978-0134292663 Chapter 12 Lecture Notes

Type Homework Help

Pages 33

Words 12454

Textbook Marketing: Real People, Real Choices 9th Edition

Authors Elnora W. Stuart, Greg W. Marshall, Michael R. Solomon

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Chapter 12: Deliver the Customer Experience: Bricks and Clicks

Chapter 12

Deliver the Customer Experience: Goods and Services via Bricks and Clicks

I. CHAPTER OVERVIEW

The face of retailing is constantly evolving. From bricks-and-mortar establishments to online

transactions, retailing is changing to meet the needs of consumers. In this chapter, students explore

the concept of wheel-of-retailing and learn how retailers are classified. The promise of B2C

e-commerce is explored as well as associated limitations. The importance of understanding the

marketing of services and other intangibles is discussed.

II. CHAPTER OBJECTIVES

1. Define retailing, understand how retailing evolves, and consider some ethical issues in

retailing.

2. Understand how we classify traditional retailers.

3. Describe business-to-consumer (B2C) e-commerce and the other common forms of non store

retailing.

4. Understand the marketing of services and other intangibles.

III. CHAPTER OUTLINE

►MARKETING MOMENT INTRODUCTION Ask students to recall a shopping trip when they

went to a store for a few items and returned with many more items than what they had planned to

buy. Why did they spend so much money? (Hint: retailing)

p. 375 REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT

ESKIMO JOE’S

In 1975, Stan Clark, a colorful entrepreneur, opened Eskimo Joe’s

bar in Stillwater, Oklahoma—the home of Oklahoma State

University. Situated right across from the OSU campus, Joe’s

carved out a niche as “the” place to go for beer, music, pool, and

foosball in this college town. Trading on the popularity of the bar as

well as its quirky logo, Stan had also begun to sell some logo

apparel. Students, friends, parents, alums, and other visitors simply

could not get enough of the t-shirts sporting the wide smiles by the

boy and his faithful dog.

Unfortunately, for Joe’s, the state of Oklahoma passed a statewide

“liquor by the drink” law; part of the new law was an increase in

the legal drinking age from 18 to 21. This new law was about to

regulate Eskimo Joe’s out of its core business forcing Stan to take a

new look at his business and think about what he might do to

ensure his retail enterprise would survive. The situation could be

life or death for Eskimo Joe’s. Stan considered his options:

1. Convert the beer bar into a full-service restaurant that

focuses on selling great food.

2. Continue operating as a beer bar at the core and work to

offset declining beer sales with an increase in apparel sales.

Part 4: Deliver and Communicate the Value Proposition

3. Close Eskimo Joe’s bar and refocus resources on building

the growing apparel business.

The vignette ends by asking the student which option he/she would

choose.

Stan chose option #1.

p. 376 1. RETAILING, TWENTY-FIRST-CENTURY STYLE

Retailing is the final stop on the distribution path—the process by

which goods and services are sold to the consumer for their

personal use.

p. 376 1.1 Retailing: A Mixed (Shopping) Bag

Over 1 million retail businesses employ nearly 16 million workers

—more than 1 of every 10 U.S. workers. Retailers belong to a

channel of distribution, and as such, they provide time, place, and

ownership utility to customers.

Exhibit:

McDonald’s

p. 377

1.2 The Evolution of Retailing

As the economic and sociocultural pictures change, different types

of retailers emerge—and they often squeeze out older, outmoded

types.

The wheel-of-retailing hypothesis states that new types of retailers

begin at the entry phase where they find it easiest to enter the

market with low-end strategies as they offer goods at lower prices

than their competitors do. After they gain a foothold, they gradually

trade up. They improve their facilities and increase the quality and

assortment of merchandise. Finally, retailers move on to a high-end

strategy with even higher prices, better facilities and amenities such

as parking and gift-wrapping. Upscaling results in greater

investment and operating costs, so the store must raise its prices to

remain profitable, which then makes it vulnerable to still newer

entrants that can afford to charge lower prices? Therefore, the

wheel turns.

Figure 12.1

Snapshot: The

Wheel of

Retailing

►Marketing Moment In-Class Activity

Ask students to recall (or ask their parents about) the early days of McDonalds in terms of prices,

service, restaurant seating etc. How has the wheel of retailing been exemplified in the fast-food

industry? (As McDonald’s, Burger King, and Wendy’s continue to upscale, bare-bone entrants such

as Rally’s and White Castle can enter the market.)

p. 378

1.3 The Evolution Continues: What’s “In Store” for the

Future?

Four factors motivate innovative merchants to reinvent the way

they do business: the economic environment, changing

demographics, technology, and globalization.

1.3.1 The Changing Economy

The 2008–2009 downturn meant that consumers worldwide were

less willing to spend discretionary income. Instead, they chose to

lower their level of debt and to save. Retail sales, including the

Exhibit: Low-

price wines

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

p. 379

all-important Christmas sales, fell in nearly all retail segments.

1.3.2 Changing Demographics and Consumer Preferences

Some of the ways changing demographics are altering the face of

retailing include:

Retailers can no longer afford to stand by and assume that

their customer base is the same as it has always been.

As more time-challenged consumers (especially women) are

involved in the workforce, they demand greater

convenience.

A change in consumer preferences has led retailer to

develop creative experiential merchandising, a tactic whose

intent is to convert shopping from a passive activity into a

more interactive one, by better engaging the customer.

Another trend is the appearance of the destination retailer,

which is a store that consumers view as distinctive enough

to go out of their way to shop there.

Although members of every ethnic group can usually find

local retailers that cater to their specific needs, larger

companies must tailor their strategies to the cultural

makeup of specific areas.

Exhibit: Peta

►Marketing Moment In-Class Activity

Metrosexual males, or just plain men, have been generally overlooked in terms of shopping malls

that tend to cater to women. How would you design a mall that would appeal to men and encourage

them to shop?

Discussion:

How do the wheel-of-retailing and retail life cycle theories explain the evolution of retailing? How

do demographics, technology, and globalization affect the future of retailing?

p. 380 1.3.3 Technology

Technology is revolutionizing retailing. The Internet has brought us

the age of e-tailing.

Omnichannel (omni-channel) marketing is a retail strategy

that provides a seamless shopping experience, whether the

customer is shopping online from a desktop or mobile

device, by telephone or in a brick-and-mortar store.

Some of the most profound changes are not even visible to

shoppers, such as advanced electronic point-of-sale

(POS) systems. These devices contain computer brains

that collect sales data and connect directly into the store’s

inventory-control system. Stores may use POS systems to

create perpetual inventory unit control systems that keeps a

running total on sales, returns, transfers to other stores, etc.

This technology allows stores to develop computerized

automatic reordering systems that are automatically

activated with inventories reach a certain reorder level.

Part 4: Deliver and Communicate the Value Proposition

Beacon marketing is a retail marketing strategy in which

beacon devices are placed strategically throughout a store

and emit a Bluetooth signal to communicate with shoppers’

smartphones as they browse the aisles of the store.

The store of the future will use RFID tags (and other

technology) to assist the shopper in ways we haven’t even

thought of.

Digital wallets refer to the use of Bluetooth technology that

connects with customer smartphones and allows customers

to pay for items without cash or even swiping a credit card.

Technology is also important to service industries.

Exhibit: Retailing

at Taiwan’s

Airport

p. 381

P. 381

p. 381

P. 382

1.3.4 Globalization

Retailers are busy expanding to other countries and bringing with

them innovations and new management philosophies. Still, retailers

need to adjust to different conditions around the world.

Fair trade refers to purchasing practices that require producers to

pay workers a living wage, well more than the prevailing minimum

wage, and offer other benefits, such as on-site medical treatment.

1.3.5 Retailtainment to Satisfy Experiential Shoppers

Experiential shoppers regard shopping as entertainment. When the

retail experience includes surprise, excitement, and a unique

experience, experiential shoppers are more likely to make impulsive

purchase decisions. Retailtainment is all about marketing strategies

that enhance the shopping experience.

