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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1
MKTG
Designed byAmy McGuire, B-books, Ltd.
Prepared byDeborah Baker, Texas Christian University
Lamb, Hair, McDaniel 2007-2008
9CHAPTER Product Concepts
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 2
Learning Outcomes
Define the term product
Classify consumer products
Define the terms product item, product line, and product mix
Describe marketing uses of branding
LO1
LO2
LO3
LO4
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 3
Learning Outcomes
Describe marketing uses of packaging and labeling
Discuss global issues in branding and packaging
Describe how and why product warranties are important marketing tools
LO5
LO6
LO7
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Define the term product
What Is a Product?What Is a Product?LO1
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 5
LO1
What Is a Product?
Everything, both favorable and
unfavorable, that a person
receives in an exchange.
Tangible Good
Service
Idea
ProductProduct
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LO1
What Is a Product?
Product is the starting point of Marketing Mix
PromotionPromotion
Place (Distribution)Place (Distribution)
PricePrice
Product Product
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REVIEW LEARNING OUTCOMELO1
Define the term product
ProductProduct
GoodService
Idea
GoodService
Idea
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Classify consumer products
Types of Consumer ProductsTypes of Consumer ProductsLO2
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LO2
Types of Products
BusinessProduct
BusinessProduct
Consumer Product
Consumer Product
A product used to manufacture other goods or services, to facilitate an
organization’s operations, or to resell to other consumers.
A product used to manufacture other goods or services, to facilitate an
organization’s operations, or to resell to other consumers.
A product bought to satisfy an individual’s personal needs or wants
A product bought to satisfy an individual’s personal needs or wants
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 10
LO2
Types of Consumer Products
UnsoughtProducts
UnsoughtProducts
SpecialtyProductsSpecialtyProducts
ShoppingProducts
ShoppingProducts
ConvenienceProducts
ConvenienceProducts
ConsumerProducts
ConsumerProducts
BusinessProductsBusinessProducts
ProductsProducts
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LO2
Types of Consumer Products
MarketDevelopment
Diversification
Increase market share among existing customers
Attract new customers to existing products
Introduce new products into new markets
Create new products for present markets
ConvenienceProduct
ShoppingProduct
SpecialtyProduct
UnsoughtProduct
A relatively inexpensive item that merits little shopping effort
A product that requires comparison shopping, because it is usually more expensive and found in fewer stores
A particular item for which consumers search extensively and are reluctant to accept substitutes
A product unknown to the potential buyer or a known product that the buyer does not actively seek
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REVIEW LEARNING OUTCOMELO2
Consumer Products
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Define the terms product item, product line,
and product mix
Product Items, Lines, and MixesProduct Items, Lines, and MixesLO3
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Product Items, Lines, and MixesLO3
Product ItemProduct Item
Product LineProduct Line
Product MixProduct Mix
A specific version of a product that can be designated as a distinct offering among an organization’s products.
A specific version of a product that can be designated as a distinct offering among an organization’s products.
A group of closely-related product items.
A group of closely-related product items.
All products that an organization sells.
All products that an organization sells.
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Campbell’s Product Lines and MixLO3
{ }
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 16
Benefits of Product LinesLO3
Equivalent QualityEquivalent Quality
Efficient Sales andDistribution
Efficient Sales andDistribution
Standardized Components
Standardized Components
Package UniformityPackage Uniformity
Advertising EconomiesAdvertising Economies
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Product Mix WidthLO3
The number of product lines an organization offers.
Diversifies risk Capitalizes on established
reputations
The number of product lines an organization offers.
Diversifies risk Capitalizes on established
reputations
Product MixWidth
Product MixWidth
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Product Line DepthLO3
The number of product Items in a product line.
Attracts buyers with different preferences
Increases sales/profits by further market segmentation
Capitalizes on economies of scale Evens out seasonal sales patterns
The number of product Items in a product line.
