and businesses problems so that marketing

managers can make decisions


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-defining the problem and clearly stating the research objective is the hardest part

-can often begin with exploratory research to help define the problem and later follow with causal or

descriptive research

Exploratory Research

Exploratory Research marketing research to gather preliminary info that will help define problems and

suggest hypotheses.

-Formats problems more precisely, clarifying concepts, gathering explanations, gaining

insight, eliminating impractical ideas, and forming hypothesises

-Does not seek to test them, just finds them out

Descriptive Research

Descriptive Research marketing research to better describe marketing problems, situations, or

markets, such as the market potential for a product or the demographics and attitudes of consumers

who buy the product.

-Seeks to describe a product, determine how many people use the product

-Defines questions, prepares the company for required changes

Causal Research

Causal Research marketing research to test hypotheses about cause-and-effect relationships.

-Seeks to find cause and effect relationships between variables-Accomplishes this by experiments

Types of Research

Observational research defined above

Mechanical Observation ex meters on TV sets

Survey Research the gathering of primary data by asking people questions about their knowledge,

attitudes, preferences, and buying behaviour.

Experimental Research the gathering of primary data by selecting matched groups of subjects, giving

them different treatments, controlling unrelated factors, and checking for differences in group

responses.

Single-Source Data Systems systems that combine surveys of huge consumer panels and electronic

monitoring of respondents purchases and exposure to various marketing activities in an effort to better

understand the link among consumer characteristics, attitudes, and purchase behaviour.

Consumer Buyer Behaviour

Consumer Behaviour the buying behaviour of consumers individuals who buy goods and services for

their own use and consumption.


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-consumer influences are strongly influenced by cultural, social, personal, and psychological

characteristics

Maslows Hierarchy of Needs

Self-Actualization Needs (self-development and realization)

Esteem Needs (self-esteem, recognition, status)

Social Needs (sense of belonging, love)

Safety Needs (security, protection)

Physiological Needs (hunger, thirst)

-tries to explain why people are driven by different needs at different times

-most pressing at bottom, least at top

-once most important need is satisfied, they move onto the next

High vs. Low Involvement Products

-low involvement products

-ex toothpaste or laundry detergent

-may require no info search


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-high involvement products

-ex motorcycle

-usually requires search time by consumers, such as, where can I buy it?

Segmentation

-identify bases for segmenting the market; develop segment profiles

Market Segmentation dividing a market into distinct groups with distinct needs, characteristics, or

behaviour that might need separate products or marketing mixes.

Market Segment a group of potential customers who respond in a similar way to a given set of

marketing efforts.

-when segmenting markets, caution and sound ethics must be used

Targeting

-develop measure of segment attractiveness; select target segments

Target Marketingthe process of evaluating each market segments attractiveness and selecting the

most appropriate ones to enter.

-target segments should be chosen based on an analysis of which ones it feels will profitably generate

the greatest customer value and sustain it over time

-niches are relatively small market segments

-most companies enter a market by serving a single segment, if this is successful, they expand to serve

additional segments-large organizations sometimes strive to meet the entire market

Positioning

-develop positioning for target segments; develop a marketing mix for each segment

-a position is a place the product occupies in the mind of the potential customer, and relative to

competitors

Market Positioning arranging for a product to occupy a clear, distinctive, and desirable place relative to

competing products in the mind of the buyer.-therefore, positions are intended to distinguish their products from competing brands and

given them the greatest strategic advantage in their target markets

-positioning ultimately exists in the mind of the individual

-first the marketer needs to establish a possible competitive advantage on which to build the position

-effective positioning begins with actual differentiating the companys marketing offer so that it

gives the consumer more than the competitor


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-once a position is chosen, the company must communicate that position to its customers

-the marketing program must support the positioning strategy

Based on four priniciples:

1. A company must establish a position in the minds of customers

2. The position should have one simple and consistent message

3. The position must set a company apart from its competitors

4. A company cannot be all things to all people it must focus its efforts

Requirements for Effective Segmentation

-There are many ways to segment a market, but not all segmentations are effective