1.4 Ethical Problems in Retailing

Retailers must deal with ethical problems that involve both their

customers and their employees. Losses due to shrinkage are a

growing problem. Shrinkage is the term retailers use to

describe stock losses due to shoplifting, employee theft, and damage

to merchandise.



Shoplifting

Organized retail crime (ORC) refers to retail shoplifting

by organized gangs of thieves that get away with

of dollars in goods in a single day.



Employee Theft



Retail Borrowing

The consumer practice of purchasing a product with the

intent to return the nondefective merchandise for a refund

after it has fulfilled the purpose for which it was

purchased.



Ethical Treatment of Customers

Customer profiling is the act of tailoring the level of

Exhibit: Planet

Hollywood

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

P. 382

customer service based on a customer’s perceived ability

to pay.

►ETHICS CHECK

Find out what other students taking this course would do and why at

www.mymktlab.com

Should retailers be free to hire a sales force that is representative of

their brand even if this policy means that some applicants won’t be

hired due to their appearance?

Ripped From the

Headlines:

Ethical/

Sustainable

Decisions in the

Real World

p. 383 2. TYPES OF BRICK-AND-MORTAR RETAILERS

Retail marketers need to understand all the possible ways they

might offer their products in the market, and they need a way to

benchmark their performance compared to other similar retailers.

p. 383 2.1 Classify Retailers by What They Sell

One of the most important strategic decisions a retailer makes is

what to sell—its merchandise mix. This choice is similar to

settling on a market segment (as we discussed in Chapter 7): If a

store’s merchandise mix is too limited, it may not have enough

potential customers, whereas if it is too broad the retailer runs the

risk of being a “jack of all trades, master of none.”

A product line is a set of related products offered by a retailer.

As retailers experiment with different merchandise mixes, it is

getting harder to make these direct comparisons. For example, even

though marketers like to distinguish between food and nonfood

retailers, in reality these lines are blurring. Combination stores

offer consumers food and general merchandise in the same store.

Supercenters such as Walmart Supercenters are combination stores

that combine an economy supermarket with other lower-priced

merchandise.

p. 384 A retailer’s merchandise assortment, or selection of products sold,

has two dimensions: breadth and depth. Merchandise breadth, or

variety, is the number of different product lines available. A narrow

assortment means that shoppers will find only a limited selection of

product lines. A broad assortment means there is a wide range of

items.

Merchandise depth is the variety of choices available within each

specific product line. A shallow assortment means that the selection

within a product category is limited. A deep assortment means that

there is a great deal of selection within a product category.

p. 384 2.2 Classify Retailers by Level of Service

Retailers differ in the level of service they provide to consumers and

realize there is a tradeoff between service and low prices.

When customers shop at self-service retailers, they make their

product selection without any assistance, they often must bring

their own bags or containers to carry their purchases, and they may

Figure 12.2

Snapshot:

Classification of

Book Retailers by

Merchandise

Selection

Part 4: Deliver and Communicate the Value Proposition

p. 385

even handle the checkout process with self-service scanners.

Contrast that experience to visiting a full-service retailer. Many of

us prefer to shop at major department stores like Bloomingdale’s

and specialty stores like Victoria’s Secret because they provide

supporting services such as gift wrapping, and they offer trained

sales associates who can help us select that perfect gift.

Limited-service retailers fall somewhere between self-service and

full-service retailers.

2.3 Major Types of Retailers

Let’s review some of the major forms these retailers take. Table 12.1

provides a list of these types and their characteristics.

2.3.1 Convenience Stores

Convenience stores carry a limited number of frequently purchased

items and cater to consumers willing to pay a premium for the ease

of buying staple items close to home.

Table 12. 1

Different

Retailers Offer

Varying Product

Assortments,

Levels of Service,

Store Sizes and

Prices

p. 387

2.3.2 Supermarkets

Supermarkets are food stores that carry a wide selection of edibles

and non-edible products.

2.3.3 Box Stores

Box stores are food stores that have a limited selection of items, few

brands per item and few refrigerated items. Generally, they are

open fewer hours than supermarkets, are smaller, and carry fewer

items than warehouse clubs.

p. 387

p. 388

2.3.4 Specialty Stores

Specialty stores have narrow and deep inventories. They do not sell

many product lines, but they offer a good selection of brands within

the lines they do sell. Specialty stores can tailor their assortment to

the specific needs of a targeted consumer, and they can offer a high

level of knowledgeable service.

2.3.5 Category Killers

A category killer is a very large specialty store that carries a vast

selection of products in its category.

Exhibit: Staples

Store Photo

Use websites here:www.oldnavy.com Old Navy is an example of a specialty store.

www.aeropostale.com Aeropostale is an example of a specialty store.

p. 388

2.3.6 Leased Departments

Leased departments are departments within a larger retail store

that an outside firm rents. This arrangement allows larger stores to

offer a broader variety of products than they would otherwise

carry.

2.3.7 Variety Stores

Variety stores originated as the five-and-dime or dime stores that

began in the late 1800s. In these early variety stores such the iconic

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

p. 388

Woolworth’s, all items sold for a nickel or a dime. Today’s variety

stores carry a variety of inexpensive items from kitchen gadgets to

toys to candy and candles.

2.3.8 Discount Stores

General merchandise discount stores, such as Target,

Kmart, and Walmart, offer a broad assortment of items at low

prices and with minimal service and are the dominant outlet for

many products.

Off-price retailers obtain surplus merchandise from manufacturers

and offer brand name, fashion-oriented goods at low prices.

Warehouse clubs such as COSTCO and BJ’s are a newer

version of the discount store. These establishments do not offer any

of the amenities of a full-service store. Customers buy many of the

products in larger-than-normal packages and quantities. These

clubs often charge a membership fee to consumers and small

businesses. A recent survey showed that the typical warehouse

shopper shops about once a month, is intrigued by bulk buying,

hates long lines, and is drawn to the club retailer because of specific

product areas such as fresh groceries.

A manufacturer owns the factory outlet store. Some factory outlets

enable the manufacturer to sell defective merchandise or excess

inventory. Other factory outlets are simply another distribution

channel. Most are located in outlet malls where a large number of

factory outlet stores cluster together in the same location.

p. 389 2.3.9 Department Stores

Department stores sell a broad range of items and offer a deep

selection organized into different sections of the store. In the United

States, department stores have struggled in recent years. In other

parts of the world, they are thriving.

Exhibit:

Kohl’s/Britney

Spears ad

Use website here: www.nordstrom.com Nordstrom is an example of a department store

p. 389

2.3.10 Hypermarkets

Hypermarkets combine the characteristics of warehouse stores and

supermarkets. These stores are very popular in different parts of

the world. Consumers in the United States find the hypermarkets to

be too large and shopping in them too time-consuming.

2.3.11 Pop-Up Stores

Pop-up stores are retail experiences that “pop up” one day and then

disappear after a period of one day to a few months.

p. 390 3. E-COMMERCE AND OTHER TYPES OF NONSTORE

RETAILERS

Nonstore retailing is any method a firm uses to complete an

exchange that does not require a customer to visit a store. The

following is a discussion of two other types of nonstore retailing:

direct selling and automatic vending.

Figure 12.3

Snapshot: Types

of Nonstore

Retailing

Part 4: Deliver and Communicate the Value Proposition

p. 390

p. 391

p. 392

3.1 B2C E-Commerce

Business-to-consumer (B2C) e-commerce is the online exchange

between companies and individual consumers.

A number of factors prevent online sales from growing even more.

Most consumers prefer stores where they can touch and feel items

and avoid issues with returns and shipping costs. In addition, many

consumers do not like to buy online because they want the product

immediately.

3.1.1 Benefits of B2C E-Commerce

From the consumer’s perspective, electronic marketing increases

pconvenience as it breaks down many of the barriers time and

location cause.

For some consumers, online shopping provides an additional benefit

because it fulfills their experiential needs, that is, their desire to

shop for fun. Consumers who are collectors or who enjoy hobbies

are most likely to be experiential shoppers.

