Strategic Marketing
Stowe Shoemaker, PhD
Cornell University Executive Education Faculty
University of Houston
sshoemaker@uh.edu
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Objectives
1. Introduce Strategic Marketing System Model – the
Framework for the class
2. Review definition of marketing and discuss the future
of marketing
3. Review the buyer purchase model
4. Discuss how to calculate the life time value of the
customer and the value of WOM and why this is
important
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Objectives
6. Review Product Strategy (discuss four components
of a service product)
7. Review Communication Strategy (discuss types of
WOM, including blogs)
8. Review Pricing Strategy with focus on value pricing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Review Basics of Marketing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
The Concept of Marketing
• Definition of Marketing:
– identifying evolving consumer preferences, then
capitalizing on them through the creation,
promotion and delivery of products and services
that satisfy the corresponding demand. This is done
by solving the right customers’ problems, giving
them what they want or need at the time and place
of their choosing, and at the price they are willing
to pay.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
4 P of Marketing
•
•
•
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P
P
P
P
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
7 P of Marketing
•
•
•
•
•
•
•
P
P
P
P
P
P
P
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Fourteen C’s of Marketing
• Customization
• Customer
• Communications
• Categories of
offerings
• Customer measurement
• Capabilities of firm
• Customer care
• Cost, profitability and • Chain of relationships
value
• Capacity management
• Control of process
• Competitors
• Collaboration within • Cost to the customer
firm
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Interactive Marketing
• Refers to any activity that uses the Internet to
advertise and sell goods and services to
consumers, business, or nonprofit organizations
and government
– Marketer’s Toolkit by Harvard Business School
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Contextual Marketing
• Give the customer what she wants and make it
useful and accessible so she can take action
when it matters to her
• Widget: widgets are basically little websites that
display directly on the Dashboard, rather than in
a web browser.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Examples of Contextual Marketing:
Widgets
• Movable mini-applications used by consumers to
craft custom experiences
• http://www.clearspring.com/docs/introduction
• http://www.kickapps.com/platform/
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Ultimate Travel Widget
Ultimate Travel Widget Travel Widgets presents the "Ultimate Travel Widget".
Now you can book your Hotels, Air, Cruises, Hotel and Air Packages all in one
widget. No more clutter of 3 or 4 widgets to fill up your Dashboard. The Ultimate
Travel widget utilizes World Choice Travel, a Travelocity company, so you can
book with confidence. Air fares are compared with 28 sites. Hotels from over
20,000 locations and every cruise line can be searched for reservations. The 4 tab
interfaces allows you to toggle quickly from section to section. World wide travel
and many currencies supported. Download the Ultimate Travel Widgets today and
start traveling right from your dashboard.
http://www.jadewatertravel.com/Ultimate_Travel.zip
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
http://www.nimblefish.com/
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
RSS is a family of web feed formats used to publish frequently
updated digital content, such as blogs, news feeds or podcasts.
Users of RSS content use programs called feed 'readers' or
'aggregators': the user 'subscribes' to a feed by supplying to their
reader a link to the feed; the reader can then check the user's
subscribed feeds to see if any of those feeds have new
content since the last time it checked, and if so, retrieve that
content and present it to the user.
The initials "RSS" are variously used to refer to the following
standards:
* Really Simple Syndication (RSS 2.0)
* Rich Site Summary (RSS 0.91, RSS 1.0)
* RDF Site Summary (RSS 0.9 and 1.0)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
From Expedia.com Website
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
The Evolution of Marketing
Profitability
Sales
Strategic
Tactic
Push traffic,
no targeting,
discounts, little
measurement.
Still push,
discounts,
some
measurement.
“Price” driven,
segmented,
transaction
based.
Added value to
product, support
price, customized,
strengthen brand.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Knowledge,
Help support
VAR in
loyalty
The Purchase Cycle
Brand
Advocate
WOM
Repeat Purchase
Loyalty
Circle
Satisfaction
Trial (Initial Purchase)
Dissatisfaction
Barriers
a.
b.
c.
Switching costs
Perceived risks
Lack of information
Need
Recognition
Awareness/
Search/Evoked Set
Complain
Switch
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Why Switch?
Types of Risk
1.
2.
3.
4.
5.
Financial risk
Social risk
Psychological risk
Performance risk
Physical risk
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Buyers Most Sensitive to Risk
Monetary Risk:
Risk capital consists of money and property. Those with
relatively little income and wealth are most vulnerable
Physical Risk:
Risk capital consists of physical vigor, health, and vitality.
Those who are elderly, frail, or in ill health are most vulnerable
Functional Risk
Risk capital consist of alternate means of performing the
.
function or meeting the need. Practical consumers are most
sensitive
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Buyers Most Sensitive to Risk
Social Risk
Risk capital consist of self-esteem and self-confidence.
Those who are insecure and most uncertain are most sensitive.
Psychological Risk
Risk capital consists of affiliations and status. Those lacking
self-respect or attractiveness to peers are most sensitive
.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Purchases Most Subject to Risk
Monetary Risk
most
High-ticket items that require substantial expenditures are
subject to this form of risk.