-To be useful, markets segments must be:

Measureable: the size, purchasing power, profiles of the segments, can be

measured

Accessible: the segments can be effectively reached and servedDifferentiable: the segments are conceptually distinguishable and respond

differently to different marketing mix elements and programs

Actionable: effective programs can be designed for attracting and serving the

segments

Differentiation Strategies

Differentiated Marketing a market-coverage strategy in which a firm decides to target several market

segments and designs separate offers for each.-generates higher sales and a stronger position within each market segment

-more expensive

Types of differentiation:

-product -people -channels

-services -image


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Positioning Strategies

Good vs. Service

8 differences between goods and services:

1. Most service products cannot be inventoried

-customers may be turned away or have to wait

2. Intangible elements usually dominate value creation

-customers cant taste, smell, or touch these elements and not may be able to see or hear them

-harder to evaluate service and distinguish from competitors

3. Services are often difficult to visualize and understand

-customers perceive greater risk and uncertainty

4. Customers may be involved in co-production

-customers interact with providers equipment, facilities, and systems-poor task execution by customers may hurt productivity, spoil service experience, curtail

benefits

5. People may be a part of the service experience

-appearance, attitude, and behaviour of service personnel and other customers can shape the

experience and affect satisfaction


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6. Operational inputs and outputs tend to vary more widely

-harder to maintain consistency, reliability, and service quality or to lower costs through higher

productivity

-difficult to shield customers from results of service failures

7. The time factor often assumes great importance

-customers see time as a scarce resource to be spend wisely; dislike wasting time waiting, want

service at times that are convenient

8. Distribution may take place through nonphysical channels

-info-based services can be delivered through electronic channels but core products involving

physical activities or products cannot

Product Types

Consumer Products

Consumer Products product bought by individuals for person consumption.

Convenience Products consumer product that the individual usually buys frequently, immediately, and

with a minimum of comparison and buying effort. Ex soap, candy, newspapers, fast food

Shopping Products consumer product that people, in the process of selection and purchase,

characteristically compares on bases such as suitability, quality, price, and style. Ex furniture, clothing,

used cards, major appliances, hotel and airline services

Specialty Products consumer product with unique characteristics or brand identification for which a

significant group of buyers is willing to make a special purchase effort. Ex cars, high-priced photography

equipment, designer clothes, services of legal or medical specialists

Unsought Products consumer product that the consumer either does not know about or knows about

but does not normally think of buying. Ex life insurance, cemetery plots, blood donations

Industrial Products

Industrial Products product bought by individuals and organizations for further processing or for use in

conducting a business.

-materials and parts, capital items, and supplies and services

Product line

Product Line - A group of products that are closely related because they function in a similar manner,are sold to the same customer groups, are marketed through the same types of outlets, or fall within

given price ranges.


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Service characteristics

Four Service Characteristics:

Intangibility services cannot be seen, tasted, felt, heard, or smelled before purchase

Inseparability services cannot be separated from their providers

Perishability services cannot be stored for later sale or useVariability quality of services depends on who provides them and when, where, and how

7Ps Of Service

-combines the 4 Ps of marketing (product, price, place, promotion) with an additional 3 service-specific

Ps (process, physical environment, people)

Product Elements

-Service products lie at the heart of a firms marketing strategy, if its poorly designed, it wont createmeaningful value for customers

-Service products need a core product that response to the customers primary need and an array of

supplementary service elements that help use the core product effectively

Place and Time

-When delivering, it involves decisions on when and where to deliver, as well as methods

-Use the electronic or physical channels, speed and convenience of place and time have become

important determinants of effective service delivery today

Price and other user outlays

-Make sure customer sees this price as worth it, if not, go beyond this

-Make it worth it to the customer, and give the customer satisfaction

Promotion and Education

-Be sure to use marketing programs, without them, no one will know about your product-Suppliers need to inform customers about benefits of this service, where and when to obtain it, and

how their participation can provide the best results

Process

-How a firm does things, the underlying processes, these are just as important as what it does