Attracts buyers with different preferences
Increases sales/profits by further market segmentation
Capitalizes on economies of scale Evens out seasonal sales patterns
Product LineDepth
Product LineDepth
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 19
AdjustmentsLO3
Product Modification
Product Modification
ProductRepositioning
ProductRepositioning
Product LineExtension or Contraction
Product LineExtension or Contraction
Adjustments to Product Items,
Lines, and Mixes
Adjustments to Product Items,
Lines, and Mixes
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 20
Types of Product ModificationsLO3
Quality ModificationQuality Modification
Functional ModificationFunctional Modification
Style ModificationStyle Modification
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Planned ObsolescenceLO3
PlannedObsolescence
PlannedObsolescence
The practice of modifying products
so those that have already been
sold become obsolete before they
actually need replacement.
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 22
RepositioningLO3
Changing Demographics
Changing Demographics Declining SalesDeclining Sales
Changes in Social
Environment
Changes in Social
Environment
Why reposition Why reposition established brands?established brands?
Why reposition Why reposition established brands?established brands?
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 23
Product Line ExtensionLO3
Product Line Extension
Product Line Extension
Adding additional products to an
existing product line in order to
compete more broadly in the
industry.
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Product Line ContractionLO3
Some products have low sales or cannibalize sales of other items
Resources are disproportionately allocated to slow-moving products
Items have become obsolete because of new product entries
Symptoms of Product Line OverextensionSymptoms of Product Line Overextension
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REVIEW LEARNING OUTCOMELO3
Product item, product line, and product mix
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Describe marketing uses of branding
BrandingBrandingLO4
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 27
LO4
Brand
A name, term, symbol,
design, or combination
thereof that identifies a
seller’s products and
differentiates them from
competitors’ products.
BrandBrand
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LO4
Branding
Brand Name
BrandMark
Brand Equity
That part of a brand that can be spoken, including letters, words, and numbers
The elements of a brand that cannot be spoken
The value of company and brand names
GlobalBrand
A brand where at least 20 percent of theproduct is sold outside its home country
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LO4
Benefits of Branding
Product Identification
Product Identification
Repeat SalesRepeat Sales
New Product Sales
New Product Sales
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Biz Flix
LO4Josie and the Pussycats
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LO4
Top Five Global and North American Brands
Global
1. Apple
2. Google
3. IKEA
4. Starbucks
5. Al Jazeera
North American
1. Apple
2. Google
3. Target
4. Starbucks
5. Pixar
SOURCE: Deborah L. Vence, “Not Taking Care of Business,” Marketing News, March 15, 2005, p. 19.
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LO4
Branding Strategies
Brand No Brand
Manufacturer’s Brand Private Brand
IndividualBrand
Family Brand
Combi-nation
IndividualBrand
Family Brand
Combi-nation
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 33
LO4
Generic Brand
A no-frills, no-brand-
name,
low-cost product that is
simply identified by its
product category.
GenericProduct
GenericProduct
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 34
LO4
Manufacturers’ Brands VersusPrivate Brands
Manufacturers’ Brand
Private Brand
The brand name of a manufacturer.
A brand name owned by a wholesaler or a retailer. Also
known as a private label or store brand.
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 35
LO4
Advantages of Manufacturers’ Brands
Heavy consumer ads by manufacturers
Attract new customers
Enhance dealer’s prestige
Rapid delivery, carry less inventory
If dealer carries poor quality brand, customer may simply switch brands and remain loyal to dealer
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LO4
Advantages of Private Brands
Earn higher profits on own brand
Less pressure to mark down price
Manufacturer can become a direct competitor or drop a brand/reseller
Ties customer to wholesaler or retailer
Wholesalers and retailers have no control over the intensity of distribution of manufacturers’ brands
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 37
LO4
Individual Brands Versus Family Brands
Individual Brand
Family Brand
Using different brand names for different products.
