Question

Good morning,

I cannot find the answers to these questions on my book and I would like some help please.

1. Customer value is defined as the customer's evaluation of the perceived difference between all the benefits and all the costs of a marketing offer relative to those of competing offers. T/F

2. An aspect of managing service differentiation is in the company's service delivery. T/F

3. After carefully questioning your major suppliers and resellers, you ascertain they do not form important sources of intelligence information for marketing decision making. T/F

Answer 1

1. Customer value is defined as the customer's evaluation of the perceived difference between all the benefits and all the costs of a marketing offer relative to those of competing offers. T/F

False

Customer-perceived value

The customer's evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers.

2. An aspect of managing service differentiation is in the company's service delivery. T/F

False

Introduction- Service Differentiation All the above mentioned points are for a tangible product. But, how can we differentiate services. It is easy when the differentiation of variables is tangible as in the case of product but, difficult in case of services. If the product has not many tangible features, then adding value-added services to the product is one of the methods. This process is called service differentiation. In the days of intense price competition, service marketers often complain about the difficulty or how different is there service from their competitors. To the extent that customers view the services of different providers as similar, they care less about the provider than the price. The solution to price competition is to develop a differentiated offer, delivery and image. The offer can include innovative features that set one company’s offer apart from competitors’ offers. Some hotels offer car – speed internet connections in their rooms. Airlines differentiate their offers through frequent – flyer award programs and special services. For example, British Airways offers spa services at its Arrivals Lounge at Heathrow airport and softer in flight beds. Plumper pillows and cozier blankets. Says one ad:” Its simple goal is to deliver the best service customer could ask for without himu having to ask.” Service companies can differentiate their service delivery by having more able and reliable customer-contact people, by developing a superior physical environment in which the service product is delivered, or by designing a superior delivery process. Differentiation is the key to successful marketing, competing, and building your sustainable competitive advantage. A superior product or service means nothing without a way of somehow letting your prospective customers know about it. Your differentness can be any customer benefit that separates you from your competitors. You must find that difference and communicate it to your customer. For example, many grocery chains now offer online shopping and home delivery as a better way to shop and home delivery as a better way to shop than having to drive, park, wait in line, and tote groceries home. Finally, service companies also can work on differentiate their images through symbols and branding. The harris bank adopted the lion as its symbol on its stationery, in this advertising, and even as stuffed animals offered to new depositors. The well known Harris lion confers an image of strength on the bank. Other well – known service symbols include Merrill Lynch’s bull MGM’s lion, McDonald’s golden arches, Allstate’s “good hands” and the Travelers red umbrella.

Tools for Service Differentiation The main factors which can be used for Service Differentiation are: 1) Installation: It refers to the work done to make a product operational in its planned location, differentiation by installation is practically important for company that offer complex product such as computers. 2) Customer Training: It refers to how the customer’s employees are trained to use the vendor equipment properly & efficiently. 3) Customer Consulting: It refers to data information system & Advertising services that the seller offers to buyers. 4) Maintenance & Repairs: It refers to the service program for helping customers keep purchasing products in good working order, an important consideration for many products. 5) Delivery: It is related to how well the product or service is delivered to the customers covering speed, Accuracy & Customer Care. 6) Ordering Ease: It refers to how easy it is for you to place an order with the company. Let us take another example of Differentiation in the Inline retailers. Amazon has build a differentiation strategy of quick delivery and easy returns. While on the other hand Snapdeal aims to differentiate itself on low price strategy. FlipKart has aimed to differentiate itself on the basis of wide collection of consumer goods at competitive process. Thus, each service firm can have a large tools from which it may choose to build a differentiation strategy. Marketers are constantly searching for differentiation. Unless a company has a genuine scientific or technological advantage, preferably one that can be protected by a patent, competitors can more often than not match any incremental change in an ever-shortening time-scale. Taking cost out of an operation, maybe through new tools and techniques in operational management, relocating production to areas of lower labour cost, or a combination of both, likewise creates advantage that can be sustained only over a relatively short time. This is true of manufacturing and service industries alike. It is why so much manufacturing has migrated into China and so much software development and IT-based services have migrated into India.

These moves would have happened on cost grounds alone; however there is another dimension. The general raising of educational standards and the speed with which knowledge is disseminated nowadays mean that socio-economic development is being accelerated and that certain industrialising economies are achieving rates of change that were unheard of even as recently as 20 years ago. The internet is just one tool for disseminating knowledge that is open to competing organisations worldwide. Where this tool is used to enhance an existing robust business, the effect on the established competitive structure can be very significant. This is a phenomenon that is becoming known as time compression. Companies are now in a race to bring a stream of incremental changes to product and service faster than before and this is becoming the real differentiator: the difference between the financial performance of first-in-class and third-in-class is widening and the famous bell-shaped curve applied to profitability distribution between players in a given market is becoming flatter. According to recent research across many sectors done by Stanford University, the number of companies and the percentage of sector revenue generating twice the average industry sector profit have been declining steadily over the past 20 years. The winner may not take all, but does take an increasing share of available value. Twenty years ago one of the mainstream channels of thought in marketing strategy (indeed in business strategy more broadly) was the need to choose between price leadership and differentiation and to avoid being “stuck in the middle”. This particular distinction is now less valid. Given the wider and more even diffusion of technology and dissemination of knowledge, price is becoming much more of a differentiator. To take a simple example, the phrase “made in China” no longer signifies a lower standard of quality: the fact that welleducated and well-trained Chinese workers do not have minimum two televisions per home, do not think of a car as a necessity and do not regard two foreign holidays per year as a right means that they can use cost/price as a very effective differentiator. This argument does not (yet) apply to all products: the important issue here is that it is gradually and inexorably applying to an increasing number. It applies also in the service sector. Ryanair differentiates itself as “The Low-Fares Airline”, making price the biggest element in its marketing strategy. The success of Ryanair compared with British Airways, in parallel with its earlier counterparts in the USA and their established competitors, illustrates the power of price as a differentiator when no amount of promotional hype and advertiser’s candy-floss prose can disguise the fact that (a) economy class airline seats are not significantly differentiated and (b) everyone’s service standards have more-or-less converged. Achieving and sustaining a competitive cost/price balance has always been required: the problem now is that it is more difficult to do, and the characteristics of the end product cannot be guaranteed to do it all for you.

