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MBA 601 Entrepreneurial
Marketing Strategies
Week Two
Class Lecture
Chapters 13, 14, 15 & 16
1
13
Designing and Managing
Services
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.
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Services are Everywhere
Copyright © 2011 Pearson
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Categories of Service Mix
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Pure tangible good
Good with accompanying services
Hybrid
Service with accompany goods
Pure service
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Service Distinctions
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Equipment-based or people-based
Service processes
Client’s presence required or not
Personal needs or business needs
Objectives and ownership
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Distinctive Characteristics
of Services
Intangibility
Inseparability
Variability
Perishability
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Physical Evidence and Presentation
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Place
People
Equipment
Communication material
Symbols
Price
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Inseparability
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Variability
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Increasing Quality Control
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Perishability
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Matching Demand and Supply
Demand side
• Differential pricing
• Nonpeak demand
• Complementary
services
• Reservation systems
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Supply side
• Part-time employees
• Peak-time efficiency
• Increased consumer
participation
• Shared services
• Facilities for future
expansion
Figure 13.3 Root Causes of
Customer Failure
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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
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Figure 13.4 Types of Marketing in
Service Industries
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Best Practices
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Strategic Concept
Top-Management Commitment
High Standards
Self-Service Technologies
Monitoring Systems
Satisfying Customer Complaints
Satisfying Employees
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Table 13.3 Factors Leading to
Customer Switching Behavior
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Pricing
Inconvenience
Core Service Failure
Service Encounter Failures
Response to Service Failure
Competition
Ethical Problems
Involuntary Switching
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Improving Service Quality
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Listening
Reliability
Basic service
Service design
Recovery
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Surprising customers
Fair play
Teamwork
Employee research
Servant leadership
Figure 13.6 Service-Quality Model
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Determinants of Service Quality
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Reliability
Responsiveness
Assurance
Empathy
Tangibles
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Customer Worries
Failure frequency
Downtime
Out-of-Pocket Costs
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1
14
Developing Pricing
Strategies and Programs
Synonyms for Price
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Rent
Tuition
Fee
Fare
Rate
Toll
Premium
Honorarium
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Special assessment
Bribe
Dues
Salary
Commission
Wage
Tax
The Internet Changes the
Pricing Environment –
By Providing Information
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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
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Consumer Psychology
and Pricing
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Reference prices
Price-quality inferences
Price endings
Price cues
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Table 14.1 Possible Consumer
Reference Prices
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“Fair price”
Typical price
Last price paid
Upper-bound price
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Lower-bound price
Competitor prices
Expected future price
Usual discounted price
Steps in Setting Price
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Select the price objective
Determine demand
Estimate costs
Analyze competitor price mix
Select pricing method
Select final price
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Step 1: Selecting the Pricing Objective
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Survival
Maximum current profit
Maximum market share
Maximum market skimming
Product-quality leadership
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Step 2: Determining Demand
• Price sensitivity
• Estimate demand curves
• Price elasticity of demand
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Step 3: Estimating Costs
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Types of costs
Accumulated production
Activity-based cost accounting
Target costing
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Figure 14.2 Cost Per Unit at
Different Levels of Production
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Cost Terms and Production
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Fixed costs
Variable costs
Total costs
Average cost
Cost at different
levels of
production
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14-34
Analyzing Competitor’s Costs
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Step 5: Selecting a Pricing Method
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Markup pricing
Target-return pricing
Perceived-value pricing
Value pricing
Going-rate pricing
Auction-type pricing
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Figure 14.5 Break-Even Chart for
Determining Target-Return Price
and Break-Even Volume
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Step 6: Selecting the Final Price
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Impact of other marketing activities
Company pricing policies
Gain-and-risk sharing pricing
Impact of price on other parties
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Geographical Pricing
• Pricing varies by location
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Promotional Pricing Tactics
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Loss-leader pricing
Special-event pricing
Cash rebates
Low-interest financing
Longer payment terms
Warranties and service contracts
Psychological discounting
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Differentiated Pricing
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Customer-segment pricing
Product-form pricing
Image pricing
Channel pricing
Location pricing
Time pricing
Yield pricing
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Traps in Price Cutting Strategies
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Low-quality trap
Fragile-market-share trap
Shallow-pockets trap
Price-war trap
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Should We Raise Prices?
