MGMT E-6020

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MGMT E-6020Session 13

Presentation Order

1) 5:30 DesRoches, Dixit, Sreedharan (cell phones)

2) 5:45 Bertoni, Adler-Golden, Iyasere, Woo (amusement parks)

3) 6:00 Aytar, Reddy, Tokaojian (consulting/IT)

4) 6:15 Davis, Hyde, Welch, Wilston (exec ed)

5) 6:30 Aurora, Fellows, Spiess, Rawdon (travel sites)

6) 6:45 Collins, Saraswathy, Friedman, Brooks (airlines)

7) 7:00 McCarthy, Belge, Saranathan, Osman (amusement parks)

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Southwest: Questions about future growth

• In the post 9/11 era, should SW continue to pursue its yearly 10-15% growth (about ~150 new flights per year)?

• Should they connect existing stations, and if so should they do it with long-haul flights or short-haul flights?

• Should they add new cities? Why or why not?

• Other options?

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Differences between marketing goods and marketing services

Product Price Placement Promotion

ProcessPhysical

Environment People

Traditional 4 Ps:

Additional Ps:

1. Most service products cannot be inventoried2. Intangible elements usually dominate value creation3. Services are often difficult to visualize and understand4. Customers may be involved in co-production5. People may be part of the service experience6. Operational inputs and outputs tend to vary more widely7. The time factor often assumes great importance8. Distribution may take place through nonphysical channels

3 Stage Model of Consumption

• Identify need

• Search for solutions

• Evaluate alternatives

• Make decision

Pre-Purchase Service Encounter Post-Encounter

• Interaction with service provider

• Point of requesting service through service delivery

• “Moments of truth”

• Evaluation• Future intent

• Attributes– Search– Experience– Credence

• Risk Reduction• “Zone of Tolerance”

• Theater as a metaphor

• Customer contact points

• Satisfaction• “Delight”

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S-T-P

• Defining your target market well and understanding customer needs is critical– Process: Segment, Target, Position (Best Buy)

– Pay attention to how your customer base and customers’ needs change over time and as your brand expands. Periodically confirm that your value proposition still resonates (Starbucks)

– Make sure you research what is important to the customer, the “determinant attributes.” Don’t guess! (ThoughtWorks and Consultant’s Comeuppance)

• Understand the profitability and lifetime value of your customer segments

– Consider these aspects carefully when planning investments and DO THE MATH! (Starbucks, Ritz Carlton)

Customer Value Proposition – Strive to Resonate

Value Proposition

All Benefits Favorable Points of Difference

Resonating Focus

Consists of:

All benefits customers receive from a market offering

All favorable points of difference a market offering has relative to the next best alternative

Key points of difference (and, perhaps, a point of parity) whose improvement will deliver the greatest value to the customer for the foreseeable future

Answers the customer question:

“Why should our firm purchase your offering?”

“Why should our firm purchase your offering instead of your competitor’s?”

“What is most worthwhile for our firm to keep in mind about your offering?”

Requires:Knowledge of own market offering

Knowledge of own market offering and next best alternative

Knowledge of how own market offering delivers superior value to customers, compared with next best alternative

Has the potential pitfall:

Benefit assertion Value PresumptionRequires customer value research

Source: Harvard Business Review, “Customer Value Propositions in Business Markets” by James C. Anderson et al

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Integrated Marketing Communications

• Questions to ask in planning:– Who is our target audience?– What do we need to communication and achieve?– How should we communicate this?– Where should we communicate this?– When do communications need to take place?– How will we measure it?

• Think about how your communications work together across media, conveying consistent branding and messaging (Mastercard “priceless” campaign)

• Social Media: Though the verdict is still out on the return on investment for social media, it’s important to have a presence where your customers are – Track whatever you can using campaign links and analytics

Pricing

• Likely the most important decision you make in terms of impact on profit

• Different customer groups have different needs and sensitivity to price. – Segment and price accordingly

(Liberty Mutual)– A customer’s price sensitivity

changes over time

• Keep perception of fairness in mind (Coke)

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Perceived Value

Service Price

Cost of Goods Sold

$0

Consumer’s Incentive to Purchase = (Perceived Value – Price)

Firm’s Incentive to Sell= (Price – COGS)

Marketing Efforts

Price of Substitutes

People: A Source of Competitive Advantage in Service Businesses

• Through empowerment, respect, rewards, recognition you can create an incentive for continuous improvement and employee loyalty (Ritz Carlton)

• Employee turnover is expensive and impacts service delivery (Bright Horizons)

• Employee productivity is related to profit (Southwest airplane turnaround times)

• Build customer loyalty by hiring employees with empathy, understanding of customer needs (Dr. Mahalee, Southwest)

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The links in the service profit chain

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Leadership and Culture

Culture is an important asset not explicitly shown on the balance sheet (Ritz Carlton and Southwest)

In businesses that depend on human interaction for success, the types of beliefs and values instilled by organizational leaders are crucial.

What leaders can do to make customer focus a reality:•Demonstrate a genuine commitment•Ensure that employees understand what is at stake•Engage employees in customer solutions•Reward customer-focused behavior•Open communication channels

Source: http://blogs.hbr.org/hmu/2008/02/leadership-that-focuses-on-the-1.htm

Growth

• Businesses may have multiple options for growth and often there are unintended consequences of rapid growth (Starbucks)

• Consider the ease and financial implications of growth options (Aussie Pooch Mobile)

• Remember to factor in the impacts of different options on the customer’s experience of the service and brand (Starbucks, Southwest)

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