Functional Risk
Products or services whose purchase and use requires the
buyer’s exclusive commitment are most sensitive.
Physical Risk
Mechanical or electrical goods (such as vehicles or
flammables), drugs and medical treatment, and food and
beverages are most sensitive.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Purchases Most Subject to Risk
Social Risk
Socially visible or symbolic goods, such as
clothes,
most
jewelry, cars, home or sports equipment are
subject to social risk.
Psychological Risk
Expensive personal luxuries that may
engender
guilt, durables, and services whose
use demands
self-discipline or sacrifice are
most sensitive.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Product Service Sub-strategy
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Functional Value Includes the
Dimensions of Service Quality
• Reliability
• Assurance
• Tangible
• Empathy
• Responsiveness
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
The Four Components of the
Process
Physical
Product
• Whatever the organization transfers to the
Customer that can be touched
• Must be Customer-Oriented (create value)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
The Four Components of a Service
Process
Service
Product
Physical
Product
Process
•
•
•
•
Core performance purchased by the Customer
Includes all interactions with the Customer
“Plan Your Work”
Incorporate RATER system into each plan; e.g. in-room dining
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Plan Your Work
• Scripts for each service encounter
– Hostess:
• “We will be asking you throughout your visit how we can
do things better. Please be aware that our goal is to
provide a wonderful dining experience; if we fall short of
that goal, please do not hesitate to tell us.”
– Wait person:
• “We have great desserts here. They are made locally by a
woman named Cynthia. Cynthia has lived in area for
ages and follows a family recipe.”
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Plan Your Work
• Scripts for each service encounter
– About Our Fish
• As you may know, one should not eat oysters in months
that have an R. Therefore, we will not be serving oysters
tonight as we only serve the freshest fish here. ”
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
The Four Components of a Service
People
Service
Delivery
Process
Service
Product
Physical
Product
• Refers to what happens when your Customer interacts
with employee
• “Work Your Plan”
• Example: What is said to the customer
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Work Your Plan
• Goal is to incorporate some aspect of the
RATER system in each interaction
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
The Four Components of the Process
Service
Product
Service
Delivery
Physical
Product
Service Environment
• The physical backdrop that surrounds the service
• 3 Elements: ambient conditions; spatial layout; and
signs, symbols, & artifacts
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
CUSTOMER
Expected Service
GAP 5
Perceived Service
Service Delivery
COMPANY
GAP 4
External
Communications
to customers
GAP 3
GAP 1
Customer-driven service designs and standards
GAP 2
Company perceptions of consumer expectations
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
CUSTOMER
Expected Service
COMPANY
GAP 1
Company perceptions of consumer expectations
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reasons for GAP # 1
• Inadequate marketing research
• Lack of upward communication
• Insufficient relationship focus
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Ways to Close GAP # 1 first four ways
–
–
–
–
Transactional surveys
Market-wide surveys
Employee Field Reporting
Mystery shopping
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Next please think for a moment about the reason for visiting a specific
legalized gambling establishment in Las Vegas. Please tell me how important
each reason is for you in your decision to visit one specific property over another.
Please use a 1 to 10 scale where a "1" means the reason is not at all important
and a "10" means the reason is very important in your decision to choose
one legalized gambling establishment over another. You may use any number
on this 1 to 10 scale.
Do you understand how this 1 to 10 scale works?
(IF NOT REPEAT SCALE)
[ASK QUESTIONS IN RANDOM ORDER
How important is....____________________... in your decision
to chose one place to visit over another?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Now I am going to read you a list of features that may or may not describe some
of the casinos in the Las Vegas area. We'll use a 1 to 10 scale where 1 means it
"does not describe the casino at all" 10 means it "describes the casino perfectly"
If you have not been to the casino personally, please base your answers on what you
have heard, or what you believe to be true. The first feature is:
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Ways to Close GAP # 1 second 3 ways
– Service reviews/ Customer advisory panels
– Employee Research
– Focus groups
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Focus Groups
•
•
•
•
•
•
•
•
What Are They
Why Use
What They are Good For/Not Good For
Visual Stimuli in Focus Groups
Guidelines for Selecting Moderators
Focus Group Bill of Rights
Recruiting Focus Group Respondents
Moderator’s Guide
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
See article on buying and using
marketing research
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
CUSTOMER
COMPANY
Customer-driven service designs and standards
GAP 2
Company perceptions of consumer expectations
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reasons for GAP # 2
• No customer-driven standards
• Inadequate service leadership
• Poor service design
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reasons for GAP # 2
• Complete exercise starting on next page:
– Use following scale:
•
•
•
•
•
1 Very True
2 Somewhat True
3 Not applicable
4 Somewhat untrue
5 Very untrue
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Questions
1.
2.
3.
4.
5.
6.
We do not know what our customers require of us ______
Policies exist for the convenience of the organization, not the
customer ____
Everyone has a specialized job function and is not allowed to
intrude in others’ areas___
Customer contact people do not have the power to make
decisions ______
Service polices are arbitrary ______
We are more interested in making a profit than in building a
loyal customer base _______
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Questions continued
7.