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Brand Leader Responses to Competitive Price
Cuts
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Maintain price
Maintain price and add value
Reduce price
Increase price and improve quality
Launch a low-price fighter line
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1
15
Designing and Managing
Integrated Marketing
Channels
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.
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Intermediaries
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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
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REI Employs Hybrid Channels
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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
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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
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Marketing Channel Levels
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Figure 15.2 Consumer Markets
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Figure 15.2 Industrial Markets
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Reverse-Flow Channels
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Designing a
Marketing Channel System
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Analyze customer needs
Establish channel objectives
Identify major channel alternatives
Evaluate major channel alternatives
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Figure 15.3 What European
Consumers Value
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Service Outputs of Channels
Lot size
Waiting and delivery time
Spatial convenience
Product variety
Service backup
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Identifying Channel Alternatives
• Types of intermediaries
• Number of intermediaries
• Terms and responsibilities
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Figure 15.5
Break-Even Cost Chart
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Channel-Management Decisions
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Selecting channel members
Training channel members
Motivating channel members
Evaluating channel members
Modifying channel members
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Channel Integration and Systems
• Vertical marketing
systems
– Corporate VMS
– Administered VMS
– Contractual VMS
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• Horizontal marketing
systems
• Multichannel systems
Figure 15.6 The Hybrid Grid
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Channel Conflict
• What types of conflict arise in channels?
• What causes conflict?
• What can marketers do to resolve it?
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Causes of Channel Conflict
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Goal incompatibility
Unclear roles and rights
Differences in perception
Intermediaries’ dependence on manufacturer
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Table 15.3 Strategies for Managing
Channel Conflict
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Strategic justification
Dual compensation
Superordinate goals
Employee exchange
Joint memberships
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Cooptation
Diplomacy
Mediation
Arbitration
Legal recourse
E-Commerce
Pure-click
Brick-and-click
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M-Commerce
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1
16
Managing Retailing,
Wholesaling,
and Logistics
Retailing
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Table 16.1 Major Retailer Types
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Specialty store
Department store
Supermarket
Convenience store
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Discount store
Off-price retailer
Superstore
Catalog showroom
Nonstore Retailing
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Direct selling
Direct marketing
Automatic vending
Buying service
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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
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Changes in the
Retail Environment
• New retail forms and combinations
• Competition between store-based and nonstore-based retailing
• Growth of giant retailers
• Decline of middle market retailers
• Growing investment in technology
• Global profile of major retailers
• Growth of shopper marketing
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Retailers’ Marketing Decisions
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Target market
Product assortment
Procurement
Prices
Services
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Store atmosphere
Store activities
Store experiences
Communications
Location
Retailer Services Mix
• Prepurchase services
• Postpurchase services
• Ancillary services
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Store Atmosphere
and Experiences
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16-77
Location Decision
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Central business districts
Regional shopping centers
Community shopping centers
Shopping strips
Location within a larger store
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Wholesaling Functions
• Selling and promoting
• Buying and
assortment building
• Bulk breaking
• Warehousing
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Transportation
Financing
Risk bearing
Market information
Management services
and counseling
Major Wholesaler Types
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Merchant
Full-service
Limited-service
Brokers and agents
Manufacturers
Specialized
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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.
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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
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Market Logistics
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Sales forecasting
Distribution scheduling
Production plans
Finished-goods
inventory decisions
• Packaging
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• In-plant warehousing
• Shipping-room
processing
• Outbound
transportation
• Field warehousing
• Customer delivery and
servicing
Market Logistics Decisions
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How should orders be handled?
Where should stock be located?
How much stock should be held?
How should goods be shipped?
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Figure 16.1 Determining Optimal
Order Quantity
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Transportation Factors
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