Marketing several different products under the same brand name.
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 38
LO4
Cobranding
IngredientBranding
IngredientBranding
Cooperative Branding
Cooperative Branding
Complementary Branding
Complementary Branding
Types of Types of CobrandingCobranding
http://www.bose.com
Online
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 39
LO4
Trademarks
A Trademark is the exclusive right to use a brand.
Many parts of a brand and associated symbols qualify for trademark protection.
Trademark right comes from use rather than registration.
The mark has to be continuously protected. Rights continue for as long as the mark is used. Trademark law applies to the online world.
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REVIEW LEARNING OUTCOMELO4
Marketing Uses of Branding
Page 41
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Describe marketing uses of packaging
and labeling
PackagingPackagingLO5
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Functions of PackagingLO5
Contain and Protect
Promote
Facilitate Storage, Use, and Convenience
Facilitate Recyclinghttp://www.levesquedesign.com/http://www.design4packaging.com
Online
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 43
LabelingLO5
Online
http://www.fda.gov
Persuasive
Focuses on promotional theme
Consumer information is secondary
Informational
Helps make proper selections
Lowers cognitive dissonance
Includes use/care
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Universal Product CodesLO5
Universal Product Codes
(UPCs)
A series of thick and thin vertical lines
(bar codes), readable by computerized
optical scanners, that represent
numbers used to track products.
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REVIEW LEARNING OUTCOMELO5
Packaging and Labeling
Page 46
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Discuss global issues in branding
and packaging
Global Issues in Global Issues in Branding and PackagingBranding and Packaging
LO6
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 47
Global Issues in BrandingLO6
Adaptations & Modifications
Adaptations & Modifications
Global Options Global Options for Brandingfor Branding
One Brand NameEverywhere
One Brand NameEverywhere
Different Brand Names in Different
Markets
Different Brand Names in Different
Markets
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Global Issues in PackagingLO6
AestheticsAesthetics
Global Global Considerations Considerations for Packagingfor Packaging
Climate Considerations
Climate Considerations
LabelingLabeling
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REVIEW LEARNING OUTCOMELO6
Global Issues in Branding and Packaging
Branding Choices:
1 nameModify or adapt 1 nameDifferent names in
different markets
Packaging Considerations:
LabelingAestheticsClimate
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Describe how and why product
warranties are important
marketing tools
Product WarrantiesProduct WarrantiesLO7
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Product Warranties
LO7
Warranty
ExpressWarranty
Implied Warranty
A confirmation of the quality or performance of a good or service.
A written guarantee.
An unwritten guarantee that the good or service is fit for the purpose for which it was sold. (UCC)
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REVIEW LEARNING OUTCOMELO7
Product Warranties
Express warranty = written guarantee
Implied warranty = unwritten guarantee
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 53
MKTG
Designed byAmy McGuire, B-books, Ltd.
Prepared byDeborah Baker, Texas Christian University
Lamb, Hair, McDaniel 2007-2008 Services
and Nonprofit Organization Marketing
11
CHAPTER
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 54
Learning Outcomes
Discuss the importance of services to the economy
Discuss the differences between services and goods
Describe the components of service quality and the gap model of service quality
LO1
LO2
LO3
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 55
Learning Outcomes
Develop marketing mixes for services
Discuss relationship marketing in services
Explain internal marketing in services
Discuss global issues in services marketing
Describe nonprofit organization marketing
LO6
LO5
LO7
LO8
LO4
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Discuss the importance of services to the
economy
The Importance of ServicesThe Importance of ServicesLO1
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LO1
Service
The result of
applying human or
mechanical efforts to
people or objects.