8.
9.
Employees are not trained in people skills____
Management does not solve problems creatively _____
Employees do not seem to realize that customers want to be
treated well ____
10. The organization is focused on solving problems rather than
preventing them
11. We know how to handle complaints, but not how to serve the
customer
12. The organization does not formally value and reward
employees _____
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Transfer scores to here
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
____
____
____
____
____
____
____
____
____
____
____
____
TOTAL _______
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Interpretation
12-21 Your organization does not seem concerned with customers
22-31 Your organization seems to regard customers as an after
thought
32-41 Your organization seems about average in thinking about
customers
42-51 Your organization seems concerned with customers, but
could improve its system with dealing with them
52-60 Your organization seems very customer friendly
From: Joan Koob Cannie: Turning Customers into Gold. NY:
American Management Association
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
CUSTOMER
Service Delivery
COMPANY
GAP 3
Customer-driven service designs and standards
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reasons for GAP 3
• Deficiencies in human resources
• Failure to match supply and demand
• Customers not fulfilling roles
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Ways to Provide Customer Oriented
Service Delivery
• from Zeithaml, Valerie A. and Mary Jo Bitner
(1996). Services Marketing. New York:
McGraw Hill: 312
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Develop
People to
Deliver
Service
Quality
Provide
Needed Support
Systems
Te om
am ote
wo
rk
Customeroriented
Service
Delivery
Pr
e
lud s
Inc yee
plo
Em he
in t any’s
mp
Co ision
V
De
Se velo
ori rvice p
Int ente Pr ern d
oc
es al
se
s
Hire the
Right People
Empower
Employees
Retain the
Best
People
B
Pr e the
Em eferr
plo ed
ye
r
r
fo d
n an
ai l
Tr nica tive
c
ch ra
te nte kills
i S
Me
Treat
a
Employees as S R sur
tro ew e a
Customers
n
Pe ng S ard d
rfo er
rm vic
er e
s
for
e
t
e
mp est
o
C eB
th ople
Pe
Hire for Service
Competencies
and Service
Inclination
ure
s
a
l
Me terna
In rvice
Se ality
Qu
Provide
Supportive
Technology
and
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Equipment
CUSTOMER
COMPANY
Service Delivery
GAP 4
External
Communications
to customers
GAPS Model of Service Quality
(from Zeithaml, A. Valarie and Mary Jo Bitner (1996). Services Marketing. New York: McGraw Hill p. 48.)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reasons for GAP 4
• Ineffective management of customer
expectations
• Over-promising
• Inadequate horizontal communications
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reset
customer
expectations
manage
horizontal
communications
Delivery > or =
Promises
Improve
customer
education
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Manage
service
promises
CUSTOMER
Expected Service
GAP 5
Perceived Service
COMPANY
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reason for GAP 5
• Service has not managed GAPS 1-4
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reliability
Assurance
Tangibles
Empathy
Responsiveness
Reliability
Assurance
Tangibles
Empathy
Responsiveness
Reliability
Assurance
Tangibles
Empathy
Responsiveness
Interaction
Quality
Situational
Factors
Service
Quality
Physical
Environment
Quality
Product
Quality
Customer
Satisfaction
Price
Outcome
Quality
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Personal
Factors
Problem Impact Tree
Please indicate if you reported any problems during your visit and
how they were resolved.
No problems experienced . . . . . . . . . . . . . . . . . . . .1 SKIP X
Problems reported and were resolved in a friendly
effective manner . . . . . . . . . . . . . . . . . . . . . . 2
Experienced problems, but didn’t report to staff . … 3
Problems reported and were not resolved in a
friendly, effective manner. . . . . . . . . . . . . . . . . 4
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
FIGURE II: TOTAL SAMPLE (n=4259, 100%)
No Problems Experienced (n=3576, 84%)
Problems Not Reported (n=262, 38.4%)
Problems resolved in a friendly and
effective manner (n=295, 70.1%)
Experienced Problems (n=683, 16%)
Problems Reported (n=421, 61.6%)
Problems not resolved in a
friendly effective manner
(n= 126, 29.9%)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
FIGURE III:
IMPACT ON LIKELIHOOD TO FLY AIRLINE AGAIN
No Problems Experienced (n=3547)
Percent Rating Likelihood to Fly Again
a “5”=53.3%
Problems Not Reported (N=260)
Percent Rating Likelihood to Fly Again
a “5”= 18.1%
Problems resolved in a friendly and
effective manner (n=293)
Percent Rating Likelihood to Fly Again
a “5”= 40.3%
Experienced Problems (n= 677)
Percent Rating Likelihood to Fly Again
a “5”= 26.6%
Problems Reported (n=417)
Percent Rating Likelihood to Fly Again
a “5”= 31.9%
Problems not resolved in a
friendly effective manner (n=124)
Percent Rating Likelihood to Fly Again a
“5”= 12.1%
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Word of Mouth
• The One Number Firms Should Be Concerned
About
• Critical in services because of variability and
heterogeneity – customers discount advertising,
PR, and the like
• WOM comes from friend, associate, family
member
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Word of Mouth - continues
• Questions to ask:
– How likely is it that you would recommend
_______ to a friend or colleague?
use a 0 to 10 scale
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Word of Mouth - continues
• Net Promoter: calculate
– % of people who respond with a 9 or 10 (promoters)
– % of people who respond with a 0 – 6 (detractors)
Net Promoter Score = Promoters – Detractors
(E-Bay, Amazon, USAA 75% - 80%
Median 400 firms in 28 industries was 16%)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Life-Time Value
Case Pre Assignment
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Assignment
• Calculate the life-time value incremental customer
for Jellystone Resort Campground
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Life Time Value Incremental Customer
Jellystone Resort Campground
•
Need to Know the following
–
–
–
–
–
–
–
Sale price
Fixed cost
Variable cost
Average stay
Lifetime Customers visit
Return customers
Total customers
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Life Time Value Incremental Customer
Jellystone Resort Campground
•
Calculate the following:
a. Gross profit of an average purchase:
b. Average number of purchases per year by customer:
c. Average number of years customer will continue to
purchase:
d. Probability customer will continue to purchase:
•
Formula:
LVIC = (a*b) + (a*b*c*d)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Assignment
• Calculate the value of word of mouth
recommendation for Jellystone Resort
Campground – both positive and negative
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Word of Mouth: Incremental Customer
•
Need to know the following
a. Likelihood that customer will refer
b. Number of people to whom the recommendation will be
made
c. Percent of referrals that are empathetic (i.e., have the
ability to act on what they hear)
d. Probability of those who are empathetic who will buy the
service
e. LVIC
•
Formula:
WOM = (a*b*c*d*e)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Negative Word of Mouth: Incremental
Customer
•
Need to know the following
a. Number of people dissatisfied customers tells
b. Percent of people that are empathetic (i.e., have
the ability to act on what they hear)
c. LVIC
•
Formula (a*b*c) = $
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
How Might We Ask Questions to Get
WOM Information?
• How likely are you to recommend ____ to your
friends? “0 – 10”
• How many friends are you likely to tell when
you have a very positive experience?
• How many friends are you likely to tell when
you have a very negative experience?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Assignment
• Calculate the value of promotion for Jellystone
Resort Campground
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Impact of Promotion to Increase Word of
Mouth: Jellystone Resort Campground
• What we know:
– Mailed 1000 postcards
– 10% off a 2 night stay and same discount for friends
they brought with them
– Need to bring post card with you to get discount
– 200 people returned with card
– 50 came with card that was passed on to them by
original receiver
• What is value of this promotion?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Impact of Promotion to Increase Word of
Mouth: Jellystone Resort Campground
•
What we need to know:
a.
b.
c.
d.
e.
f.
g.
h.
# of redemptions
Revenue per customer per day
Discount
Length of stay
Number of new comers
New customer revenue
Life time value of new comers
What program cost
loss revenue = 250 * $35* 2 = $17,500 (no discount)
250 *$31.50*2 = $15,750 (discount)
difference: $1, 750 + cost of mailing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Communications Strategy
• To plan, implement, and control persuasive
communication with customers
• Six stages of the communication process:
–
–
–
–
–
–
To whom to say it
Why to say it
What to say
How to say it
How often to say it
Where to say it
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Communication
•
•
•
•
•
•
•
Sales force
Outlets
Reservations
Direct Marketing
Electronic Commerce
Mobile Commerce
Employees
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Best Practice for Communication
•
•
•
•
•
Start off slow
Show you are listening
Offer value in return
Not everyone wants dialogue
Do not misuse the trust created
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Other Keys to Successful
Communication via E-Mail*
1. Be selective as to who is added to your list or you will create
more work for yourself;
–
–
–
Use double op-in
Make it easy for people to opt-out
Put privacy statement on website and follow it
2. Use HTML instead of text
–
–
Make sure it can be easily read without graphics appearing as some
graphics blocked and if read off-line graphics will not appear
Give customer choice as to how they would like to receive information
* From Right Now Technologies
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Other Keys to Successful
Communication via E-Mail*
3. Make e-mails relevant and extremely valuable;
–
–
–
–
–
50% e-mail now spam
From: represents your brand
Subject: represents timely and relevant proposition
Personalize
Use past buyer behavior information to target offers
4. Let customer choose how often they would like to hear from
you
–
–
See www.landsend.com for their policy
Do not send overnight so gets lost in morning clutter
* From Right Now Technologies
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Other Keys to Successful
Communication via E-Mail*
5. Keep e-mail short and packed with value;
–
–
–
–
Use bullets
Use lots of space
“come on, I am easy to read”
Print out and see what it looks like, as many recipients will do that
6. Make it distinctive and appear as if they cannot get anywhere
else
–
–
Subscribe to competitive lists to see what is being done
Develop own voice and distinctive style
* From Right Now Technologies
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Other Keys to Successful
Communication via E-Mail*
7. Do Not Make e-mail visual circus;
–
–
–
–
Make focal point of e-mail obvious
Many people do not scroll
Design to be seen in preview pain
Print out and see what it looks like, as many recipients will
do that
8. Test Everything
– Benchmark yourself
– Split test
* From Right Now Technologies
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Evaluation
Metrics
continued
Basic Form of Pre-test Post-test with Control
01
02
03
04
TE
Pre-test Test Group
Post-test Test Group
Pre-test Control Group
Post-test Control Group
Treatment Effect
example:
visits 5.3
visits 6.8
visits 5.4
visits 5.6
Mailing
TE = (02 - 01) - (04 - 03)
TE = (6.8 - 5.3) - (5.6 - 5.4)
= (1.5 - 0.2)
= (1.3) increase in # of visits
Question: Is this good?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Other Keys to Successful
Communication via E-Mail*
9. Multimedia e-mails;
– Know your audience
– Useful or just showing off?