Marketers realize equally important benefits from e-commerce.

Because an organization can reach such a large number of

consumers via electronic commerce, it is possible to develop very

specialized businesses that could not be profitable if limited by

geographic constraints. The Internet provides an excellent

opportunity to bring merchants with excess merchandise and

bargain-hunting consumers together.

One of the biggest advantages of e-commerce is that it is easy to get

price information.

E-commerce also allows businesses to reduce costs. Compared to

traditional bricks-and-mortar retailers, e-tailers’ costs are minimal

—no expensive mall sites to maintain and no sales associates to pay.

3.1.2 Limitations of B2C E-Commerce

One drawback is that customers must wait a few days to receive

most products. Another is that many e-commerce sites suffer from

poor design that people find confusing or irritating. In addition,

Security is a concern to both consumers and marketers, and

consumers are concerned about Internet fraud. Consumers cannot

touch and feel information before buying many products.

Shopping cart abandonment occurs when e-commerce customers

leave an e-commerce site with unpurchased items in their cart.

Developing countries with primarily cash economies pose another

obstacle to the success of B2C e-commerce. Because few consumers

use credit cards, they cannot easily pay for items they purchase over

the Internet. For consumers in these countries there are a growing

Exhibit:

Brick-and-Morta

r bookstores

Table 12.2

Benefits and

Limitations of

E-commerce

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

p. 393

number of alternatives for safely paying for online purchases.

PayPal is a global leader in online payments. Twitpay is a service

that permits consumers to send payments using the social network

site Twitter.

As major marketers beef up their presence on the web, they worry

that inventory they sell online will cannibalize their store sales.

3.1.3 B2C’s Effect on the Future of Retailing

It is unlikely that virtual distribution channels will completely

replace traditional ones. However, this does not mean that physical

retailers can rest easy. Stores as we know them will continue to

evolve to lure shoppers away from their computer screens. In the

future, the trend will be destination retail; that is, consumers will

visit retailers not so much to buy a product but for the

entertainment they receive from the total experience.

Exhibit: Motilo

Activity: As a college graduate, you and a friend think the career you really would enjoy means

being your own boss—you want to start your own business. You feel the future of e-commerce is the

place for you to make your fortune. You and your friend are considering two options: (1) an online

business that sells custom-made blue jeans based on customers’ measurements and (2) an online

business that sells gourmet foods from around the world. In a role-playing exercise, debate with

your friend the pros and cons of each of these two online retail businesses and make a decision

about which is better.

Activity: Brainstorm with a group of students the future of business-to-consumer e-commerce. Your

text tells you there is enormous retailing potential but that reaching potential will depend on

offering sites that are entertaining and informative and worth surfing even when the novelty wears

off. What other factors will contribute to retailing e-commerce success? How have your own

shopping patterns changed over the last few years? Are you doing more or less e-commerce? What

contributes to the changes in your shopping behavior?

p. 394 3. 2 Direct Selling

Direct selling occurs when a salesperson presents a product to one

individual or a small group, takes orders, and delivers the

merchandise.

Use Mary Kay website here: www.marykay.com

3.2.1 Door-to-Door Sales

Door-to-door selling is still popular in some countries, such as

China. However, it is declining in the United States, where

two-income households are the norm, because fewer people are

home during the day, and those who are home are reluctant to open

their doors to strangers. Door-to-door selling is illegal in

communities that have Green River Ordinances; they prohibit

door-to-door selling unless the household gives prior permission.

p. 394 3.2.2 Parties and Networks

With ome shopping parties, a company representative makes a sales

presentation to a group of people who have gathered in the home of

a friend. One reason that these parties are so effective is that people

Part 4: Deliver and Communicate the Value Proposition

p. 394

who attend may be caught up in the “group spirit,” and buy things

they would not normally purchase if they were alone—even Botox

injections to get rid of those nasty wrinkles. We call this sales

technique a party plan system. Perhaps the most famous

home shopping parties were the Tupperware parties popular in the

1950s.

3.2.3 Multilevel Marketing

Another form of direct selling, which the Amway Company

epitomizes, is a multilevel marketing or network marketing.

In this system, a master distributor recruits other people to become

distributors. The master distributor sells the company’s products to

the people she entices to join, and then she receives commissions on

all the merchandise sold by the people he or she recruits.

One of the advantages of multilevel marketing is that it allows firms

to reach consumers who belong to tightly knit groups that are not so

easy to reach.

Despite the growing popularity of this technique, some network

systems are illegal. They are really pyramid schemes: illegal

scams which promise consumers or investors large profits from

recruiting others to join the program rather than from any real

investment or sale of good to the public.

►Marketing Moment In-Class Activity

Ask students to describe the different products that are sold at “parties.” Who is the target market

for most of these products? (i.e., women). Can the students come up with a “party” product for

men? Would this method of selling work for targeting men?

p. 395 3.3 Automatic Vending

Coin-operated vending machines are a tried-and-true way to sell

convenience goods. They are best suited to the sales of inexpensive

merchandise, food, and beverages.

Most consumers are reluctant to buy pricey items from a machine.

New vending machines may spur more interest, however, as

technological developments loom on the horizon.

Discussion: Macy’s and other stores are using vending machines to

sell electronics such as iPods. What are some other opportunities for

vending-machine sales? What are the negative and positive

elements of vending-machine sales?

p. 395

4. RETAILING WHAT ISN’T THERE: SERVICES AND OTHER

Retailing is about selling goods and services to consumers for their

personal use. Thus, we must also understand services and how

marketers provide consumers with quality services (and other

intangibles) that meet their needs.

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

4.1 Marketing What Isn’t There

Intangibles are services and other experience-based products that

we cannot touch.

p. 396 Services are acts, efforts, or performances exchanged from producer

to user without ownership rights. Like other intangibles, a service

satisfies needs when it provides pleasure, information, or

convenience.

Services are provided for consumers as well as organizations. The

market for business services has grown rapidly because it is often

more cost effective for organizations to hire outside firms that

specialize in these services than to try to hire a workforce and

handle the service themselves.

Use website here:www.mckinsey.com McKinsey & Co.

p. 396 4.1.1 Characteristics of Services

Services share four characteristics:

Intangibility

Perishability

Variability

Inseparability

Figure 12.4

Snapshot:

Characteristics of

Services

p. 396 Intangibility

Intangibility is the characteristic of a service that means customers

can’t see, touch, or smell good service. Services cannot be inspected

or handled before the purchase is made, making it difficult for

consumers to evaluate.

Because they are buying something that is not there, customers look

for reassuring signs before purchasing. Marketers provide physical

cues to reassure buyers such as the look of a facility, its furnishings,

logos, appearance of employees, etc.

p. 396

►Marketing Moment In-Class Activity

Ask students to identify service industries (such as dentistry, real estate,

education, etc.). How might these different entities “tangibilize” their

product for consumers? (e.g., dentist gives you a “free” toothbrush and

floss after a checkup so you have something to show for your money).

Perishability

Perishability refers to the characteristic of a service that makes it

impossible to store for later sale or consumption—it’s a case of use it or

lose it.

Capacity Management

Capacity management is the process by which organizations

adjust their services in an attempt to match supply with demand. This

strategy may mean adjusting the product, or it may mean adjusting the

price.

Variability

Part 4: Deliver and Communicate the Value Proposition

p. 397

p. 398

Variability is the characteristic of a service that means that

even the same service performed by the same individual for the same

customer can vary.

Inseparability

In services, inseparability means that it is impossible to divide the

production of a service from the consumption of that service.

4.1.2 The Service Encounter

The central role-played by employees in making or breaking a service

underscores the importance of the service encounter, or the interaction

between the customer and the service provider. The <emphasis>service

encounter</emphasis> has several dimensions that are important to

marketers, such as social contact and physical environment. Services are

intimately tied to company employees who deliver the

service.<emphasis> The quality of a service is only as good as the worst

employee is</emphasis>. Disintermediation means removing the

“middleman” and thus eliminating the need for customers to interact

with people at all.

