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Connecting the Dots: Principles of Marketing in a Really Short Time
Purdue UniversityJuly 28, 2009
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Slides taken from Principles of Marketing, 10th Edition, by Philip Kotler and Gary Armstrong
and used with permission.
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Changes in the Service Sector
1. Shift in the Base of World Economies
2. Your customer's Expectations Are Shifted by Forces Outside Your Industry
3. Technology, Technology, Technology!
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Shift in World Economies
• Agricultural
• Industrialization
• Service
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Your Customer’s Expectations Are Shifting!
• Your customer expects your service to be:
• Immediate
• Perfect
• Free
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Opportunities Spring from Technology
Creation of new or improved service
More involvement of customers in operation tasks through self-service
Creation of centralized customer service departments
Recording customer information on easily accessible data banks
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What is Marketing?
• Process by which individuals and groups obtain what they needneed and want want through creating and exchanging products exchanging products and value with others.
• More simply: Marketing is the delivery of customer satisfaction at a profit.
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What is Marketing?
"Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders." American Marketing Association 2004
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What Motivates a Consumer to Take Action?
• Needs – state of felt deprivation for basic items such as food and clothing and complex needs such as for belonging. i.e. I need a better job
• Wants – form that a human need takes as shaped by culture and individual personality. i.e. I want a college degree
• Demands – human wants backed by buying power. i.e. I have money to obtain a college degree from XYZ University
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How Do Consumers Choose Among Products and Services?
• Customer Value – benefit that the customer gains from owning and using a product compared to the cost of obtaining the product.
• Customer Satisfaction – depends on the product’s perceived performance in delivering value relative to a buyer’s expectations. Linked to Quality and Total Quality Management (TQM).
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Marketing & Sales Concepts Contrasted
Factory ExistingProducts
Sellingand
Promoting
ProfitsthroughVolume
Market CustomerNeeds
IntegratedMarketing
Profitsthrough
Satisfaction
The Selling ConceptThe Selling Concept
The Marketing ConceptThe Marketing Concept
StartingPoint Focus Means Ends
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The Marketing Process
TargetConsumers
Product
Place Price
Promotion
Mar
ketin
g
Im
plem
enta
tion
Marketing
Planning
Marketing
Control
Mar
ketin
g
Analys
is
Competitors
MarketingIntermediaries
PublicsSuppliers
Demographic-Economic
Environment
Technological-Natural
Environment
Political-Legal
Environment
Social-Cultural
Environment
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Seven P’s of Service
• Product• Quality• Features• Options• Style• Brand
• Packaging• Sizes• Services• Warranties• Returns
Traditional four P’s of Marketing
• Payment Period• Credit Terms
• Price• List Price• Discounts• Allowances
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Seven P’s of Service
Place• Channels• Coverage• Location
• Inventory• Transport
Promotion• Advertising• Personal Selling
• Sales Promotion• Publicity• Direct Marketing
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3 More P’s
Physical Evidence– Arrangements of objects– Materials used – Shapes/lines – Lighting/shadows
− Color− Temperature− Noise
Process Design– Policies & Procedures – Factory/delivery cycle time
Participant– Service Provider
– Other employees and customers
− Training and rewarding systems
− Customer being serviced
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The Marketing Information System
Marketing Information System
InformationAnalysis
InternalData
MarketingResearch
MarketingIntelligence
DistributingInformation
Assessing InformationNeeds
Marketing Managers
Marketing EnvironmentMarketing Environment
Ma
rke
tin
g D
ec
isio
ns
an
d C
om
mu
nic
ati
on
s
Developing Information
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Characteristics Affecting Consumer Behavior
BuyerBuyer
Psychological
Personal
Social
Culture
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The Buyer Decision Process
Need RecognitionNeed Recognition
Information SearchInformation Search
Evaluation of AlternativesEvaluation of Alternatives
Purchase DecisionPurchase Decision
Postpurchase BehaviorPostpurchase Behavior
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Steps in Segmentation, Targeting, and Positioning
1. Identify Basesfor Segmenting the Market
2. Develop Profilesof Resulting Segments
3. Develop Measuresof Segment Attractiveness
4. Select TargetSegment(s)
5. Develop Positioningfor Each Target Segment
6. Develop MarketingMix for Each Target Segment Market
Positioning
MarketTargeting
Market Segmentation
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Step 1. Market SegmentationBases for Segmenting Consumer Markets
Geographic
Demographic
Age, gender, family size and life cycle, or income
Psychographic
Social class, lifestyle, or personality
Behavioral
Occasions, benefits, uses, or responses
Nations, states, regions or cities
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Using Multiple Segmentation Bases: Geodemographics
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Step 3. Positioning for Competitive Advantage: Strategies
Against aCompetitor
Against aCompetitor
UsageOccasions
UsageOccasions
Away fromCompetitors
Away fromCompetitors
ProductAttributes
ProductAttributes
ProductClass
ProductClass
BenefitsOffered
BenefitsOffered
UsersUsers
B
AA
ED
CH
G
F
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Selecting the Right Competitive Advantages
Criteriafor
DeterminingWhich
Differencesto
PromoteAffordableAffordable SuperiorSuperior
ProfitableProfitable
PreemptivePreemptive
DistinctiveDistinctive
ImportantImportant
CommunicableCommunicable
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Communicating A Strong Positive Image
• Image Formula• (accuracy + clarity + consistency) x continuity
• Accuracy* Honest and reachable – 95% who we are and who we want to be
• Clarity* Is our message understandable and measurable?
• Consistency* Is everyone singing the same tune?
• Continuity* Over time
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What is a Product?