– Do not assume audience wants multi media
* From Right Now Technologies
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Other Keys to Successful
Communication via E-Mail*
10. Types of responses;
–
–
–
–
–
Valid response
Hard response (e-mail no longer in existence or
address error)
Mail box full
Spam filters
Out of office replies
* From Right Now Technologies
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Other Keys to Successful
Communication via E-Mail*
10. Create and Think Customer Experience;
11. Make privacy part of brand promise
* From Right Now Technologies
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Types of WOM
• Buzz Marketing: Using high-profile entertainment or news
to get people to talk about your brand.
• Viral Marketing: Creating entertaining or informative
messages that are designed to be passed along in an
exponential fashion, often electronically or by email.
• Community Marketing: Forming or supporting niche
communities that are likely to share interests about the brand
(such as user groups, fan clubs, and discussion forums);
providing tools, content, and information to support those
communities.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Types of WOM
• Grassroots Marketing: Organizing and motivating
volunteers to engage in personal or local outreach.
• Evangelist Marketing: Cultivating evangelists,
advocates, or volunteers who are encouraged to take a
leadership role in actively spreading the word on your
behalf.
• Product Seeding: Placing the right product into the
right hands at the right time, providing information or
samples to influential individuals.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Types of WOM
• Influencer Marketing: Identifying key communities
and opinion leaders who are likely to talk about
products and have the ability to influence the
opinions of others.
• Cause Marketing: Supporting social causes to earn
respect and support from people who feel strongly
about the cause.
• Conversation Creation: Interesting or fun
advertising, emails, catch phrases, entertainment, or
promotions designed to start word of mouth activity.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Types of WOM
• Brand Blogging: Creating blogs and
participating in the blogosphere, in the spirit of
open, transparent communications; sharing
information of value that the blog community
may talk about.
• Referral Programs: Creating tools that enable
satisfied customers to refer their friends.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
How to Create WOM
•
•
•
•
•
•
Encouraging communications
Giving people something to talk about
Creating communities and connecting people
Working with influential communities
Creating evangelist or advocate programs
Researching and listening to customer feedback
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
How to Create WOM
• Engaging in transparent conversation
• Co-creation and information sharing
• Blogs
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
http://www.subservientchicken.com/
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Blog
• Word of the year in 2004
• Defined by Merriam-Webster as “a web-site
that contains an online personal journal with
reflections, comments, and other hyperlinks.”
• Survey by the Pew Internet and American Life
Project revealed that 27 percent of adults who
go online in the United States read blogs.
Janet Johnson, Vice President of Communications, Marqui, Inc.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Blog
• More than 28% of journalists now rely on blogs
for reporting and research, according to a
survey by EURO RSCG Magnet and Columbia
University, with 53% of surveyed journalists
revealing they gleaned story ideas from blogs
and 36% saying they used blogs to locate
sources
Janet Johnson, Vice President of Communications, Marqui, Inc.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
What a blog should be used for
• Provide product or service information, talk
about your market, explore the vision of your
management or leadership team, provide
opportunity for customers to share their stories
Janet Johnson, Vice President of Communications, Marqui, Inc.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Examples of Blogs
•
•
•
•
•
www.thelobby.com
http://www.blogs.marriott.com/
http://behospitable.com/
http://www.hamptonlandmarks.com/
http://www.homewoodstories.com/
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Loyalty Programs as a Way to
Impact Product and Communication
Strategies
Hilton HHonors Case
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Case Study: Hilton HHonors
•
Questions for case
1.
Hotels are an unusual kind of product. Consumers buy a
branded experience, but the experience is delivered far from
corporate scrutiny, under various kinds of control - a manager,
a franchisee or a property operator. How can a loyalty
program help the property operator and brand owner manage
the relationship with the customers better? How can it help
with the overall service experience? How can it help create
loyalty?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Case Study: Hilton HHonors
2.
3.
4.
5.
Can you quantify the value of the HHonors program to
Hilton? How does the value generated by the program
compare to the program's cost?
Now look at the program from the perspective of a franchisee.
If the franchisee had the choice of putting the Hilton brand or
one of the Starwood brands onto its property, how would they
assess the value of doing so?
What is the impact of the program to the brand Hilton?
What should Hilton do in response to Starwood?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Case Study: Hilton HHonors
6.