4.2 Physical Elements of the Service Encounter: Servicescapes and

Other Tangibles

Because services are intangible, marketers have to be mindful of the

physical evidence that goes along with them. An important part of this

physical evidence is the servicescape, the environment in which the

service is delivered and where the firm and the customer interact.

Servicescapes include facility exteriors—elements such as a building’s

architecture, the signage, parking, and even the landscaping. They also

include interior elements, such as the design of the office or store,

equipment, colors, air quality, temperature, and smells.

Marketers know that carefully designed servicescapes can have a

positive influence on customer’s purchase decisions, their evaluations of

service quality, and their ultimate satisfaction with the service.

4.3 How We Provide Quality Service

If a service experience is not positive, it can turn into a disservice with

nasty consequences. Quality service ensures that customers are satisfied

with what they have paid for. However, satisfaction is relative because

the service recipient compares the current experience to some prior set

of expectations. That is what makes delivering quality service tricky.

What may seem like excellent service to one customer may be mediocre

to another person. Marketers must identify customer expectations and

then work hard to exceed them.

4.4 Strategic Issues When We Deliver Service Quality

Delivering quality is the goal of every successful service organization.

Firms work to maximize the likelihood that a customer will choose its

service and become a loyal customer. Just as in goods marketing, the

Table 12.3

Marketing

Strategies for

Service

Organizations

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

p. 399

p. 400

first step is to develop effective marketing strategies.

Sometimes service quality does fail. The important thing, after a failure,

is that the firm takes fast action to resolve the problem. Quick action

means that the problem will not occur again (hopefully) and that the

customer’s complaint will be satisfactorily resolved. The key is speed;

research shows that customers whose complaints are resolved quickly

are far more likely to buy from the same company again, than when

complaints take longer to be resolved.

To make sure that service failures are at a minimum and that recovery is

fast, managers should first understand the service and the potential

places where failures are most likely to occur and then make plans

ahead of time to recover. That is why the process of identifying critical

incidents can be so important. In addition, employees should be trained

to listen to complaints. They should be empowered to take appropriate

actions immediately.

► METRICS MOMENT

We can easily measure service quality. The SERVQUAL scale is one

popular instrument to measure customers’ perceptions of service quality.

SERVQUAL identifies five dimensions, or components, of service

quality:

• Tangibles

• Reliability

• Responsiveness

• Assurance

• Empathy

Gap analysis is a measurement tool that gauges the difference between

a customer’s expectation of service quality and what actually occurs. By

identifying specific places in the service system where there is a wide

gap between what is expected and what is received, service marketers

can get a handle on what needs improvement.

Applying the Metrics

Think back on a service encounter you’ve had in the past few

days. This could be either in person or by phone.

Rate the quality of the service on each of the five SERVQUAL

dimensions above (consider if each aspect was low, medium, or

high) and then give an overall rating for the service encounter.

Explain why you gave the ratings that you did.

4.5 Marketing People, Place, and Ideas

Intangibles such as people, places, and ideas often need to be “sold” by

someone and “bought” by someone else.

4.5.1 Marketing People

People are products. A sizable number of people hire personal image

consultants to devise a marketing strategy for them, and others undergo

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p. 400

p. 401

plastic surgery, physical conditioning, or cosmetic makeovers to

improve their “market position” or “sell” themselves to potential

employers, friends, or lovers. Sophisticated consultants create and

market politicians when they “package”” candidates (clients) who then

compete for “market share” as measured by votes.

From actors and musicians to athletes and supermodels, the famous and

near famous jockey for market position in popular culture. Agents

carefully package celebrities as they connive to get their clients

exposure on TV, starring roles in movies, recording contracts, or product

endorsements. <endnoteref label="48" olinkend="ch10endnoteset48"/>

Like other products, celebrities even rename themselves to craft a

“brand identity.”

Marketers use other techniques to sell celebrities. These include:

A pure selling approach, in which an agent presents a client’s

qualifications to potential “buyers” until he

finds one who is willing to act as an intermediary.

The product improvement approach, in which the agent works

with the client to modify certain characteristics that will

increase market value.

The market fulfillment approach, in which the agent scans the

market to identify unmet need.

►Marketing Moment In-Class Activity

Ask students to think about how marketing might influence political

elections. Suppose you were in charge of Mick Jagger’s presidential

campaign. (This is a real stretch—assume that Mick is an American

citizen or substitute another candidate). What technique would you use

to “sell” Mick? What adjustments in his “marketing mix” would you

suggest?

►Marketing Moment In-Class Activity

Based on information from The World Is Flat, ask students to brainstorm

about services that with increased technology, can be outsourced (e.g.,

tax forms can be sent electronically to India, completed there, and then

filed in the U.S., MRIs taken at a local hospital can be sent

electronically and read by a Radiologist in China).

4.5.2 Marketing Places

Place marketing</keyterm> strategies regard a city, state, country, or

other locale as a brand. Marketers use the marketing mix to create a

suitable identity so that consumers choose this brand over competing

destinations when they plan their travel. Because of the huge amount of

money tourism generates, the competition to attract visitors is fierce.

4.5.3 Marketing Ideas

Idea marketing</keyterm> refers to strategies that seek to gain market

Table 12.4

Strategies to Sell a

Celebrity

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p. 402

share for a concept, philosophy, belief, or issue. The marketing of ideas

can be even more difficult than marketing goods and services.

Consumers often do not perceive that the value received from wearing

seat belts or recycling garbage or even not driving while drinking is

worth the cost—the extra effort necessary.

4.6 The Future of Services

As we look into the future, we recognize that service industries will

continue to play a key role in the growth of both the United States and

the global economy. Figure 12.5 provides several trends for us to

consider that will provide both opportunities and challenges for the

marketers of services down the road (that means you). In the future, we

can expect services we can’t even imagine yet.

Several trends are important to consider. Following is a list:

Changing demographics

Globalization

Technological advances

Proliferation of information

REAL PEOPLE, REAL CHOICES: HERE’S MY CHOICE AT

ESKIMO JOE’S

Stan chose option #1.

Figure 12.5

Snapshot: Factors

That Shape the

Future of Services

Part 4: Deliver and Communicate the Value Proposition

IV. END-OF-CHAPTER ANSWER GUIDE

CHAPTER questions and activities

 QUESTIONS: TEST YOUR KNOWLEDGE

Define retailing. What is the role of retailing in today’s world?

Retailing is the process by which goods and services are sold to consumers for their personal use.

Retailing is big business. About one of every five U.S. workers is employed in retailing. There are

over 1.2 million retail firms, but only about 8 percent of them have annual sales greater than $2.5

million.

Retailers provide time, place, and ownership utility to consumers.

How does the wheel-of-retailing theory explain the evolution of retailing? How do the

economic environment, demographics, technology, and globalization affect the future of

retailing?

The wheel-of-retailing hypothesis is a theory that explains how retail firms change, becoming more

“upscale” as they go through their life cycle. The suggestion is that retailers compete on price and

then move “upscale,” leaving room for other new, low-price entrants.

The retail life-cycle concept theory is a theory of retailing that focuses on the various life-cycle

stages, from introduction to decline. The suggestion is that retail institutions are introduced, grow,

reach maturity, and then decline. Their degree of aggressiveness and innovation rise and then

decline with the stages of the cycle.

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

A number of environmental trends will continue to drive the evolution of retailing. These include

the downward economic trend, which reduces consumers’ discretionary incomes to spend in retail

stores; demographic changes, such as an aging population, increasing affluence among ethnic

groups, time poverty resulting from increased numbers of working women; and technological

developments such as advanced POS systems that enable retailers to provide more personal service.

Environmentally conscious consumers look for retailers who are environmentally sensitive. Market

globalization will continue to offer new opportunities for retailing innovation.

12-3 Describe experiential merchandising, destination retailing and omnichannel marketing.

Experiential merchandising is a tactic whose intent is to convert shopping from a passive

activity into a more interactive one, by better engaging the customer.

