2011.2.12 marketing

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  • Chapter 12 Services and Nonprofit Organization Marketing Marketing cannot be accomplished in isolation. Even though the marketing function resides with marketers, the concept of marketing must permeate the entire organization.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: The service sector accounts for 81 percent of both U.S. gross domestic product and U.S. employment. The demand for services is expected to continue. As a result of demographic shifts, services are expected to account for nearly half of all net job growth through the year 2016. (The aging population will need nursing care, physical therapy, and social workers.)
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Intangibility: Services cannot be touched, seen, tasted, heard, or felt in the same way as goods. Services cannot be stored and are easy to duplicate. Tangible cues are often used to communicate a service’s quality and nature. Facilities are a critical tangible part of a service experience. Produced and Consumed Simultaneously: Goods are produced, sold, and then consumed. In contrast, services are often sold, produced, and consumed at the same time. Consumers are involved in the production of the services that they buy. The quality of services depends on the quality of employees. Greater variability: Services are less standardized and uniform than goods—a characteristic known as heterogeneity. Because services are labor-intensive, consistency and quality control can be hard to achieve. Standardization and training help increase consistency and reliability. Perishability: Services cannot be stored, warehoused, or inventoried. If not used, the revenue is lost. One of the most important challenges in many service industries, such as hotels and airlines, is finding ways to synchronize supply and demand. Deep discounts and off-peak pricing strategies encourage demand during nonpeak times.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Intangibility is the basic difference between services and goods. Also, evaluating the quality of services is harder than evaluating the quality of goods. A search quality is a characteristic that can be easily assessed before purchase. Compared to goods, services tend to exhibit fewer search qualities. Services tend to exhibit more experience and credence qualities. An experience quality is a characteristic that can be assessed only after use. A credence quality is a characteristic that consumers may have difficulty assessing even after purchase because they do not have the necessary knowledge or experience. Online Web MD What elements of Web MD Web site communicate the search, experience, and credence qualities of the services offered by online medical consultant?
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Service quality is more difficult to define and measure than is the quality of tangible goods. Business executives rank the improvement of service quality as one of their most critical challenges. Researchers have shown that customers evaluate service quality by these five components.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: A model of service quality called the gap model identifies five gaps that can cause problems in service delivery and influence customer evaluations of service quality. These gaps are shown in Exhibit 11.1. [Used by permission of Valarie A. Zeithaml, Mary Jo Biner, and Dwayne Gremler, “Services Marketing,” 4/e, ©2006, NY, McGraw-Hill, 2006] Gap 1: the gap between what customers want and what management thinks customers want. This gap results from a lack of understanding or a misinterpretation of customers’ needs or wants. To close gap 1, keep in touch with what customers want by doing research on customer needs and customer satisfaction. Gap 2: the gap between what management thinks customers want and the quality specifications that management develops to provide the service. Gap 3: the gap between the service quality specifications and the service that is actually provided. If gaps 1 and 2 are closed, gap 3 is due to the inability of management/employees to do what should be done. Poorly trained or motivated workers can cause this gap. To close gap 3, employees need the skills, training, and tools to perform their jobs. Gap 4: the gap between what the company provides and what the customer is told it provides. This is a communication gap, caused by such things as misleading or deceptive advertising campaigns. To close gap 4, companies need to create realistic customer expectations through honest, accurate, realistic communication. Gap 5: the gap between the service that customers receive and the service they want. This gap can be positive or negative. As the gaps shrink, service quality improves. Discussion/Team Activity: Discuss firms who provide high levels of service quality. Examples: Ritz-Carlton, Nordstrom, Neiman Marcus, Lexus.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Due to services’ unique characteristics, elements of the marketing mix need to be adjusted to meet these special needs.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Product strategies for service offerings include decisions on: Type of process involved Core and supplementary services Standardization or customization of the service product, and Service mix. These are described on the following slides.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Two things get processed in service organization: People and objects. In some cases, the process is physical, while in others the process is intangible. There are four types of service processing categories: People processing takes place when the service is directed at a customer. Examples: health care, hairstyling Possession processing occurs when the service is directed at customers’ physical possessions. Examples: lawn care, car repair, dry cleaning Mental stimulus processing refers to services directed at people’s minds. Examples: spectator sports events, theater performances, education Information processing describes services that use technology or brainpower directed at a customer’s assets. Examples: insurance, consulting, banking