Cheat Sheet to Help Answer the Above Questions:
–
–
–
–
–
–
–
–
7.
What is the occupancy rate?
What percent of all nights were my members of Hilton’s Program?
What percent of all member stays are due directly to the program?
Assume break-even occupancy of 68%. Without the program, what would
occupancy be? What does this mean?
What is the incremental room nights sold?
If contribution is 80%, how much less would they have earned in contribution
if they did not have the program?
Assume the average cost of advertising, selling, and other marketing costs is
$750 per room, is a frequency program cheaper?
If one thinks an 80% contribution is too high, at what point would the
contribution have to be to break even (hint: they would have come anyway
analysis)
How does program relate to the loyalty circle? (Complete table)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Reasons for Frequency Programs
Process
Value Added Value
Recovery
Aid in revenue management
Collaboration with partners
Encourage franchisee or management
contract relationships
Improving relationship with guest
Customizing a guest’s experience
Helping corporate travel managers gain
compliance
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Communication
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Pricing Sub-strategy
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Two common approaches to pricing products and
services:
• cost-based pricing,
• value-based pricing,
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Cost-Based Pricing
• Involves adding a target margin to the cost of producing a
product or service.
• Satisfies no goal other than achieving the target margin (to
the extent the target margin is chosen arbitrarily).
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Value-Based Pricing
• Involves choosing a price after developing
estimates of market demand based on how
potential customers perceive the value of the
product or service.
• Can satisfy diverse product strategies,
including, for example, market penetration or
profit maximization.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Value-Based Pricing: Key Benefits
• It forces managers to review the objectives they
have when marketing their product or service.
• It generally will be superior to cost-based pricing
in achieving any goals that might be implicit in
the margin targets used in a cost-based pricing.
• It requires managers to keep in touch with the
needs and preferences of customers.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
The Evolution of Pricing Strategies In Hotels
Bundling and
other
techniques to
change
perception of
value
Profitability
Strategic
Tactic
Rates vary by
season,
some
Measurement,
Some DF
Revenue
Pricing based
Management;
upon value
look at the
received, not cost
total value
to produce;
the customer;
Strategic Marketing GM of
Program
(c) Stowe Shoemaker,
Ph.D loyalty
consider
Yield
Management
Systems; much
DF;
Pricing based
on customer
knowledge
Pricing and Decision Making
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Question: Where Would You Buy
Gas?
Station A:
Sells gasoline for € 2.30 per gallon, and gives a
€ 0.10 discount if the buyer pays with cash.
Station B:
Sells gasoline for € 2.20 per gallon, and charges a
€ 0.10 surcharge if the buyer pays with a credit card.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Examples
• Which do you choose? A____ or B____
– A. Receive €50
– B. 55% chance of receiving €100; 45% chance of
earning nothing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Examples
• Which do you choose? C____ or D____
– C. Loose €20
– D. 20% chance of loosing €100; 80% chance
loosing nothing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
of
Answer to Previous Question
Pertains to Prospect Theory
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Daniel Kahneman Toasting Noble Prize
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Prospect Theory: Basic Idea
• Value is associated not with actual levels of
consumption, but with anticipated changes in
well being
• Buyer assesses prospective decision outcomes
(prospects) by mentally categorizing them as
either gains or losses relative to reference point
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Explanation
Station A sets reference point at €2.30 and then rewards
buyers who pay cash; that is; a gain relative to the
reference point;
Station B first establishes a reference point at
€2.20 and then penalizes buyers who use credit cards; a
loss relative to the reference point
This is in contrast to economic theory that predicts that
gains and losses of equal size are valued the same
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Positive Value
Value Function
Station A (€2.30 – 0.10)
1.0
Losses
Gains
1.6
Reference Point
(state of well being)
Station B:
(€2.20 +.10)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Negative Value
Examples
• Which do you choose? A____ or B____
– A. Receive €50
– B. 55% chance of receiving €100; 45% chance
of earning nothing
• Which do you choose? C____ or D____
– C. Loose €20
– D. 20% chance of loosing €100; 80% chance
of loosing nothing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Answer
• If you chose A in Question 1, then you should
choose C in Question 2
• If you chose B in Question 1, then you should
choose D in Question 2
• How many had a reversal?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Rationale for Answers
• Prospect theory states that people are risk adverse (e.g.,
conservative) when considering gains; in contrast,
more naturally inclined to risk a loss than to pay even
the expected value of avoiding it.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Positive Value
Value Function
Gains
Losses
Reference Point
(state of well being)
Negative Value
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Economic Theory versus Prospect
Theory
• Economic Theory
– Gains and losses of
equal size treated the
same (e.g., €100 gain =
to €100 loss)
• Prospect Theory
– loss judged more
painful than a gain of
equal value (e.g., loss
of €100 more painful
than a gain of €100)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Economic Theory versus Prospect
Theory
• Economic Theory
– People are consistent in
their decision making
• Prospect Theory
• If people perceive they are in
the gain domain, they will
act conservatively
• If people are in the loss
domain, they will tend to
take more risks
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Economic Theory versus Prospect
Theory
• Economic
– Expected utility of
uncertain outcome is
weighted by its
probability
• Prospect
– Expected utility of uncertain
outcome is multiplied by a
decision weight (p) where :
– 1. Impossible events are
discarded (0)=0
– 2. Low probabilities are
over weighted while moderate
and high probabilities are
under weighted (e.g., odds of
being involved in an airline
crash versus car accident)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Prospect Theory – Implications
• Increasingly larger gains are incrementally less
pleasurable (10 to 20 great; 110 to 120 not as great)
• Increasingly larger losses are incrementally less painful
(and smaller losses are almost as painful as slightly
larger losses)
• The displeasure associated with losing a certain amount
(e.g., of money) is generally greater than the pleasure
associated with winning the same amount (e.g., of
money)
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Implications
• Once consumers have agreed to spend a
certain amount of money, getting to pay
more is easier than one would think
• Goal for is to move the reference point
beyond “price” to something that can gain a
competitive advantage – e.g., brand, type of
ingredients, service, etc.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Positive Value
Value Function
Gains
Losses
Reference Point
(state of well being)
Negative Value
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Prospect Theory Leads to Framing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Framing
Buyers frequently form frames of reference
when making buying decisions, and these
frames of reference in turn influence how
buyers respond to price and product
information.