Destination retailing refers to a store that consumers view as distinctive enough to go out

of their way to shop there.

Omnichannel (omni-channel) marketing A retail strategy that provides a seamless

shopping experience, whether the customer is shopping online from a desktop or mobile

device, by telephone or in a brick-and-mortar store.

12-4 What is beacon marketing? What are digital wallets?

Beacon marketing is a retail marketing strategy in which beacon devices are placed

strategically throughout a store and emit a Bluetooth signal to communicate with shoppers’

smartphones as they browse the aisles of the store.

Digital wallets refer to the use of Bluetooth technology that connects with customer

smartphones and allows customers to pay for items without cash or even swiping a credit

card.

12-5 Explain retail store shrinkage and the ways shrinkage normally occurs. What is

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“sweethearting”? What is retail borrowing? What are some of the ethical issues in retailers’

treatment of consumers?

Shrinkage is the term retailers use to describe losses due to shoplifting, employee theft, and damage

to merchandise. Analysts estimate that shrinkage during 2005–2006 was 2.76 percent of overall

retail sales.

On the other side of the retail ethics issue is how retailers and their employees treat customers.

While not providing equal access to consumers of different ethnic groups may be illegal, behavior

that discourages customers who appear economically disadvantaged or socially unacceptable is not.

“Sweethearting” is an employee practice in which a cashier consciously undercharges, gives a cash

refund, or allows a friend to walk away without paying for items. Sometimes a dishonest employee

simply carries merchandise out the backdoor to a friend’s waiting car.

12-6 How do marketers classify retail stores? Explain merchandise breadth and depth.

Retail stores are classified by: (1) what they sell—the merchandise mix. In retailing, a product line

is the set of related products offered by the retailer; and (2) by level of service.

Self-service retailers do not assist customers in making selections.

Full-service retailers have trained associates who can help us select a product plus extra services

such as gift-wrapping.

Limited-service retailers fall in between self-service and full-service.

Merchandise selection includes a retailer’s merchandise assortment, which includes the

merchandise breadth or number of different product lines available and the merchandise

depth the variety of choices available for each specific product.

12-7 Describe the differences in merchandise assortments for convenience stores, supermarkets,

box stores, specialty stores, category killers, leased departments, variety stores, general

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

merchandise discount stores, off-price retailers, warehouse clubs, factory outlet stores,

department stores, hypermarkets, and pop-up stores.

Differences in merchandise assortments for the following types of retailers include:

Convenience stores: neighborhood retailers that carry a limited number of frequently purchased

items, including basic food products, newspapers, and sundries, and cater to customers who are

willing to pay a premium for the ease of buying close to home.

Supermarkets: food stores that carry a wide selection of edibles and related products.

Box stores: food stores that have a limited selection of items, few brands per item and few

refrigerated items. Generally, they are open fewer hours than supermarkets, are smaller, and carry

fewer items than warehouse clubs.

Specialty stores: retailers who carry only a few product lines but offer good selection within the

lines they sell.

Category killers: Large selection of items in one or a few product lines.

Leased departments: departments within a larger retail store that an outside firm rents. This

arrangement allows larger stores to offer a broader variety of products than they would otherwise

carry.

Variety stores: originated as the five-and-dime or dime stores that began in the late 1800s. In these

early variety stores such the iconic Woolworth’s, all items sold for a nickel or a dime. Today’s

variety stores carry a variety of inexpensive items from kitchen gadgets to toys to candy and

candles.

General merchandise stores: offer a broad assortment of items at low prices and with minimal

service and are the dominant outlets for many products.

Discount stores: retailers who offer a wide variety of inexpensive brand-name items in a

self-service, “no-frills” setting. Discount retailers include off-price retailers, warehouse clubs, and

factory outlet stores.

Department stores: retailers who sell a broad range of items and a good selection within each

product line.

Hypermarkets: retailers with the characteristics of both warehouse stores and supermarkets;

hypermarkets are several times larger than other stores and offer virtually everything, from

grocery items to electronics.

Pop-up stores: are retail experiences that “pop up” one day and then disappear after a period of

one day to a few months.

Part 4: Deliver and Communicate the Value Proposition

12-8 Explain the different types of direct selling. What is the difference between a multilevel

network and a pyramid scheme?

Direct selling includes door-to-door sales, parties, and networks. Door-to-door selling is one of the

oldest forms of retailing. However, the method is declining in the United States because of the high

labor costs, large number of homes that are empty during the day, and an increasing reluctance of

those who are at home to admit strangers. Today, consumers tend to buy more in the office than in

the home. Therefore, door-to-door selling has to make modifications.

Home shopping parties are popular in neighborhoods and useful if the product needs intimacy and

demonstration to execute a sale. Many times, party participants buy out of obligation to the host

and purchase items that they normally would not purchase. Tupperware is famous for this method.

Multilevel network, also known as network marketing, is a system with master distributor recruits

other people to become distributors. The master distributor sells the company’s products to the

people she entices to join, and then she receives commissions on all the merchandise sold by the

people she recruits. Whereas pyramid schemes are illegal scams in which large numbers of people at

the bottom of the pyramid pay money to advance to the top and to profit from others who might

join.

12-9 What is B2C e-commerce? What are some benefits of B2C e-commerce for consumers and

for marketers? What are the limitations of B2C e-commerce?

Business-to-consumer (B2C) e-commerce is the online exchange between companies and individual

consumers.

Benefits of B2C e-commerce include:

E-commerce allows consumers and marketers to easily find and make exchanges in a global

marketplace.

From a consumer’s perspective, electronic marketing has increased convenience by breaking down

the barriers caused by time and location.

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

For some consumers, the Internet fulfills experiential needs.

Marketers are able to reach a large number of consumers cheaply via the Internet. There are no

geographic constraints.

Marketers can develop very specialized businesses.

One of the biggest advantages is that e-commerce allows the consumer to get price information.

For some companies, e-commerce allows for almost instantaneous delivery.

Limitations of B2C e-commerce include:

Consumers still may have to wait several days before receiving merchandise.

Some websites are poorly designed, confusing, and irritating.

Security is a major concern.

Consumers are concerned about Internet fraud.

There is an inability to “touch and feel” products.

There is concern that e-commerce sales (and inventory requirements) only cannibalize existing

store sales.

If a country has a cash economy, it has a difficult time converting to e-commerce activities.

12-10 What are some possible effects of B2C e-commerce on traditional retailing?

Areas to begin a discussion with include:

Does the growth of B2C e-commerce mean the death of bricks-and-mortar stores, as we know

them? No, it does not!

However, stores may evolve toward a hybrid model.

12-11 What are intangibles? How do basic marketing concepts apply to the marketing of

intangibles?

Part 4: Deliver and Communicate the Value Proposition

Intangibles are experience-based products that cannot be touched. The basic marketing concept

applies to many types of products, including those we cannot touch. The concept of identifying

needs and wants and developing goods/services which meet those needs and wants is just as crucial

for intangibles as it is for tangible goods. Branding is also important when marketing intangibles.

12-12 What is a service? What are the important characteristics of services that make them

different from goods?

Services are products that are intangible and that are exchanged directly from producer to

customer. Generally, services are acts that accomplish some goal. They may be directed either

toward people or toward an object or possession. Important service characteristics include 1)

intangibility (they cannot be seen, touched, or smelled); 2) perishability (they cannot be stored); 3)

variability (they are never exactly the same); and 4) inseparability from the producer (most services

are produced, sold, and consumed at the same time). Goods are tangible and examples include food

or clothing, raw materials, tools, and machinery.

12-13 What dimensions do consumers and business customers use to evaluate service quality? How

should marketers respond to failures in service quality?

Because services are inseparable in that they are not produced until they are consumed, consumers

and business customers find it difficult to estimate how good service will be until it is purchased.

Therefore, marketers come up with ways for to illustrate the benefits their services will provide.

Search qualities: attributes that the consumer can examine before purchase such as flight

attendants’ uniforms.

Experience qualities: product attributes that customers can determine only during or after

purchase.