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: The service offering is a bundle of activities that includes the core service, which is the most basic benefit, and a group of supplementary services that enhance or support the core service. In many industries, the core service becomes a commodity product as competition increases. As a result, supplementary services are used to create competitive advantage. Discussion/Team Activity: Name organizations and discuss their core and supplementary services.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: This slide depicts the core and supplementary services offered by FedEx. The core service is overnight transportation and package delivery. Supplementary services include problem solving, advice and information, and billing statements.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: An important issue in developing service offerings is whether to customize or standardize. Customized services are more flexible but command a higher price. On the other hand, standardized services are more efficient and cost less. Instead of choosing either strategy, elements of both can be incorporated into an emerging strategy called mass customization. Mass customization uses technology to deliver customized services on a mass basis, thus meeting customers’ specific needs. Discussion/Team Activity: Identify companies who have successfully used mass customization to deliver individualized services. Examples include: Lands’ End, airlines’ video on demand
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Most service organizations market more than one service. Therefore, each part of the service mix should make a different contribution to achieving the firm’s goals. Designing a service strategy means deciding what new services to introduce to which target market, and deciding what services to maintain and to eliminate.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Distribution strategy for services should focus on issues shown on this slide. Convenience Number of outlets: the intensity of distribution should meet the target market’s needs and preferences. Direct vs. indirect distribution: many service firms use direct distribution or franchising. The newest form of direct distribution is the Internet. Location: the location of a service reveals the relationship between its target market strategy and distribution strategy. Scheduling: the most important factor for time-dependent service providers like airlines, physicians, and dentists. Discussion/Team Activity: Identify specific service providers who have utilized the distribution strategies described above.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Services are less tangible and are more difficult to promote than tangible goods. Four promotion strategies are: Stressing tangible cues Using personal informational sources Creating a strong organizational image Engaging in postpurchase communication Discussion/Team Activity: Identify specific service providers who have utilized the promotion strategies described above.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: The unique characteristics of services present two pricing challenges. Defining the unit of service consumption. Should it be based on completing a service task or should it be time based? Determining if multiple elements are bundled. Should pricing be based on a bundle of elements or whether each element should be priced separately? Discussion/Team Activity: Identify specific service providers who have utilized the pricing strategies described above.
  • Chapter 12 Services and Nonprofit Organization Marketing Online: E*Trade, Ameritrade, Schwab Compare the pricing for services on the largest Internet financial Web sites. How can you account for the great differences in price for essentially the same service? Notes: Marketers should set performance objectives when pricing each service. Three categories of pricing objectives are: Revenue-oriented pricing focuses on maximizing the surplus of income over costs. Operations-oriented pricing seeks to match supply and demand by varying prices. Patronage-oriented pricing tries to maximize the number of customers using the service. A firm may need to use more than one type of pricing objective.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Many services involve ongoing interaction between the service organization and the customer. They can benefit from relationship marketing as a means of attracting, developing, and retaining customer relationships. It is more cost effective to keep existing customers than to attract new ones. Increasing customer retention by 2 percent can have the same effect on profits as reducing costs by 10 percent.