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EXAM REVIEW - mcs 1000

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Marketing and Consumer Studies
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MCS 1000
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EXAM REVIEW The Seven P’s of Service - Product elements: all components of the service performance that create value for customers. - Place and Time: management decisions about when, where, and how to deliver services to customers. - Price and other user outlays: expenditures of money, time, and effort that customers incur in purchasing and consuming services. - Promotion and education: all communication activities and incentives designed to build customer performance for a specific service or service provider. - Process: a particular method of operations or series of actions, typically involving steps that need to occur in a defined sequence. - Physical Environment: the appearance of visible cues, all providing tangible evidence of a firm’s image and service quality. Can have profound impact on customer’s expressions. - People: customers and employees who are involved in service production. Brand Equity - The idea that a brand has numeric dollar value even though there are no tangible assets - The dollar amount attributed to the value of the brand, based on all the intangible qualities that create that value. Competition Based Pricing - Setting prices relative to those charged by competitors - Firms with relatively similar services need to monitor what competitors are charging and try to price accordingly. - When customers see little or no difference between competing offerings, they must choose what they think is cheapest. Consumer Buyer Behavior 1) Need recognition and Problem Awareness: the buyer recognizes a problem or need. 2) Information Search: the consumer spends time searching for information on the product. 3) Evaluation of Alternatives: how we go about evaluating our purchase alternatives depends on the buying situation. Sometimes rely on impulse or intuition, other times use careful calculations and logical thinking. 4) Purchase: all purchases begin with a need recognition and a purchase intention. Final purchase decisions are a result of all those influences on our behaviour – personal preferences, beliefs, and attitudes. The information sought and found, and the comparisons made. 5) Post-Purchase Evaluation: the process of evaluating what our expectations of the purchase were and comparing those expectations to how we feel now that we own the product. Consumer Surplus Consumerism - The concept that an ever-expanding consumption of goods is advantageous to the economy. - The belief that high and constantly increasing consumer-spending leads to a healthy economy, and that government policy should encourage this. - Bolstered by advertising, encourages people to judge themselves and others by what they own rather than who they are. Conventional distribution channel vs vertical marketing system Marketing or Distribution Channel: A set of independent organizations in the process of making a product or service available to use or consumption by the consumer or business user. Vertical Marketing System: A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contacts with them. Or has so much power that they all cooperate. Conventional vs. Vertical Conventional marketing channel: Manufacturer Wholesaler Retailer Consumer Vertical Marketing System: (Manufacturer, wholesaler, retailer) Consumer Core product & Supplementary services (flower of service) Core Product- Central component that supplies the principal, problem-solving benefits customers seek Supplementary Services- Augment the core product, facilitating its use and enhancing its value and appeal Delivery Process- Used to deliver both the core product and each of the supplementary services. The Flower of Services A visual framework for understanding the supplementary service elements that surround and add value to the product core. There are two kinds of supplementary services - Facilitating Supplementary Services: either needed for service delivery, or help in the use of the core product - Enhancing Supplementary Services: add extra value for the customer These different supplementary services can be classified into one of the eight clusters: Facilitating - Information: to obtain value from any good or service, customers need relevant information. - Order taking: once customers are ready to buy, the company accepts applications, orders and reservations. - Billing: expected to be clear, and prompt. - Payment: the action taken after billing is complete. Enhancing - Consultation: consists of immediate advice from knowledgeable service people in response to a request. - Hospitality: should ideally, reflect pleasure at meeting new customers and greeting old ones when they return. - Safekeeping: a reliable place for customers to keep their possessions and feel safe. - Exceptions: involve supplementary services outside the normal service delivery. How to Determine What Supplementary Services should be Offered - Market positioning strategy - Firms with different levels of service often add extra supplementary for each upgrade in service levels. Criticisms of marketing CRM (Customer Relationship Management) Strategies CRM Systems – what are they and what do they do? - Stands for Customer Relationship Management - Helps the researcher collect, store, and organize customer data. - The purpose is to manage customers artificially so that we don’t have to. - Crucial to success because it reduces that number of hours worked all around. - Any corporate software system that collects and organizes data and provides marketing managers, customer-service representatives with powerful information tools. Common Objectives of CRM Systems (Service Perspectives) - Data collection - Data Analysis - Sales Force automation - Marketing Automation - Call Centre automation Common Failures in CRM Implementation - Unfortunately, there is a high failure rate for CRM implementations - Common reasons for failures o Viewing CRM as a technology Initiative o Lack of customer focus o Not enough understanding of customer lifetime value (CLV) o Inadequate support from top management o Lack of coordination o Failure to reengineer business processes o Underestimating the challenges in data integration Cycle of failure, mediocrity, success Importance of frontline employees and how difficult their work is. How poor mediocre and excellent firms set up their frontline employees for failure mediocrity or success. Cycle of Failure: begins with a narrow design of jobs for low skill levels. Demand management approaches Demand Management Strategies Differentiation Strategies Dimensions of service quality Tangibles: Appearance of physical facilities, equipment, personnel, and communication materials. Reliability: Dependable and accurate performance. The ability to perform the promised service dependably and accurately. Responsiveness: promptness; helpfulness. Willingness to help customers and provide prompt service. Assurance: Competence, courtesy, credibility, security. Empathy: Easy access, good communication, understanding of customer. Distribution channel conflict Environmentalism