Shaping the market offerings
1. At the second level of the customer value hierarchy, the marketer has to turn the core benefit into a basic product.
2. Design is the totality of features that affect how a product looks and functions in terms of customer requirements.
3. Top firms audit service performance by collecting voice of customer (VOC) measurements to probe customer satisfiers and dissatisfiers.
4. Services are typically produced and consumed simultaneously. This is an example of the inseparability characteristic of services.
5. In considering an observed price, consumers often compare it to an internal price called a reference price.
6. When PepsiCo sells its cola syrup to Russia for rubles and agrees to buy Russian vodka at a certain rate for sale in the United States, this is called offset.
Exercises
1. Name and describe the three groups products can be classified into according to durability and tangibility.
According to durability and tangibility products have been classified into three categories. Products of the first category are called nondurable. They are tangible, and people tend to consume them in a few uses. Therefore, consumers buy such goods often. The appropriate strategy for these products would be to advertise them heavily in order to encourage first-time consumption, to charge small price premium and to ensure wide availability. Durable goods, on the other hand, are tangible goods, which can be used for a longer period of time. They are usually sold with a higher margin and using more personal selling techniques and seller guarantees. Lastly, services are intangible and inseparable goods. They are highly variable and perishable, thus requiring higher quality control, supplier flexibility and credibility (Kotler & Keller, 2009).
2. Identify and explain the six levels of the product hierarchy.
Product hierarchy can be subdivided into 6 levels: need family, product family, product class, product line, product type and item (also known as stockkeeping unit or product variant). Need family is the core need, which is the basis of a product family. Product family is the array of products, which can effectively satisfy the core need. Product class (product category) is a subgroup of the product family, where products possess functional coherence. Product line is a subgroup of a product class, where all products are closely related and are priced in the same range. They usually perform similar functions, are sold to the same customers and are marketed through the same channels. Product lines may consist of a family brand, an individual brand with extended product lines or of different brands. Product type is a group of products, which share product form and belong to the same product line. Finally, an item is the smallest unit within a product line or a brand, which can be distinguished by such attributes as size, appearance, price etc (Kotler & Keller, 2009).
3. What are the five categories of offerings in the product-service mix?
In a product-service mix products can be subdivided into five categories, based on the service component of the offering. Products from the first category are pure tangible goods, which are not accompanied by any service. The next category, tangible goods with accompanying services, consists of the tangible goods, which are accompanied by one or several services. Third category, hybrids, consist of both goods and services in approximately equal proportions. If the offering is mostly comprised of a service, which includes some additional products, the offering is a major service with accompanying minor goods and services. Lastly, pure service consists mainly of the service components (Kotler & Keller, 2009).
4. What are the five determinants of service quality in order of importance?
Service quality determinants in order of importance are reliability, responsiveness, assurance, empathy, tangibles. Reliability determined the ability to provide the service accurately and dependably. Responsiveness can be defined as the willingness to provide prompt service and to assist customers. Assurance refers to the ability of employees to convey confidence and truth, to their expertise and courtesy. Empathy is the ability to provide individualized and thoughtful attention to the customers. Finally, tangibles refer to the availability of physical facilities, personnel, equipment and the means of communication (Kotler & Keller, 2009).
5. What is the six-step procedure most firms use to set their pricing policy?
The 6 steps in defining a pricing policy are: (1) selecting the pricing objectives, (2) demand planning, (3) cost estimation, (4) analysis of the competitors in terms of costs prices and product offerings, (5) choosing a pricing method and finally (6) choosing the price (Kotler & Keller, 2009).
1.What percentage of U.S. toys are produced by foreign manufacturers? Why might this be a problem?
Today more than eighty percent of the U.S. toys come from foreign manufacturers, mostly from China (Ireland, Hoskisson & Hitt, 2009). Outsourcing toy manufacturing abroad has been an important cost-cutting trend during the past years, however contemporary consumers are not only concerned about the price, but also about the quality and safety of the toys. Toys recalls due to lead in the paint and the danger of children choking on the small parts of toys brought consumer confidence to the all-time low. Therefore, toys distributors decided that outsourcing has become costly, resulting in the loss of reputation, lawsuits and consumer confidence decrease. The solution in this case could be turning to the U.S. manufacturers, who offer higher quality but more expensive products. Perhaps, this solution may become a new trend in the toy industry in the U.S., which will resolve the safety concerns of the consumers and increase their confidence in the products.
2.What two consumer concerns drove several massive toy recalls?
Massive toy recalls were caused by consumer concerns about the quality of the products, which came from foreign sources. The main quality issues were connected to the high lead content in the paint, which was used for toys’ surfaces, and by the threat of small children choking from small parts of the toys. However, the hazards associated with the use of toys were extended even further, including sharp edges, strangulation etc (Robertson, 2010). The recalls connected to toys’ safety significantly decreased consumer confidence in the quality of toys and threatened the success of the U.S. toy distributors.
References
Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2009). Understanding business strategy:
concepts and cases. (pp. C 148 - C149). Mason, the United States of America:
Southern-Western Cengage Learning.
Kotler, P., & Keller, K. (2009). Marketing management. (13 ed.). Prentice Hall.
Robertson, C. (2010). Safety, nutrition and health in early education. (4th ed., p. 103).
Belmont, the United States of America: Wadsworth Cengage Learning.