Credence qualities: attributes difficult to evaluate even after purchase.

The important thing for marketers when service quality does fail is to take quick action and resolve

the problem quickly, making sure that the problem will not occur again and that the customer’s

complaint will be satisfactorily resolved. Managers should also be sure to understand the potential

points at which failure might occur. In addition, employees should be trained to listen to

complaints; they should be empowered to take action immediately.

12-14 What do we mean by marketing people? Marketing places? Marketing ideas?

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

People are products and are marketed as such. A number of people hire personal image consultants

to devise a marketing strategy for them, others undergo plastic surgery, physical conditioning, or

cosmetic makeovers to improve their “market position” or “sell” themselves.

Place marketing strategies regard a city, state, country, or other locale as a brand and attempt to

position this location so that consumers choose to visit.

Idea marketing is about gaining market share for a concept, philosophy, belief, or issue.

ACTIVITIES: APPLY WHAT YOU’VE LEARNED

12-15 Creative Homework/Short Project Assume you are an entrepreneur who is seeking

funding to start up your new retail business specializing in handcrafted artisan goods from

developing and least developed countries. Customers would be able to acquire a unique

product and at the same time receive a good feeling knowing that a portion of the price paid

for the product would go back to the individuals who produced the product. Using the

wheel of retailing as a guide, map out how you expect your business to grow and change

over time while remaining profitable.

MyMarketingLab for answers to Assisted Graded Questions.

12-16 Creative Homework/Short Project Assume that you are the director of marketing for a

national chain of convenience stores. Your firm has about 200 stores located in 43 states.

The stores are fairly traditional both in design and in the merchandise they carry. Because

you want to be proactive in your marketing planning, you are concerned that your firm may

need to consider making significant changes because of the current economic, demographic,

technological, and global trends in the marketplace. You think it is important to discuss

Part 4: Deliver and Communicate the Value Proposition

these things with the other executives at your firm. Develop a presentation that includes the

following:

A discussion of the economic changes that might impact your stores

A discussion of the demographic changes that will impact your stores

A discussion of the technological changes that will impact your stores

A discussion of how global changes may provide problems and opportunities for your organization

Your recommendations for how your firm might meet the challenges faced in each of these areas

Students should begin to develop their presentation by reviewing the material on demographic,

technological, and global changes found in the chapter. They will notice that demographic changes

such as an aging population will affect how retailers implement strategies in the future (for

instance, consumers may want to stay closer to home to shop—convenience stores will need to be in

the neighborhoods). Next, technology indicates that shopping online may be increasing. The chain’s

ability to create a hybrid model where consumers can use the Internet to find stores, have home

delivery, or select merchandise that can be picked up quickly might be a secret for future success.

Globally, cultural changes and a shrinking world might mean that different forms of services or

products might need to be offered in the chain’s stores. Each of these areas might be used to begin

the student’s presentation attempt.

12-17 In Class, 10–25 Minutes for Teams Retailers are faced with the problem of shrinkage and

what to do about it. Shrinkage comes, of course, from shoplifting and employee theft. More

subtle, however, is shrinkage that involves customers, such as “sweethearting” and “retail

borrowing.” Many consumers feel that such practices are okay. Conduct a short survey of

students in your group to study these two sources of shrinkage. You might want to include

questions about the following:

If and how frequently students engage in such practices

The attitudes of students as to whether such practices are unethical and why or why not

What harm comes from such practices

What respondents think retailers should do to prevent such shrinkage

Develop a short report on your findings and present it to your class.

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

This activity is sure to provide controversial opinions from students. The book provides the

following on “sweethearting” and “retail borrowing.”

“Sweethearting” is an employee practice in which a cashier consciously undercharges, gives a cash

refund, or allows a friend to walk away without paying for items. <endnoteref label="28"

olinkend="ch16endnoteset28"/> Sometimes a dishonest employee simply carries merchandise out

the backdoor to a friend’s waiting car. A third source of shrinkage is an unethical consumer

practice the industry calls <emphasis>retail borrowing</emphasis>. Merchants over recent decades

have developed liberal policies of accepting returns from customers because the product performs

unsatisfactorily or even if the customer simply changes her mind. Retail borrowing refers to the

return of non-defective merchandise for a refund after it has fulfilled the purpose for which it was

purchased. <endnoteref label="29" olinkend="ch16endnoteset29"/> Popular objects for retail

borrowing include a dress for a high school prom, a new suit for a job interview, and a boom box

for a weekend picnic on the beach.

12-18 Creative Homework/Short Project You just started working for a firm that sells baseball

caps. Currently, the firm sells its products only in specialty stores, like Lids. You think

you can improve sales by branching out to other types of retailers. Prepare a presentation

that identifies the additional types of retailers your firm could sell to and what the

advantages of selling to those types of retailers would be. Also, how would you change

your retail strategy for these different retailers?

MyMarketingLab for answers to Assisted Graded Questions.

12-19 For Further Research (Individual) One problem that traditional retailers face when they

open online stores is cannibalization. Select a traditional retailer where you and your

fellow students might normally shop that also sells products online. You might, for

example, select Best Buy, Banana Republic, Gap, or Target. Visit the retailer’s online

store and make notes on the site’s product offering, pricing, customer service policies, and

so on. (If the store you have chosen offers many different product lines, you might wish to

limit your research to one or two different product lines.) Then visit the store and compare

what is offered there with the online offerings. Develop a report that summarizes your

Part 4: Deliver and Communicate the Value Proposition

findings and discusses the potential for cannibalization and its implications for the retailer.

Also, discuss any changes in either the online or store strategies that you would

recommend.

Students should be asked in this activity to develop recommendations based on their

analyses. Should the retailer expand or limit their online stores? Should different items be

offered in the online store or should all online store items be available in the physical

store?

12-20 Creative Homework/Short Project Because of increased competition in its

community, you have been hired as a marketing consultant by a local restaurant. You know that the

characteristics of services (intangibility, perishability, variability, and inseparability) create unique

marketing challenges. You also know that these challenges can be met with creative marketing

strategies. Outline the challenges for marketing the restaurant created by each of the four

characteristics of services. List your ideas for what might be done to meet each of these challenges.

Services have four unique characteristics: intangibility, perishability, variability, and

inseparability. Students should consider how each of these applies to the specific activities and

customer expectation of a bank and how banks can develop strategies to address these. The

information in the text provides some good ideas that will stimulate student ideas. Below is a

summary of the four characteristics.

Intangibility

Service intangibility means that customers cannot see, touch, or smell a service.

A service cannot be inspected or handled before the purchase is made.

Services are more difficult to evaluate than products.

Consumers look for reassuring signs before purchasing. The “look” is very important (such as the

service provider’s facility).

Physical cues could be uniforms, brand logos, and carefully designed websites.

Perishability

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

Service perishability means that a firm cannot store its services. It is a case of “use it or lose it.”

Marketers try to avoid “perishability” problems by using the marketing mix to encourage demand

for the service during times when it would otherwise be low.

Prices can be reduced to match demand.

Variability

Service variability refers to the inevitable differences in a service provider’s performance from one

day to the next.

It is difficult to standardize services because service providers and service customers vary.

One solution to the problem of variability is to institute total quality management programs for

continuous improvement of service quality.

Inseparability

A service can only take place at the time the service provider performs an act on either the

customer or the customer’s possession.

Services cannot be detached from those that provide them.

Employees are important in services.

To reduce the problems that might occur in the service encounter, service providers are

experimenting with disintermediation—eliminates the need for customers to interact with people

(i.e., self-service banks).

The Internet has provided opportunities for disintermediation (especially in financial services).

12-21 In Class, 10–25 Minutes for Teams You are currently a customer for a college education, a

very expensive service product. You know that a service organization can create a

competitive advantage by focusing on how the service is delivered after it has been

purchased—making sure the service is efficiently and comfortably delivered to the

customer. Develop a list of recommendations for your school for improving the delivery of

its service. Consider both classroom and nonclassroom aspects of the educational product.

