Jessica Gahtan MKTG2030 1
Chapter 7: Create the Value Proposition
Marketer’s two tasks: First, to create a better value than what’s out there already, and
second, to convince customers that this is true.
Good: A tangible product that we can see, touch, smell, hear, or taste.
Intangibles: Experience-based products.
Marketers think of the product as more than just a thing that comes in a package.
Attributes: Include features, functions, benefits, and uses of a product. Marketers view products
as a bundle of attributes that includes the packaging, brand name, benefits, and supporting
features in addition to a physical good.
Marketer’s role in creating the value proposition is to develop and market products
Layers of the Product
Core product: consists of all the benefits the product will provide for consumers or business
Actual product: is the physical good or the delivered service that supplies the desired benefit.
Augmented product— the actual product plus other supporting features such as a warranty,
credit, delivery, installation, and repair service after the sale.
How Long Do Products Last?
Durable goods are consumer products that provide benefits over a period of months, years, or
even decades, such as cars, furniture, and appliances.
Nondurable goods, such as gasoline, newspapers and food, in the short term.
Marketers also classify products based on where and how consumers buy the product:
Convenience product typically is a nondurable good or service that consumers purchase
frequently with a minimum of comparison and effort.
Staples: basic or necessary items that are available almost everywhere; consumers don’t
perceive big differences among brands
Impulse products: bought on the spur of the moment; create a package design that is enticing
and that ‘reaches out and grabs the customer; highly visible
Emergency products: products bought when there’s a dire need; price- and sometimes quality-
is irrelevant for decision-making
Shopping products: g/s for which consumers will spend time and effort to gather info on price,
attributes and quality
Intelligent agents: (aka Shopbots) are computer programs that find sites selling a particular
Specialty products: have unique characteristics that are important to buyers at almost any price;
consumers usually know a good deal about specialty products; tend to be brand loyal
Unsought products: g/s (other than convenience products) for which a consumer has little
awareness or interest until a need arises
How Do Businesses Buy Products?
Equipment (aka Heavy Equipment, installations or capital equipment): Expensive goods, which
last for a long time that an organization uses in its daily operations.
Maintenance, repair, and operating (MRO) products: are goods that a business customer
consumes in a relatively short time. Maintenance products include light bulbs, mops, cleaning
supplies, and the like. Repair products are items such as nuts, bolts, washers, and small tools.
Operating supplies include computer paper and oil to keep machinery running smoothly.
Raw materials: are products of the fishing, lumber, agricultural, and mining industries that
organizational customers purchase to use in their finished products.
Processed materials: Products created when firms transform raw materials from their original
Component parts: Manufactured goods or subassemblies of finished items that organizations
need to complete their own products.
Marketing What Isn’t There (Intangibles) Jessica Gahtan MKTG2030 2
Services are acts, efforts, or performances exchanged from producer to user without ownership
1. Intangibility: can’t see, touch, smell etc. before purchase- therefore it’s difficult to
evaluate before purchasing
2. Perishability: it’s impossible to store for later sale/ consumption- use it or lose it; can use
marketing mix to encourage demand for the service during slack times- i.e. lowering cost
of airplane tickets; some may attempt to match supply and demand via capacity
management (=adjusting the product or adjusting the price)- i.e. a ski hill that’s open
during the summer for golfing
3. Variability- over time, even the same service the same individual performs for the
customer changes- even if only in minor ways- no two haircuts are identical; difficult to
standardize services b/c service providers and customers vary; you don’t necessarily
want standardization when you purchase a service- you don’t really want the same
haircut as your grandmother
4. Inseparability: it’s impossible to divide production of a service from the consumption of
that service- a service can only take place at the time the actual service provider
performs and act on either the customer or the customer’s possession- The central role
that employees play in making or breaking a service underscores the importance of the
service encounter (= the interaction between the customer and the service provider)
Some businesses use disintermediation (=removing the middlemen and thus
eliminating the need for customers to interact with people at all, i.e. use of ATM machine)
to mitigate the potentially negative effects of bad service encounters
THE SERVICE ENCOUNTER
Social contact dimension: one person interacting with another person
Physical dimension: customers often pay close attention to the environment where they receive
“The moment of truth”: it’s the employee who often determines whether the customer will come
away with a positive or a negative impression of the service
Equipment or faculty based services
Clear signs and other guidelines must show customers how to use the service. In
particular, firms need to minimize waiting times, marketers employ lots of tricks to give
impatient customers the illusion they aren’t’ waiting too long- i.e. mirrors by hotel
Especially important for frequently purchased services that are obtained at a fixed spot-
when you choose a bank or gym, for example, its location often factors into the decision
Marketers must make sure their service sites are convenient and in neighborhoods that
are attractive to prospective customers
Create an attractive/pleasant environment to lure customers
People have less and less time to get things done, the importance of people-based
services is increasing
Self-improvement services are increasingly popular
CORE AND AUGMENTED SERVICES
When a person buys a service they may be purchasing a set of services
Core Service: is a benefit that a customer gets from the service
To attract customers, a service firm often tries to offer augmented services (additional
service offerings that differentiate the firm from competition Jessica Gahtan MKTG2030 3
PHYSICAL ELEMENTS OF THE SERVICE ENCOUNTER: SERVICESCAPES AND OTHER
Servicescape: the actual physical facility where the service is performed, delivered and
Search engine optimization (SEO): Searchability; a systematic process of ensuring that your
firm comes up at or near the top of lists of typical search phrases related to your business
HOW WE PROVIDE QUALITY SERVICE
If negative service experience- disservice
Quality service ensures that customers are satisfied with what they’ve paid for
Satisfaction is relative
Marketers identify customer expectations and then work hard to exceed them
SERVICE QUALITY ATTRIBUTES
Difficult to estimate how good a service will be until you buy it
Most services can’t offer a free trial, need to find creative ways to illustrate the benefits of
the service being provided
First consider 3 types of service quality attributes
Search qualities: product attributes that the consumer can examine prior to purchase (think
smell, fit, price, texture, etc.) – tangible goods will have these but for services you need to build
them in by paying attention to details- i.e. the style of flight attendant’s uniforms
Experience qualities: product attributes that customers identify during or after consumption-
travel agency having a slick presentation, enthusiastic recommendations from other clients who
had a positive experience- careful not to overpromise- b/c when actual experience falls short-
Credence qualities: attributes that are difficult to evaluate even after we’ve experienced them-
client must trust the service provider- i.e. trust that the doctor’s diagnosis was correct
HOW WE MEASURE SERVICE QUALITY
Servqual: A multiple-item scale used to measure service quality across dimensions of tangibles,
reliability, responsiveness, assurance, and empathy. Usually administered through written, online
or phone questionnaire; firms look at these scores over time to see how their service quality is
improving or not
Gap analysis: A marketing research method that measures the difference between a customer’s
expectation of a service quality and what actually occurred. Locating a gap b/w expectation and
what’s received gives insight on what needs improvement
Gap between consumers’ expectations and management’s perceptions: When the firm’s
managers don’t understand what its customers’ expectations are in the first place
Gap between management’s perception and quality standards the firm sets: firm fails to establish
a quality-control program; successful service firms develop written quality goals
Gap between established quality standards and service delivery: employees do not deliver the
service at the level the company specifies, quality suffers
Gap between service quality standards and consumers’ expectations: services firm is better off
when it communicates exactly what the customer can expect and how the company will make it
right if it doesn’t deliver on its promises
The Critical Incide