Chapter 08 – Developing Marketing Strategies
8-21
CHAPTER OUTLINE AND TEACHING NOTES
C. Developing Service Marketing Strate-
gies
1. Strategies for marketing services dif-
fer according to the level of customer
contact.
2. Primacy of the marketing concept
a. The marketing concept is more
3. Pricing services
a. The price of a service should re-
flect the quality and value of its
REAL WORLD EXAMPLE 8.19
Lynn Brown prices her Mini-Maid services according to
how frequently customers use her service.
4. Promoting services
a. Word-of–mouth advertising, per-
sonal selling, and publicity are
used to promote services.
Chapter 08 – Developing Marketing Strategies
8-22
CHAPTER OUTLINE AND TEACHING NOTES
b. Advertising may be through the
Yellow Pages, direct mail, or lo-
VIII. IMPLEMENTING YOUR MARKETING
STRATEGY
A. The Introductory Stage
1. Analyze market situations to deter-
REAL WORLD EXAMPLE 8.21
One small manufacturing firm realized that a larger com-
petitor could produce their primary product at a lower cost.
They switched to producing a product for a smaller market
niche—springs for swimming pool diving boards.
3. Evaluate your company’s resources,
B. The Growth Stage
1. Expand products to reach new mar-
kets
Chapter 08 – Developing Marketing Strategies
8-23
CHAPTER OUTLINE AND TEACHING NOTES
present product line, can in-
crease profits and contribute to
REAL WORLD EXAMPLE 8.22
When Dave Neeleman was CEO of JetBlue, he flew at
least once per month to talk to travelers and listen for ideas.
LEARNING OBJECTIVES REVISITED
VI. PRICING YOUR PRODUCT
Learning Objective 6.
Describe how prices are set and administered.
A. Pricing can make the difference between
success and failure for any business, but
it is especially crucial for a small busi-
ness.
1. The “Four Cs of Pricing” are:
a. Customer and Company (inter-
2. Three aspects of pricing to consider
are:
Chapter 08 – Developing Marketing Strategies
8-24
b. The price must be set to maintain
B. Establishing Pricing Policies (See Ta-
ble 8.2.)
1. Effect of the product life cycle: When
you introduce a product you have two
alternatives.
2. Meeting the competition:
a. By following the pricing policies
of competitors.
3. Cost-oriented pricing
a. Total costs provide a floor below
the item.
4. MARKUP is the amount added to the
product’s cost to determine the sell-
ing price.
a. The amount of the markup is de-
termined by:
Chapter 08 – Developing Marketing Strategies
8-25
(1) The type of product sold.
b. Markup percentage is calculated
by this formula:
5. Discounts and allowances
a. A DISCOUNT is a reduction from
the list price given to customers
as an inducement to buy more of
C. How Prices Are Set by Small Busi-
nesses
1. By service firms.
a. Service firms either charge the
“going rate” (the usual rate for a
Chapter 08 – Developing Marketing Strategies
8-26
used to produce the service.
(2) Direct charges, such as
2. By retailers.
a. A CUSTOMARY PRICE is what
customers expect to pay be-
cause of custom, tradition, or so-
cial habits.
REAL WORLD EXAMPLE 8.17
When prices for cocoa and sugar increased, Hershey cut
the size of the candy bar rather than raise the price.
b. Some discount stores discount
REAL WORLD EXAMPLE 8.18
After-holiday shoppers expect 50-75% discounts on holi-
day items.
d. UNIT PRICING is listing the
Chapter 08 – Developing Marketing Strategies
8-27
Ing products such as meat,
Produce and deli items,
charging per ounce
or pound.
(2) The retailer’s selling price
3. By wholesalers:
a. Prices are usually based on a
4. By producers: (See Chapter 14.)
a. Meeting competitors’ prices is
common.
Chapter 08 – Developing Marketing Strategies
8-28
COST-PLUS PRICING
basing the price all costs, plus a
markup for profit.
(1) Cost of land, labor, materials
and supplies.
D. Other Aspects of Pricing
1. A price should be consistent with the
image the business wants to project.
a. Customers often equate the
quality of unknown products with
their prices.
(1) Raising prices may increase
Chapter 08 – Developing Marketing Strategies
8-29
VII. STRATEGY FOR MARKETING SERVICES
Learning Objective 7.
Show how marketing services differs from marketing
goods.
A. Nature of Service Businesses
1. PERSONAL SERVICES are per-
formed by a business for consumers,
and include activities such as:
a. Financial services.
2. BUSINESS SERVICES are provided
to another business or professional,
and may include:
a. Advertising Agencies.