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Before beginning this exercise, students should review chapter material on the physical and social

aspects of the service encounter. Some ideas to get students started, include examining contact and

admission services registration processes, graduation or exit processes, classrooms, timing of

classes, etc. (Answers to these will vary depending upon the school.) In addition, extra services such

as social, dorms, job placement, career counseling and psychological and trauma services might all

be included in the student’s assessment.

12-22 Creative Homework/Short Project As a soon-to-be college graduate, you be will be

looking for a full-time job in your field. As part of this process, you will need to learn to successfully

market yourself. Prepare an outline for your marketing plan. First, list the special problems and

challenges associated with marketing people rather than a physical product. Then outline your

ideas for each of the four Ps.

People are products, too. They craft a “brand identity” and use the same strategies marketers use to

ensure that their products make an impression on consumers, including memorability, suitability,

and distinctiveness. Students can develop creative ways to present themselves in a marketing plan.

In addition to branding efforts, other strategies to “sell” a person include:

The pure selling approach: Presenting qualifications to potential “buyers”.

The product improvement approach: Modifying certain characteristics that will increase market

value.

The market fulfillment approach: Identifying unmet needs and meeting a set of minimum

qualifications.

12-23 In Class, 10–25 Minutes for Teams Address the same issues in item 12-22 for a

marketing plan for the town or city where your college is located. How would you market

this town or city and the surrounding area as part of the overall college experience to

potential students?

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

Place marketing refers to strategies regarding a city, state, country, or other locale as a brand.

Marketers use the marketing mix to create a suitable identity so that consumers choose this brand

over competing destinations when they plan their travel. Because of the huge amount of money

tourism generates, the competition to attract visitors is fierce. Every town or city has an economic

development office charged with luring new businesses or residents. Students can develop strategies

to market the town in which their college is located. They can discuss how the surrounding area is

part of the overall college experience. For example, many students who like to hike and ski attend

colleges in Colorado because of its outdoor opportunities.

►CHOICES: WHAT DO YOU THINK?

Critical Thinking Most retail store shrinkage can be attributed to shoplifting, employee

theft, and retail borrowing. What are some ways that retail store managers can limit or stop

shrinkage? What are some problems inherent in security practices? Should retailers create

stricter merchandise return policies?

Surveillance cameras, security guards, and stricter merchandise return policies can help

retailers reduce shrinkage.

Ethics Studies have shown—and court rulings have confirmed—that “customer profiling” does take

place in U.S. retail stores, whether intentional or not. Have you ever been the victim of profiling?

What were the circumstances? Did you make a complaint? Why or why not? As the store manager

of an employee who is accused of profiling, what actions would you take for both the customer and

the employee?

MyMarketingLab for answers to Assisted Graded Questions.

Critical Thinking Experts predict the future of B2C e-commerce to be very rosy indeed, with

exponential increases in Internet sales of some product categories within the next few years. What

effect do you think the growth of e-retailing will have on traditional retailing? In what ways will

this be good for consumers, and in what ways will it not be so good?

MyMarketingLab for answers to Assisted Graded Questions.

Part 4: Deliver and Communicate the Value Proposition

Critical Thinking Most U.S. consumers have purchased a product online at one time or another.

What products have you ever purchased online? How did you pay for these products? Do you

consider a site’s security methods at the time of purchase? Why or why not? Should retailers be

required to post information about how they’re keeping your information secure? How should

retailers be held accountable if the personal information they keep on you is hacked?

Students can share their online purchase experiences, including payment methods. They can discuss

the security methods in place and whether retailers should be required to post information about

how they’re keeping your information.

Critical Thinking Disintermediation is becoming more commonplace in the service

industry, often eliminating a customer’s interaction with, for example, bank tellers or

supermarket clerks. How does this lack of interaction affect the customer’s experience? How

does this lack of interaction affect a firm’s ability to provide superior customer service?

Disintermediation means removing the “middleman” and thus eliminating the need for customers

to interact with people at all. Students need to think about what they gain and what they lose from

e-commerce shopping. For those with time constraints, e-commerce is a good alternative. For those

who enjoy the sociability of shopping, the ability to try, touch, and experience, traditional retailing

will have more appeal. The lack of customer interaction affects the customer’s experience positively

because it minimize the potentially negative effects of bad service encounters, provides speed and

efficiency, and saves on labor costs that are passed on to the consumer. A firm can provide superior

customer service if its website, online ordering process, and cancellation policies are superior. If

there are credit card problems or poorly communicate policies, a company’s lack of interaction can

negatively affect business. Students will be able to brainstorm quite a number of pros and cons.

Critical Thinking Sometimes service quality may not meet customers’ expectations.

What problems have you experienced with quality in the delivery of the following services?

A haircut

A dental visit

Computer repairs

Your college education

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

What do you think is the reason for the poor quality? How would you improve the quality

of service?

The students should be encouraged to express their feelings and ideas about the above services.

Point out how the characteristics of services (intangibility, perishability, inseparability, and

variability) affect the perception of the service and its quality. Encourage students to think about

why these quality problems occur. Is it the fault of management, of employee training, etc.? What

could they (as potential marketers) do to correct the wrongs that they have expressed? Did the

wrongs cost the service provider any money? If not, why not?

Critical Thinking There has been a lot of criticism about the way politicians have been marketed in

recent years. What are some of the ways marketing has helped our political process? What are

some ways the marketing of politicians might have an adverse effect on our government?

Most students should have some sort of opinion about the role of marketing in politics and

government. Critics point out that political marketing is deception at its finest. They claim that

candidates tell voters whatever they want to hear just to get their vote. Though perhaps true in

some sense, the voter still has the final vote on the credibility of the candidate. Hopefully, bad

candidates (like bad products) finish last. With more communication and an attempt to understand

the voting consumer, marketing may have brought the political process out of the smoke-filled

rooms and on to television and the Internet. One of the benefits of the marketing application is the

close inspection that the consumer is able to give the candidates. Strategies become clear and

usually have to withstand the test of daylight if the candidate is to succeed.

Ethics Many not-for-profit and religious organizations have found that they can be more successful

by marketing their ideas. What are some ways that these organizations market themselves that are

similar to and different from the marketing by for-profit businesses? Is it ethical for churches and

religious organizations to spend money on marketing? Why or why not?

Marketing is just as important for non-profit organizations as it is for profit organizations.

However, contributors to non-profit organizations hold the organizations account for the money

they spend. Thus, it is important that they not spend too much money on “glitzy” marketing.

Discussions about churches and religious organizations can become heated and should be

monitored carefully. The deferring opinions of the students will be hard to form a single view of

advertising, but stick to the ethical aspects of money spent on advertising.

Part 4: Deliver and Communicate the Value Proposition

Critical Thinking Many developed countries, including the United States, have in recent decades

become primarily service economies; that is, there is relatively little manufacturing of goods, and

most people in the economy are employed by service industries. Why do you think this has

occurred? In what ways is this trend a good and/or a bad thing for a country? Do you think this

trend will continue?

Students who have taken an economics course may have already studied this issue and will

provide valuable insight. Some students may feel that economies shift and evolve and the

U.S. economy may shift back. Others may talk about dependency on foreign nations and

the associated positives and negatives. Students also should consider fair wages, fair

treatment of workers, international leadership, and so on.

APPLYING MARKETING METRICS </inst>

Inventory management is an important aspect of retail strategy. For example, it is important to

know when it is time to reorder and how much to order at a time, a metric called reorder point.

As consumers buy a product day after day, the inventory level declines. The question for retailers is

how low they should allow the inventory level to decline before they place an order; that is, when is

the optimal time to reorder? If you order too late, you take a chance of losing sales because you are

out of stock. If you order too soon, consumer tastes may change, and you will be stuck with excess

and unsellable merchandise. And generally, retailers do not want more inventory on hand than is

necessary to avoid stock-outs because inventory ties up cash.

Hence, the decision of when to order and how much to order is critical to a retailer’s bottom line.