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Relationship marketing can be practiced at three levels: Level 1: The firm uses pricing incentives to encourage customers to continue doing business. Examples include airline frequent flyer programs. This level of relationship marketing is the least effective because its price-based advantage is easily imitated by competitive firms. Level 2: This level uses pricing incentives as well as building social bonds with customers. The firm keeps in touch with customers. Examples include the 1-800-FLOWERS online Gift Reminder Program. Level 3: At this level, the firms adds structural bonds to the formula. This offers value-added services that are not available by competitive firms. Examples include Hertz #1 Club gold.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Services are performances, so the quality of a firm’s employees is an important component in building long-term relationships with customers. It is beneficial to the company to keep happy employees. Studies show that replacing an employee costs roughly 1.5 times a year’s pay. Examples of employee satisfaction programs include paying 100 percent of health insurance premiums, providing free lunches, and ongoing continuing education programs.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: International marketing of services is a major part of global business. The United States is the world’s largest exporter of services. Because of competitive advantages, services industries such as construction and engineering have great global market potential. To be successful in the global marketplace, firms must first determine the nature of their core product, then design the marketing mix elements to take into account each country’s cultural, technological, and political environment.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Nonprofit organizations account for over 20 percent of the economic activity in the United States.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Nonprofit organizations share characteristics with service firms. Both market intangible products, often require the customer to be present during the production process. Services often vary greatly, and can not be stored in the same way as tangible goods.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Most nonprofit organizations perform the marketing activities as shown on this slide. Often, nonprofit organizations that carry out these functions do not realize they are engaged in marketing.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Nonprofit organizations do not seek to make a profit for redistribution to owners or shareholders. The focus is often on generating enough funds to cover expenses. Most nonprofit organizations are expected to provide equitable and efficient services that respond to the wants and needs of multiple constituencies.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Three issues relating to target markets are unique to nonprofit organizations: Apathetic or strongly opposed targets: Nonprofit organizations must often target those who are apathetic about or strongly opposed to receiving their services. Examples: vaccinations, help for drug or alcohol-related problems, and psychological counseling. Pressure to adopt undifferentiated segmentation strategies: Nonprofit organizations often fail to recognize the advantages of targeting, or are pressured to service the maximum number of people. Complementary positioning: Nonprofit organizations must often complement, rather than compete with, the effort of other groups.
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: There are three product-related distinctions between business and nonprofit organizations: Benefit complexity: Nonprofit organizations often market complex behavior or ideas, such as the need not to smoke tobacco. The benefits that a person receive are complex, long term, and intangible, and consequently difficult to communicate to consumers. Benefit strength: The benefit strength of nonprofit offerings may be weak or indirect. For example, donating blood or asking neighbors for contributions to a charity. Involvement: Many nonprofit organizations market products that elicit low involvement, such as “don’t litter” campaigns.
  • Chapter 12 Services and Nonprofit Organization Marketing Online: Advertising Council What are the most compelling PSAs on the Ad Council site at the moment? Notes: Many nonprofit organizations (such as federal organizations) are prohibited from advertising, or do not have the resources to retain marketing expertise. However, special promotion resources include: Professional volunteers, such as donation of advertising agency time. Donated services create goodwill, personal contacts, and general awareness of the organization. Sales promotion activities that make use of existing services to draw attention to the offerings of nonprofit organizations. Public service advertising that is donated by a medium.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • Chapter 12 Services and Nonprofit Organization Marketing Notes: Five key characteristics distinguish the pricing decisions of nonprofit organizations from those of the profit sector: Pricing objectives: The main objective is to defray all or partial costs rather than achieve a profit. Nonfinancial prices: In many nonprofit situations, consumers must absorb nonmonetary costs, such as opportunity cost of time, embarrassment costs, and effort costs. Indirect payment: through taxes. Separation between payers and users: The services of many nonprofit organizations are used by those who are relatively poor and paid for by those who are better off financially. Below-cost pricing: An example is university tuition, with services priced below cost.