• Anything that can be offered to a market for attention, acquisition, use or consumption.• Satisfies a want or a need.• Includes:
• Physical Products• Services• Persons• Places• Organizations• Ideas• Combinations of the above
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Levels of Product
BrandName
QualityLevel
Packaging
Design
Features
Delivery& Credit
Installation
Warranty
After-SaleService
CoreBenefit
orService
ActualProduct
ActualProduct
CoreProduct
AugmentedProduct
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Characteristics of Services
IntangibilityIntangibility
InseparabilityInseparability
VariabilityVariability
PerishabilityPerishability
Can’t be seen, tasted, felt, heard, or smelled before purchase.
Can’t be separated from service providers.
Quality depends on who provides them and when, where and how.
Can’t be stored for later sale or use.
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Marketing Strategies for Service Firms
• Managing Service Differentiation• Develop offer, delivery and image with competitive advantages.
• Managing Service Quality• Empower employees• Become “Customer obsessed”• Develop high service quality standards• Watch service performance closely
• Managing Service Productivity• Train current or new employees• Utilize technology
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Value = Benefits – Costs
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Benefits = Solution to a problem
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Costs =
Financial Time Hassle Opportunity Physical Psychological Social
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Distribution
Access Location Control the pathways
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The Communication Process
Noise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise Noise
Noise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise NoiseNoise Noise Noise Noise Noise Noise
MediaMedia
MessageMessage
ResponseResponse
FeedbackFeedback
SenderSender
EncodingEncoding
DecodingDecoding
ReceiverReceiver
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Steps in Developing Effective Communication
Step 1. Identifying the Target AudienceStep 1. Identifying the Target Audience
Step 2. Determining the Communication ObjectivesBuyer Readiness Stages
Step 2. Determining the Communication ObjectivesBuyer Readiness Stages
PurchasePurchase
Conviction
Preference
Liking
Knowledge
Awareness
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Setting the Promotion Mix
Nature of Each Promotion Tool
AdvertisingReaches Many Buyers, Expressive
Impersonal
AdvertisingReaches Many Buyers, Expressive
Impersonal
Personal SellingPersonal Interaction, Builds Relationships
Costly
Personal SellingPersonal Interaction, Builds Relationships
Costly
Sales PromotionProvides Strong Incentives to Buy
Short-Lived
Sales PromotionProvides Strong Incentives to Buy
Short-Lived
Public RelationsBelievable, Effective, EconomicalUnderused by Many Companies
Public RelationsBelievable, Effective, EconomicalUnderused by Many Companies
Direct MarketingNonpublic, Immediate, Customized,
Interactive
Direct MarketingNonpublic, Immediate, Customized,
Interactive
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Customer Satisfaction
Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations.
Buyer’s Expectations Are Based On:
Customer’s Past Buying Experiences Opinions of Friends & Associates
Marketer/ Competitor Information & Promises
Pro
du
ct’
s A
ctu
al
Pe
rfo
rma
nc
e
Performance Exceeds Expectations– Customer is Delighted
Performance Below Expectations – Customer is Dissatisfied
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The Basis of Service Quality
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Other’s Definition
Quality = Zero Defects– Deming
Conformance to specifications– Crosby
“Attention to detail and exceeding customer expectations”– Disney
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The Customer’s Definition
• Reliability• Consistency• Dependability• Honor your promises
• Responsiveness• Willingness/readiness of employees to provide service• Timeliness of service
– Berry et al
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• Competence• Possession required skills and knowledge• Of contact personnel• Of operational support personnel• Research capability of firm
• Access• Approachability and ease of contact
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• Courtesy• Politeness• Respect• Consideration• Friendliness
• Communication• Keeping customers informed in language they understand• Listening to customers
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• Credibility• Trustworthiness• Believability• Honesty
• Security• Freedom from danger, risk or doubt• Physical safety• Financial• Confidentiality
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• Understanding the Customer• The marketing concept• Specific customer requirements• Individualized attention• Recognizing the regular customer
• Tangibles• Physical evidence of service
• Facilities• Personnel• Other customers• Tools or equipment
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Breakdown in Service Quality
Key Factors:
Lack of market segmentationInsufficient marketing research
Inadequate use of marketing researchLack of interaction between management and customers
Insufficient communication between contact employees and managers
CustomerExpectations
Perceptions ofCustomer Expectations
Source of For Service Gaps: Zeithaml, Berry & Parasuraman, 1993.
GAP1
Service Gaps
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Breakdown in Service Quality
Key Factors:
Lack of customer-defined standards andprocess management
Absence of formal process for setting service quality goalsPerception of infeasibility — that customer expectations
cannot be metInadequate management commitment to service quality
Perceptions ofCustomer Expectations
Service QualityStandards
Source of For Service Gaps: Zeithaml, Berry & Parasuraman, 1993.
GAP2
Service Gaps
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Breakdown in Service Quality
Key Factors:Role ambiguity among employeesRole conflict among employees
Poor employee - technology - job fitInappropriate evaluation / compensation system
lack of perceived control (contact personnel!)Lack of teamwork
Service QualityStandards
Service Delivery
Source of For Service Gaps: Zeithaml, Berry & Parasuraman, 1993.
GAP3
Service Gaps
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Breakdown in Service Quality
Service Gaps
Key Factors:Inadequate management of expectations
Overpromising in advertisingOverpromising in personal selling
Inadequate communication among departments/functionsDifferences in policies and procedures across branches or units
Service Delivery
ExternalCommunications
to Customers
Source of For Service Gaps: Zeithaml, Berry & Parasuraman, 1993.
GAP4
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Thank you!