-Create an effective process

-Customers are often involved in these processes, as co-producers

-If its badly designed slow processes and ineffective, it leads to a disappointing experience as well

-Make sure front line staff does the best they can

Physical Environment

-Appearance of buildings, landscaping, vehicles, interior furnishing, equipment, staff uniforms, signs,

printed materials, and other visible cues are all signs of good evidence of a firms quality-Manage physical evidence carefully

People

-No matter what, services will always require direct interaction between customers and customer-

contact personnel

-These interactions strongly influence how customers perceive service quality


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Productivity and Quality

-Improving productivity is essential for any strategy for reducing costs, but making inappropriate cuts

will lead to bad service quality

-Improving quality is essential for product differentiation and for building customer satisfaction and

loyalty

-Its unwise to invest in service-quality improvements without understanding trade-offs between theincremental costs and incremental revenues

Brand Equity

-the real power of a strong brand is its ability to capture consumer preference and loyalty

-a powerful brand has high brand equity

Brand Equity the usually positive but sometimes negative differential effect that knowing the brand

name has on a customer response to the product.

-measure of a brands equity is the extent to which people are willing to pay more for the brand

-the fundamental asset underlying brand equity is customer equity the value of the customerrelationships that the brand creates

New Product Development

- The development of original products, new brands, and product improvement and

modifications, through the firms own research and development (R&D) efforts

- Firm can obtain a new product in two ways:

1.Acquisition:

-By buying a whole company, patent, or a licence to produce someone elses product2. New product development:

-Development of original products, new brands, and product improvements and modifications

through the firms own research and development efforts

Major stages in the new product development process are:

1. Idea Generation

-The systematic search for new product ideas

-Company must usually generate many ideas to find a good one

-Good product ideas usually come out from watching and listening to customers

2. Idea Screening

- Sorting through new product ideas to identify good ideas, and separate them from the

not-so-good ideas3. Concept Development and Testing

- Developing the new product idea into various alternative forms and testing the concepts

with a group of potential customers

4. Marketing Strategy Development

-Designing an initial marketing strategy for a new product based on the product concept

Product Concept - a detailed version of the new product idea that can be shown to potential customers


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5. Business Analysis

- A review of the sales, cost, and profit projections for a new product to determine whether the

companys objectives will be met

6. Product Development and Testing

-Developing the product concept into a real working version of the product and subjecting it to a variety

of tests-All new products must pass through the product development and testing phase

7. Test Marketing

- Testing the product and marketing program in real, but limited market conditions

8. Commercialization

- The full-scale introduction of the new product into the market

Marketing Mix

-aka the 4 Ps of marketing (product, price, place, promotion)

Marketing Mix the set of controllable, tactical marketing tools that the firm blends to produce the

response it wants in the target market.

-consists of everything the organization can do to influence demand for its products and services

-the marketing mix constitutes the companys tactical tool kit for establishing strong positioning in target

markets

-an effective marketing program blends all the marketing mix elements into an integrated marketing

program designed to achieve the companys marketing objectives by delivering value to consumers

Price Elasticity

Price Elasticity = percentage change in demand / percentage change in price

- A way of measuring how sensitive the market is to price changes

Inelastic: minimal change in demand as price increases

Elastic: significant drop in demand as price increases

-when price elasticity is at unity, sales of a service rise (or fall) by the same percentage the price falls

(or rises)

Types of Retailers

-can be classified in terms of amount of service offered, breadth and depth of product lines, the relative

prices they charge, and how they are organized

-self-service retailers (ex supermarkets and future shop) vs limited-service retailers (ex Sears) vs full-

service retailers (ex specialty stores and first-class department stores)

Product line

Specialty Store a retail store that carries a narrow product line with a deep assortment within that line.


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Department Store a retail organization that carries a wide variety of product lines typically clothing,

home furnishings, and household goods; each line is operated as a separate department managed by

specialist buyers or merchandisers.