REAL WORLD EXAMPLE 8.22
Leo Rivera, the founder of Bishops Barbershop, opened a
rock ‘n’ roll theme barbershop, and later added a DJ and beer.
Still rocking in 2016, he is raking in the profits.
Chapter 08 – Developing Marketing Strategies
8-30
B. How Services Differ:
1. Service firms are chosen on the basis
of their perceived reputation, so a
good image is of utmost importance.
a. There are few objective stand-
ards for measuring the quality of
2. Services cannot be stored in inven-
tory.
3. The level of customer contact re-
quired to provide the service also var-
ies.
C. Developing Service Marketing Strate-
gies
1. Strategies for marketing services dif-
fer according to the level of customer
contact.
a. A high-contact service must be
2. Primacy of the marketing concept
a. The marketing concept is more
Chapter 08 – Developing Marketing Strategies
8-31
perform the service themselves.
b. Service companies must con-
do the job.
3. Pricing services
a. The price of a service should re-
(1) A customer may rent a
Shampooer for a home rug,
REAL WORLD EXAMPLE 8.23
Lynn Brown prices her Mini-Maid services according to
how frequently customers use her service.
4. Promoting services.
a. Word-of–mouth advertising, per-
sonal selling, and publicity are
used to promote services.
Chapter 08 – Developing Marketing Strategies
8-32
VIII. IMPLEMENTING YOUR MARKETING
STRATEGY
A. The Introductory Stage
1. Analyze market situations to deter-
REAL WORLD EXAMPLE 8.24
One small manufacturing firm realized that a larger com-
petitor could produce their primary product at a lower cost.
They switched to producing a product for a smaller market
niche—springs for swimming pool diving boards.
3. Evaluate your company’s resources,
B. The Growth Stage
1. Expand products to reach new mar-
kets
a. You may add related products,
ucts.
b. DIVERSIFICATION, adding
products that are unrelated to the
present product line, can in-
2. Increase penetration of the present
market.
3. Make no marketing innovations.
Chapter 08 – Developing Marketing Strategies
REAL WORLD EXAMPLE 8.25
Dave Neeleman, CEO of JetBlue, flies on at least one
flight per month to talk to travelers and listen for ideas.
LEARNING OBJECTIVES REVISTED
1. Describe the marketing concept, and explain how it can be used by a small business.
● The marketing concept involves giving special consideration to the needs, desires, and
wishes of present and prospective customers.
2. Show how marketing research can be used to implement the marketing concept.
● Market research involves the systematic gathering, recording, and analyzing of data relat-
ing to the marketing of goods and services.
3. Explain how to develop and implement a marketing strategy.
● First, set marketing objectives in line with your competitive edge.
Chapter 08 – Developing Marketing Strategies
8-34
4. Explain how the product life cycle affects marketing strategies.
● As the product moves through its cycle, the marketing strategies should be evaluated and
possibly changed.
○ In the introduction phase the market effort should communicate the product’s fea-
tures.
5. Explain how packaging affects marketing.
● Packaging protects and promotes the product.
6. Describe how prices are set and administered.
● The best selling price should be cost- and market-oriented.
● Three aspects of pricing should be considered:
○ The price must be one that customers are willing and able to pay.
7. Show how marketing services differs from marketing goods.
● There are few objective standards for measuring service quality.
● A service is usually complete before a buyer can evaluate its quality.
Chapter 08 – Developing Marketing Strategies
8-35
KEY TERMS USED IN THIS CHAPTER
Allowances are given to customers for accepting quality or quantity reductions.
Business services are provided to another business or professional.
A competitive edge (competitive advantage) is a particular characteristic that makes one firm more attractive to
customers than its competitors.
A discount is a reduction from the list price given to customers as an inducement to buy more of a prod-
uct.
Diversification is adding products that are unrelated to the present product line
E-commerce is technology-mediated exchanges between parties as well as the electronically based intra-
or interorganizational activities that facilitate such exchanges.
Loss leader is an item priced at or below cost to attract customers into the store to buy more profitable
items.
Market research is the systematic gathering, recording, and analyzing of data relating to the marketing of
goods and services.
Chapter 08 – Developing Marketing Strategies
8-36
Secondary Data is existing facts that someone else has documented and is less expensive to acquire, but
may not be the best for decision making.
A skimming price is one set relatively high initially to rapidly skim off the “cream” of profits.
NOTES FOR DISCUSSION QUESTIONS
1. What is the marketing concept, and why is it so important to small firms?
According to the marketing concept the firm should have a customer orientation. That is, the tar-
marketing policies understood by all employees.