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Goal of Understanding
Frames of Reference
1. Change the relationship between what
customers perceive they pay and what
they perceive they get in return.
And manage this relationship
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example -1
Change the relationship between what customers perceive they pay and
what they perceive they get in return.
• Option 1: Oliva Cameroon Cigar for €15
• Option 2: Oliva Cameroon (Figurado, 6 ½ inch x 60
ring); made by Oliva Cigar Co. – Nicaragua
The Authentic Cameroon Wrapper gives this boxed
pressed figurado a pronounced aroma of nuts, with
hints of cocoa and coffee.
It is medium-bodied, but not exceedingly strong.
€15
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example-2
Change the relationship between what customers perceive they pay and
what they perceive they get in return.
• Option 1: Selection of teas from wooden box €1.95
• Option 2: Fresh pot of Lapsang Souchong blacksmoked tea:
From the Fujian province of China, this black tea is
full ancient history and flavor! Smoky smooth
character is achieved through the smoking process
over pine and oak fires. €3.95
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example 3
• Staying at the Venetian Hotel in Las Vegas for a
vacation; Staying two nights; 3036 rooms
• Which Would You Choose?
– A: Luxury suite room at €159 and then for an additional
€30 you get guaranteed room on a high floor with a strip
view
– B: Luxury suite room with guaranteed room on a high
floor for €189, or room for €30 less anywhere in the
hotel
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example -3
• Venetian Hotel in Las Vegas
• Manipulation
– Quote €159 first (option A previous slide)
– Quote €189 first (option B previous slide)
• Two Teams
– Team 1: conversion 21.9%; calls 1813
– Team 2: conversion 21.2%; calls 1654
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example - 3
• Upgrades:
– €159 quoted first: 13.59% upgraded (option A)
– €189 quoted first: 20.55% upgraded (option B)
– Translates €31,878 extra revenue for the month
to the bottom line
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example-4
Change the relationship between what customers perceive they
pay and what they perceive they get in return.
• Focus on the features of the menu item that are
different from what consumer can buy at home;
e.g., Kobe beef
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Ways To Frame Purchase Decisions
1. Structure transactions to reflect gains
and avoid losses
–
–
Present price last after descriptions
endow potential buyers
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
# 2 Change Way Frame Decisions
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example 1
Let customer know the cost of not booking
and paying now; that is, give the difference
between current booking class and the next
level up
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Examine How We Quote Rates
• We always quote low to high, which sets
reference point low and the other prices a “loss”
• If we quote high price first, then other prices are
a “gain”
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example 2
Make it simple for customer to see options – and
trade-offs
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
This slide shows how
prices change
depending upon day of
flight; key
here is that customer
sees the options
and can make choices
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Figure 3
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Figure 4
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Figure 5
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Note: departure and
return
are bundled
Customers knows
price but
has to buy
prepackaged
schedule
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Customer chooses by
schedule
but does not know
price
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Customer can easily get
both
price and schedule and
therefore it
is easy to make choice
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example 3
Frame decision outcomes in terms of gains or
losses
–
do not discuss benefits of buying the product, but discuss
the consequences of not buying the product
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Example 4
Frame by Bundling Gains and Losses
– un-bundle gains
– bundle losses
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Restaurant Study
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Study Design
• Eight different menus
23
– Type of description
• Modest/Detailed
– Number of items
• Three per category/Two per category
– Prices
• High prices/Low prices
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Spinach and Feta Dip
• Modest Description:
– Spinach and Feta Cheese with Tomatoes and
Pinenuts
• Detailed Description:
– Organic Spinach Sautéed in Garlic and Combined
with Authentic Athenian Feta Cheese, Sun Ripened
Yellow Tomatoes and Toasted Pinenuts
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
MENU DESIGN
Menu One: Detailed Menu Descriptions, High Price, 3 Choices
Menu Two: Detailed Menu Descriptions, Low Price, 3 Choices
Menu Three: Detailed Menu Descriptions, High Price, 2 Choices
Menu Four: Detailed Menu Descriptions, Low Price, 2 Choices
Menu Five: Modest Menu Description, High Price, 3 Choices
Menu Six:
Modest Menu Description, Low Price, 3 Choices
Menu Seven: Modest Menu Description, High Price, 2 Choices
Menu Eight: Modest Menu Description, Low Price, 2 Choices
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Hypothesis
Two Items
Each Menu
Category
Ho1 X value (high price with detailed description) = X value (high price with modest description)
Mean
4.74
4.26
p=.083
Ho2: X value (low price with detailed description) = X value (low price with modest description)
Mean
4.99
4.74
P=.369
Ho3: X value (high price with detailed description) = X value (low price with detailed description)
Mean
4.74
4.99
P=.315
Ho4: X value (high price with modest description) = X value (low price with modest description)
Mean
4.26
4.74
p=.113
Ho5: X value (high price with detailed description) ≥ X value (low price with modest description)
Mean
4.74
4.74
p=1.00
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
What Influence Buyers’ Reference
Prices
1.