Supermarket large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of

food, laundry, and household products.

Convenience Stores a small store located near a residential area that is open long hours seven days a

week and carries a limited line of high-turnover convenience goods.

Superstores a store much larger than a regular supermarket that carries a large assortment of

routinely purchased food and nonfood items and offers services such as dry cleaning, post offices, photo

finishing, cheque cashing, bill paying, lunch counters, car care, and pet care.

Category Killer giant specialty store that carries a very deep assortment of a particular line and is

staffed by knowledgeable employees.

Service Retailers retailers that sell services rather than goods. Ex hotels and universities.

Relative Prices

Discount Store a retail institution that sells standard merchandise at lower prices by accepting lower

margins and selling at a higher volume. Ex Walmart.

Off-Price Retailers retailer that buys at below wholesale prices and sells at less than retail. Ex factory

outlets, independents, warehouse clubs.

Independent Off-Price Retailers off-price retailer that is either owned and run by

entrepreneurs or is a division of a larger retail corporation. Ex Winners.

Factory Outlets off-price retailing operation that is owned and operated by a manufacturer

and that normally carries the manufacturers surplus, discounted, or irregular goods.

Warehouse Clubs off-price retailer that sells a limited selection of brand-name grocery items,

appliances, clothing, and a hodgepodge of other goods at deep discounts to members who pay annual

membership fees. Ex Costco.

Retail Organizations

-four major types: corporate chains, voluntary chains and retailer cooperatives, franchise organizations,

and merchandising conglomerates

Chain Stores two or more outlets that are owned and controlled in common, have central buying and

merchandising, and sell similar lines of merchandise. Ex LCBO

Voluntary Chain a wholesale-sponsored group of independent retailers that engages in group buying

and common merchandising. EX IGA

Retailer Cooperative independent retailers banded together for central buying and promotion. Ex Ace

Hardware

Merchandising Conglomerate a free-form corporation that combines several diversified retailers under

central ownership. Ex The Venator Group Northern Reflections, Northern Getaway, etc.

Franchise a contractual association between a manufacturer, wholesaler, or service organization (a

franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or

more units in the franchise system. Ex Canadian Tire


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Conventional Distribution Channel VS Vertical Marketing System

Conventional distribution channel consists of one or more independent producers,

wholesalers, and retailers, each a separate business seeking to maximize its own profits

even at the expense of profits for the system as a whole

-no channel member has much control over the other members, and no formal

means exists for assigning roles and resolving channel conflict

Vertical marketing system (VMS)consists of producers, wholesalers, and retailers

acting as a unified system. One channel member owns the other, has contracts with

them, or has so much power that they all cooperate (ie. sears buys more than 50% of its

goods from companies that it partly or wholly owns)

-can be dominated by the producer, wholesaler, or retailer

-Franchisesare special types of vertical marketing systems that link several stages in the

production-distribution

Distribution Channel Conflict

-a chain is only as strong as its weakest link

Channel Conflict disagreements among marketing channel members about who should do what, and

for what rewards.

Horizontal Conflict conflict among firms at the same level of the channel.

-two retailers or two manufacturers

Vertical Conflict conflict between different channels ofthe same level.

Marketing Communications Mix

Marketing Communications Mix the specific blend of advertising, sales promotion, public relations,

personal selling, and direct marketing tools a company uses to pursue its advertising and marketing

objectives.

-each element requires its own delivery medium (method through which members of the target market


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can receive its communications)

-everything a company does communicates a message to its consumers

Five major promotional tools:

Advertising any paid form of non-personal presentation and promotion of ideas, goods, or services by

an identified sponsor. The paid placement of a promotional message in mass media.

Sales Promotion short-term incentives usually presented at the point of purchase, designed to

encourage the immediate purchase of a product or service.

Personal Sellingpersonal presentation by the firms sales reps for the purpose of making sales and

building customer relationships.