2. How are the key success factors for a firm related to its competitive edge?
Key areas in which a firm might obtain a competitive edge are quality, reliability, integrity, ser-
vice, prices, novelty, innovation, and friendliness. In analyzing the firm’s external environment, it is vital
3. Why is marketing research so important to a small business—especially a new one?
Small firms must do marketing research in order to find out what their customers want. In this
respect, small businesses for once have an edge over larger firms, since their owner–managers are closer
to customers and can learn much more quickly about consumers’ likes and dislikes.
Marketing research is helpful at several points in a small firm’s life. Before starting or buying a
Chapter 08 – Developing Marketing Strategies
8-37
4. What is market segmentation, and how can it be made more effective?
Market segmentation is the process of identifying and evaluating various layers of a market.
Some potential customers have a stronger need or desire for a product than others do. There are three
steps to follow in effective market segmentation:
(1) Identify the characteristics of two or more segments of the total market. Then differentiate
5. Discuss some of the characteristics that should be considered in selecting a target market.
In choosing a target market small businesses must consider changing consumer characteristics.
6. What controllable variables are combined into a market mix to satisfy the target market?
The basic variables in the marketing mix are the “Four P’s”: product, place, promotion, and price.
7. What are the major stages of the product life cycle, and how do marketing strategies differ at
each stage?
The product life cycle has four major stages: introduction, growth, maturity, and decline. As a
8. In what ways is packaging important to small firms and their customers?
Packaging involves protecting and promoting the product. It can make a product more convenient
Chapter 08 – Developing Marketing Strategies
8-38
9. What are the three basic aspects that should be considered in pricing products? Explain cost-ori-
ented pricing. What is markup?
The three aspects to consider in setting prices are (1) a price that customers will be willing to pay,
10. Explain how service firms, retailers, wholesalers, manufacturers, and building contractors actu-
ally set prices.
Service firms usually set prices at the going rate or set prices according to the one prevalent in
their industry. Some charge cost plus profit, where cost is an hourly rate plus other costs or may include
11. How does the marketing of services differ from the marketing of goods?
Services differ from goods in several significant ways: There are few objective standards for
measuring the quality of services; they are often judged subjectively. Not only is a service usually com-
NOTES FOR CASE QUESTIONS
CASE 8.1: Parkview Drug Store: Adding the “Personal Touch”
1. Do you think the “personal touch” is still feasible in today’s mass-merchandising climate?
Large mass-merchandisers usually compete on the basis of price. Wal-Mart, for example, can un-
Chapter 08 – Developing Marketing Strategies
8-39
2. What are your thoughts on hiring customers? What are the strengths and weaknesses of this
practice?
Potential employees must be recruited, screened, and selected. Most employers know nothing
3. Is the policy of letting students without funds have medicine a practical one?
The English Family have operated for over 35 years under this policy and have never been left
4. How do you explain the owners’ success in using the Golden Rule as an operating philosophy?
There will always be a market for businesses that provide quality and service. Price competition
5. In 2014, Parkview Drug was sold to CVS. Bert and Barbara English decided to retire and
6. What is your opinion about the loss of small business to big corporations? Would you be
willing to pay more to promote small business? Or shop “Downtown” locals over the conven-
ience of large stand-alone stores or shopping malls?
There are many people who love mom and pop stores. There is a saying, “If you build it, they will
CASE 8.2: Buying Diamonds Online
1. Personal selling seemed to fail. Why?
The approach that was used for personal selling was inappropriate for the target market. Although
2. Why do you think the Blue Nile website is successful?
Blue Nile successfully identified the target market—educated men making good incomes—and
3. Explain the market segmentation used in the case.
Market segmentation is identifying and evaluating various layers of a market. From the total mar-
Chapter 08 – Developing Marketing Strategies
8-40
BONUS EXERCISE
Evaluating Alternative Courses
This exercise asks students to consider strategic alternatives for a manufacturing firm. Use
Handout 8.-A Evaluating Alternative Courses on the following page for this exercise.
HANDOUT 8-A
Evaluating Alternative Courses
Monmouth Thermics, a subsidiary of General Standard, a large conglomerate, manufacturers
thermometers. Your primary customers are large companies who purchase the thermometers to use for
specialty advertising. Over the last several years, however, low-cost overseas competitors have pulled
away many of the company’s long-time customers.
General Standard has become concerned about the loss of market share and declining profit. You,
as Monmouth general manager, have been asked to put together a recovery plan to present to the General
Standard board of directors. Your management team has pulled together the following options:
• Cut costs by imposing an across-the-board pay cut for all personnel. This would save
enough money to bring the company back to profitability.
Which option would you recommend to the General Standard board of directors? Defend your
choice.