  • Chapter 12 Services and Nonprofit Organization Marketing
  • 2011.2.12 marketing

    1. 1. Lamb, Hair, McDaniel CHAPTER 12 Services and Nonprofit Organization Marketing 2010-2011
    2. 2. LO 1 Discuss the importance of services to the economy LO 2 Discuss the differences between services and goods LO 3 Describe the components of service quality and the gap model of service quality Learning Outcomes
    3. 3. LO 4 Develop marketing mixes for services LO 5 Discuss relationship marketing in services LO 6 Explain internal marketing in services LO 7 Discuss global issues in services marketing LO 8 Describe nonprofit organization marketing Learning Outcomes
    4. 4. The Importance of Services Discuss the importance of services to the economy LO 1
    5. 5. The Importance of Services Services as a percentage of GDP Services as a percentage of employment LO 1 10 20 30 40 50 60 70 80 90 100 81% Services Deed Performance Effort ~50% 10 20 30 40 50 60 70 80 90 100
    6. 6. How Services Differ from Goods Discuss the differences between services and goods LO 2
    7. 7. How Services Differ from Goods No physical object makes it hard to communicate benefits. Production and consumption are simultaneous, meaning the consumer takes part in production. Services depend on their employees for quality, which makes consistency difficult to achieve. Services cannot be saved, and it is challenging to synchronize supply and demand. LO 2 Intangible Inseparable Heterogeneous Perishable
    8. 8. When Services are Assessed <ul><li>Search Quality—applied to goods more often, assessed before purchase </li></ul><ul><li>Experience quality—assessed after purchase </li></ul><ul><li>Credence quality—assessed only with appropriate knowledge. </li></ul>LO 2 Online http://www.webmd.com
    9. 9. Service Quality Describe the components of service quality and the gap model of service quality LO 3
    10. 10. Components of Service Quality LO 3 Tangibles The physical evidence of a service. Empathy Caring, individualized attention to customers. Assurance The knowledge and courtesy of employees. Responsiveness The ability to provide prompt service. Reliability The ability to perform the service right the first time.
    11. 11. The Gap Model of Service Quality LO 3
    12. 12. Marketing Mixes for Services Develop marketing mixes for services LO 4
    13. 13. Product Strategies for Services LO 4 Service Mix Customization or Standardization Core and Supplementary Process
    14. 14. Service as a Process LO 4 Mental Stimulus Processing People Processing Possession Processing Information Processing
    15. 15. The Service Offering LO 4 Core Service Supplementary Service The most basic benefit the consumer is buying. A group of services that support or enhance the core service.
    16. 16. Core and Supplementary Services for FedEx LO 4 Overnight transportation and delivery of packages Problem solving Billing statements Tracing Documentation Order taking Supplies Pickup Advice and information
    17. 17. Customization/Standardization Mass Customization LO 4 A strategy that uses technology to deliver customized services on a mass basis.
    18. 18. The Service Mix <ul><li>Determine what new services to introduce </li></ul><ul><li>Determine target market </li></ul><ul><li>Decide what existing services to maintain and to eliminate </li></ul>LO 4
    19. 19. Place (Distribution) Strategy LO 4 Scheduling Location Direct or indirect distribution Number of outlets Convenience
    20. 20. Promotion Strategy LO 4 Stress tangible cues Use personal information sources Create a strong organizational image Engage in postpurchase communication
    21. 21. Price Strategy <ul><li>Define the unit of service consumption </li></ul><ul><li>Determine if multiple elements are “bundled” or priced separately </li></ul>Pricing Challenges for Services LO 4
    22. 22. Pricing Objectives LO 4 Revenue-Oriented Pricing Operations-Oriented Pricing Patronage-Oriented Pricing Maximize the surplus of income over costs Match supply and demand by varying price Maximize the number of customers by varying price http://www.etrade.com http://www.tdameritrade.com http://www.schwab.com Online
    23. 23. Marketing Mixes for Services PRODUCT = SERVICE LO 4 PLACE Core and Supplementary Direct Personal information Operations oriented Revenue oriented Process Number of outlets Tangible cues Mass Customization Standardization PROMOTION PRICE Indirect Location Strong image Post-purchase communication Patronage oriented
    24. 24. Relationship Marketing in Services Discuss relationship marketing in services LO 5
    25. 25. Relationship Marketing in Services LO 5 2 Social Financial 1 Financial 3 Structural Social Financial Pricing incentives Design services to meet customer needs Creating value-added services not available elsewhere
    26. 26. Internal Marketing in Service Firms Explain internal marketing in services LO 6
    27. 27. Internal Marketing LO 6 Internal Marketing Treating employees as customers and developing systems and benefits that satisfy their needs.