ServiceService
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REVIEW LEARNING OUTCOMELO1
The Importance of Services
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
81%
Services as a percentage of GDP
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
81%
Services as a percentage of employment
ServicesDeedPerformanceEffort
DeedPerformanceEffort
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Discuss the differences between services and goods
How Services Differ from GoodsHow Services Differ from GoodsLO2
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How Services Differ from Goods
LO2
IntangibleIntangible
InseparableInseparable
HeterogeneousHeterogeneous
PerishablePerishable
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How Services Differ from Goods
LO2
IntangibilityIntangibility
Search Qualities
Experience Qualities
Credence Qualities
Online
http://www.webmd.com
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Describe the components
of service quality and the gap model of service quality
Service QualityService QualityLO3
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Components of Service QualityLO3
TangiblesTangibles The physical evidence of a service.
The physical evidence of a service.
EmpathyEmpathy Caring, individualized attention to customers.Caring, individualized attention to customers.
AssuranceAssurance The knowledge and courtesyof employees.
The knowledge and courtesyof employees.
ResponsivenessResponsiveness The ability to provideprompt service.
The ability to provideprompt service.
ReliabilityReliability The ability to perform the service right the first time.The ability to perform the service right the first time.
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The Gap Model of Service Quality
LO3
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Biz Flix
LO3Intolerable Cruelty
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REVIEW LEARNING OUTCOMELO3
Service Quality
Page 67
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Develop marketing mixes for services
Marketing Mixes for ServicesMarketing Mixes for ServicesLO4
Page 68
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LO4
Product Strategies for Services
ServiceMix
Standardizationor
Customization
Core andSupplementary
Process
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LO4
Service as a Process
Mental StimulusProcessing
Mental StimulusProcessing
People Processing
People Processing
PossessionProcessing
PossessionProcessing
InformationProcessing
InformationProcessing
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LO4
The Service Factory
Possession processing
Mental-stimulus processing
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LO4
The Service Offering
CoreServiceCore
Service
SupplementaryService
SupplementaryService
The most basic benefit the consumer is buying.
The most basic benefit the consumer is buying.
A group of services that supportor enhance the core service.
A group of services that supportor enhance the core service.
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 72
LO4
Core and Supplementary Services for FedEx
Overnight Overnight transportation transportation and delivery of and delivery of
packagespackages
Problem solving
Billing statements
TracingDocumentation
Order taking
Supplies
Pickup
Advice andinformation
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 73
LO4
Customization/Standardization
A strategy that uses
technology to
deliver customized
services on a mass
basis.
MassCustomization
MassCustomization
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LO4
The Service Mix
Determine what new services to introduce
Determine target market
Decide what existing services to maintain and to eliminate
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LO4
Place (Distribution) Strategy
SchedulingScheduling
LocationLocation
Direct or indirect distribution
Direct or indirect distribution
Number of outletsNumber of outlets
ConvenienceConvenience
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LO4
Promotion Strategy
Stress tangible cues
Use personal information sources
Create a strong organizational image
Engage in postpurchase communication
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LO4
Price Strategy
Pricing Challenges for Services
Define the unit of service consumption
Determine if multiple elements are “bundled” or priced separately
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Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 78
LO4
Pricing Objectives
Revenue-OrientedPricing
Operations-OrientedPricing
Patronage-OrientedPricing
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.comhttp://www.tdameritrade.comhttp://www.schwab.com
Online
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REVIEW LEARNING OUTCOMELO4
Marketing Mixes for Services
PLACEPLACE PROMOTIONPROMOTION PRICEPRICEPRODUCT
= SERVICE
PRODUCT =
SERVICE
ProcessProcess
Core and Supplementary
Core and Supplementary
Mass Customization
Mass Customization
StandardizationStandardization
Number ofoutlets
Number ofoutlets
DirectDirect
IndirectIndirect
LocationLocation
Tangiblecues
Tangiblecues
Personalinformation
Personalinformation
Strong imageStrong image
Post-purchasecommunication
Post-purchasecommunication
Revenueoriented
Revenueoriented
Operationsoriented
Operationsoriented
Patronageoriented
Patronageoriented
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Discuss relationship marketing in services
Relationship MarketingRelationship MarketingLO5
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REVIEW LEARNING OUTCOMELO5
Relationship Marketing in Services
2Social
Financial
1Financial
3Structural
SocialFinancial
Pricing incentives
Design services to meet customer needs
Creating value-added services not available elsewhere
Page 82
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Explain internal marketing in services
Internal Marketing in Internal Marketing in Service FirmsService Firms
LO6
Page 83
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Internal MarketingLO6
Internal Marketing
Internal Marketing
Treating employees as customers and developing systems and benefits that satisfy their needs.