Direct Response Marketing direct communications with carefully targeted customers that request an

immediate, measureable response and cultivate lasting customer relationships.

Public Relationsbuilding good relations with the companys various publics by obtaining favourable

publicity, building a good corporate image, and handling or heading off unfavourable rumors, stores,

and events.

Push vs Pull Strategy

PUSH STRATEGY

Push Strategy a promotion strategy that calls for using the sales force and trade promotion to push the

product through the channels.

-producer markets to retailers to carry and promote the product, who will then market the product to

consumers

-generally used in B2B markets

PULL STRATEGY

Pull Strategy

a promotion strategy that calls for using advertising and consumer promotion to buildconsumer demand.

-idea is to get consumers asking retailers for the product, who will ask the company to produce it

-generally used in consumer products companies

Four Categories of Service

Tangible:

1.People Processing

-services directed at peoples bodies: passenger transportation, health care, lodging, beauty salons,physical therapy, etc.

2.Possession Processing

-services directed at physical possessions: freight transportation, repair and maintenance,

warehousing/storage, laundry and dry cleaning, landscaping/gardening, etc.

Intangible:

3.Mental-Stimulus Processing


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-services directed at peoples minds: advertising/PR, arts and entertainment, broadcasting/cable,

management consulting, education, info services, music concerts, psychotherapy, religion, etc.

4.Information Processing

-services directed at intangible assets: accounting, banking, data processing, data transmission,

insurance, legal services, programming, research, securities investment, software consulting

Core Product & Supplementary Services (flower of service)

-supplementary services play one of two roles:

1. Facilitating supplementary services are either required for service delivery or aid in the use of

the core product

-ex information, order-taking, billing, payment

2. Enhancing supplementary services add extra value for customers

-ex consultation, hospitality, safekeeping, exceptions

-petals are examples around core product, listed in a clockwise manner in which they are often likely to

be encountered by customers

-people processing services tend to be accompanied by more supplementary services than do the other

three categories

-high-contact services will have more supplementary aspects than low-contact services

-types of exceptions: special requests, problem-solving, handling of complaint/suggestions, restitution

Competition-Based Pricing (services)

-firms with relatively undifferentiated services need to monitor what competitors are charging and

should try to price accordingly

Price competition intensifies with:

-increasing number of competitors

-increasing number of substituting offers

-wider distribution of competitor and/or substitution offers

-increasing surplus capacity in the industry

Circumstances that reduce price competition:

-non-price-related costs of using competing alternatives are high-personal relationships matter

-switching costs are high

-time and location specificity reduce choice


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-managers should take into account entire cost to customers of each competitive offering, including all

related financial and non-monetary costs, plus potential switching costs, and then compare this total

with that of the providers own service

Value-Based Pricing (services)

-importance of understanding the monetary worth of the incremental value created by a service

-when customers purchase a service, they are weighing the perceived benefits obtained from the service

against the perceived costs they will incur

-four broad expressions of value:

-value is low price

-value is whatever I want in a product

-value Is the quality I get for the price I pay

-value is what I get for what I give

-aka Net Value the sum of all perceived benefits (gross value) minus the sum of all the

perceived costs of service. The greater the positive difference, the greater the net value

Consumer Surplus the difference between the price customers pay and the amount they would

actually have been willing to pay to obtain the desired benefits offered by a specific product.

-four distinct categories for capturing and communicating the value of a service:

-uncertainty reduction

-relationship enhancement

-low-cost leadership

-value perception management

-uncertainty can be reduces by: a) benefit-driven pricing pricing the aspect of the service that directly

benefits customers; b) flat-rate pricing quoting a fixed price in advance of service delivery so as to

avoid surprises for users

-a strategy is relationship pricing, to discount prices for large purchases which can often be profitable for

both parties, or giving a discount when two or more services are purchased together

-cost leadership is an effective strategy

-must manage the perception of value to ensure customers know what value they have received

Demand Management Strategies

5 basic ways to manage demand:

1. take no action and leave demand to find its own levels

2. Reduce demand in peak periods

3. Increase demand in low periods

4. Inventory demand using a queuing system (asking customers to wait in line)

5. Inventory demand using a reservations system


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CRM (Customer Relationship Management) Strategies

- Overall process of building and maintaining profitable customer relationships by delivering

superior customer value and satisfaction

- One of most important concepts for modern marketing

- CRM is the generic term for any corporate software system that collects and organizes customer

data and provides marketing managers, customer service representatives and sales

representatives with powerful information tools

Strategies:

1. Business Strategy

-guides the development of customer strategy

-business vision

-industry and competitive analysis

2. Customer Strategy

-target segments-tiering of services

-loyalty bonds

-churn management

Processes:

-value creation

-multichannel integration

-performance assessment process

Cycle of Failure, Mediocrity, Success

-applies to both employees and customers

Cycle of Failure

-occurs in businesses with high employee turnover

-search for productivity leads to simplifying job processes that pay minimum wage and require repetitive

tasks that need little to no training

-employee cycle of failure begins with a narrow design of jobs for low skill levels; emphasis on rules

rather than service; use of technology to control quality; low wages; little investment in selection and

training; bored employees who adopt a poor service attitude

-results in low service quality and high employee turnover

-customer cycle of failure; high employee turnover leaves no customer relationships and customers who

are dissatisfied with the employee performance

-results in high customer turnover

Cycle of Mediocrity

-occurs in businesses that offer job security but are rule and procedure based

-stress on operational efficiencies


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-job responsibilities are narrowly defined

-salary increases and promotions are based on length of work time

-successful performance is seen as no mistakes rather than high productivity or outstanding customer

service

-customers are frustrated with the rules and lack of service flexibility

-jobs pay good wages and so employees are reluctant to leave

Cycle of Success

-occurs in businesses that are managed well

-better pay and benefits attract good quality staff

-good training

-employees are happier in the workplace and provide better service

-lower turnover means customers appreciate the continuity in the service and are likely to be loyal

-higher profit margins

Demand Management Approaches

1. Use price and other costs to manage demand

-charge customers more money to use services during peak periods

-may also cause customers to go at a different time (either to avoid $ or save $)

-when capacity is limited, goal should be to make as much use of the capacity as possible by

making available to the most profitable segments at any given time

2. Change product elements

3. Modify the place and time of delivery

-3 options: 1) no change, 2) varying the times when the service is available, 3) offering service to

customers at a new location

4. Promotion and Education

-tell customers about peak times and encourage them to purchase at non-peak times

-educate them about undesirable demand (ex 911 calls that are not emergencies)

Dimensions of Service Quality

5 dimensions of service quality:1. Tangibles (appearance of physical elements)

-appearance of facilities, equipment, personal, and communication materials

2. Reliability (dependable and accurate performance)

-ability to perform the promised service dependably and accurately

3. Responsiveness (promptness and helpfulness)

-willingness to help customers and provide prompt service


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4. Assurance (credibility, competence, courtesy, security)

-credibiltiy trustworthiness, believability, and honesty of the service provider

-security freedom of danger, risk, or doubt

-competence possession of the skills and knowledge required to perform the service

-politeness, respect, consideration, and friendliness of the service personnel

5. Empathy (good communications, customer understanding, and easy access)

-access approachability and ease of contact

-communication listening to customers and keeping them informed in a language they can understand

-understanding the customer making the effort to know the customer and their needs

Service Attributes

Search Attributes product characteristics that consumers can readily evaluate prior to service.

-tangible characteristics such as style, colour, texture, taste, and sound

Experience Attributes product performance features that customers can only evaluate during service

delivery.

-ex. Vacations, live entertainment performances, sporting events

Credence Attributes product characteristics that consumers may not be able to evaluate even after

purchase and consumption.

