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1 Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Services and Services and Nonprofit Organization Marketing Nonprofit Organization Marketing Prepared by Prepared by Deborah Baker Deborah Baker Texas Christian University Texas Christian University Chapter 11

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Page 1: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

1Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Services andServices andNonprofit Organization MarketingNonprofit Organization Marketing

Prepared byPrepared byDeborah BakerDeborah Baker

Texas Christian UniversityTexas Christian University

Chapter 11

Page 2: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

2Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning ObjectivesLearning Objectives

1.1. Discuss the importance of services to the economy.

2. Discuss the differences between services and goods.

3. Describe the components of service quality and the gap model of service quality.

Page 3: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

3Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objectives Learning Objectives (continued)(continued)

4. Develop marketing mixes for services.

5. Discuss relationship marketing in services.

6. Explain internal marketing in services.

Page 4: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

4Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objectives Learning Objectives (continued)(continued)

7. Discuss global issues in services marketing.

8. Describe nonprofit organization marketing.

Page 5: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

5Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Discuss the importance of services to the economy.

11

On Linehttp://www.yellowfreight.com

On Linehttp://www.yellowfreight.com

Page 6: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

6Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

ServiceService

The result of applying

human or mechanical

efforts to people or objects.

11

Page 7: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

7Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

The Importance of ServicesThe Importance of Services

79% of workers are inservice sector

79% of workers are inservice sector

Services account for 76% of U.S. GDP

Services account for 76% of U.S. GDP

Service occupations will be responsible for all net job

growth through 2005

Service occupations will be responsible for all net job

growth through 2005

11

Page 8: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

8Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Service-Producing IndustriesService-Producing Industriesand Job Growthand Job Growth

11

Page 9: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

9Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Discuss the differences between services and goods.

22

On Linehttp://www.sheraton.com

On Linehttp://www.sheraton.com

Page 10: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

10Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

How Services Differ from How Services Differ from GoodsGoods

Services Are Intangible Performances

Services Are Intangible Performances

Services Are Produced and Consumed Simultaneously

Services Are Produced and Consumed Simultaneously

Services Have Greater VariabilityServices Have Greater Variability

Services Are PerishableServices Are Perishable

22On Linehttp://www.nationalamusements.comhttp://www.amctheatres.comhttp://www.movietickets.com

On Linehttp://www.nationalamusements.comhttp://www.amctheatres.comhttp://www.movietickets.com

Page 11: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

11Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Describe the components of service quality and the gap model of service quality.

33

Page 12: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

12Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Components of Service Components of Service QualityQuality

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.

33

Page 13: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

13Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

The Gap Model of Service The Gap Model of Service QualityQuality33

Page 14: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

14Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Develop marketing mixes for services.

44

Page 15: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

15Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Marketing Mixes for ServicesMarketing Mixes for Services

Product Product (Service)(Service)StrategyStrategy

Product Product (Service)(Service)StrategyStrategy Mental StimulusMental Stimulus

ProcessingProcessingMental StimulusMental Stimulus

ProcessingProcessing

People People ProcessingProcessing

People People ProcessingProcessing

PossessionPossessionProcessingProcessing

PossessionPossessionProcessingProcessing

InformationInformationProcessingProcessing

InformationInformationProcessingProcessing

44

Page 16: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

16Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Core and Supplementary Core and Supplementary ServicesServices

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.

44

Page 17: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

17Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Core and Supplementary Core and Supplementary ServicesServices

for FedExfor FedEx

Overnight Overnight transportation transportation and delivery and delivery of packagesof packages

Problem solving

Billing statements

TracingDocumentation

Order taking

Supplies

Pickup

Advice andinformation

44

Page 18: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

18Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Mass CustomizationMass Customization

A strategy that uses

technology to deliver

customized services on a

mass basis.

44

Page 19: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

19Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Mass CustomizationMass CustomizationC

ust

om

izat

ion

Cu

sto

miz

atio

n

Low

Lo

w

High

Hig

h

CustomizedCustomizedFocusFocus

StandardizedStandardizedFocusFocus

CostCost

MassMassCustomizationCustomization

44

Page 20: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

20Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Service Mix StrategyService Mix Strategy

Determine what new services to introduce

Determine target market

Decide what existing services to maintain and/or eliminate

44

Page 21: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

21Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Distribution Strategy IssuesDistribution Strategy Issues

SchedulingScheduling

LocationLocation

Direct vs. Indirect Distribution

Direct vs. Indirect Distribution

Number of OutletsNumber of Outlets

ConvenienceConvenience

Focus forFocus forDistribution Distribution StrategiesStrategies

Focus forFocus forDistribution Distribution StrategiesStrategies

44

Page 22: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

22Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Promotion Strategy IssuesPromotion Strategy Issues

Stress tangible cues

Use personal information sources

Create a strongorganizational image

Engage in postpurchase communication

ServiceServicePromotion Promotion StrategiesStrategies

ServiceServicePromotion Promotion StrategiesStrategies

44

Page 23: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

23Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Price StrategyPrice Strategy

Pricing Pricing ChallengesChallenges

Pricing Pricing ChallengesChallenges

Trends have Trends have made pricing an made pricing an

active component active component

Trends have Trends have made pricing an made pricing an

active component active component

Define unit of Define unit of service consumptionservice consumption

Define unit of Define unit of service consumptionservice consumption

Determine if multiple Determine if multiple elements are “bundled”elements are “bundled”Determine if multiple Determine if multiple

elements are “bundled”elements are “bundled”

44

Page 24: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

24Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Pricing ObjectivesPricing Objectives

Revenue-OrientedPricing

Revenue-OrientedPricing

Operations-OrientedPricing

Operations-OrientedPricing

Patronage-OrientedPricing

Patronage-OrientedPricing

Categories ofCategories ofPricingPricing

ObjectivesObjectives

Categories ofCategories ofPricingPricing

ObjectivesObjectives

44On Linehttp://www.etrade.comhttp://www.ameritrade.comhttp://www.schwab.com

On Linehttp://www.etrade.comhttp://www.ameritrade.comhttp://www.schwab.com

Page 25: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

25Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Discuss relationship marketing in services.