Page 84
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REVIEW LEARNING OUTCOMELO6
Internal Marketing in Services
Page 85
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Discuss global issues
in services marketing
Global Issues in Global Issues in Services MarketingServices MarketingLO7
Page 86
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REVIEW LEARNING OUTCOMELO7
Global Issues in Services Marketing
United States is world’s largest exporter of services.
U.S.A.
Page 87
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Describe nonprofit organization
marketing
Nonprofit Organization Nonprofit Organization MarketingMarketingLO8
Page 88
Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 88
Nonprofit Organization Marketing
LO8
NonprofitOrganization
Marketing
NonprofitOrganization
Marketing
An organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment.
Page 89
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Nonprofit Organization Marketing
LO8
Government
Museums
Theaters
Schools
Churches
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Nonprofit Organization Marketing
LO8
Market intangible productsMarket intangible products
Production requires customer’s presenceProduction requires customer’s presence
Services vary greatlyServices vary greatly
Services cannot be storedServices cannot be stored
Shared Characteristics
with Service
Organizations
Shared Characteristics
with Service
Organizations
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Nonprofit Organization Marketing
LO8
Identify desired customersIdentify desired customers
Specify objectivesSpecify objectives
Develop, manage, eliminate programs and servicesDevelop, manage, eliminate programs and services
Decide on pricesDecide on prices
Schedule events or programsSchedule events or programs
Communicate their availabilityCommunicate their availability
Page 92
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Unique Aspects of Nonprofit Organization Marketing Strategies
LO8
Setting of marketing objectives
Selection of target markets
Development of marketing mixes
Page 93
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Objectives
LO8
Provide services that respond to the wants of :
Users
Payers
Donors
Politicians
Appointed officials
Media
General Public
Page 94
Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 94
Target Markets
LO8
Apathetic or strongly opposed
targets
Apathetic or strongly opposed
targets
Pressure to adopt undifferentiated segmentation
Pressure to adopt undifferentiated segmentation
Complementary positioning
Complementary positioning
Unique Issues of Nonprofit
Organizations
Page 95
Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 95
Product Decisions
LO8
Distinctions between Business and Nonprofit Organizations
Benefit complexity
Weak or indirect benefit strength
Low involvement
Page 96
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Promotion Decisions
LO8
Sales promotion activities
Public service advertising
Professional volunteers
Online
http://www.adcouncil.com
Page 97
Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 97
Pricing Decisions
LO8 Below-cost pricingBelow-cost pricing
Separation betweenpayers and users
Separation betweenpayers and users
Indirect paymentIndirect payment
Nonfinancial pricesNonfinancial prices
Pricing objectivesPricing objectives
Characteristics Distinguishing
Pricing Decisionsof Nonprofit
Organizations
Characteristics Distinguishing
Pricing Decisionsof Nonprofit
Organizations
Page 98
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REVIEW LEARNING OUTCOMELO8
Nonprofit Organization Marketing
TARGET• Apathetic or
strongly opposed• Undifferentiated
segmentation• Complementary
positioning
PRODUCT
PROMOTION
PLACE
PRICE
Professional
volunteersSales
Public ServiceAdvertising
Involvement
Benefitstrength
Benefitcomplexity
Specialfacilities
Nonfinancial
Indirect payment
Separation
Below costpricing