    28. 28. Internal Marketing in Services LO 6
    29. 29. Global Issues in Services Marketing Discuss global issues in services marketing LO 7
    30. 30. Global Issues in Services Marketing <ul><li>The U.S. is the world’s largest exporter of services </li></ul><ul><li>The marketing mix must reflect each country’s cultural, technological, and political environment </li></ul>LO 7
    31. 31. Nonprofit Organization Marketing Describe nonprofit organization marketing LO 8
    32. 32. Nonprofit Organization <ul><li>An organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment. </li></ul><ul><ul><li>Government </li></ul></ul><ul><ul><li>Museums </li></ul></ul><ul><ul><li>Theaters </li></ul></ul><ul><ul><li>Schools </li></ul></ul><ul><ul><li>Churches </li></ul></ul>LO 8
    33. 33. Nonprofit Organization Marketing LO 8 Market intangible products Production requires customer’s presence Services vary greatly Services cannot be stored Shared Characteristics with Service Organizations
    34. 34. Nonprofit Organization Marketing Activities LO 8 Identify desired customers Specify objectives Develop, manage, eliminate programs and services Decide on prices Schedule events or programs Communicate their availability
    35. 35. <ul><li>Setting of marketing objectives </li></ul><ul><li>Selection of target markets </li></ul><ul><li>Development of marketing mixes </li></ul>Unique Aspects of Nonprofit Organization Marketing Strategies LO 8
    36. 36. Objectives LO 8 Provide services that respond to the wants of : <ul><li>Users </li></ul><ul><li>Payers </li></ul><ul><li>Donors </li></ul><ul><li>Politicians </li></ul><ul><li>Appointed officials </li></ul><ul><li>Media </li></ul><ul><li>General Public </li></ul>
    37. 37. Target Markets Unique Issues of Nonprofit Organizations LO 8 Apathetic or strongly opposed targets Pressure to adopt undifferentiated segmentation Complementary positioning
    38. 38. <ul><li>Benefit complexity </li></ul><ul><li>Weak or indirect benefit strength </li></ul><ul><li>Low involvement </li></ul>Product Decisions Distinctions between Business and Nonprofit Organizations LO 8
    39. 39. Promotion Decisions LO 8 Sales promotion activities Public service advertising Professional volunteers Online http://www.adcouncil.com
    40. 40. Public Service Announcements <ul><li>PSAs take many forms, but many organizations are using television and the internet to spread awareness. </li></ul><ul><ul><ul><li>iava.org (Irag and Afghanistan Veterans of America) asks visitors to “become a fan” on Facebook to see their latest PSA </li></ul></ul></ul><ul><ul><ul><li>Senior Citizens League PSA </li></ul></ul></ul><ul><ul><ul><li>NCAA PSA </li></ul></ul></ul><ul><ul><ul><ul><li>What messages are these PSAs sending? Are they effective? </li></ul></ul></ul></ul>LO 8
    41. 41. Pricing Decisions LO 8 Below-cost pricing Separation between payers and users Indirect payment Nonfinancial prices Pricing objectives Characteristics Distinguishing Pricing Decisions of Nonprofit Organizations
    42. 42. Nonprofit Organization Marketing TARGET PRODUCT PROMOTION PLACE PRICE Professional volunteers Sales Public Service Advertising Involvement Benefit strength Benefit complexity Special facilities Nonfinancial Indirect payment Separation Below cost pricing • Complementary positioning • Apathetic or strongly opposed • Undifferentiated segmentation LO 8

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