55

Page 26: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

26Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Relationship Marketing Relationship Marketing in Servicesin Services

Level 1Level 1FinancialFinancial

Level 2Level 2Financial, SocialFinancial, Social

Level 3Level 3Financial, Social, StructuralFinancial, Social, Structural

Three LevelsThree Levelsof of

Relationship Relationship MarketingMarketing

55

Page 27: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

27Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Explain internal marketing in services.

66

Page 28: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

28Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Internal MarketingInternal Marketing

Treating employees as

customers and developing

systems and benefits that

satisfy their needs.

66

Page 29: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

29Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Internal Marketing ActivitiesInternal Marketing Activities

StressingTeamworkStressingTeamwork

Competing for Talent

Competing for Talent

Offeringa VisionOfferinga Vision

TrainingEmployeesTraining

Employees

EmpowermentEmpowermentKnowing

Employees’ Needs

KnowingEmployees’

NeedsRewarding

PerformanceRewarding

Performance

InternalInternalMarketingMarketingActivitiesActivities

66

Page 30: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

30Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Discuss global issues in services marketing.

77

Page 31: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

31Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Global Issues in Global Issues in Services MarketingServices Marketing

FinancialFinancial

ConstructionConstruction

EngineeringEngineering

InsuranceInsurance

Hotel ChainsHotel ChainsU.S. is world’s U.S. is world’s

largest largest exporter of servicesexporter of services

77

Page 32: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

32Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Learning Objective Learning Objective

Describe nonprofit organization marketing.

88

Page 33: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

33Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Nonprofit Organization Nonprofit Organization MarketingMarketing

An organization that exists

to achieve some goal other

than the usual business

goals of profit, market

share, or return on

investment.

88

Page 34: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

34Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Nonprofit OrganizationsNonprofit Organizations

GovernmentGovernment

Private MuseumsPrivate Museums

TheatersTheaters

SchoolsSchools

ChurchesChurches

Other Non-GovernmentOther Non-Government

Nonprofit Organizations

Nonprofit Organizations

88

Page 35: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

35Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Nonprofit Organization Nonprofit Organization MarketingMarketing

Market intangible productsMarket intangible products

Production requires customer’s presenceProduction requires customer’s presence

Services vary greatlyServices vary greatly

Services can not be storedServices can not be stored

Shared Shared Characteristics Characteristics

with with Service Service

OrganizationsOrganizations

Shared Shared Characteristics Characteristics

with with Service Service

OrganizationsOrganizations

88

Page 36: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

36Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Nonprofit Organization Nonprofit Organization Marketing ActivitiesMarketing Activities

Identify Desired CustomersIdentify Desired Customers

Specify ObjectivesSpecify Objectives

Develop, manage, eliminate programs/services

Develop, manage, eliminate programs/services

Set pricesSet prices

Schedule eventsSchedule events

Communicate through advertising/PRCommunicate through advertising/PR

88

Page 37: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

37Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Unique Aspects of Nonprofit Unique Aspects of Nonprofit Organization Marketing StrategiesOrganization Marketing Strategies

Setting of Marketing ObjectivesSetting of Marketing Objectives

Selection of Target MarketsSelection of Target Markets

Development of Marketing MixesDevelopment of Marketing Mixes

88

On Linehttp://www.peta.com

On Linehttp://www.peta.com

Page 38: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

38Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Market ObjectivesMarket Objectives

Users

Payers

Donors

Politicians

Appointed officials

Media

General Public

Provide Services to:

Provide Services to:

88

Page 39: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

39Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Target MarketsTarget Markets

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 Unique Issues of Nonprofitof Nonprofit

OrganizationsOrganizations

88

Page 40: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

40Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Product DecisionsProduct Decisions

BenefitComplexity

BenefitComplexity

WeakBenefit Strength

WeakBenefit Strength

Low Involvement

Low Involvement

Distinctions betweenDistinctions betweenBusiness and NonprofitBusiness and Nonprofit

OrganizationsOrganizations

88

Page 41: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

41Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

On Linehttp://www.adcouncil.org

On Linehttp://www.adcouncil.org

Promotion DecisionsPromotion Decisions

Sales PromotionActivities

Public ServiceAdvertising

ProfessionalVolunteers

88

Page 42: 1Chap. 11 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Services and Nonprofit Organization Marketing Prepared by Deborah Baker

42Chap. 11 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Pricing DecisionsPricing Decisions

Below-Cost PricingBelow-Cost Pricing

Separation BetweenPayers and Users

Separation BetweenPayers and Users

Indirect PaymentIndirect Payment

Nonfinancial PricesNonfinancial Prices

Pricing ObjectivesPricing Objectives

Characteristics Characteristics DistinguishingDistinguishing

Pricing DecisionsPricing Decisionsof Nonprofit of Nonprofit

OrganizationsOrganizations

Characteristics Characteristics DistinguishingDistinguishing

Pricing DecisionsPricing Decisionsof Nonprofit of Nonprofit

OrganizationsOrganizations

88