Ch1-2 Flashcards
Utility
A measure of the strength of the customer preferences for a given product or service. Customers buy the product or service that maximizes their utility.
Demand is driven by the 3 utilities
Understanding how customers derive utility from products or services is at the heart of marketing
3 types of utility:
Consumption utility, price utility, inconvenience utility
Consumption Utility
How much you like a product or service, ignoring the effects of price and inconvenience …attributes
Performance: If not all, most people agree
Fit: Customers do not agree…heterogeneous preferences
Inconvenience Utility
Of obtaining the product or receiving the service…a.k.a transaction costs
2 major sub components:
Location and Timing
Capabilities
Allow companies to do well on some sub components making up the customer utility function
Trade-offs
The need to sacrifice one capability in order to increase another one
Strategic trade-off (tradeoffs between responsiveness and costs)
Market Segments
A set of customers who have similar utility functions
Pareto Dominated
A firm’s product or service is inferior to one or multiple competitors on all dimensions of the customer utility function.
Efficient Frontier
The set of firms not Pareto dominated…have no firms in the industry to their upper right
Costs
2 types: Costs for inputs and resources
Inputs: things that a business purchases
Resources: things in a business that help transform input into output and thereby help provide supply for what customers demand
Inefficiencies a.k.a.
3 system inhibitors
Waste, variability, inflexibility
Waste: all the consumption of inputs and resources that do not add value to the customer
Variability: changes in either demand or supply over time (demand variability: customer arrivals, requests, and behavior)… Supply Variability (time to serve a customer, disruptions, defects)
Inflexibility: the inability of an operation to quickly and cheaply change in response to new information
Process
A set of activities that takes a collection of inputs, performs some work or activities with those inputs and then yields a set of outputs
Process Flow Diagram
Provides a a graphical representation of the process
It represents resources
Process Scope
The set of activities
It can be narrow and expand
A flow unit
The basic unit that moves through a process
Example: patients, minutes of workout, riders on the roller coaster
Who receivers the service??
Inconvenience Utility
Of obtaining the product or receiving the service…a.k.a transaction costs
2 major sub components:
Location and Timing
Capabilities
Allow companies to do well on some sub components making up the customer utility function
Trade-offs
The need to sacrifice one capability in order to increase another one
Strategic trade-off (tradeoffs between responsiveness and costs)
Market Segments
A set of customers who have similar utility functions
Pareto Dominated
A firm’s product or service is inferior to one or multiple competitors on all dimensions of the customer utility function.
Efficient Frontier
The set of firms not Pareto dominated…have no firms in the industry to their upper right
Costs
2 types: Costs for inputs and resources
Inputs: things that a business purchases
Resources: things in a business that help transform input into output and thereby help provide supply for what customers demand
Inefficiencies a.k.a.
3 system inhibitors
Waste, variability, inflexibility
Waste: all the consumption of inputs and resources that do not add value to the customer
Variability: changes in either demand or supply over time (demand variability: customer arrivals, requests, and behavior)… Supply Variability (time to serve a customer, disruptions, defects)
Inflexibility: the inability of an operation to quickly and cheaply change in response to new information
Process
A set of activities that takes a collection of inputs, performs some work or activities with those inputs and then yields a set of outputs
Process Flow Diagram
Provides a a graphical representation of the process
It represents resources
Process Scope
The set of activities
It can be narrow and expand
A flow unit
The basic unit that moves through a process
Example: patients, minutes of workout, riders on the roller coaster
Who receivers the service??