“What is differentiation?” - The Question Revisited This question looks fairly simple. Differentiation exists when consumers under conditions of competitive supply and faced with a range of choices (a) perceive that product offerings do not have the same value and (b) are prepared to dispose of unequal levels of resource (usually money) in acquiring as many of the available offerings as they wish. It is, however, a little more complicated; and it is the concept of value itself that complicates it.

What Determines Value? There are two dimensions to this answer. The first is what can be termed “techno-economic logic”, the second “emotional logic”. What is clear, however, is that these two logics have one thing in common - they are defined by the customer, not by the supplier. Understanding the relative significance of each and communicating this to a consumer faced with increasingly wide choice are the essential requirements in achieving differentiation. Since this is getting more difficult to achieve in the first place and to sustain over time for the reasons I have set out, we need to understand two broader concepts of business. These emerging determinants of value, and the potential source of renewable differentiation, are twofold: (a) the supply chain and (b) the product experience. I believe that these two concepts are beginning to move our focus away from the three traditional elements of product, brand and service. Though I acknowledge that these three elements remain a part of marketing, my argument is that their significance has changed from being “order winners” to “order qualifiers”.

3. After carefully questioning your major suppliers and resellers, you ascertain they do not form important sources of intelligence information for marketing decision making. T/F

False

Sources of marketing information system areinternal company data. These are data that is generatedand stored within the company, for example data fromaccounting, sales, activities of sales personnel,supplies, financial liabilities and solvency customers.They provide marketers data on revenues and costs,which are used to assess profitability of individualproducts. This cycle is the heart of the internalinformation system. Sales representatives, dealers andcustomers send firm orders. Department of ordersmakes an invoice and its send copy to expedition.Items that are not in stock, must be backordered. Goodsis sent by shipping and billing documents.

a. Information inside the company:

information isdrawn in a form of financial results, customer data,distribution, competition and other specific andadditional data. A source of this data tend to becompany records, accounting records, managementstaff, all available information, which is fairlyreadily available, their disadvantage, however, isquestionable timeliness and relevance. It can beobtained faster and cheaper than from othersources.

b. Marketing intelligence:

It is a valuable source ofinformation obtained from various sources, usuallyfrom external channels which might be specializedagencies acquiring large volumes of data fordifferent purposes. An overview of the competition,monitor production volume, price movements, salesmethods, methods of promotion can be obtainedusing them. Such information may also be obtainedfrom websites of electronic media databasesystems.

c. Marketing Research:

The highest and mosteffective form of obtaining necessary informationspecifies the information necessary for thespecification of marketing problems. Marketingresearch consists of obtaining objective facts of situation in a market, customer behaviour and of potential risk. It is specification, collection, subsequent analysis and submission of data to enable :

* understand a particular market,

* identify risks and problems related to the segment and to identify potential opportunities

* formulate trends of marketing activities and evaluate trend

RESOURCES FOR MARKETINGINFORMATION SYSTEM (MIS)

We look for information both inside thecompany, both in the outer stakeholders. Internalrecords provide information on sales, costs,inventories, production timetable, the reactions ofintermediaries, etc.. It can be obtained from statisticaland accounting records. Information from internalsources can normally get faster and cheaper thaninformation from other sources, but also not withoutproblems. It may be incomplete or unsuitable formarketing decision-making. Many areas of largecompanies produce large quantities of information tokeep track of all is too difficult. MIS must collect,organize, process and sort the amount of information sothat managers can easily find them and quickly getthem. Marketing intelligence represents everydayinformation about developments in the marketingenvironment that help managers prepare and adjustmarketing plans. Marketing news can be gathered frommultiple sources. Many of them are obtained fromcompany's own employees - executives, managers,engineers, scientists, buyers and sales staff. A companymust also obtain suppliers, intermediaries andcustomers for providing valuable reports. Informationon competitors can be obtained from annual reports,speeches, press releases, advertising, literature andsales promotions. Intelligence can also be bought from  

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external suppliers.External sources of marketing information.Amount of current knowledge of the world is nowstored in databases that are publicly available, on acommercial basis. Databases are accessible examplethrough dialog information services. The essentialpoint is that the data (information) collected in a database is available 24 hours a day on so-called hostcomputers. Connection with these builds usercomputers for their work via terminal, personalcomputers and telecommunications. They provide evengreater comfort databases stored on compact discs(CD-ROM).Managers can not always wait for informationwhich gradually come from marketing intelligencesystem. Marketing research gathers information thatbusinesses need to know to most effectively regulate itsactivity in the market and that not obtained from otherparts of its information system. This includesinformation about:

consumers, product, competition, suppliers, technological developments etc.