-ex. Counseling, legal advice, surgery, financial investment, planning services and consulting

services

-ex the cleanliness in a restaurants kitchen after eating there

Gaps in Service Design and Delivery

6 Gaps (5 gaps that lead to the 6th gap):

Gap 1: The Knowledge Gap

-difference between what the senior management thinks customers expect and what customers

actually need and expect

Gap 2: The Policy Gap

-difference between managements understanding of the customers expectations and the

service standards they set for delivery

-usually set standards below customer expectations because of cost and feasibilityGap 3: The Delivery Gap

-difference between service standards and the service delivery teams actual performance on the

standards

Gap 4: The Communications Gap

-difference between what the company communicates and what it actually delivers to the

customer


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-caused by two sub-gaps: internal communications gap and overpromise gap (then

interpretation gap)

Gap 5: The Perceptions Gap

-difference between what is actually delivered and what customers feel they have received

Gap 6: Service Quality Gap

-difference between what the customers expect to receive and their perceptions of the service

that is actually delivered

Service Employees

Service personnel help to maintain the firms positioning. They are:

1. A core part of the product

-most visible part of the service

-deliver the service

2. The service firm

-are the firm from the customers perspective

3. The brand

-either deliver or do not deliver the brand promise

-a source of customer loyalty

-see what customers need

-deliver the service

-build personal relationships with customers

-key driver of the productivity of the frontline operation

Service-Profit Chain a strategic framework that links employee satisfaction to performance on service

attributes to customer satisfaction, then to customer retention, and finally to profits.

Boundary Spanning jobs that straddle the boundary between the external environment, where

customers are encountered, and the internal operations of the organization.

Sources of conflict:

Organizational/Client Conflict must attend to both operational and marketing goals

Person/Role Conflict conflict between job requirements and own personalities

Interclient Conflict have to tell a customer to obey the rules

Emotional Labour expressing socially appropriate (but sometimes false) emotions toward customers

during service transactions.

-ex of flight attendant asked to smile


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Front and Back Stage Personnel

-part of a cause and effect analysis

Front Stage Personnel

Front Stage those aspects of service operations and delivery that are visible and otherwise apparent to

customer.-experienced directly by customers

Back Stage Personnel

-experienced through a ripple effect

Backstage (or Technical Core) those aspects of service operations that are hidden from customers.

Four Service Focus Strategies

Can either be:

Market Focus extent to which a firm serves few or many markets.

or

Service Focus extent to which a firm offers few or many services.

Four service focus strategies:

1. Fully Focused

-provides a limited range of services to a narrow and specific market segment

2. Market Focused

-concentrates on a narrow market segment but offers a wide range of services

3. Service Focused

-offer a narrow range of services to a fairly broad market

4. Unfocused

-serve broad markets with a wide range of services

-firms are often the jack of all trades and master none not a good focus strategy

Important vs Determinant Attributes

-attributes that differentiate services are not always the most important ones

Determinant Attributes those that actually determine buyers choices between competing alternatives.

-consumers focus on attributes that are different between competing alternatives


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Establishing Service Levels

-customers can often be segmented according to their willingness to give up some level of service for a

lower price

-price-insensitive customers are willing to pay a relatively high price to obtain high levels of service on all

attributes that are important to them-price-sensitive customers will look for an inexpensive service that offers relatively low levels of

performance on many key attributes

Jack Trouts Four Principles of Positioning

Effective positioning is based on four levels:

1. A company must establish a position in the minds of its target customers

2. The position should have one simple and consistent message

3. The position must set a company apart from its competitors

4. A company cannot be all things to all people it must focus its efforts


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Wheel of Loyalty

-you need a solid foundation for building customer loyalty

-right mix of customer segments

-attracting the right customers

-tiering the service and delivering high levels of satisfaction-develop close bonds with customers

-through cross-selling and bundling

-loyalty rewards (delivering special treatment benefits)

-higher level bonds (creating social benefits)

-identify and reduce factors that result in churn

Churn loss of existing customer accounts and the need to replace them with new ones.

Documents

F11 MCS-1000 ExamNotes