An organized movement of concerned citizens, businesses, and governments agencies working to protect and improve the natural environment. Group of citizens, businesses and government agencies that... - Protect and improve the living environment - Maximize life quality, rather than consumption choice or satisfaction - Strive for environmental sustainability - Enact government regulations to support these goals. Establishing service levels Establishing Service Levels and Tiers - Need to make decisions on service levels – level of performance firm plans to offer on each attribute - Segment customers according to willingness to trade off prices versus service level - Service Tiering: Positioning strategy based on offering several price-based classes of service concept. Review four principles (objectives) of positioning strategy Four categories of service Four service focus strategies Front and back stage personnel Gaps in service design and delivery Gap 1 – The Knowledge Gap: is the difference between what senior management believes customers expect and what customers actually need and expect. Gap 2 – The Policy Gap: is the difference between management’s understanding of customers’ expectations and the service standards they set for service delivery. We call it the policy gap because the management made a policy decision not to deliver what they think customers expect. Reasons for setting standards below customer expectations are typically cost and feasibility considerations. Gap 3 – The Delivery Gap: is the difference between service standards and the service delivery teams’ actual performance on these standards Gap 4 – The Communications Gap: is the difference between what the company communicates and what it actually delivers to the customer. The gap is caused by two sub- gaps called internal communications gap and the overpromise gap. Gap 5 – The Perceptions Gap: is the difference between what is actually delivered and what customers feel they have received because they are unable to accurately judge service quality accurately. Gap 6 – The Service Quality Gap: is the difference between what customers expect to receive and their perception of the service that is actually delivered. How Close the Gaps? 1) Knowledge gap: Learn what customers expect 2) Policy gap: specify SQ standards that reflect expectations 3) Delivery Gap: ensure service performance meets standards 4) Internal communications gap: Ensure that communication promises are realistic 5) Perception gap: educate customers to see reality of service quality delivered 6) Service Gap: Close gaps 1 to 6 to meet customer expectations consistently Tools to Analyze and Address Service Quality Problems - Fishbone diagram o Cause-and-effect diagram to identify potential causes of problems - Pareto Chart o Separating the trivia from the important. Often, a majority of problems is caused by minority of causes (i.e. the 80/20 rule) - Blueprinting o Visualizations of service delivery, identify points where failures are most likely to occur General Pricing Approaches Cost-based Approach - Cost-plus pricing - Break-even analysis - Target profit pricing Value-based Approach - Consumer perceptions of value Competition-based Approach - What competitors are charging Market skimming Pricing - High price to reap maximum profit from early adopter segments - Strategy must be supported by product quality, production costs, and competitors’ difficulty in entertainment market. Market Penetration Pricing - Low price to gain maximum market share - Market must be price sensitive, costs must fall with rising volume, and price must discourage competition. Good vs. Service Service: any activity or benefit that one party can offer to another that is essentially intangible and does not result in ownership of anything. Good: Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. High vs. Low involvement products Important vs determinant attributes Customers usually make their choices between alternative service offerings based on the perceived differences between them. But the attributes that differentiate competing services aren’t always the most important ones. Determinant attributes (those that actually determine buyers’ choices between competing alternatives) are often not on the top of the list of service characteristics that are important for making buying decisions. Rather, consumers focus on attributes that are different between competing alternatives. In contrast, for budget-conscious holiday-makers, price is often a determinant attribute. Jack Trout’s four principles of positioning 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 objective. - 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 the 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. - Public Relations: building good relations with the company’s various publics by obtaining favourable publicity, building a good corporate image, and handling or heading off unfavourable rumours, stories and events. - Personal Selling: Personal presentation by the firm’s sales representatives for the purpose of making sales and building customer relationships. - Direct Response Marketing: Direct communications with carefully targeted customers (consumers or businesses) that request an immediate, measureable response and cultivate customer relationships. Marketing concepts Production - Affordability/availability: buyers will favour products that are widely available and affordable. - The proper focus of marketing management is to improve production and distribution efficiency. - Profits through price and saturation Product - Quality and innovation - Believing that the focus of marketing management should be on product development and improvement - Profits through innovation - Although, better products will not sell without an attractive design, package and price. And it must be brought to the attention of the buyer Selling - Promotion and hard selling - If their sales people are good enough, they can sell anything. - Profits through volume Marketing - Customer satisfaction and relationships, customer focus and value. - Profits through customer satisfaction - Starts with a well-defined market, focuses on customer needs and integrates the marketing activities that affect customers. - Achieving marketing and company goals depends on knowing the needs and wants of your chosen customers and delivering the values and satisfaction they need, want and demand. Societal - Long-term value to both customer and society. - Profits through customer satisfaction and social responsibility - Integrated Marketing - Considers not only the needs and wants of individuals but the welfare of society. - Maintains or improves the well-being of society Marketing Environment The factors and forces outside marketing’s direct control that affect marketing direct control that affect marketing management’s ability to develop and maintain successful transactions with target consumers. The Microenvironment - The major actors that influence the marketer’s microenvironment. - Marketing success will require building relationships with other company departments, suppliers, marketing intermediaries, customers, competitors, and various publics, all of which c
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