BU352 - CH 10,11,12 Flashcards
What is a service?
– Intangible customer benefits that are produced by people or machines and that cannot be separated from the producer
- involves a deed, performance or effort that cannot be physically possessed
what are the Core Differences Between Services and Goods?
a) Inseparable - Services are produced and consumed at the same time, that is, the service and consumption are inseparable
b) Variable (inconsistent) - The more that humans provide the service in question, the more likely there is to be variability or inconsistency in the services quality
c) Perishable (inventory) - they cannot be held in inventory or stored for use in the future. You cannot stockpile a service as you would inventories of goods
d) Intangible - They cannot be touched, tasted or seen like a pure product can. - most fundamental difference
What is the Gaps Model?
Gaps model is designed to encourage the systematic examination of all aspects of the service delivery process and prescribe the step necessary to develop an optimal service strategy
What are the four service gaps? (Gaps Model)
a) Knowledge Gap - the differences between customers’ expectations and the firm’s perception of those customer expectations.
b) Standards Gap - the difference between the firm’s perceptions of customers’ expectations and the service standards it sets.
c) Delivery Gap - difference between the firm’s service standards and the actual service it provides to customers
d) Communication Gap - the difference between the actual service provided to customers and the service that the firm’s promotion program promises.
Customers generally use what 5 distinct service dimensions to determine overall quality?
Reliability –The ability to perform the service dependably and accurately
Responsiveness – The willingness to help customers and provide prompt service
Assurance – The knowledge of and courtesy by employees and their ability to convey trust and confidence.
Empathy – The caring, individualized attention provided to customers
Tangibles – The appearance of physical facilities, equipment, personnel, and communication materials.
what are Voice-of-Customer (VOC) programs?
- Ongoing marketing research system that collects customer inputs and integrates them into managerial decisions. Uses various methods to collect insights and intelligence from consumers and use them to influence or drive business decisions.
what is Zone of Tolerance Method?
Method of evaluating how well firms perform on 5 service dimensions. The area between customers’ expectations regarding their desired service and the minimum level of acceptable service. The difference what the customer really wants and what they are willing to accept before going elsewhere.
o Consumer perceptions are effectively and inexpensively collected at time of sale
o Essentially need to put mangers on the front lines occasionally to interact directly with customers
What are ways to reduce the standards gap between the firms’ perceptions of customers’ expectations and the service standards it sets?
- Achieving Service Goals through Training – To deliver consistently high quality service, firms must set specific, measurable goals based on their customers’ expectations.
o Frontline service employees can be taught specific tasks but it is not enough to tell employees to be nice to the customer –> Quality goal should be specific - Commitment to Service Quality – Service providers take their cues from management
Ways to reduce the delivery gap - The difference between the firms service standards and the actual service it provides to the customers?
Can be reduced when employees are empowered to act in the customers and the firms best interest and are supported in their efforts to do so.
- Empowering Service Provider
- Providing Service Incentives
- Use of Technology
Explain why it is important that service marketers understand and manage customer expectations?
- a knowledge gap occurs when marketers don’t understand what their customers want. They may not be providing customers enough or the right service, in which case customers will be disappointed. To understand customer expectations, marketers analyze service quality through comprehensive studies and by interacting with customers.
What are the three service recovery strategies?
- Listen carefully to the customer and let the customer air his or her complaint
- find a fair solution to the problem that not only compensates the customer for the failure but also follows procedures that the customer believes are fair.
- resolve the problem quickly
What are the 5 C’s of Pricing?
1) Company Objectives
2) Customers
3) Costs
4) Competition
5) Channel Members
Explain how Company Objectives are used in Pricing?
- Profit Orientation – Even though all company objectives may ultimately be profit motivated, firms implement profit orientation by focussing on…
a) Target Profit Pricing
b) Maximizing Profit Strategy
c) Target Return Pricing - Sales Orientation - belief that increasing sales will help the firm more than will increasing profits
- Competitor Orientation - the firm should measure itself primarily against its competition
a) Competitive Parity – set prices that are similar to those of major competitors - Customer Orientation -invokes the concept of value and sets prices to match consumer expectations
(Customers) Explain how Economics is used in Pricing?