The simplest formula to determine the reorder point is the following:

Reorder point = Usage rate × Lead time

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

Usage rate is basically how quickly the inventory sells, and lead time is the length of time from

reorder to delivery. Retailers tend to keep a little extra stock on hand—“safety stock”—just in case

their historical data on usage rate and lead time might vary from any one particular reorder

experience. Adding in safety stock, the formula becomes the following:

Reorder point = (Usage rate × Lead time) + Safety stock

Sam’s 24-Hour Gas ‘n’ Sip sells 97 large sodas a day. It takes five days to place an order and

receive a new shipment of large cups. But to be prepared for the possibility of extra sales or a

late shipment, they need to have a safety stock equal to three days of sales.

12-33 What is the reorder point for large cups for Sam’s gas station?

MyMarketingLab for answers to Assisted Graded Questions.

MINI-PROJECT: LEARN BY DOING

Select a good that you, as a consumer, would like to purchase in the next week or so. Shop for

this product both online and at a physical retailer.

12-34 As you shop, record the details of both shopping experiences, including the following:

a. Type of retailer

b. Clerks available to assist you

c. Website or physical facilities

d. Product variety

e. Product availability

f. Product price

g. Store hours

h. Ease of transaction

Part 4: Deliver and Communicate the Value Proposition

i. Ease of return

12-35 Explain why you would be more likely to purchase this product online or at a physical

retailer in the future.

The purpose of the mini-project listed in the chapter is to get students to analyze a service

they use and review the service encounter.

Through three specific questions (or exercises), individuals (or teams) are asked to review the

marketing practices of a local service provider. Students are asked to visit the service provider and

review all aspects of the service delivery process as seen by a typical service recipient. Students

conclude the exercise by recommending improvements to the service encounter. Students should

write a descriptive report of their findings and experiences.

Instructors may wish to extend the deadline for this assignment so students have many

opportunities to visit, write their report, and report their findings.

Mini-project 2

Theme and entertainment parks like Universal Studios fall in the middle of the goods/services

continuum—half goods and half services. To be successful in this highly competitive market, a park

must position its product? Visit the websites of three of the top theme park organizations: Walt

Disney World (www.disneyworld.disney.go.com), Six Flags parks (www.sixflags.com)

and Universal’s Orlando Theme Park (www.universalorlando.com)

Theme-Parks/World-Class-Theme-Parks.aspx).

12-36 How is this positioning communicated through the website?

Theme parks such as those mentioned sell both tangible goods and service. Can the students name

the several services (some will be core and some will be augmented)? Each theme park has different

approaches to positioning. Can the students pick out the differences? Do the national websites have

much to do with local establishments and services? This should make a good discussion question.

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

12-37 What changes or improvements would you recommend for each website?

Students are directed to visit websites of several popular theme parks. During these visits, students

are then asked to consider target markets and positioning strategies for the various organizations.

Once these sites have been visited (and associated text material reviewed), students will be prepared

to answer the questions above.

V. MARKETING IN ACTION CASE: REAL CHOICES AT

ALIBABA

Summary of Case

Initially, Alibaba was a business-to-business portal to bring together Chinese exporters,

manufacturers, and entrepreneurs with overseas buyers. Today, the Alibaba Group, called the

Chinese Amazon, is a leading online and mobile marketplace in retail and wholesale trade, cloud

computing, and other services. As of 2016, the group’s retail businesses had more than 423 million

active users, 12.7 million annual orders in its marketplace, and 86.2 percent of the Chinese mobile

shopping market.

Only 19 percent of rural China is using online buying services. Due to the constraints of lower

incomes, dispersed populations, and poor logistics, rural traditional retail options are limited, have

higher prices, and inferior product quality. These limitations make for tremendous prospects for

expansion of online sales. To take advantage of this opportunity, Alibaba’s e-commerce business,

Taobao, has opened service centers in many rural villages. Alibaba has committed to investing over

USD$1.5 billion on logistics, hardware, and training in more than 100,000 villages. The company

recently acquired a controlling stake in a Singapore e-commerce firm. The portals are online

shopping and selling destinations . Of course, there are still challenges. China is struggling with

slowing development. Alibaba also faces growing competition from Amazon, eBay, JD.com, and

Baidu.

Suggestions for Presentation

This case could be assigned for various out-of-class or in-class discussion activities.

Out-of-Class

Use the Internet to investigate Alibaba and its competition. Research Alibaba’s competitors such as

Amazon.com, eBay, JD.com, and Baidu.

As an out-of-class project, ask student groups to develop a new advertising campaign for Alibaba.

The campaign should begin with identifying the target audiences and should include the

development of an advertising message and budget objectives.

Part 4: Deliver and Communicate the Value Proposition

Evaluate the pros and cons of Alibaba’s expansion into less populated areas.

In-Class

You Make the Call

12-38 What is the decision facing ALIBABA?

Students will come up with various important decisions, among those might be:

How should Alibaba meet the competition and expand into other countries in Southeast Asia?

How can Alibaba increase the number of online shoppers, which represent only 19% of the rural

Chinese market?

12-39 What factors are important in understanding this decision situation?

The following factors are important in understanding this decision situation:

China’s economy has slowed.

There are infrastructure problems in rural areas of China which present an opportunity for online

shopping.

China faces the constraints of lower incomes, dispersed populations, and poor logistics.

Rural traditional retail options are limited, have higher prices, and inferior product quality.

Alibaba faces competition from other online retailing companies such as Amazon and eBay.

Expansion into other countries in Southeast Asia presents challenges because these countries do not

have the necessary distribution networks and information technology management.

12-40 What are the alternatives?

Students might recommend a variety of different marketing strategies. Some possibilities are:

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

Do nothing—continue to develop and maintain its online presence in rural China.

Continue to expand into other countries in Southeast Asia.

Continue to improve logistics in rural areas.

Continue to invest in hardware and training in more than 100,000 villages.

Research the marketing strategies of competitors like Baidu and offer similar services.

Research opportunities in emerging countries because share of total retail sales may be larger than

in developed countries.

Increase the number of company-provided computers.

12-41 What decision(s) do you recommend?

Students may focus on several of the alternatives developed. Students should be encouraged to

think about the strength of the Alibaba brand image, the effect of the weakened economy in China,

and what the impact of any recommended strategy.

12-42 What are some ways to implement your recommendation?

Students may make a variety of suggestions for implementation depending on their

recommendations. Students should recommend some type of feasibility study before

developing new strategies and the costs involved.

►MYMARKETING LAB

Go to mymktlab.com for Auto-graded writing questions as well as the following assisted-graded

writing questions:

12.43 Today, traditional bricks-and-mortar retailers are faced with competition from B2C E-

commerce. What are some of the benefits and limitations of B2C E-commerce?

12.44 In this chapter, we learned that the characteristics of services are intangibility,

perishability, variability, and inseparability. Explain each of these characteristics and how

Part 4: Deliver and Communicate the Value Proposition

they create challenges for marketing services.

WEB RESOURCES

Pearson Inc.: www.mymktlab.com

Kohl’s website: www.kohls.com

Ideeli is a members-only shopping community for trendsetting women: www.ideeli.com

Overstock.com website: www.overstock.com

Online grocer, Peapod, website: www.peapod.com

Barnes and Noble bookstore website: www.barnesandnoble.com

Amazon, online bookseller, website: www.amazon.com

REI, Seattle-based outdoor gear retailer website: www.rei.com

Eskimo Joe’s clothing retail website: www.eskimojoes.com

Walmart website: www.walmart.com

Old Navy website: www.oldnavy.com

Chapter 12: Deliver the Customer Experience: Bricks and Clicks

Aeropostale website: www.aeropostale.com

Mary Kay’s website: www.marykay.com

Order your Big Mac or a spicy vegetable dragon roll for delivery online: Egypt’s <ulink

url="http://www.otlob.com">www.otlob.com

Bloomingdales’ department store website: www.bloomingdales.com

“Shop bots”: www.ask.com

Alibaba’s website: www.alibaba.com

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978-0134292663 Chapter 12 Lecture Notes

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