2.
3.
4.
5.
Current Price Influences
Past Price Influences
Purchase Context Influences
Prices of similar items
Price considering cost of making item yourself
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Current Price Influence
• Which wine would you choose if you knew
nothing about wine?
– $38
– $48
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Current Price Influence
• Which wine would you choose if you knew
nothing about wine?
– $38
– $48
– $58
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Anchoring and Current Price
Influences
• Product-Line Pricing
– Adding a premium product to the product line may
not necessarily result in overwhelming sales of the
premium product itself
– It does enhance buyer’s perceptions of lower-priced
products in the product line and influences low-end
buyers to trade up to higher-priced items
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Current Price Influences
• Suggested Reference Prices
– State a price charged previously
– State a price charged by a competitor
– State suggested retail price
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Current Price Influences
• Consider the following airline prices seen on Internet for roundtrip
– London to Paris
£ 310
– Paris to Prague
£ 288
– Nice to Prague
£ 289
– London to Nice
£ 310
• What price would you expect to pay to fly from London to
Prague?
• What is the most you would pay?
• What is a fair price?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Past Price Influences
• Past price paid has a particularly strong
influence on the reference price because it is
more likely to be recalled as a frame of
reference than past prices that were observed in
advertising
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Past Price Influences
• Implications
– Numerous small price increases for frequently
purchased items more likely to be accepted than are
infrequent large increases
– Need to always state actual price and discount from
that
• Low promotional prices can establish low reference
prices for judging the value of later purchases
– How is the last statement different for airlines and
why might this be the case?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Purchase Context Influences
• You are lying on the beach on a hot day. All you have to drink
is warm water. For the last hour you have been thinking about
how much you would enjoy a nice cold bottle of beer. A
companion gets up to make a phone call and offers to bring
back a beer. The only near by place where beer is sold is a
small, run-down grocery store. He asks what the maximum
price you are willing to pay. If the price is higher, he will not
buy it.
• What price do you tell him?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Purchase Context Influences
• You are lying on the beach on a hot day. All you have to
drink is warm water. For the last hour you have been
thinking about how much you would enjoy a nice cold
bottle of beer. A companion gets up to make a phone call
and offers to bring back a beer. The only near by place
where beer is sold is a five-star resort hotel. He asks what
the maximum price you are willing to pay. If the price is
higher, he will not buy it.
• What price do you tell him?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Purchase Context Influences
• Use context as a frame of reference that makes
the price seem fair or reasonable
– Eight hours tossing and turning trying to get
comfortable versus good night sleep
– A day at the office
– What is your time worth to drive versus to fly to
airport that is not convenient?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Competitor prices
• Other airlines
– E.g. if consumers think there is no difference, then
there is a problem
• Other modes of transportation
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Price Differentials
• You are a purchasing agent for a large
organization. You have ordered for your own use
a new electric typewriter with special features
which will cost £1,000. A friend discovers that
the identical typewriter is available from another
vendor for £ 600.
• Would you cancel the current order and switch to
the other vendor?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Price Differentials
• You are a purchasing agent for a large
organization. You have ordered a new word
processor with special features, which will cost
£ 20,000. Your purchasing department
discovers that the identical word processor is
available from another vendor for £ 19,600
• Would you cancel the current order and switch
to the other vendor?
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Objectives
1. Introduce Strategic Marketing System Model – the
Framework for the class
2. Review definition of marketing and discuss the future
of marketing
3. Review the buyer purchase model
4. Discuss how to calculate the life time value of the
customer and the value of WOM and why this is
important
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Objectives
6. Review Product Strategy (discuss four components
of a service product)
7. Review Communication Strategy (discuss types of
WOM, including blogs)
8. Review Pricing Strategy with focus on value pricing
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D
Questions
Strategic Marketing GM Program (c) Stowe Shoemaker, Ph.D