- Demand Curves and Pricing - Knowing the demand curve for a product or service enables firms to examine different prices in terms of the resulting demand and relative to its overall objective
- Price Elasticity of Demand - Generally consumers are less sensitive to price increases for necessary items like milk, bread etc.
- Factors Influencing Price Elasticity of Demand - Income Effect, Substitution Effect, Cross Price Elasticity
Three Levels of Competition?
- Oligopolistic – Occurs when there are only a few firms that dominate the market.
- Monopolistic – Occurs when there are many firms that sell closely related but not homogeneous products; these products may be viewed as substitutes but are not perfect substitutes.
- Pure Competition – Occurs when different companies sell commodity products that consumers perceive as substitutable; price usually is set according to laws of supply and demand
What are Grey Markets?
Employs irregular but not necessarily illegal methods. Generally it circumvents authorized channels of distribution to sell goods at prices lower than those intended by the producer
How are pricing strategies affected by Channel members((manufacturer, retailer etc.) ?
a manufacturer could be looking to build a brand as high quality or premium and want high prices while the retailer is focused on sales volume and setting low prices to sell more units regardless of consumers’ perception of the brand (each can have a different perspective on pricing strategies).
what are the 3 different pricing strategies?
- Cost Based Method – Determines the final price to charge by starting with the cost, without recognizing the role that consumers or competitors prices play in the marketplace.
- Competitor Based Method – Attempts to reflect how the firm wants consumers to interpret its products relative to the competitors’ offerings.
- Value based Method – Focus on the overall value of the product offering as perceived by consumers, who determine value by comparing the benefits they expect the product to deliver with the sacrifice they will need to make to acquire the product.
what are the New Product Pricing Strategies?
- Price Skimming - a strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay in order to obtain it. After the high price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture the next most sensitive segment
- Market Penetration Pricing – Setting the initial price low for the introduction of the product, with the objective of building sales, market share and profits quickly.
what are the Psychological Factors Affecting Value-Based Pricing Strategies?
- Reference Pricing - A reference price is the price at which buyers compare the actual selling price of the product and that facilitates their evaluation process.
- EDLP vs. High/Low – some consumers perceive EDLP retailers as carrying lower quality merchandise compared to high/low priced retailers because they use the initial price at the high/low store as a reference price.
- Odd Prices - $2.99
- Price Quality Relationship - higher price = higher quality
what are examples of B2B Pricing Tactics and Discounts
- Seasonal discounts
- Cash Discounts
- Allowances (Advertising allowance, Listing allowances)
- Quantity Discounts (Non-cumulative, cumulative)
- Uniformed delivery Versus Geographical Pricing
What are examples of Pricing Tactics Aimed at Consumers?
- Price Lining – Tactic of establishing a price floor and a price ceiling from an entire line of similar products and then setting a few other price points in between to represent distinct differences in quality.
- Price Bundling –Selling more than one product for a single, lower price that what the items would cost sold separately. Can be used to sell slow moving items, to encourage consumers to stock up so they don’t purchase competing brands, to encourage trial of a new product or to provide an incentive to purchase a less desirable product in the same bundle
- Leader Pricing – Attempts to build store traffic by aggressively pricing and advertising a regularly purchased item, often priced at or just above the stores cost.
Examples of Consumer Price Reductions ?
- Markdowns – reductions retailers take on the initial price of the product or service. Retailers must get rid of slow moving merchandise that does not sell and use markdown to do so.
- Size Discounts – The most common application of the quantity discount on the consumer level, the larger the quantity bought, the less price per unit. Family value sizes, etc.
- Seasonal Discounts – price reductions offered on products and services to stimulate demand in off peak seasons. Such as reductions in prices of winter coats in spring, or bikes in the winter etc.
- Coupon – Provides a stated discount on the final selling price of a specific item; the retailer handles the discount
- Rebate – A portion of the purchase price is returned to the buyer in cash; the manufacturer, not the retailer issues the refund.
What are the Legal and Ethical Aspects of Pricing?
- Deceptive or Illegal Price Advertising
o Deceptive Reference Points
o Loss Leader Pricing
o Bait and Switch
- Predatory Pricing
- Price Discrimination
- Price Fixing
o Horizontal Price fixing
o Vertical Price fixing
